FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v LG Electronics
Australia Pty Ltd [2006] FCA 1118
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v LG ELECTRONICS AUSTRALIA PTY LTD ABN 98 064 531 264
WAD 419 of 2005
SIOPIS J
4 JULY 2006
PERTH
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD 419 OF 2005 |
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BETWEEN: |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
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AND: |
LG ELECTRONICS AUSTRALIA PTY LTD ABN 98 064 531 264 Respondent
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JUDGE: |
SIOPIS J |
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DATE OF ORDER: |
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WHERE MADE: |
PERTH |
THE COURT ORDERS THAT:
Declaration
1. The Respondent has contravened s.52 and s.53(g) of the Trade Practices Act 1974 by making the express statement in the user manuals for mobile telephones identified by model numbers U8110, U8120, U8180, U8330 and U8360 that:
“2. WHAT THIS WARRANTY DOES NOT COVER:
(7) This limited warranty is in lieu of all other warranties, expressed or implied in terms of marketability or fitness for a particular use. Specifically the company will accept no responsibility or liability for consequential, indirect, incidental and special loss or damage caused by or due to failure of operation or malfunction of the product, or arising from the use or inability to use the product”
(a) and thereby representing that a consumer of a specified model of the mobile telephones has only the benefit of a voluntary warranty provided by the Respondent, whereas a consumer has the benefit of non-excludable conditions and warranties implied by law, including the Trade Practices Act 1974, as to fitness for purpose and merchantable quality;
(b) and thereby further representing that an owner of a specified model of the mobile telephones has no right of action or remedy against the Respondent for consequential, indirect, incidental and/or special loss or damage at all, whereas an owner has non-excludable statutory rights of action and remedies (including for consequential, indirect, incidental and special loss and damage) against the Respondent if a mobile telephone is not fit for a particular purpose or is not of merchantable quality.
2. The Respondent has contravened s.52 and s.53(g) of the Trade Practices Act 1974 by making the express statement in user manuals for mobile telephones identified by model numbers DM150 and DM120 that:
“2. WHAT THIS WARRANTY DOES NOT COVER:
(6) This limited warranty is in lieu of all other warranties, express or implied either in fact or by operation of law, statutory or otherwise, including, but not limited to any implied warranty of marketability or fitness for a particular use”
in the case of DM150; and
“2. WHAT THIS WARRANTY DOES NOT COVER:
(6) This limited warranty is in lieu of all other warranties, express or implied either in fact or by operation of law, statutory or [sic]”
in the case of DM120,
(a) and thereby representing that a consumer of the specified model of the mobile telephones has only the benefit of a voluntary warranty provided for by the Respondent, whereas a consumer has the benefit of non-excludable conditions and warranties implied by law, including the Trade Practices Act 1974, as to title, fitness for purpose, merchantable quality, correspondence with description and correspondence with sample;
(b) and thereby further representing that an owner of a specified model of mobile telephone has no right of action or remedy against the Respondent, whereas an owner has the benefit of non-excludable conditions and warranties implied by law as to title, fitness for purpose, merchantable quality, correspondence with description and correspondence with sample;
(c) and thereby further representing that an owner of a specified model of mobile telephone has no right of action or remedy against the Respondent, whereas an owner has non-excludable statutory rights of action and remedies (including for damages) against the Respondent if a mobile telephone is not fit for a particular purpose; does not correspond with the description of the same; is not of merchantable quality or does not correspond with a sample of the same.
3. The Respondent has contravened s.52 and s.53(g) of the Trade Practices Act 1974 by making the express statement in user manuals for mobile telephones identified by model numbers LGC-800W, B2100, C110, F1200, F2100, F2300, G1500, G5300, G5300i, G5400, G7020, G7050, G7100, L1100, T5100 that:
“1. WHAT THIS WARRANTY COVERS:
(1) The limited warranty for the product extends for ONE (1) year beginning on the date of purchase of the product”.
“A3 WARRANTY STATEMENT
ANY IMPLIED WARRANTY OF MECHANTABLITY, OR FITNESS FOR A PARTICULAR PURPOSE OR USE, SHALL BE LIMITED TO THE DERATION (sic) OF THE FOREGOING WRITTEN WARANTY (sic). OTHERWISE, THE FOREGOING WARRANTY IS THE PURCHASER’S SOLE AND EXCLUSIVE REMEDY AND IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED. LG SHALL NOT BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OR A LOSS OF ANTICPATED BENEFITS OR PROFITS, LOSS OR IMPAIRMENT OF PRIVACY OF CONVERSATIONS, WORK STOPPAGE OR LOSS OR IMPAIRMENT OF DATA ARISING OUT OF THE USE OR INABILITY TO USE THE PRODUCT”
(a) and thereby representing that other than in respect of implied conditions or warranties regarding merchantable quality or fitness for purpose, a consumer of the specified model of the mobile telephones has only the benefit of a voluntary warranty provided for by the Respondent, whereas a consumer also has the benefit of non-excludable conditions and warranties implied by law, including the Trade Practices Act 1974, as to title, correspondence with description and correspondence with sample;
(b) and thereby further representing that an owner of a specified model of the mobile telephones has no right of action or remedy against the Respondent for incidental or consequential damages or a loss of anticipated benefits or profits, loss or impairment of privacy of conversation, work stoppage or loss or impairment of data arising out of the use or inability to use the product, whereas an owner has non-excludable statutory rights of action and remedies against the Respondent if a mobile telephone is not fit for a particular purpose; is not of merchantable quality; does not correspond to a description of the same or does not correspond with a sample of the same;
(c) and thereby further representing that a consumer has the benefit of any implied conditions or warranties of merchantable quality or fitness for purpose for the period of 1 year only from the date of supply, whereas by law, including the Trade Practices Act 1974, that period cannot be limited to 1 year.
4. The Respondent has contravened s.52 and s.53(g) of the Trade Practices Act 1974 by making the express statement in user manuals for mobile telephones identified by model number C3320 that:
“3. WARRANTY STATEMENT:
Except for those terms that cannot by law be excluded, all terms other than those expressly contained in this limited warranty statement are excluded. In the case of a warranty implied under the Trade Practices Act 1974, LG’s liability is limited to, in the case of goods, supplying the goods again or paying the cost of having them supplied again and, in case of services, supplying the services again or paying the cost of having them supplied again. To the extent permitted by law, LG excludes all liability (whether in contract, tort or otherwise) for any consequential, special, incidental or indirect loss or damage including loss of profit, loss or impairment of privacy of conversations, work stoppage or loss or impairment of data arising out of the use or inability to use the Product.”
(a) and thereby representing that the Respondent’s liability is limited to supplying the specified model of the mobile telephone again or paying the cost of having the mobile telephone supplied again, whereas a consumer has the benefit of non-excludable conditions and warranties implied by law, including the Trade Practices Act 1974, as to title, fitness for purpose, merchantable quality, correspondence with description and correspondence with sample;
(b) and thereby further representing that the Respondent’s liability is limited to supplying the specified model of the mobile telephone again or paying the cost of having the mobile telephone supplied again, whereas an owner has non-excludable statutory rights of action and remedies against the Respondent if a mobile telephone is not fit for a particular purpose; is not of merchantable quality; does not correspond to a description of the same or does not correspond with a sample of the same.
Injunction
5. An injunction restraining the Respondent, for a period of 3 years, whether by itself, its officers, employees or members or otherwise howsoever, in trade or commerce, from making representations to the effect that:
5.1. in respect of the marketability or fitness for a particular use of the Mobile Telephones, a consumer would only have the benefit of the voluntary warranty provided by the Respondent, as it was in lieu of all other warranties, including statutory conditions and warranties that would otherwise apply to the Mobile Telephones;
5.2. an owner of a Mobile Telephone would not have any right or remedy against the Respondent for consequential, indirect and special loss or damage caused by or due to failure of operation or malfunction of the product, or arising from the use or inability to use the product, in circumstance where the owner may, in fact have such a right or remedy;
5.3. other than in respect of implied conditions or warranties regarding merchantable quality or fitness for purpose of the Mobile Telephones, a consumer would only have the benefit of the voluntary warranty provided by the Respondent as it was in lieu of all other warranties express or implied including statutory conditions and warranties;
5.4. an owner of a Mobile Telephone would not have any remedy against the Respondent for incidental or consequential damages or a loss of anticipated benefits or profits, loss or impairment of privacy of conversations, work stoppage or loss or impairment of data arising out of the use or inability to use the product, in circumstances where the owner may, in fact have such a right or remedy;
5.5. that a consumer would only have the benefit of implied conditions or warranties relating to merchantable quality or fitness for purpose of the Mobile Telephones for a duration fixed by the voluntary warranty; or
5.6. in the case of a warranty implied under the Act, the Respondent's liability in respect of the Mobile Telephones is limited to supplying the goods again or paying the cost of having them supplied again.
Trade Practices Compliance Program
6. An order that the Respondent:
6.1. review its existing trade practices compliance program;
6.2. implement an upgraded trade practices compliance program in accordance with the requirements set out in "Annexure A" for the employees or other persons involved in the Respondent's business, being a program designed to minimise its risk of future breaches of Part V of the Act and to ensure their awareness of the responsibilities and obligations in relation to the requirements of sections 53(g) and 52 of the Act, ("the Program");
6.3. maintain and continue to implement the Program for a period of 3 years from the date of this Order; and
6.4. provide, at its own expense, a copy of any documents requested by the Applicant under clauses 8 and 10 of Annexure A.
Disclosure Orders
7. An order that the Respondent:
7.1. Within 30 days of the date of this Order, cause to be published on the website controlled by LG Electronics Inc (accessible via uniform resource locater addresses including http://www.lge.com.au and http://www.lg.com.au), for a period of 60 days the consumer notice in the form at "Annexure B" to this Order and use its best endeavours to ensure that such notice:
7.1.1. shall appear immediately upon access to the mobile telephone page of the Respondent's website, accessible via addresses including http://www.lge.com.au and http://www.lg.com.au;
7.1.2. shall be not less than 50% of the size of the computer screen;
7.1.3. shall have a bold type heading in at least 18 point type and the body of the notice shall be in a type not less than 12 points, Times New Roman font and right and left justified; and
7.1.4. shall include the logo of the Respondent at the top as appearing in Annexure B.
8. An order that the Respondent:
8.1. within 30 days of the date of this Order, cause to be published an advertisement, at its own expense, in terms of Annexure B to this order, in the following newspapers:
8.1.1. The Australian;
8.1.2 The Sydney Morning Herald;
8.1.2. The Age;
8.1.3. The Canberra Times;
8.1.4. The Courier-Mail;
8.1.5. The Northern Territory News;
8.1.6. The Advertiser;
8.1.7. The Mercury; and
8.1.8. The West Australian; and
8.2. use its best endeavours to ensure that such advertisements:
8.2.1. are within the first 20 pages of the newspapers;
8.2.2. are of a size not less than 120mm x 80mm;
8.2.3. are in a text which is in a type not less than 10 points; and
8.2.4. include the logo of the Respondent as appearing in Annexure B.
9. An order that the Respondent:
9.1. within 30 days of the date of this Order, provide each retailer of Mobile Telephones supplied by the Respondent with a notice that shall explain:
9.1.1. the existence of conditions implied into consumer contracts by sections 69, 70, 71 and 72 of the Act;
9.1.2. the existence of consumer rights pursuant to sections 74B, 74C and 74D of the Act;
9.1.3. the fact that, in the case of mobile phones, these rights and conditions can not be excluded, restricted or modified by either a manufacturer or retailer;
9.1.4. the fact that these rights and conditions may still apply after expiry of the period of the manufacturer’s express warranty; and
9.1.5. that it may therefore be misleading for a manufacturer or retailer to tell a consumer that he or she has no rights in relation to a fault because the period of the manufacturer’s express warranty has expired; and
9.2. and use their best endeavours to ensure that each retailer explains the contents of that notice or makes a copy of the notice available to its customer service staff.
Other Orders
10. The Respondent pay the Applicant’s costs to be agreed or, if no agreement is reached, to be taxed.
ANNEXURE A
TRADE PRACTICES COMPLIANCE PROGRAM
The Respondent will establish a Trade Practices Compliance Program (the Compliance Program) that complies with each of the following requirements:
Appointments
1. Within one month of the date of these Orders the Respondent will appoint a Director or a Senior Manager with suitable qualifications or experience in corporate compliance as Compliance Officer with responsibility for ensuring the Compliance Program is effectively designed, implemented and maintained.
2. Within two months of the date of these Orders the Respondent shall appoint a qualified, internal or external, compliance professional with expertise in trade practices issues (the Compliance Advisor). The Respondent shall instruct the Compliance Adviser to conduct a Trade Practices Act risk assessment (Risk Assessment) in accordance with i‑iv below:
(i) identify the areas where the Respondent is at risk of breaching Part V of the Trade Practices Act 1974 (the Act);
(ii) assess the likelihood of these risks occurring and the consequences of the risks to the business operations of the Respondent should they occur;
(iii) identify where there may be gaps in the Respondent's existing procedures for managing these risks; and
(iv) provide recommendations for action having regard to the assessment.
Compliance Policy
3. The Respondent will, within 30 days of the date of these Orders, issue a policy statement outlining the Respondent's commitment to trade practices compliance (the Compliance Policy). The Respondent will ensure that the Compliance Policy:
(i) is written in plain language;
(ii) contains a statement of commitment to compliance with the Act;
(iii) contains a strategic outline of how commitment to trade practices compliance will be realised within the Respondent;
(iv) contains a requirement for all staff to report any compliance related issues and trade practices compliance concerns to the Compliance Officer;
(v) contains a clear statement that the Respondent will take action internally against any persons who are knowingly or recklessly concerned in a contravention of the Act and will not indemnify them in respect of penalties that may be imposed in respect of such contraventions.
Complaints Handling System
4. The Respondent will ensure that the Compliance Program includes a trade practices complaints handling system. The Respondent will ensure that staff and customers are made aware of the complaints handling system.
Reports to Board/Senior Management
5. The Respondent will ensure that the Compliance Officer reports to the Board and/or senior management meetings every 6 months on the continuing effectiveness of the Compliance Program.
Training
6. The Respondent will ensure that the Compliance Program provides for regular (at least once a year) and practical trade practices training for all directors, officers, employees, representatives and agents of the Respondent, whose duties could result in them being concerned with conduct that may contravene Part V of the Act. The Respondent must ensure that the training is conducted by either a suitably qualified compliance professional or legal practitioner with expertise in trade practices law.
7. The Respondent will ensure that the Compliance Program includes a requirement that awareness of trade practices compliance issues forms part of the induction of all new directors, officers, employees, representatives and agents, whose duties could result in them being concerned with conduct that may contravene Part V of the Act.
Supply of Compliance Program Documents to the Applicant
8. The Respondent shall, at its own expense, within 3 months of the date of these Orders, cause to be produced and provided to the Applicant copies of each of the documents constituting the Compliance Program.
Review
9. The Respondent shall, at its own expense, cause annual Reviews of the Compliance Program (the Reviews) to be carried out in accordance with each of the following requirements:
(a) Independence of Reviewer - the Respondent shall ensure that the Reviews are carried out by a suitably qualified, independent compliance professional with expertise in trade practices law (the Reviewer). The Reviewer will qualify as independent on the basis that he or she:
(i) did not design or implement the Compliance Program;
(ii) is not a present or past staff member or director of the Respondent;
(iii) has not acted and does not act for the Respondent in any trade practices related matters;
(iv) has not and does not act for or consult to the Respondent or provide other services on trade practices related matters other than Compliance Program reviewing; and
(v) has no significant shareholding or other interests in the Respondent.
(b) Scope of the Reviews - the Reviews should be broad and rigorous enough to enable the Reviewer to reliably conclude that the Respondent has in place a program that complies with each of the requirements detailed in paragraphs 1‑7 above and to provide the Review reports and opinions detailed at paragraph 10 below;
(c) Evidence - the Respondent shall use its best endeavours to ensure that the Reviews are conducted on the basis that the Reviewer has access to all relevant sources of information in the Respondent's possession or control, including without limitation:
(i) enquiries of any officers, employees, representatives, agents and stakeholders of the Respondent;
(ii) the Respondent's records, including the Respondent's complaints register/reports and any documents relevant to the Respondent's training or induction program; and
(iii) documents created by the Respondent's consultants and legal practitioners for use in the Respondent's Compliance Program.
(d) The Respondent shall ensure that the first Review is completed within one year and one month of the date of these Orders and that each subsequent Review is completed within one year thereafter.
Reporting
10. The Respondent shall use its best endeavours to ensure the Reviewer sets out the findings of the Review in two separate reports as set out below:
(a) Company Compliance Program Review Report (to be provided to the Respondent)
The Respondent's Company Review Report will provide particular and specific information regarding the performance of the Compliance Program to the corporation including:
(i) If, and to what extent, the Compliance Program of the Respondent includes all the elements detailed in paragraphs 1‑7 above;
(ii) If, and to what extent, the Compliance Program adequately covers the parties and areas identified in the initial Risk Assessment;
(iii) If, and to what extent, the trade practices training is effective;
(iv) If, and to what extent, the Respondent's complaints handling system is effective; and
(v) Recommendations for rectifying deficiencies in (i)‑(iv) above that the Reviewer thinks are reasonable necessary to ensure that the Respondent maintains and continues to implement the Compliance Program in accordance with the requirements of these Orders.
(b) Commission Compliance Program Review Report (to be provided to the Applicant)
The Commission Review Report will provide particular and specific information regarding the scope of the Review and the effectiveness of the Compliance Program including:
(i) details of the evidence gathered and examined during the Review;
(ii) the name and relevant experience of the person appointed as the company Compliance Officer;
(iii) the Reviewer's opinion on whether the Respondent has in place a Compliance Program that complies with the requirements detailed in paragraph 1‑7 above;
(iv) the Reviewer's opinion on if, and to what extent, the Respondent has complied with the Compliance Program component of these Orders;
(v) actions recommended by the Reviewer to ensure the continuing effectiveness of the Respondent's Compliance Program;
(vi) confirmation that any actual and potential inadequacies in the Respondent's Compliance Program have been brought to the attention of the Compliance Officer and the Board;
(vii) confirmation that the Reviewer has revisited any actual and potential inadequacies in the Respondent's Compliance Program identified in any previous Company Compliance Program Review Report, and assessed how they have been addressed by the Respondent;
(viii) any reservations that the Reviewer might have about the reliability and completeness of the information to which the Reviewer had access in the conduct and reporting of the Review; and
(ix) any comments or qualifications concerning the Review process that the Reviewer, in his or her professional opinion, considers necessary.
11. The Respondent will ensure that the Review Reports are completed and provided to the Respondent within two months of each Review.
12. The Respondent will retain the Company Compliance Program Review Report and cause the Commission Compliance Program Review Report to be provided to the Applicant within 14 days of its receipt from the Reviewer.
13. Recommendations - the Respondent shall implement promptly and with due diligence any recommendations made by the Reviewer that are reasonably necessary to ensure that the Respondent maintains and continues to implement the Compliance Program in accordance with the requirements of these Orders.
ANNEXURE B
"CONSUMER NOTICE
Published by order of the Federal Court of Australia
[insert LG logo here]
Warranties for mobile telephones implied by law
Following legal action by the Australian Competition and Consumer Commission, the Federal Court has declared that LG Electronics Australia Pty Ltd (LG) made false and misleading representations in a number of its online user manuals for LG mobile telephones in breach of sections 53(g) and 52 of the Trade Practices Act 1974 (the Act).
The Court found that some of LG's online user manuals contained false, misleading or deceptive statements, including statements to the effect that:
11. consumers would only have the benefit of the voluntary warranty provided by LG, as it was in lieu of all other warranties, including statutory conditions and warranties, that would otherwise apply to the mobile telephones;
12. owners would not have any rights or remedies against LG for consequential, indirect and special loss or damage caused by failure of operation or malfunction of the mobile telephones;
13. in the case of some statutory conditions and warranties, LG's liability in respect of the mobile telephones was limited to supplying the goods again or paying the cost of having them supplied again; and/or
14. the duration of certain statutory conditions and warranties was limited to a period specified by LG.
LG informs consumers that the warranties and conditions implied into consumer contracts by the Act (and relevant State‑based Fair Trading legislation) and the remedies available to consumers if those warranties and conditions are breached cannot be excluded nor, in many cases, limited. Owners of goods also have certain other rights and remedies under the Act available directly against manufacturers that cannot be excluded or limited. Such conditions, warranties, rights and remedies are therefore available to consumers or owners of LG mobile telephones.
The Federal Court also made orders that LG:
1. be restrained from making representations to similar effect in the future;
2. be required to implement an upgraded trade practices compliance program;
3. cause the publication of consumer notices on its website and in a number of newspapers;
4. provide all retailers of its mobile telephones with a notice explaining consumer rights and remedies under the Act; and
5. pay the ACCC's costs.
For further information, contact LG."
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD 419 OF 2005 |
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BETWEEN: |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
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AND: |
LG ELECTRONICS AUSTRALIA PTY LTD ABN 98 064 531 264 Respondent
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JUDGE: |
SIOPIS J |
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DATE: |
4 JULY 2006 |
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PLACE: |
PERTH |
REASONS FOR JUDGMENT
1 On 29 December 2005 the applicant filed an application and statement of claim in which it alleged that the respondent had engaged in misleading or deceptive conduct in contravention of s 52 and s 53(g) of the Trade Practices Act 1974 (Cth) (‘the Act’).
2 The applicant claimed the respondent had in its user manuals misrepresented the rights which were available to consumers in respect of defects in certain models of LG mobile phones. On 17 March 2006 the respondent filed a defence which consisted essentially of admissions. The respondent thereby admitted that it had engaged in the alleged contraventions of the Act.
3 On 30 March 2006 the parties filed joint submissions in support of proposed orders which the parties have asked the Court to make by consent. At a directions hearing on 29 May 2006 I advised the parties that I was not content to make the declarations in the form which had been set out in the minute of proposed consent orders. The parties have now produced an amended minute of proposed orders which deals with objections that I had to the terms of the declaratory relief sought.
4 When dealing with an application for the Court to make orders by consent, the Court must satisfy itself that it has the power to make the orders. Further, the Court has a responsibility to be satisfied that what is proposed is not contrary to the public interest and is at least consistent with it. I adopt the following observations made by French J in the case of the Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at 86 (‘REIWA’) where his Honour said:
‘The question whether an undertaking is to be accepted or a consent order made is not concluded by finding that it is within the power of the court to do so. The power of the court to make orders sought is “defined and conferred by public law not by private agreement”…In the exercise of that power the court is not merely giving effect to the wishes of the parties, it is exercising a public function and must have regard to the public interest in doing so. This principle applies to the resolution of private litigation by consent orders or undertakings. A fortiori it applies to proceedings brought by the Crown or public or statutory authorities to enforce the law in the public interest...’
5 The following observations that French J made in Reiwa at 87 are also relevant to this case:
‘A general principle of judicial restraint in the scrutiny of proposed settlements was enunciated early in the history of the Trade Practices Act. It is not the function of the court to impede settlements between parties legally represented and able to understand and evaluate the desirability of agreeing to a settlement nor to refuse to give effect to terms of settlement by refusing to make orders or accept undertakings where they are within the court’s jurisdiction and are otherwise unobjectionable: Trade Practices Commission v Milreis Pty Ltd (No 2) (1978) 32 FLR 234 at 243 (Franki J). This approach extends to the submission of agreed pecuniary penalties: see Trade Practices Commission v Hymix Industries Pty Ltd (1995) ATPR 41‑369 (Lockhart J); Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Ltd (1996) ATPR 41‑457; Trade Practices Commission v Monier Roofing Ltd (1996) ATPR 41‑464. In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 141 ALR 640, Burchett and Kiefel JJ observed in their joint judgment (at 644):
“There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.”
Similarly, in relation to proposed consent orders and undertakings the Court will not simply substitute its own view of the orders or undertakings which it would have made if those proffered fall within the range of an appropriate disposition of the case.’
6 The relief which the applicant seeks is fourfold, namely, declarations, prohibitory injunctions, an order for the review and upgrading of the existing Trade Practices Compliance Program, and orders for the publication of notices in the nature of corrective advertising.
The declarations
7 The Court has power under s 21 of the Federal Court of Australia Act 1976 (Cth)to make binding declarations of right. The declaration must be directed toward the determination of legal controversies and not to answering abstract or hypothetical questions. In this case, I am satisfied that the declarations, which the applicant asks the Court to make, relate to a legal controversy in which the parties were engaged and which they have agreed to settle.
8 Next, I must determine whether it is appropriate for the Court to exercise its jurisdiction to make binding declarations. It is, in my view, appropriate to make the binding declarations proposed because this is a case which involves the public interest and the declarations will serve to vindicate the applicant's claim that the respondent contravened provisions of the Act. It may also be of assistance to the applicant in the future in carrying out the duties which are conferred on it by the Act. Further, the declarations will serve to mark the Court’s disapproval of the particular conduct engaged in by the respondent in contravention of the Act.
9 I adopt the observations of Lee J in the case of the Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd (2004) 207 ALR 329 at 333 where his Honour said:
‘…it may be said that there is some utility in declaring contraventions of the Act to have occurred in order to define and publicise the type of conduct that constitutes a contravention of the Act and to set out clearly the foundation on which the consequential orders by way of injunction and pecuniary penalty, including those based on accessorial liability, are grounded. …’
10 The initial objections that I had to the form of the declarations have now been remedied and, therefore, I am content to make the orders.
Prohibitory injunctions
11 I now turn to the prohibitory injunctions which are set out in para 5 of the minute of proposed orders. The Court’s power to make injunctions is to be found in these circumstances under s 80 of the Act.
12 Further, I am satisfied that there is a sufficient nexus between the contravening conduct by the respondent and the orders which are sought. I am also satisfied that the proposed injunctions are made in the public interest and that the injunctions will assist in preventing the recurrence of the contravening conduct. Accordingly, I will make the injunctions in the form in which they are set out in para 5 of the minute of proposed orders.
Trade Practices Compliance Program
13 The next order which is sought is in relation to the respondent upgrading its Trade Practices Compliance Program. That order is set out in para 6 of the minute of proposed orders. The Court has power to make orders of this nature on the application of the applicant under s 86C of the Act. Section 86C relevantly provides:
‘(1) The Court may, on application by the Commission, make one or more of the orders mentioned in subsection (2) in relation to a person who has engaged in contravening conduct.
(2) The orders that the Court may make in relation to the person are:
…
(b) a probation order for a period of no longer than 3 years;
…’
14 In my view there is also in this case a sufficient nexus between the terms of the proposed upgraded Trade Practices Compliance Program, which is proposed as Annexure A to the proposed orders, between the contravening conduct and the terms of the compliance program. I am also satisfied that the program sets out the steps that are to be taken with sufficient clarity so that it is able to be obeyed. I am also of the view that it is in the public interest that the respondent undertake this compliance program in order to assist it and its employees in complying with the Act and thereby benefiting consumers.
15 However, I will amend the proposed orders by the deletion of the words ‘within three months of the date of this order’ in para 6.2 of the proposed orders. In my view those words are unnecessary because the time limits are well set out in the compliance program itself.
Disclosure orders
16 Lastly, I turn to the question of what has been referred to as the ‘disclosure orders’. These are orders which require that the respondent place certain notices on its website and in newspapers circulating throughout Australia. The power of the Court to make orders of this nature, is to be found in s 86C(2)(d) of the Act, which provides:
‘…
(2) The orders that the Court may make in relation to the person are:
…
(d) an order requiring the person to publish, at the person’s expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order.
…’
17 It is the case that the Court is not to make orders under s 86C of the Act which are simply punitive, in the sense that the advertisements are not to be ordered solely for the purpose of announcing that the respondent has been successful in an application and, as French J expressed it in the REIWA case, had had ‘a win’.
18 It is important that the Court be satisfied that the disclosure notices are published in the public interest and are directed towards protecting the public interest and to dispelling incorrect impressions that may have been gained by the contravening conduct. In the case of Australian Competition and Consumer Commission v On Clinic Australia Pty Ltd (1996) 35 IPR 635 at 640, Tamberlin J described the position as follows:
‘The purpose of correcting advertising is to protect the public interest…Corrective advertising is intended to dispel incorrect or false impressions which may have been created as a result of deceptive or misleading conduct. It is not intended to be punitive. …’
19 In my view, the proposed disclosure orders are aimed at protecting the public interest by correcting the incorrect impressions which consumers may have gained as to their rights from the respondent’s publications in relation to defects in their mobile phones. It also raises public awareness about the true position in relation to implied conditions and consumer rights which exist under the Act. The notices are also directly related to the contraventions of the Act which have been declared.
20 As to the question of costs, the Court plainly has power to award costs and the cost orders that are proposed are appropriate.
21 Accordingly, for the reasons which I have set out above, I am prepared to make the orders sought in the amended minute of proposed orders.
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I certify that the preceding twenty‑one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. |
Associate:
Dated: 23 August 2006
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Counsel for the Applicant: |
Ms N Owen‑Conway |
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Solicitor for the Applicant: |
Australian Government Solicitor |
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Counsel for the Respondent: |
Ms C L Peterson |
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Solicitor for the Respondent: |
Blake Dawson Waldron |
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Date of Hearing: |
4 July 2006 |
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Date of Judgment: |
4 July 2006 |
