FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Pepe’s Ducks Ltd [2013] FCA 570

THE COURT DECLARES BY CONSENT THAT:

1    The Respondent (“Pepe’s Ducks”) has, in trade or commerce, by:

(a)    from at least about 2004 until about 2007, using the words ‘Open Range’ and an Outdoor Duck Picture on its packaging for its Duck Meat Products;

(b)    from at least about 2007, using the words ‘Open Range’ and/or ‘Grown Nature’s Way’ and an Outdoor Duck Picture on its packaging for its Duck Meat Products as shown in Annexures A and F to the Application;

(c)    from at least about 2004 until at least about April 2012, using the words ‘Open Range’ and an Outdoor Duck Picture on its delivery vehicles as shown in Annexure B to the Application;

(d)    from at least about 2007 until at least about April 2012, using the words ‘Open Range’ and/or ‘Grown Nature’s Way’ and an Outdoor Duck Picture on its delivery vehicles;

(e)    from at least about 2004 until about April 2012, using the words ‘Open Range’ and an Outdoor Duck Picture on its website;

(f)    from at least about 2007 until about April 2012, using the words ‘Open Range’ and/or ‘Grown Nature’s Way’ and an Outdoor Duck Picture on its website as shown in Annexure F to the Application;

(g)    from at least about 2010, using the words ‘Grown Nature’s Way’ and an Outdoor Duck Picture on signage as shown in Annexure B to the Application;

(h)    from at least about 2007 until about 30 April 2012, using the words ‘Grown Nature’s Way’ and an Outdoor Duck Picture on stationery and merchandise;

represented to the public in Australia that:

(i)    the Duck Meat Products it sells or offers for sale were or will be processed from ducks that were allowed to spend at least a substantial amount of their time outdoors;

(j)    the Duck Meat Products it sells or offers for sale were or will be processed from ducks that were allowed to spend at least a substantial amount of their time with access to an outdoor body of water;

(k)    the Duck Meat Products it sells or offers for sale were or will be processed from ducks that were allowed to spend at least a substantial amount of their time foraging for food outdoors;

(l)    the Duck Meat Products it sells or offers for sale were or will be of a different quality than duck meat products processed from barn-raised ducks;

when that was not the case, and thereby:

(m)    engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive, in contravention of:

(i)    section 52 of the TPA, for conduct engaged in up to 31 December 2010; and

(ii)    section 18 of the ACL, for conduct engaged in from 1 January 2011;

(n)    made a representation in trade or commerce, in connection with the supply or possible supply or promotion of the supply of goods, that was false or misleading as to the standard, quality, value and/or history of the goods, in contravention of:

(i)    section 53(a) of the TPA, for conduct engaged in up to 31 December 2010; and

(ii)    section 29(1)(a) of the ACL, for conduct engaged in from 1 January 2011.

THE COURT ORDERS BY CONSENT THAT:

1    Pepe’s Ducks, whether by itself, its servants, agents or howsoever otherwise, in connection with the supply or possible supply of, or the promotion by any means of, Duck Meat Products offered for sale, be restrained for a period of three years from the date of this Order, from using the words ‘Open Range’ or ‘Grown Nature’s Way or an Outdoor Duck Picture (without the words ‘Barn Raised’ prominently displayed in close proximity to the Outdoor Duck Picture), on any packaging, signage, website, delivery vehicle or stationery or merchandise supplied or displayed by Pepe’s Ducks, save that this injunction will not apply to:

(a)    the supply of frozen ducks by Pepe’s Ducks prior to 17 February 2013, to restaurants and BBQ shops, whether directly by Pepe’s Ducks or by specialist wholesalers, in packaging containing the words “Open Range” and/or “Grown Natures Way”, so long as the frozen ducks are:

(i)    supplied in boxes that do not display the words “Open Range” or “Grown Natures Way” (such words may be totally covered over by stickers); and

(ii)    accompanied with a prominent notice requiring that the ducks not be on-sold to retail consumers in their original packaging.

2    Pepe’s Ducks at its own expense shall:

(a)    by 1 February 2013 establish a Trade Practices Compliance Program which meets the requirements set out in Annexure A to this Order; and

(b)    maintain the Trade Practices Compliance Program for a period of 3 years from the date on which it was established.

3    Pepe’s Ducks at its own expense shall:

(a)    within 14 days of the date of this Order, send a notice in the form of Annexure B to this order to each customer that it is able to identify from its commercial records as being a customer to whom it has supplied Duck Meat Products during the two year period prior to the date of this order;

(b)    for a period of 90 days, publish on its Australian website homepage located at the URL http://www.pepesducks.com.au (“Pepe’s Ducks Homepage”) and on each of the internal webpages accessible by following the ‘click-through’ icons which appear on the Pepe’s Ducks Homepage (“Pepe’s Ducks Internal Webpages”), a notice in the terms and form of Annexure C to this Order (“Pepe’s Ducks Website Notice”) and ensure that:

(i)    the Pepe’s Ducks Website Notice shall be viewable by clicking a ‘click-through’ icon located on the Pepe’s Ducks Homepage and each of the Pepe’s Ducks Internal Webpages;

(ii)    the click-through icon referred to in the previous sub-paragraph (i) shall contain the words ‘click here – False and Misleading Conduct by Pepe’s Ducks Ltd – Notice Ordered by Federal Court of Australia’ and that text shall include the following characteristics:

(1)    the text shall have the size of 15 points in times new roman font;

(2)    the text shall appear in a black typeface on a white background and be centred unless otherwise stated;

(3)    the text shall appear in bold; and

(4)    the text shall appear at the top of the Pepe’s Ducks Homepage and Pepe’s Ducks Internal Webpages surrounded by clear space in proportion to 2 centimetres above and below the ‘click-through’ icon on a 22 inch desktop screen; and

(iii)        the Pepe’s Ducks Website Notice shall occupy the entire webpage that is accessible via the ‘click-through’ icon referred to above;

(c)    within 14 days of the date of this order display a notice in the form of Annexure C to this Order at the front of each of its business premises which shall be viewable to the public, and keep that notice on display for at least 90 days.

4    Pursuant to:

(a)    section 76E of the TPA, in respect of its conduct from 15 April 2010 until 31 December 2010 in contravention of section 53(a) of the TPA referred to in paragraph 1 of this Order; and

(b)    section 224 of the ACL, in respect of its conduct from 1 January 2011 in contravention of section 29(1)(a) of the ACL referred to in paragraph 1 of this Order;

on or before 25 January 2013, Pepe’s Ducks pay to the Commonwealth of Australia the sum of $375,000 by way of pecuniary penalty.

5    On or before 25 January 2013, Pepe’s Ducks pay the sum of $25,000 as a contribution to the ACCC’s costs of, and incidental to, this proceeding.

6    Schedule 1 and 2 to the Statement of Agreed Facts and Admissions dated 14 December 2012 be placed in a sealed envelope and marked ‘not to be opened without permission of a judge of the Court’.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    A person must not engage in conduct that is misleading or deceptive or likely to mislead or deceive. That command is one of the requirements imposed on persons engaged in trade and commerce by s 18 of the Australian Consumer Law, being Schedule 2 of the Competition and Consumer Act 2010 (Cth) (“the ACL”). A person must not, in trade or commerce, in connection with the supply of goods, make a false or misleading representation as to the standard, quality, value and/or history of the goods. That command is found in s  29(1)(a) of the ACL.

2    The respondent (“Pepe’s Ducks”) is a major producer and supplier of duck meat products in Australia. Since 2004, Pepe’s Ducks has promoted and sold duck meat products making representations to the effect that the ducks from which its products were processed, spent a substantial portion of their time outdoors and had access to an outdoor body of water. Contrary to those representations, the ducks were barn raised and did not have access to an outdoor body of water.

3    The Australian Competition and Consumer Commission (“the ACCC”) instituted proceedings against Pepe’s Ducks in July 2012 alleging that in making representations regarding the ducks used in its duck meat products, Pepe’s Ducks contravened ss 18 and 29(1)(a) of the ACL and also the former ss 52 and 53(a) of the Trade Practices Act 1974 (Cth) (“the TPA”). The TPA applies to Pepe’s Ducks conduct before 1 January 2011 and the ACL applies to conduct after that date. The relevant legislative provisions in place both before and after 1 January 2011 are not materially different and for the purposes of these reasons it will be convenient to refer for the most part to the provisions of the ACL.

4    Pepe’s Ducks admitted that the impugned representations made by the company contravened ss 18 and 29(1)(a) of the ACL and ss 52 and 53(a) of the TPA.

5    The parties filed a Statement of Agreed Facts as well as an Outline of Joint Submissions in support of consent orders for various forms of relief. On 18 December 2012, I agreed to make the orders sought. These reasons for judgement set out my reasons for making the orders then made.

The contravening representations

6    The contravening representations made by Pepe’s Ducks were set out in a detailed Statement of Agreed Facts and Admissions which (other than for its confidential schedules) is attached to these reasons. For present purposes those representations can be briefly summarised as follows.

7    From 2004 Pepe’s Ducks supplied duck meat products in plastic packaging and in boxes prominently displaying the words “Open Range” together with a pictorial representation of a duck in the outdoors, walking on grass in front of a lake with hills in the background (“the outdoor duck picture”). From 2007, the words “Open Range” were supplemented or replaced by the words “Grown Nature’s Way”.

8    Also from 2004, combinations of the “Open Range”, “Grown Nature’s way” and the outdoor duck picture representations adorned Pepe’s Ducks’ delivery vehicles, website and merchandise.

9     The parties jointly contended that Pepe’s Ducks’ conduct constituted the making of representations to the Australian public that the duck meat products it sold or offered for sale were or would be processed from ducks that were allowed to spend a substantial amount of their time outdoors, with access to an outdoor body of water and able to forage for food outdoors. It was also jointly contended that Pepe’s Ducks had represented that its duck meat products were or would be of a different quality than duck meat products processed from barn raised ducks.

10    Contrary to those representations, since 2004 some, and since 2007 all of the ducks raised and then processed by Pepe’s Ducks (including those raised by its contractors), were barn raised and not allowed to spend any of their time outdoors.

The applicable legislation

11    Section 18 of the ACL relevantly states:

(1)    A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

This section replaced s 52 of the TPA which was in substantially the same terms.

12    Section 29 of the ACL relevantly states:

(1)    A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

(a)    make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or

This section replaced s 53 of the TPA and while the wording of the two provisions differs slightly, those differences are not material to the present case.

The orders sought

13    Pepe’s Ducks admitted its conduct contravened the ACL and TPA and consented to the making of orders which I have made. Those orders included declarations, injunctions, corrective measures, a pecuniary penalty of $375,000 and an order that Pepe’s Ducks pay $25,000 towards the ACCC’s legal costs.

14    The consent of the parties to the relief sought is a consideration of some importance. However, the question of relief remains in the discretion of the Court. The Court must be satisfied that it has the power to grant the relief the parties have agreed to and that the proposed penalties are appropriate in all the circumstances. Having examined each of the relevant considerations, I was satisfied that the orders proposed by Pepe’s Ducks and the ACCC were appropriate. I will set out my reasons for making each of the orders that I made.

Pecuniary Penalty

The guiding legal principles

15    Section 224(1)(a)(ii) of the ACL empowers the Court, in respect of a contravention of s 29, to order a contravener to pay “such pecuniary penalty, in respect of each act or omission…as the court determines to be appropriate”. While the legislation requires the Court to have regard to “all relevant matters”, there are three mandatory considerations expressly specified by s 224(2). They are:

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and

(b)    the circumstances in which the act or omission took place; and

(c)    whether the person has previously been found by a court in proceedings under Chapter 4 or this Part to have engaged in any similar conduct.

16    Section 224(2) of the ACL is in substantially identical terms to the former s 76E(2) of the TPA. A number of judgments of this Court have confirmed that (with some exception) the guiding principles relevant to the imposition of a civil penalty under the former s 76 of the TPA (which dealt with penalties for restrictive trade practices) had application to s  76E(2): see the cases referred to at [20] of Australian Competition and Consumer Commission v Harvey Norman Holdings Limited [2011] FCA 1407 (Collier J) and see further Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629 at [59]-[61] (Murphy J). Given the substantial identicality of s 224(2) and the former s 76E(2), it follows that the guiding principles developed for the former s 76 of the TPA are of relevance.

17    A checklist of matters which judges of this Court have regarded as of assistance is set out in the judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 292. An updated checklist of guiding considerations is set out by Perram J in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 at [11]. On appeal, that checklist was referred to without demur by Keane CJ, Finn and Gilmour JJ at [37] of Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249. The list identifies the relevant non-mandatory factors to include:

    •    the size of the contravening company;

•    the deliberateness of the contravention and the period over which it extended;

•    whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;

•    whether the contravener has a corporate culture conducive to compliance with [the ACL] as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention;

•    whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of [the ACL] in relation to the contravention;

•    whether the contravener has engaged in similar conduct in the past;

•    the financial position of the contravener; and

•    whether the contravening conduct was systematic, deliberate or covert.

18    However, before turning to the mandatory and non-mandatory factors which need to be considered in the application of s 224 of the ACL, there are two other important considerations that should be emphasised. The first is that many authorities have recognised that the primary reason for the imposition of a penalty in the context of a provision such as s 224, is the need to deter repetition of the contravening conduct by the contravener (‘the need for specific deterrence’) and to deter others who might be tempted to engage in similar contraventions (‘the need for general deterrence’): Singtel Optus at [41] and [62]-[64] (Keane  CJ, Finn and Gilmour JJ); Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] FCA 855 at [76] (Murphy J); Australian Competition and Consumer Commission v Gourmet Goody’s Family Restaurant Pty Ltd [2010] FCA 1216 at [10] (Jagot  J); TPG Internet (No 2) at [63]-[66] (Murphy J).

19    As the Full Court in NW Frozen Foods said at 294-295:

The Court should leave no room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay…

20    In Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) (2002) 190 ALR 169 at [17]-[18], Finkelstein J observed that deterrence was the means by which a corporation is to be hindered from engaging in contravening conduct and that it followed that the penalty must be set “at a meaningful level”. That is, it must be sufficiently large to be an effective deterrent.

21    More recently, the Full Court in Singtel Optus at [63] emphasised that a penalty must be fixed so that:

Generally speaking, those engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention.

22    The Full Court continued at [68] that:

The court must fashion a penalty which makes it clear to [the contravener], and to the market, that the cost of courting a risk of contravention of the Act cannot be regarded as [sic] acceptable cost of doing business.

23    The other matter of importance which requires due recognition is that an agreement has been reached between Pepe’s Ducks and the ACCC as to the appropriate relief. As the parties have proposed an agreed penalty to be imposed in this proceeding, the relevant question for the Court is different to that which would otherwise have been the case. In the context of an agreed penalty, the Court’s task is to assess whether the agreed penalty is “appropriate in all the circumstances”: Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [51] (Branson, Sackville and Gyles JJ), where the Full Court adopted the reasoning of Burchett and Kiefel JJ (with whom Carr J agreed) in NW Frozen Foods at 298-299.

24    In Mobil at [51], the Full Court listed the principles enunciated in NW Frozen Foods including that:

    it is the Court’s responsibility to determine the appropriate penalty;

    determining the quantum of a penalty is not an exact science;

    there is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy;

    the view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty;

    in determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case;

    where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so in the circumstances of the case;

    where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement;

    the question is whether that figure is, in the Court’s view, appropriate in the circumstances of the case;

    in answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure; and

    the agreed penalty will be appropriate if within the ‘permissible range’.

25    In Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [129], Jessup  J expressed the view, which a number of judges (including myself) have agreed with, that the phrase “permissible range” may be regarded as referring to that range that would be permitted by the Court, which is neither manifestly inadequate nor manifestly excessive: Hills v Sutton [2007] FCA 2033 at [7] (Tracey J); Wells v Locarno Management Pty Ltd [2008] FCA 1034 at [23] (Jessup J); Alfred v Construction, Forestry, Mining and Energy Union [2011] FCA 556 at [68] (Tracey J); Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2012] FCA 189 at [22] (Bromberg J); Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479 at [23] (Bromberg J).

26    Under the former ss 76E(3) of the TPA and under s 224(3) of the ACL the maximum penalty for each act or omission by a body corporate is $1.1 million. Where conduct constitutes a contravention of two or more penalty provisions, s 224(4) and the former s 76E(4) provide that a person will not be liable to more than one pecuniary penalty in respect of the same conduct.

Is the proposed penalty within the permissible range?

27    Pepe’s Ducks’ contraventions of the TPA and ACL are very serious. They had the potential to mislead a large number of consumers, to divert customers from law abiding competitors and to generate a positive perception of the company in the market that was based on falsehoods. Of most concern is the deliberate nature of the company’s conduct in misleading customers and taking advantage of consumer preferences over a lengthy period of time. Pepe’s Ducks did not seek to deny the deliberateness of its conduct and there was no evidence or submission made directed to excusing or explaining the conduct.

28    Pepe’s Ducks is a company of considerable size that supplies 40% of the Australian market for duck meat products, selling around 80,000 ducks each week. I was provided with financial information of the company for the past 5 financial years on a confidential basis which left me in no doubt that Pepe’s Ducks has the means to pay a substantial penalty.

29     The size and financial position of the company also indicate that it is likely Pepe’s Ducks takes a sophisticated and deliberate approach to the marketing of its duck meat products. The company would clearly have been aware of increasing concern among consumers regarding sources of food and the treatment of animals used to produce food products. Pepe’s Ducks would also have been aware that many consumers prefer products that are sustainably produced with reasonable concern for animal welfare and that many consumers are prepared to pay a premium for such products.

30    Pepe’s Ducks deliberately sought to take advantage of these consumer preferences by employing as part of its primary promotional message, terms and pictures designed to appeal to such consumers. This was done despite the fact the representations made were known to be false and, I would infer, recognised to be misleading or deceptive.

31    It was not possible to say with certainty how Pepe’s Ducks false and misleading claims impacted upon the company’s financial performance and how many consumers were misled. Nor was it possible to attribute a dollar figure to the loss and damage suffered by consumers. I was however satisfied that Pepe’s Ducks’ conduct was likely to have impacted on a very large number of people who chose to consume Pepe’s Ducks’ products on the basis that they believed those products to have attributes which they did not have. It is also likely to have led to a substantial increase in the market share of Pepe’s Ducks at the expense of its law abiding competitors.

32    Pepe’s Ducks admits that senior management were at all times aware of the representations being made and the fact that the ducks from which duck meat products were produced were barn raised.

33    I was prepared to give Pepe’s Ducks some credit for its disposition to cooperate with the ACCC. That cooperation was demonstrated by the company’s willingness to cease making certain contravening representations when concerns were first raised by the ACCC about the misleading and deceptive nature of Pepe’s Ducks’ marketing claims. Pepe’s Ducks agreed to the proposed penalties and participated in the making of joint submissions, which avoided the need for a contested trial and the diversion of substantial ACCC resources for the conduct of that trial. That acknowledgement of the company’s liability entitled Pepe’s Ducks to a reduction in the amount of the penalty that would otherwise be assessed: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 at [40]–[41] (Goldberg J).

34    I also gave some weight to the fact that Pepe’s Ducks had not previously been found by a court to have engaged in similar conduct.

35    It is well recognised that the primary reason for the imposition of a penalty, in the context of a provision such as s 224, is the need to deter repetition of the contravening conduct by the contravener and to deter others who might be tempted to engage in similar contraventions: Singtel Optus at [41], [62]-[64] and [68] (Keane CJ, Finn and Gilmour JJ); NW Frozen Foods at 294-295 (Burchett and Kiefel JJ, with whom Carr J agreed).

36    A substantial pecuniary penalty was appropriate in this case in order to ensure that Pepe’s Ducks and others are deterred from making false or misleading claims regarding the nature and quality of the products they offer for sale. However, in assessing the level of deterrence that ought be reflected in the amount of the pecuniary penalty, I took into account that a range of corrective orders have been made in addition to the pecuniary penalty, which also serve to deter Pepe’s Ducks and others from engaging in similar conduct in the future.

37    Courts often consider the maximum pecuniary penalty available in determining the appropriate penalty for contraventions of the ACL. As referred to earlier, the maximum penalty for a body corporate provided for under the relevant legislation is $1.1 million in respect of each contravention.

38    In cases such as the present there is often uncertainty as to how many contraventions should be attributed to similar conduct, which occurred in a range of arenas over an extended period of time. Where one course or pattern of conduct is involved, it will often be appropriate, in order that a contravener not be dealt with twice for the same conduct, to characterise the contravening conduct as constituting a single course of conduct: see for example the single advertising campaign referred to by Tracey J in Australian Competition and Consumer Commission v Turi Foods Pty Ltd (No 2) [2012] FCA 19 at [38]. Alternatively, it may be appropriate to group distinct aspects of the conduct into categories and apply a single penalty to each category. In Singtel Optus at [53]-[55] (Keane CJ, Finn and Gilmour JJ), misleading representations were made repeatedly in various media and the Full Court regarded multiple representations in each medium of communication formed a single contravention.

39    In this case the parties agreed on a global penalty for all contraventions without identifying the number of contraventions in respect of which the penalty ought be imposed. I did not think it necessary to engage in the complex exercise of determining the precise number of contraventions. As Middleton J said in Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [235], in a passage cited with approval by the Full Court in Singtel Optus at [53]:

In the final analysis, in applying the totality principle, the question is one of discretion in coming to the correct, adequate and appropriate penalties.

40    In some instances courts have looked to the quantum of pecuniary penalties imposed in similar cases as a point of reference for determining the appropriate penalty in a particular case. The parties referred in their joint submissions to Turi Foods (No 2) as it involved similar kinds of representations made in the context of the market for poultry. However, the Full Court has cautioned against making comparisons between cases involving different combinations of circumstances: Singtel Optus at [60] (Keane CJ, Finn and Gilmour JJ). In Turi Foods (No 2), the contravening representations were made in two separate promotions that had limited circulation and also appeared on signage on the side of the respondent’s delivery trucks. The representations were to the effect that the chickens raised by the respondent in barns had substantial room to move, which the respondent agreed was misleading. Given the substantially different circumstances of the contraventions, I have not found that case to be of assistance. The same can be said in relation to a recent decision of Murphy J in Australian Competition and Consumer Commission v Kingisland Meatworks & Cellars Pty Ltd [2013] FCA 48, which involved misleading representations about the geographical origin of meat products sold by the respondent.

ACCC decision not to fully pursue its costs

41    The ordinary rule in civil proceedings is that costs follow the event. The ACCC was entitled in these proceedings to seek a costs order against Pepe’s Ducks. Instead the ACCC agreed, as part of the settlement, to accept payment of $25,000 in respect of its costs. This sum appears to be an inadequate reflection of the ACCC’s true costs in the matter and the ACCC confirmed that this was the case. The ACCC’s likely party/party costs were about $60,000-$70,000.

42    In the absence of the ACCC pursuing its costs in full, an inference may be drawn that the proposed penalty was agreed to as an all up figure which reflected in part, the preparedness of the ACCC not to fully pursue its costs. During the hearing I raised my view that such an inference was open. I raised this concern in part because I was conscious that the extent of the financial penalty in one case may be used for comparative purposes to identify appropriate penalties in other cases. If this is to be done, it is important that like be compared with like and that proposed penalties which have been negotiated on the basis that the ACCC will not fully pursue its costs, should be identified as such.

Conclusions regarding pecuniary penalty

43    The imposition of a penalty is a discretionary exercise, involving the synthesising of relevant factors in order to arrive at a conclusion as to where the contravener’s conduct sits on a scale of wrongdoing set by reference to the maximum penalty which could be imposed. Taking that approach to the question of whether the proposed penalty is appropriate, in the context of the relevant factors earlier identified, I have concluded that it is.

44     I arrived at that view despite some reservations. A pecuniary penalty of $375,000 is a moderate fine in light of the contraventions involved and the size of the offending company. However, when considered in combination with the other relief, the penalty is not manifestly inadequate and thus is within the permissible range.

45    I have also arrived at my conclusion in light of the regulator’s view that the agreed penalty is appropriate. Further, there is a public interest in courts exercising restraint in overly scrutinising proposed settlements so that settlements may be encouraged and potentially lengthy and expensive litigation avoided.

Declarations

46    The parties agreed to the making of declarations in the form set out in the orders made.

47    Section 21 of the Federal Court of Australia Act 1976 (Cth) provides the Court with a broad discretion to make declarations. The considerations relevant to its exercise are well known and the Court’s discretion is wide.

48    I was satisfied that the proposed declarations:

    serve to identify Pepe’s Ducks’ contravening conduct: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 100; Australian Competition and Consumer Commission v Chen (2003) 132 FCR 309 at [35]-[36];

    are an appropriate vehicle to record the Court’s disapproval of the contravening conduct: Australian Competition and Consumer Commission v Goldy Motors Pty Ltd [2000] FCA 1885 at [34];

    are of some assistance to the ACCC in the future in carrying out the duties which are conferred upon it by the Act: Goldy Motors at [34]; and

    may deter corporations from contravening the ACL: Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd (2004) 207 ALR 329 at [22].

Injunctions

49    The parties agreed to the grant of an injunction to restrain Pepe’s Ducks from engaging in the same contravening conduct in future. Under s 232 of the Act the Court has broad discretion to grant injunctive relief. I was satisfied the proposed injunction was an appropriate order for the Court to make.

Corrective Notices

50    Pepe’s Ducks agreed to publish corrective notices in a specified form on its website, at the front of each of its business premises and to send a copy of a corrective notice to each customer that it is able to identify from its commercial records as being a customer to whom it supplied duck meat products over the past two years.

51    This is an important form of relief as it is intended to dispel false impressions created by the false and misleading conduct of Pepe’s Ducks. Many retail and wholesale customers would have purchased Pepe’s Ducks products out of concern for animal welfare or because they believed, rightly or wrongly, that duck meat products produced from ducks of the nature represented by Pepe’s Ducks, were of superior quality. It is important that these customers are disabused of any false impression created by Pepe’s Ducks’ representations.

52    Section 246(2)(c) of the ACL gives the Court power to make orders compelling the publication of corrective notices and I regarded that as an appropriate remedy in this case.

Compliance Program

53    Section 246(2)(6) of the ACL empowers the Court to make orders compelling Pepe’s Ducks to take action designed to guard against Pepe’s Ducks engaging in similar offending conduct in future. The maximum duration for such an order is three years.

54    Pepe’s Ducks consented to orders requiring the company to establish a Trade Practices Compliance Program which must meet detailed requirements specified by the ACCC. These requirements include the appointment of a compliance officer, the conduct of a risk assessment, the development of a compliance policy, the establishment of a complaints handling system, staff training, provision for external review and a mechanism for mandatory feedback to the ACCC. Pepe’s Ducks will be required to maintain the program for three years from the date it is established.

55    Given Pepe’s Ducks prolonged and deliberate violation of trade practices laws, this order was entirely appropriate to safeguard against future violations.

Costs

56    The orders I have made also reflect the agreement that Pepe’s Ducks pay the legal costs of the ACCC in the amount of $25,000.

Associate:

Dated:    14 June 2013

ANNEXURE

Statement of Agreed Facts and Admissions

1.    This Statement of Agreed Facts and Admissions (Statement) is made jointly by the Applicant (ACCC) and the Respondent (Pepe’s Ducks) for the purposes of section 191 of the Evidence Act 1995 (Cth).

2.    This Statement deals with conduct that is agreed to have principally taken place from about 2004 to about April 2012 in relation to the promotion by Pepe’s Ducks for sale of duck meat, carcasses and fat (Duck Meat Products).

3.    The facts and the admissions made herein are agreed to for the purpose of these proceedings only and do not constitute any admission outside the context of these proceedings.

4.    The ACCC and Pepe’s Ducks have reached agreement as to the relevant facts regarding the conduct that gives rise to the contraventions. These facts are set out below.

Parties

5.    The ACCC is:

(a)    a body corporate established by section 6A of the Competition and Consumer Act 2010 (Cth) (CCA); and

(b)    entitled to sue in its corporate name.

6.    Pepe’s Ducks is and was at all material times:

(a)    a company duly incorporated pursuant to the Corporations Act 2001 (Cth);

(b)    able to be sued in its corporate name;

(c)    a trading corporation formed within the limits of Australia; and

(d)    a corporation within the meaning of the CCA and the Trade Practices Act 1974 (Cth), as in force immediately before 1 January 2011 (TPA).

7.    Pepe’s Ducks has at all material times carried on business:

(a)    growing ducks, including by contracting others to grow ducks for it;

(b)    processing, including slaughtering, ducks; and

(c)    supplying Duck Meat Products to wholesalers, distributors, retailers and individual consumers in Australia.

8.    Pepe’s Ducks has a market share of about 40% for its Duck Meat Products. A summary of its net revenue and profit after income tax figures, resulting from its sale of Duck Meat Products, for each of the financial years from 2008 to 2011/2012 is set out in CONFIDENTIAL Schedule 1. A bundle of financial statements for each of those financial years is contained in CONFIDENTIAL Schedule 2.

9.    During 2011, Pepe’s Ducks’ sales levels of ducks in Australia was about 80,000 ducks per week.

10.    Pepe’s Ducks’ retail customers for its Duck Meat Products were predominantly restaurants, barbecue shops, butcher shops and supermarkets.

Pepe’s Ducks’ Conduct

Packaging

11.    From 2004 until about 2007, Pepe’s Ducks supplied Duck Meat Products in plastic packaging and in boxes prominently displaying on the front of the packaging and on the sides of the boxes:

(a)    the words ‘Open Range’; and

(b)    a pictorial representation of a duck in the outdoors, walking on grass against a background of a lake and with hills behind (Outdoor Duck Picture).

12.    From 2007 to around April 2012, Pepe’s Ducks supplied Duck Meat Products in plastic packaging and in boxes prominently displaying on the front of the packaging and on the sides of the boxes:

(a)    an Outdoor Duck Picture; and

(b)    the words ‘Open Range’; and/or

(c)    the words ‘Grown Nature’s Way’.

Two examples of such packaging are in Schedule 3. An example of a box used from about 1980 to about April 2012 is in Schedule 4.

13.    Since about April 2012, Pepe’s Ducks has continued to supply frozen ducks to butcher shops, restaurants, Asian barbeque shops and wholesalers, in old packaging containing the words 'Open Range' and 'Grown Nature’s Way' and in boxes prominently displaying the words 'Open Range'.

14.    Save for the supply of the frozen ducks, since about 1 May 2012, Pepe’s Ducks has ceased using the words ‘Open Range’ or ‘Grown Nature’s Way’ in relation to its sale of Duck Meat Products, and it has since that time used new packaging without those words.

Delivery vehicles

15.    Since at least 2004, Pepe’s Ducks has delivered some of its Duck Meat Products in numerous delivery vans. From 2004 until April 2012 Pepe’s Ducks delivered its Duck Meat Products in a delivery vehicle that had prominently displayed on the sides of the vehicle:

(a)    the words ‘Open Range’; and

(b)    an Outdoor Duck Picture.

16.    A photograph of that delivery vehicle is in Schedule 5.

17.    From about 2007, Pepe’s Ducks delivered its Duck Meat Products in five delivery vehicles that had prominently displayed on the sides of the vehicle:

(a)    the words ‘Grown Nature’s Way’; and

(b)    an Outdoor Duck Picture;

and between October 2009 and November 2011 the words ‘Grown Nature’s Way’ were removed from those delivery vehicles.

Website

18.    From 2004 until April 2012, Pepe’s Ducks operated a website to promote the sale of its Duck Meat Products at the URL www.pepesducks.com.au (the Website) on which it published or caused to be published:

(a)    the words ‘Open Range’; and

(b)    an Outdoor Duck Picture.

19.    Since at least about 2007 until April 2012, the Website also prominently featured the words ‘Grown Nature’s Way'.

20.    Print-outs of relevant pages from the Website are in Schedule 6.

Stationery and other merchandise

21.    Since at least about 2007 until 30 April 2012, Pepe’s Ducks used stationery and supplied merchandise, including calendars, pens, key rings, cups, umbrellas and aprons displaying the words ‘Grown Nature’s Way’ and an Outdoor Duck Picture in the course of promoting its sale of Duck Meat Products.

22.    A photograph of a sample calendar for 2012 displaying the words ‘Grown Nature’s Way’ and an Outdoor Duck Picture is shown in Schedule 7.

23.    An image showing stationery and business cards used by Pepe's Ducks and displaying the words ‘Grown Nature’s Way’ and an Outdoor Duck Picture is shown in Schedule 8.

Pepe's Ducks' customers

24.    During the period from 15 April 2010 to 18 April 2012, Pepe's Ducks supplied Duck Meat Products in the packaging as shown in Schedule 4, and generally packed 8 to a box using the box as shown in Schedule 4:

(a)    to a total of about 418 different restaurants in New South Wales. Collectively these restaurants were supplied about 6,190 ducks per week on average;

(b)    to a total of about 174 different butcher shops in New South Wales and Queensland. Collectively these butcher shops were supplied about 7,160 ducks per week on average, 28% of which was sold as cut up ducks or duck pieces in plain clear packaging;

(c)    to a total of about 51 wholesalers, who in turn supplied interstate restaurants and butchers. Collectively these wholesalers were supplied about 15,200 ducks per week on average;

(d)    to a total of about 340 supermarkets. Collectively these supermarkets were supplied about 500 ducks per week on average;

(e)    to a total of about 42 Asian barbeque shops. Collectively these Asian barbeque shops were supplied about 22,400 ducks per week on average.

25.    During the relevant penalty period from 15 April 2010 until 18 April 2012, Pepe's Ducks also supplied frozen ducks in packaging and boxes containing the representations, to restaurants, wholesalers, supermarkets and Asian barbeque shops, supplying approximately 23,000 - 25,000 ducks per week on average.

26.    During this period, Pepe's Ducks also supplied Duck Meat Products in plain clear packaging and in cartons containing the representations to Asian barbeque shops in New South Wales. Collectively these Asian barbeque shops were supplied 40 boxes per week on average being a total of about 320 ducks.

27.    From approximately 19 April 2012 to the present date, Pepe's Ducks also supplied frozen ducks in packaging and boxes containing the representations, to restaurants, wholesalers, supermarkets and Asian barbeque shops, supplying approximately 12,000 ducks per week on average.

Signage

28.    Pepe's Ducks provided the signage shown in Schedule 9 to a stall holder at the Eveleigh Farmers’ Market, featuring the words ‘Grown Nature’s Way’ and an Outdoor Duck Picture, and authorised that stall holder to use that sign for the purpose of selling Pepe’s Ducks’ Duck Meat Products.

Conditions in which Pepe’s Ducks raised its ducks

29.    Until about 2004, Pepe’s Ducks allowed its ducks to roam in the open air during the day.

30.    However, since at least about 2004 some, and since at least about 2007 all, of the ducks raised and then processed by Pepe’s Ducks, including those ducks raised by its contractors, were, with the knowledge of Pepe’s Ducks, barn raised and:

(a)    those ducks were not allowed to spend any of their time outdoors;

(b)    those ducks were not allowed to spend any of their time with access to an outdoor body of water;

(c)    those ducks were not allowed to spend any of their time foraging for food outdoors; and

(d)    the Duck Meat Products produced from those ducks were not of a different quality than duck meat processed from barn-raised ducks.

Response to ACCC Correspondence

31.    On 27 March 2012, the ACCC wrote to Pepe’s Ducks to raise its concerns in relation the conduct of Pepe’s Ducks. Solicitors acting for Pepe’s Ducks provided initial responses to that letter on 11 April 2012 and 18 April 2012. The 18 April 2012 letter set out steps that Pepe’s Ducks had undertaken to remove signage and redesign packaging to remove the words ‘Open Range’ and ‘Grown Nature’s Way’ and to close down its website.

The contravening conduct

32.    By:

(a)    using the packaging referred to in paragraphs 11 to 14 above;

(b)    using the delivery vehicles referred to in paragraphs 15 to 17 above;

(c)    using the Website referred to in paragraphs 18 to 20 above; and

(d)    using the stationery and other merchandise referred to in paragraphs 21 to 23 above;

Pepe’s Ducks has in each instance made each of the following representations to the public in Australia in trade or commerce:

(e)    the Duck Meat Products it sold or offered for sale were or would be processed from ducks that were allowed to spend at least a substantial amount of their time outdoors;

(f)    the Duck Meat Products it sold or offered for sale were or would be processed from ducks that were allowed to spend at least a substantial amount of their time with access to an outdoor body of water;

(g)    the Duck Meat Products it sold or offered for sale were or would be processed from ducks that were allowed to spend at least a substantial amount of their time foraging for food outdoors;

(h)    the Duck Meat Products it sold or offered for sale were or would be of a different quality than duck meat products processed from barn-raised ducks

(together, the Representations).

33.    By making each of the Representations, Pepe’s Ducks:

(a)    engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive, in contravention of:

(i)    section 52 of the TPA, insofar as the conduct occurred before 1 January 2011; and

(ii)    section 18 of the Australian Consumer Law (ACL), insofar as the conduct occurred on or after 1 January 2011;

(b)    made a representation in trade or commerce, in connection with the supply or possible supply or promotion of the supply of goods, that was false or misleading as to the standard, quality, value and/or history of the goods, in contravention of:

(i)    section 53(a) of the TPA, insofar as the conduct occurred before 1 January 2011; and

(ii)    section 29(1)(a) of the ACL, insofar as the conduct occurred on or after 1 January 2011.

34.    When it made each of the Representations referred to in paragraph 32 above, Pepe’s Ducks knew (including by its senior management) the facts alleged at paragraph 30 above.