FEDERAL COURT OF AUSTRALIA

Australian Consumer and Competition Commission v Moonah Superstore Pty Ltd [2013] FCA 1314

THE COURT ORDERS THAT:

1.    The Court declares, pursuant to section 21 of the Federal Court of Australia Act 1976 (Cth), that in making the oral statements listed at paragraph 1(a) and (b) of the Originating Application filed on 12 June 2013 in the Proceeding, the Respondent:

(a)    made representations in connection with the supply or possible supply of goods or services that were false or misleading and concerned the existence, exclusion or effect of guarantee, right or remedy available under the consumer guarantee provisions in Division 1 of Part 3-2 to the Australian Consumer Law (‘the ACL’) being Schedule 2 to the Competition and Consumer Act 2010 (Cth), and the remedies relating to those guarantees in Part 5-4 of the ACL in contravention of section 29(1)(m) of the ACL; and

(b)    in doing so, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the ACL.

2.    Pursuant to section 232 of the ACL, the Respondent is restrained (whether by itself, its servants, agents or otherwise howsoever) for a period of three years from the date of these orders from making representations (whether oral or written) to any customer to the effect that the Respondent:

(a)    does not have an obligation to provide remedies in relation to goods supplied by it independently of the manufacturer;

(b)    does not have an obligation to determine whether any remedy by way of replacement is available to a consumer in relation to goods supplied by it, as such a determination will be made by the manufacturer; and

(c)    is not able to determine whether any remedy by way of replacement is available to a consumer in relation to goods supplied by it (and the consumer is similarly not able to make such a determination), as such a determination will be made by the manufacturer.

3.    Pursuant to sections 224(1)(a)(ii) and 228 of the ACL, the Respondent is to, within 28 days of the date of these Orders, pay to the Commonwealth a pecuniary penalty in respect of the contravention of section 29(1)(m) of the ACL in the amount of $28,000.

4.    Pursuant to section 246(2) of the ACL, the Respondent is to, within 28 days of the date of these Orders, prominently display at the point of sale of every product supplied by the Respondent during the operation of a retail sales service undertaken under the name Harvey Norman a copy of the summary of consumer rights under the ACL at Annexure A of the Originating Application for a period of three years.

5.    Pursuant to section 246 of the ACL, from 28 February 2014 or 28 days after the date the court orders are made as agreed whichever is later (‘the Commencement Date’),

(a)    the Respondent is to:

(i)    for a period of one year following the Commencement Date, implement its own compliance program to be undertaken by each employee of the Respondent with respect to the rights available to consumers under the ACL (including the consumer guarantees in Division 1 of Part 3-2 of the ACL and the remedies relating to those guarantees in Part 5-4 of the ACL) (‘the Consumer Law Compliance Program’). The Consumer Law Compliance Program must conform to the compliance standards set out in the Australian Standard on Compliance Programs (AS 3806-2006);

(ii)    for a period of two years thereafter, participate in a consumer law compliance program to be recommended by subsidiaries of Harvey Norman Holdings Limited to all franchisees trading under the “Harvey Norman ®” name in Australia and made available for the participation of their employees; and

(b)    the Respondent is to, no later than 28 days after the Commencement Date, serve on the ACCC an affidavit verifying that, in conformity with these Orders, it has complied with its obligation under Order 4 and it has implemented the Consumer Law Compliance Program under Order 5(1) above.

6.    Each party is to bear their costs of the Proceeding and all previous costs orders in the Proceeding be vacated.

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

REASONS FOR JUDGMENT

INTRODUCTION

1    The Applicant (‘ACCC’) seeks pecuniary, declaratory and other relief against the Respondent (‘Moonah Superstore’).

2    Moonah Superstore is a franchise of Harvey Norman operating a store out of Moonah, Tasmania.

3    Moonah Superstore admits that in the period between December 2011 and January 2012 it engaged in conduct that contravened ss 18 and 29(1)(m) of the Australian Consumer Law (ACL) (being Sch 2 to the Competition and Consumer Act 2010 (Cth) (‘CCA’)). This proceeding raises similar issues and legal principles as those described in my reasons in Australian Competition and Consumer Commission v HP Superstore Pty Ltd [2013] FCA 1317 which I will not repeat.

4    Moonah Superstore made a total of two representations on a total of two occasions to a total of two consumers (one of whom had purchased a product as gift for the other) “concerning the existence, exclusion or effect of any warranty, guarantee, right or remedy” within the meaning of those words in s 29(1)(m) of the ACL. The representations, the circumstances in which they were made and the respects in which they were false or misleading, are set out in the Statement of Agreed Facts filed by the parties which I attached to this judgment marked “Annexure A” (‘Agreed Facts’). Moonah Superstore admits that, in making each representation, it thereby contravened s 18 and s 29(1)(m) of the ACL.

5    The parties have agreed that appropriate orders are as follows:

(a)    make declarations pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth);

(b)    grant injunctive relief pursuant to s 232 of the ACL;

(c)    order payment by Moonah Superstore of a penalty in the amount of $28,000.00 pursuant to s 224 of the ACL;

(d)    order that Moonah Superstore display a copy of the summary of consumer rights under the ACL at the point of sale for three years; and

(e)    make orders pursuant to s 246 of the ACL providing for Moonah Superstore to establish a compliance program.

APPLICATION OF LEGAL PRINCIPLES TO THE FACTS

6    The facts and admissions establishing the particular conduct that Moonah Superstore admits gave rise to contraventions of the ACL, together with other matters relevant to penalties, are set out in the Agreed Facts. In support of the proposed penalty, the parties rely on those facts and admissions by Moonah Superstore.

7    I now turn to consider the salient matters to be considered.

Nature, extent and duration of conduct - circumstances in which conduct took place

Whether conduct deliberate

8    The conduct comprised a total of two oral statements made by a total of two sales representatives of Moonah Superstore to a total of two consumers, Ms Bromfield and Mr Owens, in circumstances where Ms Bromfield had purchased the a coffee machine as a gift for Mr Owens and, later, Mr Owens had been provided with a second machine by Moonah Superstore as a replacement for the first machine. The conduct occurred over a period of about four weeks in December 2011 to January 2012.

9    There is no indication that the oral statements were made with an intention to mislead or deceive the consumer or to misrepresent the existence, exclusion or effect of any warranty, guarantee, right or remedy.

10    A great number of electrical appliances are bought by consumers from retailers such as Moonah Superstore in Australia every day. It is not unusual for consumers to return new electrical appliances to retailers on the basis of a fault in the goods or out of a concern that the goods were not of acceptable quality when they purchased them.

11    Processes to ensure that consumers can obtain a remedy, if goods were not of acceptable quality when sold to consumers, represent a cost on the retailer’s business. Retailers may need to incur costs to maintain a culture of compliance with the ACL, including by supervision of staff. An appropriate penalty would take into account the need to deter other retailers from encouraging, permitting or risking similar contraventions of the ACL.

Amount of loss caused

12    There is no evidence of loss or damage to consumer in this proceeding, arising from the contravening conduct of the Moonah Superstore.

Whether similar prior conduct

13    Moonah Superstore has not been previously found by a court to have contravened any provision of the ACL, or to have engaged in conduct similar to that described in the Agreed facts.

Involvement of senior employees or management

14    There is no evidence of involvement by senior employees or senior management.

15    An appropriate penalty would take into account the need to encourage senior employees and management, both of Moonah Superstore and other retailers, to prevent contraventions of the ACL.

Size and financial position

16    The Agreed Facts shows the size and financial position of Moonah Superstore. The penalty of $28,000 which they are putting to the Court as an appropriate penalty takes proper account of Moonah Superstore’s size and financial position.

Culture of compliance and corrective measures in response to contravention

17    The Agreed Facts sets out ACL compliance training engaged in by Moonah Superstore both before and after the relevant conduct.

18    Regular compliance training assists ongoing staff to keep abreast of changes to the protections offered under the ACL and remind those staff of their obligations under that and other legislation. New staff will always need to be trained.

19    In the circumstances, the Court can take into account the existing compliance measures that Moonah Superstore has taken, the admitted failure in relation to these proceedings and Moonah Superstore’s agreement to undertake the compliance training proposed by paragraph 5 of the Short Minutes of Order.

Co-operation and contrition/discount

20    The Agreed Facts sets out Moonah Superstore’s co-operation with ACCC. It is a mitigating factor that Moonah Superstore is admitting liability for the contraventions set out in this document without a contested hearing. As a result of this cooperation by Moonah Superstore, a more complex trial has been avoided. A fully contested trial would have required a longer hearing and, with the potential for appeals, consume large amounts of the Court’s and the ACCC’s time and resources. It is also significant that affected consumers have not had to attend court from interstate to give evidence and submit to cross examination.

21    The parties have not sought to state a specified percentage discount for Moonah Superstore’s co-operation and acknowledgement of liability. However, Moonah Superstore is entitled to a discount for voluntary acknowledgement of liability and co-operation.

Deterrence

22    A factor relevant to penalty is whether the penalty is of a sufficient magnitude for general deterrence among corporations making representations to consumers about their rights under the consumer guarantee legislation generally, and corporations supplying computer products to consumers specifically.

23    The proposed penalty, together with the other proposed orders, sufficiently deter repetition of the conduct by both Moonah Superstore and retailers generally.

Maximum penalties and one transaction / one course of conduct principle/totality

24    The maximum penalty for a body corporate for each act or omission that relates to a provision of Div 1 of Pt 3-1 of the ACL, which Division includes s 29, is $1.1 million.

25    Courts are required to pay careful attention to maximum penalties when imposing penalties. This is because, first, the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they provide a yardstick, taken and balanced with all of the other relevant factors.

26    The conduct comprised a total of two oral statements made by a total of two sales representatives of Moonah Superstore to a total of two consumers, Ms Bromfield and Mr Owens, in circumstances where Ms Bromfield had purchased the first coffee machine as a gift for Mr Owens and, later, Mr Owens had been provided with a second machine by Moonah Superstore as a replacement for the first machine. The two contraventions occurred in one course of conduct.

27    It is appropriate to fix and impose a single penalty for all the contraventions because they arose out a single course of conduct.

Conclusion on appropriate penalty

28    I consider that a pecuniary penalty pursuant to s 224 of the ACL in the sum of $28,000 is appropriate (and within the permissible range) for the contraventions admitted by Moonah Superstore.

IN STORE NOTICE

29    Compelling a retailer such as Moonah Superstore to display a notice at the point of sale is useful to ensure that every consumer sees an accurate statement of the rights under the ACL available to them when entering into a consumer transaction with Moonah Superstore.

30    Such a notice also assists sales representatives to be aware of the consumers’ rights under the ACL.

COMPLIANCE TRAINING

31    Orders for the implementation of a compliance program and audits may be made under s 246 of the ACL (where provision is made expressly).

32    Moonah Superstore should undertake the ACL compliance programs. The compliance programs are appropriate to the circumstances of Moonah Superstore and the industry in which it does business.

CONCLUSION

33    For the above reasons, I will make the following orders:

1.    The Court declares, pursuant to section 21 of the Federal Court of Australia Act 1976 (Cth), that in making the oral statements listed at paragraph 1(a) and (b) of the Originating Application filed on 12 June 2013 in the Proceeding, the Respondent:

(a)    made representations in connection with the supply or possible supply of goods or services that were false or misleading and concerned the existence, exclusion or effect of guarantee, right or remedy available under the consumer guarantee provisions in Division 1 of Part 3-2 of the Australian Consumer Law (‘the ACL’) being Schedule 2 to the Competition and Consumer Act 2010 (Cth), and the remedies relating to those guarantees in Part 5-4 of the ACL in contravention of section 29(1)(m) of the ACL; and

(b)    in doing so, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the ACL.

2.    Pursuant to section 232 of the ACL, the Respondent is restrained (whether by itself, its servants, agents or otherwise howsoever) for a period of three years from the date of these orders from making representations (whether oral or written) to any customer to the effect that the Respondent:

(a)    does not have an obligation to provide remedies in relation to goods supplied by it independently of the manufacturer;

(b)    does not have an obligation to determine whether any remedy by way of replacement is available to a consumer in relation to goods supplied by it, as such a determination will be made by the manufacturer; and

(c)    is not able to determine whether any remedy by way of replacement is available to a consumer in relation to goods supplied by it (and the consumer is similarly not able to make such a determination), as such a determination will be made by the manufacturer.

3.    Pursuant to sections 224(1)(a)(ii) and 228 of the ACL, the Respondent is to, within 28 days of the date of these Orders, pay to the Commonwealth a pecuniary penalty in respect of the contravention of section 29(1)(m) of the ACL in the amount of $28,000.

4.    Pursuant to section 246(2) of the ACL, the Respondent is to, within 28 days of the date of these Orders, prominently display at the point of sale of every product supplied by the Respondent during the operation of a retail sales service undertaken under the name Harvey Norman a copy of the summary of consumer rights under the ACL at Annexure A of the Originating Application for a period of three years.

5.    Pursuant to section 246 of the ACL, from 28 February 2014 or 28 days after the date the court orders are made as agreed whichever is later (‘the Commencement Date’),

(a)    the Respondent is to:

(i)    for a period of one year following the Commencement Date, implement its own compliance program to be undertaken by each employee of the Respondent with respect to the rights available to consumers under the ACL (including the consumer guarantees in Division 1 of Part 3-2 of the ACL and the remedies relating to those guarantees in Part 5-4 of the ACL) (‘the Consumer Law Compliance Program’). The Consumer Law Compliance Program must conform to the compliance standards set out in the Australian Standard on Compliance Programs (AS 3806-2006);

(ii)    for a period of two years thereafter, participate in a consumer law compliance program to be recommended by subsidiaries of Harvey Norman Holdings Limited to all franchisees trading under the “Harvey Norman ®” name in Australia and made available for the participation of their employees; and

(b)    the Respondent is to, no later than 28 days after the Commencement Date, serve on the ACCC an affidavit verifying that, in conformity with these Orders, it has complied with its obligation under Order 4 and it has implemented the Consumer Law Compliance Program under Order 5(1) above.

6.    Each party is to bear their costs of the Proceeding and all previous costs orders in the Proceeding be vacated.

Associate:

Dated:    6 December 2013

“ANNEXURE A”