FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Pirovic Enterprises Pty Ltd (No 2) [2014] FCA 1028

THE COURT DECLARES THAT:

The Respondent:

(a)    by supplying for sale or causing to be supplied for sale eggs produced by laying hens and packaged in egg cartons bearing the brand “Pirovic Free Range Eggs” in the form of Annexures 1 to 3 from January 2012 until January 2014 (“Free Range Egg Cartons”); and

(b)    by advertising and promoting the eggs sold in the Free Range Egg Cartons by publishing the following website, from February 2012 until January 2014: http//www.pirovic.com.au/ in the form of Annexure 4;

in each instance represented to consumers that the eggs contained in those Free Range Egg Cartons were produced:

(c)    by laying hens that were farmed in conditions so that the laying hens were able to move around freely on an open range on an ordinary day (where an ordinary day is every day other than a day when on the open ranges weather conditions endangered the safety or health of the laying hens or predators were present or the laying hens were being medicated); and

(d)    by laying hens most of which moved about freely on an open range on most ordinary days,

when in fact the eggs contained in the Free Range Egg Cartons were produced by laying hens most of which did not move about freely on an open range on most ordinary days by reason of a combination of:

(a)    the stocking densities of the barns;

(b)    the flock sizes in the barns; and

(c)    the number, size, placement and operation of the physical openings to the open range

reducing the ability and propensity of the laying hens to exit the barns and move about freely, and the Respondent thereby in trade or commerce:

(e)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law which is Schedule 2 to the Competition and Consumer Act 2010 (Cth); and

(f)    in connection with the supply or possible supply of eggs, and the promotion of the supply of the eggs, made misleading representations that the eggs were of a particular quality, or have had a particular history in contravention of s 29(1)(a) of the Australian Consumer Law; and

(g)    engaged in conduct that is liable to mislead the public as to the nature or characteristics of the eggs, in contravention of s 33 of the Australian Consumer Law.

AND THE COURT ORDERS THAT:

1.    The Respondent pay to the Commonwealth of Australia a pecuniary penalty in the sum of $300,000 pursuant to s 224 of the Australian Consumer Law.

2.    The Respondent, at its own expense:

(a)    within 3 months of the date of this order, establish a Trade Practices Compliance Program which meets the requirements set out in Annexure A; and

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

3.    The Respondent pay the Applicant’s costs of the proceeding in the sum of $25,000 and all previous costs orders made in favour of the Respondent are hereby vacated.

4.    The Originating Application is otherwise dismissed.

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

REASONS FOR JUDGMENT

1    In December 2013 the Australian Competition and Consumer Commission (the “ACCC”) filed in this Court an Originating Application and a Statement of Claim. The Respondent to that proceeding was Pirovic Enterprises Pty Ltd (“Pirovic Enterprises”). That company is engaged in the business of the production and supply of eggs to retailers for their later supply to individual consumers. An Amended Statement of Claim was filed in May 2014. A Further Amended Statement of Claim was filed in August 2014. Declaratory and injunctive relief is sought together with an order for the imposition of penalties and a compliance order.

2    The ACCC alleges (inter alia) that Pirovic Enterprises had engaged in misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth). Contraventions of ss 29(1)(a) and 33 of the Australian Consumer Law are also alleged. The conduct the subject of the proceeding focusses attention upon the conditions in which laying hens were kept at farms operated by Pirovic Enterprises at Pheasants Nest and Bargo in the State of New South Wales and upon the marketing of its eggs, including the marketing of the eggs as “free range”. Pirovic Enterprises filed a Defence in February 2014 and a Defence to the Amended Statement of Claim in June 2014. Those Defences denied the alleged contraventions of the Australian Consumer Law and went on to set forth details as to the number of laying hens it had in its production sheds located at Pheasants Nest and Bargo in New South Wales.

3    As from March 2014 the parties had been advised that the hearing would be set down for two weeks commencing on 8 September 2014.

4    In May 2014 the ACCC filed an Interlocutory Application seeking (inter alia) an order that it be permitted, pursuant to s 47A(1) of the Federal Court of Australia Act 1976 (Cth), to give the evidence of its then expert by way of video link. That application was refused: Australian Competition and Consumer Commission v Pirovic Enterprises Pty Ltd [2014] FCA 544.

5    In late August 2014, the parties advised the Court that they had reached an in-principle agreement as to the settlement of the proceeding. A Statement of Agreed Facts and Admissions was shortly thereafter prepared and a Minute of Proposed Orders was forwarded to the Court. Joint Submissions were also filed.

6    It is concluded that orders should be made substantially in accordance with the Proposed Orders subject to the form of the proposed declaratory relief being varied.

The Statement of Agreed Facts and Admissions

7    The Statement of Agreed Facts and Admissions was admitted as an exhibit in the present hearing. Section 191 of the Evidence Act 1995 (Cth) thereafter operates in respect to its factual content such that evidence is “not required to prove the existence of an agreed fact”.

8    The Statement of Agreed Facts and Admissions properly focusses attention upon the facilities operated by Pirovic Enterprises at Pheasants Nest and Bargo. At both locations Pirovic Enterprises had three barns in which the laying hens were kept. The conditions in which the laying hens were kept varied from barn to barn and from time to time. For present purposes it is sufficient to note the conditions in which the laying hens were kept and an improvement in those conditions over time. Thus, for example, the following comparisons may be made in respect to those conditions which prevailed at Barn 1 at Pheasants Nest:

The Statement of Agreed Facts and Admissions sets forth the different conditions at each of the other barns at Pheasants Nest and those for the three barns at Bargo.

9    It was further agreed that for the relevant periods Pirovic Enterprises supplied for sale eggs in cartons labelled “Free Range Eggs”. It was also agreed that:

From at least February 2012, Pirovic advertised and promoted free range eggs sold in the Free Range Egg Cartons by publishing, inter alia, the following on the website:

http://www.pirovic.com.au/ (Pirovic Website):

(1)    the words “Free Range Eggs”;

(2)    the words “Our hens feed on wholesome natural gains, roam freely on green pastures during the day and return to the safety of large barns at night”;

(3)    the words “What is a Free Range Egg? Free Range eggs are layed [sic] from hens that live in large barns and have the opportunity to go outside to roam and forage within a ranging area. They may travel in and out of the barn at free will or spend some portion of their day roaming outdoors”

(4)    images of the Free Range Egg Cartons;

(5)    an image of 3 hens in a grassy field; and

(6)    from a date unknown but at least November 2013, an image of a grassy field.

10    By engaging in the conduct set forth in the Statement of Agreed Facts and Admissions, Pirovic Enterprises admits that it:

    engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead to deceive in contravention of s 18 of the Australian Consumer Law;

    in connection with the supply or possible supply of goods, and the promotion of the supply of goods, made misleading representations that the goods were of a particular quality or have had a particular history in contravention of s 29(1)(a) of the Australian Consumer Law; and

    engaged in conduct that is liable to mislead the public as to the nature or characteristics of any goods, in contravention of s 33 of the Australian Consumer Law.

Each of these admissions, it is respectfully considered, was properly made.

11    The conduct of Pirovic Enterprises, however, was not engaged in or pursued with indifference. In marketing and promoting its eggs as “Free Range”, Pirovic Enterprises had regard to, inter alia, the fact that:

(1)    its farming conditions during the Relevant Period were consistent with the practices of most other competitors that sold and promoted for sale eggs as “Free Range”;

(2)    its labelling practices were reviewed by the peak industry body, the Australian Egg Corporation Limited and deemed to comply with its Egg Labelling Guide;

(3)    it was licensed by the Australian Egg Corporation Limited to use the Egg Corporation Assured Trademark as a consequence of Pirovic meeting the criteria under the Egg Corporation Assured National Egg Quality Assurance Program Trade Mark Certification Scheme. Each of Pirovic’s free range farms had a “Level A” accreditation for free range egg production; and

(4)    the NSW Food Authority deemed the Egg Corporation Assured Scheme to be compliant with the Primary Industries Standing Committee’s Model Code of Practice for the Welfare of Animals – Domestic Poultry (4th Edition, SCARM Report 83, 2002).

12    It should further be noted that the number of eggs produced and marketed was considerable. The total number of laying hens at Pheasants Nest and Bargo when the farms were at full production was approximately 80,000; the total number of eggs labelled as “free range” was approximately 1.6 million dozen each year. Perhaps surprisingly, the supply of such a volume of eggs constituted Pirovic Enterprises as but “a relatively small player” in the relevant period – its branded eggs accounted for approximately 1% of sales of free range eggs by major retailers in New South Wales. Although there was concern during the course of the hearing on the part of Pirovic Enterprises as to the disclosure of its actual turnover for years from 2010/2011 through to 2012/2013 and its actual profit margins, a non-confidential note was prepared which recorded that:

1.    In the 2011/2012 financial year, the profit made by the Applicant from its sale of eggs in the Free Range Egg Cartons (as defined in paragraph 27 of the Statement of Agreed Facts and Admissions filed 26 August 2014) was approximately $382,152.

2.    In the 2012/2013 financial year, the profit made by the Applicant from its sale of eggs in the Free Range Cartons was approximately $377,048.

13    It is against this background that the proposed orders are to be considered.

Agreed facts and orders – the Court is not a mere rubber stamp

14    Notwithstanding the agreement between the parties as to the manner in which they would like the case resolved, and an accepted public interest in the settlement of cases, it must also be further recognised that the laws being applied by the Courts are public laws and that the Court should not act as “a mere rubber stamp” approving that which has been agreed between the parties: Australian Competition & Consumer Commission v Real Estate Institute (WA) Inc [1999] FCA 18 at [1], (1999) 161 ALR 79 at 80 per French J (as his Honour then was).

15    It is not the function of a Court “to impede settlements between parties legally represented and able to understand and evaluate the desirability of agreeing to a settlement”: [1999] FCA 18 at [20], (1999) 161 ALR 79 at 87. See also: Australian Competition and Consumer Commission v Willessee Healthcare Pty Ltd [2011] FCA 301 at [22] to [24] per Dodds-Streeton J.

16    The agreement between the parties in the present proceeding, it should be noted, has played a considerable part in the conclusions reached – particularly in respect to determining the appropriate quantum of the penalty to be imposed.

Declaratory relief

17    Of central importance to the proposed manner of resolution of the present proceeding is the form of declaratory relief.

18    The Court has wide discretionary power to grant declaratory relief. Section 21 of the Federal Court of Australia Act 1976 (Cth) thus provides as follows:

Declarations of right

(1)    The Court may, in civil proceedings in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed.

(2)    A suit is not open to objection on the ground that a declaratory order only is sought.

In exercising the discretionary power to grant declaratory relief, it is generally recognised that “rules” should not be laid down which seek to confine the ambit of the power but that there remain three requirements to be satisfied: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421. When addressing the power to grant declaratory relief conferred by s 10 of the Equity Act 1901 (NSW), Gibbs J there observed at 437 to 438:

It is neither possible nor desirable to fetter the broad discretion given by s 10 by laying down rules as to the manner of its exercise. It does, however, seem to me that the Scottish rules summarized by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd ([1921] 2 AC 438 at p 448) should in general be satisfied before the discretion is exercised in favour of making a declaration:

“The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought.”

Beyond that, however, little guidance can be given. As Lord Radcliffe said in Ibeneweka v Egbuna ([1964] 1 WLR at p 225):

“After all, it is doubtful if there is more of principle involved than the undoubted truth that the power to grant a declaration should be exercised with a proper sense of responsibility and a full realisation that judicial pronouncements ought not to be issued unless there are circumstances that call for their making. Beyond that there is no legal restriction on the award of a declaration.”

These observations have often been repeated, including in decisions of this Court (Australian Competition and Consumer Commission v Marksun Australia Pty Ltd [2011] FCA 695 at [47] per Gilmour J; Australian Competition and Consumer Commission v Gordon Superstore Pty Ltd [2014] FCA 452 at [53] per Edmonds J) and other Courts (e.g., Brady Street Developments Pty Ltd v M E Asset Investments Pty Ltd [2013] NSWSC 1755 at [62] per Pembroke J; Clark v Framlingham Aboriginal Trust [2014] VSC 367 at [185] to [186] per Robson J). Each of these three requirements is satisfied in the present proceeding.

19    In exercising the power conferred by s 21, the Court may act upon the basis of agreed facts and has frequently done so in proceedings involving the ACCC: e.g., Australian Competition and Consumer Commission v Real Estate Institute of Western Australian Inc [1999] FCA 18, (1999) 161 ALR 79. See also: Australian Competition and Consumer Commission v The Construction, Forestry, Mining and Energy Union [2006] FCA 1730; Australian Competition and Consumer Commission v Digital Products Group Pty Ltd [2006] FCA 1732 per Tracey J; Australian Competition and Consumer Commission v Jetplace Pty Ltd [2010] FCA 759 at [47] to [52] per Gilmour J.

20    And the Court may make a declaration in accordance with a form of order that is the subject of consent between the parties. But “close attention” should be given “to the form of proposed declarations” – especially those made “by consent”: Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75 at [90], (2003) 216 CLR 53 at 91 per Gummow, Hayne and Heydon JJ. Immediately preceding this observation, their Honours gave content to their concern as to the form of the declarations that had been made in that case in respect to contraventions of the Trade Practices Act 1974 (Cth) as follows:

[89]    The trial judge's orders. The trial judge made declarations that Rural Press and Bridge had contravened s 46; that Rural Press, Bridge and Waikerie Printing had contravened s 45; that McAuliffe and Law were directly or indirectly knowingly concerned in the contraventions by Rural Press and Bridge of ss 45 and 46; and that Paul Taylor was directly or indirectly knowingly concerned in the contraventions by Waikerie Printing of s 45. The Rural Press parties made no complaint about these declarations to the Full Federal Court or to this Court. The declarations spoke merely of “an arrangement” having a purpose and effect, without giving any content to that expression and without indicating the gist of the findings of the primary judge identifying the arrangement.

[90]    These declarations provide a bad precedent and were of a kind which the trial judge should not have agreed to make even if urged to do so by the parties…

After citing their Honours observations as to the need for “close attention” to be given to the form of a declaration, Gray, Goldberg and Weinberg JJ in BMW Australia Ltd v Australian Competition and Consumer Commission [2004] FCAFC 167 at [35], (2004) 207 ALR 452 at 465 observed that “at the very least” a declaration “should disclose the basis on which” a product had “failed to comply with the prescribed consumer product safety standard…”.

21    In the present proceeding, the form of declaratory relief that was initially the subject of consent between the parties was further revised during the course of the hearing. The revision to the form of the declaratory relief proposed by the Court was an attempt to give content to the constraints imposed upon the laying hens in the present case such that they could not move freely on an open range. Although it was quite properly submitted on behalf of Pirovic Enterprises that the present case should not be seen as a resolution of what constitutes “free range” eggs in the abstract, the revision suggested gave content to the facts of the present case which led to the admissions made on behalf of Pirovic Enterprises as to contraventions of the Australian Consumer Law. The revision suggested was consented to by the parties.

The penalty to be applied

22    The draft Orders agreed between the parties proposed the imposition of a penalty in the sum of $300,000 pursuant to s 224 of the Australian Consumer Law.

23    The task of fixing an appropriate penalty, it is recognised, is not “an exact science” but a task that has to take into account:

    the principal objective of imposing a penalty, namely deterrence;

    those considerations previously identified by decisions of this Court and those mandated by the Legislature; and

    any agreement between the parties.

24    The principal objective of imposing a penalty, it is well-recognised, is deterrence both to those engaged in the contravention and deterrence and to those who may otherwise be tempted to engage in like conduct: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 294 to 295. Burchett and Kiefel JJ there observed:

The Court should not leave 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, and detection lead merely to a compliance program for the future.

Their Honours had previously observed:

Because the fixing of the quantum of a penalty cannot be an exact science, the Court, in such a case, does not ask whether it would without the aid of the parties have arrived at the precise figure they have proposed, but rather whether their proposal can be accepted as fixing an appropriate amount.

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…

Their Honours later rejected the proposition that “it is not actually useful to investigate whether, unaided by the agreement of the parties, we would have arrived at the very figure they propose”: (1996) 71 FCR at 299. See also: Minister for Industry, Tourism and Resources v Mobil Oil Australia [2004] FCAFC 72 at [49] per Branson, Sackville and Gyles JJ.

25    More recently, Keane CJ, Finn and Gilmour JJ in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20, (2012) 287 ALR 249 at 265 observed:

[62] There may be room for debate as to the proper place of deterrence in the punishment of some kinds of offences, such as crimes of passion; but in relation to offences of calculation by a corporation where the only punishment is a fine, the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by that offender or others as an acceptable cost of doing business. The primary judge was right to proceed on the basis that the claims of deterrence in this case were so strong as to warrant a penalty that would upset any calculations of profitability. The purpose of Optus’ conduct was to generate sales, and hence, profits. The advertising deployed by Optus was calculated to win business from its rivals. The same share of business might not have been attracted by a more balanced presentation of the advantages of the plans. There is no reason to doubt that Optus knows its business sufficiently well that it is safe to proceed on the footing that its course of conduct in the campaign reflected informed calculation. While one cannot isolate the profits attributable to the campaign, it is necessary and desirable to impose a penalty which is apt to affect in a substantial way the profitability of Optus’ misconduct

26    In addition to taking into account the need to fix a penalty of a sufficient quantum that it acts as a deterrence, other considerations of relevance have been differently expressed in different decisions of this Court. However expressed, there remains a common element of considerations which guide the exercise of the discretion in any particular case. In Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (In liq) [2007] FCAFC 146 at [60], (2007) 161 FCR 513 at 527, Moore, Dowsett and Greenwood JJ referred to the “primary objective of imposing a pecuniary penalty” upon the person who effectively controlled the corporate respondent (Mr Russell) as deterrence and continued at 527 to 528:

[61]    In determining a pecuniary penalty the Court will have regard to the nature, character, content and extent of the contravening conduct; whether the conduct was deliberate and undertaken by Mr Russell in disregard of the prohibition imposed by the legislation; the scale (size, resources and market power) of the corporation engaging in the conduct through the actions of Mr Russell; the seniority of and role discharged by Mr Russell in relation to the conduct of the corporation; the commercial consequences of the conduct upon all participants affected by the conduct; the contextual events within which the conduct occurred (such as the nature of the industry and the methodology adopted to give effect to the conduct); whether the contravention is truly isolated or aberrant notwithstanding a demonstrated culture of compliance (if one exists) on the part of the corporation or a demonstrated culture of compliance on the part of the senior manager engaged in the conduct giving rise to the contravention; whether Mr Russell has cooperated with the ACCC in seeking to address the conduct in the face of examples of contravening conduct identified and put by the ACCC to Mr Russell; and whether Mr Russell has previously been found by the Court to have contravened a provision of Pt IV of the TPA.

See also: Australian Competition and Consumer Commission v T F Woollam & Son Pty Ltd (No 2) [2011] FCA 1216 at [23] to [26] per Logan J; Australian Competition and Consumer Commission v Safe Breast Imaging Pty Ltd (No 2) [2014] FCA 998 at [38] per Barker J.

27    More recently, Perram J in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761, (2011) 282 ALR 246 at 251 when addressing s 76E of the Trade Practices Act 1974 (Cth) observed :

[11] … relevant non-mandatory factors under s 76E will include:

(1)    The size of the contravening company.

(2)    The deliberateness of the contravention and the period over which it extended.

(3)    Whether the contravention arose out of the conduct of senior management of the contravener or at some lower level.

(4)    Whether the contravener has a corporate culture conducive to compliance with the Act (or the new Australian Competition and Consumer Law) as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention.

(5)    Whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention.

(6)    Whether the contravener has engaged in similar conduct in the past.

(7)    The financial position of the contravener.

(8)    Whether the contravening conduct was systematic, deliberate or covert.

On appeal, the Full Court did not cavil with this summary of factors as provided by his Honour: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20, (2012) 287 ALR 249.

28    In addition, s 224(2) of the Australian Consumer Law provides as follows for mandatory considerations to which regard must be had:

In determining the appropriate pecuniary penalty, the court must have regard to all relevant matters including:

(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

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

(b)    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.

29    Although deterrence is the “primary objective” and although there are various considerations to be taken into account, it remains the position that the Court may nevertheless pay regard to any agreement between the parties as to the amount of a pecuniary penalty: Australian Competition and Consumer Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653. Buchanan J there observed:

[4]    It is well established by authority in this court that, although the terms of orders made by the court are within the discretion of the court, and not the parties, the court may pay regard to an agreed position about the orders which are appropriate to be made following admission of a civil contravention of a statutory standard. That principle extends to an agreement about the amount of a pecuniary penalty to be imposed…

See also: Australian Competition and Consumer Commission v Startel Communication Co Pty Ltd [2014] FCA 352 at [21] per Collier J.

30    It is concluded that the agreed penalty of $300,000 is appropriate in the circumstances of the present case having regard to the “primary objective” of deterrence and each of those factors identified by the Full Court in Dataline and by Perram J in Singtel Optus and the terms of s 224(2).

31    It is sufficient for present purposes to express agreement with the appropriateness of such a penalty without addressing each of those factors or matters individually. Despite some initial reservation as to whether the quantum of the penalty should be increased, it has ultimately been concluded that $300,000 will act as both a specific and general deterrence and cannot be regarded as “the cost of doing business” (Singtel Optus). Whether the Court would have arrived at the same quantum is, perhaps, not to the point; where the parties have agreed upon the quantum of an appropriate penalty, it has been said “it will not be useful to investigate whether the Court would have arrived at that precise figure…” (NW Frozen Foods; Mobil Oil). The accepted co-operation on the part of Pirovic Enterprises and the public interest in the avoidance of a comparatively lengthy hearing also tell in favour of accepting the agreed quantum as the appropriate penalty to be imposed.

Compliance

32    Section 246 of the Australian Consumer Law confers power upon the Court to order a respondent to establish and implement a training program to assist in ensuring that it avoids future contraventions. That section in relevant part provides as follows:

Non-punitive orders

(1)    A court may, on application of the regulator, make one or more of the orders mentioned in subsection (2) in relation to a person who has engaged in conduct that:

(a)    contravenes a provision of Chapter 2, 3 or 4; or

(b)    …..

(2)    The court may make the following orders in relation to the person who has engaged in the conduct:

(a)    …

(b)    an order for the purpose of ensuring that the person does not engage in the conduct, similar conduct, or related conduct, during the period of the order (which must not be longer than 3 years) including:

(i)    an order directing the person to establish a compliance program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to such conduct; and

(ii)    an order directing the person to establish an education and training program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to such conduct; and

(iii)    an order directing the person to revise the internal operations of the person's business which led to the person engaging in such conduct;

(b)    an order requiring the person to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to;

(c)    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.

33    At present Pirovic Enterprises does not have a compliance program and consents to an order being made to implement one. The compliance programme that forms part of the orders to be made is linked to the conduct, the subject of the proceeding, being training to cover the provisions of Part 2-1 and Division 1 of Part 3-1 of the Australian Consumer Law.

34    It is appropriate to make an order pursuant to s 246(2) of the Australian Consumer Law.

CONCLUSIONS

35    Effect should be given to the agreement between the parties as to the form of orders to be made, subject to the suggested revision to the form of declaratory relief.

36    Those orders further provide for the quantum of the penalty to be imposed, the non-punitive order for the implementation of a compliance program and the payment of costs in the amount of $25,000.

THE COURT DECLARES THAT:

The Respondent:

(a)    by supplying for sale or causing to be supplied for sale eggs produced by laying hens and packaged in egg cartons bearing the brand “Pirovic Free Range Eggs” in the form of Annexures 1 to 3 from January 2012 until January 2014 (“Free Range Egg Cartons”); and

(b)    by advertising and promoting the eggs sold in the Free Range Egg Cartons by publishing the following website, from February 2012 until January 2014: http//www.pirovic.com.au/ in the form of Annexure 4;

in each instance represented to consumers that the eggs contained in those Free Range Egg Cartons were produced:

(c)    by laying hens that were farmed in conditions so that the laying hens were able to move around freely on an open range on an ordinary day (where an ordinary day is every day other than a day when on the open ranges weather conditions endangered the safety or health of the laying hens or predators were present or the laying hens were being medicated); and

(d)    by laying hens most of which moved about freely on an open range on most ordinary days,

when in fact the eggs contained in the Free Range Egg Cartons were produced by laying hens most of which did not move about freely on an open range on most ordinary days by reason of a combination of:

(a)    the stocking densities of the barns;

(b)    the flock sizes in the barns; and

(c)    the number, size, placement and operation of the physical openings to the open range

reducing the ability and propensity of the laying hens to exit the barns and move about freely, and the Respondent thereby in trade or commerce:

(e)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law which is Schedule 2 to the Competition and Consumer Act 2010 (Cth); and

(f)    in connection with the supply or possible supply of eggs, and the promotion of the supply of the eggs, made misleading representations that the eggs were of a particular quality, or have had a particular history in contravention of s 29(1)(a) of the Australian Consumer Law; and

(g)    engaged in conduct that is liable to mislead the public as to the nature or characteristics of the eggs, in contravention of s 33 of the Australian Consumer Law.

AND THE COURT ORDERS THAT:

1.    The Respondent pay to the Commonwealth of Australia a pecuniary penalty in the sum of $300,000 pursuant to s 224 of the Australian Consumer Law.

2.    The Respondent, at its own expense:

(a)    within 3 months of the date of this order, establish a Trade Practices Compliance Program which meets the requirements set out in Annexure A; and

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

3.    The Respondent pay the Applicant’s costs of the proceeding in the sum of $25,000 and all previous costs orders made in favour of the Respondent are hereby vacated.

4.    The Originating Application is otherwise dismissed.

Associate:

Dated:    23 September 2014

Annexure A

TRADE PRACTICES COMPLIANCE AND EDUCATION/TRAINING PROGRAM

Interpretation

1    In this Annexure:

(1)    "ACCC" means the Australian Competition and Consumer Commission;

(2)    "ACL" means the Australian Consumer Law, comprising Schedule 2 to the CCA;

(3)    "CCA" means the Competition and Consumer Act 2010 (Cth);

(4)    "Compliance Advisor" means the person defined in paragraph 6 below;

(5)    "Compliance Officer" means the person appointed under paragraph 2 or 3 below;

(6)    "Compliance Policy" means the policy defined in paragraph 8 below;

(7)    "Compliance Program" means the Trade Practices Compliance and Education/Training Program in this Annexure;

(8)    "Compliance Program Review Report" is the report defined in paragraph 19 below;

(9)    "Compliance Trainer" is defined in paragraph 14 below;

(10)    "Contravening Conduct" means the conduct declared by the Federal Court of Australia in these proceedings to be in contravention of Part 2-1 and Division 1 of Part 3-1 of the ACL;

(11)    "External Reviews" means the reviews required by paragraph 18 below;

(12)    "Pirovic Enterprises" means Pirovic Enterprises Pty Ltd (ACN 002 857 338)

(13)    "Order of the Court" means the relevant order(s) of the Federal Court of Australia made in these proceedings;

(14)    "Relevant Provisions" means Part 2-1 and Division 1 of Part 3-1 of the ACL;

(15)    "Respondent's Program" means the steps taken by Pirovic Enterprises to comply with the Order of the Court in relation to the Compliance Program;

(16)    "Reviewer" is defined in paragraph 18(2)(b) below;

(17)    "Risk Assessment" means the assessment required by paragraph 6 below;

(18)    "Risk Assessment Report" means the report required by paragraph 7 below; and

(19)    "Training" means the training required by paragraph 13 below.

Compliance Officer

2    Pirovic Enterprises must, within one month of the date of the Order of the Court, appoint a Director or a senior employee with suitable qualifications or experience in corporate compliance as Compliance Officer with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.

3    After the appointment of the Compliance Officer in accordance with paragraph 2, Pirovic Enterprises must take all reasonable steps to ensure that, for the duration of the Order of the Court, there is a Director or a senior employee with suitable qualifications or experience in corporate compliance appointed as Compliance Officer with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.

4    Pirovic Enterprises must take all reasonable steps to ensure that for the duration of the Order of the Court the Compliance Officer discharges his or her responsibility of ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.

5    Pirovic Enterprises must take all reasonable steps to ensure that the Compliance Officer reports in writing to Pirovic Enterprises' board of directors every six months with respect to the on-going maintenance and administration of the Compliance Program including, in particular, whether the Respondent's Program is effectively:

(1)    ensuring an awareness by the employees and other persons involved in Pirovic Enterprises' business of their responsibilities and obligations in relation to the Relevant Provisions; and

(2)    revising the internal operations of Pirovic Enterprises' business which led to Pirovic Enterprises engaging in the Contravening Conduct.

Risk Assessment

6    Pirovic Enterprises must, within one month of the date of the Order of the Court, appoint a qualified, internal or external, compliance professional with expertise in trade practices issues (Compliance Advisor) to conduct a risk assessment to:

(1)    identify the areas of Pirovic Enterprises' business where it is at risk of contravening the Relevant Provisions;

(2)    assess the likelihood of any such contravention occurring;

(3)    identify where there are deficiencies in Pirovic Enterprises' procedures for managing any such risk;

(4)    make findings concerning sub-paragraphs (a) to (c) above; and

(5)    make recommendations for action having regard to sub-paragraphs (a) to (d) above (Risk Assessment).

7    Pirovic Enterprises must instruct the Compliance Advisor to set out, and must take all reasonable steps to ensure that the Compliance Advisor sets out, the findings and recommendations of the Risk Assessment in a written report (Risk Assessment Report), to be provided to Pirovic Enterprises' board of directors within two months of his or her appointment.

Compliance Policy

8    Pirovic Enterprises must, within one month of the date of the Order of the Court, establish a policy (Compliance Policy) which is communicated in writing to all employees and other persons involved in Pirovic Enterprises' business regarding compliance with the CCA, which must include:

(1)    a statement of commitment by Pirovic Enterprises to comply with the Relevant Provisions;

(2)    a direction to all employees or other persons involved in the business to report any compliance related issues and CCA compliance concerns to the Compliance Officer;

(3)    a statement guaranteeing that employees or other persons involved in Pirovic Enterprises' business making a complaint or report in relation to Pirovic Enterprises' compliance with the Relevant Provisions will not be prosecuted or disadvantaged in any way by reason of their complaint or report and that their complaint or report will be kept confidential and secure; and

(4)    a statement that Pirovic Enterprises will take disciplinary action against any persons who are knowingly or recklessly concerned in a contravention of the Relevant Provisions and will not indemnify them.

9    Pirovic Enterprises must take all reasonable steps to ensure that the Compliance Program is maintained and administered in a manner that is consistent with the Compliance Policy for the duration of the Order of the Court.

10    Pirovic Enterprises will provide a copy of the Compliance Policy to all new staff at the commencement of their employment with Pirovic Enterprises.

Complaints Handling System

11    Pirovic Enterprises must establish, maintain and administer a trade practices complaints handling system.

12    Pirovic Enterprises must take all reasonable steps to ensure that the trade practices complaints handling system is in accordance with AS/ISO 10002:2006 Customer satisfaction - Guidelines for complaints handling in organizations, though tailored to its own circumstances (Complaints Handling System).

Training

13    Pirovic Enterprises must take all reasonable steps to ensure that all directors, officers, employees, representatives and agents of Pirovic Enterprises, whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions, receive practical training regarding the CCA (Training) no less than once annually.

14    The Training must be conducted by either a suitably qualified compliance professional or legal practitioner with expertise in the CCA (Compliance Trainer).

15    Pirovic Enterprises must instruct the Compliance Trainer to design the Training, and must take all reasonable steps to ensure that the Training is designed, to ensure that the persons at the Training are made aware of:

(1)    the responsibilities and obligations in relation to the Relevant Provisions;

(2)    the potential consequences of contravening the Relevant Provisions;

(3)    the areas of Pirovic Enterprises’ business where it is at risk of contravening the Relevant Provisions, as identified in the Risk Assessment Report; and

(4)    the content of the Compliance Program.

16    Pirovic Enterprises must provide to the Compliance Trainer, for the purposes of conducting the Training, a copy of:

(1)    the Order of the Court;

(2)    the Compliance Policy;

(3)    the Complaints Handling System; and

(4)    the Risk Assessment Report.

17    Pirovic Enterprises must take all reasonable steps to ensure that an awareness of the Compliance Program 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 the Relevant Provisions.

External Review

18    Pirovic Enterprises must take all reasonable steps to ensure that annual reviews of Pirovic Enterprises compliance with the Order of the Court are carried out in accordance sub-paragraphs (a) to (d) below (External Reviews):

(1)    Scope of the External Reviews – The External Reviews are to ascertain whether the Respondent's Program:

(a)    has made the employees and other persons involved in Pirovic Enterprises' business aware of their responsibilities and obligations in relation to the Relevant Provisions;

(b)    has revised the internal operations of Pirovic Enterprises' business in relation to the Relevant Provisions and the circumstances that led to the Contravening Conduct; and

(c)    is effectively maintaining and administering the Compliance Program.

(2)    Independence of Reviewer – Pirovic Enterprises must take all reasonable steps to ensure that all External Reviews are carried out by a suitably qualified, independent compliance professional with expertise in the CCA (Reviewer). The Reviewer will qualify as independent on the basis that he or she:

(a)    is not a present or past director, employee or officer of Pirovic Enterprises;

(b)    has no significant shareholding or other interests in Pirovic Enterprises;

(c)    has not acted for or consulted to, and does not act for or consult to, Pirovic Enterprises in any matters involving alleged contraventions of the CCA;

(d)    has not acted for or consulted, and does not act for or consult to, Pirovic Enterprises or provide other services in relation to this Compliance Program, other than as the Reviewer in a previous year; and

(e)    has no conflict of interest in carrying out the Reviews.

(3)    Evidence – Pirovic Enterprises must take all reasonable steps to ensure that in the conduct of the External Reviews the Reviewer has access to all relevant sources of information in Pirovic Enterprises' possession or control, including access to:

(a)    any officers, employees, representatives or agents of Pirovic Enterprises;

(b)    any relevant records of Pirovic Enterprises, including its complaints register/reports and any documents relevant to the Training or its induction program; and

(c)    any documents created by Pirovic Enterprises' consultants or legal advisers for use in relation to the Respondent's Program.

(4)    Timing – Pirovic Enterprises must take all reasonable steps to ensure that the first External Review is completed within one year of the date of the Order of the Court and that each subsequent External Review is completed within one year thereafter, save that all steps to be taken by Pirovic Enterprises in relation to the final External Review are to be completed one month prior to the expiration of the Order of the Court.

19    Pirovic Enterprises must instruct the Reviewer to set out, and must take all reasonable steps to ensure that the Reviewer sets out, the findings of each of the External Reviews in a written report (Compliance Program Review Report) which addresses each of the following:

(1)    details of the evidence gathered and examined during the External Review;

(2)    the name and relevant qualifications/experience of the person appointed as the Compliance Officer;

(3)    if, and to what extent, the Respondent's Program includes all the elements and requirements of the Compliance Program;

(4)    if, and to what extent, the Respondent's Program covers the areas identified in the Risk Assessment; and

(5)    recommendations that the Reviewer considers are reasonably necessary to ensure that the Respondent's Program effectively maintains and administers the Compliance Program.

20    Pirovic Enterprises must instruct the Reviewer to complete and provide the Compliance Program Review Report to it, and must take all reasonable steps to ensure that the Compliance Program Review Report is completed and provided to it, within one month of each Review.

21    Pirovic Enterprises must retain each Compliance Program Review Report.

22    Within 30 days of the receipt of each Compliance Program Review Report, Pirovic Enterprises' board of directors must hold a meeting to consider the matters described in paragraph 23 below.

23    At the meeting referred to in paragraph 22 above, Pirovic Enterprises' board of directors must consider:

(1)    the Compliance Program Review Report;

(2)    whether to make any changes to the Respondent's Program to more effectively implement the Compliance Program for the purposes of:

(a)    ensuring an awareness for the employees or other persons involved in Pirovic Enterprises' business of their responsibilities and obligations in relation to the Relevant Provisions; and

(b)    revising the internal operations of Pirovic Enterprises' business in relation to the circumstances that led to the Contravening Conduct;

(3)    any recommendations of the ACCC for the purposes of sub-paragraph (b) above.

24    Within 14 days of holding the meeting referred to in paragraph 22 above, Pirovic Enterprises must advise the ACCC in writing of:

(1)    details of when the meeting was held and who was present;

(2)    the outcome of the meeting, including:

(a)    what, if any, changes Pirovic Enterprises decided to make to the Respondent's Program to more effectively implement the Compliance Program and details of the proposed implementation of any changes; and

(b)    the decisions made by Pirovic Enterprises about each of the recommendations that had been made by the ACCC (if any).

25    Within 14 days of holding a meeting referred to in paragraph 23 above at which Pirovic Enterprises decides to make changes to the Respondent's Program it must take all reasonable steps to communicate those changes to all employees or other persons involved in Pirovic Enterprises' business.

Supply of Documents to the ACCC

26    Pirovic Enterprises must within 14 months of the date of the Order of the Court, cause to be produced and provided to the ACCC copies of each of the following documents:

(1)    documents evidencing the appointment of the Compliance Officer and Compliance Adviser;

(2)    the Risk Assessment Report;

(3)    the Compliance Policy and the documents evidencing its implementation; and

(4)    documents evidencing the provision of Training, including all materials used in the Training.

27    Pirovic Enterprises must provide a copy of each Compliance Program Review Report to the ACCC within 14 days of its receipt from the Reviewer.

28    If requested in writing by the ACCC, Pirovic Enterprises must, at its own expense, provide copies of documents and information constituting or evidencing compliance or non-compliance with the Order of the Court.