FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Spreets Pty Ltd [2015] FCA 382

DECLARATIONS

THE COURT DECLARES THAT:

Representations to consumers about the price of deals

Melbourne City Skydive Centre Deal email advertisement

1.    The Respondent (Spreets), on or about 30 June 2011, by sending an email to consumers, which promoted a daily deal for a tandem skydive and two course lunch (the First Melbourne City Skydive Centre Deal) and included three references to the price of the deal being $375, “only $375” and “just $375”, represented to consumers that:

1.1.    by paying $375 a consumer could purchase a voucher from Spreets for the First Melbourne City Skydive Centre Deal and redeem it without further costs;

when in fact:

1.2.    the voucher purchaser was required to pay an extra $25 fee to the Melbourne City Skydive Centre to redeem the voucher, unless the voucher purchaser was a member of the Australian Parachute Federation (APF);

and thereby Spreets has, in trade or commerce and in connection with the supply, possible supply or promotion of the supply of Spreets’ services, being the supply of vouchers to voucher purchasers (Spreets’ services):

1.3.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

1.4.    made a false or misleading representation with respect to the price of services in contravention of s 29(1)(i) of the ACL.

Melbourne City Skydive Centre Deal website advertisement and offer

2.    Spreets, on four occasions from on or about 30 June 2011 to in or about mid-September 2011 by advertising and offering voucher deals on its website (the Spreets Website) for a tandem skydive and two course lunch (the Melbourne City Skydive Centre Deals), which each prominently stated the price of the deal as $375 and as “Only $375”, represented to consumers on each occasion that:

2.1.    by paying $375 a consumer could purchase a voucher from Spreets for the Melbourne City Skydive Centre Deals and redeem it without further costs;

when in fact:

2.2.    the voucher purchaser was required to pay an extra $25 fee to the Melbourne City Skydive Centre to redeem the voucher, unless the voucher purchaser was a member of the APF;

and thereby Spreets, in trade or commerce and in connection with the supply, possible supply or promotion of the supply of Spreets ‘ services, has on each occasion:

2.3.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

2.4.    made a false or misleading representation with respect to the price of services in contravention of s 29(1)(i) of the ACL.

Coffs City Skydivers Deal email advertisement

3.    Spreets, on or about 23 December 2011, by sending an email to consumers, which promoted a daily deal for a tandem skydive (the First Coffs City Skydivers Deal) and included two references to the price of the deal being $129 and as “Just $129”, represented to consumers that:

3.1.    by paying $129 a consumer could purchase a voucher for the First Coffs City Skydivers Deal from Spreets and redeem it without further costs;

when in fact:

3.2.    the voucher purchaser was required to pay an extra $35 fee to Coffs City Skydivers to redeem the voucher, unless the voucher purchaser was a member of the APF;

and thereby Spreets has, in trade or commerce and in connection with the supply, possible supply or promotion of the supply of Spreets ‘ services:

3.3.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

3.4.    made a false or misleading representation with respect to the price of services in contravention of s 29(1)(i) of the ACL.

Coffs City Skydivers Deal website advertisement and offer

4.    Spreets, on two occasions on or about 23 December 2011, by advertising and offering voucher deals on the Spreets Website for a tandem skydive (the Coffs City Skydivers Deals), which each prominently stated the price of the deal as $129 and as “Just $129”, represented to consumers on each occasion that:

4.1.    by paying $129 a consumer could purchase a voucher for the Coffs City Skydivers Deals from Spreets and redeem it without further costs;

when in fact:

4.2.    the voucher purchaser was required to pay an extra $35 fee to Coffs City Skydivers to redeem the voucher, unless the voucher purchaser was a member of the APF;

and thereby Spreets, in trade or commerce and in connection with the supply, possible supply or promotion of the supply of Spreets ‘ services, has on each occasion:

4.3.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

4.4.    made a false or misleading representation with respect to the price of services in contravention of s 29(1)(i) of the ACL.

Rainbow Beach Skydive Deal website advertisement and offer

5.    Spreets, on two occasions from on or about 18 September 2011 to about 19 September 2011, by advertising and offering voucher deals on the Spreets Website for a tandem skydive (the Rainbow Beach Skydive Deals), which each prominently stated the price of the deal as $130 and as “Just $130”, represented to consumers on each occasion that:

5.1.    by paying $130 a consumer could purchase a voucher for the Rainbow Beach Skydive Deals from Spreets and redeem it without further costs;

when in fact:

5.2.    the voucher purchaser was required to pay an extra $35 fee to Skydive Rainbow Beach to redeem the voucher, unless the voucher purchaser was a member of the APF;

and thereby Spreets, in trade or commerce and in connection with the supply, possible supply or promotion of the supply of Spreets ‘ services, has on each occasion:

5.3.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

5.4.    made a false or misleading representation with respect to the price of services in contravention of s 29(1)(i) of the ACL.

Representations to consumers in relation to the applicability of consumer guarantees

Melbourne City Skydive Centre Deal

6.    Spreets, from on or about 30 June 2011 to on or about 5 July 2011, by selling approximately 134 vouchers to consumers for a tandem skydive and 2 course lunch, which vouchers each contained the statements:

6.1.    “Refunds are NOT APPLICABLE”; and

6.2.    “Not available with any other offer and no refunds; not redeemable for cash” represented to each voucher purchaser that:

6.3.    he or she had no right to a refund of the purchase price of the voucher in any circumstances;

when in fact:

6.4.    in certain circumstances voucher purchasers had a statutory right, conferred by Div 1 of Pt 3-2 and Pt 5-4 of the ACL, to a refund of the voucher purchase price;

and thereby Spreets, in trade or commerce and in connection with the supply of Spreets ‘ services, has in relation to each voucher sold:

6.5.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

6.6.    made a false or misleading representation concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy, in contravention of s 29(1)(m) of the ACL.

Travel Smoove Hong Kong Holiday Deal

7.    Spreets, from on or about 7 December 2011, by selling approximately 303 vouchers to consumers for a Hong Kong holiday package, which vouchers each contained the statement “non-refundable and non-exchangeable”, represented to each voucher purchaser that:

7.1.    he or she had no right to a refund of the purchase price of the voucher in any circumstances;

when in fact:

7.2.    in certain circumstances voucher purchasers had a statutory right, conferred by Div 1 of Pt 3-2 and Pt 5-4 of the ACL, to a refund of the voucher purchase price;

and thereby Spreets, in trade or commerce and in connection with the supply of Spreets ‘ services, has in relation to each voucher sold:

7.3.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

7.4.    made a false or misleading representation concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy, in contravention of s 29(1)(m) of the ACL.

Vivere Products Eight Cube Storage System Deal

8.    Spreets, from on or about 12 March 2012, by selling approximately 318 vouchers to consumers for a delivered Eight Cube Storage System, which vouchers each contained the statement “Refund on faulty products accepted up to 7 days after receipt of delivery (return shipping not included)”, represented to each voucher purchaser that:

8.1.    he or she could only obtain a refund of the amount paid by the voucher purchaser from the merchant where a product was faulty and the voucher purchaser returned the product within 7 days of receiving it;

when in fact:

8.2.    in certain circumstances, voucher purchasers had a statutory right, conferred by Div 1 of Pt 3-2 and Pt 5-4 of the ACL, to a refund of the amount paid by the voucher purchaser from the merchant outside the period of 7 days from receiving the product;

and thereby Spreets, in trade or commerce and in connection with the supply of Spreets ‘ services, has in relation to each voucher sold:

8.3.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

8.4.    made a false or misleading representation concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy, in contravention of s 29(1)(m) of the ACL.

Deals in Australia Wine Aerator Deal

9.    Spreets, from on or about 15 April 2012, by selling approximately 424 vouchers to consumers for a delivered wine aerator, which vouchers each contained the statement “Refund on faulty products accepted up to 7 days after receipt of delivery (return shipping not included)”, represented to each voucher purchaser that:

9.1.    he or she could only obtain a refund of the amount paid by the voucher purchaser from the merchant where a product was faulty and the voucher purchaser returned the product within 7 days of receiving it;

when in fact:

9.2.    in certain circumstances, voucher purchasers had a statutory right, conferred by Div 1 of Pt 3-2 and Pt 5-4 of the ACL, to a refund of the amount paid by the voucher purchaser from the merchant outside the period of 7 days from receiving the product;

and thereby Spreets, in trade or commerce and in connection with the supply of Spreets ‘ services, has in relation to each voucher sold:

9.3.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

9.4.    made a false or misleading representation concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy, in contravention of s 29(1)(m) of the ACL.

Representations to consumers with respect to voucher redemption and remedies

Extra terms and conditions

10.    Spreets, by representing to voucher purchasers who had been unable to redeem unexpired vouchers because the relevant merchants had refused to honour them, during the period from in or about July 2011 to in or about February 2012, that one or more of the following terms applied to the deals they had purchased:

10.1.    Spreets was only required to assist voucher purchasers with unexpired vouchers;

10.2.    Spreets was only required to assist voucher purchasers if they sought assistance from Spreets a reasonable time before the end of the validity period;

10.3.    Spreets was entitled to treat vouchers as expired, and therefore refuse to assist voucher purchasers with the redemption of, or obtaining the return of the price paid for, their vouchers when:

10.3.1.    voucher purchasers sought assistance from Spreets prior to the end of the voucher validity period; but

10.3.2.    the voucher validity period ended before Spreets had fully considered the request for assistance;

10.4.    Spreets was not required to assist voucher purchasers with the redemption of, or obtaining the return of the price paid for, their vouchers after vouchers had been supplied to voucher purchasers;

when in fact the terms referred to in sub paragraphs 10.1 to 10.4 did not form part of the terms and conditions of the deals bought by voucher purchasers and thereby Spreets has, in trade or commerce and in connection with the supply of Spreets ‘ services:

10.5.    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

10.6.    made a false or misleading representation concerning the existence or effect of a condition in contravention of s 29(1)(m) of the ACL.

Adelaide Airports Deal – Contraventions relating to undisclosed limitations on deals

11.    Spreets, on or about 28 April 2011, by advertising and offering a voucher deal on the Spreets Website for a trial instructional flight redeemable from the merchant Adelaide Airsports containing the following terms:

11.1.    “bookings are essential and subject to availability”; and

11.2.    “Voucher valid from 4/5/11 – 4/5/12” (the Adelaide Airsports Deal Validity Period)

in circumstances where:

11.3.    on or about 14 April 2011:

11.3.1.    Adelaide Airsports advised Spreets it was not able to service the voucher deal between 14 May 2011 and 20 May 2011;

11.3.2.    Spreets advised that Adelaide Airsports could either expressly exclude those dates from the validity period or use the term referred to in paragraph 11.1 instead;

11.3.3.    Adelaide Airsports advised Spreets that it wished to use the term referred to in paragraph 11.1 instead of excluding the dates referred to in paragraph 11.3.1 from the validity period (the Adelaide Airsports Deal Limitation);

11.4.    Spreets knew by reason of the Adelaide Airsports Deal Limitation that voucher purchasers could not in fact redeem their vouchers for the whole of the Adelaide Airsports Deal Validity Period;

11.5.    Spreets failed to disclose the Adelaide Airsports Deal Limitation to consumers prior to selling the vouchers; and

11.6.    the Adelaide Airsports Deal Limitation was a limitation that consumers would have expected to be disclosed to them by Spreets prior to their purchase of a voucher for the Adelaide Airsports deal

and thereby Spreets has, in trade or commerce, engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 18 of the ACL.

The George Restaurant Deal - Contraventions relating to undisclosed limitations on deals

12.    Spreets, on or about 8 August 2011, by advertising and offering a voucher deal on the Spreets Website for a breakfast for two persons redeemable from the merchant The George restaurant containing the following terms:

12.1.    “Valid Monday to Friday, 7am – 10.30am”;

12.2.    “Phone bookings are essential and subject to availability”; and

12.3.    “Voucher valid for 3 months from 9/8/11 – 9/11/11” (The George Restaurant Deal Validity Period)

in circumstances where:

12.4.    on or about 29 July 2011:

12.4.1.    Spreets asked The George Restaurant whether the proposed George Restaurant Deal could be extended so that vouchers could be redeemed from Monday to Friday instead of Monday to Thursday;

12.4.2.    Spreets advised The George Restaurant that if it allowed the extension referred to in paragraph 12.4.1 above it only had to allocate 2 or 3 tables to Spreets voucher purchasers on Fridays;

12.4.3.    The George Restaurant advised Spreets that it would allow the extension referred to in paragraph 12.4.1 above but it would limit the tables available to voucher purchasers in accordance with Spreets ‘ advice referred to in paragraph 12.4.2 above (The George Restaurant Deal Limitation);

12.5.    Spreets knew by reason of The George Restaurant Deal Limitation that only a limited number of voucher purchasers could redeem their vouchers on Fridays during The George Restaurant Deal Validity Period, in circumstances where The George Restaurant had significantly greater capacity than 2 or 3 tables;

12.6.    Spreets failed to disclose The George Restaurant Deal Limitation to consumers prior to selling the vouchers; and

12.7.    The George Restaurant Deal Limitation was a limitation that consumers would have expected to be disclosed to them by Spreets prior to their purchase of a voucher for The George Restaurant Deal

and thereby Spreets has, in trade or commerce, engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 18 of the ACL.

PECUNIARY PENALTIES

THE COURT ORDERS THAT:

13.    Spreets pay to the Commonwealth of Australia, in respect of the contraventions of the ACL referred to in paragraphs 1 to 10 above, a pecuniary penalty in the amount of $600,000 within 28 days of the date of this order.

COSTS

14.    Spreets pay the applicant’s costs of and incidental to these proceedings fixed in the amount of $25,000 within 28 days of the date of this order.

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

REASONS FOR JUDGMENT

1    Before the Court is an originating application filed on 30 July 2014 by the Australian Competition and Consumer Commission (“ACCC”) against Spreets Pty Ltd ACN 142 688 524 (“Spreets”), in respect of alleged false representations and misleading conduct by Spreets. The ACCC seeks a number of orders by way of:

    Declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”).

    Orders for civil penalties under s 224 of Sch 2 to the Competition and Consumer Act 2010 (Cth), comprising the Australian Consumer Law (“ACL”).

    Non-punitive orders under s 246 of the ACL.

    Costs.

2    The application relates to the alleged conduct of Spreets in respect of their supply, possible supply or promotion of the supply of Spreets’ services, being the supply of vouchers to voucher purchasers, which the ACCC claims was in contravention of s 18 and s 29 of the ACL.

3    While it is necessary to shortly turn to examine the facts of this case in greater detail, I note in particular that before the Court are joint submissions and a statement of agreed facts and admissions pursuant to s 191(3)(a) of the Evidence Act 1995 (Cth) (“Evidence Act”) filed 21 November 2014 on behalf of the ACCC and Spreets. Ms Brennan, Counsel for the ACCC, also tendered a draft short minute of orders at the hearing before me on 10 April 2015, with no objection from Mr May, Counsel for Spreets.

4    At the oral hearing both parties also noted the unresolved question whether the decision of the High Court in Barbaro v The Queen (2014) 305 ALR 323 affected the ability of the ACCC to make submissions as to the appropriate range and penalty in proceedings for a civil penalty. As was recently noted by the Chief Justice of this Court in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330 at [11], the majority of the Court of Appeal of Victoria expressed the view in Matthews v The Queen [2014] VSCA 291 at [29] that the comments in Barbaro were inapplicable to proceedings for civil penalties. As was the case in Coles Supermarkets, this issue has not been the subject of argument before me, and I make no findings in that regard for the purposes of this judgment.

5    In the circumstances of this case, I am of the view that I ought make the orders in the form tendered by the ACCC with the addition of an order that Spreets pay a pecuniary penalty in the amount of $600,000. Before turning to my reasons for doing so, it is useful to set out the background facts to this case, including the specific claims of the ACCC against Spreets.

CLAIMS AGAINST THE RESPONDENT

Claims pursuant to s 18 and s 29(1)(i) ACL: misleading or deceptive conduct/false misleading representation with respect to the price of services

6    The ACCC claimed that Spreets, in trade or commerce and in connection with the supply, possible supply or promotion of Spreets’ services, had engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and made a false misleading representation in contravention of s 29(1)(i) of the ACL with respect to the price of services.

7    Section 18 of the ACL provides:

18    Misleading or deceptive conduct

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

(2)    Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1).

Note:    For rules relating to representations as to the country of origin of goods, see Part 5-3.

8    Section 29(1)(i) o the ACL provides:

29    False or misleading representations about goods or services

(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:

…

(i)    make a false or misleading representation with respect to the price of goods or services; or

9    In summary, the ACCC sought the relief against Spreets in respect of the following conduct:

(1)    Melbourne City Skydive Centre Deal email advertisement

10    The ACCC seeks a declaration that Spreets, on or about 30 June 2011, by sending an email to consumers, which promoted a daily deal for a tandem skydive and 2 course lunch (the First Melbourne City Skydive Centre Deal) and included 3 reference to the price of the deal being $375, “only $375” and “just $375”, represented to consumers that:

    by paying $375 a consumer could purchase a voucher from Spreets for the First Melbourne City Skydive Centre Deal and redeem it without further costs;

when in fact:

    the voucher purchaser was required to pay an extra $25 fee to the Melbourne City Skydive Centre to redeem the voucher.

(2)    Melbourne City Skydive Centre Deal website advertisement and offer

11    The ACCC sought a declaration that Spreets, on 4 occasions from on or about 30 June 2011 to in or about mid-September 2011 by advertising and offering voucher deals on its website (the Spreets Website) for a tandem skydive and 2 course lunch (the Melbourne City Skydive Centre Deals), which each prominently stated the price of the deal as $375 and as “Only $375”, represented to consumers on each occasion that:

    by paying $375 a consumer could purchase a voucher from Spreets for the Melbourne City Skydive Centre Deals and redeem it without further costs;

when in fact:

    the voucher purchaser was required to pay an extra $25 fee to the Melbourne City Skydive Centre to redeem the voucher.

(3)    Coffs City Skydivers Deal email advertisement

12    The ACCC sought a declaration that Spreets, on or about 23 December 2011 by sending an email to consumers, which promoted a daily deal for a tandem skydive (the First Coffs City Skydivers Deal) and included 2 references to the price of the deal being $129 and as “Just $129”, represented to consumers that:

    by paying $129 a consumer could purchase a voucher for the First Coffs City Skydivers Deal from Spreets and redeem it without further costs;

when in fact:

    the voucher purchaser was required to pay an extra $35 fee to Coffs City Skydivers to redeem the voucher;

(4)    Coffs City Skydivers Deal website advertisement and offer

13    The ACCC sought a declaration that Spreets, on 2 occasions on or about 23 December 2011, by advertising and offering voucher deals on the Spreets Website for a tandem skydive (the Coffs City Skydivers Deals), which each prominently stated the price of the deal as $129 and as “Just $129”, represented to consumers on each occasion that:

    by paying $129 a consumer could purchase a voucher for the Coffs City Skydivers Deals from Spreets and redeem it without further costs;

when in fact:

    the voucher purchaser was required to pay an extra $35 fee to Coffs City Skydivers to redeem the voucher.

(5)    Rainbow Beach Skydive Deal website advertisement and offer

14    The ACCC sought a declaration that Spreets, on 2 occasions from on or about 18 September 2011 to about 19 September 2011, by advertising and offering voucher deals on the Spreets Website for a tandem skydive (the Rainbow Beach Skydive Deals), which each prominently states the price of the deal as $130 and as “Just $130”, represented to consumers on each occasion that:

    by paying $130 a consumer could purchase a voucher for the Rainbow Beach Skydive Deals from Spreets and redeem it without further costs;

when in fact:

    the voucher purchaser was required to pay an extra $35 fee to Skydive Rainbow Beach to redeem the voucher.

Claims pursuant to s 18 and s 29(1)(m) ACL: misleading or deceptive conduct and false misleading representation concerning (inter alia) the existence of a condition or warranty in relation to the price of certain deals

15    Second, in the originating application filed on 30 June 2014 the ACCC made the following claims on the grounds stated in the statement of claim and filed with the application that Spreets had, in trade or commerce and in connection with the supply, possible supply or promotion of Spreets’ services, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and made a false misleading representation concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy, in contravention of s 29(1)(m) of the ACL, in respect of representations to consumers about the price of certain deals.

16    I have already set out s 18 ACL. Section 29(1)(m) of the ACL provides:

29    False or misleading representations about goods or services

(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:

…

(m)    make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2).

17    In summary, the ACCC sought the relief against Spreets in respect of the following conduct:

(1)    Melbourne City Skydive Centre Deal

18    The ACCC sought a declaration the Spreets, from on or about 30 June 2011 to on or about 5 July 2011, by selling approximately 134 vouchers to consumers for a tandem skydive and 2 course lunch, which vouchers each contained statements:

    “Refunds are NOT APPLICABLE”; and

    “Not available with any other offer and no refunds; not redeemable for cash” represented to each voucher purchaser that:

o    he or she had no right to a refund of the purchase price of the voucher in any circumstances;

when in fact:

o    in certain circumstances voucher purchasers had a statutory right, conferred by Div 1 of Pt 2-3 and Pt 5-4 of the ACL, to a refund of the voucher purchase price.

(2)    Travel Smoove Hong Kong Holiday Deal

19    The ACCC sought a declaration that Spreets, from on or about 7 December 2011, by selling approximately 303 vouchers to consumers for a Hong Kong holiday package, which vouchers each contained the statement “non-refundable and non-exchangeable”, represented to each voucher purchasers that:

    he or she had no right to a refund of the purchase price of the voucher in any circumstances;

when in fact:

    in certain circumstances voucher purchasers had a statutory right, conferred by Div 1 of Pt 2-3 and Pt 5-4 of the ACL, to a refund of the voucher purchase price.

(3)    Vivere Products Eight Cube Storage System Deal

20    The ACCC sought a declaration that Spreets, from on or about 12 March 2012, by selling approximately 318 vouchers to consumers for a delivered Eight Cube Storage System, which vouchers each contained the statement “Refund on faulty products accepted up to 7 days after receipt of delivery (return shipping not included)”, represented to each voucher purchaser that:

    he or she could only obtain a refund of the amount paid by the voucher purchaser from the merchant where a product was faulty and the voucher purchaser returned the product within 7 days of receiving it;

when in fact:

    in certain circumstances, voucher purchasers had a statutory right, conferred by Div 1 of Pt 2-3 and Pt 5-4 of the ACL, to a refund of the amount paid by the voucher purchaser from the merchant outside the period of 7 days from receiving the product.

(4)    Deals in Australia Wine Aerator Deal

21    The ACCC sought a declaration that Spreets, from on or about 15 April 2012, by selling approximately 424 vouchers to consumers for a delivered wine aerator, which vouchers each contained the statement “Refund on faulty products accepted up to 7 days after receipt of delivery (return shipping not included)”, represented to each voucher purchaser that:

    he or she could only obtain a refund of the amount paid by the voucher purchaser from the merchant where a product was faulty and the voucher purchaser returned the product within 7 days of receiving it;

when in fact:

    in certain circumstances, voucher purchasers had a statutory right, conferred by Div 1 of Pt 2-3 and Pt 5-4 of the ACL, to a refund of the amount paid by the voucher purchaser from the merchant outside the period of 7 days from receiving the product.

Claims pursuant to s 18 and s 29(1)(m) ACL: misleading or deceptive conduct and false misleading representation concerning representations to consumers with respect to voucher redemption and remedies

22    Third, in the originating application filed on 30 June 2014 the ACCC made the following claims on the grounds stated in the statement of claim and filed with the application that Spreets had, in trade or commerce and in connection with the supply, possible supply or promotion of Spreets’ services:

(a)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

(b)    made a false misleading representation concerning the existence and effect of a condition in contravention of s 29(1)(m) of the ACL;

in relation to representations to consumers with respect to voucher redemption and remedies, namely:

(1)    Extra terms and conditions

23    The ACCC sought a declaration that Spreets, by representing to voucher purchasers who had been unable to redeem unexpired vouchers because the relevant merchants had refused to honour them, during the period from in or about July 2011 to in or about February 2012, that one or more of the following terms applied to the deals they had purchased:

    Spreets was only required to assist voucher purchasers with unexpired vouchers;

    Spreets was only required to assist voucher purchasers if they sought assistance from Spreets a reasonable time before the end of the validity period;

    Spreets was entitled to treat vouchers as expired, and therefore refuse to assist voucher purchasers with the redemption of, or obtaining the return of the price paid for their vouchers when:

o    voucher purchasers sought assistance from Spreets prior to the end of the voucher validity period; but

o    the voucher validity period ended before Spreets had fully considered the request for assistance;

    Spreets was not required to assist voucher purchasers with the redemption of, or obtaining the return of the price paid for, their vouchers after vouchers had been supplied to voucher purchasers;

when in fact:

    these terms did not form part of the terms and conditions of the deal bought by voucher purchasers.

(2)    Urban Spa Deal

24    The ACCC sought a declaration that Spreets, on or about 18 August 2011, by representing to a consumer who:

    had purchased a voucher from Spreets for massage and other beauty services redeemable from the merchant Urban Spa (the Urban Spa Deal) in August 2010;

    sought to make a booking with Urban Spa to redeem the Urban Spa Deal during the voucher validity period;

    was unable to make a booking with Urban Spa because it had no capacity to service the voucher; and

    contacted Spreets to seek a refund shortly before the end of the voucher validity period that:

o    the terms and conditions for the Urban Spa Deal included the following terms:

    the right to redeem the voucher was “subject to availability”;

    the consumer had to contact Spreets for assistance within a “reasonable time frame” prior to the end of the voucher validity period before she could receive a remedy from Spreets; and

o    because of the matters referred to in paragraph 11.5 above the consumer had not complied with the terms and conditions for the Urban Spa deal and was unable to receive a refund or other remedy from Spreets:

when in fact:

    the terms and conditions referred to in paragraph 2.5 did not apply to the Urban Spa Deal; and

    the consumer had not failed to comply with the terms and conditions for the Urban Spa Deal and was not unable to receive a refund or other remedy from Spreets.

Claims pursuant to s 18 ACL: misleading or deceptive conduct concerning undisclosed limitations on deals

25    Fourth, in the originating application filed on 30 June 2014 the ACCC made the following claims on the grounds stated in the statement of claim and filed with the application that Spreets has, in trade or commerce and in connection with the supply, possible supply or promotion of Spreets’ services engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; in relation to undisclosed limitations on deals, namely:

(1)    Adelaide Airsports Deal

26    The ACCC sought a declaration that Spreets, on or about 28 April 2011, by advertising and offering a voucher deal on the Spreets Website for a trial instructional flight redeemable from the merchant Adelaide Airsports containing the following terms:

    “bookings are essential and subject to availability”: and

    “Voucher valid from 4/5/11 – 4/5/12” (the Adelaide Airsports Deal Validity Period) in circumstances where:

    on or about 14 April 2011:

o    Adelaide Airsports advised Spreets it was not able to service the voucher deal between 14 May 2011 and 20 May 2011;

o    Spreets advised the Adelaide Airsports could either expressly exclude those dates from the validity period or use the term referred to in paragraph 1.1 instead;

o    Adelaide Airsports advised Spreets that it wished to use the terms referred to in paragraph 1.3.1 from the validity period (the Adelaide Airsports Deal Limitation);

    Spreets knew by reason of the Adelaide Airsports Deal Limitation that voucher purchasers could not in fact redeem their vouchers for the whole of the Airsports Deal Validity Period;

    Spreets failed to disclose the Adelaide Airsports Deal Limitation to consumers prior to selling the vouchers; and

    the Adelaide Airsports Deal Limitation was a limitation that; in all the circumstances, consumers would have expected to be disclosed to them by Spreets prior to their purchase of a voucher for the Adelaide Airsports deal.

(2)    The George Restaurant Deal

27    The ACCC sought a declaration that Spreets, on or about 8 August 2011, by advertising and offering a voucher deal on the Spreets website for a breakfast for 2 persons redeemable from the merchant The George restaurant containing the following terms:

    “Valid Monday to Friday, 7am – 10.30am”;

    “Phone booking are essential and subject to availability”; and

    “Voucher valid for 3 months from 9/8/11 – 9/11/11” (The George Restaurant Deal Validity Period) in circumstances where:

    on or about 29 July 2011:

o    Spreets asked The George restaurant whether the proposed George Restaurant Deal could be extended so that vouchers could be redeemed from Monday to Friday instead of Monday to Thursday;

o    Spreets advised The George restaurant that if it allowed the extension referred to in paragraph 2.4.1 above it only had to allocate 2 or 3 tables to Spreets voucher purchasers on Fridays;

o    The George restaurant advised Spreets that it would allow the extension referred to in paragraph 2.4.1 above but it would limit the tables available to voucher purchasers in accordance with Spreets ‘ advice referred to in paragraph 2.4.2 above (The George Restaurant Deal Limitation);

    Spreets knew by reason of The George Restaurant Deal Limitation that only a limited number of voucher purchasers could redeem their vouchers on Fridays during The George Restaurant Deal Validity Period, in circumstance where The George restaurant had significantly greater capacity than 2 or 3 tables;

    Spreets failed to disclose The George Restaurant Deal Limitation to consumers prior to selling the vouchers; and

    The George Restaurant Deal Limitation was a limitation that, in all the circumstances, consumers would have expected to be disclosed to them by Spreets prior to their purchase of a voucher for The George Restaurant Deal.

Orders sought

28    Finally, in the originating application filed on 30 June 2014, the ACCC sought the following orders:

    declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”);

    orders for civil penalties under s 224 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (“the Act”), comprising the Australian Consumer Law (“ACL”);

    non-punitive orders under s 246 of the ACL; and

    costs;

as well as additional orders, being in summary:

    an order that Spreets pay a pecuniary penalty to the Commonwealth of Australia, in respect of the contraventions of the ACL referred to in paragraphs 1 to 13 of the originating application; and

    an order that Spreets at its own expense and within 90 days of the date of this order develop and implement a compliance program, being an enhancement of Spreets ‘ existing compliance guidelines, procedures or programs that are designed to minimise the risk of Spreets engaging in conduct which contravenes s 18 and s 29 of the ACL by:

(a)    conducting a review of existing compliance guidelines procedures or programs;

(b)    appointing and maintaining the appointment of a compliance officer;

(c)    issuing a written policy statement outlining its commitment to compliance with the ACL;

(d)    implementation of regular and practical training for all employees whose duties could result in being concerned with the ACL;

(e)    ensuring that the compliance program is included in all induction processes for new staff whose duties could result in being concerned with the ACL; and

(f)    maintaining the compliance program for a period of 3 years from the commencement date.

JOINT SUBMISSIONS AND STATEMENT OF AGREED FACTS AND ADMISSIONS

29    Before the Court were joint submissions and statement of agreed facts and admissions pursuant to s 191(3)(A) of the Evidence Act. These submissions were filed on 21 November 2014 on behalf of the ACCC and Spreets.

30    In summary:

    For the purpose of the proceeding and in order to resolve the allegations arising from the ACCC’s investigation, Spreets admitted the conduct and the contraventions of s 18 and s 29 of the ACL as pleaded in the Statement of Claim.

    For the purposes of s 191(3)(a) of the Evidence Act, the ACCC and Spreets reached agreement in respect of the facts of this case and the terms of relief to be ordered by the Court to resolve the proceedings.

    Spreets has agreed to maintain its existing compliance practices for a period of three years. These compliances practices reflect certain improvements to the compliance programme of Spreets made after the commencement of the ACCC investigation. The ACCC does not seek further orders in relation to the Spreets compliance program.

    The parties recognise that, under s 224 of the ACL, it is for the Court to determine whether the contraventions occurred, and the quantum of any pecuniary penalties and other relief that should be ordered.

31    At the hearing before me on 10 April 2014, Ms Brennan tendered a short minute of orders. Mr May consented to this tender and made no further submissions in this regard.

DETAIL OF THE SHORT MINUTE OF ORDERS

Declarations

32    In summary, the short minute of orders detailed the following agreed declarations.

33    First, in respect of representations by Spreets to consumers concerning the price of deals, that Spreets has, in trade or commerce and in connection with the supply or possible supply or promotion of the supply of Spreets’ service, being the supply of vouchers to voucher purchasers engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and made a false or misleading representation with respect of the price of services in contravention of s 29(1)(i) of the ACL. This was in relation to the following scenarios:

    Melbourne City Skydive Centre Deal email advertisement;

    Melbourne City Skydive Centre Deal website advertisement and offer;

    Coffs City Skydivers Deal email advertisement;

    Coffs City Skydivers Deal website advertisement and offer; and

    Rainbow Beach Skydive Deal website advertisement and offer.

34    I note that the only difference between the short minute of orders and the declarations sought by the ACCC in its originating application is that, in all scenarios, the voucher purchaser was required to pay an extra fee to redeem the voucher, unless the voucher purchaser was a member of the Australian Parachute Federation.

35    Second, in respect of representations to consumers in relation to the applicability of consumer guarantees, that Spreets has, in trade or commerce and in connection with the supply of Spreets’ services, in relation to each voucher sold, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 19 of the ACL and made a false misleading representation concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy, in contravention of s 29(1)(m) of the ACL. This was in relation to the following scenarios:

    Melbourne City Skydive Centre Deal;

    Travel Smoove Hong Kong Holiday Deal;

    Vivere Products Eight Cube Storage System Deal; and

    Deals in Australia Wine Aerator Deal.

36    In this instance there appears to be no difference between the short minute of orders tendered by the ACCC and relevant declarations it sought in the originating application.

37    Third, in respect of representations to consumers in relation to voucher redemption and remedies, that Spreets has, in trade or commerce and in connection with the supply, possible supply or promotion of Spreets’ services, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and made a false misleading representation concerning the existence and effect of a condition in contravention of s 29(1)(m) of the ACL. This was in relation to scenarios where extra terms and were placed on unexpired vouchers.

38    In this instance the only difference between the short minute of orders tendered by the ACCC and relevant declarations sought by the ACCC in the originating application appears to be that the ACCC no longer seeks a declaration in relation to its claim relating to the Urban Spa Deal.

39    Finally, in respect of contraventions relating to undisclosed limitations on deals, that Spreets has, in trade or commerce and in connection with the supply, possible supply or promotion of Spreets’ services, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL, in the following scenarios:

    Adelaide Airsports Deal; and

    The George Restaurant Deal.

40    In this instance there is no difference between the short minute or orders tendered by the ACCC and the declarations it sought in the originating application.

Pecuniary orders

41    The parties agreed that the following pecuniary penalties could appropriately be imposed on Spreets, namely that within 28 days of the making of orders:

    Spreets pay to the Commonwealth of Australia a pecuniary penalty amount in respect of the contraventions of the ACL referred to within the declarations, an amount of which is at the discretion of the Court. At the hearing the parties proposed that a pecuniary penalty of $600,000 would be appropriate.

    Spreets pay the applicant’s costs incidental to these proceedings fixed in the amount of $25,000.

Compliance program

42    The short minute of orders does not refer to the implementation by Spreets of a compliance program with respect of their business. At the hearing on 10 April 2014, Ms Brennan for the ACCC explained that Spreets has already initiated a compliance program, which began when Spreets was taken over by Yahoo in January 2011, and that Spreets has agreed to continue that compliance program for three years following the making of orders by the Court in this matter.

BACKGROUND FACTS

43    As I have already observed, this proceeding was commenced by the ACCC as a result of an investigation by it into the conduct of Spreets.

44    At all material times, from at least around 19 March 2010 to 1 March 2013 (“the relevant period”), Spreets operated an online group buying (“OGB”) business in Australia. Around December 2012 Spreets began to change its business model, with the change taking full effect from 6 March 2013, such that I understand Spreets now operates as a deal aggregator for other OGB businesses.

45    Spreets operates a website, which functioned as a platform for merchants to offer various types of goods and services to consumers at significantly discounted prices by way of voucher deals. These offers were made in the following forms:

    sending emails advertising deals offered nationally and locally to consumers who had requested to be included on the Spreets’ database;

    posting deal details on social media including Facebook and Twitter; and

    promoting deals on the Spreets website, both on the front page of the Spreets Website and on a specific webpage for the deal, which was available to the public for a limited period of time.

46    Where Spreets promoted its deals to consumers, those promotions typically included a link to the relevant deal page on the Spreets Website, which included an advertisement for the deal, specified terms and conditions that applied to the deal and a link where vouchers could be purchased.

47    Spreets used a voucher system to enable consumers to purchase a voucher for the deals from Spreets that was redeemable for particular goods and services from a particular third-party merchant, subject to various terms and conditions including redemption of the voucher within a specified period. In summary, terms and conditions for the voucher deals were made up of:

    specific terms and conditions disclosed on the voucher deal page on the Spreets website which were then printed on vouchers purchased by consumers; and

    general terms and conditions for Spreets’ consumers which were available on the Spreets Website and relevant to vouchers purchased by consumers.

48    Person who purchased voucher deals from Spreets were consumers as defined by s 3 of ACL and were directed to Spreets’ consumer terms and conditions before they completed a purchase.

49    Features of Spreets’ business model included:

    merchants offering to supply goods or services at discounted prices by way of vouchers sold by Spreets on the Spreets website;

    a pre-condition that a minimum number of vouchers must be sold during the “voucher selling period” before the deal was “activated” or is “tipped”; and

    a cap on the number of vouchers that Spreets could sell for the voucher deal that could be imposed.

50    As part of its business operations, Spreets provided the following services to merchants in accordance with an agreement between it and the merchant:

    advice to merchants about terms and conditions that would be appropriate for the particular type of deal that the merchant would offer;

    online marketing and editorial services, including development of the vouchers and deal pages on the Spreets Website; and

    promoted the deals to consumers.

51    Spreets provided the following services to consumers:

    facilitating the purchase of vouchers through the Spreets Website; and

    accepted payment for the voucher deals and supplied vouchers for the deals to consumers (retaining a percentage – generally 10%-30% – of payments as commission, remitting the remaining revenue to merchants); and

    handled enquiries and complaints from consumers about voucher deals.

52    The redemption process for Spreets’ vouchers varied from merchant to merchant with the process including a consumer, in summary:

    making a booking with the merchant;

    presenting the voucher in exchange for goods or services the subject of the deal; and

    providing a delivery address (to either Spreets or the merchant) to which a merchant could deliver the goods the subject of the deal.

53    In the joint submissions and statement of agreed facts and admissions filed 21 November 2014, it is agreed that during the relevant period Spreets was one of the larger OGB businesses in Australia. As at May 2011, Spreets had an active national database of over 1 million members. During 2011 and 2012, Spreets promoted around 6,000 deals and sold around 2 million vouchers to consumers over the Spreets Website.

54    Importantly, the parties submit that the contraventions admitted by Spreets fall into four broad categories:

1.    representations to consumers about the price of deals.

2.    representations about the consumer guarantees and refund rights in Pt 3-2 and Pt 5-4 of the ACL on vouchers sold through the Spreets website.

3.    representations to individual consumers about their rights under, and the effect of, Spreets’ terms and conditions.

4.    contraventions relating to undisclosed limitations on voucher deals sold to consumers.

DETAIL OF RELEVANT REPRESENTATIONS AND CONTRAVENTIONS

1.    Representations to consumers about the price of deals

55    The parties agreed that this aspect of the case particularly concerned three voucher deals promoted by Spreets and offered for sale on the Spreets website for tandem skydives, each redeemable from different merchants, namely the Melbourne City Skydive Centre Deal, the Coffs City Skydivers Deal and the Rainbow Beach Skydive Deal.

56    The parties submit that the admitted contraventions for both the Melbourne City Skydive Centre Deal and the Coffs City Skydivers Deal involved both:

(a)    promotional emails sent by Spreets to persons subscribed to receive deals from Spreets; and

(b)    deals as offered on the deal pages on the Spreets website.

57    The admitted contravention for the Rainbow Beach Skydive Deal related solely to the deal pages on the Spreets website.

58    In each case, the contraventions involved Spreets prominently promoting a “headline” price for which the voucher deals could be purchased, without adequately disclosing that voucher purchasers would also be required to pay a compulsory Australian Parachute Federation levy (APF Levy) in the amount of either $25 or $35 to the relevant merchant when purchasers sought to redeem their voucher. A purchaser would not need to pay this levy if he or she were already a member of the APF at the time of redemption of the voucher, however this fact was not disclosed in the conditions for the relevant deals.

59    The parties jointly submitted a table in the following form, summarising the nature of each convention:

Table 1: Representations about prices

(a)    Representations about the price of deals - email advertisements

60    The email contraventions related to promotional emails sent by Spreets to subscribers maintained on the Spreets database, who had subscribed to receive promotional emails and other material from Spreets about deals offered nationally and in the localities in which the consumers lived. Contraventions alleged by the ACCC concerned two emails (“the contravening emails”) sent by Spreets:

    the Melbourne City Skydive Centre email sent to over 200,000 subscribing consumers located in Victoria on or about 30 June 2011; and

    the Coffs City Skydivers email sent to approximately subscribing consumers located in Sydney and approximately 200,000 subscribers in Brisbane on or about 23 December 2011.

61    The contravening emails contained a number of common features, in particular:

    in relation to the Melbourne City Skydive Centre:

o    a list of voucher deals available for purchase by consumers;

o    a short “headline” description of each listed voucher deal (which in this case stated: “The Ultimate Adventure Experience! Tandem Sky Dive & Scenic Flight into Yarra Valley Winery with Two­Course Lunch & Wine for Only $375, Value $750!”);

o    a further prominent, unqualified statement of the price of each deal (“$375”);

o    a description of the savings stated to be available to voucher purchasers (“Value $750. Discount 50%. You Save $375”); and

o    a link to the relevant deal page on the Spreets website where further details of the voucher deal, including any applicable terms and conditions were provided (“See Today ‘s Deal”).

    In relation to the Coffs City Skydivers:

o    a list of voucher deals available for purchase by consumers;

o    a short “headline” description of each listed voucher deal (which in this case stated: “Experience the Thrill of Your Life! Incredible Tandem Skydive from 8,000 Feet- JUST $129! Normally $265!”);

o    a further prominent, unqualified statement of the price of each deal (“$129”);

o    a description of the savings stated to be available to voucher purchasers (“FULL PRICE $265. SAVE 51%”); and

o    a link to the relevant deal page on the Spreets website where further details of the voucher deal, including any applicable terms and conditions were provided (“View deal”).

62    To purchase a voucher for the Melbourne City Skydive Centre deal or Coffs City Skydivers deal, the recipient of the email clicked on the link in the relevant email.

63    The parties agreed that the contravening emails:

    did not make reference to the Australian Parachute Federation (“APF”) levy;

    represented that by paying the advertised “headline” price, a consumer could purchase a voucher for the relevant skydiving deal; and

    advertised “headline” price was the only price that a consumer needed to pay to redeem a voucher for each voucher deal from the specified merchant.

64    However, the parties also agreed that notwithstanding these representations:

    unless the consumer was already a member of the APF, consumers who purchased a voucher for either deal were required to pay the APF Levy ($25 in the case of the Melbourne City Skydive Centre Deal and $35 in the case of the Coffs City Skydivers Deal) in addition to the headline price advertised by Spreets in the contravening emails;

    to become aware of the APF levy applicable to each voucher deal, a consumer would have to view the relevant deal page on the Spreets Website and scroll down to the section titled “The Fine Print”;

    the contravening emails and the website pages all three merchants did not refer to the payment of the APF levy being unnecessary if a consumer was already a member of the APF”.

65    Having regard to Spreets’ target audience, the parties agreed that most voucher purchasers would not already have been members of the APF. Moreover, in making the representations as summarised above and in the joint submissions and statement of agreed facts and admissions filed 21 November 2014, Spreets admitted that, in trade or commerce, and in connection with the supply, possible supply or promotion of the supply of Spreets’ services to consumers, being the supply of vouchers to voucher purchasers (Spreets’ services), it, on each occasion:

(a)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and

(b)    made false or misleading representations with respect to the price of services in contravention of s 29(1)(i) of the ACL.

(b)    Website advertisements and offers

66    The parties agreed that this particular aspect involved a series of deal pages published on the Spreets website for each of the Melbourne City Skydive Centre, Coffs City Skydivers and Rainbow Beach Skydive deals from on or about 30 June 2011 until approximately 25 December 2011 (“the contravening deal pages”), which allowed customers to purchase vouchers for the relevant deal via a website link.

67    The contravening deal pages were active on the Spreets website, on multiple deal pages, during the following periods:

(a)    the Melbourne City Skydive Centre deal on four occasions between about 30 June 2011 and about 19 September 2011;

(b)    the Rainbow Beach Skydive deal on two occasions from approximately 16 September 2011 to approximately 19 September 2011; and

(c)    the Coffs City Skydivers deal on two occasions from about 23 December 2011 to approximately 25 December 2011.

68    In relation to these offers, consumers could access the contravening deal pages either by following a link from the email advertisement relating to the deal or by directly accessing the deal pages through the Spreets website. Once each deal had expired, the relevant deal page remained on the Spreets website with a message stating “THE DEAL IS OVER” or “Deal is over” and vouchers could no longer be purchased.

69    The contravening deal pages contained a number of common features for all merchant providers, as summarised below:

    a deal headline which matched the headline in any email sent to subscribers;

o    the Melbourne City Skydive Centre headline read “The Ultimate Adventure Experience! Tandem Sky Dive & Scenic Flight into Yarra Valley Winery with Two-Course Lunch & Wine for Only $375, Value $750!”;

o    the Coffs City Skydivers headline read “Experience the Thrill of Your Life! Incredible Tandem Skydive from 8,000 Feet- Just $129! Normally $265!”; and

o    the Rainbow Beach headline read “Ultimate Skydiving Experience! Tandem Skydive Over Rainbow Beach for Just $130 (Value $260). See the Sights From New Heights!”;

    the prominent statement of the price of the voucher, in the largest text on the deal page;

o    the Melbourne City Skydive Centre price was “$375”;

o    the Coffs City Skydivers price was “$129”; and

o    the Rainbow Beach price was “$130”;

    a picture related to the deal, which in all instances was a picture of a tandem skydive;

    a “Highlights” section setting out features of the deal and what the consumer would be entitled upon purchasing a voucher; and

    a section below the “Highlights” section labelled “The Fine Print” containing specific terms and conditions relevant to the deal;

o    the Melbourne City Skydive Centre condition referring to the APF levy appeared as the fifth condition out of the 16 conditions listed under the “Fine Print” section;

o    the Coffs City Skydivers condition referring to the APF levy appeared as the eighth condition out of the 13 conditions listed under the “Fine Print” section; and

o    the Rainbow Beach condition referring to the APF levy appeared as the ninth condition out of the 14 conditions listed under the “Fine Print” section.

70    It was agreed by the parties that the unqualified deal headlines and prominent statement of price conveyed a representation for each of the contravening deal pages that a consumer need pay no more than the advertised headline price in order to be able to redeem the voucher for the skydiving service. The parties agreed that this representation was misleading, as most consumers would not have been able to redeem their voucher without payment of the additional APF levy to the relevant merchant.

71    The parties further agreed that these representations were not sufficiently corrected by the conditions in the respective fine print sections for each deal because:

    there was no qualification in the “headline” price alerting customers to the fact that additional fees or charges applied;

    the conditions were inconsistent with the representations conveyed by the “headline” message;

    the “Fine Print” section in each of the Contravening Deal pages was not immediately visible to consumers when they first arrived at the deal webpage and consumers had to scroll down the page before this section became visible; and

    the relevant conditions were in significantly smaller font than the headline and were one of a number of conditions in the “Fine Print” section.

72    Spreets has admitted to making these representations, in each of the contravening deal pages. Further, they have admitted that, in trade or commerce, and in connection with the supply, possible supply or promotion of the supply of Spreets’ services, on each occasion that they engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and made false or misleading representations with respect to the price of services in contravention of s 29(1)(i) of the ACL.

2.    Representations to consumers about consumer guarantees

73    This aspect of the matter concerns statements by Spreets to consumers pursuant to four available deals.

74    The parties jointly submitted a similar table detailing the respective deals and summarising the nature of each alleged convention. In each case, the statements along with a number of other terms and conditions for the deals were printed on the face of the vouchers provided to consumers by Spreets.

Table 1: Representations about consumer guarantees

75    In each case, the parties submitted that by making the statements above, Spreets contravened the provision for consumer guarantees in Div 1 of Pt 3-2 of the ACL and the related remedies in Pt 5-4 of the ACL as they appeared at 30 June 2011, which provide for a statutory right to a refund in identified circumstances and which cannot be excluded by contract.

76    Spreets has admitted to these contraventions in respect of all four deals. Further, they have admitted that, they have, in trade or commerce, and in connection with the supply of Spreets’ services, in relation to each voucher sold, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and have made a false or misleading representation concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy in contravention of s 29(1)(m) of the ACL.

3.    Representations to individual consumers about their rights under, and the effect of, Spreets’ terms and conditions

77    This aspect of the matter involves representations to individual consumers about the effect of Spreets’ terms and conditions, as they applied to voucher deals purchased by consumers.

78    In summary, terms and conditions for the voucher deals were made up of:

    specific terms and conditions disclosed on the voucher deal page on the Spreets website which were then printed on vouchers purchased by consumers; and

    general terms and conditions for Spreets ‘ consumers which were available on the Spreets Website and relevant to vouchers purchased by consumers.

79    The ACCC relied on representations to six consumers in respect of representations concerning voucher deals, namely:

    Ms Liana Kovacevic – Zensara Day Spa

    Ms Janet Davis- Urban Spa

    Bernard – Nirvana Beauty

    Ms Rachel Moftah – Glamour Day Spa

    Lindsay – Apollo Bay Shark Fishing Tours

    Ms Michelle Braggins – Walhalla Star Hotel

80    It is appropriate to examine the agreed circumstances of each customer.

Ms Liana Kovacevic – Zensara Day Spa

81    In summary, the parties agreed in respect of the following facts concerning Ms Kovacevic:

(a)    In or about June 2011, Spreets advertised and offered a voucher deal on the Spreets Website for hair removal services redeemable from the merchant, Zensara Day Spa, at the purchase price of $399.

(b)    Ms Kovacevic purchased two vouchers at a total cost of $798.

(c)    On 6 July 2011, Ms Kovacevic complained by email to Spreets that she had unsuccessfully attempted to contact the merchant by “ringing every day several times during the day, and had left voicemails”. Ms Kovacevic advised that if she was unable to “get in touch” with the merchant in the “next few days” she felt that she had no choice but to ask Spreets for a refund.

(d)    On 7 July 2011, Spreets replied by email thanking Ms Kovacevic for bringing the matter to their attention. They advised that Spreets could not control how the merchant operated on a daily basis and that the merchant could be busy servicing their existing customer base as well as Spreets customers.

(e)    On 8 July 2011, Ms Kovacevic complained by email to Spreets that her attempts to contact the merchant continued to be unsuccessful. Ms Kovacevic advised that if she were unable to contact the merchant by 9 July 2011, she sought a full refund from Spreets.

(f)    On 11 July 2011, Ms Kovacevic complained by email to Spreets that her attempts to contact the merchant continued to be unsuccessful and that her attempts had now lasted nine days. Ms Kovacevic advised that in light of this, she sought a full refund from Spreets.

(g)    On 20 July 2011, Spreets responded to Ms Kovacevic by email explaining that “it is often the case that due to the increased business generated from running a deal with Spreets, companies are initially too busy to call back or reply to emails”. Spreets advised Ms Kovacevic that she should continue to call or email the merchant as Spreets were confident that she would still be able to redeem her vouchers within the validity dates. Spreets gave Ms Kovacevic the name and number of a suggested contact person at Zensara Day Spa.

(h)    On 20 July 2011, Ms Kovacevic responded to Spreets that she wanted a refund as soon as possible as she did not wish to deal with “this company” any longer.

(i)    Having received no response to her email by 28 July 2011, Ms Kovacevic sent a further email to Spreets reiterating her request for a refund as she no longer wished to deal with Zensara Day Spa.

(j)    On 29 July 2011, Spreets replied to Ms Kovacevic stating that they were “not be able to process any refunds for this deal as [they] have already made all payments to Zensara and if a refund is desired, [it] must be directed to the business themselves and they will issue it to you”.

82    It is submitted by the parties that the purported term that Spreets was not required to assist Ms Kovacevic with her request was not part of the terms and conditions applying to the Zensara Day Spa Deal.

Ms Janet Davis – Urban Spa

83    The ACCC pleaded both a general contravention and a specific contravention of the ACL involving representations made by Spreets to Ms Davis concerning the Urban Spa Deal. However, in the joint submissions and statement of agreed facts and admissions filed 21 November 2014, I note that the ACCC no longer seeks a separate declaration or separate penalty in relation to the misrepresentations to Ms Davis.

84    Rather, I note that Spreets admits to the pleaded conduct concerning Ms Davis. The parties jointly submit that the conduct of Spreets should be considered as part of the conduct constituting the general contravention.

85    The parties submitted, in summary, the following facts in relation to Ms Davis:

    In or about August 2010, Spreets advertised and offered a voucher deal on the Spreets Website for massage and beauty services redeemable from the merchant, Urban Spa, at the purchase price of $79.

    The terms and conditions applying to the deal included “Voucher valid 12/8/10- 12/8/11” and “Bookings essential”.

    On or about 12 August 2010, Spreets sold a voucher to Ms Davis for this deal, valid until 12 August 2011.

    Ms Davis attempted to make a booking with Urban Spa to redeem her voucher.

    On 9 August 2011, a representative of Urban Spa advised Ms Davis that Urban Spa had no times available for her to redeem her voucher up until the expiry date; however she could be placed on the waiting/cancellation list.

    On 10 August 2011 (two days before the expiry of the validity period), Ms Davis emailed Spreets advising that she was having trouble redeeming her voucher and that she would like to claim a refund.

    On 18 August 2011, Spreets respondent to Ms Davis by email stating that they were unable to provide her with a refund. Spreets advised that their “deals are “subject to availability” and that this terms is “not only stipulated on our terms and conditions under section 12, but also on the fine print of the deal itself”. Spreets went further to explain that if Ms Davis had contacted them (Spreets) within a reasonable time frame to assist her in redeeming her purchase, rather than two days before the expiry date, they “could of [sic] resolved this issue” for her.

    Ms Davis responded to Spreets email on 18 August 2011 pressing her request for a refund.

    Another Spreets representative subsequently replied to Ms Davis request reiterating that their (Spreets) deals are subject to availability and that had she got in touch with Spreets sooner they could have investigated the issue earlier for her.

86    It is submitted by the parties that the purported term that customers were to contact Spreets within a reasonable time from prior to the expiry of the deal was not part of the terms and conditions applying to the Urban Spa Deal.

Bernard – Nirvana Beauty

87    The parties submitted, in summary, the following facts in relation to an individual customer known only as Bernard:

    In or about January 2011, Spreets advertised and offered a voucher deal on the Spreets Website for a “princess package” (comprising a massage, facial and other services) with the merchant Nirvana Beauty, at the purchase price of $89.

    The voucher was redeemable from 17 January 2011 to 17 July 2011.

    On 27 July 2011, Spreets received an email complaint from Bernard stating that he/she had made several unsuccessful attempts to book an appointment with the merchant “at a few locations”. Bernard explained that he/she had subsequently left booking the appointment for a later time however he/she realised that the voucher had expired. Bernard asked Spreets for their assistance in this regard.

    On 27 July 2011, Spreets responded by email stating that all vouchers have a specific time frame to redeem services. Spreets explained that had Bernard contacted Spreets within the validity period they would have been able to assist him/her in redeeming his/her purchase. Spreets explained that they were unable to extend the voucher period or provide a refund. Spreets explained that the nature of their business required a strict protocol in relation to the expiration period of their deals as they had contracted with all merchants, which affected payment both to Spreets and the merchants. Spreets reiterated the terms and conditions on their website, which stated:

11.2(e)    the expiration date of a Voucher will be specified on the Voucher and disclosed on the Site. Once a Voucher has expired, Spreets considers the Voucher to be invalid and it will not be honoured by Spreets or the Merchant. Spreets will not provide any refunds in whole or in part for any expired Vouchers.

    Bernard responded to Spreets stating that he/she had attempted “more than 3 times” in the few days prior to the expiry date to make an appointment. Bernard explained that it was obvious that he/she had paid his/her money in advance and that the merchant was not willing to give an appointment. Bernard questioned Spreets as to why he/she should lose his/her money for not obtaining an appointment despite several unsuccessful attempts.

    On 10 August 2011, Spreets replied to Bernard with a standard form response, stating, in summary that they were unable to provide a refund for this deal as it has expired. Spreets referred Bernard to their terms and conditions, namely 12.1, which stated:

12.1    All vouchers relating to the provision of services by Merchants is [sic] subject to availability and may require you to make a booking in advance. Spreets cannot guarantee that services will be available at your preferred times. It is your responsibility to arrange your booking directly with the Merchant.

Spreets also advised that if Bernard had contacted Spreets earlier, they would have been able to investigate the issue earlier.

88    The parties submitted that the purported terms upon which Spreets relied, namely that Spreets would not provide refunds for expired vouchers and the requirement to contact Spreets within a reasonable time frame prior to the expiry of the deal, were not part of the terms and conditions applying to the Nirvana Beauty deal.

Ms Rachel Moftah – Glamour Day Spa

89    The parties submitted, in summary, the following facts in relation to Ms Moftah:

    In about April 2011, Spreets advertised and offered a voucher deal on the Spreets Website for a manicure or pedicure with the merchant, Glamour Day Spa, redeemable from 4 May 2011 to 4 August 2011 at the price of $39.

    Ms Moftah purchased one voucher for this deal.

    On 4 August 2011, Ms Moftah emailed Spreets to the effect that she had called the merchant on numerous occasions to book an appointment. Each attempt was unsuccessful. Ms Moftah asked whether it would be possible to have her money refunded as the voucher expired on that day and she had not heard back from the merchant.

    Spreets responded by email stating that they were unable to extend the voucher period or provide a refund in this instance. Spreets explained that had Ms Moftah contacted Spreets within the validity period they would have been able to assist her in redeeming her purchase. Spreets gave explanation that the nature of their business requires a strict protocol in relation to the expiration period of their deals as they are contracted with all merchants, of which affect payment both to Spreets and the merchants. Spreets reiterated the terms and conditions on their website, which stated:

11.2(e)    the expiration date of a Voucher will be specified on the Voucher and disclosed on the Site. Once a Voucher has expired, Spreets considers the Voucher to be invalid and it will not be honoured by Spreets or the Merchant. Spreets will not provide any refunds in whole or in part for any expired Vouchers.

    Ms Moftah replied to Spreets, outlining that she had in fact contacted them within the validity period (being the last day of the validity period), and that she would therefore like a refund.

    On 5 August 2011, Spreets responded to Ms Moftah stating that they felt that by contacting Spreets on the last day of the validity date to resolve the issues, Ms Moftah was making an unreasonable request. Spreets referred Ms Moftah to the terms and conditions in which they state she purchased the deal under, namely 12.1, which stated:

12.1    All Vouchers relating to the provision of services by Merchants is subject to availability and may require you to make a booking in advance. Spreets cannot guarantee that services will be available at your preferred times. It is your responsibility to arrange your booking directly with the Merchant.

Spreets went further to explain that whilst they could not control how the merchants operated, but that they were willing to offer Ms Moftah a $10 credit to her Spreets account as a gesture of goodwill.

    Ms Moftah responded to Spreets’ email stating that within the 12 week validity period, she had tried unsuccessfully to contact the merchant. She advised that contacting Spreets, the seller of the product, was a last resort, as the expiry date approached. Ms Moftah explained that she understood why Spreets could not extend the validity period, however she did not believe that it was an unreasonable request to ask for a refund in the circumstances. Ms Moftah advised that if she did not receive a refund, she would contact consumer protection for resolution of the matter.

    On 15 August 2011, Spreets continued to reject Ms Moftah’s request for a refund, reiterating that they were unable to give her a refund and that had she contacted them sooner, they could have investigated the issue sooner.

90    The parties agreed that the purported term that customers were to contact Spreets within a reasonable time from prior to the expiry of the deal was not part of the terms and conditions applying to the Glamour Day Spa Deal.

Lindsay – Apollo Bay Shark Fishing Tours

91    The parties submitted, in summary, the following facts in relation to an individual customer known only as Lindsay:

    In about September 2011, Spreets advertised and offered a voucher deal on the Spreets Website for a six hour shark fishing trip with the merchant, Apollo Bay Fishing, & Adventure Tours”, redeemable from 8 September 2011 to 24 December 2011 at the price of $99.

    On 22 December 2011, Spreets received an email complaint from Lindsay which stated that he/she had purchased 4 x voucher deals for the Apollo Bay Shark Fishing Tour. Lindsay explained that he/she has made numerous calls to the merchant to book, however has only reached their voicemail on each occasion. Lindsay explained that as a result of the merchant not returning his/her calls; he/she was formally requesting a refund from Spreets of all monies paid.

    On 10 January 2012 (after the expiry of the voucher), Spreets responded to Lindsay referring him/her to the fine print of the portion of the deal which provided details concerning the validity period. Spreets explained that to ensure availability on the tour, Lindsay must book one month before the end of the validity period, otherwise bookings were subject to availability and not guaranteed. Spreets further stated that had Lindsay contacted them earlier, within the validity period, they could have assisted him/her with this issue. Spreets advised that all deals were subject to availability, as detailed in their terms and conditions and in the fine print of each deal. Spreets referred Lindsay terms 12.1, which stated:

12.1    All Vouchers relating to the provision of services by Merchants is subject to availability and may require you to make a booking in advance. Spreets cannot guarantee that services will be available at your preferred times. It is your responsibility to arrange your booking directly with the Merchant.

    Lindsay responded to Spreets explaining that he had attempted to contact the merchant on numerous occasions in November (one month before the expiry of the validity period). On each attempt Lindsay explained that he/she had received the merchant’s voicemail, had left a message, and that he/she did not receive a return call from the merchant. Lindsay explained that he/she had used his best endeavours to contact the merchant, they failed to respond, and as a result the matter was out of his/her control. Lindsay asked for the matter to be reviewed once more.

    On 20 January 2012, Spreets responded to Lindsay and continued to deny liability. Spreets explained that they were not able to process Lindsay‘s request as the deal has expired and that they have already paid the merchant. Spreets advised that Lindsay should contact the merchant directly to negotiate whether the voucher can be used or refunded at the discretion of the merchant.

92    The parties agreed that the purported terms upon which Spreets relied were not part of the terms and conditions applying to the Apollo Shark Fishing Tours deal.

Ms Michelle Braggins – Walhalla Star Hotel

93    In summary, the parties agreed the following facts concerning Ms Braggins:

    On or about 1 February 2011, Spreets advertised and offered a voucher deal on the Spreets website for two nights ‘ accommodation at the Walhalla Star Hotel in Victoria redeemable from 4 February 2011 to 4 February 2012 at the price of $149.

    Ms Braggins purchased a voucher for the deal.

    On 25 December 2011, Ms Braggins sent an email request to Spreets for a refund. Ms Braggins explained that although there were six weeks left before the expiry of the validity period and that the merchant had rooms available during that period; the merchant was not renting any rooms without customers paying an upgrade fee, over and above the voucher price, of $80 - $135 per night.

    In an email dated 12 January 2012, Spreets offered to contact the merchant on Ms Braggins ‘s behalf. Ms Braggins consented to this course of action.

    On 30 January 2012, Spreets sent a further email to Ms Braggins stating that they apologised for any delay in the response to her query. Spreets explained that they had upgraded their support systems, making some customer queries temporarily unavailable for answer. Spreets asked whether the merchant had been in contact with Ms Braggins.

    On 10 February 2012, Ms Braggins responded to Spreets, explaining that she had made attempts at resolution in this matter, but to no avail. Ms Braggins sought a full refund, on the basis that her voucher had contained misrepresentations by Spreets. Ms Braggins stated that if she did not receive a full refund within 48 hours she would take her complaint to an independent ombudsman for assistance.

    On 16 February 2012, Spreets responded by email, explaining that they were unable to process refunds as they needed to escalate this issue to their management and sales team. Spreets requested five working days for them to investigate the matter fully.

    On 20 February 2012 (after the expiry of the validity period), Spreets emailed Ms Braggins and explained that whilst they have been in contact with the merchant, they would not be issuing Ms Braggins with a refund. Spreets explained that all deals were subject to availability, as detailed in their terms and conditions and in the fine print of each deal. Spreets referred Ms Braggins to their term 12.1, which stated:

12.1 All Vouchers relating to the provision of services by Merchants is subject to availability and may require you to make a booking in advance. Spreets cannot guarantee that services will be available at your preferred times. It is your responsibility to arrange your booking directly with the Merchant.

Spreets went further to explain that the additional charges were only for the times that the merchant was “booked out of rooms” as allocated to Spreets customers, such as during their peak season. Spreets explained that the hotel offered available dates where there were rooms allocated for Spreets customers.

    Following Ms Braggins’ attempt to continue to press her request for a refund, Spreets responded by email on 24 February 2012 stating that they were unable to provide her with a refund because they had paid the merchant in full and the voucher had expired. Moreover, they reiterated that there was availability for Spreets customers for bookings where a surcharge payment was not required. Spreets explained that if Ms Braggins still wished to redeem the vouchers, she should contact the merchant directly but such redemption was at the merchant’s discretion. Spreets explained that the merchant had advised Spreets not to process a refund for Ms Braggins.

94    The parties agreed that the purported terms that Spreets was not required to assist Ms Braggins because Spreets had already paid the merchant and that Spreets would not assist consumers with expired vouchers, were not part of the terms and conditions applying to the Walhalla Star Hotel deal.

Summary

95    The parties agreed that these general contraventions arose in circumstances where individual customers experienced difficulty in redeeming vouchers and contacted Spreets to obtain assistance. In summary, when voucher purchasers contacted Spreets in this regard during the period from in or about July 2011 to about February 2012, Spreets represented that they:

    could only assist voucher purchasers with unexpired vouchers;

    were required to assist voucher purchasers if they sought assistance from Spreets within “a reasonable time” before the end of the voucher validity period;

    were entitled to treat vouchers as expired, and therefore refused to assist the voucher purchasers, in circumstances where voucher purchasers sought assistance from Spreets prior to the end of the validity period and the validity period ended before Spreets had fully considered the request for assistance; or

    were not required to assist voucher purchasers after vouchers had been supplied to voucher purchasers (including because they had “already made all payments to the business (merchant)”).

96    In each case the parties agreed that these representations were false or misleading, in that those limitations did not in fact form part of the terms and conditions applying to the voucher deals purchased by consumers (except insofar as the terms and conditions stated from 2 June 2011 that Spreets would not provide any refunds in whole or in part for any expired vouchers).

97    Spreets admitted that by making the representations, they have, in trade or commerce, and in connection with the supply of Spreets’ services, engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL, and further that they have made false or misleading representations concerning the existence, exclusion or effect of conditions in contravention of s 29(1)(m) of the ACL.

4.    Undisclosed limitations on deals

98    This aspect of the matter involves Spreets advertising deals without disclosing that voucher purchasers:

    would not be able to redeem their vouchers for the entire validity period; or

    would face restrictions on making bookings on certain days during the validity period.

99    The parties agreed that these restrictions were sufficiently material that they should have been disclosed to consumers when the deals were advertised and offered for sale to consumers. Further, and in in each case, Spreets agreed that it was aware of the restrictions imposed by the merchant. Spreets advised the merchants that it was not necessary to disclose the limitation provided the advertisement stated that “bookings are essential” and were “subject to availability”.

100    The parties agreed, in summary, the following facts in relation to the following deals:

The Adelaide Airsports Deal

    On or about 28 April 2011, Spreets advertised and offered a voucher deal for a trial instructional flight with Adelaide Airsports, which included a t-shirt and a $50 voucher towards further flight instruction.

    The deal had a purchase price of $99.

    The terms and conditions for the voucher included that “Bookings are essential and subject to availability” and “Voucher valid from 4/5/11- 4/5/12”.

    At the time of advertising, Spreets knew that voucher purchasers could not redeem a voucher for the Adelaide Airsports Deal during the entire validity period because Adelaide Airsports would not accept such vouchers during the period 14 May 2011 to 20 May 2011.

    This limitation was not disclosed to potential purchasers.

The George Restaurant Deal

    On or about 8 August 2011, Spreets advertised and offered a voucher deal on their website for a breakfast for two at The George Restaurant in Perth for the purchase price of $15.

    The terms and conditions for the deal included that it was “Valid Monday to Friday, 7am-10.30am”, that “Phone bookings are essential and subject to availability” and that the voucher was “valid for 3 months from 9/8/11- 9/11/11”.

    Before advertising the deal, Spreets’ Business Development Manager for Perth discussed the terms of the advertisement with an employee of The George Restaurant.

    In an email dated 29 July 2011, Spreets asked whether they were “good to run this deal” and whether they were able to include the Friday breakfast. Spreets explained that the merchant would only have to allocate 2 or 3 tables to Spreets customers for Friday and that they thought this (including Friday breakfast) would “increase numbers”.

    The George Restaurant acquiesced to Spreets’ request, however the fact that only limited number of vouchers would be honoured for Friday breakfast for Spreets customers was not disclosed to potential purchasers.

Summary

101    The parties agreed that the limitations on these deals were limitations which, in all the circumstances, consumers would have expected would be disclosed to them prior to purchasing a voucher for the deal.

102    Spreets has admitted that both the Adelaide Airsports and the George Restaurant deal contravened s 18 of the ACL. No contravention of s 29 was alleged by the ACCC in relation to this conduct and accordingly no separate penalty has been sought.

CONSIDERATION

103    In summary, Spreets have admitted to the following conduct:

    By making representations to consumers about the price of deals in each of the contravening deal pages, they have, in trade or commerce, and in connection with the supply, possible supply or promotion of the supply of Spreets’ services, on each occasion, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and made false or misleading representations with respect to the price of services in contravention of s 29(1)(i) of the ACL;

    By making representations to consumer about consumer guarantee in each of the four deals, they have, in trade or commerce, and in connection with the supply of Spreets’ services, in relation to each voucher sold, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and have made a false or misleading representation concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy in contravention of s 29(1)(m) of the ACL;

    By making representations to individual consumers about their rights under, and the effect of Spreets’ terms and conditions, they have, in trade or commerce, and in connection with the supply of Spreets’ services, engaged in conduct in that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and have made false or misleading representations concerning the existence, exclusion or effect of condition in contravention of s 29(1)(m) of the ACL; and

    By failing to disclose limitations on deals, have contravened section 18 of the ACL.

104    In this matter, I have been requested jointly by the parties to make particular orders by way of resolution, in light of the conduct of Spreets. In deciding whether to make these orders as jointly submitted by the parties, I must be satisfied that I have the power to make such orders and that they are appropriate in the circumstances. It is a well-known principle in circumstances such as this that parties cannot, by consent, confer power to make orders that the Court otherwise lacks the power to make: cf for example Thomson Holdings Pty Ltd v TPC (1981) 148 CLR 150 at 163 and Australian Competition & Consumer Commission v Alvaton Holdings Pty Ltd [2010] FCA 760 at [23].

105    Notwithstanding this, it is equally recognised that co-operation of a respondent with regulatory authorities and agreement as to orders to be put to the Court in respect of cases under the Competition and Consumer Act 2010 (Cth) (“CCA”) is a matter to be taken into account by the Court as being in the public interest. Further, as the law currently stands the Courts acknowledge the persuasiveness of orders agreed by the parties and put to the Court to resolve such matters. As Burchett and Kiefel JJ observed in NW Frozen Foods Ply Ltd v ACCC (1996) 71 FCR 285 at 291:

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.

It appears to us that the authorities in both Australia and New Zealand have provided unanimous support for the approach we have outlined …

106    Relevantly, I note that it is also appropriate to treat the consent of Spreets to the joint submissions put to the Court as admission by Spreets of all facts necessary or appropriate to the grant of the relief sought: Thomson Australian Holdings Proprietary Limited v Trade Practices Commission (1981) 148 CLR 150 at 164.

Proposed declarations

107    Under s 21 of the Federal Court Act the Court has a wide discretionary power to make declarations. Moreover, the Court does not lack jurisdiction or power to grant declaratory relief merely because the relief is sought with the consent of the parties: IMF (Australia) Ltd v Sons Of Gwalia Ltd (administrator appointed) (2004) 211 ALR 231 at (47]; Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 at [30].

108    In Forster v Jododex Australia Ltd (1972) 127 CLR 421 at 437-8, the High Court held that before making declarations, three requirements should be satisfied:

    the questions must be a real and not a hypothetical or theoretical one;

    the applicant must have a real interest in raising it; and

    there must be a proper contradictor.

109    The parties have submitted that each of these requirements is satisfied in this case because:

    the proposed declarations relate to conduct that contravenes the ACL and the matters in issue have been identified and particularised by the parties with precision;

    it is in the public interest for the ACCC to seek to have the declarations made and for the declarations to be made;

    there is a significant legal controversy in this case, which is being resolved.

    The ACCC, as a public regulator under the ACL, has a genuine interest in seeking the declaratory relief; and

    Spreets is a proper contradictor because it is a company, which has contravened the ACL and is the subject of the declarations. It therefore has an interest in opposing the making of them.

110    In addition, the parties further submit that by having regard to the reasoning of Nicholson J in Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] ATPR 42-140 at [6], the declarations sought in this case are appropriate because they serve to:

    record the Court’s disapproval of the contravening conduct;

    vindicate the ACCC ‘s claim ACCC’s claim that Spreets contravened the ACL;

    assist the ACCC to carry out the duties conferred upon it by the CCA;

    inform consumers of Spreets’ contravening conduct; and

    deter other corporations, including Spreets’ competitors operating with similar business models, from contravening the ACL.

111    To the extent that the Court required evidence in support of the declarations pursuant to s 191 of the Evidence Act, the parties submit that the joint submissions and statement of agreed facts and admissions filed 21 November 2014 provide such evidence, and that the proposed declarations contain sufficient indication of how and why the relevant conduct is a contravention of the ACL.

112    In this case material before the Court indicates repeated and clear instances of contravention of the ACL as claimed by the ACCC. These contraventions are admitted by Spreets. I consider that it is appropriate to make the declarations sought, both in the interests of justice and in the public interest.

Costs

113    The Court has discretion pursuant to s 43 of the Federal Court Act to make an award of costs in proceedings. A person entitled to costs can apply for an order for a lump sum for costs under r 40.02(b) of the Federal Court Rules 2011 (Cth) (“FCR”).

114    Spreets has agreed to pay the amount of $25,000 towards the ACCC’s costs of and incidental to the proceedings, within 28 days of the Court’s order. In my view this order is appropriate in the circumstances of this case.

Pecuniary penalty

115    Section 224(1)(a)(ii) of the ACL empowers the Court, in respect of contraventions of provisions of Pt 3-1 of the ACL (which includes s 29), to order the contravener to pay such pecuniary penalty in respect of “each act or omission” as the Court determines to be appropriate. No penalties apply to contraventions of s 18 of the ACL.

116    As I noted earlier in this judgment, the parties jointly submit that the Court should make orders pursuant to s 224 of the ACL imposing a pecuniary penalty upon Spreets in the amount totalling $600,000.

117    This is a significant penalty for a contravention of s 29 of the ACL. It is appropriate to have regard to relevant principles as they apply in the circumstances of this case.

Statutory consideration

118    Section 224(2) of the ACL provides that, in determining the appropriate pecuniary penalty, the Court must have regard to all relevant matters including:

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

    the circumstances in which the act or omission took place; and

    whether the person has previously been found by a Court in proceedings under Chapter 4 or Pt 5-2 of the ACL to have engaged in any similar conduct.

119    Section 224(4)(b) of the ACL provides that a person is not liable to pay more than one pecuniary penalty in respect of the same conduct.

120    The factors relevant to the assessment of a pecuniary penalty under earlier equivalent legislation to s 224 of the ACL were identified by French J in Trade Practices Commission v CSR Ltd (1991) ATPR 1141-076 at 52, 152-153 as:

    the nature and extent of the contravening conduct;

    the amount of loss or damage caused;

    the circumstances in which the conduct took place;

    the size of the contravening company;

    the degree of power of the contravener, as evidenced by its market share and ease of entry into the market;

    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 a lower level;

    whether the contravener has a corporate culture conducive to compliance with the legislation as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and

    whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the legislation in relation to the contravention.

121    Those considerations have since been approved with the following extensions by Full Courts of this Court:

    similar conduct in the past;

    effect on the functioning of the market and other economic effects of the conduct;

    the financial position of the contravening company; and

    whether the conduct was systematic, deliberate or covert.

(NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 290, 292-294 and 297; J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532 at [158] and [163]; TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at [141].)

Deterrence

122    The High Court in Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 confirmed that the principal object of pecuniary penalties in the context of the consumer protection provisions in the Competition and is deterrence and that it should be taken into account in considering the appropriate amount of a penalty under s 224. As French CJ, Crennan, Bell and Keane JJ explained at [65]:

General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct.

123    In TPG, the High Court also cited with approval a statement made by the Full Court of the Federal Court in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at 266 [68]:

that the court, in fixing a penalty, must “make it clear to [the contravener], and to the market, that the cost of courting a risk of contravention … cannot be regarded as [an] acceptable cost of doing business”.

124    Traditionally the element of deterrence contains two elements:

    specific deterrence in respect of the actual contravener; and

    general deterrence of others “who may be disposed to engage in prohibited conduct of a similar kind.

125    The Full Court in NW Frozen Foods made it clear at 295-295 that:

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.

126    On the other hand it is also important that a penalty not be so high as to be oppressive.

Determining penalty

127    The process to be applied in arriving at a penalty figure was considered in the context of criminal sentencing by the High Court in Markarian v The Queen (2005) 228 CLR 357. This “instinctive synthesis” approach is also relevant to the assessment of pecuniary penalties under s 224 ACL (for a recent example of this application I note the decision of Murphy J in Australian Competition and Consumer Commission v South East Melbourne Cleaning Pty Ltd (in liq) (No 2) [2015] FCA 257).

128    In Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ held, in summary, that:

    assessment of the appropriate penalty is a discretionary judgment based on all relevant factors;

    careful attention to maximum penalties will almost always be required, first because 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 do provide, taken and balanced with all of the other relevant factors, a yardstick (at [31]);

    it will rarely be appropriate for a Court to commence with the maximum penalty and proceed by making a proportional deduction from that maximum;

    the Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors;

    it is not appropriate to determine an ‘objective’ sentence and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities;

    the Court “may not add and subtract item by item from some apparently subliminally derived figure” to determine the penalty to be imposed; and

    since the law strongly favours transparency, accessible reasoning is necessary in the interests of all, and, while there may be occasions where some indulgence in an arithmetical process will better serve the end, it does not apply where there are numerous and complex considerations that must be weighed.

129    When applying this process to all relevant factors when exercising the discretion to impose a pecuniary penalty, consideration should be given to the one transaction (or one course of conduct) principle and the totality principle.

Nature of contravening conduct, and damage caused

130    First, the conduct of Spreets over a period of ten months affected consumers who purchased vouchers for specific services. In my view this is a significant period of time.

131    Second, this conduct occurred at a time when I understand that Spreets was a relatively new company in a relatively new industry, and did not have in place adequate systems or processes to prevent the admitted contraventions from occurring. However, notwithstanding the fact that Spreets was a new company, the material before the Court indicates that it was a company of some substance and indeed was one of the larger online group buying companies in Australia.

132    Third, the contraventions went to the core of Spreets’ business and constituted conduct of Spreets involving a variety of contraventions of the ACL.

133    Fourth, it is likely that the contravening advertisements would have been viewed by a large number of consumers. Further, it is clear from the material before the Court that consumers suffered harm from these contraventions. While it is likely that not every consumer redeemed his or her voucher, it is apparent that 732 consumers did redeem vouchers which were subject to additional costs of between $25-$35 for all customers other than APF members. The parties have put to the Court – and I accept this submission – that if each voucher purchaser was required to pay “on the day” fees in addition to the purchase price of the voucher, then the total cost of these fees (across all vouchers) totalled $23,550 to those purchasers. Indeed the loss or damage suffered by the six individual consumers to whom I have referred in this judgment varied from $39 to $798 in each reported case, as a result of Spreets’ misrepresentations about their rights.

134    Fifth, to the extent that Spreets misrepresented the nature of consumer guarantees available to consumers, I consider that these misrepresentations were serious, being contrary to the express effect of the consumer guarantees contained in the ACL. I note further that these misrepresentations continued after Yahoo had acquired Spreets, commenced reviewing its compliance practices and had identified historical compliance concerns with Spreets’ business.

135    Moreover, the very nature of the conduct of Spreets in misrepresenting the nature of the consumer guarantees available to purchasers means that it is likely that consumers would not have sought assistance where they had an issue with the products or service the subjects of the deals. Whilst is it not possible to quantify the precise loss as a result of Spreets’ representations, the parties agree that Spreets received a high volume of complaints specifically in relation to the Vivere Products Storage System Deal. In that instance, almost one in three consumers who purchased this product, totalling 103 customers out of 318 sales, contacted Spreets to request a refund and it appears that 22 of those customers had their request refused by Spreets.

Spreets size and financial position

136    The capacity of a company to pay a penalty is a relevant factor for the Court to consider, as is the level of the penalty necessary to achieve deterrence in relation to a company of a particular size. The parties have submitted the following financial position for Spreets for the 2012 and 2013 calendar years.

137    At the time of the relevant conduct, Spreets was one of the largest online group buying companies in Australia, however it was constrained by other competitors. The table set out above indicates that there was a deterioration in the financial position of Spreets between 2012 and 2013. In this respect I note that a penalty of $600,000 is likely to have a significant impact on Spreets’ financial position.

Whether conduct systematic, deliberate or covert

138    While the misrepresentations made to consumers were made deliberately in the sense that they constituted a standard response given as part of Spreets’ normal business practices, there is no suggestion that Spreets intentionally set out to mislead, deceive or cheat voucher purchasers.

139    However as I have already noted, it cannot be said that the contravening conduct constituted isolated incidents. The fact that the misrepresentations I have outlined in detail in this judgment were standard responses indicates that there was a systemic failure in the processes of Spreets in a core aspect of its business.

Involvement of senior employees or management

140    Spreets acknowledges that its senior management was involved in the contravening conduct in that:

(a)    During the period from July 2011 to October 2011, all deal content was required to be approved by Spreets’ Head of Editorial and sent to the merchant for approval, at the merchant’s request, before being published on the Spreets Website.

(b)    The contravening content relating to the Melbourne City Skydive Centre Deal and the Rainbow Beach Skydive Deal published by Spreets during this period was required to be approved by the Head of Editorial before publication.

(c)    From October 2011, deal content was no longer required to be approved by the Head of Editorial prior to publication. However, the deal content was approved internally by Editorial staff in accordance with policies developed and approved by Spreets’ senior management prior to being sent to the merchant for subsequent review and approval, after which it was placed on the Spreets Website.

(d)    With the exception of the communications directed towards Ms Braggins (which were considered by Spreets’ sales and management teams) the representations directed towards individual consumers to deny refunds to particular customers were not made by Spreets’ management.

141    Further, the fact that the contravening conduct occurred in accordance with Spreets’ policies supports a finding that senior management of Spreets failed to implement adequate processes to prevent the contraventions from occurring.

Culture of compliance and corrective measures

142    The contraventions admitted by Spreets extended over a significant period of time. Prior to Spreets’ acquisition by Yahoo in January 2011, Spreets did not have a corporate compliance program. Following acquisition, Yahoo conducted a comprehensive review of Spreets’ operations, which resulted in:

    trade practices compliance seminars being provided to staff in July 2011 and September 2011;

    the appointment of a compliance manager;

    preparation of a consumer law compliance manual for staff (effective from February 2012).

143    Throughout the period between July 2011 and April 2012, there was no requirement for editorial content or vouchers to be reviewed by the compliance officer or a member of Spreets’ legal department prior to publication. While it is submitted that these steps are indicative of a desire by Yahoo to improve Spreets’ corporate culture of compliance, it nonetheless remains the case that a significant number of the admitted contraventions took place after Spreets began implementing its compliance program.

144    I understand that following the commencement of the ACCC’s investigation into the conduct of Spreets, Spreets took steps to upgrade and improve its compliance program. Spreets has agreed to maintain its current compliance practices, including those improvements, for a period of three years.

145    I accept that Spreets’ willingness to improve its compliance systems should be considered as a mitigating factor. Further, I note that Spreets has taken steps to cooperate with the ACCC to resolve these proceedings, avoiding the need for a contested hearing in the matter which would consume time and resources of the Court as well as the regulator.

Conclusions on appropriate penalties

146    I have already noted concerning the importance of penalties being of sufficient magnitude to achieve general deterrence in the relevant industry and to specifically deter repetition of the contravening conduct by the respondent.

147    The maximum penalty for a body corporate for each act or omission that relates to a provision of Pt 3-1 of the ACL, which includes s 29, is $1.1 million as per Item 2 of s 224(3) of the ACL.

148    In this case there has been a course of conduct which has resulted in the investigation and action by the regulator. As the majority of the Full Court explained in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 at [41]:

… the principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, the court must ensure that the offender is not punished twice for the same conduct. In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion.

149    Applying these principles, the parties submit that it would be appropriate to group the various categories of contravening conduct of Spreets in order to assess penalty. More particularly, the parties submit that these categories are:

    conduct involving Melbourne City Skydive Centre, Coffs City Skydivers and Rainbow Beach Skydive deals; and

    representations concerning consumer guarantees;

    representations to individual consumers.

150    In my view it is appropriate to group the categories of conduct for the purposes of assessing penalties.

151    Further, in determining the appropriate penalty, it is also relevant to take into account the “totality principle”, namely the Court should not order a total penalty for related offences which exceeds what is proper for the entirety of the contravening conduct involved: Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375; Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383.

152    Taking all of these factors into account, the parties submitted that a total pecuniary penalty in the amount of $600,000 is appropriate, comprising the following:

1.    Representations about the price of deals:

    $40,000 for the contravention of s 29(i) of the ACL relating to the Melbourne City Skydive Centre Deal email advertisement;

    $60,000 for the contravention of s 29(i) of the ACL relating to the Melbourne City Skydive Centre Deal website advertisement and offer;

    $40,000 for the contravention of s 29(i) of the ACL relating to the Coffs City Skydivers Deal email advertisement;

    $40,000 for the contravention of s 29(i) of the ACL relating to the Coffs City Skydivers Deal website advertisement and offer; and

    $40,000 for the contravention of s 29(i) of the ACL relating to the Rainbow Beach Skydive Deal website advertisement and offer.

2.    Representations about consumer guarantees:

    $50,000 for the contravention of s 29(1)(m) of the ACL relating to the Melbourne City Skydive Centre Deal voucher representations;

    $50,000 for the contravention of s 29(1)(m) of the ACL relating to the Travel Smoove Hong Kong Holiday Deal voucher representations;

    $50,000 for the contravention of s 29(1)(m) of the ACL relating to the Vivere Products Eight Cube Storage System Deal voucher representations; and

    $50,000 for the contravention of s 29(1)(m) of the ACL relating to the Deals in Australia Wine Aerator Deal voucher representations.

3.    Representations to individual consumers:

    $180,000 for the contravention of s 29(1)(m) of the ACL relating to the representations to individual consumers.

153    In light of the seriousness of the contravening conduct, the fact that it was systemic in Spreets, the need for general and specific deterrence, and the size and financial position of Spreets, I consider it proper to order a total penalty of $600,000.

Associate:

Dated:    23 April 2015