FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2015] FCA 399

THE COURT ORDERS THAT:

Pecuniary Penalty

1.    Within 30 days of the date of this order, the Respondent pay to the Commonwealth of Australia a pecuniary penalty of $700,000 in respect of its contraventions of sections 29(1)(g) and 29(1)(i) of the Australian Consumer Law (the ACL) contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth).

Publication Orders

2.    Within 21 days of the date of this order, the Respondent publish, at its own expense, a notice in a weekday edition of The Advertiser newspaper which is in the terms and form of Annexure A, and complies with the following specifications:

(a)    is placed within the first 10 pages of the newspaper;

(b)    is of a size at least 20 centimetres by 7 columns and/or of a size no less than one half of a page in the newspaper;

(c)    has a banner font of sans serif 12 point, bold;

(d)    has a headline font of 12 point, bold;

(e)    contains in the body of text font that is no less than 11 point size; and

(f)    has the ACCC and Commonwealth logos of at least 20 millimetres in height and centred.

3.    Within 60 days of the date of this order, the Respondent at its own expense:

(a)    cause a DL size insert in the terms of Annexure A to be distributed once with each of its invoices sent by post; or

(b)    cause a document in the terms of Annexure A to be distributed once with each of its invoices sent electronically,

to all residential consumers in South Australia who consumed less than 160 MWh of electricity per annum, with whom the Respondent entered into an energy plan in an inbound telephone conversation with a Customer Service Representative in the period 1 January 2012 to 15 July 2012 and to whom the Respondent sent a letter in mid-2012 informing them of an increase in the rates under their energy plan (Non-Party Consumers) and who are current customers of the Respondent.

Compliance Program

4.    From 21 August 2016 until 20 August 2019, the Respondent is to continue to maintain at its own expense the competition and consumer law compliance program amended in accordance with the requirements of paragraph 13 of the orders made by Justice Middleton on 20 May 2013 in Federal Court Proceeding VID 267 of 2012.

Non-Party Consumer Redress

5.    The Respondent is:

(a)    within 60 days from the date of this order, to calculate the required credit or refund for each Non-Party Consumer for their invoices issued in respect of the period from the mid 2012 rate increase until the earlier of (a) the end of the initial fixed period of their “Advantage” energy plan or (b) termination of their “Advantage” or “Freedom” energy plan or (c) the end date of the period covered by their most recent invoice prior to 31 March 2015 (the Original Invoices) in the manner set out below:

(i)    recalculating the charges for each Original Invoice for each Non-Party Consumer:

(A)    using the energy usage rates and supply charges:

(1)    for the period 1 July 2012 to 31 December 2012, which applied under the Respondent's standard retail contract during that period; and

(2)    for the period 1 January 2013 until the earlier of (a) the end of the initial fixed period of their “Advantage” energy plan or (b) termination of their “Advantage” or “Freedom” energy plan or (c) the end date of the period covered by their most recent invoice prior to 31 March 2015, that applied from time to time to consumers who commenced a standard retail contract with the Respondent on or before 31 January 2013 (the Lowest Standard Retail Contract); and

(B)    not applying any discounts off energy usage charges,

(the Recalculated Invoices);

(ii)    for each Non-Party Consumer, comparing each of their Original Invoices to each corresponding Recalculated Invoice to identify the date when the charges billed to the Non-Party Consumer first exceeded the charges calculated for the corresponding date within the Recalculated Invoices (the Recalculation Date); and

(iii)    for each Non-Party Consumer, from the Recalculation Date until the last day of the period covered by the Original Invoices, calculating the amount by which the charges billed to the Non-Party Consumer in the relevant Original Invoices exceed the charges calculated in each of the Recalculated Invoices (the Redress Amount);

(b)    within 90 days from the date of this order, but not before 18 June 2015 with respect to any Non-Party Consumer with an "Advantage" energy plan who is sent a notice in the form of Annexure C referred to below, to send by post or electronically, at the most recent address to which the Respondent has posted or emailed invoices or correspondence to each Non-Party Consumer entitled to a credit or refund calculated pursuant to this order (the Relevant Non-Party Consumers), a notice in the terms of:

(i)    Annexure B in the case of Relevant Non-Party Consumers who continue to be supplied electricity by the Respondent and for whom (a) the initial fixed period of their “Advantage” energy plan has ended or (b) their “Advantage” or “Freedom” energy plan has been terminated;

(ii)    Annexure C in the case of Relevant Non-Party Consumers who continue to be supplied electricity by the Respondent and for whom (a) the initial fixed period of their “Advantage” energy plan has not ended and (b) their “Advantage” or “Freedom” energy plan has not been terminated (Continuing Relevant Non-Party Consumers); and

(iii)    Annexure D in the case of Relevant Non-Party Consumers who are no longer supplied electricity by the Respondent; and

(c)    within 180 days from the date of this order, to provide all Relevant Non-Party Consumers with their credit or refund by:

(i)    applying the Redress Amount as a credit to the Relevant Non-Party Consumer's account, in the case of those who continue to be supplied electricity by the Respondent; or

(ii)    refunding the Redress Amount to the Relevant Non-Party Consumer, in the case of those who are no longer supplied electricity by the Respondent.

6.    In respect of each Continuing Relevant Non-Party Consumer, within 260 days from the date of this order, the Respondent is to:

(a)    provide a further credit or refund for their invoices issued in respect of the period from the first day of the period covered by their most recent invoice issued after 31 March 2015 until the earlier of (a) the end of the initial fixed period of their Advantage energy plan or (b) termination of their Advantage or Freedom energy plan by any Continuing Relevant Non-Party Consumer or (c) 30 days from the date of the notice provided in accordance with order 5(b)(ii) (the Future Invoices), in the manner set out below:

(i)    recalculating the charges for each Future Invoice:

(A)    using the lowest energy usage rates and supply charges applicable to the Respondent’s standard retail contract in effect from time to time and howsoever described; and

(B)    not applying any discounts off energy usage charges,

(the Recalculated Future Invoices); and

(ii)    calculating the amount by which the charges billed in the relevant Future Invoices exceeds the charges calculated in each of the Recalculated Future Invoices (the Further Redress Amount); and

(b)    provide the Continuing Relevant Non-Party Consumers with their further credit or refund by:

(i)    applying the Further Redress Amount as a credit to the Continuing Relevant Non-Party Consumer’s account, in the case of those who continue at that point in time to be supplied electricity by the Respondent; or

(ii)    refunding the Further Redress Amount to the Continuing Relevant Non-Party Consumer, in the case of those who at that point in time are no longer supplied electricity by the Respondent.

7.        The Respondent is not required to provide a credit or refund in accordance with order 5 or 6 above to a Relevant Non-Party Consumer or to a Continuing Relevant Non-Party Consumer:

(a)    who gives notice to the Respondent in the manner set out in Annexures B, C and D that he or she does not agree to be bound by these orders and accordingly does not agree to receive a credit or refund from the Respondent in the terms set out in these orders in satisfaction of any claim they may have against the Respondent relating to their energy plan; or

(b)    is no longer supplied electricity by the Respondent and does not advise the Respondent, in the manner set out in Annexure D, of his or her preferred payment method for the refund and the details necessary to enable the Respondent to provide the refund.

8.    In addition to the right of each Continuing Relevant Non-Party Consumer to receive a further credit or refund as set out in order 6 above, each Continuing Relevant Non-Party Consumer is entitled at their election, in the manner set out in Annexure C, to terminate their “Advantage” or “Freedom” energy plan and transfer to:

(a)    another of the Respondent's energy plans;

(b)    the Respondent's Lowest Standard Retail Contract; or

(c)    another electricity supplier,

without a termination or other fee imposed on them by the Respondent referable to that termination and transfer.

Verification Affidavit

9.    Within 290 days of the date of this order, the proper officer of the Respondent provide to the Applicant an affidavit (or affidavits) verifying that the obligations under orders 2, 3 and 5 to 8 above have been carried out to the extent required as at the date the affidavit (or affidavits) are sworn or affirmed and:

(a)    in respect of order 2 above, attaching a copy of the notices caused to be published in accordance with these orders;

(b)    in respect of order 3 above, attaching a copy of one DL sized insert and a copy of the electronic notice caused to be published in accordance with these orders; and

(c)    in respect of order 5 above, attaching one example of each of the notices the Respondent caused to be distributed in accordance with these orders.

Costs

10.    Within 30 days of the date of this order, the Respondent pay $300,000 in respect of the Applicant's costs of the proceeding.

NOTICE PURSUANT TO RULE 41.06 OF THE FEDERAL COURT RULES 2011 (CTH)

TO:     AGL South Australia Pty Ltd

You are liable to sequestration of property or to punishment for contempt if:

(a)    when this order requires you to do an act or thing within a specified time, you refuse or neglect to do that act within that time; or

(b)    when this order requires you not to do an act or thing, you disobey the order.

ANNEXURE A

CORRECTIVE NOTICE FROM AGL SOUTH AUSTRALIA PTY LTD

ANNEXURE B

[AGL SA letterhead]

[Customer name

Address]

Refund under your discounted AGL electricity energy plan

False or misleading representations and misleading or deceptive conduct

As a result of successful action by the Australian Competition and Consumer Commission (ACCC) against AGL South Australia Pty Ltd (AGL), the Federal Court of Australia declared that AGL made false or misleading representations and engaged in misleading and deceptive conduct concerning discounts consumers would receive under AGL’s energy plans.

The relevant energy plans were AGL’s discounted residential electricity energy plans which were entered into by consumers as a result of them making a telephone call to AGL between 1 January 2012 and 15 July 2012.

The Court held that, when informing those consumers of an increase in their rates for electricity usage in mid 2012, AGL represented that any discounts would continue to apply when, in fact, those consumers effectively received reduced discounts.

On [insert date] the Federal Court ordered AGL to offer refunds to affected consumers based on the difference between:

•    the charges they paid on their discounted energy plan; and

•    the charges they would have paid if applying:

o    the usage rates and supply charges applicable under AGL's standard retail contract up to 31 December 2012; and

o    the lowest of the usage rates and supply charges applicable under AGL's standard retail contract from 1 January 2013.

The refunds are to be calculated from the date the affected customers would have been financially better off had they been on a standard retail contract rather than on their discounted energy plan. The Federal Court also ordered that AGL send this letter.

Your entitlement to a refund

AGL has identified that you are an affected consumer and that you are therefore entitled to accept a refund of $[insert amount] covering the period up to the end of the initial fixed period or the termination of your AGL discounted energy plan.

What you need to do to accept your refund

You do not need to do anything if you wish to accept your refund. Your refund will be credited to your current AGL electricity account and will appear as a credit on your next electricity bill.

If you do not wish to accept the refund from AGL, you can opt out by registering at [insert AGL website] or by contacting AGL on [insert telephone number] within 30 days of the date of this letter.

Unless you inform AGL to the contrary within 30 days of the date of this letter, then:

a.    it will be assumed that you wish to accept the refunds from AGL and AGL will credit the refund as described above; and

b.    you may not bring any further claim against AGL for loss or damage you may have suffered as a result of any representations or conduct by AGL in mid 2012 regarding the discount applicable to your discounted energy plan by remaining on your discounted energy plan rather than transferring to AGL's standard retail contract.

Further information

More information in relation to the court action taken by the ACCC against AGL is available on the ACCC’s website at [insert link to relevant ACCC media release here].

If you would like to know more about your energy plan with AGL, please contact us on [insert phone number here].

ANNEXURE C

[AGL SA letterhead]

[Customer name

Address]

Refund under your discounted AGL electricity energy plan

False or misleading representations and misleading or deceptive conduct

As a result of successful action by the Australian Competition and Consumer Commission (ACCC) against AGL South Australia Pty Ltd (AGL), the Federal Court of Australia declared that AGL made false or misleading representations and engaged in misleading and deceptive conduct concerning discounts consumers would receive under AGL’s energy plans.

The relevant energy plans were AGL’s discounted residential electricity energy plans which were entered into by consumers as a result of them making a telephone call to AGL between 1 January 2012 and 15 July 2012.

The Court held that, when informing those consumers of an increase in their rates for electricity usage in mid 2012, AGL represented that any discounts would continue to apply when, in fact, those consumers effectively received reduced discounts.

On [insert date] the Federal Court ordered AGL to offer refunds to affected consumers based on the difference between:

•    the charges they paid on their discounted energy plan; and

•    the charges they would have paid if applying:

o    the usage rates and supply charges applicable under AGL's standard retail contract up to 31 December 2012; and

o    the lowest of the usage rates and supply charges applicable under AGL's standard retail contract from 1 January 2013.

The refunds are to be calculated from the date the affected customers would have been financially better off had they been on a standard retail contract rather than on their discounted energy plan. The Federal Court also ordered that AGL send this letter.

Your entitlement to a refund

AGL has identified that you are an affected consumer and that you are therefore entitled to accept refunds on the terms set out in this letter:

a.    a refund of $[insert amount] covering the period up to the end of the billing period in your most recent invoice prior to 31 March 2015; and

b.    a further refund, which has not yet been calculated, covering the subsequent period from immediately after the end date in (a) above until the earlier of:

i.    the end of the initial fixed period of your Advantage energy plan (if applicable);

ii.    30 days after the date of this letter; or

ii    if you terminate your energy plan prior to 30 days after the date of this letter, the date of termination.

What you need to do to accept your refunds

You do not need to do anything if you wish to accept your refunds. Your refunds will be credited to your current AGL electricity account and will appear as a credit on your next electricity bill.

If you do not wish to accept the refunds from AGL, you can opt out by registering at [insert AGL website] or by contacting AGL on [insert telephone number] within 30 days of the date of this letter.

Unless you inform AGL to the contrary within 30 days after the date of this letter, then:

a.    it will be assumed that you wish to accept the refunds from AGL and AGL will credit the refunds as described above; and

b.    you may not bring any further claim against AGL for loss or damage you may have suffered as a result of any representations or conduct by AGL in mid 2012 regarding the discount applicable to your discounted energy plan by remaining on your discounted energy plan rather than transferring to AGL's standard retail contract.

Your termination rights

If you have not already done so by the date of this letter, you are also entitled to terminate your AGL discounted energy plan entered into between 1 January 2012 and 15 July 2012 and transfer to another of AGL’s energy plans, to its standard retail contract or to another supplier without incurring any early termination fee or any other fee.

If you wish to do so, please contact us on [insert telephone number] within 30 days of the date of this letter.

If you do not wish to terminate your discounted energy plan, your energy usage rates will continue in accordance with the terms and conditions of your plan.

Further information

More information in relation to the court action taken by the ACCC against AGL is available on the ACCC’s website at [insert link to relevant ACCC media release here].

If you would like to know more about your energy plan with AGL, please contact us on [insert phone number here].

ANNEXURE D

[AGL SA letterhead]

[Customer name

Address]

Refund under your discounted AGL electricity energy plan

False or misleading representations and misleading or deceptive conduct

As a result of successful action by the Australian Competition and Consumer Commission (ACCC) against AGL South Australia Pty Ltd (AGL), the Federal Court of Australia declared that AGL made false or misleading representations and engaged in misleading and deceptive conduct concerning discounts consumers would receive under AGL’s energy plans.

The relevant energy plans were AGL’s discounted residential electricity energy plans which were entered into by consumers as a result of them making a telephone call to AGL between 1 January 2012 and 15 July 2012.

The Court held that when informing those consumers of an increase in their rates for electricity usage in mid 2012, AGL represented that any discounts would continue to apply, when in fact, those consumers effectively received reduced discounts.

On [insert date] the Federal Court ordered AGL to offer refunds to affected consumers based on the difference between:

•    the charges they paid on their discounted energy plan; and

•    the charges they would have paid if applying:

o    the usage rates and supply charges applicable under AGL's standard retail contract up to 31 December 2012; and

o    the lowest of the usage rates and supply charges applicable under AGL's standard retail contract from 1 January 2013.

The refunds are to be calculated from the date the affected customers would have been financially better off had they been on a standard retail contract rather than on their discounted energy plan. The Federal Court also ordered that AGL send this letter.

Your entitlement to a refund

AGL has identified that you are an affected consumer and that you are therefore entitled to accept a refund of $[insert amount] covering the period up to the end of the initial fixed period or the termination of your AGL energy plan.

What you need to do to accept your refund

If you wish to accept your refund from AGL, you need to inform AGL of your preferred payment method (that is cheque or payment to a nominated bank account) within 45 days of the date of this letter. You can provide AGL with this information by either registering at [insert AGL website] or by contacting AGL on [telephone number].

If you accept your refund from AGL you may not bring any further claim against AGL for loss or damage you may have suffered as a result of any representations or conduct by AGL in mid 2012 regarding the discount applicable to your discounted energy plan by remaining on your discounted energy plan rather than transferring to AGL's standard retail contract.

Unless you provide AGL with your preferred payment method within 45 days of the date of this letter, AGL will not be required to provide you with the refund set out above.

Further information

More information in relation to the court action taken by the ACCC against AGL is available on the ACCC’s website at [insert link to relevant ACCC media release here].

If you have any questions please contact us on [insert phone number here].

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

REASONS FOR JUDGMENT

1    Following a trial, the Court found that AGL South Australia Pty Ltd had made false and misleading representations and had engaged in misleading or deceptive conduct in statements which it made to certain of its customers when informing them of increases in its electricity rates: Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2014] FCA 1369. The representations, made in letters sent between 9 July 2012 and 16 August 2012 (the 2012 Rate Increase Letters), were to the effect that the customers would continue to receive agreed discounts, when that was not the case.

2    The Court found that AGL South Australia Pty Ltd had thereby contravened ss 29(1)(g), 29(1)(i) and 18(1) of the Australian Consumer Law contained in Sch 2 to the Competition and Consumer Act 2010 (Cth) (the CC Act).

3    Subsequently the Court made declarations giving effect to its findings and adjourned for separate consideration the imposition of penalties and the other relief sought by the Australian Competition and Consumer Commission (the ACCC). On the eve of the penalty hearing, the parties reached agreement about the remaining matters, and provided the Court with a statement of agreed facts, agreed proposed orders and a joint set of submissions.

4    I am satisfied that effect should be given to the parties’ agreement and that the orders they propose should be made. My reasons follow.

The contravening conduct

5    AGL South Australia Pty Ltd is a wholly owned subsidiary of AGL Energy Limited, one of the top 50 ASX listed companies. Except when it is necessary to distinguish between them, I will refer to AGL South Australia Pty Ltd as AGL.

6    AGL’s contraventions occurred in relation to those customers who had, in the period between 1 January 2012 and 18 July 2012, entered into an energy plan with it during a telephone call initiated by the customer. In the principal judgment I referred to these customers as the “Category 3 Consumers”. The principal features of the energy plans were that the customers were, in consideration of their commitment to take their supply of electricity from AGL, to receive agreed discounts from their energy usage charges.

7    AGL increased its electricity rates in July and August 2012. However, AGL did not increase its rates uniformly. It selectively increased the rates applicable to the Category 3 Consumers with the effect that the rates which it used to calculate their energy usage charges were higher than those applicable to its other residential customers. In particular, the new rates were no longer the same as the rates applicable under AGL’s standard retail contracts (SRCs). Nor, subject to a qualification which need not be mentioned presently, were they the same as the rates which AGL applied to those entering into energy plans with it after 18 July 2012 (Category 5 Consumers).

8    The 2012 Rate Increase Letters were in one or other of two forms. The first stated (relevantly):

Important adjustment to your AGL account

As part of our review of our energy prices in South Australia, we’re writing to advise you that the rates you pay for your electricity are about to increase. Your new rates and their effective date for your site, is shown on the back of this letter. This increase is in line with the terms of your contract. Sites that have Energy Plans with discounts or rebates will continue to receive these.

The increase for an average AGL residential electricity customer in South Australia equates to around $6.80 (incl. GST) per week, however the actual impact on your bills will depend on the usage at the site shown.

(Emphasis added)

9    The second form of letter stated (relevantly):

Important information about your AGL electricity Energy Plan

As part of our review of our energy prices in South Australia, we’re writing to advise you that the rates you pay for your electricity will increase from [ ]. Your new rates are shown on the back of this letter. Any discounts or rebates you currently receive on your energy usage charges will continue to apply.

….

The increase for an average AGL residential electricity customer in your area equates to around $7.10 (incl. GST) per week, however the actual impact on your bills will depend on your individual usage and specific circumstances.

(Emphasis added)

10    As can be seen, both forms of letters told Category 3 Consumers that they would “continue” to receive their discounts.

11    In the principal judgment, I found that the Category 3 Consumers comprised three sub-classes, namely, (i) consumers who were aware that AGL could supply electricity to them without them entering into an energy plan; (ii) consumers, being a sub-set of (i), who were aware that the entry into a standing contract (whether or not they knew it by that name) was the means by which AGL could supply electricity to them if they did not agree on an energy plan; and (iii) consumers who were not aware that AGL could still supply electricity to them in the event that they did not enter into an energy plan.

12    I went on to find that AGL’s representation to the sub-class (i) and (ii) consumers was misleading. They were told that the discount that they were then receiving would continue to apply when that was not the case, as the discount would no longer be from the amount which they would be charged if they were not on an energy plan.

13    I found that the Mid-2012 Discount Representation in relation to the sub-class (iii) Category 3 Consumers was to the effect that they would continue to receive their percentage discount from the energy usage charges calculated by rates which AGL applied generally to consumers like themselves, and that this was a misrepresentation. That was because they would no longer receive the agreed discount from charges calculated by reference to rates applying generally to consumers like themselves but by reference to rates which had been increased selectively.

14    Following the Mid-2012 Rate Increase, the rates charged to Category 3 Consumers were 2.6% higher than the rates AGL charged under its SRC and to its Category 5 Consumers. Accordingly, the advantages which the discounts under the agreed energy plans provided to the Category 3 Consumers were diminished. The effect of the 2012 Discount Letters was to disguise this.

The making of orders by consent: principles

15    The ACCC and AGL proposed the imposition on AGL of a penalty of $700,000, an order that AGL make a payment towards the ACCC’s costs in the sum of $300,000, and the making of orders with respect to the publication of corrective orders, a compliance program by AGL and with respect to non-party consumer redress.

16    The principles upon which the Court acts in relation to the imposition of agreed pecuniary penalties have been discussed in a number of cases and, in particular, in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 and in Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72. The authorities have recognised that, while it is for the Court to determine the penalty in a given case, it is appropriate for the Court to give effect to the parties’ agreement, and in particular an agreed penalty, if the proposed penalty is within a permissible range. Doing so recognises the public interest in promoting the settlement of litigation and the importance of the views of a regulator such as the ACCC on matters within its expertise. The authorities have emphasised however that the Court is not to act as a mere rubber stamp of the parties’ agreement.

17    In Barbaro v The Queen [2014] HCA 2; (2014) 305 ALR 323, the majority of the High Court held that, in criminal proceedings, the prosecution should not be permitted to make a submission as to the specific penalty, or the range of penalties, which would be appropriate. The Full Court of this Court is presently reserved on the question of whether this principle applies in relation to civil penalty proceedings. In that circumstance, I consider that it is appropriate to act in accord with the decisions in NW Frozen Foods and in Mobil Oil, these being judgments of the Full Court.

Section 224 of the ACL

18    By s 224 of the ACL, the Court may impose a pecuniary penalty on a person who contravenes a provision of Pt 3-1 of the ACL. The Court may impose such a penalty in respect of “each act or omission” by the person, as the Court determines to be appropriate.

19    Section 29 of the ACL is located within Pt 3-1. A contravention of s 18, which is located within Pt 2-1, does not attract the imposition of a pecuniary penalty.

20    The maximum penalty in respect of each contravention of a provision in Pt 3-1 by a body corporate is $1.1 million: s 224(3) Item 2. A person is not liable to more than one pecuniary penalty in respect of conduct constituting a contravention of two or more provisions of Pt 3-1: subs (4).

21    Section 224(2) requires a court determining an appropriate penalty to have regard to all relevant matters, including:

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

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

(c)    whether the person has previously been found by a Court in proceedings under Ch 4 or Pt 5-2 to have engaged in any similar conduct.

22    The matters which may bear upon the fixation of the appropriate penalty in a given case are settled, and it is not necessary to refer to the authorities in any detail. A recent summary of many of the relevant matters was given by Perram J in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761; (2011) 282 ALR 246 at [11]:

…

1.    the size of the contravening company;

2.    the deliberateness of the contravention and the period over which it extended;

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

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

5.    whether the contravener has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention;

6.    whether the contravener has engaged in similar conduct in the past;

7.    the financial position of the contravener;

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

23    The Court should determine an appropriate penalty by a process of instinctive synthesis after taking into account all relevant matters: Markarian v The Queen [2005] HCA 25, (2005) 228 CLR 357 at [37]-[39]; Australian Competition and Consumer Commission v BAJV Pty Ltd [2014] FCAFC 52 at [52].

24    Deterrence, both specific and general, is particularly important in the assessment of penalties: Trade Practices Commission v CSR Limited [1991] ATPR 41-076 at 52,152; NW Frozen Foods at 294-5.

25    In a context such as the present, penalties should not be of such a size that they can be regarded by contravenors, and potential contravenors, as a mere cost of doing business: Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited [2001] ATPR 41-815 at [13]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20, (2012) 287 ALR 249 at [62].

Consideration of the agreed penalty

Nature and extent of the conduct

26    As already noted, the penalty is to be imposed on AGL in respect of its contraventions of ss 29(1)(g) and (i) only. Section 29(1)(g) was contravened because of the representation that AGL’s supply of electricity to consumers would continue to have a “benefit” and s 29(1)(i) because of the misleading statement as to the price at which electricity would be supplied.

27    Contraventions of s 29(1)(g) and (i) of the ACL are serious, as the maximum penalties which may be imposed indicate. AGL accepts that its conduct amounted to serious contraventions. This was an appropriate acknowledgement. AGL’s conduct involved an increase in rates diminishing the effect of the discounts it had agreed to provide and a contemporaneous misleading of consumers as to the effect of the increase.

28    I found that there were approximately 27,000 Category 3 Consumers who had received one or other of the pro forma letters in mid-2012.

29    AGL is the largest retailer of electricity to residential consumers in South Australia, supplying approximately 50% of the market. AGL’s history, size and reputation in the South Australian market are such that consumers are likely to have thought that they could rely on its representations. I found that the Category 3 Consumers were likely to have included the experienced and the inexperienced, the astute and not so astute, the educated and the less well educated, and the careful and not so careful. They are likely to have included large numbers who had a relatively unsophisticated knowledge of the electricity market and some with little or no experience in securing a supply of electricity. It is understandable therefore that many of the 27,000 customers who received the 2012 Rate Increase Letters would have been misled.

30    The ACCC and AGL submit, appropriately, that the contraventions of s 29(1)(g) and s 29(1)(i) arose from the “same conduct” for the purposes of s 224(4). Strictly speaking, a separate contravention of s 29(1)(g) and s 29(1)(i) occurred with the sending of each of the 2012 Rate Increase Letters. However, I agree with the parties that it is appropriate to regard AGL’s conduct as comprising a single course of conduct in respect of which one penalty should be imposed: Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; (2011) 195 FCR 1 at [87]. This does not mean that the maximum penalty for the contraventions comprising the one course of conduct is the maximum penalty which may be imposed for a single contravention: Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2015] FCA 274 at [95]. Instead, the single penalty is to be fixed having regard to the fact that the multiple contraventions were separate incidents in a single course of conduct.

31    The parties agree that it is appropriate for the Court to have regard to the size and financial position of the corporate group of which AGL forms part. That is especially appropriate in this case as separate financial statements for AGL South Australia Pty Ltd as a subsidiary of AGL Energy Limited are not prepared.

32    On any view, the AGL corporate group is substantial. In each of the financial years ending June 2013 and 2014, the AGL group generated revenues exceeding $9.5 billion and an underlying profit exceeding $550 million. It is well able to meet the penalty proposed by the parties. It also means that the penalty to be imposed should be substantial, if its deterrent effect is to be achieved.

The loss or damage suffered by consumers

33    Section 224(2) of the ACL requires the Court to have regard to the loss or damage suffered as a result of the contraventions. At the same time, it is appropriate to have regard to the means agreed by the parties by which AGL is to redress that loss or damage. Both are matters of some complexity which are more conveniently addressed in more detail in relation to the proposed orders for non-party consumer redress. For present purposes, it is sufficient to record that AGL has estimated the loss to Category 3 Consumers resulting from its contraventions at $782,521. The ACCC accepted that it was appropriate for the Court to proceed on the basis of this estimate. The parties are also agreed in proposing orders under s 239 of the ACL for the redressing of that loss.

34    In the criminal law, steps taken, or to be taken, by offenders to make good the losses caused by their crimes are relevant to the imposition of sentence, and are usually mitigatory: R v Wirth (1976) 14 SASR 291 at 294. It is in the public interest that offenders should be encouraged to lessen the impact of their crimes on victims if it is within their power to do so (R v Mickelberg (1984) 13 A Crim R 365 at 370) and, accordingly, it is the consistent policy of courts to encourage the making of restitution: R v Bandjak [2011] SASCFC 19; (2011) 109 SASR 315 at [80].

35    The making of reparation is relevant in sentencing for a number of reasons: victims who suffered financial loss are substantially restored to the position in which they were before the crimes were committed; reparation is often an indication of contrition and remorse; and the making of restitution out of defendants’ own resources will mean that they do not profit from the crime: R v Allen [2005] QCA 73 at 8; R v Sheehan [2007] QCA 409 at 4.

36    The criminal courts often view offers of reparation made for the first time during the course of sentencing submissions with some circumspection. In the Queensland case of R v O’Keefe [1959] Qd R 395 at 400, Stanley J (with whom Wanstall and Stable JJ agreed) said:

It would be of the worst example if any sentence induced or tended to induce a belief that offenders would escape punishment if, when convicted, they made or offered to make restitution. Offenders cannot bargain with the court, and, in effect buy themselves out of sentences.

Nevertheless, as the decision in O’Keefe itself shows, if the Court is satisfied about the genuineness of the offered restitution, it may be a very relevant consideration in the sentencing.

37    The extent to which the making of reparation will be mitigatory depends on all the circumstances. Reparation which involves substantial sacrifice on the part of a defendant is particularly mitigatory: R v Phelan (1993) 66 A Crim R 446 at 448. On the other hand, the making of reparation by a well-resourced defendant which is little more than a recognition of the inevitable is usually less significant. The economic consequence to a defendant of making reparation will not usually be material by itself but, in conjunction with other circumstances, may be mitigatory.

38    Many of these principles are also apposite in relation to the imposition of penalties under s 224. The Court should encourage the voluntary making of appropriate reparation. This will facilitate the protection of consumers, which is a significant objective of the provisions in the ACL. On the other hand, the Court should be careful not to allow the making of reparation to be given undue significance when it amounts to little more than a disgorging by a contravenor of profits achieved through the contravening conduct and, in effect, is a recognition of the inevitable. In particular, the Court should exercise caution before allowing the economic consequence to a contravenor of making reparation, considered by itself, to be regarded as mitigatory: Australian Competition and Consumer Commission v Origin Energy Limited [2015] FCA 55 at [55].

39    In the present case, I do consider that the steps to be taken by AGL should be regarded as mitigatory, although the extent to which that is so is modest. Given the circumstances of this case, it is probable that some form of compensatory order would have been made, so that AGL’s consent to the orders under s 239 appears to be a recognition of the inevitable. The absence of any expression of regret or contrition by AGL for its wrongdoing tends to confirm the impression that it is doing that which the law is likely to have required in any event. I also note that AGL’s agreement to make reparation was communicated to the Court only on the eve of the penalty hearing and that the expert report upon which it relied for the estimate of the extent of the losses caused by its conduct was received by AGL only a few days earlier.

40    Nevertheless, the means by which AGL is to make the reparation involves some complexity. AGL is entitled to credit for its willingness to facilitate the making of reparation in these circumstances.

41    The parties’ submissions focused on the loss to AGL’s customers. It is likely that AGL’s conduct also caused loss to its competitors by reason that customers were induced to continue their relationship with it rather than switching to a competitor. It should not be thought that the estimate of $782,521, even if accurate, is the full measure of the loss caused by the contraventions.

Previous contraventions

42    This is not the first occasion upon which AGL South Australia Pty Ltd has been found to have contravened provisions in the ACL. In Australian Competition and Consumer Commission v AGL Sales Pty Ltd [2013] FCA 1030 (ACCC v AGL Sales), AGL South Australia Pty Ltd was found to have contravened ss 18(1), 74(a), 74(b) and 75(1)(a) of the ACL by reason of the conduct of its agent, CPM Australia Pty Ltd, which had engaged in unlawful door-to-door selling practices. Another subsidiary of AGL Energy Limited, AGL Sales Pty Ltd, was also found to have contravened ss 74(a) and 74(b). AGL Sales was ordered to pay a penalty of $1,485,000 and AGL South Australia Pty Ltd a penalty of $70,000.

43    The contravening conduct of AGL Sales and of AGL occurred in September 2011, that is, before the contraventions presently under consideration. Further, the Court did not make the declarations of contraventions and other orders until 11 October 2013, which was after the present contraventions.

44    The previous contraventions of AGL South Australia Pty Ltd and of AGL Sales are very significant in the imposition of penalty. It is appropriate to refer in this respect to the explanation given by King CJ in R v McInerney (1986) 42 SASR 111 at 113:

… Offences committed prior to sentence for the offence under consideration may affect the sentence in two ways. They may diminish or abrogate any leniency by reason of good character. They may, moreover, lead to a greater sentence than would otherwise be imposed, although within the proper limits indicated by the facts of the immediate crime, for the purpose of personal deterrence; the prisoner’s record may indicate that greater punishment is needed to protect the public by deterring him from further crime. Where the other offences have been committed before the commission of the immediate offence, their relevance is clear in the generality of cases. The offender has committed the offence not as a first offender by as a person whose character is affected by previous offending. He must be sentenced against the background of his record … The effect of the prior offences is more cogent if they have been the subject of conviction before the immediate offence. In such cases, the offender has committed the immediate offence notwithstanding the formal judgment and condemnation of the law in respect of the earlier offences and notwithstanding the warning as to the future which the conviction experience implies.

45    In Ryan v The Queen [2001] HCA 21; (2001) 206 CLR 267 at [67], Gummow J cited this passage in McInerney when stating that, whilst “good character” may operate in mitigation, “bad character” cannot operation in aggravation because a person is not to be punished, or punished again, for crimes other than that for which the sentence is imposed.

46    The significance of a previous record in the sentencing process was addressed by the High Court in Weininger v The Queen [2003] HCA 14; (2003) 212 CLR 629 at [32]. The plurality said:

[32]    … A person who has been convicted of, or admits to, the commission of other offences will, all other things being equal, ordinarily receive a heavier sentence than a person who has previously led a blameless life. Imposing a sentence heavier than otherwise would have been passed is not to sentence the first person again for offences of which he or she was earlier convicted or to sentence that offender for the offences admitted but not charged. It is to do no more than give effect to the well-established principle (in this case established by statute) that the character and antecedents of the offender are, to the extent that they are relevant and known to the sentencing court, to be taken into account in fixing the sentence to be passed. Taking all aspects, both positive and negative, of an offender's known character and antecedents into account in sentencing for an offence is not to punish the offender again for those earlier matters; it is to take proper account of matters which are relevant to fixing the sentence under consideration.

47    The penalty in the present case is to be assessed having regard to these principles. AGL is not to be penalised again for its previous contraventions, but account is to be taken of its record. In particular, it is not entitled to any leniency on the grounds of a good record. Further, the previous contraventions serve to indicate that personal deterrence is particularly important in the present case.

The deliberateness of the contravening conduct

48    The ACCC submits that AGL’s making of the statements found to be false or misleading was intentional. Plainly that was so. The statements were not made accidentally or inadvertently. In the principal judgment I found at [221] that the statements “were plainly intended to be of a reassuring kind and to allay any concerns of the consumers”.

49    However, it is one thing to hold that AGL made the statements deliberately and for the purpose of achieving a particular effect. It is another thing to hold that AGL’s contraventions of s 18 and s 29 were deliberate. In its submissions at the trial, the ACCC accepted, appropriately, that intention was not an element of the contraventions of ss 18 and 29 which it alleged. The ACCC went further and disclaimed any submission that AGL had in fact acted with an intention to mislead or deceive. I did not understand it to contend for any different position on the penalty hearing.

50    I consider it appropriate to assess the penalty proposed by the parties on that basis, although I will refer later to one feature of the case bearing upon this issue which has caused some concern.

The involvement of senior management

51    Mr Fitzgerald, the General Counsel of AGL Energy Limited, has a filed an affidavit in which he deposes, amongst other things, to “review processes” which were adopted generally within AGL in mid-2012 in relation to written communications to customers and which he understands were adopted in respect of the 2012 Rate Increase Letters. That process is as follows. The Customer Communications team prepared a first draft of the letter; the Energy Regulation group reviewed the draft to ensure that it complied with national and state-based electricity laws; the Legal group reviewed the draft for “broader potential legal issues”, including compliance with the CC Act; the Products and Pricing team reviewed the draft for technical accuracy; the Digital and Customer Experience team reviewed the draft to confirm that it met AGL’s expectations for clear and concise communication; the respective heads of the Customer Communications and Brand Communications teams then reviewed the draft before it was checked again by the General Manager of Marketing and Retail Sales. The seniority of that manager in the AGL hierarchy is indicated by the fact that, at the time the letter was sent, he reported to the Group General Manager Retail who, in turn, reported to AGL Energy Limited’s Managing Director.

52    Accordingly, the submission was that the letters had been the subject of careful review and, ultimately, authorisation by the General Manager of Marketing and Retail Sales of AGL.

53    The parties are agreed that the circumstance that the 2012 Rate Increase Letters were sent with the knowledge and direct authorisation of senior management in AGL is a fact calling for a penalty of the size proposed. I agree that that it is a very significant matter which serves to aggravate the contraventions.

54    Mr Fitzgerald does not depose to any personal involvement in the process he described. He was accordingly unable to give a first hand account.

55    It seems surprising that the false and misleading nature of the statements in the 2012 Rate Increase Letter was not recognised during the process of review described by Mr Fitzgerald. The fact that it was not appears to raise some concerns about the level of rigor involved in some aspects of the review.

56    I observe, in addition, that AGL has not provided any evidence of how the contraventions did in fact occur, given the process of review described by Mr Fitzgerald. To my mind this is a significant omission. Given that AGL had determined to increase selectively the rates applicable to Category 3 Consumers and to commence new customers in identical circumstances on lower rates, it is likely that senior management within AGL must have appreciated that the manner in which it communicated the increases to the Category 3 Consumers was a matter requiring particular care. AGL has not provided any evidence indicating the manner in which it sought to recognise and address the need for that care. This precludes a complete assessment of the extent of AGL’s culpability.

57    Generally speaking, the determination of an appropriate penalty makes it appropriate for the Court to be provided with evidence concerning the circumstances in which the contravention occurred. That information will usually be relevant in a number of ways: allowing a proper assessment of the contravenor’s culpability; allowing the extent to which deterrence (both personal and general) should be reflected in the Court’s decision; and it may bear upon an assessment of any expressions of contrition or acknowledgement of the wrong doing by the contravenor as part of the penalty hearing.

58    There is another matter which bears on these considerations in the present case. In the principal reasons I also referred to other ways in which AGL’s communications with the Category 3 and Category 5 Consumers may have been misleading. There is no evidence that these possibilities were recognised and addressed by the AGL personnel involved.

59    In relation to the absence of evidence of how the contraventions occurred, counsel for AGL submitted that in any system, however refined, the “human element” can mean that the system will fail. He submitted that that may be the explanation in this case. One can accept counsel’s proposition at a level of generality. However, given the particular circumstances of this case in which AGL was informing customers of the effect of increases in rates which it knew to be selective, the explanation is not persuasive. I am left with the impression that the Court has not been provided with a complete account of the manner in which AGL’s contraventions came about.

Cooperation by AGL

60    AGL is not entitled to any credit for acknowledging at an early stage its contraventions and for working to facilitate an early resolution of the proceedings. Instead, AGL disputed its liability. It did so successfully in relation to the ACCC allegations concerning the Rate Increase Letters sent in mid-2013.

61    AGL is not to be penalised for having contested the ACCC allegations, but it is not entitled to the credit which the Court gives to respondents who provide full and early admissions of liability: Australian Competition and Consumer Commission v Mitsubishi Electric Australia Pty Ltd [2013] FCA 1413 at [118]-[120].

62    However, the ACCC has acknowledged that AGL has worked cooperatively with it to achieve an agreed resolution of the penalty hearing. It is entitled to credit in that respect.

The parity principle

63    The parties submitted that the Court should have regard to the parity principle, that is, the principle that, all other things being equal, similar contraventions should incur similar penalties. This led the parties to make submissions comparing the proposed penalty with those imposed by the Court in Australian Competition and Consumer Commission v Origin Energy Ltd [2015] FCA 55. In that case, the Court imposed a penalty of $125,000 on Origin Energy Ltd and a penalty of $100,000 on each of Origin Electricity Ltd and Origin Energy Retail Ltd in respect of contraventions of s 29(1)(g) and (i) of the ACL.

64    The parity principle forms part of the common law of sentencing for criminal offences. It seemed that the parties were referring to the same principle.

65    In my opinion, there is very little scope for the application of the parity principle in the present case. That principle is concerned, primarily, with the sentencing of co-offenders. The principle was discussed in Green v The Queen [2011] HCA 49; (2011) 244 CLR 462. French CJ, Crennan and Kiefel JJ said:

[28]    “Equal justice” embodies the norm expressed in the term “equality before the law”. It is an aspect of the rule of law. ... It requires, so far as the law permits, that like cases be treated alike. Equal justice according to law also requires, where the law permits, differential treatment of persons according to differences between them relevant to the scope, purpose and subject matter of the law. As Gaudron, Gummow and Hayne JJ said in Wong v R:

Equal justice requires identity of outcome in cases that are relevantly identical. It requires different outcomes in cases that are different in some relevant respect. (emphasis in original)

Consistency in the punishment of offences against the criminal law is “a reflection of the notion of equal justice” and “is a fundamental element in any rational and fair system of criminal justice”. It finds expression in the “parity principle” which requires that like offenders should be treated in a like manner. As with the norm of “equal justice”, which is its foundation, the parity principle allows for different sentences to be imposed upon like offenders to reflect different degrees of culpability and/or different circumstances.

[29]    General concepts of “systematic fairness” and “reasonable consistency” in sentencing, as an aspect of the administration of federal criminal justice, were discussed in Hili v R. They apply to persons charged with similar offences arising out of unrelated events. The consistency they require is “consistency in the application of the relevant legal principles, not some numerical or mathematical equivalence.” That kind of general consistency is maintained by the decisions of intermediate courts of appeal. The consistency required by the parity principle is focussed on the particular case. It applies to the punishment of “co-offenders”, albeit the limits of that term have not been defined with precision.

[30]    In Lowe v R and in Postiglione v R, this court was concerned with the application of the parity principle to persons charged with the same offences arising out of the same criminal conduct or enterprise. Those decisions are not authority for the proposition that the principle applies only to persons so charged. The foundation of the parity principle in the norm of equality before the law requires that its application be governed by consideration of substance rather than form. Formal identity of charges against the offenders whose sentences are compared is not a necessary condition of its application. Nevertheless, as Campbell JA recognised in Jimmy v R, there can be significant practical difficulties in comparing the sentences of participants in the same criminal enterprise who have been charged with different crimes. The greater the difference between the crimes, the greater the practical difficulties, particularly where disparity is said to arise out of a sentence imposed on a co-offender who has been charged with an offence that is less serious than that of the appellant. The existence of those difficulties may be accepted. So too may the inability of a court of criminal appeal to undertake, under the parity rubric, a de facto review of prosecutorial charging discretions. Those practical difficulties and limitations, however, do not exclude the operation of the parity principle. The effect given to it may vary according to the circumstances of the case, including differences between the offences with which co-offenders are charged.

(Citations omitted and emphasis added)

66    There are no co-contravenors in the present case. The contraventions of the defendants in Origin Energy are not identical with those of AGL, and there are a number of relevant differences in the circumstances of each of the respective defendants.

67    The penalties imposed on other contravenors for similar contraventions may be relevant in a general way, in particular, in assisting the Court to determine a just and proportionate penalty appropriate in the circumstances of the given case. However, attempts to apply the parity principle other than in the case of co-offenders have the potential to distract the Court from that task. The observation of Brennan J in Lowe v The Queen (1984) 154 CLR 606 at 617 is pertinent in this respect:

[I]t is wrong to think that it is “more important that sentences should be proportionate to one another than that they should be proportionate to guilt”.

Similarly, in Green v The Queen, Bell J at [106] referred to a number of decision in New South Wales in which it has been held that the avoidance of disparity is not justified if it requires the reduction of an appropriate sentence to the level of an inadequate sentence.

68    Accordingly, I have not thought it appropriate to have regard to the parity principle in consideration of the proposed penalty.

Compliance program

69    Mr Fitzgerald’s affidavit indicates that, at least since 2012, AGL has had systems in place to ensure compliance with its obligations under the CC Act and with its own company objectives. The affidavit also indicates that AGL is attempting to develop a culture which is conducive to compliance with the ACL.

70    In ACCC v AGL Sales, Middleton J made orders requiring AGL to maintain an appropriate competition and consumer compliance program. The parties are agreed that an order should be made extending AGL’s obligations under that program for a further three years.

71    It is in the public interest that AGL have an effective competition and consumer compliance program. The circumstance that it has a reasonably sophisticated program in place now, and will continue it, is mitigatory.

Summary on penalty

72    The proposed penalty of $700,000 is undoubtedly a significant penalty, even for a member of a corporate group such as AGL. The penalty seems approximately proportionate to the losses to consumers which AGL’s conduct caused. The serious nature of AGL’s contraventions, its previous record of contraventions, and the fact that AGL has not disclosed all the material bearing upon the full extent of its culpability may well have warranted the imposition of a higher penalty than that upon which the parties have agreed. Nevertheless, I consider that the single penalty of $700,000 is within a reasonable range of penalties for the contraventions of s 29, and that effect should be given to the parties’ agreement.

Non-party consumer redress

73    The parties are agreed that orders should be made under s 239 of the ACL for refunds to consumers. They propose that the refunds be made on the basis that the representations made to consumers before they entered into the energy plans, and in the Welcome Packs, did not have contractual effect, so that the consumers are not entitled to be paid the difference between the amounts they actually paid for their electricity, on the one hand, and what they should have paid, if AGL had honoured the representations, on the other. Instead, the refunds are to be based on a comparison of each consumer’s position on the assumed basis that, if the consumers had not been misled, they would have chosen to switch to AGL’s SRC as soon as it became economically rational to do so, that is, from the time consumers would have paid less for their electricity under the AGL’s SRC than they were paying under their energy plan.

74    The parties are agreed that consumers should be compensated on this basis until the end of their plan. In many cases, those plans have already expired but those with a three year term may not expire until July 2015.

75    The effect of the parties’ agreement is that AGL will be required to:

(a)    identify (i) which Category 3 Consumers were worse off under their energy plan than had they instead been supplied electricity by AGL under the SRC; and (ii) the point in time at which those consumers were worse off in that respect; and

(b)    from the point in time when each consumer was worse off until the end of the initial term or earlier termination of their energy plan, refund or credit to them the difference between what they paid under their energy plans compared with the amount they would have paid under the SRC to 31 December 2012 and, from that date, under the SRC using AGL’s lower standard retail contract rate.

Consumers who remain customers of AGL will receive a credit while those consumers who have ceased to be AGL customers will receive a refund.

Legislation and relevant principles

76    Section 239 of the ACL provides:

239 Orders to redress etc. loss or damage suffered by non-party consumers

(1)    If:

(a)    a person:

(i)    engaged in conduct (the contravening conduct) in contravention of a provision of Chapter 2, Part 3-1, Division 2, 3 or 4 of Part 3-2 or Chapter 4; or

(ii)    is a party to a consumer contract who is advantaged by a term (the declared term) of the contract in relation to which a court has made a declaration under section 250; and

(b)    the contravening conduct or declared term caused, or is likely to cause, a class of persons to suffer loss or damage; and

(c)    the class includes persons who are non-party consumers in relation to the contravening conduct or declared term;

a court may, on the application of the regulator, make such order or orders (other than an award of damages) as the court thinks appropriate against a person referred to in subsection (2) of this section.

(2)    An order under subsection (1) may be made against:

(a)    if subsection (1)(a)(i) applies—the person who engaged in the contravening conduct, or a person involved in that conduct; or

(b)    if subsection (1)(a)(ii) applies—a party to the contract who is advantaged by the declared term.

(3)    The order must be an order that the court considers will:

(a)    redress, in whole or in part, the loss or damage suffered by the non-party consumers in relation to the contravening conduct or declared term; or

(b)    prevent or reduce the loss or damage suffered, or likely to be suffered, by the non-party consumers in relation to the contravening conduct or declared term.

(4)    An application under subsection (1) may be made at any time within 6 years after the day on which:

(a)    if subsection (1)(a)(i) applies—the cause of action that relates to the contravening conduct accrued; or

(b)    if subsection (1)(a)(ii) applies—the declaration is made.

As can be seen, subs (1) identifies the circumstances in which the Court may make an order for non-party consumer redress; subs (2) the persons against whom such an order may be made; subs (3) the nature of the orders which may be made; and subs (4) a time limit.

77    Section 243 indicates the kind of particular orders which the Court may make. It provides (relevantly):

Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of those sections against a person (the respondent) include all or any of the following:

…

(d)    an order directing the respondent to refund money or return property to the injured person;

However, the Court may not make an award of damages: see s 239(1) and s 243(e).

78    Section 240 identifies matters to which the Court may have regard in determining whether to make an order under s 239(1). It provides:

(1)    In determining whether to make an order under section 239(1) against a person referred to in section 239(2)(a), the court may have regard to the conduct of the person, and of the non-party consumers in relation to the contravening conduct, since the contravention occurred.

…

(3)    In determining whether to make an order under section 239(1), the court need not make a finding about either of the following matters:

(a)    which persons are non-party consumers in relation to the contravening conduct or declared term;

(b)    the nature of the loss or damage suffered, or likely to be suffered, by such persons.

79    A consumer who has the benefit of a non-party consumer redress order will be precluded from bringing any separate action in respect of the loss or damage to which the order relates. That is the effect of s 241 which provides:

241 When a non-party consumer is bound by a redress order etc.

(1)    A non-party consumer is bound by an order made under section 239(1) against a person if:

(a)    the loss or damage suffered, or likely to be suffered, by the non-party consumer in relation to the contravening conduct, or the declared term, to which the order relates has been redressed, prevented or reduced in accordance with the order; and

(b)    the non-party consumer has accepted the redress, prevention or reduction.

(2)    Any other order made under section 239(1) that relates to that loss or damage has no effect in relation to the non-party consumer.

(3)    Despite any other provision of:

(a)    this Schedule; or

(b)    any other law of the Commonwealth, or a State or a Territory;

no claim, action or demand may be made or taken against the person by the non-party consumer in relation to that loss or damage.

80    Section 239 is, in substance, the counterpart of s 87AAA of the Trade Practices Act 1974 (Cth) (the TPA). Section 87AAA was inserted into the TPA by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth). A counterpart provision, s 12GNB, was inserted into the Australian Securities and Investments Commission Act 2001 (Cth) at the same time. The Explanatory Memorandum accompanying the Second Reading Speech indicates that the intention was to vest this Court with power to make orders for the redressing of the loss caused to non-party consumers resulting from contraventions of provisions in the TPA, given that this Court had held in Medibank Private Ltd v Cassidy [2002] FCAFC 290; (2002) 124 FCR 40 that s 87 of the TPA did not permit compensatory orders to be made in respect of persons who were not parties to the proceedings.

81    In the Second Reading Speech, the Minister said:

The redress for non-parties provisions of the Bill will allow the ACCC and ASIC to act more effectively where, for instance, thousands of consumers suffer small losses on which each of them might not take action individually because of cost and inconvenience. Businesses should not profit from consumer detriment, just because the amount is small or the harm spread widely.

…

This reform will allow a court to order the payment of refunds and similar forms of redress without the need for all consumers affected to be named as parties to the regulator’s court proceedings.

This is not a general power to award damages, but a power to order redress where that loss or damage is clearly identifiable and there is no need to adjudicate the merits of each particular case. It could be used to order redress of a standard form, such as the making of an apology, the exchange of goods or the payment of a refund.

82    The conditions necessary for the application of s 239 are established in this case. AGL has contravened a provision of Ch 2 (s 18) and of Pt 3.1 (s 29(1)); the contravening conduct has caused loss to a class of persons (the Category 3 Consumers as defined); and they are non-party consumers as defined in s 2 of the ACL. The ACCC, which has applied for the order, is a regulator for the purposes of s 239(1), and AGL is the entity which has engaged in the contravening conduct. The order proposed by the parties will redress, at least in part, the loss suffered by the Category 3 Consumers.

83    It is not necessary for the Court to making findings as to the particular Category 3 Consumers, nor as to the precise nature and extent of the loss which they have suffered (s 240(3)). However, the Category 3 Consumers are identifiable and most will be contactable.

84    The parties’ proposed order contemplates that the Category 3 Consumers will be in one of three sub-categories: first, those whose energy plans with AGL have expired but who continue to be customers of AGL under some other arrangement; secondly, those whose energy plans have not yet expired; and, thirdly, those who are no longer AGL customers at all.

85    In the case of the first two sub-categories, AGL will credit the invoices for the ongoing supply of electricity with the amount of the calculated overpayment. This will occur automatically, unless the consumers elect that that should not occur.

86    AGL will inform its former customers of their entitlement to a refund by notification to their last known address. These customers will have to “opt in” to the scheme, by informing AGL of their preferred payment method, together with details of the means by which payment may be made.

87    The regime proposed by the parties includes agreed terms of notification to consumers of their entitlement. Consumers will also be informed of their entitlement to refuse acceptance of the redress, so that they will be free to pursue their own claims in respect of loss caused by AGL’s conduct (s 241).

88    I am satisfied that it is appropriate for the non-party consumer redress orders to be made.

Compliance program

89    As already noted, one of the orders made in ACCC v AGL Sales required AGL Sales and AGL South Australia Pty Ltd to establish and maintain for three years a trade practices compliance program with defined elements. The affidavit of Mr Fitzgerald indicates that AGL has established such a program.

90    The parties are agreed that an order be made extending the obligation of AGL to maintain that program for a further three years. I agree that this order is appropriate. It is in the public interest that AGL South Australia Pty Ltd continues to have an effective competition and consumer compliance program in place.

Publication and disclosure orders

91    The orders which the parties propose the Court makes pursuant to s 246(2)(d) with respect to publication and pursuant to s 247(1) with respect to adverse publicity are appropriate and will be made. They will serve the public interest in dispelling incorrect or false impressions created by AGL’s misleading and deceptive conduct and false or misleading representations (Medical Benefits Fund of Australia Ltd v Cassidy at [49]), will alert affected consumers to the fact of the contraventions and, in particular, will provide them with information about the non-party consumer redress orders and their right to elect not to take that redress: Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [22].

Verification affidavit

92    The orders proposed by the parties for AGL to provide the ACCC with an affidavit verifying that it has discharged its obligations under the orders is appropriate and will be made.

Costs

93    It is appropriate to give effect to the parties’ agreement that AGL pay $300,000 towards the costs of the ACCC in relation to the proceedings.

Summary

94    In summary, I am satisfied that it is appropriate in this case to give effect to each of the orders proposed by the parties.

Associate:

Dated:    29 April 2015