FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Ozsale Pty Limited [2016] FCA 1049

ORDERS

THE COURT DECLARES THAT:

(a)    Conduct relating to the Sleep Sack

1.    Pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) that, by offering to supply and supplying the Sleep Sack, on various dates between 21 September 2014 and 9 January 2015, in trade or commerce via its website www.ozsale.com.au, in circumstances in which the Sleep Sack was:

(a)    subject to application of AS/NZS 1249:2003, Children’s nightwear and limited daywear having reduced fire hazard, published by Standards Australia on 29 December 2003 as varied by the Regulations, as applied by the Trade Practices (Consumer Product Safety Standards) (Children’s Nightwear and Paper Patterns for Children’s Nightwear) Regulations 2007 (the Standard);

(b)    a Category 4 garment for the purposes of the Standard;

(c)    supplied without any accompanying fire hazard label;

Ozsale failed to comply with clauses 4.6, 5.2(c), 5.3 and 5.5(a) of the Standard and thereby contravened ss 106(1) and 106(2) of the Australian Consumer Law (ACL).

(b)    Conduct relating to the Absorba Bodysuit

2.    Pursuant to s 21 of the Federal Court of Australia Act that, by offering to supply and supplying, on various dates between 7 July 2015 and 30 October 2015 consumer goods in trade or commerce via its website www.ozsale.com.au, being an absorba bodysuit (the Absorba Bodysuit), in circumstances in which the Absorba Bodysuit was:

(a)    subject to application of the Standard;

(b)    a Category 3 garment for the purposes of the Standard;

(c)    supplied without any accompanying fire hazard label;

Ozsale failed to comply with clauses 3.4, 5.2(c), 5.3 and 5.5(a) of the Standard and thereby contravened ss 106(1) and 106(2) of the ACL.

(c)    Conduct relating to the Babycottons Pajamas

3.    Pursuant to s 21 of the Federal Court of Australia Act that, by offering to supply and supplying, between 19 and 23 July 2014 consumer goods in trade or commerce via its website www.ozsale.com.au, being a cupcake snug fit short sleep set (the Babycottons Pajamas), in circumstances in which the Babycottons Pajamas:

(a)    were subject to application of the Standard;

(b)    were a Category 2 garment for the purposes of the Standard;

(c)    carried a fixed fire hazard label on the top that stated, in characters less than 25 mm high: “WEAR SNUG FITTING. NOT FLAME RESISTANT” and was partially obscured by a label that stated “24M” and a further detachable fire label that stated: “For child’s safety, garment should fit snugly. This garment is not flame resistant. Loose-fitting garment is more likely to catch fire”;

(d)    carried a fixed fire hazard label on the pants, located at the waist seam of the garment, partially obscured by a label, that stated “24M” and in characters less than 25 mm high “WEAR SNUG FITTING. NOT FLAME RESISTANT”,

Ozsale failed to comply with clauses 2.9, 5.2(c), 5.3(b), 5.3(e) and 5.5(a) and (c) of the Standard and thereby contravened ss 106(1) and 106(2) of the ACL.

(d)    Conduct relating to the Orange Superhero Pajamas

4.    Pursuant to s 21 of the Federal Court of Australia Act that, by offering to supply and supplying, on various dates between 8 February 2014 and 3 November 2014 the Orange Superhero Pajamas in circumstances in which the Orange Superhero Pajamas:

(a)    did not meet Clauses 2.5 or 2.6 (as required for Category 2) and were designated Category 4 under the Standard;

(b)    did not comply with clause 4.3 of the Standard; and

(c)    did not comply with the Standard as they did not meet the requirements of any of the categories in the Standard;

Ozsale thereby contravened ss 106(1) and 106(2) of the ACL.

(e)    Conduct relating to the Joules Junior Pajamas

5.    Pursuant to s 21 of the Federal Court of Australia Act that, by offering to supply and supplying, on various dates between 3 March 2015 and 28 May 2015, consumer goods in trade or commerce via its website www.buvinvite.com.au, being joules junior pajamas (the Joules Junior Pajamas), in circumstances in which the Joules Junior Pajamas:

(a)    were subject to application of the Standard;

(b)    were a Category 2 garment for the purposes of the Standard;

(c)    carried a fixed fire hazard label on the top located at the neck seam, located near the sleeve seam that stated in red text on a white label: “WARNING KEEP AWAY FROM FIRE” and a further detachable fire hazard label that was attached to the price tag and intended to be removed with that tag, hanging from the neck of the garment, that stated “IN THE INTEREST OF SAFETY, IT IS ADVISABLE TO KEEP THIS GARMENT AWAY FROM FIRE AND FLAMES”;

(d)    carried a fixed fire hazard label on the on the pants located at the waist seam of the garment near the outer leg seam that stated in red text on a white label: “WARNING KEEP AWAY FROM FIRE” and a further fixed fire hazard label, located at the leg seam of the garment that stated in red text on a white label: “KEEP AWAY FROM FIRE”;

Ozsale trading as Buylnvite failed to comply with clauses 2.4, 2.9, 5.2(c), 5.3(a), 5.3(e) and 5.5(a) and (e) of the Standard and thereby contravened ss 106(1) and 106(2) of the ACL.

THE COURT ORDERS:

6.    Until 28 August 2019, the Respondent, whether by itself, its officers, servants, agents or howsoever otherwise, in trade or commerce in Australia be restrained from supplying or offering to supply a children's nightwear garment which is subject to a safety standard for the purposes of Division 1 of Part 3-3 of the ACL in force at the time of supply or offering to supply, unless that garment complies with the safety standard.

7.    Pursuant to s 246(2)(b) of the ACL the Respondent:

(a)    establish a compliance program in accordance with the program set out in Annexure A for the employees or other persons involved in its business, being a program:

(i)    designed to ensure its awareness of the responsibilities and obligations in relation to the conduct declared by the Court in this proceeding to be in contravention of the ACL and any similar or related conduct; and

(ii)    revising the internal operations of its business which led to it engaging in the conduct declared by the Court in this proceeding to be a contravention of the ACL;

(b)    maintain and administer, at its own expense, the compliance program set out in Annexure A for a period of three years; and

(c)    provide, at its own expense, a copy of any documents to be provided to the Applicant pursuant to the compliance program set out in Annexure A.

8.    Pursuant to s 224(1) of the ACL, the Respondent pay to the Commonwealth of Australia a pecuniary penalty of the amount of $500,000 in respect of the contraventions of ss 106(1) and (2) of the ACL the subject of the Declarations in paragraphs 1-5 above.

9.    Pursuant to s 43(1) of the Federal Court of Australia Act, the Respondent pay the Applicant's costs of and incidental to this proceeding in the amount of $50,000.

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

ANNEXURE A

AUSTRALIAN CONSUMER LAW COMPLIANCE PROGRAM - OZSALE

Ozsale Pty Limited (Ozsale) will establish an Australian Consumer Law Compliance Program (the Compliance Program) that complies with the following requirements.

Maintaining copies of relevant Mandatory Australian Standards

1.    Within 1 month of the date of the Order of the Court, Ozsale will obtain up-to-date copies of all consumer product safety standards and consumer information standards made or declared under the Australian Consumer Law (ACL), being schedule 2 to the Competition and Consumer Act 2010 (CCA), that relate to the products supplied by Ozsale (the Mandatory Australian Standards) and make such copies available online or in hard copy at each of its business premises responsible for sourcing and purchasing products for supply.

Appointments

2.    Within 3 months of the date of the Order of the Court, Ozsale will appoint, either on an ongoing or temporary contractual basis for a total period of at least 3 years, a person with suitable qualifications and experience to be responsible for ensuring that the Compliance Program is managed effectively (the Compliance Officer).

3.    The person appointed to the role of Compliance Officer may be an existing Ozsale employee with suitable qualifications and experience, reporting to the Chief Executive Officer.

Training

4.    As soon as reasonably practicable following the Compliance Officer’s appointment, Ozsale will cause the Compliance Officer to attend practical training focusing on section 106 of the ACL and methods to assess and identify business activities that pose a risk to compliance with that provision.

5.    Ozsale will ensure that this training is administered by a suitably qualified compliance professional or legal practitioner with expertise in the ACL.

Ensuring compliance with relevant Mandatory Australian Standards

6.    The Compliance Officer will be responsible for ensuring that the Compliance Program is managed effectively and that there is a suitable system in place designed to ensure that products offered for sale or supplied by Ozsale to Australian consumers comply with the Mandatory Australian Standards applicable to those products.

7.    In giving effect to this responsibility, the Compliance Officer will, either directly or through supervising other employees:

7.1    Ensure that Ozsale provides access, online or otherwise, to up-to-date copies, at its relevant business premises, of all Mandatory Australian Standards relating to products supplied by Ozsale or intended to be supplied by Ozsale.

7.2    For products that Ozsale intends to sell or offer for sale to Australian consumers, oversee the compliance process to ensure that Ozsale uses its best endeavours to ensure that products Ozsale supplies comply with applicable Mandatory Australian Standards, prior to Ozsale obtaining supply from its suppliers, by, but not limited to:

(a)    in respect of children’s nightwear subject to a Mandatory Australian Standard,

(i)    provide suppliers of the children’s nightwear with up to date copies of the Mandatory Australian Standards applicable to children's nightwear; and

(ii)    require suppliers of the children’s nightwear to provide Ozsale with:

A.    a test report evidencing that the garment, or a garment of the same style and fabric composition as that garment, complies with the Mandatory Australian Standard; or

B.    if a test report is not available, a statement in writing signed by the supplier, verifying that the garment or a garment that is the same style and fabric composition as that garment, complies with the Mandatory Australian Standard. The statement should be accompanied by detailed images of the garment and any attached labels for identification purposes, and in addition, Ozsale must use its best endeavours to have the supplier include in the statement the relevant category under the Mandatory Australian Standard which applies to the garment;

C.    where available, copies of specification sheets used by the supplier recording the correct trim dimensions, fabric weight and other relevant information for the garment;

(b)    in respect of all other products, obtain written confirmation from Ozsale’s suppliers that the product complies with the applicable Mandatory Australian Standards;

(c)    in respect of all products, ensure confirmation is provided to the Merchandising team and/or the category manager that written confirmation of a product's compliance with applicable Mandatory Australian Standards has been received from the supplier, prior to the product being offered for sale in a sales event;

(d)    in respect of all products, inform the relevant supplier that a product will not be offered for sale on Ozsale’s Australian website until written confirmation has been provided from that supplier that the products comply with applicable Mandatory Australian Standards.

7.3    For all children’s nightwear products received from suppliers, Ozsale will ensure that no items of such nightwear are dispatched or supplied to any Australian consumer without Ozsale having arranged for an employee or other person, who is appropriately trained in relation to the application of the Mandatory Australian Standard to children’s nightwear, first having conducted a physical inspection of samples of the garment against a suitable inspection protocol and being satisfied that the garment complies with the applicable Mandatory Australian Standard. Ozsale will keep records of the results of these inspections as part of its supply and compliance procedures.

7.4    A suitable inspection protocol should be developed in consultation with a quality assurance professional and should include all practical steps that can be taken to ensure compliance without the use of a laboratory.

7.5    For products that Ozsale intends to sell or offer to Australian consumers, develop a protocol for Ozsale to verify the products' compliance with applicable Mandatory Australian Standards prior to the products being offered for sale or supplied to Australian consumers, including, but not limited to maintaining a system to ensure suppliers have provided confirmation that the products supplied to Ozsale comply with the Mandatory Australian Standards.

7.6    For products that Ozsale intends to sell or offer to Australian consumers that Ozsale has not obtained written confirmation from Ozsale’s suppliers that those products comply with applicable Mandatory Australian Standards, ensure that there is a process in place to ensure those products are not offered for sale or sold on Ozsale’s Australian websites.

8.    Develop procedures for Ozsale to deal with any products determined to be non-compliant with applicable Mandatory Australian Standards following the procedures set out in paragraph 7 above being undertaken, including but not limited to procedures for quarantining and adequately disposing of such products to ensure non-compliant products are not supplied to Australian consumers (and noting that such products may not be exported from Australia without the consent of the relevant Federal Minister).

9.    The Compliance Officer will within 3 months of their appointment create and maintain a document (the Compliance Policy) which outlines the procedures and protocols (for which the Compliance Officer will hold ultimate responsibility) that Ozsale will employ in giving effect to the requirements set out in paragraph 7 above.

10.    The Compliance Officer will also ensure there is maintained, a record containing:

10.1    copies of the test reports or written confirmations received from suppliers that the garments comply with the Mandatory Australian Standards (in accordance with paragraph 7.2 above); and

10.2    a record of the results of the inspections set out in paragraph 7.3 above.

11.    The Compliance Officer will, either directly or through supervising other employees, create and maintain records of the actions taken by Ozsale pursuant to the Compliance Policy.

Developing, implementing and maintaining recalls procedures

12.    Upon discovery or notification that Ozsale has sold, or offered for sale, to Australian consumers a product that is non-compliant with its applicable Mandatory Australian Standard, the Compliance Officer will use their best endeavours to ensure Ozsale conducts an effective recall of that non-compliant product.

13.    In giving effect to this responsibility, the Compliance Officer will either directly or through supervising other employees:

13.1    as part of Ozsale’s general business practices, ensure that Ozsale:

(a)    keeps accurate records of all suppliers involved in the manufacture, supply and sale of all products;

(b)    keeps accurate records of the written confirmation provided by suppliers that products supplied to Ozsale comply with applicable Mandatory Australian Standards, if relevant;

(c)    records and tracks batch numbers for all products;

(d)    determines how each product category sold would be collected from customers, and rectified or destroyed, should Ozsale determine or be notified that a product sold by it to Australian consumers is non-complaint and is required to be recalled;

13.2    as part of Ozsale’s specific recalls procedures, ensure that Ozsale:

(a)    initiates steps to commence the recalls process within 2 business days of Ozsale determining or being notified that the non-compliant product is required to be recalled;

(b)    establishes clear delegations for each employee responsible for specific recall tasks;

(c)    determines the exact number of product units in any batch, and where applicable, the number of affected product lines (where there are variants of a single product line that suffer the same defect) requiring recall and each customer who purchased each affected product, in a timely manner;

(d)    makes use of the information contained in Ozsale’s customer databases, such as email addresses, postal or shipping addresses, in order to notify each purchaser of the recall of the affected products in a timely manner;

(e)    clearly advises each affected customer of the reason for the recall of the affected products, in a timely manner;

(f)    considers, and where appropriate, implements incentives for customers to participate in the recall beyond offering repair, replacement or refund of the affected product; and

13.3    keeps clear and accurate records of the:

(a)    number of affected product units;

(b)    number of affected product lines (where there are variants of a single product line that suffer the same defect);

(c)    notifications made to each customer who purchased the affected product;

(d)    response to the recall of each customer who purchased the affected product;

(e)    strategies used to engage affected customers and encourage them to return the affected products;

(f)    method, time and date of each product units' return to Ozsale in response to the recall, where applicable;

(g)    method, time and date of the disposal or repair and return to the customer, where applicable, of each product unit that was returned to Ozsale in response to the recall.

14.    The Compliance Officer will within 3 months of their appointment create and maintain a document (the Recall Procedures) which outlines the procedures and protocols (for which the Compliance Officer will have responsibility) that Ozsale will employ in giving effect to the requirements set out in paragraph 12 above.

15.    The Compliance Officer will, either directly or through supervising other employees, create and maintain records of the actions taken by Ozsale pursuant to the Recall Procedures.

External compliance reviews

16.    Ozsale will, at its own expense and with the oversight of the Compliance Manager, cause a review of Ozsale’s compliance with the requirements of this Annexure, Ozsale’s Compliance Policy and Recalls Procedures, and the actions taken by Ozsale pursuant to its Compliance Policy and Recalls Procedures (the Review) to be carried out in accordance with the following requirements;

16.1    Scope of the Review — Ozsale will ensure the Review is broad and rigorous enough to:

(a)    provide Ozsale and the ACCC where relevant, with documentary verification that Ozsale has a Compliance Program in place that complies with the requirements of this Annexure;

(b)    provide Ozsale and the ACCC where relevant, with documentary verification that Ozsale’s Compliance Policy, and the actions taken by Ozsale in accordance with its Compliance Policy, comply with the requirements of this Annexure and otherwise maintain and oversee processes to ensure that products offered for sale or supplied by Ozsale are compliant with any Mandatory Australian Standard applicable to those products; and

(c)    provide Ozsale and the ACCC where relevant, with documentary verification that Ozsale's Recall Procedures, and the actions taken by Ozsale in accordance with its Recall Procedures, comply with the requirements of paragraphs 12 to 15 of this Annexure;

16.2    Specifically, the Review should include a process whereby, during the period of the first Review,(referred to in paragraph 19(a) below), and every six months thereafter until the Reviews referred to in paragraph 19 are complete, the Reviewer (referred to in paragraph 17 below) purchases three items of children’s nightwear products at random which items shall be from three different brands and sold in three different sales by Ozsale for the purpose of testing for compliance with the Mandatory Australian Standard by a facility accredited by the National Association of Testing Authorities, Australia. The results of these tests should form part of the Reviewer’s report to Ozsale.

17.    Independence of Reviewer —Ozsale will ensure that the Review is carried out by a suitably qualified, independent compliance professional with expertise in consumer law (the Reviewer). The Reviewer will qualify as independent on the basis that they:

(a)    did not design or implement Ozsale’s Compliance Program, Compliance Policy or Recalls Procedures;

(b)    are not a present or past staff member or director of Ozsale;

(c)    have not acted and do not act for Ozsale in any ACL related matters;

(d)    have not and do not act for or consult to Ozsale or provide other services on Australian Consumer Law related matters other than Compliance Program reviewing; and

(e)    have no significant shareholding or other interests in Ozsale.

18.    Evidence — Ozsale will ensure that each Review is conducted on the basis that the Reviewer has access to all relevant sources of information in Ozsale’s possession or control, including without limitation:

(a)    the ability to make enquires of any employees, representatives, and agents of Ozsale;

(b)    documents relating to Ozsale’s Compliance Program, Compliance Policy, Recalls Procedures, and actions taken by Ozsale in accordance with Ozsale’s Compliance Program, Compliance Policy, Recalls Procedures; and

(c)    any and all documents required to assess Ozsale’s compliance with section 106 of the ACL.

19.    Timing —In addition to the scheduled purchasing in 16.2, Ozsale will ensure that:

(a)    the first Review is completed within 3 months of the appointment of the Compliance Officer;

(b)    subsequent Reviews are conducted every 6 months thereafter for a period of 1 year.

(c)    at the end of the first year, the Reviewer prepares a summary of the previous half yearly Reviews; and

(d)    for 2 years following the first year, Ozsale will ensure annual Reviews are conducted.

20.    Reporting — Ozsale will:

(a)    use its best endeavours to ensure that, within 30 days of a Review, the Reviewer will provide a report of their Review to Ozsale;

(b)    provide a copy to the ACCC of the half yearly Review reports and the annual Reviews specified in paragraph 18; and

(c)    implement all reasonable recommendations made by the Reviewer to improve Ozsale’s compliance with the requirements of this Annexure, and to otherwise improve Ozsale’s compliance with section 106 of the ACL.

Retention of Compliance Program documents

21.    Ozsale will maintain a record of and store all documents relating to and constituting Ozsale’s Compliance Program, Compliance Policy and Recalls Procedures, and the actions taken by Ozsale in accordance with Ozsale’s Compliance Program, Compliance Policy, Recalls Procedures, for a period of no fewer than 3 years.

22.    If requested by the ACCC, Ozsale will at its own expense provide any documentation pertaining to this Annexure to the ACCC promptly.

ACCC recommendation

23.    Ozsale will implement promptly and with due diligence any recommendations that the ACCC may make that the ACCC deems reasonably necessary to ensure that Ozsale maintains and continues to implement the Compliance Program in accordance with the requirements of this Annexure.

REASONS FOR JUDGMENT

ROBERTSON J:

Introduction

1    These proceedings were commenced by application filed on 4 December 2015 by the Australian Competition and Consumer Commission (ACCC). That application was amended on 2 March 2016 to limit its scope to exclude certain implied representations pleaded in relation to one of the lines of goods, the Sleep Sack.

2    The ACCC alleges, and Ozsale Pty Ltd (Ozsale) now admits, that Ozsale has engaged in conduct in contravention of ss 106(1) and 106(2) of the Australian Consumer Law (ACL) by offering to supply and supplying five different items of children’s nightwear via its websites during flash sales on various dates, which products failed to comply with AS/NZS 1249:2003 Children’s nightwear and limited daywear having reduced fire hazard, published by Standards Australia on 29 December 2003, as applied by the Trade Practices (Consumer Product Safety Standards) Children’s Nightwear and Paper Patterns for Children’s Nightwear) Regulations 2007 (Cth) (the Standard).

3    The parties filed joint submissions on 15 August 2016. The parties have reached agreement on proposed pecuniary and non-pecuniary orders that they submit ought to be granted, while recognising that the question of relief remains in the discretion of the Court.

4    In relation to the contraventions of ss 106(1) and 106(2) of the ACL, the parties submitted that there were five courses of conduct, comprising one course for each different garment supplied. The parties submitted that a total pecuniary penalty of $500,000, constituted as follows, was appropriate and within the range of penalties a court would order in the circumstances:

(a)    Orange Superhero Pajamas contravention: $160,000;

(b)    Sleep Sack contravention: $160,000;

(c)    Absorba Bodysuit contravention: $110,000;

(d)    Joules Junior Pajamas contravention: $40,000; and

(e)    Babycottons Pajamas contravention: $30,000.

5    The proposed short minutes of order agreed between the ACCC and Ozsale also provide for declarations, an injunction against Ozsale for a period of three years and non-punitive orders and a contribution to the ACCC’s costs agreed in the sum of $50,000.

The statement of agreed facts and admissions

6    The joint statement of agreed facts and admissions is made pursuant to s 191(3)(a) of the Evidence Act 1995 (Cth).

7    Ozsale operates members only shopping clubs via its websites, through which it offers for supply and supplies a wide range of apparel and other consumer goods, including children’s nightwear, throughout Australia.

8    Ozsale’s business model is to source products, including all kinds of apparel and children’s apparel, from suppliers in Europe or the United States, usually at the end of the relevant “sales season” in those markets, and to offer those products for sale via its websites to consumers in Australia for short sale periods as online flash sales. The sales were only offered to consumers who had signed up as members of Ozsale’s websites by registering their name and email address with the websites.

9    Ozsale admits that it engaged in conduct in contravention of ss 106(1) and 106(2) of the ACL by offering to supply and supplying certain children’s nightwear products via its websites, during flash sales on various dates as follows:

(a)    the Sleep Sack for a total of 21 days in the period 21 September 2014 to 9 January 2015;

(f)    the Absorba Bodysuit for a total of at most 33 days in the period 7 July 2015 to 30 October 2015;

(g)    the Babycottons Pajamas for a total of 5 days in the period 19 July to 23 July 2014;

(h)    the Orange Superhero Pajamas for a total of 24 days in the period 8 February 2014 to 3 November 2014; and

(i)    the Joules Junior Pajamas for a total of 13 days in the period 3 March 2015 to 28 May 2015;

which products failed to comply with the Standard as applied by the Trade Practices (Consumer Product Safety Standards) Children’s Nightwear and Paper Patterns for Children’s Nightwear) Regulations 2007 (Cth).

10    The Sleep Sack had no fire hazard label and was a Category 4 garment that required a high fire danger label. The garment was the subject of sales for a total of 21 days during which 56 were supplied.

11    The Absorba Bodysuit had no fire hazard label and was a Category 3 garment that required a low fire danger label. The garment was the subject of sales for a total of up to 33 days during which 138 were supplied.

12    The Babycottons Pajamas garment was labelled “Wear Snug Fitting. Not Flame Resistant” and was a Category 2 garment that required a low fire danger label. The garment was the subject of sales for a total of five days. Two of the garments, the relevant supplies, were supplied to the ACCC.

13    The Orange Superhero Pajamas garment had no fire hazard warning and did not comply with the Standard. As such, it should not have been sold in Australia. The garment was the subject of sales for a total of 24 days during which 18 were supplied.

14    The Joules Junior Pajamas garment was labelled “Warning Keep Away from Fire” and also had a detachable warning label. It was a Category 2 garment that required a low fire danger label. The warning labels were also in the wrong position on the garment. The garment was the subject of sales on a total of 13 days during which six were supplied.

15    Neither the ACCC nor Ozsale received any complaints to the effect that any person suffered any injury arising from the purchase of the non-compliant children’s nightwear garments from Ozsale.

16    Although there was no evidence of any loss or damage being suffered, 220 non-compliant garments were sold and there was a larger number of garments available for supply by Ozsale. This failure put children at risk.

17    The parties submitted, and I find, that Ozsale’s contraventions of the ACL are serious, given the circumstances in which they took place. I note that the products were supplied and offered for supply for use by infants. Ozsale’s contravening conduct was the result of it having inadequate product safety procedures. The procedures lacked sufficient safeguards and checks to identify non-compliant children’s nightwear garments being offered for supply by Ozsale. In the case of four products, contraventions took place after the ACCC had put Ozsale on notice of the requirement to comply with the Standard as a result of the supply of the non-compliant Babycottons Pajamas. While Ozsale did take some steps to comply with the Standard, those efforts were inadequate since contraventions continued. The circumstances of the Absorba Bodysuit contraventions were particularly serious. Although there is no evidence to suggest any deliberate attempt on Ozsale’s part to supply non-compliant children’s nightwear, Ozsale sold the nightwear without evidence that it complied with the Standard.

18    I note that Ozsale co-operated with the ACCC before the commencement of and during this proceeding in respect of the contraventions the subject of the proceeding. Ozsale complied with its legal obligations under the ACL and undertook product recalls of all of the non-compliant products after being notified of the non-compliance by the ACCC. Ozsale followed-up with customers who had purchased the non-compliant garments to notify them of the recalls and offered incentives to the customers to return the products.

19    The parties agree, and I find, that in assessing the appropriate penalty, the Orange Superhero Pajamas and the Sleep Sack contraventions are more serious contraventions than the others, given that one garment should not have been sold and the other had no fire hazard warning when it should have had a high fire danger label. The Absorba Bodysuit is also more serious given the absence of a fire hazard label and the circumstance that contraventions took place after the ACCC had put Ozsale on notice.

20    The parties submit, and I find, that in considering the appropriate penalty, both specific and general deterrence should be given significant weight. Relevantly:

(a)    Ozsale’s conduct had the potential to put a significant number of children, a vulnerable class of the community, at risk of serious injury;

(b)    the conduct was not an isolated incident but involved contraventions in respect of five children’s nightwear garments over distinct periods over 96 sales days when the various items were offered for sale;

(c)    Ozsale’s total revenue from the sale of the 220 non-compliant items was approximately $4000 and its gross margin on the sale of these garments was just over $2000;

(d)    Ozsale’s contravening conduct was the result of it not having in place internal procedures that were adequate to ensure that children’s nightwear products that it offered for sale complied with the Standard; and

(e)    a number of the contraventions took place after Ozsale was put on notice of the ACCC’s concerns regarding Ozsale’s compliance procedures to ensure compliance with the Standard.

21    It is also appropriate to have regard to the fact that Ozsale is a corporation of significant size and turnover. Ozsale is a large Australian proprietary company, trading under its own name and the business name BuyInvite. It is a wholly owned subsidiary of MySale Group Plc. Ozsale is a large, well-known online retailer and in financial year 2015 its sales revenue was $232.3 million, with a loss before income tax (expense)/benefit of $21.8 million, the corresponding figures for financial year 2014 being $222.4 million and $13.5 million. As at the end of March 2016, Ozsale employed 211 staff in Australia.

Consideration

22    Pursuant to s 224 of the ACL, where the Court is satisfied that a person has contravened s 106 it may order a pecuniary penalty in respect of each act or omission “as the court determines to be appropriate”. The maximum civil pecuniary penalty under s 224 for a corporation for each contravention of s 106 is $1.1 million: see s 224(1)(a)(viii) and item 9 of the table in s 224(3). It is within the Court’s discretion to impose a separate penalty for each contravention or to impose one penalty for all contraventions.

23    By s 224(2), 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 to have engaged in similar conduct.

24    I also take into account the factors summarised in Australian Competition and Consumer Commission v SingTel Optus Pty Ltd (No 4) [2000] FCA 761; 282 ALR 246 at [11], (referred to with apparent approval on appeal: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249 at [37]) where Perram J referred to:

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

1.    the size of the contravening company;

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

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

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

5.    whether the contravener has shown a disposition to 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.

I also take into account the following additional factors referred to in Australian Competition and Consumer Commission v Woolworths Ltd [2016] FCA 44 at [126] per Edelman J:

9.    the extent of contrition;

10.    whether the contravening company made a profit from the contraventions;

11.    the extent of the profit made by the contravening company; and

12.    whether the contravening company engaged in the conduct with an intention to profit from it.

25    I accept, as the parties have put, that in cases of contraventions of safety standards involving products used by children, general deterrence demands a significant penalty. I accept that in relation to fire hazard labelling for children’s nightwear, the fact that the risk of fire and burning is a very dangerous one is relevant to the issue of general deterrence.

26    I also accept, as the parties have put, that in determining the appropriate penalty the total penalty for related offences ought not to exceed what is proper for the entire contravening conduct involved. I refer in this respect to Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 per Goldberg J.

27    I take into account, as jointly submitted by the parties, the nature and extent of the contravening conduct and the loss or damage suffered; the circumstances in which the contravening conduct took place; that no previous proceedings have been instituted against Ozsale in respect of similar conduct; that Ozsale is a large Australian proprietary company; the period over which the contravening conduct extended, being 96 sales days; the conduct of senior management which, although not involved in the specific episodes, had in place inadequate processes and systems; the lack of a culture of compliance at relevant times; and the co-operation by Ozsale with the ACCC. In that context I note the contrition on the part of Ozsale conveyed to the Court by the company’s legal representative in her oral submissions.

Conclusion and orders

28    I find that the total pecuniary penalty of $500,000 is appropriate. I refer to the matters I have set out at [20] above.

29    As to the other remedies on which the parties have put joint submissions I propose to make the proposed declarations, which identify with precision the specific conduct which contravened the ACL and are directed to the determination of a legal controversy. I find that the declarations will serve the public interest in defining and publicising the type of conduct that constitutes a contravention. It will serve the purposes of deterrence, of informing consumers and of recording the Court’s disapproval of the conduct engaged in: see Australian Competition and Consumer Commission v Cotton On Kids Pty Ltd [2012] FCA 1428 at [29] per Tracey J.

30    In my opinion, it is also appropriate to make orders restraining Ozsale for a period of three years from supplying or offering to supply a children’s nightwear garment which is subject to a safety standard, or offering to supply such a children’s nightwear garment, unless that garment complies with the safety standard. I find the injunction to which the parties have agreed is appropriate to deter repetition of the contraventions by attaching the sanctions available for contempt of court to any repetition of the contraventions.

31    I also find, as submitted by the parties, that the imposition of a product safety compliance program in the form agreed at Annexure A to the parties’ joint submissions is warranted given the ongoing instances of non-compliance by Ozsale the subject of the proceeding. I note that those orders include an independent testing of sample purchases to be undertaken by the independent reviewer as a means of checking that the compliance program is effective and working.

32    In relation to costs, I note the agreement of the parties that the respondent pay the applicant’s costs of and incidental to the proceeding in the amount of $50,000, and I so order.

33    I make orders accordingly.

Associate:

Dated:    29 August 2016