Australian Competition and Consumer Commission v iSelect Limited [2020] FCA 1523

Federal Court of Australia

File number:	VID 370 of 2019

Judgment of:	MOSHINSKY J

Date of judgment:	8 October 2020

Catchwords:	CONSUMER LAW – misleading or deceptive conduct – false or misleading representations – where the respondent represented to consumers visiting its website that through its comparison service it would compare all of the plans available from its partner retailers in a consumer’s area and recommend the most suitable or competitive plan to the consumer – where the respondent represented to consumers that the price for an available plan was an amount lower than the price that the consumer would, or would be likely to, pay to the energy provider for the plan – where the respondent admitted liability for contraventions of the Australian Consumer Law – where the parties prepared a statement of agreed facts and admissions and jointly proposed declarations and orders including a pecuniary penalty of $8.5 million – whether proper basis to make the declarations and orders – whether proposed penalty appropriate in the circumstances – proposed declarations and orders made

Legislation:	Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law, ss 18, 29, 34, 224, 246 Trade Practices Act 1974 (Cth)

Cases cited:	Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 Australian Competition and Consumer Commission v Optus Internet Pty Limited [2018] FCA 777 Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 Australian Competition and Consumer Commission v STA Travel Pty Ltd [2020] FCA 723 Olesen v Eddy [2011] FCA 13

Division:	General Division

Registry:	Victoria

National Practice Area:	Commercial and Corporations

Sub-area:	Regulator and Consumer Protection

Number of paragraphs:	63

Date of hearing:	7 October 2020

Counsel for the Applicant:	Mr MI Borsky QC with Ms C van Proctor

Solicitor for the Applicant:	Corrs Chambers Westgarth

Counsel for the Respondent:	Mr PJ Brereton SC with Ms C Dermody

Solicitor for the Respondent:	Clayton Utz

ORDERS

		VID 370 of 2019

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	ISELECT LIMITED Respondent

order made by:	MOSHINSKY J
DATE OF ORDER:	8 OCTOBER 2020

THE COURT DECLARES THAT:

Plan Representation

1. Between 13 November 2016 and 6 December 2018, the respondent (iSelect), in trade or commerce, in connection with the supply or possible supply, or the promotion of the supply, of its Comparison Service, as defined in the statement of agreed facts and admissions (Comparison Service):

(a) engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the Australian Consumer Law (ACL), which is Schedule 2 to the Competition and Consumer Act 2010 (Cth);

(b) made false or misleading representations that its Comparison Service had performance characteristics, uses or benefits that it did not have in contravention of s 29(1)(g) of the ACL; and

(c) engaged in conduct that was liable to mislead the public as to the nature, the characteristics, and the suitability for purpose of the Comparison Service in contravention of s 34 of the ACL,

by representing to consumers visiting its website (at www.iselect.com.au) that through its Comparison Service it would compare all of the plans available from its partner retailers in a consumer’s area and recommend the most suitable or competitive plan to the consumer, when:

(d) iSelect did not adequately disclose that it did not compare all of the plans available from its partner retailers in the consumer’s area;

(e) iSelect did not adequately disclose that certain Preferred Partner retailers may have made certain offers via its call centre to consumers that were cheaper than offers made available through iSelect’s online Comparison Service;

(f) iSelect did not adequately disclose that the recommended plan was not necessarily the most suitable or competitive plan from iSelect’s partner retailers in a consumer’s area because:

(i) partner retailers may have offered cheaper plans in the consumer’s area, which were not available through the iSelect Comparison Service; and

(ii) certain Preferred Partner retailers may have made certain offers available through iSelect’s call centre that were cheaper than offers made available through iSelect’s online Comparison Service; and

(g) iSelect did not and could not know whether a recommended plan would be the most suitable or competitive plan for a consumer available from a partner retailer in the consumer’s area because partner retailers may have offered cheaper plans in the consumer’s area which were not available through the iSelect Comparison Service.

Price Representation

2. Between March 2017 and November 2019, iSelect, in trade or commerce, in connection with the supply or possible supply, or the promotion of the supply, of its Comparison Service:

(a) engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the ACL; and

(b) made false or misleading representations with respect to the price of an energy service provided by a partner retailer in contravention of 29(1)(i) of the ACL,

by representing to consumers that the price for an available plan was an amount lower than the price that the consumer would, or would be likely to, pay to the energy provider for that plan, in circumstances where due to a coding error:

(d) those consumers were likely to incur costs for controlled load usage.

THE COURT ORDERS THAT:

Pecuniary Penalty

3. iSelect pay to the Commonwealth of Australia a pecuniary penalty of $8,500,000 in respect of each act or omission constituting a contravention of ss 29(1)(g), 29(1)(i) and/or 34 of the ACL declared by the Court. The pecuniary penalty will be payable in instalments as follows:

(a) $1,900,000 within thirty days from the date of this order;

(b) $2,000,000 within thirteen months from the date of this order;

(d) $2,600,000 within thirty-seven months from the date of this order; and

(e) if there is any default in the payment of an instalment by a required date in this paragraph, the balance of all outstanding instalments will be due and payable immediately.

Corrective Publication Orders

4. Within 21 days of the date of this order and for a period of 120 days, iSelect must at its own expense publish, or cause to be published on its website at the URLs www.iselect.com.au and www.iselect.com.au/energy (iSelect Webpages) a corrective notice (Notice) in the form and terms set out in Annexure A to these orders, and ensure that the Notice complies with the following specifications:

(a) the Notice is viewable by clicking a ‘click through’ icon located on the iSelect Webpages;

(b) the ‘click through’ icon referred to in the previous sub-paragraph is located in the top third of the iSelect Webpages and is not obscured, blocked or interfered with by any operation of the iSelect website;

(i) contains the words:

“Misrepresentations by iSelect Limited – Corrective Notice Ordered by Federal Court of Australia – Click Here” in upper case 14 point, bold, black, Times New Roman font on a white background, centred and in a bordered box;

(ii) the bordered box and its contents, including the white space, is to operate in the form of a one-click hyperlink to the said Notice; and

(iii) the border must be black;

(d) the Notice must occupy the entire webpage that is accessed via the ‘click-through’ icon referred to above;

(e) the Notice must not be displayed as a ‘pop up’ or ‘pop under’ window; and

(f) the Notice must be crawlable (i.e. its contents may be indexed by a search engine).

Costs

5. The respondent pay a contribution to the applicant’s costs in the amount of $100,000 within thirty days from the date of this order.

6. There be liberty to apply in relation to confidentiality orders regarding the material filed in the proceeding.

7. The proceeding be otherwise dismissed.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1 The respondent (iSelect) is a public company, listed on the Australian Stock Exchange. It conducts (and, at all relevant times, conducted) a business through an online and telephone service (Comparison Service) that:

(a) enables consumers in South East Queensland, New South Wales, the Australian Capital Territory, Victoria and South Australia to compare electricity and gas products and plans made available to iSelect by energy retailers (energy plans) with which iSelect has a commercial agreement (partner retailers);

(b) recommends an energy plan offered by a partner retailer; and

2 The applicant (the ACCC) commenced this proceeding in April 2019. By its further amended concise statement filed on 23 December 2019, the ACCC alleged (among other things) that iSelect had made certain representations that were misleading or deceptive, or likely to mislead or deceive, regarding the Comparison Service and the price of certain energy plans. The ACCC alleged that iSelect had engaged in conduct that contravened ss 18, 29(1)(g), 29(1)(i) and 34 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth). Section 29(1) relevantly provides as follows:

A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

…

(g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or

…

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

3 Section 34 (omitting the Note) provides:

A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services.

4 The ACCC and iSelect have reached an agreement regarding the resolution of this proceeding. In summary, iSelect has admitted that it made certain representations and that, in doing so, it contravened the relevant provisions of the Australian Consumer Law. The parties jointly propose that the Court impose a pecuniary penalty on iSelect of $8.5 million in respect of the contraventions.

5 The parties have prepared a statement of agreed facts and admissions (SOAF), a copy of which appears as Schedule 1 to these reasons.

6 Annexure A to the SOAF is a list of documents, copies of which were provided to the Court. The fourth document is a copy of the iSelect Landing Page as at 19 September 2018. This is reproduced in Schedule 2 to these reasons.

7 There are two groups of admitted contraventions.

8 The first group is as follows. iSelect admits that, during the period 13 November 2016 to 6 December 2018, by making certain statements on its website, it represented to consumers visiting the website that through its Comparison Service it would compare all of the plans available from its partner retailers in a consumer’s area and recommend the most suitable or competitive plan to the consumer (the Plan Representation).

9 In fact, however, the Comparison Service did not necessarily include the most competitive rate offered by a partner retailer in the consumer’s area. In some cases, a more competitive rate was available through iSelect’s call centre than was available through iSelect’s online Comparison Service. Further, in some cases, a more competitive rate was available outside iSelect than was available through iSelect’s Comparison Service (whether accessed online or through the call centre).

10 By the SOAF, iSelect admits for the purposes of the proceeding that it:

(a) did not adequately disclose that it did not compare all of the plans available from its partner retailers in the consumer’s area;

(b) did not adequately disclose that certain Preferred Partner retailers may have made certain offers via its call centre to consumers that were cheaper than offers made available through iSelect’s online Comparison Service;

(c) did not adequately disclose that the recommended plan was not necessarily the most suitable or competitive plan from iSelect’s partner retailers in a consumer’s area because:

(i) partner retailers may have offered cheaper plans in the consumer’s area, which were not available through the iSelect Comparison Service; and

(d) did not and could not know whether a recommended plan would be the most suitable or competitive plan for a consumer available from a partner retailer in the consumer’s area because partner retailers may have offered cheaper plans in the consumer’s area which were not available through the iSelect Comparison Service.

11 The second group of admitted contraventions is as follows. Due to a coding error, the prices quoted to certain NSW consumers did not account for ‘controlled load usage’ in the tariff rate. The effect was that these consumers were underquoted in relation to the total price payable for electricity plans recommended by iSelect.

12 iSelect admits for the purposes of this proceeding that, in the period between March 2017 and November 2019, it represented to certain consumers that the price for an available plan was an amount lower than the price that the consumer would, or would be likely to, pay to the energy provider for that plan, in circumstances where due to a coding error:

(a) iSelect offered plans to some consumers that did not account for controlled load usage in the tariff rate; and

(b) those consumers were likely to incur costs for controlled load usage,

(the Price Representation).

13 The parties have provided proposed orders and a joint submission on contravention and relief. The proposed declarations (including a minor change to paragraph 1 discussed during the hearing) are as follows:

Plan Representation

(b) made false or misleading representations that its Comparison Service had performance characteristics, uses or benefits that it did not have in contravention of s 29(1)(g) of the ACL; and

(c) engaged in conduct that was liable to mislead the public as to the nature, the characteristics, and the suitability for purpose of the Comparison Service in contravention of s 34 of the ACL,

by representing to consumers visiting its website (at www.iselect.com.au) that through its Comparison Service it would compare all of the plans available from its partner retailers in a consumer’s area and recommend the most suitable or competitive plan to the consumer, when:

(d) iSelect did not adequately disclose that it did not compare all of the plans available from its partner retailers in the consumer’s area;

(f) iSelect did not adequately disclose that the recommended plan was not necessarily the most suitable or competitive plan from iSelect’s partner retailers in a consumer’s area because:

(i) partner retailers may have offered cheaper plans in the consumer’s area, which were not available through the iSelect Comparison Service; and

Price Representation

2. Between March 2017 and November 2019, iSelect, in trade or commerce, in connection with the supply or possible supply, or the promotion of the supply, of its Comparison Service:

(a) engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the ACL; and

(b) made false or misleading representations with respect to the price of an energy service provided by a partner retailer in contravention of 29(1)(i) of the ACL,

by representing to consumers that the price for an available plan was an amount lower than the price that the consumer would, or would be likely to, pay to the energy provider for that plan, in circumstances where due to a coding error:

(d) those consumers were likely to incur costs for controlled load usage.

14 The proposed orders include a pecuniary penalty order, a corrective publication order and a costs order. The proposed orders are as follows:

Pecuniary Penalty

(a) $1,900,000 within thirty days from the date of this order;

(b) $2,000,000 within thirteen months from the date of this order;

(d) $2,600,000 within thirty-seven months from the date of this order; and

(e) if there is any default in the payment of an instalment by a required date in this paragraph, the balance of all outstanding instalments will be due and payable immediately.

Corrective Publication Orders

(a) the Notice is viewable by clicking a ‘click through’ icon located on the iSelect Webpages;

(i) contains the words:

“Misrepresentations by iSelect Limited – Corrective Notice Ordered by Federal Court of Australia – Click Here” in upper case 14 point, bold, black, Times New Roman font on a white background, centred and in a bordered box;

(ii) the bordered box and its contents, including the white space, is to operate in the form of a one-click hyperlink to the said Notice; and

(iii) the border must be black;

(d) the Notice must occupy the entire webpage that is accessed via the ‘click-through’ icon referred to above;

(e) the Notice must not be displayed as a ‘pop up’ or ‘pop under’ window; and

(f) the Notice must be crawlable (i.e. its contents may be indexed by a search engine).

Costs

5. The respondent pay a contribution to the applicant’s costs in the amount of $100,000 within thirty days from the date of this order.

6. The proceeding is otherwise dismissed.

15 In the joint submission it is explained that the proposed penalty is comprised of:

(a) $7.3 million for the Plan Representation (to which paragraph 1 of the proposed orders relates); and

(b) $1.2 million for the Price Representation (to which paragraph 2 of the proposed orders relates).

16 At the hearing, the parties made oral submissions in support of the proposed declarations and orders.

17 For the reasons that follow, I consider there to be a proper basis for making the proposed declarations. I also consider the proposed penalty to be appropriate. The penalty reflects the circumstances of the contraventions and should operate as a deterrent against such conduct being engaged in by iSelect or other like comparator services in the future. I also consider it appropriate to make the other orders proposed by the parties.

Applicable principles

Making orders by agreement and declarations

18 The applicable principles as regards the making of orders by agreement and as regards declarations were summarised by Gordon J in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [70]-[79] as follows:

2.3.1 Orders sought by agreement

…

70 The applicable principles are well established. First, there is a well-recognised public interest in the settlement of cases under the [Competition and Consumer Act]: NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 at 291. Second, the orders proposed by agreement of the parties must be not contrary to the public interest and at least consistent with it: Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [18].

71 Third, when deciding whether to make orders that are consented to by the parties, the Court must be satisfied that it has the power to make the orders proposed and that the orders are appropriate: Real Estate Institute at [17] and [20] and Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1]. Parties cannot by consent confer power to make orders that the Court otherwise lacks the power to make: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163.

72 Fourth, once the Court is satisfied that orders are within power and appropriate, it should exercise a degree of restraint when scrutinising the proposed settlement terms, particularly where both parties are legally represented and able to understand and evaluate the desirability of the settlement: Australian Competition & Consumer Commission v Woolworths (South Australia) Pty Ltd (Trading as Mac’s Liquor) [2003] FCA 530 at [21]; Australian Competition & Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 at [24]; Real Estate Institute at [20]-[21]; Australian Competition & Consumer Commission v Econovite Pty Ltd [2003] FCA 964 at [11] and [22] and Australian Competition & Consumer Commission v The Construction, Forestry, Mining and Energy Union [2007] FCA 1370 at [4].

73 Finally, in deciding whether agreed orders conform with legal principle, the Court is entitled to treat the consent of Coles as an admission of all facts necessary or appropriate to the granting of the relief sought against it: Thomson Australian Holdings at 164.

2.3.2 Declarations

74 The Court has a wide discretionary power to make declarations under s 21 of the Federal Court Act: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-2 and Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99.

75 Where a declaration is sought with the consent of the parties, the Court’s discretion is not supplanted, but nor will the Court refuse to give effect to terms of settlement by refusing to make orders where they are within the Court’s jurisdiction and are otherwise unobjectionable: see, for example, Econovite at [11].

76 However, before making declarations, three requirements should be satisfied:

(1) The question must be a real and not a hypothetical or theoretical one;

(2) The applicant must have a real interest in raising it; and

(3) There must be a proper contradictor:

Forster v Jododex at 437-8.

77 In this proceeding, these requirements are satisfied. The proposed declarations relate to conduct that contravenes the ACL and the matters in issue have been identified and particularised by the parties with precision: Australian Competition & Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 at [35]. The proposed declarations contain sufficient indication of how and why the relevant conduct is a contravention of the ACL: BMW Australia Ltd v Australian Competition & Consumer Commission [2004] FCAFC 167 at [35].

78 It is in the public interest for the ACCC to seek to have the declarations made and for the declarations to be made (see the factors outlined in ACCC v CFMEU at [6]). There is a significant legal controversy in this case which is being resolved. The ACCC, as a public regulator under the ACL, has a genuine interest in seeking the declaratory relief and Coles is a proper contradictor because it has contravened the ACL and is the subject of the declarations. Coles has an interest in opposing the making of them: MSY Technology at [30]. No less importantly, the declarations sought are appropriate because they serve to record the Court’s disapproval of the contravening conduct, vindicate the ACCC’s claim that Coles contravened the ACL, assist the ACCC to carry out the duties conferred upon it by the Act (including the ACL) in relation to other similar conduct, inform the public of the harm arising from Coles’ contravening conduct and deter other corporations from contravening the ACL.

79 Finally, the facts and admissions in Annexure 1 provide a sufficient factual foundation for the making of the declarations: s 191 of the Evidence Act; Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665 at [57]-[59] endorsed by the Full Court in Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [92]; Hadgkiss v Aldin (No 2) [2007] FCA 2069 at [21]–[22]; Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at [77]-[79] and Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543.

Pecuniary penalties

19 Section 224(1) of the Australian Consumer Law provides for the Court’s power to impose a pecuniary penalty upon a person who has contravened (among other things) ss 29 and 34 of the Australian Consumer Law.

20 Section 224(2) provides that, in determining the appropriate pecuniary penalty, the court must have regard to all relevant matters including:

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

(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 of the Australian Consumer Law to have engaged in any similar conduct.

21 The maximum penalty is specified in s 224(3) and (3A). For the period before 1 September 2018, the maximum applicable for a body corporate for each act or omission that relates to a contravention of s 29 or 34 was $1.1 million. For the period from 1 September 2018, the maximum applicable for each act or omission that relates to a contravention of s 29 or 34 is the greater of:

(a) $10 million;

(b) if the court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the act or omission – 3 times the value of that benefit; and

(c) if the court cannot determine the value of that benefit – 10% of the annual turnover of the body corporate during the 12 month period ending at the end of the month in which the act or omission occurred or started to occur.

22 Section 224(4) provides as follows:

If conduct constitutes a contravention of 2 or more provisions referred to in subsection (1)(a):

(a) a proceeding may be instituted under this Schedule [i.e., the Australian Consumer Law] against a person in relation to the contravention of any one or more of the provisions; but

(b) a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.

23 The principles applicable to the discretion to impose pecuniary penalties have been discussed in many cases. I refer to and adopt the summary of the principles in my judgment in Australian Competition and Consumer Commission v Optus Internet Pty Limited [2018] FCA 777 at [18]-[28].

Application of principles in the present case

The contraventions

24 In my view, the contraventions alleged by the ACCC against iSelect (summarised above) are established on the facts and admissions in the SOAF.

25 Taking into account the admissions made by iSelect in the SOAF, I am satisfied that, by making the Plan Representation to consumers, iSelect in trade or commerce, in connection with the supply or possible supply, or the promotion of the supply, of its Comparison Service:

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

(b) made false or misleading representations that its Comparison Service had performance characteristics, uses or benefits that it did not have in contravention of s 29(1)(g) of the Australian Consumer Law; and

(c) engaged in conduct that was liable to mislead the public as to the nature, the characteristics, and the suitability for purpose of the Comparison Service in contravention of s 34 of the Australian Consumer Law.

26 Further, taking into account the admissions made by iSelect in the SOAF, I am satisfied that, by making the Price Representation to consumers, iSelect, in trade or commerce, in connection with the supply or possible supply, or the promotion of the supply, of its Comparison Service:

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

(b) made false or misleading representations with respect to the price of an energy service provided by a partner retailer in contravention of s 29(1)(i) of the Australian Consumer Law.

27 I consider it appropriate to make declarations substantially in the terms proposed by the parties. The preconditions for the making of declarations, as set out above, are satisfied in the present case. In particular, I am satisfied that: there is a real and not a hypothetical question; the applicant has a real interest in raising the question; and there is a proper contradictor.

Pecuniary penalties

28 The parties propose a pecuniary penalty of $8.5 million, which is comprised of: $7.3 million in respect of the Plan Representation; and $1.2 million in respect of the Price Representation.

29 I consider the proposed pecuniary penalty to be appropriate. My reasons are as follows.

30 As noted above, the maximum penalty provision changed with effect from 1 September 2018. The old penalty regime applied at the time the majority of conduct occurred. The $1.1 million maximum applies to each of iSelect’s contraventions occurring before 1 September 2018. That is, of the 25 month period in issue for the Plan Representation, approximately 22 months fall in the period from 13 November 2016 to 31 August 2018 and must be considered under the old penalty regime; and, of the 33 month period in issue for the Price Representation, approximately 18 months fall in the period from March 2017 to 31 August 2018. The increased maximum penalty applies to the contraventions occurring on and after 1 September 2018; that is, the representations in the 3 month period from 1 September 2018 to 6 December 2018 for the Plan Representation, and the 15 month period from 1 September 2018 to November 2019 for the Price Representation.

31 In determining the statutory maximum penalties post 1 September 2018, the parties agree that any benefit obtained by iSelect from the Plan Representation and Price Representation contraventions cannot be precisely determined because the number of potentially affected consumers cannot be determined, and it is unrealistic to proceed on the assumption that every person who purchased a plan did so having been misled by the relevant representations. In consequence, the maximum statutory penalty for each contravention after 1 September 2018 is the greater of $10 million or 10% of the annual turnover during the 12-month period preceding the end of the month in which the act or omission occurred or started to occur. iSelect’s turnover in that period was $177.79 million, so the maximum statutory penalty for conduct in this period is approximately $17.77 million (SOAF, paragraphs 44-45).

32 However, this is a case where there is no meaningful maximum penalty and it is not possible, nor would it be meaningful or helpful, to seek to calculate the precise notional maximum penalty that might apply to each course of conduct on either side of the change in statutory regime.

33 Ultimately, and consistently with the authorities, no mathematical approach should be taken in seeking to apply these different maximum penalty regimes to iSelect’s conduct. The proper approach is to impose an appropriate penalty having regard to all the circumstances of the case. One such circumstance is that the conduct giving rise to the contraventions, being the publication of statements on the iSelect website, and coding an error into the Comparison Service process respectively, commenced at a time when the maximum penalty was $1.1 million, albeit the conduct continued during a time when the maximum penalty regime differed.

34 The parties submit, and I accept, that the appropriate range for penalty in the circumstances of this case is best assessed by reference to other factors, as there is no meaningful overall maximum penalty. This is consistent with the approach taken in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 at [157] and in Australian Competition and Consumer Commission v STA Travel Pty Ltd [2020] FCA 723 at [33]-[35].

35 I will now address the mandatory considerations relevant to determination of the appropriate penalty, as well as some additional considerations referred to in the cases.

Nature, extent and duration of conduct

36 Plan Representation. By making the Plan Representation, iSelect falsely represented a benefit of iSelect’s Comparison Service to consumers. The representation was misleading because iSelect did not compare all of the plans from its partner retailers in a consumer’s area and recommend the most suitable or competitive plan, and it did not adequately disclose that it did not do so, or the reasons why the recommended plan may not have been the most suitable or competitive. The contravening conduct was serious and may have diminished genuine consumer choice.

37 The representation had a high degree of visibility, arising from statements on iSelect’s Energy Homepage and Landing Page. The statements were published over a long period, from 13 November 2016 to 6 December 2018.

38 While the iSelect website contained some disclosures during this period (set out at Annexure B of the SOAF), these disclosures were not prominent or proximate to the misleading statements. The disclosures were published on separate offshoot webpages that were hyperlinked from the bottom of the Energy Homepage and Landing Page.

39 A particularly troubling aspect of iSelect’s conduct is that, during the period 2 March 2018 to 6 December 2018, the following statement appeared prominently on the Landing Page (reproduced in Schedule 2): “Find the most competitive rates from our range of electricity providers in your area.”

40 That statement was false. The fact was that the offers provided by the partner retailers to iSelect were not necessarily the partner retailers’ most competitive rates. The partner retailers were not under any contractual commitment to provide iSelect with their most competitive rate. iSelect knew that, in some cases, the rate available through its call centre was cheaper than the rate available through its online comparison tool. It also knew (as is apparent from the disclaimers and qualifiers) that the partner retailer may offer a more competitive rate outside iSelect. In light of these matters, and in circumstances where the disclaimers and qualifiers were located elsewhere on the website and not very prominent, it is difficult to understand how the statement “[f]ind the most competitive rates from our range of electricity providers in your area” could have been approved.

41 Price Representation. The Price Representation occurred over a significant period of time, from March 2017 to November 2019. iSelect recommended plans that were affected by the Price Representation to more than 4,900 consumers who conducted comparisons via its online Comparison Service or its call centre, although only a total of 1,104 consumers proceeded to purchase plans, and each of these received welcome packs from partner retailers which included correct tariff information and had statutory cooling off rights (it is unknown whether any consumers exercised those rights) (SOAF, paragraph 33).

Relevant circumstances, including deliberateness and the role of management

42 The conduct concerned the comparison of an essential household service, namely electricity. The cost of electricity is often a significant household expense. iSelect’s representations were made at a time when the reliability and transparency of energy comparator services was increasingly important, to enable consumers to engage effectively with the complex retail energy market.

43 Plan Representation. iSelect published the impugned statements on its Energy Homepage and the Landing Page. It is an agreed fact that iSelect’s commercial arrangements with its partner retailers were known at senior levels of management within iSelect (SOAF, paragraph 51). It is also an agreed fact that marketing messages and related disclaimers were to be approved by senior management, including the Senior Marketing Manager – Brand, Head of Commercial, Commercial Manager Energy, Head of Risk and Compliance and iSelect’s Legal Team (SOAF, paragraph 51). Thus, responsibility for the false or misleading statements on iSelect’s website relating to the Plan Representation, including in particular the false claim that a consumer could “[f]ind the most competitive rates from our range of electricity providers” in the consumer’s area, must be borne by the senior management of the company.

44 Price Representation. The contraventions relevant to the Price Representation arose out of an error in iSelect’s website and call centre processing codes. The former was identified and corrected by iSelect. The latter was corrected by iSelect after the ACCC’s expert identified a coding error during the proceeding in the course of the exchange of expert evidence, and the ACCC brought this to iSelect’s attention. iSelect’s Programming Team is responsible for the development of its website and call centre processing codes. While there is no evidence that iSelect deliberately set out to mislead consumers or contravene the law by making the Price Representation, iSelect bore responsibility for the computer coding that underpinned the Comparison Service, and it was of key importance to its Comparison Service that these functioned correctly.

45 iSelect is a publicly listed company and at all times had significant resources. Despite this, the error was undetected for a period of 33 months in the case of the call centre and 17 months in the case of the website. Its core business is the provision of a Comparison Service that is dependent on the accuracy of its underlying coding. iSelect’s failure to implement adequate mechanisms to prevent such an error is a significant compliance failure.

Benefits to iSelect

46 Plan Representation. The precise benefit iSelect gained from the Plan Representation cannot be calculated, as the number of consumers who were misled by the representation and subsequently purchased an electricity or bundled electricity plan via the Comparison Service is unknown. However, some indication of the benefits to iSelect of its false and misleading conduct is provided in paragraph 35 of the SOAF, which states:

During the period 13 November 2016 to 6 December 2018, the revenue iSelect received in respect of sales to consumers who conducted an online comparison and who subsequently purchased an electricity or bundled electricity and gas plan through iSelect was approximately $32.9 million. This represents 47% of iSelect’s total electricity and bundled electricity and gas plan sales in that period. Of this figure (based upon the 38% estimate referred to in paragraph 32 above), $12.5 million is attributable to sales to consumers who may have been eligible for a cheaper plan from an iSelect partner retailer outside iSelect. Of the latter figure, the gross profit to iSelect was $3.875 million (iSelect’s gross profit margin during the relevant period was approximately 31%), as iSelect incurred a number of expenses in connection with this revenue, including commissions paid to sales staff and fees paid to advertisers, and less on an EBIT basis (iSelect’s EBIT during this period was approximately 10%).

47 During the hearing it was clarified that the first sentence of the above paragraph relates both to: (a) consumers who conducted an online comparison and did not contact the call centre; and (b) consumers who conducted an online comparison and did contact the call centre. In each case, the sentence covers consumers who went on to purchase an electricity or bundled electricity and gas plan. In the second sentence it is stated that this represented 47% of iSelect’s total electricity and bundled electricity and gas plan sales in the period. The balance comprised consumers who purchased an electricity or bundled electricity and gas plan through iSelect, but did not conduct an online comparison. This includes, for example, consumers who dealt directly with the call centre and did not access the website. It also includes consumers who accessed the website, did not undertake an online comparison, and then dealt with the call centre.

48 In light of the above, it is very difficult to put a figure on the benefit obtained, or potentially obtained, by iSelect in connection with the Plan Representation. Nevertheless, I am satisfied that the benefit or potential benefit to iSelect was substantial. In particular, during the period 2 March 2018 to 6 December 2018, when iSelect falsely represented on its website that a consumer could “[f]ind the most competitive rates from our range of electricity providers” in the consumer’s area, it is likely that many more consumers used the online Comparison Service than would otherwise have been the case.

49 Price Representation. iSelect recommended an offer affected by the Price Representation on 4,968 occasions. Of these, 1,104 proceeded to purchase a plan. The precise amount iSelect stood to make in revenue from these recommendations is unknown, but the potential benefit is estimated to be in the range of $735,000 to $2.1 million from sales to consumers who conducted a comparison during the relevant period and were recommended a plan affected by the Price Representation, although they subsequently received welcome packs with correct tariffs. Of the 1,104 consumers who acquired a plan, iSelect earned revenue of $230,921. Of this, the potential benefit in gross profit terms was $71,585.51.

Loss or damage caused

50 By misleading consumers about the benefits of using its comparison service, iSelect may have diminished genuine consumer choice for an essential household service.

51 Comparing price and other features of energy services can be complex, confusing and time-consuming for consumers. iSelect’s misleading conduct may have caused some consumers to switch on the basis of a price that was understated or to commit to plans for electricity services, which though cheaper than their existing plan, may not have been the cheapest plan available.

52 Plan Representation. It is not possible to quantify the number of consumers who were misled by the Plan Representation or the financial loss suffered as a result. Hundreds of thousands of consumers visited iSelect’s website in the relevant period. It is estimated that approximately 38% of consumers who undertook a comparison through iSelect during the relevant period may have been eligible for an even cheaper plan from an iSelect partner retailer outside iSelect, but the precise number of consumers who may have been misled by the representation is unknown.

53 Price Representation. It is not possible to quantify the extent of financial harm caused by the Price Representation. From the 4,968 occasions in which iSelect recommended a plan affected by the Price Representation, 1,104 consumers purchased an affected plan. The price quoted was on average between $114.75 and $140.30 below what the consumer was likely to pay per quarter for the affected plan. It is unknown how many consumers elected to retain a plan purchased via iSelect. These consumers received a welcome pack from partner retailers with the correct tariff information. They each had cooling off rights (SOAF, paragraph 33).

Size of contravener and financial position

54 iSelect is a publicly listed company. It is a prominent competitor in the online comparator services market and provides comparison services for a range of third party retailer products, including insurance, utilities (such as electricity and gas), and finance products.

55 In the 2017 and 2018 financial year periods, more than 9 million Australians visited the iSelect website and the company made recommendations to over 6 million consumers (SOAF, paragraph 47). During the 2017, 2018, and 2019 financial year periods, iSelect’s reported financial year revenue was in excess of $150 million. In the period 13 November 2016 to 6 December 2018, it made approximately $32.9 million revenue from sales to consumers who conducted an online comparison and subsequently purchased an electricity or bundled electricity and gas plan. This represents 47% of iSelect’s total revenue from sales of electricity and bundled electricity and gas plans in this period. At all relevant times during the period of the contravening conduct, iSelect’s average gross profit margin was approximately 31% (SOAF, paragraphs 35 and 44).

56 iSelect’s financial position deteriorated during the 2020 financial year period, and worsened in the wake of COVID-19. The impact that COVID-19 has had on iSelect’s business is set out at paragraph 46 of the SOAF, and notably includes a fall of over 30% in turnover from April 2020, such that the majority of iSelect’s staff are currently receiving JobKeeper payments and iSelect’s executive staff have experienced 30% pay reductions (SOAF, paragraph 46).

Prior similar conduct and culture of compliance with Australian Consumer Law

57 iSelect has not previously been found by the Court to have contravened the Australian Consumer Law or its predecessor, the Trade Practices Act 1974 (Cth). However, its subsidiary iSelect Health Pty Ltd provided a court-enforceable undertaking to the ACCC in November 2007. Following the undertaking, iSelect made a number of improvements to its systems, policies, procedures, training and staffing to seek to avoid the future risk of misleading conduct or contravention. This conduct, which occurred over 13 years ago, is distinguishable from the current circumstances.

58 During the relevant period, iSelect had in place an Australian Consumer Law compliance program. The program included training in relation to applicable false and misleading conduct principles. However, this case is a reminder that merely having in place a compliance program and going through the process of training is not sufficient. It is necessary for the relevant personnel, including senior management, to apply their minds to whether the statements made prominently on the website are truthful and accurate.

Co-operation

59 The parties jointly submit that iSelect has co-operated with the ACCC and that a discount for co-operation is appropriate. I accept that, in relation to the Price Representation, iSelect made early admissions and moved quickly to rectify each coding error once it was identified. In relation to the Plan Representation, while iSelect has ultimately agreed to resolve the claim on the basis of the SOAF and proposed penalty, this occurred only just before the hearing of the proceeding was to commence. Thus, while I accept that some discount is appropriate for co-operation, I consider this to be limited.

Summary

60 In summary, in my view, the proposed penalty of $8.5 million (comprising $7.3 million in respect of the Plan Representation and $1.2 million in respect of the Price Representation) is appropriate. The penalty reflects the circumstances of the contraventions and should act as a deterrent – both to iSelect and others – against engaging in such conduct in the future.

61 The parties submit, and I accept, that the Court has the power to allow the 37 month payment period pursuant to s 224(1) of the Australian Consumer Law on the basis that it empowers the court to make civil penalty orders “as the court determines appropriate”. Alternatively, the power is an implied consequential power by reason of the power to impose a pecuniary penalty: see Olesen v Eddy [2011] FCA 13 at [34]. There are numerous examples of courts imposing penalties on an instalment basis under s 224 and its predecessors.

Corrective publication order

62 It is appropriate to require iSelect to publish the corrective notice in the form of Annexure A to the proposed orders, which is to remain at the URLs www.iselect.com.au and www.iselect.com.au/energy for a period of 120 days, as provided for in paragraph 4 of the proposed orders. Section 246(2)(d) of the Australian Consumer Law empowers the Court to make such orders, and the preconditions enlivening that power are met in the present case.

Conclusion

63 For these reasons, I will make declarations and orders substantially in the form proposed by the parties. I will also reserve liberty to apply in relation to confidentiality orders in respect of the material filed in the proceeding.

I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.

Associate:

Dated: 20 October 2020

SCHEDULE 1