FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Qantas Airways Limited [2024] FCA 1219
ORDERS
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant | ||
AND: | QANTAS AIRWAYS LIMITED (ACN 009 661 901) Respondent | |
DATE OF ORDER: | 8 OCTOBER 2024 |
THE COURT DECLARES THAT:
1. Pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (FCAA):
(a) Between 21 May 2021 and 26 August 2023, Qantas Airways Limited (Qantas) contravened ss 18(1), 29(1)(b), 29(1)(g) and 34 of the Australian Consumer Law (ACL), being Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA), by offering tickets for sale on certain flights, scheduled to depart between 1 May 2022 and 10 May 2024, to the public for two or more days after Qantas had made a decision to cancel the flight, and selling tickets to consumers on some of those flights (the Continued Sale Conduct). By engaging in the Continued Sale Conduct, Qantas represented to consumers, in trade or commerce, that:
(i) the relevant flights with the corresponding stated flight number and scheduled date and time were still available (Scheduled Flight Representations). The Scheduled Flight Representations were false and misleading in respect of each of the relevant flights because, at the time the Representations were made, there was no longer a flight with the stated flight number and scheduled date and time as Qantas had already decided to cancel it; and
(ii) it would use reasonable endeavours to operate the relevant flights at the scheduled date and time (Reasonable Endeavours Representations). The Reasonable Endeavours Representations were false and misleading in respect of each of the relevant flights because Qantas did not have reasonable grounds for making the representations as Qantas had already decided to cancel the flight.
(b) Between 21 May 2021 and 26 August 2023, Qantas contravened ss 18(1), 29(1)(b) and 29(1)(g) of the ACL, by continuing to display flight details for certain flights, scheduled to depart between 1 May 2022 and 1 May 2024, on the ‘Manage Booking’ page of consumers that had purchased tickets or made bookings for those flights for two or more days after Qantas had made a decision to cancel the flight with no indication that Qantas had decided to cancel the flight (the Delayed Notification Conduct). By engaging in the Delayed Notification Conduct, Qantas represented to consumers, in trade or commerce, that:
(i) the relevant flight with the stated flight number and scheduled date and time displayed on the ‘Manage Booking’ page was unchanged (Flight Unchanged Representations). The Flight Unchanged Representations were false and misleading in respect of each of the relevant flights because, at the time the Representations were made, there was no longer a flight with the stated flight number and scheduled date and time as Qantas had already decided to cancel it; and
(ii) it would use reasonable endeavours to operate the flight displayed on the ‘Manage Booking’ page at the scheduled date and time (Manage Booking Representations). The Manage Booking Representations were false and misleading in respect of each of the relevant flights because Qantas did not have reasonable grounds for making the representations as Qantas had already decided to cancel the flight.
THE COURT ORDERS THAT:
2. Pursuant to s 224(1)(a)(ii) of the ACL, within 30 days of the date of this Order, Qantas pay to the Commonwealth of Australia a total pecuniary penalty in the sum of $100 million.
3. Pursuant to s 43 of the FCAA, within 30 days of the date of this Order, Qantas pay to the Australian Competition and Consumer Commission (ACCC) a contribution of $400,000 to the ACCC’s costs of and incidental to the proceeding.
4. The proceeding against Qantas otherwise be dismissed.
THE COURT NOTES THAT:
A. Qantas has given an undertaking pursuant to s 87B of the CCA which was accepted by the ACCC on 5 May 2024 and varied on 16 August 2024.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ROFE J:
1. Introduction
1 The Australian Competition and Consumer Commission (ACCC) commenced this proceeding against Qantas Airways Limited alleging contraventions of various provisions of the Australian Consumer Law (ACL), being Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA). The contraventions relate to Qantas’ conduct regarding what has been colloquially referred to as their ‘ghost flights’.
2 By its originating application and concise statement filed on 31 August 2023, the ACCC described the impugned conduct as: Qantas’ offer for sale, and acceptance of payment, for flights which Qantas had already decided to cancel; and Qantas’ false representations to its consumers who held tickets for cancelled flights that their flights had not been cancelled. The ACCC sought redress for this conduct through declaratory and injunctive relief, pecuniary penalties and orders for a remediation program and corrective publication.
3 The parties have since reached an agreement to resolve this proceeding, including an agreement on the form of the declaratory relief and the quantum of pecuniary penalties to be imposed. On 25 September 2024, the parties filed joint written submissions and a Statement of Agreed Facts and Admissions (SAFA) pursuant to s 191 of the Evidence Act 1995 (Cth) which annexed, inter alia, the parties’ proposed form of orders and declaration. The following reasons draw on this material.
4 Qantas has admitted that, between 21 May 2021 and 26 August 2023 (Relevant Period), it:
(a) engaged in misleading or deceptive conduct, made false or misleading representations, and engaged in conduct liable to mislead the public in contravention of ss 18, 29(1)(b), 29(1)(g) and 34 of the ACL by offering for sale, and selling, tickets for flights for two or more days after Qantas had already decided to cancel those flights; and
(b) engaged in misleading or deceptive conduct and made false or misleading representations in contravention of ss 18, 29(1)(b) and 29(1)(g) of the ACL, by continuing to display flight information on the “Manage Booking” page to consumers who purchased tickets or made bookings for certain flights for two or more days after Qantas had decided to cancel those flights, with no indication that Qantas had already decided to cancel those flights.
5 On the basis of these admitted contraventions, Qantas agreed to, and the parties jointly sought:
(a) declarations of Qantas’ contraventions of ss 18(1), 29(1)(b), 29(1)(g) and 34 of the ACL in respect of the conduct outlined at [4] above pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA Act);
(b) a total pecuniary penalty in the amount of $100 million in respect of the admitted contraventions to be paid by Qantas to the Commonwealth of Australia; and
(c) an order for Qantas to pay the ACCC’s costs of the proceeding, pursuant to s 43 of the FCA Act, in the amount of $400,000.
6 Following the hearing on 8 October 2024 (8 October Hearing), I made orders in the revised form submitted by the parties to my chambers by email. The following are my reasons for making those orders.
2. Legislative provisions
7 Section 18 of the ACL prohibits a person from, in the course of trade or commerce, engaging in conduct that is misleading or deceptive or is likely to mislead or deceive.
8 Section 29(1)(b) of the ACL prohibits a person from, in the course of trade or commerce and 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, making a false or misleading representation that services are of a particular standard, quality, value or grade. Similarly, s 29(1)(g) prohibits false representations being made about goods or services having sponsorship, approval, performance characteristics, accessories, uses or benefits.
9 Section 34 of the ACL prohibits a person from, in the course of trade or commerce, engaging 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.
10 The principles applicable in determining whether conduct contravenes s 18 are well known and there are broad similarities between the type of inquiry required by s 18 and that required by ss 29 and 34: Australian Competition and Consumer Commission v Australian Private Networks Pty Ltd (t/as Activ8me) (2019) 136 ACSR 80 at [13] (per Middleton J).
11 As formulated by Middleton J in Activ8me (at [14]–[16]):
[14] Conduct is misleading or deceptive if it has a tendency to lead into error. It may involve the doing of, or refusal to do, any act. Whether conduct in relation to a particular class of consumers is misleading or deceptive is a question of fact to be resolved by a consideration of the whole of the impugned conduct in the circumstances in which it occurred.
[15] The purpose underlying provisions such as ss 18, 29 and 34 of the ACL is remedial. Accordingly, these sections should be interpreted broadly “so as to give the fullest relief which the fair meaning of its language will allow”: see Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 503; 114 ALR 355 at 387; 27 IPR 133 at 167 (Lockhart and Gummow JJ) and Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2014] FCA 1369 at [60] (White J).
[16] There is no significant difference between the words and phrases “misleading or deceptive” and “mislead or deceive” in s 18, “misleading” in s 29(1) and “mislead” in 34… The latter may apply to a narrower range of conduct…
12 When considering the provisions, a sufficient causal link must be discernible between the impugned conduct and the error on the part of persons exposed to it: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [39] (per French CJ, Crennan, Bell and Keane JJ).
13 Further, the intention behind the impugned conduct is irrelevant. A wrongdoer may be liable, regardless of their intent or knowledge regarding the conduct or representations, as the provisions are primarily concerned with the actual or likely effects or consequences of the conduct or representations: Gill v Ethicon Sàrl (No 5) [2019] FCA 1905 at [3556] (per Katzmann J), citing Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Limited (1978) 140 CLR 216 at 228 (per Stephen J), 232 (per Jacobs J) and 234 (per Murphy J).
3. Agreed facts and admitted contraventions
14 The following matters have been extracted from the SAFA.
3.1 Qantas’ business
15 Qantas is a publicly listed company incorporated in Australia. It is well known that Qantas is Australia’s largest domestic and international airline. Qantas supplies air transport services to consumers within, and to and from Australia.
16 Qantas is made up of the following four operating segments, referred to collectively as the Qantas Group:
(a) Qantas Domestic (operated by Qantas), the largest domestic airline in Australia. Qantas Domestic includes the operation of regional airlines QantasLink and Network Aviation;
(b) Qantas International (operated by Qantas), the largest airline into and out of Australia. Qantas International includes Qantas’ freight operations;
(c) Jetstar Group, which comprises Jetstar Airways Pty Ltd (a subsidiary of Qantas), Jetstar Asia Airways Pte Ltd (majority-owned by Westbrook Investments, with Qantas holding 49% ownership) and Jetstar Japan Co., Ltd. (a joint venture between Qantas, Japan Airlines and Tokyo Century Corporation). The Jetstar Group operates on domestic and international routes; and
(d) Qantas Loyalty, which operates the Qantas Frequent Flyer and Qantas Business Rewards loyalty programs, as well as Qantas’ insurance and credit card businesses.
17 As at June 2024, Qantas held 38% of the Australian domestic airline passenger market with Qantas’ subsidiary, Jetstar, holding a 25% share of that market, such that the combined market share for the Qantas Group was 63%.
3.2 Continued Sale Conduct
3.2.1 Background to contravening conduct
18 During the Relevant Period, Qantas offered for sale, and sold, flights to consumers through direct channels such as its website and mobile application (app), and indirect channels such as travel agents and third-party websites.
19 Consumers searching for or booking Qantas flights using the direct channels could:
(a) access Qantas’ website (at <www.qantas.com.au> or <www.qantas.com>) (Qantas Website) on a desktop computer or mobile device; and
(b) access Qantas’ app on either Android or iOS devices (Qantas App).
20 At all times during the Relevant Period, Qantas was the operator of the Qantas Website and the Qantas App and was responsible for the creation and display of the content viewed by consumers on those platforms. Amadeus, a third-party technology vendor, provided (and continues to provide) technical infrastructure to facilitate the display of the booking flow on those platforms.
21 During the Relevant Period, Qantas offered tickets for sale through the direct and indirect channels including by reference to:
(a) a flight number;
(b) a scheduled departure date and time;
(c) a scheduled arrival date and time;
(d) a scheduled departure and arrival airport;
(e) cabin class of travel; and
(f) a particular fare type within the selected cabin class of travel.
22 Throughout the Relevant Period, the booking flow for consumers searching for or booking flights on Qantas’ Website and Qantas App could be accessed through the homepage and comprised four pages: Flights, Options, Passengers and Payment.
23 The price of tickets during the Relevant Period from the same origin to the same destination on the same day may have varied based on a number of factors, including:
(a) the time of departure;
(b) demand and availability of seats (influenced by matters such as inbound/onward connecting traffic, seasonal factors, special events and the day of the week);
(c) the availability of alternative travel options (including competitor airlines); and
(d) proximity to the departure date.
24 Once a consumer had booked a flight online and their payment was confirmed, consumers were presented with a “Transaction Summary” which set out the details of the flight(s) booked. It also contained a link to the customer’s “Manage Booking” page. The consumer also received a confirmation email which attached an electronic ticket, itinerary and receipt. The E-Ticket Flight Itinerary attached to the confirmation email set out the details of the flight(s) booked by the consumer and the status of the booking (which was stated as “confirmed”).
25 The ACCC alleges that, during the Relevant Period, Qantas offered tickets for sale on a number of flights for two or more days after Qantas had made a decision to cancel the flight, and 86,597 consumers made bookings on, or were re-accommodated to, some of those flights after Qantas had decided to cancel the relevant flight (Continued Sale Conduct).
26 The relevant flights scheduled to depart between 1 May 2022 and 10 May 2024 which were cancelled by Qantas during the Relevant Period pursuant to the Continued Sale Conduct will be referred to as the Continued Sale Conduct Flights in these reasons.
27 Seat inventory and airfares for each flight were released for sale by Qantas around 355 days prior to departure for each respective flight (the Selling Window). For the Relevant Period, the Selling Window commenced in May 2021.
28 Qantas’ “Conditions of Carriage”, which formed part of its terms and conditions with a consumer who had made a booking for a flight, were available on the Qantas Website and Qantas App and could be accessed throughout the booking flow. Clauses 5.2 and 9.1(a) of the Conditions of Carriage stated that:
We will use our reasonable endeavours to operate in accordance with our published schedules. However, we do not guarantee the flight times and they do not form part of your contract of carriage with us.
29 During the Relevant Period, a team within Qantas, known as the Qantas Network Team, was responsible for developing a network plan and schedule for the Qantas fleet which, at a high level, involved deciding where, when and which aircraft will fly and building a schedule of flights accordingly.
30 Planned and unforeseen events could arise at different points in the Selling Window, including aircraft maintenance, adverse weather conditions, international conflict, technical problems, workforce planning and shifts in consumer demand. From time to time, when such events occurred, Qantas’ response included cancelling, rescheduling or adding new services. During the Relevant Period, any cancellation decisions made five or more days prior to a flight’s scheduled departure were made by the Network Team. Any cancellation decisions made less than five days prior to a flight’s scheduled departure were made by Qantas’ Integrated Operations Centre for Qantas branded flights and Qantas’ Regional Operations Centre for QantasLink branded flights.
31 For part of the Relevant Period, Qantas’ operations were affected by matters arising from the COVID-19 pandemic which included travel restrictions (both domestic and international), border and airport closures, staff absenteeism due to testing, reporting and isolation requirements for those with COVID-19 and ensuring that staff training was up to date.
32 Almost all (99.9%) cancellation decisions made in respect of the Continued Sale Conduct Flights and the Delayed Notification Conduct Flights (defined below at [46]) were made five or more days prior to departure and were made by the Qantas Network Team.
33 Qantas’ process for cancelling a flight during the Relevant Period, where the Qantas Network Team made the cancellation decision, was as follows:
(a) the Qantas Network Team made the cancellation decision by uploading a new flight schedule into Qantas’ IT system;
(b) Qantas’ IT system allocated batches of changes to the flight schedule into a queue to be processed by Qantas’ Schedule Distribution Team, which was responsible for managing the process of re-accommodating customers on the cancelled flights in each batch;
(c) part of Qantas’ IT system called “Amadeus Enhanced Re-accommodation” automatically allocated existing passengers on each cancelled flight to an alternative flight;
(d) a specialist member of the Schedule Distribution Team manually reviewed each passenger re-allocation and, following the review of all of the re-accommodation arrangements required for the flight, provided a sign off which triggered:
(i) removal of the flight from Qantas’ sales inventory;
(ii) the re-booking of passengers onto alternative flights;
(iii) communication of the change to ticketholders who had booked through the direct channel (and to agents for those who had booked indirectly); and
(e) an update to the customer’s “Manage Booking” page to reflect the fact that the flight had been cancelled.
34 During the Relevant Period, the following factors affected the time it took the Schedule Distribution Team to manually review and process the allocations of Amadeus Enhanced Re-accommodation:
(a) proximity to travel – Qantas prioritised re-accommodating and communicating with customers impacted by a flight cancellation relatively close to the scheduled departure date;
(b) the time taken to identify and develop re-accommodation options, which in some cases required consulting and negotiating with other carriers, particularly for international services;
(c) actual and anticipated call volumes to, and the capacity of, the Customer Contact Centre – due to resourcing constraints within its Customer Contact Centre, in particular during the COVID-19 pandemic, Qantas at times deferred communications to customers;
(d) whether the change required a bespoke Qantas process and/or communications to customers about their options, for example, in respect of a delayed recommencement of services or route suspension;
(e) there were constraints within the IT system, which set a limit of 5,000 bookings that could be processed per hour.
35 During the Relevant Period, Qantas had the ability to implement a manual ‘stop sell’, which had the effect of immediately removing a flight from sale without waiting for the completion of the cancellation process described above. The ‘stop sell’ process involved Qantas setting the number of seats available on a particular flight to zero in the Amadeus System. The ‘stop sell’ process did not result in existing ticketholders being rebooked or notified that the flight had been cancelled.
36 Qantas did not implement a manual ‘stop sell’ for any of the Continued Sale Conduct Flights.
3.2.2 Qantas’ admissions – Continued Sale Conduct
37 Qantas admits that, during the Relevant Period, it offered tickets for sale on each of the Continued Sale Conduct Flights for two or more days after Qantas had made a decision to cancel the flight, and 86,597 consumers made bookings on, or were re-accommodated to, some of those flights after Qantas had decided to cancel the relevant flight (defined at [25] above as the Continued Sale Conduct).
38 Qantas admits that by engaging in the Continued Sale Conduct, in trade or commerce, it represented to consumers that:
(a) the relevant flights with the corresponding stated flight number and scheduled date and time were still available (Scheduled Flight Representations); and
(b) it would use reasonable endeavours to operate the relevant flights at the scheduled date and time (Reasonable Endeavours Representations).
39 Qantas admits that the Scheduled Flight Representations were false and misleading in respect of each of the Continued Sale Conduct Flights because, at the time the representations were made, there was no longer a flight with the stated flight number and scheduled date and time as Qantas had already decided to cancel it.
40 Qantas admits that the Reasonable Endeavours Representations were false and misleading in respect of each of the Continued Sale Conduct Flights because Qantas did not have reasonable grounds for making the representations as Qantas had already decided to cancel the flight.
41 Qantas admits that by making the Scheduled Flight Representations and the Reasonable Endeavours Representations, it contravened ss 18(1), 29(1)(b), 29(1)(g) and 34 of the ACL.
3.3 Delayed Notification Conduct
3.3.1 The Manage Booking Page
42 After completing a flight booking, through either the direct or indirect methods, a customer is able to view details of that booking on the “Manage Booking” page of Qantas’ Website or on the Qantas App (Manage Booking Page).
43 During the Relevant Period, for each customer booking, the Manage Booking Page on the Qantas Website and the Qantas App displayed, in a box under the heading “Flights”:
(a) the flight departure date, time and departure airport;
(b) the flight arrival date, time and destination airport; and
(c) the flight duration.
44 On the Qantas Website (in desktop format), the upcoming flight details were displayed on the Manage Booking Page in the following format:
[insert days to departure] days to go
Here’s where you can manage your flight booking from [departure location] to [arrival location] departing on [day] [date] [month] [year] at [time].
45 Until the cancellation of a flight was processed against the relevant booking and the customer was sent a communication notifying them of the cancellation of their flight, the status of the booking as displayed on the Manage Booking Page remained unchanged (with no indication that the flight had been cancelled).
3.3.2 Qantas’ admissions – Delayed Notification Conduct
46 The relevant flights scheduled to depart between 1 May 2022 and 1 May 2024 which were cancelled by Qantas during the Relevant Period pursuant to the Delayed Notification Conduct (defined below at [47]) will be referred to as the Delayed Notification Conduct Flights in these reasons.
47 Qantas admits that, during the Relevant Period, it continued to display flight details for each of the Delayed Notification Conduct Flights on the Manage Booking Page of consumers who had purchased tickets or made bookings for those flights for two or more days after Qantas had made a decision to cancel the flight with no indication that Qantas had already decided to cancel the flight (Delayed Notification Conduct).
48 Qantas admits that by engaging in the Delayed Notification Conduct, in trade or commerce, it represented to consumers that:
(a) the relevant flight with the stated flight number and scheduled date and time displayed on the Manage Booking Page was unchanged (Flight Unchanged Representations); and
(b) it would use reasonable endeavours to operate the flight displayed on the Manage Booking Page at the scheduled date and time (Manage Booking Representations).
49 Qantas admits that the Flight Unchanged Representations were false and misleading in respect of each of the Delayed Notification Conduct Flights because, at the time these representations were made, there was no longer a flight with the stated flight number and scheduled date and time as Qantas had already decided to cancel it.
50 Qantas admits that the Manage Booking Representations were false and misleading in respect of each of the Delayed Notification Conduct Flights because Qantas did not have reasonable grounds for making the representations as Qantas had already decided to cancel the flight.
51 Qantas admits that by making the Flight Unchanged Representations and the Manage Booking Representations, it contravened ss 18(1), 29(1)(b) and 29(1)(g) of the ACL.
3.4 Qantas’ operating and scheduling systems
3.4.1 Qantas’ systems
52 During the Relevant Period, Qantas’ operating and scheduling systems did not always ensure that cancelled flights were promptly removed from sale, or that consumers were notified of the cancellation of their flight promptly (and at least within two days of a cancellation decision).
3.4.2 Changes to Qantas’ systems
53 Following the commencement of this proceeding, Qantas made changes to its systems so that it can now promptly remove cancelled flights from sale and notify existing ticketholders following cancellation of a flight.
54 After initially assigning personnel to manually ‘stop sell’ flights that were the subject of a cancellation decision, in mid-December 2023 Qantas implemented a solution that effectively automates the manual closure process (Automated Closure Solution). The solution was able to be built and implemented in this period because (following commencement of this proceeding) it was joined into an on-going Qantas project to build and deploy an improved in-house revenue management solution which commenced in 2021. The Automated Closure Solution was not part of the original design for the improved in-house revenue management project.
55 The Automated Closure Solution involved new steps that have been inserted in the flight cancellation process. Depending on the volume of cancellation decisions, the new process usually takes between minutes and hours to complete (assuming no technical issues arise).
56 In relation to the Manage Booking functionality, during the Relevant Period the Manage Booking Page was updated via an automated process which was triggered when cancellation communications were sent to customers, including with information regarding the re-accommodation options available. Following the commencement of this proceeding, Qantas took steps to facilitate the flight cancellation process for any cancellation decisions being completed (and therefore the Manage Booking Page updated) within 48 hours.
57 Qantas has provided training regarding the new processes to relevant Qantas employees and developed a ‘Business Continuity Plan’ to be deployed if technical issues occur with the Automated Closure Solution and a reversion to manual processing is necessary.
58 Further, as part of an additional step linked to the Automated Closure Solution, Qantas has investigated whether it is possible to simultaneously retrieve each affected passenger booking and tag it with a “flight cancellation pending” marker that the Manage Booking application can recognise to inform customers accessing Manage Booking that a change to their booking is pending. Since early June 2024, Qantas has deployed this solution for customers that booked through direct channels and anticipates it will be in a position to deploy the proposed solution for customers booked through indirect channels before the end of the year.
3.5 How Qantas benefitted from the contravening conduct
59 Qantas benefitted from engaging in the Continued Sale Conduct by:
(a) obtaining revenue from consumers who may have chosen a different or less expensive flight with Qantas had they been aware that their chosen flight had already been the subject of a cancellation decision;
(b) retaining revenue from consumers who may have chosen to fly with a different carrier had they been aware that their chosen flight had already been the subject of a cancellation decision;
(c) retaining revenue from consumers who, having purchased a ticket from Qantas, were less likely to change carrier when they were ultimately notified their flight was cancelled; and
(d) avoiding the costs associated with making the changes to its systems to avoid the Continued Sale Conduct occurring, including associated labour costs, that it has now made, at an earlier point in time.
60 Qantas benefitted from engaging in the Delayed Notification Conduct by:
(a) retaining revenue from consumers who were less likely to change carrier when they were ultimately notified their flight was cancelled; and
(b) avoiding the costs associated with making the changes to its systems to avoid the Delayed Notification Conduct occurring, including associated labour costs, that it has now made, at an earlier point in time.
61 The parties contend that the value of the benefits described above cannot be quantified.
3.6 Qantas’ compliance processes
62 During the Relevant Period, Qantas relevantly had in place the following:
(a) a Code of Conduct and Ethics, which contained a brief section titled ‘Competition and Consumer Law Compliance Policy’. The Competition and Consumer Law Compliance Policy required employees to:
(i) comply with competition and consumer laws including the ACL and specified consequences for employees who were in breach of such laws, including disciplinary action and personal responsibility for payment of associated costs and fines; and
(ii) report suspected non−compliance to the legal team; and iii. undertake mandatory competition and consumer law training if they were in contact with competitors, customers or suppliers (Relevant Personnel).
(b) a Competition Law Compliance Roadmap which:
(i) required Relevant Personnel to complete an online training course (Online Course) as soon as possible (and at the latest within three months of commencement with Qantas) and then at least once every two years. The Online Course contained a section on consumer law; and
(ii) provided that face-to-face training sessions would be provided upon request from a manager or where the competition law team has identified a business segment with this particular need. It also provided that where such training sessions were organised, attendance by personnel within the relevant area was compulsory;
(c) methods for reporting suspected, attempted or actual breaches including through a whistle-blower policy; and
(d) a Competition Law Compliance intranet site, which relevantly contained a Quick Guide for advertising.
63 Qantas’ compliance policies and training failed to ensure compliance by Qantas with the ACL and to prevent the contravening conduct from occurring, notwithstanding the knowledge of its senior managers.
4. Declaratory relief
64 Section 21 of the FCA Act confers a wide discretion on the Court to make declarations: Australian Competition and Consumer Commission v Uber B.V. [2022] FCA 1466 (ACCC v Uber B.V.) at [132] (per O’Bryan J), citing Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582 (per Mason CJ, Dawson, Toohey and Gaudron JJ).
65 While the parties here have prepared an agreed form of declaration, this in itself does not bind the Court. An agreed form of declaratory relief between the parties does not relieve the Court from its duty to satisfy itself that the form as proposed is appropriate. It is not the role of the Court to merely rubber stamp orders that are agreed as between a regulator and a person who has admitted contravening a public statute: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 at [90] (per Dowsett, Greenwood and Wigney JJ). Attention must be given to the form of the declarations so, at the very least, they are informative as to the basis on which the Court declares that a contravention has occurred and contain appropriate and adequate particulars of how and why the impugned conduct are deemed contraventions: Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2015] FCA 274 at [83] (per Gordon J).
66 I consider that it is appropriate to make a declaration in this case because the declaration records the Court’s disapproval of Qantas’ conduct, vindicates the ACCC’s claims that Qantas’ conduct contravened ss 18, 29(1)(b), 29(1)(g) and 34 of the ACL, assists the ACCC to carry out the duties conferred upon it under the CCA, assists in clarifying the law, informs the public about Qantas’ conduct and deters Qantas and other corporations from contravening the ACL.
67 The first iteration of the declarations, as proposed by the parties, was submitted as an annexure to their joint submissions. I was not satisfied that this version was appropriately formulated as it did not detail the contravening conduct at the outset.
68 Having raised these concerns with counsel at the commencement of the 8 October Hearing, the parties subsequently prepared and submitted a revised form of declarations for the Court’s consideration.
69 I consider that this revised form of declaration was drafted in a form appropriate for the Court to make. The contravening conduct was properly particularised without being overly convoluted and followed the articulation of the contravention. I am satisfied that the declaration adequately expresses the Court’s disposition on the contravening conduct by conveying its opprobrium, informing consumers as to Qantas’ conduct, and acting as a deterrence: ACCC v Uber B.V. at [135] (per O’Bryan J).
5. Proposed orders and penalties by agreement
70 In deciding whether agreed orders conform with legal principle, the Court is entitled to treat the consent of Qantas as an admission of all facts necessary or appropriate to the granting of the relief sought against it: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [73] (per Gordon J).
71 The proper approach to be taken when civil regulatory orders are sought on an agreed basis, and the public interest in doing so, was explained by the High Court in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482. The High Court there reaffirmed the practice of acting upon agreed penalty submissions, as explained in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993. The principles which apply where parties to a civil penalty proceeding have settled that proceeding and agreed to joint penalties were summarised by the Full Court in Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission (2021) 284 FCR 24 at [124]–[129] (per Wigney, Beach and O’Bryan JJ).
72 The majority in Fair Work observed at [46] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ) that:
… there is an important public policy involved in promoting predictability of outcome in civil penalty proceedings … the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers. As was recognised in Allied Mills and authoritatively determined in NW Frozen Foods, such predictability of outcome encourages corporations to acknowledge contraventions, which, in turn, assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention.
(Citations omitted.)
73 The High Court confirmed that, subject to the Court being sufficiently persuaded of the accuracy of the parties’ agreement as to the facts and their consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances, it is consistent with principle and highly desirable in practice for the Court to accept the parties’ proposal and impose the proposed penalty: Fair Work at [58]–[59] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ).
74 Further, the High Court noted, the propriety of receiving joint submissions — and imposing the proposed penalty (and other relief proposed) if appropriate — where those submissions are also advanced by the relevant regulator. The regulator is, by reason of its functions, in a unique position to provide “informed submissions as to the effects of [a] contravention on the industry and the level of penalty necessary to achieve compliance”: Fair Work at [60] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ).
75 Because fixing the quantum of a civil penalty is not an exact science, there is a permissible range in which courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another: Fair Work at [47] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ). Accordingly, the question for the Court is whether the agreed figure proposed by the parties is an appropriate penalty in the circumstances of the case, rather than the appropriate penalty. The permissible range is determined by all the relevant facts and consequences of the contravention and the contravenor’s circumstances: Volkswagen at [127] (per Wigney, Beach and O’Bryan JJ).
76 If the proposed penalty is within the permissible range then “the public policy consideration of predictability of outcome would generally provide a compelling reason for the Court to accept the proposed penalty in those circumstances”: Volkswagen at [131] (per Wigney, Beach and O’Bryan JJ). The Court will not depart from an agreed penalty figure that is within the permissible range “merely because it might otherwise have been disposed to select some other figure”: Fair Work at [47] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ).
77 The desirability of giving effect to the agreement of the parties is reinforced where, as here, they are sophisticated, legally represented and, in turn, well able to understand and evaluate the desirability of the settlement: Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 3) [2016] FCA 676 at [27] (per Jagot J). In considering whether the proposed agreed penalty is an appropriate penalty, the Court should generally recognise that the agreed penalty is most likely to reflect, amongst other things, the regulator’s considered estimation of the penalty necessary to achieve deterrence and the risks and expense of the litigation had it not been settled: Fair Work at [109] (per Keane J); Volkswagen at [125] (per Wigney, Beach and O’Bryan JJ).
6. Pecuniary penalties
6.1 Applicable principles
78 Section 224(1)(a)(ii) of the ACL empowers the Court to impose a pecuniary penalty in respect of contraventions of ss 29 and 34 in such amount as the Court determines to be appropriate, subject to specified statutory maximums: ACCC v Uber B.V. at [8] (per O’Bryan J).
79 The High Court has emphasised on multiple occasions that the primary, if not sole, purpose of pecuniary penalties in civil proceedings is deterrence: Fair Work at [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ); Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 at [15] and [40]–[41] (per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ).
80 In protecting the interests of the public, the Court must take up the necessary endeavour of “put[ting] a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the [ACL]”: Volkswagen at [147] (per Wigney, Beach and O’Bryan JJ), citing Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at [40] (per French J) and NW Frozen Foods at 292 (per Burchett and Kiefel JJ).
81 Further, the amount imposed must not be regarded by the offender or others as an “acceptable cost of doing business” which would involve the “cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention”: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [62]–[63] (per Keane CJ, Finn and Gilmour JJ), cited with approval in TPG at [66] (per French CJ, Crennan, Bell and Keane JJ) and Pattinson at [17] (per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). See also Australian Competition and Consumer Commission v Employsure Pty Ltd (2023) 407 ALR 302 at [49] (per Rares, Stewart and Abraham JJ) and Australian Competition and Consumer Commission v Medibank Private Ltd (2020) 146 ACSR 181 at [46] (per Anderson J).
82 Instead, the High Court observed in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116] (per Keane, Nettle and Gordon JJ) that:
According to orthodox sentencing conceptions … as they apply to the imposition of civil pecuniary penalties … specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty’s general deterrent effect.
(Citations omitted.)
83 The majority in NW Frozen Foods emphasised at 294–5 (per Burchett and Kiefel JJ) that the Court:
… should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay, and detection lead merely to a compliance program for the future.
84 The Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 explained at [151] (per Jagot, Yates and Bromwich JJ):
… the greater the risk of consumers being misled and the greater the prospect of gain to the contravener, the greater the sanction required, so as to make the risk/benefit equation less palatable to a potential wrongdoer and the deterrence sufficiently effective in achieving voluntary compliance. Tipping the balance of the risk/benefit equation in this way is even more important when the benefit in contemplation is profit or other material gain. It is especially important if there are disadvantages, including increased costs or lesser sales or profits, in complying with legal obligations for those who “decide” to be law-abiding.
85 Equally, the High Court cautioned that the penalty imposed must be proportionate and strike an appropriate balance between the need for deterrence with oppressive severity: Pattinson at [41] (per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). In support of this proposition, their Honours cited with approval the reasoning of the Full Court in Reckitt Benckiser at [152] (per Jagot, Yates and Bromwich JJ) that:
If it costs more to obey the law than to breach it, a failure to sanction contraventions adequately de facto punishes all who do the right thing. It is therefore important that those who do comply see that those who do not are dealt with appropriately. This is, in a sense, the other side of deterrence, being a dimension of the general deterrence equation. This is not to give licence to impose a disproportionate or oppressive penalty, which cannot be done, but rather to recognise that proportionality of penalty is measured in the wider context of the demands of effective deterrence and encouraging the corresponding virtue of voluntary compliance.
86 Finally, there is little utility to be gained in referring to the penalty imposed in other cases decided at a different time, in different circumstances, with different facts, and potentially different statutory maximum penalties: Australian Securities and Investments Commission v Commonwealth Bank of Australia [2020] FCA 790 at [77] (per Beach J).
6.2 General deterrence considerations
87 I consider that a substantial penalty is necessary to achieve general deterrence in this case. In this regard, the following matters must be noted:
(a) Qantas’ status as a large, publicly listed company, with significant financial resources, and its market position in the airline industry, means that the penalty must send a clear signal to other companies in Australia (particularly other large companies) that contraventions of the ACL will not be tolerated and that there are serious consequences for such contraventions;
(b) there is a need to ensure that the penalty is not seen by other large corporations as a mere cost of doing business. It is likely that any penalty imposed on Qantas will attract significant public attention. Other large companies conducting business in Australia will likely be aware of the penalty imposed on Qantas in this case. In this context, it is essential that the penalty imposed is beyond an amount that might be seen as an acceptable cost of conducting business for a company of Qantas’ size and resources; and
(c) the penalty must demonstrate that contraventions resulting from inadequate systems or processes have serious consequences, particularly where they involve large corporations and affect a large number of consumers. The systems, operations and processes for a company the size of, and with the resources of, Qantas must be compliant with the ACL.
6.3 Specific deterrence considerations
88 As previously noted, Qantas is the largest domestic airline in Australia, accounting for 38% of the domestic airline passenger market. Qantas carries millions of passengers each year and has extensive levels of interaction with consumers, such that compliance with the ACL should be a priority for Qantas.
89 Qantas’ conduct affected a significant number of consumers. The Manage Booking Pages of up to 883,977 consumers were subject to the Delayed Notification Conduct. The total number of consumers exposed to the representations arising from the Continued Sale Conduct during that period cannot be quantified but at least included the 86,597 consumers who made bookings on, or were re-accommodated to, flights that Qantas had already decided to cancel.
90 It is important that the penalty imposed has the necessary ‘sting’ and is not capable of being perceived by Qantas as an acceptable cost of failing to have adequate systems and processes in place. The size of the penalty must therefore be sufficient to act as an effective deterrent to Qantas against future non-compliance with the ACL. Qantas’ size and financial position mean that a significant penalty is required to achieve such deterrence.
6.4 Statutory maximum
91 In Pattinson, the majority of the High Court at [52] (per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ) stated that careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; second, because they invite comparison between the worst possible case and the case before the Court; and third, taken and balanced with all other relevant factors, the maximum penalty provides a numerical guide.
92 The appropriate penalty amount depends on the facts and circumstances of each particular case and must not exceed the maximum figures as set out at s 224(3) of the ACL. Notwithstanding, the maximum penalty is only a “yardstick” and, whilst being important, is not the only factor to take into consideration: Reckitt Benckiser at [154]–[155] (per Jagot, Yates and Bromwich JJ), citing Markarian v The Queen (2005) 228 CLR 357 at [31] (per Gleeson CJ, Gummow, Hayne and Callinan JJ).
93 During the Relevant Period, the maximum pecuniary penalty payable by a body corporate in respect of a contravention of ss 29 or 34 of the ACL was:
(a) from the beginning of the Relevant Period (May 2021) up to 9 November 2022 (when the penalty was increased by the introduction of the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth)), the greater of:
(i) $10 million;
(ii) three times the value of the benefit obtained from the contravention, if that benefit can be determined; or,
(iii) if the benefit cannot be determined, 10% of the contravenor’s annual turnover during the 12-month period ending at the end of the month in which the act or omission first occurred; and
(b) from 10 November 2022 until the end of the Relevant Period (26 August 2023), the greater of:
(i) $50 million;
(ii) three times the value of the benefit obtained from the contravention, if that benefit can be determined; or,
(iii) if the benefit cannot be determined, 30% of the contravenor’s adjusted turnover during the breach turnover period for the act or omission.
94 The parties agreed that the value of any benefit obtained by Qantas that could be reasonably attributable to the contraventions cannot be quantified. Accordingly, based on the matters set out in the SAFA in relation to Qantas’ financial position and the applicable maximum penalty for the contraventions admitted by Qantas, the maximum penalty for each contravention would be:
(a) for contraventions that occurred from the beginning of the Relevant Period up to 9 November 2022, from between $537.3 million to $1.48 billion; and
(b) for contraventions that occurred from 10 November 2022 until the end of the Relevant Period, from between $4.45 billion to approximately $6.1 billion.
95 A separate contravention occurred each time that Qantas made each of the representations that arose from the Continued Sale Conduct and Delayed Notification Conduct to a consumer.
96 In cases where the exact number of contraventions is unknown, but would give rise to a total penalty so large as to be devoid of meaning, it is appropriate to assess the total penalty by reference to other factors: Reckitt Benckiser at [157] (per Jagot, Yates and Bromwich JJ).
6.4.1 Multiple contraventions
97 There are three principles which are relevant to dealing with the issue of penalty in the context of multiple contraventions.
6.4.1.1 Same conduct
98 Section 224(4) of the ACL provides that a contravenor cannot be penalised twice for the same conduct even if the conduct constituted a contravention of two or more provisions. Accordingly, if the Court were minded to impose a penalty for conduct constituting a contravention of, for example, s 34 of the ACL, it should not impose any additional penalty in respect of the same conduct simply because the conduct also constituted a contravention of ss 29(1)(g) and/or 29(1)(b) of the ACL.
99 Section 224(4) applies to conduct which is truly ‘the same’, not merely similar or repeated, and can therefore be differentiated from the ‘course of conduct’ principle which is discussed below.
100 In this case:
(a) each time Qantas made the Scheduled Flight Representations and the Reasonable Endeavours Representations (being the representations that resulted from the Continued Sale Conduct) it contravened ss 29(1)(b), 29(1)(g) and 34 of the ACL. Each contravention of these three provisions resulted from the ‘same conduct’; and
(b) each time Qantas made the Flight Unchanged Representations and the Manage Booking Representations (being the representations that resulted from the Delayed Notification Conduct) Qantas contravened both s 29(1)(b) and 29(1)(g). Each contravention of these two provisions resulted from the ‘same conduct’.
6.4.1.2 Course of conduct
101 Ordinarily, separate contraventions arising from separate acts should attract separate penalties. However, where separate acts give rise to separate contraventions that are inextricably interrelated, they may be regarded as a ‘course of conduct’ for penalty purposes so as to avoid double punishment for those parts of the legally distinct contraventions that involve overlap in wrongdoing. Whether the contraventions should be treated as a single course of conduct is fact specific having regard to all of the circumstances of the case: Employsure at [51] (per Rares, Stewart and Abraham JJ).
102 In the present case, it is appropriate to analyse the contraventions as two courses of conduct, referable to the two categories of conduct that gave rise to the contraventions — the Continued Sale Conduct and the Delayed Notification Conduct. This analysis is consistent with Qantas engaging in the two distinct patterns of conduct during the Relevant Period.
103 However, analysing the many contraventions by reference to two courses of conduct is not to downplay the wrongdoing — the analysis does not convert the many separate contraventions into only two contraventions, nor does it limit the available maximum penalty: Reckitt Benckiser at [139]–[145] (per Jagot, Yates and Bromwich JJ).
6.4.1.3 Totality
104 The principle of totality requires the Court to make a “final check” of the penalties to be imposed on a wrongdoer, considered as a whole, to ensure that the total penalty does not exceed what is proper for the entire contravening conduct: Employsure at [52] (per Rares, Stewart and Abraham JJ).
105 In this case, the parties submit that the proposed total penalties are just and appropriate, and do not exceed what is proper for Qantas’ contravening conduct, and that accordingly, no further adjustment for totality is required.
6.5 Factors informing the appropriate penalties
106 Section 224(2) of the ACL prescribes three matters which the Court must have regard to in determining the appropriate penalty:
(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 Chapter 4 or this Part to have engaged in any similar conduct.
107 In addition to those factors, the Court must have regard to all other matters relevant to the assessment of penalty. Such matters often include those stated by French J in CSR Ltd at 52,152–52,153, in the context of contraventions of provisions of Pt IV of the Trade Practices Act 1974 (Cth). Those factors, which have been referred to often in the assessment of civil penalties and have become known as the “French Factors”, are as follows:
(a) the size of the contravening company;
(b) the deliberateness of the contravention and the period over which it extended;
(c) whether the contravention arose out of the conduct of senior management or at a lower level;
(d) whether the company has a corporate culture conducive to compliance with the Act as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention;
(e) whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention;
(f) whether the contravenor has engaged in similar conduct in the past; and
(g) the financial position of the contravenor.
108 The French Factors are not exhaustive of the matters that may be relevant in a particular case. They have “a degree of overlap” with the mandatory considerations in s 224(2) of the ACL, but “do not necessarily exhaust potentially relevant considerations” or “regiment the discretionary sentencing function”: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540 at [9] (per Allsop CJ).
109 The penalty is determined by an “intuitive” or “instinctive” synthesis of all relevant factors. Instinctive synthesis is the method by which the Court identifies all the factors that are relevant to the penalty and, after weighing all of those factors, reaches a conclusion that a particular penalty is the one that should be imposed: Employsure at [42], [50] and [53] (per Rares, Stewart and Abraham JJ).
6.5.1 Size and financial position of Qantas
110 Qantas’ size and market position is a critical matter in considering the appropriate penalty in the present case.
111 Qantas is a large, publicly listed company incorporated in Australia. It is Australia’s largest domestic and international airline. As noted above, as at June 2024, Qantas held 38% of Australia’s domestic airline passenger market and together with its subsidiary Jetstar, held 63% of the market.
112 During the Relevant Period, Qantas carried many millions of passengers (over 45 million in FY2022/23), reported over $19 billion in annual revenue and held over $20 billion in total assets. In FY2022/23, it reported a record profit of $2.5 billion, and in FY2023/24, it reported a profit of $2.08 billion.
113 The size of a contravening corporation is particularly relevant in determining the size of the pecuniary penalty that would operate as an effective deterrent.
114 In terms of specific deterrence, the sum required to achieve that object will generally be larger where the company is well-resourced: Volkswagen at [154] (per Wigney, Beach and O’Bryan JJ). The parties submit that the proposed total penalty reflects Qantas’ substantial size, significant resources and market position.
115 In order to achieve general deterrence, a higher penalty will be required in cases involving large companies, in order to deter other large companies who may be tempted to engage in similar contravening conduct. It is also essential that the penalties are beyond an amount that might be considered to be an acceptable cost of doing business for a company of Qantas’ size and resources. The parties submit that the proposed total penalty is sufficiently large to be more than an acceptable cost of business, and by reason of Qantas’ prominence, any penalty imposed on it will likely attract significant attention.
6.5.2 Duration, extent and nature of offending
116 Qantas engaged in the Continued Sale Conduct from 21 May 2021 until 26 August 2023 in respect of flights scheduled to depart between 1 May 2022 and 10 May 2024.
117 During that period:
(a) 70,543 flights (69,237 domestic/trans-Tasman and 1,306 international) were affected by the Continued Sale Conduct;
(b) whilst the total number of consumers exposed to the representations arising from the Continued Sale Conduct cannot be quantified, it at least included consumers who made bookings on, or were re-accommodated to, a flight that Qantas had already decided to cancel;
(c) 86,597 consumers made bookings on, or were re-accommodated to (after the flight they had booked was cancelled), a flight that Qantas had already decided to cancel (81,238 of those consumer bookings related to a domestic/trans-Tasman flight and 5,359 related to an international flight). In respect of bookings that were ticketed, the total amount paid by consumers in relation to those tickets was $17.9 million; and
(d) on average, tickets on the Continued Sale Conduct Flights were offered for sale for approximately 11 days after Qantas had decided to cancel the flight, and in some cases, for up to 62 days after Qantas had decided to cancel the flight.
118 Qantas engaged in the Delayed Notification Conduct from 21 May 2021 until 26 August 2023 in respect of flights scheduled to depart between 1 May 2022 and 1 May 2024.
119 During that period:
(a) 60,297 flights (57,274 domestic/trans-Tasman and 3,023 international) were affected by the Delayed Notification Conduct;
(b) the Manage Booking Pages of up to 883,977 consumers were subject to the Delayed Notification Conduct (806,406 of those consumers held bookings on a domestic/trans-Tasman flight and 77,571 held bookings on an international flight). In respect of bookings that were ticketed, the total amount paid by consumers in relation to those tickets was $170.9 million; and
(c) on average, it took approximately 11 days for consumers who had purchased tickets on these flights to be notified that a cancellation decision had been made regarding their flight, and in some cases, up to 67 days after a cancellation decision had been made.
6.5.3 Knowledge of senior managers
120 Senior managers responsible for different aspects of Qantas’ systems and operations separately knew of at least one of the following matters:
(1) that flights the subject of a cancellation decision were not immediately removed from sale;
(2) that some consumers could and did make bookings on flights after those flights had been the subject of a cancellation decision;
(3) that consumers who had made bookings on flights that were the subject of a cancellation decision were not notified of that decision immediately; and
(4) that the Manage Booking Pages for flights that were the subject of a cancellation decision were not updated to reflect that decision promptly.
121 Although no single person knew all these matters, Qantas was aware of the way in which its system operated in relation to the removal of cancelled flights from sale, and the notification of consumers regarding flight cancellations.
6.5.4 Impact of Qantas’ offending
122 Qantas’ Continued Sale Conduct caused some consumers to make bookings on flights that had been cancelled, based on false and misleading information. Some of those consumers may have lost the opportunity to choose a different flight, including at a lower cost, either with Qantas or a different carrier. For example, some consumers may have paid a higher fare to fly at a particular chosen time, and may not have done so, or may have sought to travel at a different time or date or with an alternative airline, if they had been aware that a decision had been made to cancel the flight they were booking.
123 Further, some consumers may have suffered loss as a result of making travel or other arrangements based upon expected flight schedules. For example, consumers may have paid for travel arrangements which were not flexible or refundable, or which became non-refundable in the period between the date on which the consumer booked the relevant flight and the date on which Qantas notified the consumer that the flight had been cancelled.
124 As a consequence of the Delayed Notification Conduct, consumers may have incurred greater costs in making alternate arrangements closer to their scheduled departure date and may have had more alternative options available to them than if they had been promptly notified of the cancellation.
125 Qantas offered re-accommodation options to passengers on cancelled flights. Many of those re-accommodation offers were for an alternative flight which was close to the departure time of the consumer’s original flight. For some consumers, re-accommodation of this kind may have limited or ameliorated the harm suffered as a result of Qantas’ contravening conduct. However, for other consumers, the offered re-accommodation option may have been inconvenient or unsuitable, for example because it involved travel by an indirect route and/or an arrival time inconsistent with the purpose of the travel. Further, the offer of re-accommodation options for some consumers did not address the harm associated with a consumer’s loss of opportunity.
6.5.5 Resources at Qantas’ disposal
126 It is not in dispute that Qantas is a large corporate entity which generates substantial revenue and plays a large role in the Australian economy. Qantas is very well-resourced company, and as such was more than sufficiently positioned to have introduced the changes outlined at [53]–[58] above. Had these measures been introduced in a timely fashion, the contravening conduct would not have occurred, or would have been at least minimised as it would have been recognised and stopped much earlier.
6.5.6 Qantas’ prior conduct
127 On 8 June 2002 (varied on 20 November 2004), the ACCC accepted an undertaking for the purposes of s 87B of the CCA from Qantas to address the ACCC’s concerns regarding the manner in which airlines advertised airfares in relation to the disclosure of charges, levies and taxes, as part of an industry-wide change intended to minimise any possible risk of confusion to consumers. Pursuant to that undertaking, Qantas is required to advertise airfares that are inclusive of all amounts payable by a consumer in respect of the fare.
128 On 14 December 2018, the ACCC accepted an undertaking for the purposes of s 87B of the CCA from Qantas in relation to misleading or deceptive conduct and the making of false or misleading representations concerning the nature and potential application of the consumer guarantees to flights sold by Qantas, including about the remedies that consumers may be entitled to in the event of flight delays or cancellations. Pursuant to that undertaking, Qantas was required to take various steps to review and update its compliance program and policy, and make updates to its website.
129 Qantas’ subsidiary, Jetstar, has been found to have contravened the ACL on two occasions.
130 In 2015, this Court found that Jetstar had made false or misleading representations on its website on 14 May 2013 and its mobile site on 21 March 2014 in contravention of ss 18(1), 29(1)(i) and 29(1)(m) of the ACL: Australian Competition and Consumer Commission v Jetstar Airways Pty Limited [2015] FCA 1263. The representations concerned the price Jetstar would charge for particular flights where those representations did not disclose the existence of certain booking and service fees which applied. Jetstar was ordered to pay a penalty of $545,000: Australian Competition and Consumer Commission v Jetstar Airways Pty Limited (No 2) [2017] FCA 205.
131 In 2019, this Court ordered Jetstar to pay a penalty of $1.95 million in respect of contraventions of ss 18(1) and 29(1)(m) of the ACL between 10 April 2017 and 13 March 2018: Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd (2019) 136 ACSR 603. The conduct concerned false or misleading representations on Jetstar’s website regarding consumers’ rights under the consumer guarantees in the ACL. Jetstar admitted to the contraventions.
132 Notwithstanding the above, Qantas has not previously been found by a court to have engaged in a breach of the ACL.
133 Qantas raised eight mitigatory matters in its defence to justify the proposed quantum of the pecuniary penalty.
134 First, while the ACCC had initially alleged contraventions of s 36 of the ACL concerning wrongful receipt of payment at the commencement of these proceedings, this particular allegation was not pressed at in conclusion. Qantas submitted that the omission of this claim reduces the species of conduct in which it is alleged to have engaged in and means that this Court is not called upon to penalise conduct of that kind.
135 Second, the contravening conduct was mitigated to some degree in respect of some, but not all, consumers, by reason of the re-accommodation flights offered by Qantas, which were close in time to that of the cancelled flight.
136 Third, Qantas has since sought to remedy the system deficiencies that led to the contraventions. Since the proceedings commenced, Qantas has implemented the Automated Closure Solution (discussed above at [54]), which, depending on the volume of the cancellation decisions, usually takes between minutes and hours to complete. Qantas has introduced training programs to ensure that its employees are trained within these systems. Qantas has also begun implementing a new “flight cancellation pending” marker (discussed above at [58]). Qantas accepts that, while these steps could have been introduced earlier, its willingness now to implement these changes and reform practices indicates its desire to avoid contraventions of this kind in the future. Qantas submits that the implementation of these initiatives soften the call for specific deterrence.
137 Fourth, Qantas’ commitment to implementing change can be observed from the undertaking given to and accepted by the ACCC pursuant to s 87B of the CCA (the Undertaking). In accordance with the Undertaking, Qantas will:
(a) provide remediation up to the total amount of approximately $20 million to passengers who made a booking, or were re-accommodated onto, flights the subject of the Continued Sale Conduct;
(b) where it decides to cancel a flight on or after the commencement date of the Undertaking:
(i) send a communication to all existing ticketholders informing them of the cancellation and update the Manage Booking Page of all existing ticketholders as soon as practicable and in any case within 48 hours of the cancellation decision; and
(ii) cease offering tickets for sale for that flight as soon as practicable and in any case within 24 hours of the cancellation decision;
(c) procure all relevant subsidiaries of Qantas based, or operating, in Australia (including Jetstar) to comply with the requirements in the above sub-para; and
(d) review and amend its compliance program to minimise the risk of future breaches of the ACL and to ensure its awareness of the responsibilities and obligations in relation to the requirements of the ACL.
138 Fifth, Qantas has taken extensive steps to improve its compliance systems. As part of the Undertaking, Qantas has agreed to review and amend its Competition and Consumer Law Compliance Program, being amendments designed to minimise Qantas’ risk of future breaches of the ACL, and to ensure its awareness of its responsibilities and obligations in relation to the requirements of the ACL.
139 Sixth, Qantas has agreed to procure all of its relevant subsidiaries based or operating in Australia and including, importantly, Jetstar, to comply with certain requirements of the Undertaking. In takings its commitment to reform seriously, Qantas has designed, implemented and committed to whole of business improvements concerning notification of cancellations to customers.
140 Seventh, Qantas has cooperated with the ACCC to resolve this proceeding and in doing so has saved the time and resources of the Court as well as those of the regulator. This cooperation has been further demonstrated by Qantas entering into its Undertaking.
141 Eighth, Qantas is contrite and, as put by its senior counsel, deeply regrets the harm inflicted on the affected consumers and the Australian economy at large. Qantas has attempted to redirect its remorse by creating and partaking in initiatives aimed at redressing some of the harm it has caused.
6.6 Proposed quantum of the pecuniary penalty
142 The harm caused by the contraventions to consumers and the Australian economy cannot be properly quantified. The loss of opportunity, inconvenience and frustration arising out of the contravening conduct warrants a high penalty to properly convey that the Court does not tolerate contraventions of the ACL: NW Frozen Foods at 294–5 (per Burchett and Kiefel JJ). The need for general and specific deterrence must also be factored into the amount imposed to deter Qantas, and its competitors, from future contravention: TPG at [65]–[66] (per French CJ, Crennan, Bell and Keane JJ); Employsure at [49] (per Rares, Stewart and Abraham JJ).
143 Equally, the penalty should not be so severe as to be deemed oppressive or set an undue precedent: Pattinson at [41] (per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ); Reckitt Benckiser at [152] (per Jagot, Yates and Bromwich JJ).
144 It is generally inappropriate to impose a harsh punishment for conduct that, while unacceptable, is not as egregious as it could be, especially in circumstances where it was the offenders’ first offending of the kind. Although Qantas’ behaviour was intolerable, it should be acknowledged that within the spectrum of offending, this contravention is not at the highest level. Furthermore, I am satisfied that the initiatives implemented by Qantas demonstrate both its recognition of the seriousness of Qantas’ conduct and its deserved opprobrium. While it did require the intervention of a government regulator and the initiation of this proceeding, the matter has been resolved positively without the need for contested hearings on liability and penalty, saving precious court time and resources.
145 The parties submit that a total penalty of $100 million achieves the primary objectives of specific and general deterrence, informed by the mandatory factors and other relevant factors discussed above, and is within the appropriate range for the contraventions admitted by Qantas. They submit that it is appropriate to analyse Qantas’ conduct in terms of two courses of conduct, by reference to the two categories of conduct that gave rise to the contraventions, being the Continued Sale Conduct and the Delayed Notification Conduct.
146 The parties submitted general calculations, adopting the ‘course of conduct’ approach, which examines each course of conduct which would be seen as appropriately significant and reasonably reflect the difference between the courses of conduct.
147 The calculation for the Continued Sale Conduct is as follows. These are the most serious of the contraventions. Although fewer consumers were impacted by the Continued Sale Conduct than the Delayed Notification Conduct, the conduct nevertheless affected over 85,000 consumers, over a period of more than two years. Further, the nature of the conduct was serious in that it directly distorted consumers’ ability to make purchasing decisions based on accurate information. As a consequence, these contraventions were also likely to have caused the greatest harm, including due to consumers paying more to fly at a particular time in circumstances where Qantas had decided to cancel the relevant flight two or more days earlier, and consumers choosing to fly with Qantas over a different carrier based on the stated flight time and date. Qantas benefitted from the Continued Sale Conduct by obtaining and retaining revenue from customers who may have opted for an alternative flight, either through Qantas or an alternate airline, had they been informed of the cancellation two or more days earlier. Qantas gained a financial advantage by delaying the costs associated with making the changes to its system to avoid the contravening conduct at an earlier point in time.
148 Making allowance for Qantas’ cooperation, the parties submit that an appropriate total penalty for this course of conduct is $70 million.
149 A similar approach was adopted for the Delayed Notification Conduct calculations. These contraventions affected a very significant number of consumers (up to 883,977) over a more than two-year period. The contraventions resulted in harm to consumers, including incurring greater costs in making alternate arrangements closer to their scheduled departure date as a result of delayed notification of cancellation. The contraventions resulting from the Delayed Notification Conduct also resulted in benefits to Qantas, such as retaining revenue from consumers who, having purchased a ticket from Qantas, were less likely to change carrier when they were ultimately notified their flight was cancelled, and delaying the costs associated with making the changes to its system to avoid the contravening conduct at an earlier point in time.
150 Again, making allowance for Qantas’ cooperation, the parties submit that an appropriate total penalty for this course of conduct is $30 million.
151 A lower penalty is proposed in respect of this course of conduct to reflect the more limited harm stemming from these contraventions (as compared with the harm stemming from the contraventions which resulted from the Continued Sale Conduct), as well as to take into account the substantial overlap between the flights, and consumers, impacted by both courses of conduct.
152 The parties submit that in the circumstances of this case, the proposed total penalty of $100 million is appropriate and necessary. A total penalty of this size is just and appropriate and does not require an adjustment for totality.
6.7 Conclusion on penalty
153 Having regard to the matters set out in the SAFA, the joint submissions and the applicable principles, I am satisfied that it is appropriate to impose the aggregate pecuniary penalty of $100 million on Qantas.
154 Given the need to deter wrongdoing of this kind, by major and well-resourced corporations, it is appropriate that each penalty be, and be seen to be, significant.
155 The contraventions of the ACL were serious, occurred over an extended period of time (a period of approximately two years and two months) and affected a very large number of consumers. The contraventions affected a service that is critical to the Australian economy and to consumers, and inconvenienced a great many consumers.
156 The ACL provides a framework intended to protect consumers engaging in everyday transactions, operating in good faith with the expectation that they will receive the goods or services they have purchased.
157 Consumers reasonably expect businesses, to whom they have already made payment, to notify them appropriately where there has been a change in circumstances which will impact them significantly. Consumers also reasonably expect businesses not to continue to offer for sale services which those businesses have already decided to cancel.
158 Moreover, the absence of proper notifications reflects a disregard for the rights of consumers, who are entitled to transparency in their dealings with service providers. When customers are left in the dark about such significant disruptions, it not only impacts their immediate plans for transportation, but also involves layers of additional costs and time wastage as a result of Qantas’ inadequate performance. The conduct of Qantas falls far short of the standard of conduct required under the ACL and as such, highlights the need for appropriate penalties to ensure accountability and to deter the possibility of future contraventions across the aviation industry.
159 Equally, the Court must also recognise the efforts undertaken by Qantas in redressing the situation by actively taking measures to improve its systems and increase knowledge amongst its employees to ensure a breach of this kind does not occur again. Qantas is not only being penalised for their conduct, but it is also attempting to rectify the damage caused by the affected customers through its remediation program. By cooperating with the ACCC and openly admitting to its wrongdoing without the need for substantial and unnecessary litigation, Qantas has demonstrated its remorse and willingness to rectify the matter. Qantas has also apologised for engaging in the admitted contravening conduct.
160 Furthermore, this is Qantas’ first, and, it is to be hoped, the only offending of such a kind. Qantas itself has previously not been found liable for contraventions of the ACL.
161 I consider that the total penalty of $100 million is sufficiently large to impose the necessary ‘sting’ and not be just another cost of doing business. It is also sufficiently large to deter other large companies from engaging in similar conduct, whilst at the same time reflecting the mitigating factors, including Qantas’ early admission of it contravening conduct, its remediation program, its contrition for engaging in the contravening conduct and its giving of the Undertaking to the ACCC.
7. Costs
162 Pursuant to s 43 of the FCA Act, the Court is empowered to order costs in proceedings. The parties have agreed for Qantas to pay the ACCC’s costs of the proceeding in the amount of $400,000 and I made an order to this effect.
8. Conclusion
163 For the reasons given above, I made orders in the revised form proposed by the parties on 8 October 2024. These proceedings are now finalised.
I certify that the preceding one hundred and sixty-three (163) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rofe. |
Associate:
