The ongoing proceedings between the Australian Competition and Consumer Commission (ACCC) and Reckitt Benckiser, the manufacturer of Nurofen-branded products, has taken an interesting turn. Last month, after successfully securing a consent judgment against Reckitt Benckiser (regarding its Nurofen product range), the ACCC took the unusual step of seeking discovery of documents from Reckitt Benckiser after judgment had been entered. The ACCC’s application was unusual as it related to an issue that had not previously been raised by the ACCC in its pleadings. If the “new” issue is pressed by the ACCC, it may pose interesting questions in the future for parties wishing to settle proceedings with the Commission.
In December 2015, the Federal Court of Australia ruled the promotion by Reckitt Benckiser of its Nurofen-branded products as treatments for specific ailments, such as migraines, tension headaches, period and back pain (Nurofen Specific Pain Range) was misleading and deceptive. The ACCC commenced the proceedings by way of a Fast Track Statement, which is only required to state, in summary form, the nature of the dispute, the issues likely to arise in the proceeding, and the applicant’s contentions. The ACCC’s Fast Track Statement, filed before liability and penalty were ordered to be heard separately, did not contain any suggestion that Reckitt Benckiser had systematically, deliberately, or covertly contravened the Australian Consumer Law (ACL) or had ‘taken the odds’.
On 17 February 2016, following judgment on liability, the ACCC brought an application for interlocutory orders for discovery relating to the upcoming penalty hearing. The ACCC sought documents falling into eight different categories, six of which attempted to establish what were described as ‘intentionality’ issues and were said to be relevant to the determination of the size of the penalty to be ordered. The documents sought concerned:
- the ‘deliberateness’ of the contravention
- the conduct as ‘systematic’, ‘deliberate’, or ‘covert’
- whether Reckitt Benckiser ‘took the odds’ or ‘courted the risk’ of engaging in contravening conduct.
The central questions for the Court were whether it should order discovery of documents relevant to the intentionality issues (despite them not having been raised in the Fast Track Statement) and the extent to which the ACCC was required to plead facts upon which it intends to rely in the forthcoming penalty hearing.
The Court’s decision
The Court largely ruled against the ACCC finding that Reckitt Benckiser was not presently required to discover documents relating solely to the intentionality issues. In relation to those six categories, the Court noted that, as the intentionality issues had not been pleaded and were very serious allegations, the ACCC must first seek leave to amend its Fast Track Statement so that the allegations are properly defined. While Fast Track proceedings are intended to ensure that the dispute is presented in an efficient, cost effective, and expeditious manner, this will not come at the expense of natural justice – a party remains entitled to be informed of the essential allegations made against him or her, including the material facts upon which the allegations are based.
In addition, the Court noted:
- the most basic considerations of natural justice require that Reckitt Benckiser have the opportunity to resist an application to amend the Fast Track Statement, which will shape the discovery it is required to provide
- an amended pleading that alleges these matters will only be possible if the ACCC has a proper basis to make some or all of these serious allegations
- the precise identification of these allegations in an amended Fast Track Statement will permit a discovery application which is closely tailored to the issues.
In reaching this decision, his Honour cautioned that:
My provisional view is that at this late stage it is difficult to see the justice in allowing an application which (i) raises sweeping allegations of “intentionality” using broad and vaguely formulated terms like “deliberate” without specifying what was the alleged deliberation, and (ii) expands the conduct of the post-trial penalty hearing to require more than $150,000 cost in producing potentially hundreds of documents and involving more than a month of delay which threatens the hearing date.
He then encouraged the parties to confer to try to agree a narrower amendment so as to assist in reducing the categories of documents to be discovered.
Further recent developments
Since the February hearing, the Court has made further orders by consent requiring Reckitt Benckiser to produce further documents recording: consideration by Reckitt Benckiser staff of its obligations under the ACL regarding the packaging of the Nurofen Specific Pain Range; and its sales strategies and member programs for that range. As such, it appears that the parties have acceded to his Honour’s suggestion regarding conferral. Time will tell whether this leads to a more confined and narrowly pleaded amendment to the matters in issue between the parties for the penalty hearing.
What does it mean?
If the ACCC is able to show that Reckitt Benckiser deliberately engaged in the conduct, then the likely penalty will be much higher than if the conduct had merely been inadvertent or careless. This most recent development is also unusual in that the ACCC has sought to change its case after the parties agreed to enter judgment. Query whether Reckitt Benckiser would have been as willing to do so if it had known that the ACCC was subsequently going to ‘up-the-ante’ by alleging the misleading conduct was deliberate, systemic and covert. In future, parties settling with the ACCC may want to seek assurances that an agreement to resolve a proceeding will close the door to new and potentially serious issues being raised against them.