The ACCC has recently brought criminal proceedings against two corporate officers in relation to investigative notices issued by the Regulator. Partner, Anne Freeman summarises the actions.

Section 155 CCA

The ACCC has broad powers under section 155 of the Competition and Consumer Act (CCA) to require the furnishing of information, production of documents or giving evidence where it has reason to believe that the person to whom the notice is directed can do so in relation to a matter which constitutes or may constitute a contravention of the CCA, amongst other things. It is an offence to refuse or fail to comply with a notice or to knowingly furnish information or give evidence that is false or misleading.

Criminal Proceedings Commenced

In October 2014, the ACCC commenced criminal proceedings in the Federal Court in Brisbane against Robert Davies, the sole director of Natural Food Vending Pty Limited (Natural Food), alleging that he had aided and abetted the failure by Natural Food to comply with a section 155 notice. The notice had been issued in 2010 as part of an investigation by the ACCC as to whether Natural Food had made false or misleading representations in the promotion and sale of vending machine business opportunities.

The company appointed a liquidator on the date that the response to the section 155 notice was due, and the company did not respond to the notice.

It is alleged by the ACCC that Mr Davies failed to inform the liquidator of the notice or of the investigation. In that respect, the ACCC says that Mr Davies aided, abetted, counselled or procured the failure by Natural Foods to comply with the notice.

The prosecution closely follows another set of criminal proceedings also commenced by the ACCC in the Federal Court in Brisbane against Michael Boyle for allegedly providing false or misleading evidence in an examination pursuant to a section 155 notice.

The notice had been issued in 2011 as part of an investigation into Sensaslim Australia Pty Limited (Sensaslim). That investigation led to civil proceedings against Sensaslim and some of its officers, alleging that the company and the relevant officers had engaged in misleading and deceptive conduct and made false representations in relation to the identity of Sensaslim officers, the Sensaslim Spray and the business opportunities offered by Sensaslim, including:

  • failure to disclose the involvement of notorious businessmen, Peter Foster, in the business
  • falsely representing that the Sensaslim Spray was the subject of a large worldwide clinical trial when such trial was conducted
  • falsely representing that Mr Boyle was managing the business of Sensaslim
  • failing to disclose that Mr Boyle was intending to resign as Director immediately following the launch of Sensaslim
  • falsely representing that Sensaslim franchisees were already participating in and profiting from the Sensaslim franchise, that the franchise had a certain earning potential and that there was a “money back guarantee”.

The ACCC alleges that at the examination of Mr Boyle, he knowingly gave false or misleading evidence about his knowledge of the involvement of Mr Foster with the business.

The penalties which can be imposed if the offence is proved are a fine of up to $3,400 or up to 12 months’ imprisonment.

The prosecutions serve as a warning to companies and officers that the ACCC takes compliance with section 155 notices seriously, and is willing to bring criminal proceedings some years after the notice is issued.

By way of postscript, the Harper review has in its draft report recommended that the ACCC review its guidelines regarding responses to section 155 notices, and that the obligations of a person to produce documents to the ACCC in answer to a notice should be modified so that the obligation is to undertake a “reasonable” search of documents. That recommendation is designed to reduce the burden of compliance with production notices, given the burdens of documentary searches in the digital age.