In November 2017 the Australian Competition and Consumer Commission (ACCC) commenced proceedings against Apple Pty Ltd in the Federal Court of Australia, alleging that it engaged in misleading or deceptive conduct and made or false or misleading statements to consumers about the availability of remedies under the Australian Consumer Law (ACL) in respect of defective iPhone and iPad devices.
The ACCC’s entire case rested on telephone calls which officers of the ACCC made to retail stores operated by Apple Australia. The relevant calls were “based on a series of fictions” and, in particular, a ruse was employed by the officers pretending to be a fictional consumer with a fictional defective iPhone.
There were two outcomes to the initial calls made by ACCC officers in April 2016: either a communication from an Apple employee that the fictional consumer had no rights under the ACL to a free repair or, alternatively, a request was made that the fictional iPhone be brought into an Apple store so that it could be looked at by Apple technicians.
After making the initial calls, the ACCC officers thought about how they could hone their technique. They decided to add a further element, namely, that the fictional consumer lived an inconvenient distance away so that it was impracticable for the fictional consumer to come into the Apple store. This was adopted so as to make it more likely that there would be an answer given (or admission made) by the Apple employee about whether the fictional consumer had a right to free repair under the ACL.
Ultimately, the case brought by the ACCC relied upon 13 telephone calls made in June 2016 during which an Apple employee made a statement to the effect that the fictional consumer did not have a right to free repair under the provisions of the ACL.
After proceedings had been commenced by the ACCC, Apple indicated that it objected to the evidence of the telephone calls in its entirety, including on the basis that the evidence was obtained improperly or in consequence of an impropriety within the meaning of s 138(1) of the Evidence Act 1995 (Cth). Section 138(1) provides that:
(1) Evidence that was obtained:
(a) improperly or in contravention of an Australian law, or
(b) in consequence of an impropriety or of a contravention of an Australian law,
is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.
The first stage of the Court’s task under s 138(1) is to determine whether the evidence was obtained (a) improperly or in contravention of an Australian law, or (b) in consequence of an impropriety or of a contravention of an Australian law.
The Federal Court (Lee J) observed (at ) that to amount to impropriety the conduct in question “must be quite or clearly inconsistent with (the minimum standards expected and required in the relevant context) ... mere doubts about the desirability of appropriateness of particular conduct will not be sufficient”.
The evidence adduced by the ACCC included that officers making enquiries of traders without disclosing that they are from the ACCC (described as “Jo Consumer enquiries”) are an important investigative tool for the ACCC to carry out its enforcement activities. Furthermore, the ACCC has internal guidelines or a framework as to how to conduct “Jo Consumer” operations, setting out the circumstances in which covert calls to are to be made. No evidence was adduced of the guidelines or framework, however, so the court did not know if the conduct in this case was consistent with same.
Importantly, the Court was not satisfied that the covert activity was embarked upon by reference to any perceived difficulty in the ACCC obtaining evidence relevant to the topic of the investigation, i.e. after exhausting (or dismissing as impracticable) non-deceptive investigative techniques to obtain similar evidence.
The Court also formed the impression on the evidence that the ACCC, or at least the head of the Enforcement Division of the ACCC (who gave evidence) “treated the use of deceptive investigative techniques with apparent insouciance”.
In light of the above, the Court concluded that the minimum standards expected of a regulator such as the ACCC and required in the relevant context were breached and the breaches were not minor, with the result that the evidence was obtained improperly for the purposes of s 138(1).
The second stage of the Court’s task under s 138(1) is to determine, by the principled exercise of discretion, taking into account the list of matters set out in s 138(3), whether the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.
The Court observed that in its view, the particular conduct was very much at the lower end of the spectrum of impropriety. Furthermore, the ACCC officers involved subjectively believed that they were behaving appropriately (albeit in the Court’s view overzealously), with the apparent approval of their superiors, and consistent with the general approach taken by the ACCC to Jo Consumer enquiries. The evidence also had a high probative value and importance in the case that the ACCC wished to advance against Apple.
The Court thus concluded in all the circumstances that the evidence should not be excluded under s 138. Lee J stated (at ):
Although I have disquiet about what has occurred and some surprise that a tighter rein is not kept within the ACCC to ensure that covert activity is not engaged in unless it is strictly necessary, in the particular circumstances, I do not believe that this conduct is of sufficient seriousness such that the rejection of the evidence should be used as some way of vindicating the contravention of what I regard to be the appropriate standards of conduct.
- It is possible for evidence obtained improperly or in contravention of an Australian law to be admitted into evidence. The Court will undertake a balancing exercise in determining whether such evidence is to be admitted or not. The relevant considerations will include the gravity of the impropriety (or where on the spectrum of impropriety, in the Court’s view, the particular conduct falls).
- Investigative bodies such as the ACCC need to be careful to ensure that they do not jump straight to using ‘deceptive’ methods of investigation, without first exhausting (or dismissing as impracticable) non-deceptive techniques to obtain similar evidence. The Court will scrutinise whether any ‘deceptive’ investigative techniques employed were truly necessary to obtain the evidence in question. If the answer is no, then this will increase the risk of the evidence being excluded on the basis that it was obtained improperly.