The Federal Court has ordered that Lux Distributors Pty Ltd (Lux) pay $370,000 in pecuniary penalties for engaging in unconscionable conduct during the sale of vacuum cleaners to three elderly consumers in their homes.
The decision comes two years after the Full Federal Court allowed the ACCC’s appeal against the first instance decision, blogged about here, in which it was found that Lux had not engaged in unconscionable conduct. As outlined in our previous blog post, the Full Federal Court found that Lux had engaged in unconscionable conduct when its representatives entered the homes of three elderly women on the premise of offering a free vacuum cleaner maintenance check. The Full Federal Court appeal was a significant decision in relation to the scope and operation of the unconscionable conduct provisions in the Australian Consumer Law (ACL) and can be found here.
After the Full Court appeal, the matter was remitted to the first instance judge, Justice Jessup, who made orders requiring the payment of the penalties, restraining Lux from engaging in similar conduct in the future, and requiring Lux to implement a consumer law complaints system, compliance policy and training program. In fixing the penalties, Justice Jessup took into account a number of matters including:
- the important role of deterrence in civil penalties
- the seriousness of unconscionable conduct;
- the deliberate nature of Lux’s contravening conduct; the size of Lux; the involvement of Lux’s senior management in the overall sales framework (although they did not have knowledge of the particular transactions or knowledge that the conduct was in breach of the law); and
- Lux’s cooperation with the ACCC during its investigation, and by agreeing to resolve the question of relief (that is, the orders to be made by the Court) by consent.
The penalties imposed represent about 90% of Lux’s pre-tax profit over the five years to 30 June 2014. Justice Jessup said the penalties ‘may be regarded as a harsh outcome’ but, viewed in context, were appropriate. The decision highlights that Courts are prepared to order significant penalties for breaches of the ACL. The ACCC highlighted the vulnerability of the consumers involved and the deliberate nature of the breaches. The decision reflects the ACCC’s commitment to strong enforcement and consumer protection, particularly of vulnerable consumers. The ACCC listed consumer protection issues affecting vulnerable consumers, including older consumers, as a priority area in its 2015 Compliance and Enforcement Policy, available online. ACCC Chairman Rod Sims highlighted that older consumers have been targeted by unscrupulous sales people and require extra confidence their rights are being protected.