If you find yourself in the ACCC’s sights this year, what should you do?
In the weeks leading up to Christmas 2016, the ACCC won a number of multi-million dollar victories against several high profile litigants for conduct which included cartel conduct, price fixing, and misleading and deceptive conduct. Not least of these was an appeal in the Federal Court of Australia which it won against Reckitt Benckiser (Australia) Pty Ltd (Reckitt Benckiser).
In April 2016, the Federal Court ordered Reckitt Benckiser to pay a civil pecuniary penalty of $1.7 million1 for engaging in misleading, deceptive and false conduct in the marketing of its Nurofen Specific Pain Relief products.2 You can find a link to our paper on that decision here: Reckitt Benckiser’s Nurofen nightmare: A painful ending, or just the beginning?
The ACCC appealed the decision and, on 16 December 2016, that appeal was upheld by the full court of the Federal Court. The full court ordered that Reckitt Benckiser pay a revised pecuniary penalty of $6 million – the highest ever corporate penalty to date for misleading conduct under Australia’s consumer laws.
The full court found that the primary judge had given undue weight to the course of conduct principle in determining penalties. This was because, having identified two courses of conduct by Reckitt Benckiser – the product packaging and website representations – the primary judge had then settled on an overall penalty which fell comfortably within the limit of $2.2 million.
In contrast, the full court preferred to focus on the sheer number of contraventions committed by Reckitt Benckiser over the five years during which the impugned packaging was sold. It held that the misleading character of the representations meant that they had operated as contraventions “each and every time a consumer saw the packaging”.3
Moreover, the full court noted that these contraventions had become increasingly serious over time as Reckitt Benckiser’s compliance procedures continued to fail to trigger an adequate response by Reckitt Benckiser to criticism in the media over its marketing campaign.
In light of the sheer volume of contraventions therefore, and taking into account factors such as the extent of additional profits made by Reckitt Benckiser from its conduct (this was estimated to be in the order of $25 million) and the specific need for deterrence, the full court considered that $6 million was a more appropriate penalty.
- What does this mean for you?
Our key message for you from this decision is simple. Take on the ACCC in court at your own peril.
The full court accepted almost every argument raised by the ACCC on appeal. These included submissions on how loss to consumers should be determined, the proper application of the course of conduct principle, and the manifest inadequacy of the penalty imposed by the primary judge.
The full court even made comments in its judgment to the effect that the ACCC may have been overly modest in the quantum of the pecuniary penalty sought. “Sitting as trial judges,” the full court noted, “we would have been entitled to impose a considerably greater penalty”.4
As we noted in our earlier paper, a consumer class action has been launched against Reckitt Benckiser. The first hearing is listed for 8 February 2017 and will be before Justice Jagot – one of the appeal judges who sat in the most recent instalment of Reckitt Benckiser’s Nurofen nightmare.
Given the tone of the full court’s decision, we’re not expecting it to be a walk in the park for Reckitt Benckiser.