REASoNING
16 A determination of the appropriate penalty in the present case can be approached by reference to the above considerations.
17 As to the first matter, the conduct of the defendant can be characterised as deceptive in that it falsely represented the pricing advantages suggested by the catalogue. The amount of the discrepancy between the actual prices which were charged and "WAS" prices was substantial in many cases and the suggested saving indicated was greatly exaggerated. The conduct of the defendant as demonstrated by the catalogue was designed to attract prospective customers, on an entirely false pricing basis, to buy goods from the defendant as opposed to its competitors. The effect was to significantly mislead or likely to mislead members of the public.
18 The advertising campaign as embodied in the catalogue was carried out in the Christmas lead-up period which is a period where, as indicated earlier, parties are less likely to negotiate downwards. The scale of the advertising campaign was broad and the geographic reach extended through four States.
19 There were 750,000 catalogues in question consisting of fifteen pages each with the offending misrepresentations spread over those pages wherein the price advantage suggested was prominent and the disclaimer on the back page was not. The statement in the disclaimer clause on the last page as to what the representations meant was obscure and totally inadequate to bring home the true position to a prospective customer or to any person able to read it. The existence of such a disclaimer, in my view, reflects a concern and appreciation by the defendant that the pricing needed some explanation but this was in effect buried at the back page of the catalogue in faint and very small print. The statement is generalised and clearly ineffective, there being no attempt made to rely on it in this proceeding. However, the existence of the "explanation" as indicated, has more significance above than a mere accidental failure to alert the customer to the inherent ambiguity. It indicates an awareness of the need for a proper explanation on the part of the defendant.
20 There was no evidence as to actual damage caused to any individual and the defendant stated that the goods were sold at market price. However, in my view, the conduct was such as to mislead customers, especially those not familiar with the marketing strategies in the musical instruments and products market and undermine the public interest in open and frank competition. Some significant damage to the public interest in fair competition must also have been engendered by the widespread distribution of the misleading material.
21 As to the third matter it is to be noted that the conduct took place during the Christmas sale period when, as indicated above, negotiation between buyer and seller was less likely. It is said that there is a discount mentality in the market and that prospective purchasers can be expected to negotiate and obtain a price discount, but, in my view, one cannot assume that customers are necessarily aware of this practice among sellers in the market. It may be accepted that, to some extent, a proportion of repeat buyers may be aware of this, but it is an assumption for which no proper basis has been shown in respect of its applicability in general. As a practical, commercial matter the bargaining position of the customer, even if there were negotiation, would be substantially diminished by reference to the statements indicating that substantial reductions have already been made to the price in the form of the "NOW" price. One could expect for example, that if a customer entered into negotiations to get a lower price, the response by the defendant might be to the effect that the price has already been very substantially reduced as indicated by the catalogue. On the facts of this proceeding, free, open and informed negotiation would be diminished by the false suggestions of price reduction.
22 As for factors four and five, which relate to the size and market power of the defendant, the evidence indicates that the company has a turnover of some tens of millions of dollars and cannot be said to be insubstantial in size. It operates on an inter-state basis. Notwithstanding that its market share is not a dominant one, it has a significant market share which, on the evidence, is relatively widespread.
23 Factor six considers the question of intention or deliberateness of the conduct. Assertions were made that the catalogues were compiled without any intention to deceive and that any misrepresentation was accidental. It is said that the misrepresentations arose from inadequate procedures. In my view, the failure to have any satisfactory process in place to ensure compliance with the Act is an important consideration when examining the conduct of the defendant. I do not accept that this was a matter of mere oversight given the timing, awareness and commercial sophistication of the defendant's officers as indicated in the "explanation" by way of disclaimer, which alluded to the possibility of a misunderstanding. In my view, the material was plainly designed to attract custom on a false basis during a key marketing period. The attraction of custom of course cannot be criticised, but the resort to misleading conduct is reprehensible, as acknowledged by the guilty pleas to the nine counts.
24 There is some force in the suggestion by the prosecutor that the difficult financial position of the defendant in the previous financial periods up to and prior to the campaign might provide an incentive to aggressively market and press for sales having regard to the substantial losses which had been incurred. I do not accept that a reasonably astute and commercially sophisticated Chief Executive Officer such as Mr Michael Brash, with six years prior experience specialising in retail, could inadvertently have overlooked the misleading nature of the advertisements. This is a matter which should have been identified by a reasonably competent and astute management, such as that which the defendant company appears to have had. In my view, the contravention arose in the course of a campaign calculated to attract customers' business without regard to the false or possible misleading nature of the assertions in the catalogue. These matters were not given any attention.
25 There has, however, since the time of the offence been an extensive compliance programme established in response to the acknowledged contravention and this, coupled with the cooperation of the defendant and the plea of guilty are mitigating factors which I have taken into account on the question of penalty. This is the subject of the ninth factor.
26 An important consideration is that the defendant has no prior convictions since its incorporation in 1998.
27 As mentioned earlier I cannot agree that the existence of a discount culture on the part of suppliers in the market provides any basis to justify or mitigate the making of false claims as to reductions from prices represented as having been previously charged. In particular, I do not accept that a customer would understand the pricing policies of the suppliers in the market as referring to reductions from a prior recommended price as opposed to a prior actual price.
28 I also note that there were no complaints, apart from the complaint to the prosecutor, from customers, but customers, of course, would probably not have been aware of the discrepancies in pricing between that represented and that which was actually charged.
29 Finally, the defendant has indicated that it proposes to offer each of the customers affected a $50 Allans gift voucher and if the customer cannot be contacted it will then donate $50 to charity. I have also taken this into account, but it should be borne in mind that the extent to which Allans departed from the true position as to earlier pricing is significantly in excess of $50 and in some cases amounts to a difference in excess of a $1,000 in respect of an individual item. There were approximately 170 sales involved.
30 Having regard to the above considerations and, in particular the lack of any compliance program prior to the breach, as well as the failure to advert to the likely effect of the statements in the catalogue, I consider that the appropriate penalty in total in respect of the nine counts for which guilty pleas were entered is an amount of $80,000.
31 Accordingly, I record a conviction of the defendant on counts 2, 4, 6,7, 9, 11, 14, 15 and 17 of the Information for an Offence filed on 30 April 2002. I fix the penalty in respect of these counts as a total amount of $80,000 cumulatively. I order the defendant to pay the costs of the prosecutor. I order that the fine be paid within three calendar months of this date: in default, distress.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.