PECUNIARY PENALTIES
5 It is pertinent to pause at this stage and reflect on the conduct of Energy Watch and Mr Polis. They have contravened three very important provisions of the ACL, two of which have penal consequences. In a mass-marketed campaign (which, according to Mr Polis's evidence, cost millions of dollars) Energy Watch made six types of false and misleading representations in 80 advertisements across various forms of media. The campaign was aimed at saturating the public with its business product. The representations were that Energy Watch's services had uses and benefits that its services did not have; see s 29(1)(g) of the ACL. Energy Watch deceived the Australian public in a very serious way. Mr Polis did likewise in radio broadcasts in Brisbane. He did so as the figurehead of Energy Watch, thereby giving greater gravitas to the false and misleading conduct than if the radio advertisements had been spoken by a voiceover actor. The Australian people have been misled and deceived by the sharp business practices engaged in by Energy Watch and Mr Polis and they would rightly expect that such conduct not be treated lightly by this Court.
6 The conduct can also be described as liable to mislead the public as to the nature, characteristics and suitability for their purpose of the services of Energy Watch; see s 34 of the ACL.
7 Each of ss 29 and 34 of the ACL (unlike s 18) is a penalty provision. Under s 224 of the ACL, the relevant maximum penalty for breaches of those provisions is $1.1 million for a body corporate and $220,000 for an individual. Whilst Energy Watch and Mr Polis breached ss 29(1)(g) and 34, the same underlying courses of conduct were involved in the contraventions of each provision. A single penalty for the breach of both provisions is mandated by s 224(4)(b) of the ACL which provides that a person is not liable to more than one pecuniary penalty under s 224 in respect of the same conduct.
8 Under s 224(2), the Court is required, in setting penalties, to have regard to all relevant matters, including the nature and extent of the act and any loss or damage suffered, the circumstances in which the act occurred and any previous relevant transgressing conduct.
9 The other relevant matters envisaged by s 224 are not in contest. They include:
the size of the contravening company;
the deliberateness of the contraventions and the period over which they extended;
whether the contraventions arose out of the conduct of senior management;
whether the company has a corporate culture conducive to compliance with the ACL;
whether the company has cooperated with the ACCC; and
the financial position of the company.
10 However, the most significant factor is the question of general deterrence. Specific deterrence will also have a role to play with Mr Polis. As the Full Court said in Singtel Optus v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [62]:
…the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by that offender or others as an acceptable cost of doing business.
11 Mr Star, counsel for the ACCC, submits, and the Court accepts, that there are 12 relevant courses of conduct pertinent to the assessment of penalty. They are:
1. The Big Screen television advertisements;
2. Door Knocker television advertisements;
3. The You Could Be Getting Ripped Off television advertisements;
4. The Jack Watts television advertisements;
5. The nine radio advertisements in Brisbane featuring Mr Polis;
6. The thirty advertisements published in Melbourne daily newspapers over the period 2 July 2011 to 30 August 2011, other than The Age foldout of 26 August 2011;
7. The three page foldout advertisement published in The Age on 26 August 2011;
8. The AFL Record for the round played on 26-28 August 2011;
9. The Energy Watch website advertisements;
10. The associated website advertisements;
11. The eleven billboard advertisements; and
12. The MCG scoreboard advertisements during three AFL games.
12 Mr Star submits that the appropriate penalty for those courses of conduct is as follows:
1. $250,000;
2. $250,000;
3. $250,000;
4. $250,000;
5. $250,000;
6. $250,000;
7. $50,000;
8. $50,000;
9. $150,000;
10. $50,000;
11. $100,000;
12. $50,000.
13 For the reasons set out below, the Court is satisfied that any lesser penalties on Energy Watch than those proposed by the ACCC would be insufficient to provide adequate general deterrence. The corporate world should know that it is wrong to engage in such deceptive business practices and that doing so will incur the risk of large penalties; see judgment of the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 294-295. Mr Star pointed out that the ACCC's proposal for penalties includes a consideration of the totality principle. Even if that had not been the case, I would not have reduced the penalty on Energy Watch any further, having regard to the totality principle. Any lesser penalty would fail to give adequate recognition to the principle of general deterrence, given the seriousness of the contravening conduct. In assessing the appropriate penalty at $1.95 million, I have considered the matters referred to below.
14 The relevant circumstances concern the retail energy industry. Retail energy prices are a matter of public interest. For many people, energy bills represent a large part of day-to-day living expenses. Energy prices are also significant for businesses. In this context, it is likely that consumers, both household and business, would have been attracted by representations that lower retail energy prices may be achieved through Energy Watch. Indeed, the Energy Watch advertising campaign referred to helping "over 150,000 people every year". To that figure should be added the people whom Energy Watch could not help but who were, nonetheless, drawn into its marketing web.
15 The advertising campaign lasted from late January 2011 until early September 2011. The television advertisements were virtually inescapable for Melbourne viewers, involving high frequency broadcasts across commercial metropolitan stations. The radio advertisements in which Mr Polis featured as the voice of Energy Watch ran from at least 22 June 2011 to 3 August 2011 in Brisbane. The radio stations concerned had a significant combined share of the Brisbane radio audience market at the time.
16 The newspaper advertisements were prominent and difficult not to notice. They were usually large in size and brightly coloured. The foldout which appeared in The Age newspaper on 26 August 2011 was particularly prominent. The other advertisements constituting the various other courses of conduct (referred to above) were also prominent, especially the billboards. It was extremely difficult to be a Melbournian and not be aware of Energy Watch and its advertising claims in the period from February to August 2011. Brisbane residents were exposed to the message via the airwaves for a shorter period. The newspaper advertisements travelled to wherever Melbourne daily newspapers were available and the internet advertising took the Energy Watch messages into cyber space.
17 There is no evidence before the Court of actual loss or damage to any consumers but it would be fanciful to suggest that many consumers were not drawn into the marketing web of Energy Watch by its contravening conduct. I accept the submissions of the ACCC that the contraventions recorded in the declarations were serious in nature and that they were likely and liable to mislead consumers about specific monetary savings and the extent of the comparisons engaged in by Energy Watch.
18 The Court observes that Energy Watch and Mr Polis have no record of previous relevant contravening conduct and, but for that factor, each of them would have been punished more severely than they have been in this matter.
19 The Court observes that Energy Watch was a medium sized company which earned large cash flows during the currency of its advertising campaign. In the year ending 30 June 2011, Energy Watch made close to $12 million in income before expenses. In the year ending 30 June 2012, its income before expenses exceeded $14 million. Why it is now in liquidation with debts of about $8 million is not explained by any evidence before the Court. It is important to stress that Energy Watch should not be punished as if it had been a small business. Its sponsorship agreements, for example, attest to its former size. These included a $6 million sponsorship with the Melbourne Football Club, the Melbourne Victory sponsorship of $500,000 and the Melbourne Rebels sponsorship of $300,000. Further, the Court should not be deterred from imposing the appropriate penalty by the fact of Energy Watch's liquidation. Otherwise, insufficient attention will be paid to the very important consideration of general deterrence.
20 As the Full Court said in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [21]:
…there will be cases where other factors make it clearly desirable to impose a penalty on a company even though it is in liquidation.
This is such a case. It does not matter that the $1.95 million penalty which the Court will impose on Energy Watch will never be paid. The penalty will serve as a warning to all business people who engage in energy brokering services, not to replicate the conduct recorded in the declarations.
21 In assessing the appropriate penalty, the Court has had regard to the deliberateness of the conduct and the fact that it occurred without Energy Watch obtaining legal advice about compliance with relevant consumer laws. Although Energy Watch cooperated with the ACCC in the efficient conduct of the trial, and is given credit for that, it should be noted that the ACCC first warned it about compliance issues concerning its advertising content in mid June 2011.
22 The assessment of an appropriate penalty on Mr Polis is a more difficult task. The ACCC submits that a penalty of $100,000 is appropriate. His counsel, Mr Strong, submits that $20,000 is sufficient, given his current lack of means and the public disgrace that he has recently incurred. Mr Strong also refers to the lesser public reach of the radio advertising engaged in by Mr Polis in comparison to the other forms of advertising.
23 Mr Polis was the public face of Energy Watch. His personal endorsement in the radio advertisements, which in many broadcasts may fairly be described as high pressure salesmanship, was significant. He presented the advertisements in an authoritative and convincing manner. Although the extent of competition in the electricity market in Brisbane was much smaller than in Victoria, his contravening conduct is not to be downplayed.
24 However, any penalty imposed on Mr Polis should not be crushing. It should be a penalty which pays sufficient attention to general and specific deterrence, but one which is realistic and capable of being paid over a reasonable period of time. Although Mr Polis is currently suffering financial hardship, I have no doubt that he will recover from that situation. He is young, intelligent and energetic. He has already recovered from two previous failed business ventures. Taking all relevant matters into account, but especially the need for specific and general deterrence, it would not be a sufficient acknowledgement of the gravity of the offending to impose a penalty of any less than $65,000 on Mr Polis, even when one takes into account the totality principle, which the Court does.