Is the proposed penalty within the permissible range?
26 The most concerning aspect of Apple's contravention of s 33, is the deliberate nature of its conduct. Apple does not seek to deny the deliberateness of its conduct and there are no facts before me which seek to excuse or explain the conduct, other than that the conduct occurred at the behest of Apple's parent company, the second respondent ("Apple Inc").
27 The promotional campaign for the "iPad with WiFi + 4G" was settled and deployed by Apple Inc. Apple Inc provided marketing material to Apple for the campaign to market the "iPad with WiFi + 4G" in Australia. Those materials were then provided by Apple to its various resellers in Australia. The same campaign was used worldwide by the Apple group of companies.
28 The controlling hand of Apple Inc may also be discerned from the fact that, despite the ACCC and others having raised their concerns with Apple regarding its conduct on a number of occasions from 15 March 2012, Apple did not desist in its use of "iPad with WiFi + 4G" until 12 May 2012, when the product designator was changed globally.
29 Apple was aware that the "iPad with WiFi + 4G" was not compatible with the Telstra LTE network. That matter was raised with Apple as early as 8 March 2012.
30 In my view, the risk of a contravention of s 33 of the ACL was reasonably obvious, and must have been recognised as substantial by those within Apple familiar with the Australian market's understanding of the term "4G". In that context, and in the absence of any other explanation, the facts to which I have just referred, suggest that Apple's desire for global uniformity was given a greater priority than the need to ensure compliance with the ACL.
31 Conduct of that kind is serious and unacceptable.
32 Multi-national corporations who (through their subsidiaries or otherwise) operate in and profit from the Australian market, must respect that market and the laws which serve to regulate it and protect its participants. Those who design global campaigns, and those in Australia who adopt them, need to be attuned to the understandings and perceptions of Australian consumers and ensure that representations made by such campaigns will not serve to mislead. The penalty imposed in this case, needs to make that message clear.
33 The reach of Apple's conduct was extensive and substantial. The class of consumer concerned with the functionality of the new iPad cellular model was a very broad demographic, being the general public. I have identified the categories of use of the product designator at [12] above. There was wide publication of the product designator in a very short period of time, including because of Apple's launch of the new iPad and the use of the product designator on Apple's website, at its retail stores and at over one hundred and fifty reseller outlets. The product designator "iPad with WiFi + 4G" was used in the context of an Australia-wide multi-media campaign, which received extensive media coverage.
34 The number of new iPad cellular model devices sold by Apple in the relevant period was very substantial. The specific number of sales has been provided to the Court, but is not here disclosed to protect its confidentiality.
35 It is not possible to say, with any certainty, how many Australian consumers were misled by Apple's use of the term "4G". Nor is it possible to discern the level of disappointment (as distinct from proven loss or damage) involved for those consumers who were misled. I have no doubt that given the promotion by Telstra of the superiority of its 4G network, many purchasers will have felt decidedly short-changed, despite the fact that only a very small percentage of them took up the opportunity of a refund, offered by Apple on 28 March 2012 as part of the undertakings given to the Court. Beyond that, all that I am able to do on the evidence before me, is recognise that the wide-ranging reach of the conduct is likely to have resulted in many hundreds of thousands of consumers being exposed to Apple's misleading use of the term "4G". The potential for harm may be taken into account in determining the seriousness of a contravention: Australian Competition and Consumer Commission v Rural Press Ltd [2001] FCA 1065 at [46] (Mansfield J). That potential, adds significantly to the seriousness with which the contraventions of s 33 must be regarded. However, for reasons to which I now turn, the potentially adverse effect of the conduct was likely to have been substantially diminished by about 4 April 2012.
36 In assessing the extent of the conduct and its potential effect, I have taken into account the action taken by Apple in furtherance of the undertaking it gave to the Court on 28 March 2012, on the return of the ACCC's application for interlocutory relief. Apple undertook to prepare a statement advising consumers that the new iPad cellular model was not compatible with current Australian 4G LTE networks and WiMax networks. By 4 April 2012 (about half way through the relevant period), that statement was prominently displayed on Apple's website and at the points of sale in its stores and those of its Australian resellers. I regard that action, and the related media attention which accompanied the giving of the undertakings by Apple, as likely to have very substantially diminished the potential for consumers to be misled.
37 I have also taken into account, as an ameliorating factor to the severity of any penalty, that there is no evidence before me as to any actual loss or damage caused to consumers or to Apple's competitors. In that latter respect, all that the evidence identified was that during the relevant period, a third party tablet device was being promoted by the use of the "4G" descriptor. That device was compatible with the Telstra LTE network.
38 Addressing the circumstances in which the conduct took place and the need for specific deterrence, should also involve consideration of the size and financial position of the contravener. As Goldberg J said in Australian Competition and Consumer Commission v Leahy Petroleum (No 3) [2005] FCA 265 at [39]:
The penalty imposed must be substantial enough that the party realises the seriousness of its conduct and is not inclined to repeat such conduct. Obviously the sum required to achieve this object will be larger where the Court is setting a penalty for a company with vast resources.
See further Rural Press at [56] (Mansfield J) and TPG Internet (No 2) at [114]-[116] (Murphy J).
39 For that purpose, confidential information was provided to the Court. There is no issue as to the capacity of Apple to pay a substantial penalty. The matter of far greater concern is what level should a penalty be set in order that it will be meaningful for a corporation with the substantial net assets and net profitability of Apple.
40 The agreed facts do not permit an assessment of whether or not Apple has a corporate culture conducive to compliance with the ACL, which is evidenced by educational programs and disciplinary or other corrective measures taken in response to acknowledged contraventions. For reasons I have earlier adverted to, the agreed facts do suggest that Apple's senior management was involved in the conduct. In Apple's favour, the agreed facts do however, accept that Apple has never before been engaged in conduct similar to that which is the subject of this proceeding. I have given that factor significant weight.
41 I have also given Apple credit for its disposition to co-operate with the ACCC, the responsible authority for the enforcement of the ACL. That co-operation was in part demonstrated by Apple's preparedness to give undertakings on 28 March 2012 which, amongst other benefits, avoided a contested interlocutory hearing. Apple agreed to proposed penalties and participated in the making of joint submissions, which avoided the need for a contested final hearing. Apple's acknowledgement of its liability, entitles it to a reduction in the amount that would otherwise be assessed: Leahy Petroleum Pty Ltd (No 3) at [40]-[41] (Goldberg J).
42 There is nearly always an issue in cases like this as to how many contraventions should be attributed to conduct of a similar nature, which occurred in a range of arenas and over a period of time. Where one course or pattern of conduct is involved, it will often be appropriate, in order that a contravener not be dealt with twice for the same conduct, to characterise the conduct as constituting a single course of conduct. Alternatively, it may be appropriate to group distinct aspects of the conduct into categories and apply a single penalty to each category: Singtel Optus at [53]-[55] (Keane CJ, Finn and Gilmour JJ).
43 As Middleton J said in Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [235], in a passage cited with approval by the Full Court in Singtel Optus at [53]:
In the final analysis, in applying the totality principle, the question is one of discretion in coming to the correct, adequate and appropriate penalties.
44 In this case, the parties have proposed an agreed penalty based on four contraventions of s 33 of the ACL. Each of the categories of conduct identified at [12] above has been treated as constituting a single course of conduct. By that route, and with the maximum penalty of $1.1 million set for a corporation by s 224(3) of the ACL in mind, it was submitted that the maximum penalty that could be imposed is $4.4 million.
45 I accept the proposed grouping of the conduct into four contraventions as appropriate. Each of the different mediums utilised by Apple to promote the misleading representation is sufficiently distinct to be characterised as a separate category of contravention: Singtel Optus at [53] (Keane CJ, Finn and Gilmour JJ). The parties have not attempted to assign a specific penalty to each contravention. I accept that in the context of the totality principle, there is good sense in that approach: Rural Press at [19] (Mansfield J).
46 Although I have been referred to penalties imposed in other cases, I have not derived any assistance from cases which inevitably turn on their own distinct facts and circumstances: Singtel Optus at [60] (Keane CJ, Finn and Gilmour JJ); Rural Press at [20] (Mansfield J).