Australian Competition and Consumer Commission v Ascot Four Pty Ltd

1 Gate Bolt Ring Bracelet $1,350 $995 $675 2 Matching Bolt Ring Bracelet $595 $300 $295 3 Two toned (Bracelet) $250 $165 $99 4 (Dolphin Charm Bracelet) $225 $149 $85 5 (Heart Charm Bracelet) $150 $99 $75 6 Padlock Bracelet $695 $425 $349 7 55cm (22") (Chain) $5,350 $3,495 $2,650 8 45cm (18") 6mm Reversible (Chain) $1,125 $725 $550 9 10.5mm Bolt Ring Bracelet $1,675 $1,100 $745 10 55cm (22") (Chain) $1,550 $1,135 $775 11 (Bracelet) $350 $250 $169

Where there is a bracketed entry under the item description, it did not appear in the catalogue. 6 During the sale period, the total sales of the 11 items was $251,040. If those items had each been sold at the respective strike-through price the total sales would have been $528,042. 7 The catalogue advertised some 330 items, of which 50 or so had comparative strike-through prices and sale prices (on pages 1, 7 and 12). In addition, there were 27 or so watches included in the catalogue where the strike-through price was described as a "rec. retail" one. The charges relate to 11 of the 50 or so jewellery items referred to.

THE MAXIMUM PENALTY 8 The maximum penalty for each offence is a fine of $1.1m. That figure is arrived at as the specified penalty for contravention of s 75AZC(1)(g) of the TP Act is 10,000 penalty units, and s 4AA(1) of the Crimes Act 1914 (Cth) (the Crimes Act) provides that a penalty unit is $110. That penalty for such conduct has been in place since 15 December 2001 when s 75 AZC(1)(g) of the TP Act came into force. Prior to that time, contravention of s 53(e) of the TP Act could constitute a criminal offence with a maximum penalty of $200,000. 9 It is common ground that s 4K(4) of the Crimes Act directs in the circumstances that a single penalty should be imposed in respect of all the offences, and that by virtue of s 79(2) of the TP Act, the maximum penalty for all counts should not in aggregate exceed $1.1m.

THE FACTORS RELEVANT TO SENTENCE 10 Section 16A(2) of the Crimes Act identifies matters which, so far as they are relevant, must be taken into account in determining the appropriate penalty. In addition, s 16A(1) requires the Court to impose a penalty that is of a severity appropriate in all the circumstances of the offence. 11 Section 16A in Pt 1B of the Crimes Act was introduced by the Crimes Legislation Amendment Act (No 2) 1989 (Cth). Section 6 of that amending act, inter alia, introduced Pt 1B - Sentencing, Imprisonment and Release of Federal Offenders, including Div 2 of Pt 1B dealing with general sentencing principles. Section 16A is within that division. That part of the amending act was to commence on a day to be fixed by Proclamation, or, if not proclaimed, then within six months of the amending act receiving Royal Assent: s 2 (13)-(14). The amending act was assented to on 17 January 1990. As there was no Proclamation concerning the commencement of Pt 1B of the Crimes Act, it thus came into force on 17 July 1990. 12 It is necessary to note these facts because the prosecutor has urged that the factors relevant to penalty are those outlined by French J (as he then was) in Trade Practices Commission v CSR Limited (1991) ATPR 41-076 at 52,152 (TPC v CSR Limited). The defendant contended that those factors should be applied with some caution, because (it was argued) TPC v CSR Limited was decided before the introduction of Pt 1B of the Crimes Act and involved a civil pecuniary penalty imposed for contraventions of ss 46 and 47 (misuse of market power and exclusive dealing) in Pt IV of the TP Act for restrictive trade practices, rather than for contravention of a consumer protection provision of the TP Act in Pt V, or for present purposes now Pt VC. Part VC - Offences was introduced into the TP Act by the Treasury Legislation Amendment (Application of Criminal Code) Act (No 1) 2001 (Cth). 13 The judgment in TPC v CSR Limited was given on 20 December 1990 but concerned conduct engaged in from 1 May 1998 and until 5 September 1990 when consent injunctive orders were made. It is clear that the penalty imposed in that case was imposed in respect of contraventions of Pt IV of the TP Act, and was determined under s 76 of the TP Act as a civil pecuniary penalty. That does not make the observations of French J in that case irrelevant, but I accept the submission on behalf of the defendant that they should not be the starting point for determining the appropriate penalty in this matter. In any event, I do not think that the factors identified by French J in TPC v CSR Limited in any significant respect are different from those now specified in s 16A(2) of the Crimes Act. Section 16A(2)(a) of the Crimes Act directs attention to the nature and circumstances of the offence. That encompasses certain of the factors identified by French J. Section 16A(2) of the Crimes Act directs attention to the injury, loss or damage resulting from the offence. That too is a matter to which French J referred. Sections 16A(2)(f), (g) and (h) of the Crimes Act direct attention to the contrition of the offender, the cooperation with the law enforcement agency, and whether there has been a plea of guilty to the charge in respect of the offence. That, in general terms, is encompassed also within the factors mentioned by French J. Sections 16A(2)(k) and (m) of the Crimes Act direct attention to the need to ensure that the person is adequately punished and to the personal elements of the offence. I think those factors are also encompassed within the factors identified by French J where he refers to the size of the contravening company and its degree of power in the market (not a matter directly relevant to a contravention of s 75AZC(1)(g) of the TP Act). Section 16A(2)(j) of the Crimes Act directs attention to the deterrent effect of the sentence upon the offender. That too was noted by French J. In certain circumstances, the matters referred to by French J will in fact fall into subsets of the matters listed in s 16A(2) of the Crimes Act. 14 I propose first to consider the factors specifically mentioned in s 16A(2) of the Crimes Act which are relevant in the circumstances. There is another relevant matter, namely, deterrence. Deterrence has two elements, namely specific deterrence of the offender and general deterrence in the community. It is also necessary to impose a penalty of sufficient magnitude to signal to the community the significance of the offending and to ensure that those who operate in a like commercial environment would be reminded of the consequences of contravention of the like provisions. The object of the TP Act is "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection". The defendant's conduct, as it acknowledged, was both serious and inconsistent with that object. The penalty imposed must be such as to reinforce in the mind of the community the consequences of non-compliance with the relevant legislative prescription as to how that object is to be achieved. 15 I have also had my attention drawn to some other cases involving imposition of penalty relating to comparative price advertising where the TP Act has been contravened. I accept that I should be cautious in drawing too much from such cases. Necessarily, the contravening conduct will differ in nature, quality and effect, as will the circumstances of the individual contravention from one case to another. Although consistency in penalty is clearly important and is desirable to ensure a rational and fair system of justice (see Lowe v The Queen (1984) 154 CLR 606 at 610-1), it is necessary to consider the individual circumstances of the contraventions and of the contravener. Nevertheless, in the manner described below, I have derived some assistance by looking at cases in which the TP Act has been contravened by comparative price advertising representations and the penalty applied in those cases.

CONSIDERATION 16 I referred to the nature and circumstances of the offence in the primary judgment, and briefly above. I will not repeat that, save to note that at material times, the defendant was a proprietor of a chain of retail jewellery stores operating under the name of "Zamel's". It operated 69 retail stores throughout South Australia, Victoria, Western Australia, Tasmania and the Australian Capital Territory. The 2005 Christmas Sale Catalogue was distributed across each of those regions. 17 The catalogue was issued centrally, that is, through the defendant's head office. It, and the elements of it which contravened s 75AZC(1)(g) of the TP Act, were not the consequence of some local or store-based conduct. In fact, two of the defendant's directors were responsible for authorising the price of the jewellery items offered and advertised for sale, and for the issue of the catalogue. 18 On the other hand, the prosecutor does not controvert the defendant's assertion that the ticketed (and strike-through) price was a price determined by the defendant's own valuers as: the market value of the item of jewellery, taking account of such things as replacement value for insurance purposes, and other market factors such as the fluctuating price of gold etc. 19 Quite what the "market value" so described represents is not further explained. There is no evidence about that. One might rhetorically ask why, if the jewellery items each had a ticketed (and strike-through) price which was its "market value", not one of them was ever sold for anything like that price in the period leading up to the Christmas sale. The defendant's valuers appear to have had a somewhat refined view of "market value". Whilst I accept that the valuers' "market value" may have given the defendant some basis for selecting a ticketed price for each of the jewellery items, the ticketed or strike-through price represented to a relevant group of consumers that during the sale period there would be a saving of the difference between the sale price and the strike-through price. The sales history referred to above demonstrates that that was not so. I do not accept, in the light of that sales history, that the defendant's ticketed price was a normal retail price, or one normally or not infrequently achieved, or one at which it anticipated it would be able to, or would, sell the offered items. But the evidence does not indicate that the defendant, through its directors or senior officers - those responsible for the promotion of the ticketed price - regarded the ticketed price as one at which the 11 jewellery items should in fact be sold or as being the "market" value, in the conventional sense as being the price at which a willing but not anxious buyer would buy them and a willing but not anxious seller would sell them. Nor does it suggest that they regarded that price as one which - if any of those items was sold but was lost - would be paid to secure a replacement. The justification for the ticketed price is not one which weighs much in favour of a lower penalty than otherwise, although I do take it into account in the defendant's favour because it demonstrates that the ticketed and strike-through price was not a contrived or randomly selected one. 20 However, the conduct of the defendant was deliberate. That is, it deliberately presented the catalogue in the way it did containing strike-through prices knowing that the 11 jewellery items had never been sold at those strike-through prices. In the primary judgment, I have recorded a general picture of the actual sales history of those items. The difference between the strike-through price and the actual previous highest price of each jewellery item is significant, and the suggested saving by the representations was also very significant: in all but one instance, the sale price was less than half the strike-through price. 21 The prosecutor contends that the Court should have regard to the fact that it had conducted a public awareness campaign directed to the jewellery industry in the latter months of 2005 and shortly before the contravening conduct. It says that the campaign was to assist retailers to comply with the law of comparison pricing and dual price advertising and to warn of the dangers of non-compliance with the TP Act. On 25 February 2005, the prosecutor issued a Media Release launching the "ACCC Guide to Price Comparison Advertising". On 5 September 2005 it issued a further media release launching a guide to fair trading in the jewellery industry, entitled "Advertising and promotion in the jewellery industry" in the form of a booklet. At the same time it issued a Check List for jewellery manufacturers, wholesalers, retailers and valuers. The first page of the Check List included the following, which the prosecutor says is directly relevant: "You are likely to breach the Trade Practices Act if: … you refer to the "Was" price which is not a general previous selling price or, (sic) the goods were not offered for sale for a reasonable price at that "Was" price. I do not take that into account as a factor adverse to the defendant in assessing penalty. The first reason is that I was not pointed to any evidence showing the defendant was aware of the detail of that material. The second reason is that, to some degree, the quoted part of that text is a little open-ended, where it refers to the alternative of a price at which the goods were previously "offered for sale". The defendant says that in fact, by its ticketed pricing, it in fact satisfied that alternative. Arguably it did so, although that might be qualified where a seller did not in fact realistically expect to sell any of those items at that price. 22 Indeed, the defendant sought to take advantage of that circumstance by saying that the catalogue relevantly was compiled in accordance with the Check List. I equally do not give the defendant credit for that. First, as I have said, the relevant passage in the Check List may have been taken to refer to ticketed prices at which the seller realistically expected to sell those items, and secondly because there is no evidence that the defendant adopted the strike-through price in the catalogue because it thought that in doing so it was complying with the Check List. 23 There is no evidence of any particular person or persons shown to have relied upon the conduct constituting the contraventions, so as to have suffered particular loss. The prosecutor's investigation into the defendant's conduct arose from an anonymous complaint. However, I do not accept the defendant's contention that its contravening conduct did not induce any consumer to buy one or other of the 11 jewellery items. After all, the purpose of the catalogue was to induce sales of the items depicted, and the point of the strike-through price was to provide to consumers a contrast with the sale price. In [6] above, I noted the difference between the total actual sale revenue from the 11 jewellery items during the sale and the sale period and the sale revenue if those items had been sold at the strike-through price. I do not assume that all those sales would have occurred at the strike-through price but for the catalogue offering a sale price. No doubt many would have occurred at the negotiated price of those sales even if there were no strike-through price in the catalogue, and indeed, even if there had been no catalogue. But, in fixing the penalty, I take into account that some of those sales would not have occurred but for the contravening conduct, although the evidence of other sales prior to the sale period shows that it is very unlikely that any of them would have been at the ticketed (and strike-through) price. That consideration does not materially affect the penalty I impose, because it is the nature of the offences themselves that the defendant's conduct was misleading, and as I have noted, no particular person is shown to have been a victim of any of the offences, or to have suffered loss as a result. 24 The defendant accepts in its written submissions that the offences as found are serious. So it was. In competitive retail markets, not just consumers may have been induced to enter into transactions that they may not have otherwise done. Competitors of the defendant who did not engage in conduct in contravention of the TP Act may have lost custom due to that conduct which they otherwise may have gained. At the least, they were competing for custom against the defendant but the defendant was not competing within the TP Act. 25 I accept, and take into account, that the defendant is contrite. There was considerable debate in submissions as to the extent of the credit that should be given to the defendant in the particular circumstances. In particular, the prosecutor had to resort to the use of its compulsive powers under s 155 of the TP Act to secure certain information from the defendant, and the defendant did not plead guilty to the contraventions and only shortly before the hearing came to agree the facts which ultimately were presented in a Statement of Agreed Facts. 26 Despite those matters, I give the defendant some credit for its conduct in relation to the investigation of the offences and in relation to the conduct of the prosecution. Ultimately, it did agree the facts relevant to the charges. It confined its position to disputing whether, on those facts, representations were in fact made which contravened s 75AZC(1)(g) of the TP Act. Its position enabled the hearing of the charges to be quite focused on a narrow legal issue. It did not challenge the prosecutor's evidence, and cooperated in reaching the Statement of Agreed Facts. At a relatively early stage in the conduct of the prosecution, the defendant indicated that it would adopt that approach, even though it then apparently took some time until shortly before the hearing for the Statement of Agreed Facts to be arrived at. I do not assume that that process was unreasonably prolonged by the defendant.

27 I also give the defendant some credit for its cooperation with the prosecutor in the investigatory stages of its inquiry. Although s 155(1) of the TP Act was utilised by the prosecutor, the defendant then came formally to offer its cooperation to the prosecutor and sought to discuss how it might demonstrate its commitment to compliance with the TP Act. Its letter (through its solicitors) of 27 April 2006 to the prosecutor indicated that the defendant would no longer use "was" / "now" pricing where the "was" prices do not reflect representative actual sales for a reasonable period prior to the promotion or where the prices after the promotion do not revert in a meaningful way to the "was" price. It also indicated it would not use references to "valued at" in its advertising. I also give it credit for offering to the prosecutor a substantial bank guarantee in respect of the potential penalty to be imposed. 28 Sections 16A(2)(j), (k), (m) and (n) direct attention to the deterrent effect upon the offender, the need to ensure that the offender is adequately punished, and the personal history and circumstances of the defendant. 29 The defendant has no criminal record, and I accept that the defendant has been a good corporate citizen. The defendant has not presented to the Court any financial records. Nor did it contend that its financial status was a reason to impose a lesser penalty than otherwise was appropriate. I infer that it has the resources to meet a significant penalty. Obviously a significant penalty is called for, given the nature of the contraventions to operate as a deterrent to the defendant, notwithstanding the factors to which I have referred which operate to mitigate the penalty. The need for a significant penalty for personal deterrence is, in my view, further reduced by the defendant having sold its business in April 2007. Since then, it has not conducted business in the jewellery industry, and I accept has no present plans to return to that industry. Until that time, as noted, it had reacted to the investigation by the prosecutor by indicating that the sort of conduct then being investigated (and subsequently the subject of the charges) would no longer be engaged in. There is no reason to think that indication was not honoured. And, in those collective circumstances, the defendant is unlikely to offend again against s 75AZC(1)(g) or like provisions of the TP Act. Nevertheless, I do not overlook that there is the prospect that it may do so.

30 I propose to record convictions on the offences found proved (there being no submission from the defendant that I should do otherwise). It is clearly an appropriate step to take. The defendant says that then, in the light of all the relevant circumstances, the imposition of a penalty at the low end of the range would act as a real general deterrent, especially with the publicity likely to accompany that outcome. 31 Although parity of penalty should be achieved, so that similar contraventions of the TP Act attract similar penalties, that of course depends upon the individual circumstances of each case. Consistency is desirable, as it flows from a rational and fair system of justice: Lowe v The Queen (1984) 154 CLR 606 at 610-1 per Mason J. 32 I was referred by senior counsel for the prosecutor and senior counsel for the defendant to a number of cases in which penalties were imposed for misleading and deceptive conduct in relation to comparative price advertising. 33 Sest v Copperart Pty Ltd (1989) ATPR 40-945 concerned nine offences by three related defendants contrary to s 53(e) of the TP Act. There was, in three sales campaigns, comparative price advertising in a television advertisement - one advertisement during each sales campaign - where the "was" price was either an artificially inflated recommended retail price or a fictitious regular price, so the claimed savings were significantly overstated. The sentencing judge found the defendants were aware of the falsity of each of the representations. The defendants pleaded guilty. Section 79(2) of the TP Act did not apply, so separate penalties were imposed. On the three counts against the principal offender, it was fined $30,000, $20,000 and $25,000 (a total of $75,000) and ordered to pay the costs of the prosecutor. The maximum fine for each offence at the time was $100,000. The principal points of difference from the present circumstances are clear from the recital of those matters, although there were of course other factual differences of degree. The sentencing judge also was satisfied that, in applying the totality principle, the overall penalty imposed was not so high as to be oppressive.

34 Trade Practices Commission v Cue Design Ltd (1996) 85 A Crim R 500 concerned 30 offences contrary to s 53(e) of the TP Act to which the defendants had pleaded guilty. A large retail chain had offered certain garments for sale by dual priced swing tags, with the higher price crossed out; the higher price had not been one at which the garment had been offered for sale. There was no widespread advertising campaign; the contravening conduct occurred only by the in-store price tags. The contraventions attracted one penalty only, by reason of s 79(2) of the TP Act and s 4K(4) of the Crimes Act. The sentencing judge regarded the sales strategy as widespread, and the contraventions as serious. The maximum penalty was $200,000. A penalty of $37,500 was imposed against each of the defendants, making a total of $75,000. As the two defendants were related, the Court treated the contraventions as being by one offender, and imposed on each defendant a penalty equal to half of the whole intended penalty. Again, these are obviously points of difference from the present circumstances, some of which are evident from the above brief description. 35 Australian Competition and Consumer Commission v Allans Music Group Pty Ltd [2002] FCA 1552 also concerned a prosecution under s 53(e) of the TP Act. The defendant pleaded guilty to nine charges, and cooperated fully in the inquiry into the contraventions. The defendant was a retailer of musical instruments and associated products. The contravening conduct occurred through a Christmas sale catalogue, of which there were 750,000 copies distributed in areas relevant to the defendant's six stores in Melbourne (2), Sydney, Brisbane, Adelaide and Ballarat. The catalogue offered the items the subject of the nine charges for sale at a "was"/"now" price, but had not sold any of the six items at the "was" price. The defendant, since the offending conduct, had implemented a detailed trade practices compliance program. The sentencing judge imposed one penalty of $80,000 pursuant to s 79(2) of the TP Act. At the time the maximum penalty was $200,000. As appears, there are significant similarities at a general level between the circumstances of that case, and the present circumstances. By contrast with the position of the present defendant is the level of cooperation with the ACCC and the guilty plea, whereas here the cooperation was somewhat later in coming and there was no guilty plea although the defendant cooperated in the presentation of evidence and confined its defence to, in effect, legal contentions based on the uncontested facts. That defendant also acted perhaps in a little more structured a way to ensure ongoing compliance with the TP Act, but I do not consider that difference is of much moment, as the present defendant agreed to abandon the (then potentially) impugned conduct and has since ceased to trade as a jeweller, having sold its business. There are obvious factual differences: the relative number of stores, the relative number of catalogues, the relative number of sales of the items the subject of the offending conduct, the relative cost of the advertised items (as overall, and not surprisingly, the cost of the jewellery items was much less than of musical instruments) and (as the prosecutor pointed out) the relative difference between the strike-through price and the sale price and so the suggested saving as a percentage of the strike-through price. 36 Australian Competition and Consumer Commission v Carrerabenz Diamond Industries Pty Ltd [2008] FCA 1103 concerned six counts of contraventions of s 75AZC(1)(g) of the TP Act by six separate newspaper advertisements in a daily newspaper circulating in Melbourne, Sydney (2), Perth (2) and Adelaide. Those advertisements offered in all 25 items of diamond jewellery at a "usual mark . price"" and a "crazy price". The defendant did not retail its products from established stores in those cities. During the trial, that defendant pleaded guilty to those charges, acknowledging that none of those items had previously been offered for sale at the "usual mark . price". A multiplier was used to the wholesale or acquisition price to arrive at the "usual mark . price" and the sentencing judge accepted as a mitigating factor that comparable items were in fact retailed at two locations at comparable prices to the "usual mark . price". A penalty of $220,000 was imposed, under s 4K(4) of the Crimes Act, having regard to what his Honour described as a "uniqueness about this case". The maximum penalty for a contravention was the same as that presently applicable. 37 In Wong v The Queen (2001) 207 CLR 584, Gaudron, Gummow and Hayne JJ at 611-2 re-affirmed the need for a sentencing judge to balance many different and conflicting elements to reach an appropriate sentence. The balancing exercise must take account of all of the circumstances of the offence and of the offender. I have undertaken that process. 38 In the result, in my view, the appropriate penalty to be imposed on the defendant on the counts (in respect of which as I indicated earlier I would impose a conviction) is the total sum of $380,000. I also order the defendant to pay the costs of the prosecutor.

Orders 39 There will be recorded a conviction against the defendant on each count. On the 11 counts collectively the defendant is ordered to pay a penalty of $380,000. The defendant is to pay that penalty within two calendar months of the date of these orders. Leave is given to the defendant within 21 days to apply to vary that period. The defendant is also ordered to pay the prosecutor's costs of the prosecution. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate: Dated: 23 January 2009 Counsel for the Plaintiff: Mr M Griffin QC and Mr R Perrotta

Solicitor for the Plaintiff: Commonwealth Director of Public Prosecutions

Counsel for the Defendant: Mr M Livesey QC and Mr I White