Australian Competition and Consumer Commission v Australian Power and Gas... [2013] FCA 1358 | Case summary

REASONS FOR JUDGMENT 1 The Australian Competition and Consumer Commission (the Commission) has alleged that Australian Power & Gas Company Limited (APG) engaged in conduct that contravened ss 18, 21, 29, 74, 75 and 76 of the Australian Consumer Law (ACL), as found in Sch 2 of what is now known as the Competition and Consumer Act 2010 (Cth) (Competition and Consumer Act). The Commission seeks the imposition of pecuniary penalties pursuant to s 224 of the ACL together with declaratory and ancillary relief. APG has admitted that it has contravened ss 18, 21, 29, 74, 75 and 76 of the ACL. 2 The Commission and APG have, in terms of s 191(3)(a) of the Evidence Act 1995 (Cth) (Evidence Act), reached agreement as to particular facts in addition to those which are admitted on the pleadings. The additional facts are to be found in paragraphs 9 to 15, 64, 74 to 78, 101 to 103 and 105 to 113 in a document entitled Joint Submissions and Statement of Agreed Facts pursuant to s 191(3)(a) of the Evidence Act, filed in court on 22 November 2013 (hereafter "the joint submissions"). The following summary of the background to the contraventions alleged and admitted is taken from the joint submissions. 3 APG is an energy retailer that commenced operations in 2007. APG holds electricity retail licences and gas retail licences under state legislation which permitted to supply electricity and gas to customers in states, including New South Wales, Queensland and Victoria. 4 In 2011, when the charge conduct occurred, Australian Power & Gas Pty Ltd was a wholly owned subsidiary of APG. On 19 September 2013 AGL, APG Holdings Pty Ltd and AGL Energy Limited (AGL) announced that AGL had acquired relevant interests in more than 90% of the issued shares and options in APG and would proceed immediately with compulsory acquisition of both classes of securities. Accordingly, APG is now owned by AGL. 5 During the period in which the specific conduct occurred (between 1 January 2011 and 31 October 2011), APG's principal method of acquiring new residential customers for its retail gas and electricity was by door-to-door marketing and sales. The door-to-door marketing and sales activities were primarily carried out by a sales force engaged by third party marketing companies that were contracted to provide services to APG. 6 Those third party marketing companies included Appco Group Energy Pty Ltd, formerly Appco Energy Direct Pty Ltd and Aegis Services Australia Pty Ltd, "Appco" and "Aegis" respectively. At all material times, The Cobra Group Pty Ltd, of which Appco is a subsidiary, was a shareholder in APG. As at 22 June 2011, it held approximately 17.85% of the shares in APG. Each of Appco and Aegis, and the sales representatives they in turn engaged, carried out the door-to-door marketing and sales of APG. Each of Appco and Aegis, and the sales representatives they in turn engaged, carried out the door-to-door marketing and sales of APG's retail gas and electricity, on behalf of APG. 7 By operation of s 139B(2)(b) of the Competition and Consumer Act, the conduct of APG's contracted sales representatives is taken for the purposes of the ACL to be the conduct of APG and, with respect to the unsolicited consumer agreement provisions in subdiv (B) of division 2 of part 3-2 of the ACL of which ss 74, 75 and 76 of the ACL are a part, s 71 and s 77 of the ACL also operate to make a contravention of a provision of subdiv (B) of Div 2 of Pt 3-2 of the ACL by APG's sales representatives, a contravention of that same provision by APG. 8 Appco and Aegis used sales materials and contractual documents of APG in conducting the door to door marketing and sales and APG was involved in providing training and instructions to them. The door-to-door sales activities involved sales representatives calling on consumers at their premises without invitation for the purpose of entering into negotiations to reach agreements relating to the supply of retail electricity or retail gas by APG. The agreements arrived at were accordingly unsolicited consumer agreements as defined in s 69 of the ACL for the purposes of Div 2 of Pt 3-2 of the ACL. APG admits that it has engaged in conduct that contravenes ss 18, 21, 29, 74, 75 and 76 of the ACL by the actions of its contracted sales representatives. 9 This comprises contraventions in relation to 16 individual consumers by reason of the door-to-door sales force: (a) engaging in misleading and deceptive conduct in relation to 15 of those consumers in contravention of s 18 of the ACL; (b) engaging in conduct in relation to one of the consumers, Ms Aslan, of whom more shortly, that was, in all the circumstances, unconscionable in contravention of s 21 of the ACL (in the form that it applied prior to January and December 2011); (c) making false or misleading representations to five of the consumers that APG's retail electricity and retail gas had sponsorship, approval or benefits that they did not in fact have, in particular, that the retail gas and electricity were associated with the consumer's existing energy supplier, rather than APG, in contravention of s 29(1)(g) of the ACL; (d) making false or misleading representations on 12 separate occasions to 11 of the consumers that APG had sponsorship or approval it did not have; in particular that APG was associated with the consumer's existing energy supplier, or was affiliated with the government, in contravention of s 29(1)(h) of the ACL; (e) making false or misleading representations to two of the consumers with respect to the price of APG's retail gas and electricity and, in particular, as to purported discounts that the consumer should have been receiving, or would receive by changing the supplier to APG, in contravention of s 29(1)(i) of the ACL; (f) in relation to 13 of the consumers on a total of 15 occasions, failing to advise the consumer clearly, before starting to negotiate, that the sales representative was calling on the consumer for the purpose of negotiating an unsolicited consumer agreement for the supply of retail gas and/or electricity by APG, and on nine of those occasions stating a contrary purpose, in contravention of s 74(a) of the ACL; (g) in relation to 14 of the consumers, on a total of 15 occasions, failing to advise the consumer clearly before starting to negotiate, that the sales representative was obliged to leave the premises immediately on the consumer's request, in contravention of s 74(b) of the ACL (h) in relation to six of the consumers on a total of seven occasions, failing to provide to the consumer, before starting to negotiate, details of APG's name and address as prescribed by reg 82 of the Competition and Consumer Regulations 2010, in contravention of s 74(c) of the ACL; (i) in relation to one of the consumers, failing to leave the premises immediately on the request of the consumer in contravention of s 75(1) of the ACL. In relation to one of the consumers, returning to the premises for the purposes of negotiating an unsolicited consumer agreement, within 30 days of having been asked to leave the premises by the consumer when previously attending for the same purpose, in contravention of s 75(2) of the ACL; and (j) in relation to three of the consumers, making an unsolicited consumer agreement for the supply of retail gas and/or electricity by APG, without giving the consumer, before the agreement was made, information as to the consumer's right to terminate the agreement during a cooling off period, in contravention of s 76 of the ACL. 10 The more detailed circumstances concerning those contraventions are to be found in the joint submissions. I do not repeat all of what is there stated, but do wish to highlight the unconscionable conduct admitted concerning a consumer by the name of Ms Laila Aslan. The joint submissions disclose that Ms Aslan is from Jordan, speaks limited English and can read and write very little English. Ms Aslan and her husband, who is disabled, receive assistance from an organisation named ParaQuad New South Wales. A sales representative of APG called on Ms Aslan in about July 2011. The sales representative said he could give her cheaper electricity and when repeatedly asked by Ms Aslan whether he had been sent by "Julita" (a representative of ParaQuad with whom Ms Aslan had frequently dealings), he falsely stated on each occasion that he had been. Although Ms Aslan informed the sales representative that she could not speak or read English well and needed to ask her husband, the sales representative informed Ms Aslan that she did not need to contact her husband at work to understand the information and the documents he was providing to her. The sales representative continued to talk to Ms Aslan seeking to persuade her to agree to cheaper electricity. She eventually agreed on the understanding he had been sent by ParaQuad. 11 The sales representative then made a verification call to APG on his mobile phone. In the course of the call, he continued to hold the mobile phone which was on speaker. Ms Aslan informed the sales representative that she could not understand what the man on the other end of the telephone was saying. The sales representative wrote the words "yes" and "no" which Ms Aslan could read and understand on a piece of paper. During the call when a question was asked by the person on the other end of the telephone, the sales representative pointed to the words "yes" or "no". Ms Aslan then said that word when he pointed to it. At the end of the call, the sales representative wrote on a contract and advised Ms Aslan to sign it, which she did. The conduct engaged in by APG's sales representative is described by agreement in the joint submissions as "deliberate, subjected Ms Aslan to unfair sales tactics, and was in all the circumstances unconscionable." That description, having regard to the conduct which by admission is agreed to have occurred in relation to Ms Aslan, is, to say the least, apt. 12 This is not the first time in which the Court has been confronted with a need to deal with these types of transgressions of provisions in the ACL regulating unsolicited door-to-door sales. Australian Competition and Consumer Commission v Neighbourhood Energy Pty Ltd [2012] ATPR 42-426 and Australian Competition and Consumer Commission v AGL Sales Pty Ltd [2013] FCA 1030 (ACCC v AGL) are earlier examples of the court dealing with this type of conduct. The Competition and Consumer Act, as its name suggests, as did for that matter, its earlier title, the Trade Practices Act, is designed by our parliament to address particular types of behaviour in the marketplace. The Competition and Consumer Act, for that purpose, employs a number of economic concepts such as competition, market and the like. It should not be thought though that the Competition and Consumer Act in so doing is but a modern phenomenon in terms of other statements it makes as to what is regarded by our parliament as unacceptable behaviour in the marketplace. 13 Misleading or deceptive conduct is hardly a phenomenon of modern times in commerce. There are earlier manifestations of conduct which was regarded by society as unacceptable which can and often do overlap with contemporary transgressions of the Competition and Consumer Act. At common law, the tort of deceit can often arise on facts which ground a contravention of the Competition and Consumer Act. Under the criminal law, false pretences can also often entail conduct that overlaps with conduct that transgresses the Competition and Consumer Act. The present contraventions, of course, are the result of particular statutory provision. My point in recalling earlier societal norms is that it should not be thought that behaviours of the kind which are admitted are behaviours which are but recently regarded by society as unacceptable. That is not to say that there have been false pretences or the tort of deceit transgressed, only that there are overlaps which can occur, and it is no excuse for corporations to pray in aid that the Competition and Consumer Act is but a 2010 statute. 14 To its particular credit, APG has not sought to do this. I am well persuaded by the ready cooperation with the administration of justice evidenced eloquently by the joint submissions that there is at present within APG under its current management an insight into the offending behaviour and a commitment to address it. That commitment is evidenced by an undertaking which APG has given to the Commission pursuant to s 87B of the Competition and Consumer Act to undertake a particular compliance program. 15 That compliance program, so I was informed and accept, extends a compliance program which APG, of its own volition, decided to put in place. Compliance programs are not empty descriptions; they entail a deliberate course of education and the monitoring of the assimilation of education by staff throughout a corporation. I have very much taken into account APG's cooperation in the administration of justice and its voluntary giving of the s 87B undertaking in forming a view that penalties proposed to the court jointly by the parties are indeed apt to address the behaviour that I have outlined in general. 16 It is important also in cases like this, particularly given the purpose of the Competition and Consumer Act, in addressing particular kinds of behaviour in the marketplace to see the contravening conduct against the broader background of other value judgments which our Parliament has made in relation to the economic life of the community and those who engage in commerce in Australian markets. 17 Over a period between 1995 and 2005, as a result of deliberate value judgments by all of the governments then Parliaments in Australia, a policy known as the National Competition Policy was agreed upon and implemented. Regard to the National Competition Council website (URL: http://www.ncc.gov.au) discloses that that policy was a sequel to the adoption of recommendations made in the report of an independent committee of inquiry into a National Competition Policy known as "the Hilmer Report". Thereafter, the Council of Australian Governments, a peek inter-governmental forum in Australia, established and implemented the National Competition Policy. As the National Competition Policy website discloses, spanning 1995 to 2005, the National Competition Policy is widely recognised as having contributed significantly to Australia's welfare. 18 Government's progress with implementation was oversighted by the National Competition Council. The National Competition Council, a body responsible to all of Australia's Governments, assessed reform progress in 1997, 1999 and then annually between 2001 and 2005. "Australia's National Reform Agenda" is, as the National Competition Council website discloses, a successor program to the National Competition Policy. 19 The Commission has an important role to play in giving voice to the commercial and economic value judgments which underpin how, in the marketplace, National Competition Policy is to be implemented. It is, in my respectful opinion, very important not to divorce the role undertaken by the Commission from the higher policy objectives in what is now known as Australia's National Reform Agenda. 20 Those lofty policy objectives can be subverted by unfair practices in the marketplace of the kind illustrated by the present case. For that reason, there is a singular need, well-recognised in the joint submissions, for deterrence to feature prominently in penalisation of contravening conduct. Benefits of the implementation of National Competition Policy can truly be subverted by unfair competition. 21 APG itself was, during the period in question (2011), one of the smaller energy retailers in Australia; its market share was about 3.1% which translated to about 323,000 customer accounts. As at 30 June 2011, its total assets were valued at $171.5 million and total liabilities of $120.3 million. It is always relevant to take into account the net worth of a corporation when determining matters of penalty. That is not to say that a minor net worth and outrageous conduct need sound in minor penalties, only that it is always relevant to take into account the worth of a person, individual or corporate in relation to matters of penalty. I am quite satisfied that the penalties proposed in the joint submissions have taken that consideration into account also. 22 Another consideration that is always relevant, indeed it provides a useful starting point, is the maximum penalty for particular contraventions. The maximum penalty for a body corporate for each act or omission that relates to a provision of Pt 2.2 of the ACL, which includes s 21, is $1.1 million. The maximum penalty for a body corporate for an act or omission that relates to the provision of Pt 3-1, which includes s 29, is likewise $1.1 million. The maximum penalty for a body corporate for each act or omission that relates to a provision of Div 2 of Pt 3-2 of the ACL, which includes ss 74, 75 and 76, is $50,000. What that reveals is that the maximum penalties to which APG is exposed are $1.1 million for the contravention of s 21 of the ACL, $1.1 million for each of 15 contraventions of s 29 of the ACL and $50,000 from each of 42 contraventions of the unsolicited consumer agreement provisions of the ACL, those found in ss 74(a), 74(b), 74(c), 75(1), 72(2) and 76. The process of mathematics reveals a total maximum of $19.7 million as the total penalty amount to which the conduct concerned potentially exposed APG. 23 That potential has to be balanced against what is known as the totality principle; a principle which was, with respect, well described by Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36: That principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved. 24 The parties here have jointly submitted the total penalty which should be imposed is an amount of $1,100,000. They have, in their submissions, agreed upon a particular foundation for that total, namely $200,000 for the contravention of s 21 of the ACL, $45,300 for each of the 15 contraventions of s 29 of the ACL totalling $679,500, and $5,250 for each of 42 contraventions of the unsolicited consumer agreement provisions of the ACL totalling $220,500. 25 The conduct concerned was not, I infer, a series of isolated aberrations. Also, I infer that it did involve a concerted form of behaviour. It is not possible to infer any more than that, but I do take those inferences into account in reaching a view that the penalties concerned are apt. 26 In one of the cases to which I have earlier made reference involving a similar type of door to door sales based course of contravening conduct, ACCC v AGL, Middleton J reviewed at paragraphs 12 and following under the heading, "The imposition of agreed pecuniary penalties", the authorities touching upon the role undertaken by the court where parties propound by agreement particular penalties. I respectfully agree with his Honour's analysis and do not, for that reason, propose to repeat what is there stated, only to highlight a particular observation at paragraphs 40 and 41 with which I particularly agree; namely: 40. All the authorities emphasise the essential matters. No court is to act as, or be seen to be acting as, a "rubber stamp" - a court must form its own opinion about the penalty undertaking its constitutional role. 41. In carrying out its constitutional role, statements of agreed fact may, as long as in the circumstances they are adequate, form a sound basis for a court determination as to the appropriate orders to make, including as to penalty. [emphasis in original] 27 I am satisfied that the facts agreed in the joint submissions do provide an adequate foundation for an acceptance by the court of the penalties propounded by the parties and, for that matter, the ancillary relief. I am also satisfied that the case is one where it is apt to grant declaratory relief in respect of the contraventions. There needs to be by declaration a clear statement that particular contravening conduct has occurred and that it is not conduct to which any approval should be given. 28 The other orders proposed are within power and apt in the circumstances. For these reasons, there will be orders in terms of the draft which I have signed and placed with the papers. I record my particular appreciation for the effort which has been so obviously evident in the joint submissions and which has made the task of applying principle to facts much easier than it might otherwise have been. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.

Australian Competition and Consumer Commission v Australian Power and Gas Company Limited

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