Consideration
144 The relevant principles in determining a civil penalty were largely not in dispute between the parties. The object of imposing a civil penalty is to put a price on contravention that is sufficiently high to deter repetition by the contravener (specific deterrence) and by would-be contraveners (general deterrence): Pattinson at [15].
145 In undertaking the process of "instinctive synthesis" and weighing the relevant factors I have considered the admitted facts and the evidence and weighed the following matters in arriving at a civil penalty.
146 To determine the theoretical maximum penalty for the conduct alleged, it is necessary to determine the number of Bloomex's contraventions. The period in which Bloomex made the Discount Representations, Star Rating Representations and the Total Product Price Representations varied. The Discount Representations were made on the Website as early as 26 February 2019 and certain Discount Representations remained on the Website as late as 28 March 2023. The Star Rating Representations were made between 26 February 2019 and 17 March 2023. The Total Product Price Representations were made between 10 August 2022 and 22 March 2023. It follows that Bloomex published false, misleading or deceptive representations on its Website for a period of more than four years. Between February 2019 and March 2023, there were approximately 6.3 million visits to the Website. The representations were likely made, and the ACL contravened, each time a consumer visited the Website. As the ACCC submits, applying the maximum penalty amount to each contravention would result in the penalty amount extending into the "multiple billions".
147 However, the proper assessment of the penalty to be imposed on Bloomex falls to be assessed by reference to the course of conduct principle and the totality principle. It is not contested, and I accept, that in this case, it is appropriate for the Court to adopt an approach based on three courses of conduct which refer to each of the distinct categories of contravening representations being the Discount Representations, the Star Rating Representations, and the Total Product Price Representations. The course of conduct principle recognises that, where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality: Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 at [41] (Middleton and Gordon JJ). The totality principle may be relied on as a final check on the civil penalties to be imposed to ensure that they are "just and appropriate": EnergyAustralia at [101]-[102]. The totality principle and the course of conduct principle overlap to the extent that both aim to avoid the imposition of a penalty that is disproportionate to the contravening conduct: Yazaki at [236].
148 I have considered the nature and extent of the wrongdoing arising from the Discount Representations, the Star Rating Representations and the Total Product Price Representations, and the circumstances of this conduct. I consider that, in the case of the Discount Representation and the Star Rating Representations, Bloomex's wrongdoing was serious in nature. In making this finding, I observe the following:
(a) The Discount Representations and the Star Rating Representations were, as the ACCC submitted, ubiquitous on the Website. A visitor to the Website could not avoid being exposed to these representations. It would have been difficult for any visitor to test or verify the discounts Bloomex was in fact applying, or the extent of past customer satisfaction with Bloomex products.
(b) The Discount Representations and the Star Rating Representations also occurred over a period of four years, during which time there were approximately 6.3 million visits to the Website.
(c) In the case of the Discount Representations, Mr Lokhonia deposed that the price comparisons on the Website did not reflect temporary discounts from Bloomex's own prices. Instead, Mr Lokhonia deposed that the price comparisons reflected an "indicative comparison" to prices at levels that were charged by its competitors: Affidavit at [41]. Even if I were to accept this explanation, it does not materially reduce the seriousness of Bloomex's wrongdoing in making the Discount Representations. I did not understand it to be in dispute, and I find on the evidence and the agreed facts, that the Discount Representations unequivocally conveyed to visitors to the Website that Bloomex was offering discounts to its usual price on Products, and those representation were false.
(d) I infer that the Star Rating Representations would have been highly important to visitors of the Website in making purchasing decisions, given that those decisions were made online. In an online context, visitors would have limited other reliable guides as to the quality of the Products. In fact, the Star Ratings were unreliable guides to the quality of the Products.
149 On the other hand, I consider that the Total Product Price Representations were of lesser seriousness for the reasons set out below.
(a) I accept that, consistently with Tracey J's reasons in AirAsia at [31], the fact that the total product price was ultimately disclosed to consumers prior to the consumer committing to a purchase does not weigh heavily in mitigation. Consistently with Tracey J's reasons, I also accept that Bloomex's conduct had the vices of attracting consumers to a transaction which they might otherwise not have found appealing, and obtaining an advantage over competitors who were compliant with s 48 of the ACL.
(b) Nonetheless, I observe that the relevant surcharge in this case was, on Mr Lokhonia's unchallenged evidence, intended to reflect fluctuations in delivery costs. Had the surcharge been incorporated within an express "delivery fee" charged to consumers, Bloomex's conduct would likely not have amounted to a contravention of s 48 of the ACL (by reason of s 48(2) of the ACL), and it is difficult to see how that conduct could otherwise have amounted to misleading or deceptive conduct.
(c) It is also notable that the Total Product Price Representations occurred for a considerably shorter period than the Discount Representations and the Star Rating Representations, having been made for approximately seven months between 10 August 2022 and 22 March 2023.
150 I have also considered the effect on consumers and competitors in the marketplace of each of the Discount Representations, the Star Rating Representations, and the Total Product Price Representations. In this respect, I make the following findings:
(a) The evidence does not establish any specific quantifiable loss or damage caused by any of the above representations.
(b) Mr Lokhonia's evidence was that to the best of his knowledge, the contraventions the subject of this proceeding had not been the subject of any complaints by consumers: Affidavit at [75]. During the course of the hearing, I was taken by the ACCC to a selection of consumer complaints to Bloomex. Those complaints principally concerned the quality of a particular Product. They referred, in passing, to the consumer having obtained the Product at a discount (a misapprehension arising from the Discount Representations). However, there was no evidence as to the volume of these complaints. I do not consider that the existence of a selection of complaints, which in any case only referred in passing to the consumer's assumption that they had obtained the Product at a discount, contradicts Mr Lokhonia's evidence that the Discount Representations, the Star Rating Representations and the Total Product Price Representations had not given rise to consumer complaints.
(c) Nonetheless, visitors to the Website were deprived of an opportunity to make purchasing decisions on a fully and properly informed basis. Similarly, competing businesses were disadvantaged insofar as those businesses published accurate information about the discounts they were offering, the satisfaction of their customers, and the prices that they charged. To this extent, it may be accepted that both visitors to the Website and competing businesses suffered relevant loss. On the authorities, the loss or damage to be considered by the Court is not limited to financial harm: Dell at [7]; ACCC v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540 at [57] (Allsop CJ). The Court must assess the nature and extent of the relevant harm even if this "requires broad or rough estimation": Dell at [7]; ACCC v Uber B.V. [2022] FCA 1466 at [34] (O'Bryan J).
(d) Adopting a broad and rough estimation of the relevant harm to consumers, I accept Bloomex's contention that, in circumstances where the Products were discretionary and perishable, with limited financial impact, the loss or harm suffered by individual consumers would be on the lower end of the scale.
(e) On the other hand, again adopting a broad and rough estimation of the relevant harm, I note that approximately 550,000 orders were placed through the Website during the relevant period when the misrepresentations were made. By reason of the quantity of orders placed through the Website, I infer that the total loss caused to consumers as a class, in the limited sense described at [150(c)] above, was not insignificant. For the same reason, I consider that the loss to competing business was not insignificant.
(f) Ultimately, however, the absence of evidence of a quantifiable loss either to consumers or competing businesses should be regarded as a mitigating factor in this case: EnergyAustralia at [42] (Middleton J); ACCC v Lactalis Australia Pty Ltd (No 2) [2023] FCA 839 at [110] (Derrington J).
151 Similarly, as conceded by the ACCC, it is not possible to precisely quantify the value of benefits that Bloomex has received as a result of the Discount Representations and the Star Rating Representations.
152 I also do not consider that there is evidence before me that would enable me to quantify the value of any benefit obtained by Bloomex from the Total Product Price Representations. Mr Lokhonia's affidavit evidence, as summarised at [60] above, was that, although Bloomex received about $317,802 in relation to the surcharge, Bloomex would have charged this additional amount in any event. It follows that, even if the surcharge been properly disclosed (or built into the price of the Products), it is likely that the amount received by Bloomex would have been largely the same.
153 On the other hand, I do not accept Bloomex's submission that Mr Lokhonia's evidence, as extracted at [59] above, establishes that there was no significant increase in sales coinciding with Bloomex's contravening conduct, and in fact, the relevant increase occurred after the contravening conduct ceased. The increase in Bloomex's sales during Mother's Day in 2022 and 2023 may be attributable to a vast range of factors related to Bloomex's business, and does not positively establish that Bloomex did not receive any benefit, or only a minimal benefit, as a result of its contravening conduct.
154 On the basis of the analysis set out at [151]-[153] above, I conclude that any benefit obtained by Bloomex by its contravening conduct is not quantifiable. I reject any submission that the evidence establishes that Bloomex did not receive any, or only received a minimal, benefit as a result of the contravening conduct.
155 I have also considered the deliberateness of Bloomex's conduct. In considering this issue, I have also had regard to the involvement of senior management in the contravening conduct, as well as the period in which the contravening conduct occurred. I make the following findings on this issue:
(a) The ACCC has conceded, and I find, that the evidence does not establish that Bloomex made false or misleading representations with the intention of deliberately misleading or deceiving consumers.
(b) Nonetheless, Mr Lokhonia deposed that the concept behind the Discount Representations and the Star Rating Representations was proposed to him by Bloomex's then marketing director, Mark Campaugh: Affidavit at [38]-[39]. I therefore accept the ACCC's characterisation that those representations were the consequence of a strategy implemented by Bloomex's senior management.
(c) I also consider that it is notable that the ACCC issued the First Notice on 30 March 2022 and the Second Notice on 12 September 2022. The First Notice raised as a possible contravention of the ACL the use of "Customer Review and Star Ratings" on the Website, albeit the ACCC's concerns at this stage differed from the allegations concerning the Star Rating Representations in this proceeding. This First Notice clearly also raised as a possible contravention of the ACL Bloomex's representations concerning the discounts applied to Bloomex's Products advertised on the Website. The Second Notice raised as possible contraventions of the ACL Bloomex's use of the Star Ratings (in terms which were more clearly related to the ACCC's allegations in this proceeding), and Bloomex's representations concerning discounts applied to Products advertised on the Website. I consider that, Bloomex was on notice that the ACCC considered that Bloomex's representations concerning its discounting of Products may amount to contraventions of the ACL by the time that it received the First Notice. I consider that, by the time of the Second Notice, Bloomex was on notice that the ACCC considered that Bloomex's use of the Star Ratings may amount to contraventions of the ACL. Similarly, the ACCC raised concerns with the Total Product Price Representations in a letter to Bloomex dated 3 November 2022. Notwithstanding this, Bloomex continued to make certain Discount Representations, the Star Rating Representations and the Total Product Price Representations until March 2023.
156 Given the above matters, it cannot be said that the Discount Representations, the Star Rating Representations and the Total Product Price Representations arose by reason of simple oversight. This is a factor that increases the need for deterrence in respect of those representations: Dell at [46].
157 I have considered Bloomex's cooperation and contrition and make the following findings:
(a) I accept that Bloomex has cooperated with the ACCC in its investigation into the contravening conduct. Mr Lokhonia's evidence was that the ACCC first contacted Bloomex in relation to the issues the subject of this proceeding on 10 March 2022, and that he had an initial call with the ACCC on 15 March 2022. He had a further call with the ACCC on 6 September 2022, at which time he was told that the ACCC was satisfied with Bloomex's cooperation. There is no evidence that Bloomex failed to comply with any of the notices or requests for information issued by the ACCC.
(b) I also accept that Bloomex cooperated with the ACCC during this proceeding. Bloomex was informed of the proceeding having been commenced on 8 December 2022. On the filing of its Concise Statement in Response on 10 March 2023, Bloomex admitted most of the contraventions alleged. The parties subsequently reached agreement on 4 May 2023 which avoided the need for a contest as to Bloomex's liability. Bloomex also cooperated to enable Joint Proposed Orders to be submitted to the Court which granted the ACCC declaratory relief, injunctions and required Bloomex to undertake a compliance program.
(c) I acknowledge that Mr Lokhonia has travelled to Australia from Canada to give evidence at the hearing and to personally apologise on behalf of Bloomex for its contravening conduct.
158 The civil penalty to be imposed will be discounted to reflect Bloomex's above-described cooperation and contrition.
159 Nonetheless, any discount on account of Bloomex's contrition must also reflect the fact that Bloomex continued to make the Star Rating Representations and certain Discount Representations for some time after first being notified of the ACCC's investigation into it in March 2022. In the case of the Total Product Price Representations, Bloomex commenced making these representations on 10 August 2022. The ACCC expressed concerns about those representations in a letter to Bloomex dated 3 November 2022, and sought further information in connection with the surcharge in that letter. Notwithstanding this, Bloomex continued making the Total Product Price Representations until 22 March 2023.
160 It appears from Mr Lokhonia's Affidavit that, upon being notified that the ACCC had commenced the proceeding on 12 December 2022, Bloomex acted to engage a law firm, and shortly thereafter took steps to resolve the proceeding, including by removing the Star Rating Representations, the Discount Representations and the Total Product Price Representations on the Website. The difficulty with this is that, by that stage, the ACCC had already issued two notices to Bloomex - the First Notice, which was issued on 10 March 2022, and the Second Notice, which was issued on 12 September 2022. Having received these notices, both of which were addressed from the Chair of the ACCC, Bloomex ought to have been aware that the ACCC was raising serious matters about potentially misleading representations on the Website, for which it may require legal advice, and in respect of which it may need to take corrective action. That Bloomex did not obtain that legal advice until after the ACCC commenced the proceeding demonstrates that it did not act as proactively as it could have to mitigate any harm to consumers and businesses as a result of its contravening conduct.
161 It was not contested, and I find, that Bloomex has not previously been found to have engaged in any similar conduct by a court under Chapter 4 or Pt 5-2 of the ACL. I also do not accept the ACCC's submission that Bloomex's dealings with NSWFT ought to be treated by this Court as heightening the need for specific deterrence in Bloomex's case. Bloomex entered into enforceable undertakings with NSWFT without admission as to liability. Bloomex's payment of three penalty notices totalling $16,5000 also cannot give rise to an admission of liability by reason of s 22A(2) of the Fines Act 1996 (NSW) and s 67(3) of the Fair Trading Act 1987 (NSW). In any case, each of the penalty notices concerned a complaint from a single customer about the quality or type of goods received, and is materially different to the ACCC's allegations in this proceeding.
162 I am not satisfied that Bloomex has a corporate culture conducive to compliance. The correspondence between Bloomex and the ACCC reveals that despite requests made by the ACCC, Bloomex has not produced evidence that it has an effective ACL compliance program.
163 I have considered Bloomex's size and financial position. Bloomex's business and its financial performance is set out in detail at paragraphs [9]-[16] above. I have also considered the related question of the impact of a civil penalty on Bloomex.
164 As explained by the majority in Pattinson at [60], a greater financial incentive is necessary to persuade a well-resourced contravener to comply with the law than will be necessary to persuade a poorly resourced contravener to do so. It has also been recognised that the deterrent quality of a penalty should be balanced by the requirement that the penalty "not be so high as to be oppressive": NW Frozen Foods at 293, quoted in Pattinson at [40]. On the other hand, it has been said that a contravening company's capacity to pay a penalty is of less relevance to the objective of general deterrence: ACCC v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 at [9] (Merkel J). A penalty that is no greater than is necessary to achieve the object of general deterrence will not be oppressive: Leahy at [9]. Thus, as explained by Heerey, Finkelstein and Allsop JJ in ACCC v High Adventure Pty Ltd [2005] FCAFC 247 at [11], even if a penalty may be so high that the offender will become insolvent, "[t]hat possibility must not prevent the Court from doing its duty for otherwise the important object of general deterrence will be undermined".
165 As to the size of Bloomex's business, as set out at [13] above, Mr Lokhonia deposed that Bloomex had only one employee in Australia, being a local director, with Bloomex's logistical operations in Australia conducted by contractors. Nonetheless, as put by Senior Counsel for the ACCC, the manner in which Bloomex has structured its operations in Australia does not gainsay that Bloomex makes profits by those operations in Australia: Mr Wallis KC, T 54-55.43-4. I therefore do not regard the size of Bloomex's business as a mitigating factor. It is necessary to consider Bloomex's revenue and profits in assessing the penalty amount appropriate to achieve specific deterrence in Bloomex's case.
166 It is agreed that Bloomex's revenue has risen from $4.579 million in the financial year 2019 to $16.065 million in financial year 2022. Bloomex's total orders have increased from 74,482 to 187,399. Bloomex's gross profits have risen from $1.526 million in the 2019 financial year to $3.186 million in the 2022 financial year. In the 2022 financial year, Bloomex recorded a net loss after tax of $1.803 million, albeit it recorded gross profits in that financial year of $3.186 million. Mr Lokhonia deposed that this was due to COVID-related issues including supply chain problems, management difficulties arising from travel restrictions and labour shortages and disruptions due to lockdowns and the pandemic generally.
167 In my opinion, the above agreed facts and evidence establish that Bloomex has experienced substantial growth both in its total orders, revenue and gross profits. It has experienced a significant loss in the 2022 financial year. However, the explanation for that loss appears to be associated with increased costs arising from the pandemic. There is no reason for the Court to consider that those issues will be ongoing. In these circumstances, I accept the ACCC's characterisation of Bloomex as a "substantial entity conducting a substantial enterprise for substantial profit": Mr Wallis KC, T 56.35.
168 Further, it was agreed that Bloomex is one of the largest florists in Australia, with production facilities in five states. I accept the ACCC's submission that the fact that Bloomex is a prominent industry participant reinforces the importance of general deterrence in determining the appropriate penalty amount in this case.
169 As to Bloomex's submission that the penalty sought by the ACCC may cause it to cease conducting business in Australia, such a matter must not prevent the Court from doing its duty of imposing a penalty that achieves the important object of general deterrence: High Adventure at [11]. In any case, Mr Lokhonia's evidence, which is extracted at [64] above, was equivocal as to the effect of the penalty sought by the ACCC. Mr Lokhonia referred to an "unduly large penalty" risking Bloomex's continued viability. Mr Lokhonia further stated that "if the penalty were so large as to make it unviable", Bloomex would have no incentive or ability to keep trading in Australia (emphasis added). This statement was followed by the statement that "[t]he most likely outcome is that Bloomex will cease to do business in Australia". While all of the above statements followed Mr Lokhonia's statement that he understood the ACCC was seeking a penalty of around $1.25 - 1.5 million, at no point did Mr Lokhonia state that, if the Court were to impose the penalty sought by the ACCC, Bloomex would cease to do business in Australia.
170 I consider that, weighing all of the above matters, penalties in the aggregate of $1 million put a price on Bloomex's contraventions that is sufficiently high to deter repetition by Bloomex (specific deterrence) and by would-be contraveners (general deterrence). I also consider that the penalties should be weighted in favour of the Discount Representations and the Star Rating Representations which, for the reasons set out at [148]-[149] above, were of a more serious nature than the Total Product Price Representations.
171 Weighing all of the above matters, I have determined that the following civil penalties are appropriate:
(a) Discount Representations: $400,000;
(b) Star Rating Representations: $400,000; and
(c) Total Product Price Representations: $200,000
172 A civil penalty of $1 million will be imposed in respect to the admitted contravening conduct.