Between 10 January 2020 and 2 November 2021, in circumstances where section 54 of the Australian Consumer Law (ACL), being Schedule 2 to the Competition and Consumer Act 2010 (Cth), provides a consumer guarantee as to acceptable quality and section 55 of the ACL provides a consumer guarantee as to fitness for purpose, Booktopia Pty Ltd (Booktopia):
(a) engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 18 of the ACL; and
(b) made false or misleading representations regarding the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy in contravention of section 29(1)(m) of the ACL,
in trade or commerce, in connection with the supply, possible supply or promotion of products including books, magazines, calendars, maps, stationery, games, puzzles and audio CDs (Booktopia Products) to Australian consumers, by representing, by causing its Terms of Business to be accessible on its website and each time a consumer accessed the terms on Booktopia's website, to consumers that any consumer must notify Booktopia, within two business days of delivery of a Booktopia Product to the consumer, of damage to, or fault or error in the product in order for the consumer to have a right to a refund or other remedy in relation to the product which is damaged, faulty or incorrect (Two Business Days Representation), when in fact a consumer's right to a refund or other remedy continued or may have continued although the consumer did not notify Booktopia within two business days of delivery of the damage, fault or error, by virtue of the following:
(a) Sections 54 and 55 of the ACL provide for consumer guarantees.
(b) Sections 259 and 263 of the ACL provide consumers with rights to a remedy for goods that do not comply with the consumer guarantees.
(c) Having regard to sections 64 and 276 of the ACL, Booktopia could not exclude, restrict or modify the availability of the consumer guarantees or a consumer's entitlement to exercise the rights to a remedy for goods that do not comply with the consumer guarantees.
(d) Two business days of delivery of a Booktopia Product is not, or may not be, a reasonable period, within the meaning of that term in sections 262 and 259 of the ACL.
Between 10 January 2020 and 2 November 2021, in circumstances where section 54 of the ACL provides a consumer guarantee as to acceptable quality and section 55 of the ACL provides a consumer guarantee as to fitness for purpose, Booktopia:
(a) engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL; and
(b) made false or misleading representations regarding the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy in contravention of s 29(1)(m) of the ACL,
in trade or commerce, in connection with the supply, possible supply or promotion of eBooks, other digital content, "Bulk Orders where special pricing and/or product sourcing has been provided with Firm Sale terms" and "Print on Demand titles where a Firm Sale has been advised" (No Return and Refund Products) to Australian consumers, by representing, by causing its Terms of Business to be accessible on its website and each time a consumer accessed the terms on Booktopia's website, to consumers that consumers were not entitled to obtain a refund in respect of the No Return and Refund Products in any circumstance (No Refund Representation), when in fact consumers were able to or may have been able to obtain a refund in respect of the No Return and Refund Products by virtue of the following:
(a) Sections 54 and 55 of the ACL provide for consumer guarantees.
(b) Sections 259(2) and 259(3) of the ACL provide consumers with the right to obtain a refund pursuant to section 263(4) of the ACL as against Booktopia as supplier in certain circumstances.
(c) Having regard to sections 64 and 276 of the ACL, Booktopia could not exclude, restrict or modify the availability of the consumer guarantees or a consumer's entitlement to exercise the rights to a remedy for goods that do not comply with the consumer guarantees.
Between April 2020 and January 2021, in circumstances where section 54 of the ACL provides a consumer guarantee as to acceptable quality and section 55 of the ACL provides a consumer guarantee as to fitness for purpose, Booktopia (through its Customer Service Centre agents):
(a) engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL; and
(b) made false or misleading representations regarding the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy in contravention of s 29(1)(m) of the ACL,
in trade or commerce, in connection with the supply of Booktopia Products to certain Identified Customers (as described in the annexure to the Concise Statement) by representing to each of the Identified Customers that Booktopia was not obliged to provide a remedy because the customer had failed to contact Booktopia within two business days of delivery (No Obligation to Remedy Representation), by virtue of the following:
(a) Sections 54 and 55 of the ACL provide for consumer guarantees.
(b) Sections 259 and 263 of the ACL provide consumers with rights to a remedy for goods that do not comply with the consumer guarantees.
(c) Having regard to sections 64 and 276 of the ACL, Booktopia could not exclude, restrict or modify the availability of the consumer guarantees or a consumer's entitlement to exercise the rights to a remedy for goods that do not comply with the consumer guarantees.
(d) Two business days of delivery of a Booktopia Product is not, or may not be, a reasonable period, within the meaning of that term in sections 262 and 259 of the ACL.
THE COURT ORDERS THAT:
The Respondent pay to the Commonwealth of Australia a pecuniary penalty in the amount of $6,000,000 in respect of the contraventions of section 29(1)(m) of the ACL declared by the Court. The pecuniary penalties will be payable in instalments as follows:
(a) $150,000 within thirty (30) days from the date of this order;
(b) $300,000 within seven (7) months from the date of this order;
(c) $300,000 within nine (9) months from the date of this order;
(d) $450,000 within twelve (12) months from the date of this order;
(e) $1,200,000 within twenty four (24) months from the date of this order;
(f) $1,200,000 within thirty six (36) months from the date of this order;
(g) $1,200,000 within forty eight (48) months from the date of this order;
(h) $1,200,000 within sixty (60) months from the date of this order; and
(i) if there is any default in the payment of an instalment by a required date in paragraphs (a) to (h) above, the balance of all outstanding instalments will be due and payable immediately.
The Respondent, at its own expense and within twenty one (21) days of the date of this Order and for a period of sixty (60) days, will publish on the Booktopia Website Homepage (www.booktopia.com.au) and Terms of Business landing page (https://www.booktopia.com.au/helpCentre.ep?p=policies&o=terms#) (Website) a notice in the terms set out in Annexure A (Notice), and ensure that the Notice complies with the following specifications:
(a) the Notice is viewable by clicking a hyperlink located on the Website;
(b) the hyperlink referred to in the previous sub-paragraph is located in the top third of the Website and is not obscured, blocked or interfered with by any operation of the Website;.
(c) the hyperlink:
(i) contains the words: "Misrepresentations by Booktopia about consumer rights - corrective notice order by the Federal Court of Australia" in upper case 14 point, bold, black, Times New Roman font on a white background, centred and in a bordered box;
(ii) the bordered box and its contents, including the white space, is to operate in the form of a one-click hyperlink to the said Notice; and
(iii) the border must be black.
The Respondent, at its own expense:
(a) establish, within ninety (90) days of the date of this order, a Consumer Law Compliance Program which meets the requirements set out in Annexure B; and
(b) maintain the compliance program for three (3) years from the date on which it is established.
Booktopia, in good faith, review its financial position and capacity to pay the penalty at Order 4 above on an annual basis, and notify the Applicant if repayment of the penalty can be accelerated and make an appropriately accelerated repayment accordingly.
The Respondent pay the Applicant's costs of, and incidental to, this proceeding, fixed in the amount of $75,000, within thirty (30) days of the date of this order.
A copy of the reasons for judgment, with the seal of the Court affixed thereon, be retained on the Court file for the purposes of s 137H of the Competition and Consumer Act.
Pursuant to ss 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth) and on the ground that it is necessary to prevent prejudice to the proper administration of justice, until further order of the Court, the text of the reasons for judgment published today is to be published and disclosed only to the parties to these proceedings and their external legal representatives who are party to confidentiality arrangements.
The parties confer and provide to chambers, within 14 days, an agreed form of the reasons for judgment that is suitable for publication, with redactions noted.
Annexure B
CONSUMER LAW COMPLIANCE PROGRAM
Pursuant to an order by the Federal Court dated 10 March 2023 (Order), Booktopia Pty Ltd (Booktopia) will establish a Consumer Law Compliance Program (Compliance Program) that complies with each of the requirements below.
Appointments
Within three (3) months of the date of the Order, Booktopia will appoint a suitable Compliance Officer to ensure the Compliance Program is effectively designed, implemented, and maintained for a period of three (3) years. Booktopia will also appoint an external or internal Compliance Advisor within three (3) months of the date of the Order to conduct a consumer law risk assessment. The consumer law risk assessment should be completed within a period of 12 months.
Compliance Policy
Within thirty (30) days of the date of the Order, Booktopia will issue a policy statement outlining its commitment to compliance with the ACL.
Complaints Handling System
Booktopia will ensure that the Compliance Program includes a consumer law complaint handling system, and Booktopia will ensure that staff and customers are made aware of the Complaints Handling System.
Staff Training
Booktopia will ensure that the Compliance Program provides for regular training for all employees, including frontline customer service staff, and the training is conducted by a suitably qualified person with expertise in consumer law. Booktopia will also include ACL compliance training as part of the induction of new employees.
Review of customer service staff training materials
Booktopia's Compliance Officer must review, or arrange for the review, of all training materials, scripts, manuals and guidelines provided to customer service staff for the purpose of responding to customer enquiries, to ensure those materials comply with the ACL. This review must be undertaken for any new or subsequent versions of these materials every six (6) months for a period of three (3) years from the date of the Order.
Review of terms and conditions applying to customers
Booktopia's Compliance Officer must review Booktopia's terms and conditions that apply to its customers to ensure the terms and conditions comply with the ACL. This review must be conducted for all future versions of the terms and conditions, including any subsequent versions of the Terms of Business, for a period of three (3) years from the date of the Order. The Compliance Officer must be satisfied that the terms and conditions comply with the ACL prior to their publication.
Compliance audits
Booktopia's Compliance Officer must conduct, or arrange to be conducted, randomised quality assurance checks of customer service staff interactions with consumers on a monthly basis, for a period of three (3) years from the date of the Order, to ensure customer service staff are acting in a manner that complies with the ACL.
Compliance Review
Booktopia will, at its own expense, prepare an annual review of the Compliance Program to be carried out by an independent person such annual review to occur for a period of three (3) years from the date of the Order.
Compliance Reports
Booktopia will use its best endeavours to ensure that within 30 days of the completion of a Review, the Reviewer includes the findings of the Review and any recommendations in a report provided to Booktopia. Where material failings are found, these should be reported to the ACCC.
Provision of Compliance Program documents to the ACCC
Booktopia will maintain all documents relating to and constituting the Compliance Program for at least three years. If requested by the ACCC, Booktopia will provide to the ACCC copies of all documents related to the Compliance Program including a copy of any Compliance Report and consumer law risk assessment.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
[2]
REASONS FOR JUDGMENT
1 INTRODUCTION [1]
2 RELEVANT LEGISLATION [4]
3 THE RELEVANT AGREED FACTS [8]
3.1 Booktopia [9]
3.2 The representations [18]
3.2.1 Two Business Days Representation [18]
3.2.2 No Refund Representation [21]
3.2.3 No Obligation to Remedy Representation [25]
3.3 Events after the first publication of the representations [29]
3.4 Admissions of liability [36]
4 CONSIDERATION [37]
4.1 Relevant principles in relation to orders by agreement and assessment of penalty [37]
4.2 Consideration of penalty [39]
4.3 Other orders [58]
CONFIDENTIAL ANNEXURE
[3]
INTRODUCTION
1 The Australian Competition and Consumer Commission (ACCC) commenced the current proceedings on 10 December 2021, alleging that Booktopia Pty Ltd had engaged in conduct in contravention of sections 18(1) and 29(1)(m) of the Australian Consumer Law (ACL) (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) by making various representations to customers about their rights to refunds and remedies in respect of goods purchased from Booktopia's online bookstore that did not comply with the consumer guarantee regime contained in Part 3-2 and Parts 5-4 of the ACL.
2 The parties have cooperated in preparing a statement of agreed facts and admissions and join in submitting to the Court that the following orders are appropriate to resolve the proceedings:
(1) declarations reflecting the agreed contraventions;
(2) an order that Booktopia pay pecuniary penalties in the total amount of $6 million, by instalments over five years;
(3) an order that Booktopia publish a corrective notice on its website;
(4) an order that Booktopia enter into certain agreed compliance measures;
(5) an order that a copy of the reasons for judgment, with the seal of the Court affixed thereon, be retained on the Court file for the purposes of s 137H of the Competition and Consumer Act;
(6) an order that Booktopia pay the ACCC's costs of, and incidental to the proceedings, fixed in the amount of $75,000.
3 For the reasons set out below, I am satisfied that these orders are appropriate.
[4]
RELEVANT LEGISLATION
4 Section 18(1) of the ACL states:
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
5 Section 29(1)(m) of the ACL states:
(1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
…
(m) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2).
6 Section 29 is within Part 3-1 of the ACL and accordingly is a pecuniary penalty provision: s 224(1)(a)(ii). Section 224 relevantly states:
(1) If a court is satisfied that a person:
(a) has contravened any of the following provisions:
…
(ii) a provision of Part 3-1 (which is about unfair practices);
…
the court may order the person to pay to the Commonwealth, State or Territory, as the case may be, such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the court determines to be appropriate.
(2) In determining the appropriate pecuniary penalty, the court must have regard to all relevant matters including:
(a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and
(b) the circumstances in which the act or omission took place; and
(c) whether the person has previously been found by a court in proceedings under Chapter 4 or this Part to have engaged in any similar conduct.
7 At the time of the impugned conduct, sections 224(3) and 224(3A) provided that the maximum pecuniary penalty payable by a body corporate "for each act or omission that relates to" a provision of Part 3-1 is the greater of:
(a) $10,000,000;
(b) if the court can determine the value of the benefit obtained directly or indirectly and that is reasonably attributable to the act or omission, three times the value of that benefit; and
(c) if the court cannot determine the value of that benefit, 10% of the annual turnover of the body corporate during the 12-month period ending at the end of the month in which the act or omission occurred or started to occur.
[5]
THE RELEVANT AGREED FACTS
8 The following are the subject of the statement of agreed facts.
[6]
3.1 Booktopia
9 Booktopia is an online bookstore, incorporated in Australia, which operates a website at the URL: http://www.booktopia.com.au (the website). Through the website, Booktopia predominantly supplies physical books, but also supplies magazines, calendars, maps, stationery, games and puzzles and digital content such as eBooks and audio books (the products), to consumers in Australia. Booktopia is a subsidiary of Booktopia Group Limited (Booktopia Group), which operates four key brands including Booktopia.
10 Booktopia Group achieved year on year revenue growth over the period from financial year 2020 to financial year 2022. Booktopia Group's preferred measure of "Underlying EBITDA" in the year to 30 June 2022 was slightly over $6.2 million (compared to $13.65 million in the prior year). However, that revenue growth has recently not corresponded to profitable performance, as, in the year to 30 June 2022, Booktopia Group's consolidated accounts record a loss of slightly over $15 million on revenue of almost $241 million. While the parties noted that this was not to detract from the significance to setting an appropriate penalty, the parties identified that Booktopia Group's loss to 30 June 2022 includes a provision for the proposed penalty at a discounted present value. The prior year loss was slightly over $18 million.
11 In the year to 30 June 2022 Booktopia achieved a net operating cash flow of slightly over $10 million (in the prior year net operating cashflow was around $6.6 million). However, that was exceeded by cash outflows in investing and financing activities, with the consequence that Booktopia Group's net cashflow saw a decrease of slightly over $3.5 million (in the prior year net cashflow was an increase of just under $1 million). Cash and cash equivalents at end of year were slightly over $8.5 million. Further details about Booktopia's financial position are outlined in the confidential annexure to these reasons, which has been redacted from the published version of these reasons.
12 Between 10 January 2020 and 2 November 2021 (the relevant period), the purchase of products on the website was governed by Booktopia's Terms of Business and the ACL. The Terms of Business were published on the website.
13 A link to the Terms of Business would appear to consumers before completing a purchase of a product on the website. Prior to clicking on a button to complete a transaction consumers were shown the following statement:
Acknowledgment of Terms of Business
By submitting this order, you confirm that you are purchasing the correct format and quantity of the above items and order Booktopia to source these on your behalf. You verify that these items are being purchased for personal or business use only (eBooks and audiobooks use are for personal, non-commercial, non-lending purposes only) and are not being purchased for resale and you accept Booktopia's Terms of Business.
14 Customers were not required to view the Terms of Business or select an acknowledgment button.
15 During the relevant period, the Terms of Business included the following statements under the heading "Returns Policy":
(a) The ACL statement: "This policy includes rights you are entitled to under Australian Consumer Law";
(b) The Two Business Days Term: "If you have received an item that is incorrect, damaged or faulty we require notification within 2 business days from the time the delivery was made"; and
(c) The No Return and Refund Term: "Returns and refunds are not possible for the following product types [the No Return and Refund Products]:
• Magazine Subscriptions
• Gift Certificates
• eBooks
• Other Digital Content
• Bulk Orders where special pricing and/or product sourcing has been provided with Firm Sale terms
• Print on Demand titles where a Firm Sale has been advised".
16 These terms were included as a result of a review undertaken by Booktopia in November 2019 which had been aimed at addressing the number of returns from change of mind requests and from customers cancelling orders within Booktopia's cooling-off period. Members of Booktopia's Senior Executive Team, which included the Chief Executive Officer, Chief Commercial Officer and Deputy CEO/Chief Technology Officer, were responsible for reviewing and approving the Terms of Business.
17 During the relevant period, Booktopia had neither an ACL compliance policy nor specific ACL compliance training for staff. Booktopia also did not have any scripts provided to customer service staff to train or guide them when dealing with customer requests for refunds or replacements. The Booktopia Senior Management Team did not seek legal advice about the compliance of the Terms of Business with the ACL.
[7]
3.2.1 Two Business Days Representation
18 Booktopia accepts that by publishing the Two Business Days Term together with the ACL statement, or alternatively, by publishing the Two Business Days Term alone, during the relevant period, it represented that any consumer must notify Booktopia, within two business days of delivery of a Booktopia Product to the consumer, of damage to, or fault or error in the product in order for the consumer to have a right to a remedy in relation to the product which is damaged, faulty or incorrect (Two Business Days Representation).
19 However, as Booktopia accepts, a consumer's right to a remedy under the ACL continued or may have continued even if the consumer did not notify Booktopia within two business days of delivery of the damage, fault or error, and Booktopia could not impose the Two Business Days Term on a consumer, by virtue of the following:
(a) sections 54 and 55 of the ACL, which provide for consumer guarantees;
(b) sections 259 and 263 of the ACL, which provide consumers with rights to a remedy for goods that do not comply with the consumer guarantees;
(c) having regard to sections 64 and 276 of the ACL, Booktopia could not exclude, restrict or modify the availability of the consumer guarantees or a consumer's entitlement to exercise the rights to a remedy for goods that do not comply with the consumer guarantees; and
(d) two business days of delivery of a Booktopia Product is not, or may not be, a reasonable period, within the meaning of that term in sections 262 and 259 of the ACL.
20 As a result of the foregoing, Booktopia accepts that the Two Business Days Representation was false, misleading or deceptive.
[8]
3.2.2 No Refund Representation
21 In respect of the No Return and Refund Term, Booktopia's conduct only relates to the No Return and Refund Products.
22 Booktopia accepts that, by publishing the No Return and Refund Term together with the ACL statement, or alternatively, by publishing the No Return and Refund Term alone, during the relevant period, Booktopia represented that consumers were not entitled to obtain a refund in respect of the No Return and Refund Products in any circumstance (No Refund Representation).
23 However, as Booktopia accepts, a consumer had or may have had a right to a refund under the ACL, and Booktopia could not impose the No Return and Refund Term by virtue of the following:
(a) sections 54 and 55 of the ACL, which provide for consumer guarantees;
(b) sections 259(2) and 259(3) of the ACL, which provide consumers with the right to obtain a refund pursuant to section 263(4) of the ACL as against Booktopia as supplier in certain circumstances; and
(c) having regard to sections 64 and 276 of the ACL, Booktopia could not exclude, restrict or modify the availability of the consumer guarantees or a consumer's entitlement to exercise the rights to a remedy for goods that do not comply with the consumer guarantees.
24 As a result, Booktopia accepts that the No Refund Representation was false, misleading or deceptive.
[9]
3.2.3 No Obligation to Remedy Representation
25 Booktopia interacted with consumers through its staff at its customer service centres in the Philippines and in Australia. The parties by agreement provided details of Booktopia's interactions with 19 consumers who contacted Booktopia in relation to Booktopia Products they had purchased (Identified Consumers) during the period from 23 April 2020 to 5 January 2021. These interactions typically involved a consumer purchasing a product (generally a book or jigsaw puzzle) from Booktopia that was damaged or faulty and contacting Booktopia for a remedy later than two business days after the product was purchased, before being told by the Booktopia representative, referring to the Terms of Business, that Booktopia required consumers to notify Booktopia within two business days from the time delivery was made.
26 During Booktopia's dealings with the Identified Consumers via three customer service staff members, two based in the Philippines and one in Australia, Booktopia represented to each of those consumers that Booktopia was not obliged to provide a remedy because the customer had failed to contact Booktopia within two business days of delivery, even where a Booktopia Product was not of acceptable quality within the meaning of section 54 of the ACL or not fit for purpose within the meaning of section 55 of the ACL (No Obligation to Remedy Representation).
27 The customer service staff member based in Australia made a No Obligation to Remedy Representation to the relevant consumer, but also provided a remedy to the relevant customer at the time of the customer's complaint.
28 However, as Booktopia accepts, Booktopia's obligation to provide a remedy to the consumer under the ACL if the Booktopia Product was not of acceptable quality or not fit for purpose continued or may have continued even if the consumer did not request the remedy within two business days of delivery, by virtue of the matters set out at 19-(d) above. As a result, Booktopia accepts that the No Obligation to Remedy Representations made to each of the Identified Consumers was false, misleading or deceptive.
[10]
3.3 Events after the first publication of the representations
29 In the relevant period, a very significant number (as recorded in the confidential annexure) of consumers completed a purchase transaction for a product. This includes hundreds of thousands of consumers who purchased a No Return and Refund Product. There were tens of thousands (as recorded in the confidential annexure) unique visitors to the webpage of the Booktopia Website containing the Terms of Business during the relevant period, but it is not known how many customers were misled.
30 Booktopia was aware by January 2021 that two customer service staff had understood the Terms of Business to mean that Booktopia would not replace a faulty item if it was reported more than two days after delivery.
31 In January 2021, Booktopia's Customer Service Operations Manager created a document entitled "Damaged policies replacement note" dated 12 January 2021. The note stated:
i. Under Australian consumer law a customer is entitled to a replacement or other remedy if an item is sent that is incorrect, damaged or faulty;
ii. Our terms of business indicate that we want customers
to contact us within 2 working days of receiving a product. You should however still engage with a customer about solutions for this item regardless of how long they have taken to contact us.
- Some types of damage aren't immediately obvious or worsen once the product is handled
- Products might be a gift or not immediately handled for a number of reasons
-We set a time frame to encourage customers to contact us promptly where damage or issues are obvious so that we have a better chance of providing a replacement or other positive outcome damaged polices.
32 There was no formal approval process for the note. The substance of the document was delivered at an all-team discussion with the customer service team members based in Manila on 12 January 2021. The note was then made available to the senior customer service team member based in Manila after the all-team discussion to be used as a reference for on-going coaching.
33 In May 2021, the ACCC raised concerns with Booktopia about the Terms of Business, but they continued to be published until 3 November 2021.
34 Booktopia cooperated with the ACCC in relation to the conduct the subject of this proceeding before the commencement of and during the proceeding in a number of ways, including providing voluntary submissions to the ACCC, providing remedies to the Identified Consumers who had not yet received a remedy, amending its Terms of Business, and initiating settlement discussions with the ACCC. The ACCC and Booktopia reached agreement on proposed relief in relation to the admitted contraventions following mediation.
35 Booktopia has no prior infringements and has not been the subject of previous adverse finding of any contravention of provisions of the Competition and Consumer Act or ACL.
[11]
3.4 Admissions of liability
36 In direct answer to the allegations of contravention, Booktopia has made the following admissions:
(a) by making the Two Business Days Representation …, during the Relevant Period, it:
(i) engaged in conduct which was misleading or deceptive, or likely to mislead or deceive, in contravention of section 18 of the ACL; and
(ii) made false or misleading representations regarding the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy with respect to the Booktopia Products in contravention of s 29(1)(m) of the ACL.
(b) by making the No Refund Representation …, during the Relevant Period, it:
(i) engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL; and
(ii) made false or misleading representations regarding the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy with respect to the Identified Consumer (as described in the Annexure C to the SAFA) in contravention of s 29(1)(m) of the ACL.
(c) by making the No Obligation to Remedy Representation …, during the period 23 April 2020 to 5 January 2021, it:
(i) engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL; and
(ii) made false or misleading representations regarding the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy with respect to the Identified Consumer (as described in the Annexure C to the SAFA) in contravention of s 29(1)(m) of the ACL.
(d) any No Obligation to Remedy Representation made by an agent engaged by Booktopia to provide customer services to Booktopia was made within the scope of the actual or apparent authority of the agent.
[12]
4.1 Relevant principles in relation to orders by agreement and assessment of penalty
37 The principles applicable to determining whether conduct contravenes s 18 of the ACL are well-established. Conduct is misleading or deceptive, or likely to mislead or deceive, if it has a tendency to lead into error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640 at [39] (French CJ, Crennan, Bell and Keane JJ). Whether conduct in relation to a particular class of consumers is misleading or deceptive is a question of fact to be resolved by a consideration of the whole of the impugned conduct in the circumstances in which it occurred. The principles that apply to what is considered to be misleading in s 18 of the ACL are the same in respect of s 29 of the ACL: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; 317 ALR 73 at [35]-[47] (Allsop CJ).
38 As I recently summarised in Australian Securities and Investments Commission v Squirrel Superannuation Services Pty Ltd [2022] FCA 702:
58 The principles relevant to the making of orders and declarations by consent are well settled. First, there is a well-recognised public interest in the settlement of cases such as the present. Secondly, the orders proposed by agreement must not be contrary to the public interest and at least consistent with it. Thirdly, when deciding whether to make orders that are consented to, the Court must be satisfied that it has to power to make the orders proposed and that they are appropriate. Fourthly, once the Court is satisfied these requirements are met, the Court should exercise a degree of restraint when scrutinising the proposed settlement terms, particularly where both parties are legally represented and able to understand and evaluate the desirability of the settlement. Finally, in deciding whether agreed orders conform with legal principle, the Court is entitled to treat the consent of the respondent as an admission of all facts necessary or appropriate to the granting of the relief sought against it: see Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [70]-[73] (Gordon J) and the authorities cited there.
59 Furthermore, where declarations are sought by consent, the Court will exercise its discretion under s 21 of the Federal Court of Australia Act, but provided that; (a) the issue in respect of which the declaration is sought is not hypothetical or theoretical; (b) the applicant has a real interest in raising it; and (c) there is a proper contradictor; the Court will be slow to refuse to give effect to the terms of a settlement reached by consent; Coles Supermarkets at [75]-[76].
60 The principles regarding the imposition of pecuniary penalties in civil proceedings are well established, and were recently restated in Australian Building and Construction Commission v Pattinson [2022] HCA 13; 399 ALR 599 at [14]-[19]. Although that decision concerned s 546 of the Fair Work Act 2009 (Cth), the observations in that case concerning the assessment of penalty for the purpose of civil penalty provisions in the Act are apposite. In that regard, the main points to observe are that:
(a) The purpose of a civil penalty is primarily protective, in promoting the public interest in compliance by deterrence from further contravening conduct: Pattinson at [15];
(b) A penalty of appropriate deterrent effect "must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business": Pattinson at [17] citing Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249 at [62] (Keane CJ, Finn & Gilmour JJ);
(c) The assessment of penalty of appropriate deterrent value will have regard to a number of factors including: (1) the nature and extent of the contravening conduct; (2) the amount of loss or damage caused; (3) the circumstances in which the conduct took place; (4) the size of the contravening company; (5) the degree of power it has, as evidenced by its market share and ease of entry into the market; (6) the deliberateness of the contravention and the period over which it extended; (7) whether the contravention arose out of the conduct of senior management or at a lower level; (8) whether the company has a corporate culture conducive to compliance, as evidenced by educational programs or other corrective measures in response to an acknowledged contravention; and (9) whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to contravention: Pattinson at [18].
(d) Ultimately the matters identified in (c) are not to be considered to be a rigid list of factors to be ticked off (Pattinson at [19]), but rather are to inform a multifactorial investigation that leads to a result arrived at by a process of "instinctive synthesis" addressing the relevant considerations: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 at [44] (Jagot, Yates and Bromwich JJ).
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4.2 Consideration of penalty
39 As a result of the materials before me and the admissions made, I am satisfied that Booktopia, in trade and commerce, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and also made false or misleading representations regarding the existence, exclusion or effect of a condition, warranty, right or remedy in contravention of s 29(1)(m) of the Act by making each of the:
(a) Two Business Days Representation;
(b) No Refund Representation; and
(c) No Obligation to Remedy Representation;
in the circumstances set out more fully in Section 3.2 above. I refer to each of these below as contraventions.
40 The class of consumers relevant to each contravention is likely to include the broad cross-section of the Australian community interested in purchasing books and other goods online.
41 Each of the Two Business Days Contravention and the No Refund Contravention was made by Booktopia in its Terms of Business published on its website and thereby made accessible to consumers over a period of some 22 months, from 10 January 2020 until 2 November 2021. The confidential evidence tendered indicates that millions of consumers purchased products from Booktopia during that period and tens of thousands of people visited the Terms of Business on the website. However, the parties agree that the value of any benefit obtained by Booktopia - or the loss suffered by consumers - that could reasonably be attributed to the contraventions cannot be determined. The latter is because it is not possible to identify how many consumers may have been dissuaded from pursuing their consumer guarantee rights under the ACL after viewing the Terms of Business. Nonetheless, I infer that the contravening conduct may have caused widespread consumer harm.
42 The No Obligation to Remedy Contraventions were made on 35 occasions to 19 separate consumers over a period from April 2020 until January 2021. Booktopia Products sell on average for a unit price of $27.50 and the average value of an order during the 2021 financial year was $71.07. Given the limited number of No Obligation to Remedy Contraventions, and also having regard to the evidence that Booktopia had contacted each of the consumers identified to have been the subject of the No Obligation to Remedy Contravention and offered a replacement product or a refund, it may be assumed that the harm suffered by consumers from that conduct was negligible.
43 I note that by operation of s 224(3A) of the Act, the maximum penalty attaching to each of the contraventions is to be the greater of $10 million or 10% of the annual turnover of Booktopia and its related bodies corporate. As the confidential annexure indicates, the latter circumstance applies. However, given the number of times that consumers may have accessed the Booktopia webpage containing the Two Business Days Contravention and the No Refund Contravention, I accept the submission advanced by the parties that the arithmetic maximum penalty attaching to Booktopia's conduct would be so disproportionately large as to make precise calculation unhelpful. The same conclusion is applicable to the 35 No Obligation to Remedy contraventions.
44 In the present case, it is of more relevance to consider penalty by having regard to three separate courses of conduct referable to each of the misrepresentations made, as summarised in (a)-(c) above at [39], all the time recognising that it is the total penalty that must be considered in order to ensure that the aggregate imposed is appropriate, having regard to the overall object of general and specific deterrence; Australian Building and Construction Commission v Pattinson [2022] HCA 13; 399 ALR 599 at [15], [10] and [45] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ).
45 Turning to the three considerations that must be considered under s 224(2) of the Act, I have noted in [39]-[42] above the nature and extent of the contravening conduct; s 224(2)(a).
46 The following points may be made in relation to the circumstances of the contraventions which must be considered pursuant to s 224(2)(b).
47 Booktopia is Australia's largest bookseller. It has been operating for 18 years and is an established participant in the market. It has been listed on the Australian Securities Exchange since 2020. As a large-volume retailer, it is a company with a significant level of interaction with consumers. It ought to have placed its customers' rights foremost in its corporate mind and been aware of the protections afforded to consumers under the ACL.
48 The Two Business Days Contraventions and the No Refund Contraventions occurred over a sustained period of time in circumstances where Booktopia did not have an ACL compliance training program in place. The Terms of Business were published in November 2019 and members of Booktopia's senior executive team had responsibility for reviewing and approving them, yet Booktopia did not seek legal advice before adopting them. In May 2021 the ACCC raised concerns with Booktopia about the Terms of Business, but it continued with the publication of the Terms of Business on its website for a further 5 months.
49 The No Obligation to Remedy Contravention involved conduct over about eight months, from 23 April 2020 until 5 January 2021. The misrepresentations were made by customer service centre staff members who are engaged to respond to customer enquiries and complaints. These staff members are located either in Sydney or in Manila, Philippines. The staff members who engaged in the contraventions identified in evidence came from both Sydney and Manila in circumstances where Booktopia did not have any scripts or other training to guide them when dealing with customers in relation to requests for refunds or replacements.
50 It may be noted that Booktopia has not previously been found to have contravened any provision of the Competition and Consumer Act or the ACL; s 224(2)(c).
51 The following further considerations are relevant to the assessment of penalty.
52 First, there is no evidence to suggest that Booktopia set out deliberately to contravene the ACL. More likely the contraventions arose from the failure on the part of senior management to obtain legal advice prior to the publication of the Terms of Business. However, it may be noted that Booktopia persisted in its misconduct for several months after it was notified by the ACCC in May 2021 of the breaches. It was also aware by January 2021 that two customer service staff had understood the Terms of Business to mean that Booktopia would not replace a faulty item if it was reported more than two days after delivery.
53 Secondly, Booktopia is a publicly listed company with a market capitalisation of $32.33 million (as at 4 October 2022). It is a significant commercial organisation with a substantial turnover. These matters are important considerations when one has regard to the importance of general and specific deterrence in determining an appropriate penalty. The penalty must be of an appropriate amount to ensure that its payment is not simply seen as a cost of doing business. Rather it should be set at an amount whereby it would be economically irrational for would-be contraveners to court the risk of contravening the ACL. A strong message must be sent.
54 Thirdly, as I have noted, members of senior management within Booktopia had direct responsibility for the content of the Terms of Business. Booktopia's board was regularly informed about customer experiences and received information and feedback about its customer service engagement (though not about Booktopia's particular interactions with the Identified Customers). The fault for the contraventions may be seen to start at the top of the organisation and extend to the failure on the part of the company to have a specific ACL compliance training programme in place.
55 Having noted these points, ameliorating factors in favour of Booktopia include the fact that it did not contest liability or penalty in these proceedings. From October 2021 it cooperated with the ACCC and in November 2021 it amended its Terms of Business. It initiated settlement discussions with the ACCC and participated in a mediation at which it reached an agreement on proposed relief in relation to admitted contraventions. Furthermore, it has offered refunds or replacements to those customers whom it could and has agreed to orders requiring that it implement improved compliance procedures. It has also agreed to pay the ACCC's costs of the proceedings in the amount of $75,000. The ACCC submits that these factors have caused it to agree to a penalty that totals $6 million in circumstances where otherwise, in a contested hearing, it would have sought a considerably higher penalty to be imposed.
56 Taking all of these matters into consideration I accept that the following pecuniary penalties which have been proposed jointly by the parties are appropriate in respect of the three courses of conduct:
(a) $3 million for the Two Business Days Contraventions;
(b) $2 million for the No Refund Contraventions; and
(c) $1 million for the No Obligation to Remedy Contraventions.
57 The contraventions in (a) and (b) are of considerably further reach than those in (c) and warrant a higher penalty. The contravention in (a) is more serious than that of (b) because the No Refund Contraventions were limited to a narrower range of products.
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4.3 Other orders
58 It will be noted that the Orders made make an allowance for Booktopia to pay the pecuniary penalties in instalments over five years. I am satisfied that this elongated payment schedule is appropriate having regard to the particular financial circumstances of Booktopia, which are set out in a confidential accountant's report which was tendered in evidence. The parties submit, and I agree, that the payment of such instalments does not undermine the deterrent effect of the penalty but gives Booktopia financial certainty. In this regard, I note that the ACCC urges this order also by reference to Order 7. That order, in the form suggested to the Court by agreement, provides:
The Court notes that Booktopia will, in good faith, review its financial position and capacity to pay the penalty at Order 4 above on an annual basis, and notify the Applicant if repayment of the penalty can be accelerated and make an appropriately accelerated repayment accordingly.
It is ambiguous whether this is merely a statement of intent or an undertaking offered to the Court. For the avoidance of doubt it has been reworded so as to make clear that Booktopia is required to undertake such a review.
59 Otherwise, I consider that having regard to the contravening conduct it is appropriate to make the declarations sought and that it is necessary and appropriate that Booktopia be required to implement compliance measures in accordance with Order 6.
I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Burley.