Australian Competition and Consumer Commission v Dateline Imports Pty Ltd

Declarations 11 The ACCC seeks declarations to the effect that Dateline contravened the TPA by making the representation concerning the Ireland ban and that Mr Taylor was knowingly concerned in that contravention. It also seeks similar declarations concerning the natural keratin contraventions. Dateline opposes the making of any declarations on the basis that they would lack utility. It also opposes any declarations in respect of the natural keratin contraventions because they were not sought in the original application. 12 The power of the Court to make declaratory orders is found in s 21(1) of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act"). That section provides: The Court may, in civil proceedings in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed. 13 The grant of declaratory relief is discretionary: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-2. Three requirements should generally be satisfied before a Court exercises its discretion to make declaratory orders: (a) the question must be a real and not a hypothetical or theoretical one; (b) the applicant must have a real interest in raising it; and (c) there must be proper contradictor. [Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-438, per Gibbs J]. 14 The respondents do not dispute that these requirements are met, but argue that the Court's discretion should be exercised against making the declarations. 15 The respondents rely on Australian Competition and Consumer Commission v Francis (2004) 142 FCR 1 at [92]-[113] in which Gray J deprecated the practice of single judges in TPA matters automatically making declarations as to the misleading or deceptive effect of the conduct concerned. His Honour considered that the making of such declarations is pointless. Despite his view, Gray J was prepared to make a declaration that the conduct of the respondent had contravened certain provisions of the TPA. 16 Gray J's views were cited with approval by the Full Court in BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452; [2004] FCAFC 167. In my opinion, the Full Court did not suggest that orders declaring the fact of a contravention of the TPA ought not be made, but merely that such declarations should not be made automatically and that their terms should be specific as to how the legislation has been contravened. 17 The respondents' arguments as to the lack of utility in any grant of declaratory relief are in summary: (a) the declarations sought by the applicant do no more than restate findings set out in the reasons for judgment; (b) making the declarations would serve no useful purpose because they will have no deterrent effect and will not clarify the law or assist the ACCC in the future; (c) there is no aspect of protection of the public involved; (d) the ACCC has already published a media release summarising the outcome of the case and had no need for declarations to do so; and (e) if the Court considers that pecuniary penalties are appropriate for the natural keratin contraventions, then there can be no utility in also making declarations in respect of the same contraventions of the TPA. 18 In Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] ATPR 42-140; [2006] FCA 1730 at [6] ("ACCC v CFMEU"), Nicholson J considered whether to grant declaratory relief proposed by agreement between the parties. In a passage repeatedly adopted and applied by other single judges, his Honour said at [6]: So far as concerns the declarations against each of the respondents proposed in the Minute of Consent Orders, I consider they are within s 21 of the Federal Court of Australia Act 1976 (Cth) and appropriate for the following reasons. They: 1. are an appropriate vehicle to record the Court's disapproval of the contravening conduct; 2. serve to vindicate the Commission's claim that the respondents contravened the Act; 3. are of some assistance to the Commission in the future in carrying out the duties which are conferred upon it by the Act; 4. are of assistance in clarifying the law; 5. may inform consumers of the dangers arising from a respondent's contravening conduct; 6. may deter corporations from contravening the Act. (Citations omitted.) 19 The factors described in ACCC v CFMEU favour the making of declarations. In particular, appropriate declarations will serve to vindicate the case brought by the ACCC and may deter corporations from contravening the law. I therefore consider that appropriate declarations will have utility and should be made. 20 The respondents also argue that as the ACCC did not seek declarations in respect of the natural keratin contraventions in its originating application, it should not be permitted to do so now. The fact that such declarations were not sought by the ACCC in its originating application does not mean that they cannot now be granted. Rule 1.32 of the Federal Court Rules 2011 (Cth) allows the Court to make any order it considers appropriate in the interests of justice. Rule 1.41 provides that if a party makes an application, the Court may grant or refuse the orders sought or make different orders. There is no prejudice identified by the respondents by reason of the ACCC's decision to belatedly seek declarations in respect of the natural keratin contraventions. As there is utility in making appropriate declarations for the reasons set out earlier, I consider that it is in the interests of justice to do so. 21 There was some argument about the appropriate form of declarations, but eventually the parties submitted an agreed form. I consider the agreed form of declarations to be unnecessarily complex, prolix and inaccurate in some respects. The declarations should indicate "the gist of the findings of the primary judge": Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [89] ("Rural Press v ACCC"), per Gummow, Hayne and Heydon JJ. The declarations should specifically and succinctly identify the relevant conduct and how and why it contravened the TPA. I will make declarations in a form that I consider meets these requirements.

Pecuniary penalty 22 The ACCC seeks the imposition of pecuniary penalties against Dateline totalling $350,000. Dateline submits that no pecuniary penalty should be imposed. The Court's power to order Dateline to pay a pecuniary penalty arises from s 76E of the TPA. Although that provision has been repealed, it continues to apply to contravening conduct that took place while it was in force. Between 15 April 2010 and 31 December 2010, s 76E provided, relevantly: (1) If the Court is satisfied that a person: (a) has contravened any of the following provisions: … (ii) a provision of Division 1 or 1AAA of Part V (other than section 52); … the Court may order the person to pay to the Commonwealth 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 the Court in proceedings under Part VC or this Part to have engaged in any similar conduct. … (4) If conduct constitutes a contravention of 2 or more provisions referred to in paragraph (1)(a): (a) a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions; but (b) a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct. 23 Sections 53(a) and (c) were found within Division 1 of Part V of the TPA. The natural keratin contraventions took place between 30 August and 9 November 2010 and, accordingly, a penalty may be imposed under s 76E. No penalty may be ordered in respect of Dateline's breach of s 52(1). 24 Section 76E(2) requires the Court to have regard to all relevant matters in determining the appropriate pecuniary penalty, including the three matters specified in that provision. In TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at [137]-[144], the Full Court summarised the principles to be applied by the Court in determining a penalty and factors that have been found to be relevant in previous cases. The most recent distillation of the principles and factors is found in Australian Competition and Consumer Commission v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135 at [74]-[80], per Gordon J. I adopt the passages I have cited without repeating them. 25 I will set out the matters that I consider are significant to the determination of whether a penalty should be imposed, and if so, the appropriate penalty. There is some overlap between them. I will largely adopt the headings used by the ACCC in its written submissions to describe the factors it contends are relevant.

Deterrence 26 General and specific deterrence play a primary role in assessing the appropriate penalty: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2003) 250 CLR 640 at [65] ("ACCC v TPG"). In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 ("Singtel v ACCC") the High Court considered that a penalty: [62] ...must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others an acceptable cost of doing business… … [63] …[T]hose engaged in trade and commerce must be deterred from this cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention. 27 However, a penalty must not be so high as to be oppressive: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 293 ("NW Frozen Foods"). A penalty that is no greater than is necessary to achieve the object of general deterrence will not be oppressive: Australian Competition and Consumer Commission v Leahy Petroleum (No 2) (2005) 215 ALR 281 at [9]; [2005] FCA 254, per Merkel J.

The nature, extent and duration of the contravening conduct and the circumstances in which it took place 28 The first contravening advertisement was published in Grazia magazine, Sunday magazine, OK! magazine and Cleo magazine between 30 August 2010 and 20 September 2010. The relevant part of the advertisement read: With its unique formulation Express Blow Out infuses over 35% Natural Keratin in the shortest amount of time! 29 The second contravening advertisement was published in Grazia magazine, OK! magazine, Sunday magazine and Who magazine between 27 September 2010 and 5 November 2010. The relevant representation read: Keratin Complex treatments contain 40% natural Keratin for far superior and long lasting results. 30 The third contravening advertisement was published in Madison magazine, Grazia magazine, OK! magazine, Vogue magazine and InStyle Professional magazine between 4 October 2010 and 9 November 2010. The relevant representation read: The 45 minute in-salon service reduces frizz, curl and styling time for up to 6 weeks by infusing 40% natural keratin into your hair in the shortest amount of time! 31 Dateline stopped selling Keratin Complex and commenced a recall of the product on 27 October 2010. Three of the contravening advertisements were published after that date. Mr Taylor's evidence was that, from his experience, it was too late to cancel those advertisements. I accept his evidence. Although it is possible that the product continued to be sold in salons until the recall was completed on 15 November 2010, the evidence does not allow such a conclusion to be reached. While the three advertisements were still capable of misleading potential readers of those advertisements, it has not been established that they were capable of causing loss to those consumers. 32 The advertisements were published in a total of 14 issues of the magazines. They were published to a broad cross-section of readers in the general population, but were principally directed at young women. The advertisement in InStyle Professional was directed at hairdressing professionals. Each of the magazines other than Sunday magazine was distributed nationally. In my previous reasons, I indicated that Sunday magazine was distributed in Victoria, but I note that it is also distributed in New South Wales. 33 The aim of the advertisements, including the contravening representations, was to increase the sales of Keratin Complex by inducing customers to request that product when attending hairdressing salons or by inducing hairdressing professionals to recommend the product to customers. 34 Dateline's advertising campaign involving the contravening advertisements was substantial. A total of approximately 3,204,000 copies of the magazines were sold. The total cost of the advertisements was approximately $97,575 plus GST. I consider the large scale of the publication of the contravening representations is a significant factor in assessing the appropriate penalty. 35 The ACCC submits that the contravening representations were the dominant message in each advertisement. Dateline submits that they were a minor part of each advertisement. 36 The first advertisement contains a photograph of a model which takes up half the advertisement. The most dominant words are "Keratin Complex", by reason of their positioning at the top of the advertisement, size and capitalisation. The words "Express Blow Out" are next and are immediately noticeable because of their pink colour, size and the style of font. Then appear the words "The Hottest New Keratin Service" which are large and capitalised. After that there are words "Smooth Shiny Hair" which are also noticeable because they are large and capitalised. Then appear the words "In a Snap" which are large, pink and capitalised. The image and the words I have described dominate the advertisement. They convey messages that Keratin Complex will deliver smooth, shiny hair and that the treatment will be quick. 37 The contravening representation appears towards the bottom of the advertisement. It appears within a block of words that are in lower case and in small type. It is not highlighted. The message relevantly conveyed by the contravening representation, that Keratin Complex is comprised of over 35% natural keratin, would not be absorbed from a casual glance at the advertisement; it would have to be deliberately read. The block of words also describes the speed of application of the product, the treatment by referring to a "45 minute" service and contains the words "in the shortest amount of time". 38 The contravening representation ties in with more dominant words containing the word "keratin", such as "The Hottest New Keratin Service" and is one of the few pieces of information presented as being factual, rather than hyperbole. The representation that Keratin Complex contains over 35% natural keratin was no doubt intended to indicate that such a high level was desirable. I accept that it cannot be regarded as an insignificant part of the advertisement. 39 However, the relatively small size of the words, the lack of emphasis or highlighting and the fact that the words would have to be deliberately read in order to be absorbed tell against the contravening representation being the dominant message. So too do the references to another factual matter, namely the speed of the treatment. I reject the ACCC's submission that the contravening representation was the dominant message. 40 I make the same finding in respect of the third advertisement for similar reasons. I also make that finding in respect of the second advertisement for similar reasons. Although the second advertisement does not refer to the speed of the treatment, it contains factual information about the absence of formaldehyde, which detracts to some extent from the impact of the factual information about the amount of natural keratin. 41 The number of magazines sold reflects at least the number of people who were exposed to, and potentially misled by, the contravening advertisements. It is likely that some of the magazines were read by more than one person. However, the advertisements are likely to have only been read (rather than merely glanced at) by persons interested in hair products and only completely read by those interested in "smooth" hair. The word "smooth" seems to be used as a euphemism for "straight". Even if that was not immediately understood by the reader, other words appearing above the contravening representations indicate that the product reduced frizz and curl. Therefore, people with straight hair and those satisfied with their frizzy or curly hair are less likely to have read and absorbed the contravening representation, or, if they did, are unlikely to have been influenced by it. The number of people capable of being misled and influenced by the contravening representations is not as great as suggested by the ACCC.

Amount of loss or damage caused and profit gained 42 The ACCC did not lead any direct evidence that consumers were misled by the contravening representations. It accepts that it is not able to quantify how many consumers might have acted differently and cannot quantify any losses caused by the contravening conduct. 43 In Singtel v ACCC at [58]-[59], the Full Court, approving Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609 at [77]-[80]; [2013] FCA 790 ("ACCC v MSY Technology"), indicated that in cases where it is easy to imagine detriment to consumers (as it is in this case), the absence of evidence of loss or damage to consumers constitutes a factor in mitigation of penalty. The rationale is that if any harm is likely to have been suffered, but no evidence is led that it was, the respondent is entitled to be sentenced on the basis that the conduct has not caused harm: Singtel Optus v ACCC at [58]; ACCC v MSY Technology at [79]. 44 The ACCC submits that the Court should infer that consumers were induced by the contravening representations to purchase Keratin Complex and did suffer financial loss because the increase in sales over the period coincided with Dateline's intensive advertising campaign. In the 15 months prior to the publication of the advertisements, gross sales of Keratin Complex averaged $115,000 per month. In the period of the contravening advertisements gross sales averaged $370,000 per month. The ACCC submits that Dateline's average gross profit on sales was approximately 69%, which would yield an increase in gross profit of $350,000 for the two months or so of the campaign. 45 I accept that the advertisements are likely to have contributed to the increase in Dateline's sales and gross profit to some unknown extent. I draw that inference because Dateline's intention in including the representations in the advertisements must have been to increase sales: cf ACCC v TPG at [55]. However, I do not accept that any financial loss to consumers (whether hairdressing salons or their customers) has been demonstrated for two reasons. 46 There is no allegation that Keratin Complex did not work. The ACCC accepted as much in its opening at the trial. Mr Taylor's oral evidence was that Dateline had never received any complaint that Keratin Complex was not effective at smoothing hair and that, in fact, the position was quite the opposite. Therefore, even if customers were induced to purchase Keratin Complex by the contravening representations, they received a product that apparently gave them straight hair, which was the purpose for which they bought the product. There was no evidence that if the product contained 35% or 40% natural keratin, it would have worked better. This is not a case where it is alleged that the misrepresentations led consumers into buying a product that did not work or underperformed. 47 In addition, Dateline's voluntary recall included making refunds to hairdressing salons and customers and arranging for the collection of unused or partially used bottles of Keratin Complex at its own cost. The scope of the recall included placing posters in the hairdressing salons which stocked Keratin Complex. The ACCC widely publicised the recall, including on-line, on a national television program and at a Hair Expo held in June 2011. 48 The customers of hairdressing salons who requested a refund were refunded their money. The evidence does not indicate how many customers received refunds. The closest that the evidence comes to providing some indication is Mr Taylor's statement that the $460,937 identified as cash refunds was "mainly" paid to individuals who had paid for treatments in salons. 49 It has not been demonstrated that any consumer of Keratin Complex has suffered loss as a result of being misled by the contravening advertisements into purchasing the product. 50 The ACCC submitted that the advertising campaign conducted by Dateline was highly profitable, demonstrated by the gross sales figures over the 2½ month period of the campaign. Against this, the cost of those sales, including the cost of the product and the cost of the advertising campaign, must be taken into account. In addition, it is likely that the lurid nature of the advertisements and their dominant statements like "Smooth Shiny Hair in a Snap" and "45 minute in-salon service", rather than merely the contravening representations, contributed to the increased sales. 51 The question of whether Dateline made any profit from sales of Keratin Complex resulting from the contravening advertisements, as the ACCC contends it did, or whether it has made an overall loss, as Dateline contends it did, is in dispute. 52 In the 15 months prior to the publication of the contravening advertisements, gross sales of Keratin Complex were $1.73 million. For the period of the contravening advertising, gross sales were approximately $740,000. 53 On 27 October 2010, the ACCC wrote to Dateline stating that it was incumbent on Dateline to initiate a voluntary recall of Keratin Complex because it contained excessive amounts of formaldehyde, although the letter suggested that there could be a mandatory recall if it did not do so. Dateline then recalled the product voluntarily. The recall had nothing to do with the natural keratin representations. The cost of the recall to Dateline exceeded $3 million. 54 On 14 June 2013, Dateline entered into a written agreement with Copomon Enterprises LLC ("Copomon"), the supplier of Keratin Complex. Under the agreement, Dateline agreed to release Copomon from any liability to Dateline in respect of the subject matter of the ACCC's proceedings against Dateline. In return, Copomon agreed, inter alia, to pay all of Dateline's past legal expenses and 80% of both Dateline's future legal expenses and any penalty imposed. The agreement also provided that Dateline would be given a discount of 33.34% from Copomon's standard prices for its products until such time as Dateline receives a total of $3.1 million of discounts. 55 Mr Taylor deposed that Dateline has received total discounts of USD167,457 in respect of products ordered from Copomon since the date of the agreement. His evidence was that the quantity of products that Dateline is ordering from Copomon has declined significantly. He considered that it would take 15 to 20 years, if at all, before Dateline receives $3.1 million worth of discounts from Copomon. 56 The agreement makes no provision for interest, so that even if Dateline does eventually recover $3.1 million by way of discounts, that will understate the extent of its recovery. On the other hand, it did make a gross profit from the sale of Keratin Complex in 2009 and 2010, although the amount any net profit is not able to be determined from the evidence. It is impossible to say whether Dateline will ultimately make a profit or a loss from its overall sales of Keratin Complex in 2009 and 2010. 57 More significantly for present purposes, it is not possible to tell from the evidence whether Dateline has made or will ultimately make any net profit from its sales of Keratin Complex for the period during which the contravening advertisements were published. I therefore proceed on the basis that it has not been established that Dateline has profited or will profit from the contravening advertisements. 58 Dateline submits that its losses arising from the recall should be taken into account as a mitigating factor in assessing any penalty. For the reasons I have given, I do not accept that the evidence establishes that Dateline has suffered or will necessarily suffer any loss as a result of the recall. Even assuming such a loss, the recall was voluntary. It was open to Dateline to refuse to voluntarily recall the product and attempt to persuade the relevant Minister that a mandatory recall was not warranted. Further, while it is possible to be sympathetic to Dateline because it recalled a product that has not been shown, at least in this proceeding, to contain excessive amounts of formaldehyde, my task is to consider whether any, and if so what, pecuniary penalty should be imposed in respect of the natural keratin contraventions. As the recall and its costs are not related to the natural keratin contraventions, I would not take into account any loss resulting from the recall in mitigation of the penalty for the natural keratin contraventions.

One course of conduct 59 The contravening advertisements were published in 14 issues of the magazines. Each publication contravened both s 53(a) and (c) of the TPA. Each such contravention of s 53(a) and (c) arose from the same conduct and it follows that the effect of s 76E(4) is that Dateline is not liable to more than one penalty in respect of each of those publications. Therefore, a maximum of 14 separate penalties may be ordered. 60 The maximum penalty at the times the contraventions occurred was, pursuant to s 76E(3), 10,000 penalty units. A penalty unit at the relevant times, under s 4AA of the Crimes Act 1914 (Cth) read with s 2B of the Acts Interpretation Act 1901 (Cth), was $110. Accordingly, the maximum possible penalty is $1.1 million for each contravention, or $15.4 million in total for 14 contraventions. 61 The ACCC submits that it is appropriate for the Court to group the contraventions into three courses of conduct based on the publication of the three distinct advertisements. It submits that the advertisements are sufficiently different to allow them to be considered separate contraventions and to require separate penalties. It contends that Dateline made a conscious decision to change the form of the advertisements and that the third of the advertisements was the only one to be published in a trade magazine, InStyle Professional. It submits that the appropriate penalties should be assessed against the maximum penalty of $1.1 million for each of the three groups of contraventions. 62 Against this, it may be noted that the substance of the contravening representations was very similar. The message conveyed by each contravening representation was effectively the same. The representations shared the same vice, namely, that they overstated the amount of natural keratin contained in Keratin Complex. The advertisements were part of a single advertising campaign. They were published over an almost continuous period of 2½ months and the timing of the second and third advertisements overlapped. The medium in which the advertisements were published was the same. There was some commonality of the magazines. 63 For these reasons, the publication of the contravening representations should be regarded as a single course or pattern of conduct, and it is appropriate to impose a single pecuniary penalty. However, it remains necessary to take into account the totality of the conduct comprising the single course of conduct.

Whether the contravening conduct was deliberate and systematic or covert 64 The ACCC submits that the deliberateness of Dateline's conduct is an aggravating factor, but does not specify what is said to be deliberate. It also submits that Dateline's conduct was reckless. 65 Within Dateline, Mr Taylor was directly responsible for the approval of the contravening advertisements. In a statement made on 28 June 2013, he said that at the relevant times he believed that Keratin Complex contained 40% natural keratin. The principal source of his information was a number of documents provided to Dateline by Copomon which stated that Keratin Complex "contains over 40% natural keratin" or "infuses over 40% Natural Keratin". He stated that he also relied upon the material safety data sheet ("MSDS") for Keratin Complex which said that Keratin Complex contained 40% Tri-Ionic Keratin Protein by weight. Tri-Ionic Keratin Protein was further described in the MSDS as hydrolysed keratin. He stated that he thought Tri-Ionic Keratin was keratin hydrated in water. In an affidavit affirmed on 22 August 2014, Mr Taylor deposed that he did not know any details about Tri-Ionic Keratin until he became aware of the MSDS for that product in the course of the proceedings. 66 The ACCC submits that Mr Taylor was reckless in failing to realise that because water was added to dilute the keratin, the amount of keratin in Keratin Complex must have been less than 40%, and in failing to check the true situation. 67 Under cross-examination, Mr Taylor retreated from the indication in his first statement that he thought that hydrolysed keratin was keratin in water. His oral evidence was that he thought hydrolysed keratin meant natural keratin. I do not accept this aspect of his evidence. His statement was clear and, as it was closer in time to when he approved the advertisements, is more likely to be accurate than his oral evidence. I accept that at the relevant times Mr Taylor believed that Tri-Ionic Keratin consisted of keratin and water. 68 Mr Taylor's evidence that he believed that Keratin Complex contained 40% natural keratin is consistent with the documents that had been supplied to Dateline by Copomon. I accept that Mr Taylor and, therefore, Dateline believed the contravening representations to be true. 69 I do not accept that Mr Taylor was reckless. There is no suggestion that natural keratin is dangerous. Nor is there any evidence that the effectiveness of the product would be reduced because it contained less than 35% or 40% natural keratin. In view of these matters and the representations from Copomon that Keratin Complex contained 40% natural keratin, I do not accept that the failure of Mr Taylor to realise that it contained less than that proportion or to make further enquiries was reckless. However, I consider that the failure to enquire was not reasonable, for reasons I will discuss. 70 Dateline submits that the absence of any deliberateness in the making of the contravening representations by Dateline is a mitigating factor. It also submits that the difficulty, or potential difficulty, in ascertaining the true position given that Keratronic's method and process of manufacture was a trade secret is a mitigating factor. I reject these submissions for the following reasons. 71 Mr Taylor knew that the MSDS for Keratin Complex stated that the product contained 40% "Trionic-Keratin Protein". He believed that Tri-Ionic Keratin consisted of water as well as keratin. It followed that it was at least possible that Copomon's representation that Keratin Complex contained over 40% natural keratin was incorrect. That should have led him to question Copomon as to the accuracy of its representations and to not publish the contravening representations unless satisfied of their accuracy. He failed to take that course. 72 I also consider that Mr Taylor acted unreasonably in assuming that Tri-Ionic Keratin consisted only of keratin and water. He deposed that he did not know any details about Tri-Ionic Keratin, but he made no enquiry of the manufacturer. A simple check of the MSDS for that Tri-Ionic Keratin would have shown him that it contained only 6.61% natural keratin, so that Copomon's representations that Keratin Complex contained over 40% natural keratin could not be correct. The MSDS states that it was issued on 7 April 2010. It was obtained by Dateline's solicitors in the course of the proceedings. There is no suggestion in the evidence that Dateline was incapable of obtaining the MSDS prior to the publication of the advertisements. 73 Sections 53(a) and (c) of the TPA can be contravened even if the person making the representation does not believe the representation to be untrue and does not act recklessly or even negligently. While engaging in a deliberate contravention of the provision is regarded as an aggravating consideration, the inadvertence of the contravener does not serve as a mitigating factor: ACCC v AirAsia Berhad Company [2012] FCA 1413 at [50]-[51]; Australian Competition and Consumer Commission v Turi Foods Pty Ltd (No 5) [2013] FCA 1109 at [49].

Any previous similar conduct 74 The ACCC does not allege that Dateline had previously breached the TPA or that it has previously breached the Australian Consumer Law in Schedule 2 to the Competition and Consumer Act 2010 (Cth).

Involvement of senior management 75 The three directors of Dateline were responsible for the content and publication of its advertising materials. As managing director, Mr Taylor was responsible for reviewing and approving the content, publication and distribution of the contravening advertisements. As a result, Dateline's contraventions are attributable to the highest level of its management. This is an aggravating factor.

The contravener's size and financial position 76 The ACCC submits that Dateline is not a small company and that this is an aggravating factor for the purpose of assessing the appropriate penalty. Dateline accepts that it is a medium-sized company. 77 The ACCC relies upon Dateline's gross profit plus other income figures for the 2010/2011 financial year in the amount of $17,505,239 and for the 2012/2013 financial year in the amount of $15,993,767. In the 2010/2011 financial year, Dateline's net assets were $14,033,282 and in 2012/2013 they were $10,034,894. Dateline submits that it is more appropriate to examine its profit or loss from trading activities. In the 2009/2010 financial year, Dateline's profit was $477,272 and in the 2010/2011 financial year, Dateline received a profit of $56,433. In the 2011/2012 financial year, Dateline made a loss from trading activities of $3,568,111 and in the 2012/2013 financial year, it made a profit of $59,722. I note that there are some discrepancies between some of the figures provided by the parties in their written submissions and my understanding of Dateline's financial reports, but these discrepancies do not affect the outcome. 78 I accept that Dateline's gross sales figures and its assets indicate that it is, as it concedes, a medium-sized company. The size and financial position of the contravener is a factor relevant to the question of whether the pecuniary penalty will have a deterrent effect: NW Frozen Foods at 293, per Burchett and Kiefel JJ; Australian Competition and Consumer Commission v Leahy Petroleum (No 3) (2005) 215 ALR 301 at [9], per Goldberg J. 79 The fact that Dateline is a medium-sized company does not worsen the conduct or make it more blameworthy. I do not accept the ACCC's submission that Dateline's size is an aggravating factor.

Culture of compliance with the TPA and corrective measures in response to the contravention 80 The ACCC submits that there is no evidence that Dateline had any trade practices compliance program at the time the relevant conduct occurred. Dateline points out that Mr Taylor, who had practiced as a lawyer in the past, reviewed all of the company's advertisements at the time the contravening advertisements were published. However, the circumstances of the contravention in this case demonstrate that Mr Taylor's ability to ensure the accuracy of Dateline's representations as to the content of Keratin Complex was deficient. There is no suggestion that Mr Taylor had any technical or scientific expertise. 81 Of more significance is the fact that Dateline has retained Engel, Hellyer & Partners (a consulting firm) since October 2010 to, inter alia, review all Dateline's advertising material to ensure that it is compliant with Australian regulatory requirements. I accept that in view of the ongoing retention of Engel Hellyer, Dateline is unlikely to contravene any regulatory standards in the future.

Co-operation and contrition 82 The ACCC submits that there has been neither co-operation nor contrition from Dateline with respect to the natural keratin contraventions. The ACCC points out that its allegations were vigorously resisted up to judgment. 83 There would have been substantial co-operation shown if Dateline had admitted the natural keratin contraventions, but the fact that it did not and contested the proceeding is not an aggravating factor: ACCC v Westminster Retail Pty Ltd [2005] FCA 1299 at [31], per Mansfield J. 84 Dateline submits that it "brought the natural keratin issue to the attention of the ACCC" in a letter from its solicitors to the ACCC dated 11 March 2013. That letter enclosed the MSDS for Tri-Ionic Keratin and gave a description of the process of manufacture of that product. The letter was focussed on an issue relevant to the formaldehyde representations. The ACCC had already pleaded that the advertisements represented that Keratin Complex contained more natural keratin than was the fact, but after receiving the letter, amended the pleading to add the allegation that whatever keratin was infused into the hair was not natural keratin. Whether Dateline's reference to "the natural keratin issue" is to both allegations or only one of them, its submission that it brought the natural keratin issue to the ACCC's attention is an overstatement. The letter does not reflect any form of co-operation or contrition that should be given weight. 85 Dateline submits that it co-operated with the ACCC by admitting the natural keratin representations in its defence and putting into issue only two matters, being whether the keratin was appropriately described as natural keratin and its percentage. It succeeded on the first of those issues, but not the second. However, the way in which a trial is conducted is not usually a matter that operates to reduce a penalty: Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at [166]. 86 Dateline also submits that it co-operated with the ACCC by recalling Keratin Complex and refunding the money paid for Keratin Complex treatments, including hairdressing services, to those customers who asked for refunds. The recall was done and the refunds were made as a result of the ACCC's allegations concerning excessive formaldehyde in Keratin Complex, not as a result of the natural keratin representations. I do not think that the recall can be seen as an act of contrition for the natural keratin representations themselves. However I do consider that the recall can be taken into account as indicating co-operation generally with the ACCC in carrying out its regulatory functions in respect of Keratin Complex. In addition, one of the reasons why I am not willing to infer that any customer suffered any loss as a result of the natural keratin representations is that Dateline offered refunds to any consumers who had purchased Keratin Complex and requested a refund, not merely those affected by the formaldehyde representations. The offer of refunds may be seen as an act of reparation that is partly attributable to the natural keratin contraventions. 87 The respondents filed written submissions for the penalty hearing in which they asserted that the cost of the recall to Dateline exceeded $3 million. The ACCC then served a notice to produce that would have required production of the indemnity agreement between Dateline and Copomon (see [54]-[56] of these reasons). The respondents then filed a further affidavit of Mr Taylor annexing the indemnity agreement. The ACCC submits that the respondents displayed a lack of frankness in not initially disclosing the indemnity agreement and that this lack of frankness should be taken into account as an aggravating factor. I accept that there was a lack of frankness on the part of Dateline in asserting that the cost of the recall to Dateline exceeded $3 million when it knew, but did not disclose, that it had the benefit of the indemnity agreement. The ACCC did not allege that Dateline had failed in any obligation under the TPA to disclose the indemnity agreement or to comply with its discovery obligations under the Federal Court Rules. There is no obligation on the respondents to co-operate in the prosecution of the ACCC's case. The absence of co-operation in these proceedings is not an aggravating factor. However, the lack of frankness does detract from the benefit that Dateline might have otherwise obtained from its co-operation and reparations.

The parity principle and relevance of previous decisions 88 The parity principle requires that similar contraventions should incur similar penalties, all other things being equal; although things are rarely equal where contraventions of the TPA are concerned: NW Frozen Foods at 295. While penalties in other cases will typically be of limited assistance, they may provide good guidance as to a broad range within which an appropriate pecuniary penalty may be imposed: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513 at [67]-[68] ("ACCC v Dataline"). 89 The ACCC referred to two cases in support of its submission that penalties totalling $350,000 should be imposed: Australian Competition and Consumer Commission v Harvey Norman Holdings Ltd (2011) ATPR 42-384; [2011] FCA 1407 and Australian Competition and Consumer Commission v Metricon Homes Qld Pty Ltd [2012] FCA 797. I find these cases to be of little assistance because both involved companies which knew their representations were false and which were much larger than Dateline. In addition, the false representations were more dominant representations than those made by Dateline. 90 Although its primary submission is that no pecuniary penalty should be ordered, Dateline referred to three related cases involving the making of oral statements that were not made with an intention to mislead or deceive: Australian Competition and Consumer Commission v Gordon Superstore Pty Ltd [2014] FCA 452, Australian Competition and Consumer Commission v Avitalb Pty Ltd [2014] FCA 222 and Australian Competition and Consumer Commission v Mandurvit Pty Ltd [2014] FCA 464. The contraventions in these cases consisted of oral statements made on between two to six different occasions. The contraventions were admitted. The penalties imposed were between $10,000 and $25,000. Those cases are of some assistance to the extent that they indicate that it is appropriate to impose a penalty lower in the range for conduct that is not a deliberate contravention. However, they are not comparable because of the much greater co-operation of the contraveners and the significantly narrower extent of the publication of the representations. 91 Dateline also referred to Australian Competition and Consumer Commission v P & N Pty Ltd [2014] FCA 6. In that case, the extent of the misleading advertising was greater than the present case and over a longer duration. The respondents were aware that the representations were false. The respondents co-operated with the ACCC and admitted the contraventions. The penalties ordered against the companies ranged from $25,000 to $50,000.

The indemnity agreement with Copomon 92 As I have indicated, Copomon has agreed to indemnify Dateline in respect of 80% of any pecuniary penalty that may be awarded against Dateline. The ACCC submits that the indemnity agreement should be taken into account as a relevant factor in determining a penalty of appropriate specific deterrent value. 93 Dateline submits that the indemnity should not be taken into account and it should not result in a higher penalty being imposed. It submits that if the legislature intended that an indemnity of this kind ought to be taken into account in assessing the penalty, it is likely to have included a specific provision to that effect. It points out that ss 77A and 77B of the TPA make specific provision prohibiting a body corporate from indemnifying a person against a civil liability or relevant legal costs, but the TPA is silent on an indemnity of the kind involved here. 94 Section 76E(2) requires the Court to have regard to all relevant matters. Neither party cited any authority on the question of whether an indemnity offered to a party in respect of a pecuniary penalty is a relevant matter. 95 However, it is obvious that specific as well as general deterrence are primary objects of imposing a pecuniary penalty. Specific deterrence involves assessment of the particular circumstances of the contravening party, so, for example, a large corporation with substantial financial resources may be liable to a greater penalty than a smaller one in respect of the same conduct. In a case involving a full indemnity against any pecuniary penalty (for example, under an insurance policy), it is difficult to see that specific deterrence would require a higher penalty to be imposed. However, in a case such as this, where the contravening party will have to pay 20% of the penalty from its own pocket, imposing a higher penalty would act as a deterrent to that party. I consider that the indemnity is a relevant factor to take into account in considering specific deterrence and may result in the imposition of a higher penalty than would otherwise be the case. 96 However, I do not think that the indemnity obtained by Dateline calls for an increase in the penalty in these circumstances. Dateline has paid a price in order to secure the indemnity. Dateline released Copomon from any claims that Dateline may have against Copomon. In circumstances where Dateline's contravening conduct was significantly contributed to by misleading representations made by Copomon, the right that Dateline has given up seems to have been one of some value. 97 I consider that the indemnity is a relevant factor to take into account in assessing penalty, but I conclude that no higher penalty should be imposed by reason of the indemnity.

Consideration 98 Dateline submits that no pecuniary penalty should be imposed. It relied, in particular, upon the fact that its contraventions were not deliberate and upon its contention that it had no way of finding out the true amount of natural keratin in Keratin Complex because its manufacture was a trade secret. It also relies upon other factors including: that it did not make any profit or any significant profit from the contravening advertisements; that it made what it asserts to be a significant loss from the recall; that the contravening representations constituted only a small part of each advertisement; and that there is no evidence of any loss to consumers. It also points to other factors, including that the absence of previous contraventions, its engagement of external consultants and its co-operation with the ACCC. 99 The Court has a discretion to decline to impose any pecuniary penalty: ACCC v Dataline at [18] and [21]. A factor of particular significance to the imposition of a penalty is the need for deterrence, both general and specific. While it is true that Dateline's conduct was not deliberate, it should have made enquiries as to the composition of Tri-Ionic Keratin and the accuracy of Copomon's representations. I do not accept that this is a case where it could not have found out the truth. There was fault on Dateline's part. I consider that it is appropriate to impose a pecuniary penalty. A penalty will act as a deterrent to Dateline and to other corporations against similar conduct. 100 In assessing the amount of the penalty, I take into account the factors that I have discussed earlier. I consider that Dateline should be ordered to pay a pecuniary penalty to the Commonwealth in the amount of $85,000.

Costs 101 The ACCC submits that the respondents should be ordered to pay the whole of the ACCC's costs of the penalty hearing and 25% of its costs of the remainder of the proceeding. The respondents submit that the ACCC should be ordered to pay 80% of their costs of the proceeding. 102 Section 43 of the Federal Court Act provides, relevantly: (1) …[T]he Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which this or any other Act provides that costs shall not be awarded. … (2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge. (3) Without limiting the discretion of the Court or a Judge in relation to costs, the Court or Judge may do any of the following: … (b) make different awards of costs in relation to different parts of the proceeding; (c) order the parties to bear costs in specified proportions; (d) award a party costs in a specified sum; (e) award costs in favour of or against a party whether or not the party is successful in the proceeding; … 103 The discretion to award costs is broad and unfettered, save that it must be exercised judicially: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [9], per Black CJ and French J. Ultimately, the Court is required to determine the appropriate order in the interests of justice: Kosciuszko Thredbo Pty Limited v ThredboNet Marketing Pty Limited (No 2) [2013] FCA 609 at [11]. 104 In Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 3) [2007] FCAFC 119, the Full Court said at [11]: The usual practice is that costs follow the event and the Court will order the recovery of costs by the successful party on a party-party basis but success or failure on separate issues may lead the Court to engage in a process of apportionment…It is appropriate that, where one party, although successful overall, raised and pursued unsuccessful grounds or abandoned grounds that the other party was expected to meet in preparation of and in the course of the hearing, and as a consequence costs have been thrown away or incurred, such costs should be paid by the successful party. (Citations omitted.) 105 In Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261, the Full Court said at 272: Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation. [See also see Roadshow Films Pty Ltd v iiNet Ltd (No 4) (2010) 269 ALR 606 at 610-613; [2010] FCA 645, per Cowdroy J, Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) (2005) 225 ALR 569 at 570; [2005] FCA 1400, per Crennan J]. 106 The ACCC has achieved limited success in the proceeding. It alleged that Dateline made 14 formaldehyde representations that contravened s 52(1) or ss 52(1) and 53(a) or (c) of the TPA. It was successful in proving only one contravention of s 52(1). 107 The ACCC also alleged that Dateline made five natural keratin representations that contravened ss 52(1), 53(a) and (c). It was successful in respect of three of those allegations. 108 The ACCC alleged that Mr Taylor was a party to six of Dateline's alleged contraventions in respect of the formaldehyde representations. It was successful against Mr Taylor in relation to only one. 109 The ACCC complains that some of its costs of preparation were increased by Dateline's late disclosure of material. Against this, however, it can be argued that the ACCC unnecessarily caused Dateline to incur costs by, for example, persisting with its allegation that not all the formaldehyde in formalin had been converted into timonacic acid, even after Mr Anthony clarified what he meant by buffered formalin. The evidence is not sufficient for me to take the parties' general conduct of the litigation into account in any considered way. 110 The ACCC has been largely unsuccessful in respect of the formaldehyde representations. The substantial bulk of the trial, as well as the affidavits and the written submissions, was concerned with the formaldehyde representations. The ACCC failed in almost half of the allegations it made against Dateline in respect of the natural keratin representations, although that failure did not add much to the length of the submissions and the trial. I consider that it is appropriate to apportion the costs of the proceeding between the parties. 111 The penalty hearing, including the preparation of written submissions and other material, stands apart, and I consider that it should be regarded as part of the issues upon which the ACCC was successful. 112 A form of order that could be made is that Dateline pay the ACCC's costs in respect of those issues upon which the ACCC was successful, and that the ACCC pay Dateline's costs in respect of those issues upon which the ACCC was unsuccessful. However, I accept Dateline's submission that attempting to divide costs in that way would be difficult, complex and costly. That exercise should be avoided if there is an alternative order which will do justice between the parties. 113 My impression is that the issues upon which the ACCC failed contributed very substantially to the affidavits, written and oral submissions and the length of the trial. I take into account the costs of the issues upon which the ACCC failed. I balance those costs against the costs of the issues upon which the ACCC succeeded and the costs of the penalty hearing. I conclude that the respondents should pay one-third of the ACCC's costs of the whole of the proceeding and the ACCC should pay two-thirds of the respondents' costs of the whole of the proceeding. I will set-off the smaller figure against the larger and order that the ACCC pay one-third of the respondents' costs of the proceeding. My intention is that the costs to be paid by the ACCC include one-third of the respondents' costs of the penalty hearing. I certify that the preceding one hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah.