In the period 1 January 2016 to 15 December 2019 ("the Relevant Period"), the respondent, Decathlon (Australia) Pty Ltd ("Decathlon"), supplied and offered for supply in trade or commerce to consumers basketball rings and backboards:
(a) which were intended to be used, or were of a kind likely to be used, for personal, domestic or household use;
(b) which were not toy basketball rings or backboards for toy basketball rings; and
(c) in respect of which there was prescribed by s 104(1) of the Australian Consumer Law ("ACL") a consumer goods safety standard, namely the Consumer Goods (Basketball Rings and Backboards) Safety Standard 2017 ("Basketball Rings and Backboards Standard")
in circumstances where the goods did not comply with ss 9, 10, 11, 12, 13 or 14 of the Basketball Rings and Backboards Standard, by reason that:
(d) the goods were not accompanied by the prescribed written warnings, warning symbol or instructions for installation of the basketball ring or backboard for its safe use, in the prescribed forms; and
(e) in circumstances where the ring or backboard was not supplied as part of a portable basketball system, the goods were not accompanied by the prescribed instructions for installation of the basketball ring or backboard for its safe use;
thereby contravening:
(f) s 106(1) of the ACL by supplying the basketball rings and backboards; and
(g) s 106(2) of the ACL by offering the basketball rings and backboards for supply.
In the Relevant Period, Decathlon supplied and offered for supply to consumers in trade or commerce portable swimming pools:
(a) which were intended to be used, or were of a kind likely to be used, for personal, domestic or household use; and
(b) in respect of which there was prescribed by s 104(1) of the ACL a consumer goods safety standard, namely the Consumer Goods (Portable Swimming Pools) Safety Standard 2013 ("Portable Swimming Pools Standard")
in circumstances where the goods did not comply with ss 6 or 7 of the Portable Swimming Pools Safety Standard, by reason that:
(c) the goods did not display a permanent warning message in the prescribed form in circumstances where the depth of the portable swimming pools was 300 mm or more;
(d) the retail packaging for the goods did not display a permanent warning message in the prescribed form in circumstances where the depth of the portable swimming pools was 300 mm or more;
(e) the goods did not display a permanent warning message in the prescribed form in circumstances where the depth of the portable swimming pools was less than 300 mm; and
(f) the retail packaging for the goods did not display a permanent warning message in the prescribed form in circumstances where the depth of the portable swimming pool was less than 300 mm
thereby contravening:
(g) s 106(1) of the ACL by supplying the portable swimming pools; and
(h) s 106(2) of the ACL by offering the portable swimming pools for supply.
In the Relevant Period, Decathlon supplied or offered for supply basketball rings and backboards at items 3 and 4 of the Identified Products in Part A of Schedule 1 of the agreed statement of facts (Exhibit A) with installation manual instructions accompanying these goods that did not strongly warn against fixing the ring or backboard to brickwork and advice to consult a structural engineer if there is any doubt about the safety or stability of the installation, and represented to consumers that the goods were of a standard or quality and had the performance characteristics, uses or benefits of being safe to affix to brickwork, when that was not the case, and thereby, in trade or commerce:
(a) engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18(1) of the ACL;
(b) in connection with the supply or possible supply of those basketball rings and backboards, made false or misleading representations that those basketball rings and backboards:
(i) were of a particular standard, quality, grade or composition, in contravention of s 29(1)(a) of the ACL; and
(ii) had approval, performance characteristics, uses or benefits which they did not have, in contravention of s 29(1)(g) of the ACL.
In the Relevant Period, Decathlon supplied or offered for supply basketball rings and backboards items 1, 2 and 5 of the Identified Products in Part A and items. 1, 2, 3, 4 and 6 of the Equivalent Products in Part A of Schedule 1 of the agreed statement of facts (Exhibit A) with installation manuals and/or retail packaging accompanying these goods that did not strongly warn against fixing the ring or backboard to brickwork, and represented to consumers that the goods were of a standard or quality and had the performance characteristics, uses or benefits of being safe to affix to brickwork, when that was not the case, and thereby, in trade or commerce:
(a) engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18(1) of the ACL;
(b) in connection with the supply or possible supply of those basketball rings and backboards, made false or misleading representations that those basketball rings and backboards:
(i) were of a particular standard, quality, grade or composition, in contravention of s 29(1)(a) of the ACL; and
(ii) had approval, performance characteristics, uses or benefits which they did not have, in contravention of s 29(1)(g) of the ACL.
THE COURT ORDERS THAT:
Decathlon pay to the Commonwealth, within 30 days of the date of this order, a pecuniary penalty in the amount of $1.5 million, pursuant to s 224 of the ACL, in respect of the contraventions of the ACL identified in paragraphs 1 to 4 above.
Pursuant to s 246 of the ACL, Decathlon, at its own expense, within 14 days of the date of these orders and for a period of 120 consecutive days, publish or cause to be published a corrective notice in the form of a 'modal' pop up window on the homepage of its website located at https://decathlon.com.au/, in the terms set out in Annexure A of the amended originating application filed on 13 August 2021, which:
(a) automatically displays and is immediately viewable on the computer screen, mobile phone or portable device upon a user's access to the website;
(b) displays a minimum of 50% of the viewable screen of the website;
(c) does not allow a user to navigate the remaining content of the website until the user 'closes' the 'modal' pop up window; and
(d) the corrective notice must be 'crawlable' in that its contents may be indexed by a search engine.
Pursuant to s 246 of the ACL that, within 3 months of the date of these orders, Decathlon establish, implement and comply with (for a period of three years from the date of these orders) a compliance program meeting the minimum requirements detailed in Annexure B of the amended originating application filed on 13 August 2021.
Decathlon pay the applicant's costs of and incidental to these proceedings.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
[2]
INTRODUCTION
1 This proceeding was commenced by the Australian Competition and Consumer Commission ("ACCC") against Decathlon (Australia) Pty Ltd ("Decathlon") seeking declaratory and injunctive relief and pecuniary penalties in respect of Decathlon's admitted contraventions of the Australian Consumer Law ("ACL"). The admitted contraventions resulted from the supply by Decathlon, in Australia, of certain basketball rings and backboards and portable swimming pools that did not comply with mandatory consumer product safety standards. Decathlon's admissions are contained in a statement of agreed facts and admissions dated 26 March 2021 ("SAFA") which is in evidence.
2 The parties have agreed the terms of declaratory and injunctive relief that should be granted but not the appropriate pecuniary penalty. The ACCC submitted that $3.5 million is an appropriate sum. Decathlon accepts that a pecuniary penalty should be imposed but submits that the sum sought by the ACCC is excessive and inappropriate, and instead submitted that $800,000 is an appropriate penalty.
3 For reasons that follow I consider that the sum of $1.5 million is an appropriate pecuniary penalty.
[3]
BACKGROUND
4 Decathlon is a company that has been operating in Australia since January 2016. Decathlon is a retailer of sporting equipment and apparel in Australia which it supplies via its online store, at www.decathlon.com.au, and its five retail stores, two of which are located in Sydney and three in Melbourne. Decathlon is part of the Decathlon Group of companies. The parent company of the entities comprising the Decathlon Group is Decathlon SE (previously known as Decathlon SA), an entity incorporated in France ("Decathlon France").
5 The admitted contraventions occurred between 1 January 2016 and 15 December 2019 ("the relevant period"). Decathlon admits that, in the relevant period, it offered for supply in Australia, both online and in retail stores, basketball rings and backboards and portable swimming pools which did not comply with relevant safety standards.
6 Decathlon also admits that installation instructions contained in the manual and retail packaging of certain of the basketball rings and blackboards represented that those products could be affixed to any wall and did not warn consumers that the products could not be affixed to a brick wall. In some cases, the manual or retail instructions contained a pictograph depicting the product installed on a brick wall.
[4]
THE RELEVANT STANDARD AND RELATED STATUTORY PROVISIONS
7 Section 18(1) of the ACL, provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Section 29(1) of the ACL, relevantly provides that:
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:
(a) make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or
…
(g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or
8 Section 106(1) provides that a person must not, in trade or commerce, supply consumer goods of a particular kind if a safety standard for consumer goods of that kind is in force and those goods do not comply with the standard. Section 106(2) of the ACL provides that a person must not, in trade or commerce, offer for supply (other than for export) consumer goods the supply of which is prohibited by s 106(1).
9 The Consumer Goods (Basketball Rings and Backboards) Safety Standard 2017 ("Basketball Rings and Backboards Standard") and the Consumer Goods (Portable Swimming Pool) Safety Standard 2013 ("Portable Swimming Pool Standard") were in force during the relevant period.
10 The purpose of the Basketball Rings and Backboards Standard is to reduce the risk of death and serious injury resulting from the improper installation or use of basketball rings and backboards and to help protect consumers from the risk of serious injury or death arising out of their inadequate installation or improper use.
11 The Basketball Rings and Backboards Standard relevantly provides:
9 Warnings and instructions to accompany basketball ring or backboard
Warnings
(1) A basketball ring or backboard must be accompanied by:
(a) a written warning described in section 10; and
(b) a warning symbol described in section 11;
in the way described in section 12.
(2) A backboard must have a warning described in section 13 permanently marked in a conspicuous place on the front of the backboard or on a label fixed in such a place.
Instructions
(1) A basketball ring or backboard must be accompanied by a label, tag or manual setting out instructions described in section 14 for installation of the basketball ring or backboard for its safe use, unless the ring or backboard is supplied as part of a portable basketball system.
10. Form of written warning accompanying basketball ring or backboard
(1) The warning accompanying the basketball ring or backboard must:
(a) consist of the words "WARNING: IMPROPER INSTALLATION OR SWINGING ON THE RING MAY CAUSE SERIOUS INJURY OR DEATH"; and
(b) be clearly legible.
(2) In the warning:
(a) the letters must be upper-case and red, and appear on a white background; and
(b) the letters of the word "WARNING" must be at least 15 millimetres high; and
(c) the letters of the other words must be at least 10 millimetres high.
11. Form of warning symbol accompanying basketball ring or backboard
(1) The warning symbol accompanying the basketball ring or backboard must be in the form of the following symbol (which is not full size):
(2) In the warning symbol:
(a) the diameter of the outer edge of the circle must be at least 120 millimetres; and
(b) the circle and diagonal line must be shown with red lines at least 5 millimetres wide; and
(c) the human figure must be entirely black; and
(d) the basketball ring and backboard must be outlined in black.
12. How written warning and warning symbol are to accompany basketball ring or backboard
If basketball ring or backboard is packaged
(1) If the basketball ring or backboard is packaged, the warning and warning symbol must accompany the ring or backboard by being marked:
(a) in a conspicuous place on the package; or
(b) on a label fixed in such a place.
If basketball ring or backboard is not packaged
(1) If the basketball ring or backboard is not packaged, the warning and warning symbol must accompany the ring or backboard by being marked:
(a) in a conspicuous place on the ring or backboard; or
(b) on a label fixed in such a place; or
(c) on a conspicuous tag attached to the ring or backboard.
13. Form of permanent warning marked on front of backboard
(1) The warning permanently marked on the front of the backboard (or on a label there) must:
(a) consist of the words "WARNING: SWINGING ON THE RING MAY CAUSE SERIOUS INJURY OR DEATH"; and
(b) be clearly legible.
(2) The lettering of the warning must be upper-case and at least 10 millimetres high.
14. Instructions accompanying basketball ring or backboard for installation for safe use
The instructions accompanying the basketball ring or backboard for its installation for safe use must:
(a) give details of the supporting structure to which the ring or backboard is to be fixed; and
(b) give details of the hardware to be used to fix the ring or backboard to the supporting structure; and
(c) strongly warn against fixing the ring or backboard to brickwork; and
(d) include advice to consult a structural engineer if there is any doubt about the safety or stability of the installation."
12 The purpose of the Portable Swimming Pool Standard is to reduce the risk of children drowning in portable swimming pools. It requires that a prescribed warning be applied to portable swimming pools and their packaging. Those warnings inform consumers of the risk of drowning, the need to ensure children have adequate adult supervision at all times, and that children must be kept within arms' reach.
13 The Portable Swimming Pool Standard relevantly provides:
6 Warning message on portable swimming pools
(1) For paragraph 104(2)(c) of the Australian Consumer Law, a portable swimming pool must display a permanent warning message.
(2) If the depth of the portable swimming pool is less than 300 mm, the warning message must include the following statement:
"WARNING!
Children have drowned in portable swimming pools. Ensure active adult supervision at all times.
Do not leave children unsupervised in or around the pool - keep them within arms' reach.
Empty and store safely after use."
7 Warning message on retail packaging for portable swimming pools
(1) For paragraph 104 (2) (c) of the Australian Consumer Law, the retail packaging for a portable swimming pool must display a permanent warning message that is conspicuous and visible to a purchaser of the portable swimming pool when the portable swimming pool is purchased.
(2) If the depth of the portable swimming pool is less than 300 mm, the warning message must include the following statement:
"WARNING!
Children have drowned in portable swimming pools. Ensure active adult supervision at all times.
Do not leave children unsupervised in or around the pool - keep them within arms' reach.
Empty and store safely after use."
[5]
THE CONTRAVENTIONS
14 Schedule 1 to the SAFA identifies the non-compliant products and the number of each sold by Decathlon during the relevant period. Part A identifies the relevant basketball ring and backboard products of which there are six (referred to as the "Identified Products") and another eight products (referred to as the "Equivalent Products") each of which is the same as one of the Identified Products but sold under a different name. Part B identifies the relevant swimming pool products of which there are five. Each product shall be referred to by the identifying item number as shown in schedule 1 to the SAFA which is reproduced below:
15 Details of the deficiencies in the warnings and related information accompanying the basketball rings and backboards are set out in Schedule 3 to the SAFA. Further information about the breaches of the relevant standards was contained in the parties' written submissions, and in a table prepared by the ACCC. Decathlon accepts that during the relevant period:
(a) Items 1, 2, 3, 5 and 6 of the Identified Products and all the Equivalent Products did not comply with sections 9, 10, 11 and 13 of the relevant standards as they were not accompanied by the prescribed written warnings and warning symbols or of the basketball ring or backboard for its safe use, in the prescribed form;
(b) Items 1, 3, 4 and 6 of the Identified Products did not comply with sections 9 and 14 of the relevant standard as they did not strongly warn against fixing the ring or backboard to brickwork and did not provide advice to consult a structural engineer if there was any doubt about the safety or stability of the installation;
(c) Items 3 and 4 of the Identified Products impliedly represented to consumers that the goods were of a standard or quality and had the performance characteristics, uses or benefits of being safe to affix to brickwork when that was not the case;
(d) Items 1, 2 and 5 of the Identified Products and items 1, 2, 3, 4 and 6 of the Equivalent Products were supplied, or offered for supply, without the prescribed instructions for installation of the basketball ring or backboard for its safe use and in doing so impliedly represented to consumers that the goods were of a standard or quality and had the performance characteristics, uses or benefits of being safe to affix to brickwork without qualification as to the composition of the wall, and did not warn against affixing the products to brickwork;
(e) Item 7 of the Identified Products did not display any permanent warning statement in the prescribed form on the retail packaging, including the warning regarding pool fencing laws that applied to the product, and therefore did not comply with s 6 of the relevant standard;
(f) Item 7 of the Identified Products did not display a permanent warning statement in the prescribed form in circumstances where the depth of the portable swimming pools was 300mm or more and as a result did not comply with s 7 of the relevant standard; and
(g) Items 8 to 11 of the Identified Products did not have the prescribed warning message on the retail packaging warning against leaving children unsupervised in or around the pool and as a result did not comply with s 7 of the relevant standard.
16 Decathlon has admitted that in supplying and offering to supply the basketball rings and backboards, that it contravened ss 106(1), 106(2), 18(1), 29(1 )(a) and 29(1)(g) of the ACL. Decathlon has also admitted in supplying and offering to supply the portable swimming pools it contravened ss 106(1) and 106(2), of the ACL.
17 It is apparent that the products contained warnings that were either the same as or similar to warnings found in European standards. Those warnings were missing key words and other elements required by the relevant Australian standards, and were materially undersized and lacking prominence. In particular:
(a) the basketball rings and backboards:
(i) did not display a warning symbol against dunking in sufficient size (the warning symbol must be at least 120mm rather than the much smaller 10, 20 or 30mm that was present, variously). It is doubtful whether a warning of that size would be sufficient to convey the relevant message to a consumer about to engage in play; and
(ii) were not accompanied by instructions strongly warning against fixing to brickwork. In fact, many of the products contained a pictogram of the product affixed to a brick wall, positively implying that it was safe to affix the product to brickwork.
(b) the swimming pool products:
(i) some omitted any reference to safety fencing requirements (two required this);
(ii) while they include similar warning words to those required by the Australian standard, some words were missing, such as the word "active" in front of the word supervision, and the information that children have drowned (information that deaths have occurred captures consumers' attention more than a theoretical risk description); and
(iii) those warning words included on the product were required to be permanently printed in a manner that was visually prominent (black front and orange background) and of a particular size (the warning word must be 10mm high and other words 6mm high), so that they would be legible and visible from a distance of 3m.
18 Decathlon's contraventions do not merely reflect a failure to precisely match the prescribed form of warning words and symbols. Some of the required warnings were omitted completely, and others were much smaller than required. Further, as previously mentioned, the labelling on some of the basketball rings and backboards supplied by Decathlon depicted the product affixed to brickwork even though the relevant standard required that the accompanying instructions strongly warn against fixing the ring or the backboard to brickwork.
[6]
Section 224
19 Section 224 of the ACL relevantly provides:
224 Pecuniary penalties
(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);
…
(viii) section 106(1), (2) … (which are about safety of consumer goods and product related services);
…
…
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.
(3) The pecuniary penalty payable under subsection (1) is not to exceed the amount worked out using the following table:
(3A) For the purposes of items … 2 [and] 9 … of the table in subsection (3), the amounts are as follows:
(a) $10,000,000;
(b) if the court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the act or omission - 3 times the value of that benefit;
(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.
(4) If conduct constitutes a contravention of 2 or more provisions referred to in subsection (1)(a):
(a) a proceeding may be instituted under this Schedule 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.
[7]
Maximum Penalty
20 Prior to 1 September 2018, the maximum penalty for a contravention of inter alia a provision of Part 3-1 of the ACL was $1.1 million: s 224(3) items 2 and 9. The current regime for determining the maximum penalty came into force on 1 September 2018: see Treasury Laws Amendment (2018 Measures No. 3) Act 2018 (Cth). From that date, the maximum penalty for each act or omission by a person in contravention of (inter alia) ss 18, 29 and 106 is provided in s 224(3A).
21 The old penalty regime with a maximum penalty for each contravention of $1.1 million applies to each of Decathlon's contraventions that occurred up to 31 August 2018. The new penalty regime provided for in s 224(3A) applies to the contraventions occurring from 1 September 2018 to 15 December 2019. Most of the contraventions occurred in that period.
22 The ACCC submitted that in determining the statutory maximum penalties in respect of contraventions occurring after 1 September 2018, any benefit obtained by Decathlon for those contraventions cannot be precisely determined because the number of potentially affected consumers cannot be ascertained, and it is unrealistic to proceed on the assumption that every person who purchased a non-complying product did so having been misled by the relevant representations. It submitted the maximum statutory penalty for each contravention after 1 September 2018 is therefore the greater of $10 million or 10% of Decathlon's annual turnover during the 12-month period preceding the end of the month in which the act or omission occurred or started to occur.
23 The ACCC further submitted that since 10% of Decathlon's turnover in the 12-month period does not exceed $10 million, the statutory maximum is $10 million for each act or omission by Decathlon in contravention of ss 29 and 106 of the ACL.
24 I accept that s 224(3A)(a) applies in this case. However, I do not accept that s 224(3A)(a) applies for the reasons submitted by the ACCC. At least with respect to Decathlon's contraventions of ss 106(1) and 106(2), it would not be appropriate for the purposes of deciding whether s 224(3A)(b) applied to inquire into whether any purchaser had been or was likely to have been misled. Rather, the relevant inquiry concerns the benefit obtained by Decathlon and its related body corporates as a result of Decathlon supplying the products. The benefit in such cases will usually be the profits made from the sale of the relevant products. The state of mind of consumers is irrelevant to that calculation.
[8]
Relevant Considerations
25 It is well established that in the Court assessing the appropriate penalty, the Court should consider the following factors:
(a) the nature and extent of the conduct and the circumstances in which it took place;
(b) the size of the contravening company;
(c) the deliberateness of the contravention and the period over which it extended;
(d) whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;
(e) whether the contravener has a corporate culture conducive to compliance with the relevant Act, as evidenced by educational programs and disciplinary or other corrective measures in respect to an acknowledged contravention;
(f) whether the contravener has shown a disposition to cooperate with the ACCC;
(g) whether the contravener has engaged in similar conduct in the past;
(h) the financial position of the contravener;
(i) whether the contravening conduct was systematic, deliberate or covert;
(j) the extent of contrition;
(k) whether the contravening company made a profit from the contraventions;
(l) the extent of the profit made by the contravening company; and
(m) whether the contravening company engaged in the conduct with an intention to profit from it.
(ACCC v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 at [11]; referred to on appeal without disapproval in Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [37] ("Singtel Optus"); ACCC v Woolworths Ltd [2016] FCA 44 ("ACCC v Woolworths") at [124]-[126]).
26 The primary objective of imposing civil penalties is specific deterrence in respect of the actual contravener, and general deterrence of others who may be disposed to engage in similar conduct (ACCC v Woolworths at [125]; TPC v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 297-298). The amount awarded should not be greater than is necessary to achieve the objective of deterrence. The Full Federal Court has referred to the need to ensure that the penalty in such cases "is not such as to be regarded by that offender or others as an acceptable cost of doing business" and will deter them "from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention": Singtel Optus at [62]-[63].
27 Rather than imposing separate penalties for each technically available contravention the Court may, in its discretion, apply the course of conduct principle where there is a sufficient interrelationship between the legal and factual elements of those contraventions: Constructions, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461 at [39] to [43]; ACCC v Marksun Australia Pty Ltd [2011] FCA 695 at [71]-[81]; ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [60]-[61]. See further Singtel Optus at [52]-[55] and ACCC v EDirect Pty Ltd (in liq) (2012) 206 FCR 160.
28 In cases involving the breach of provisions relating to safety standards intended to be used by infants and young children, deterrence (both specific and general) must be given significant weight: ACCC v Dimmeys Stores Pty Ltd [2011] FCA 372 at [63]; ACCC v Robinson [2011] FCA 17 at [66]; Director of Consumer Affairs Victoria v Dimmeys Stores Pty Ltd (2013) 308 ALR 296 at [33]; ACCC v Online Dealz Pty Ltd [2016] FCA 732 at [255]; ACCC and Ozsales Pty Ltd [2016] FCA 1049 at [25].
29 In setting a penalty of appropriate deterrent value regard must ordinarily be given to the statutory maximum penalty: ACCC v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 at [154]-[155].
30 Where multiple separate penalties are to be imposed upon a particular wrongdoer the totality principle requires the Court to make a "final check" of the penalties to be imposed, considered as a whole: ACCC v EnergyAustralia Pty Ltd (2014) 234 FCR 343 at 358 [100]-[102]. Although a reduction is not automatic, where the Court believes that the cumulative total of the penalties to be imposed would be too low or too high, the Court should alter the final penalties to ensure that they are just and appropriate: EnergyAustralia at [101]-[102].
[9]
Product Sales
31 The evidence does not suggest that Decathlon's contravening conduct resulted in any significant profit. The number of basketball rings and backboards and portable swimming pools sold in Australia was small and the profit from the sales (approximately $35,000) was modest.
32 Decathlon sold a total of 432 units of the basketball rings and boards during the relevant period, 108 units before 1 September 2018 and 324 units (approximately 75%) after 1 September 2018.
33 Decathlon sold a total of 307 units of the portable swimming pools during the relevant period, 62 units before 1 September 2018 and 245 units (approximately 80%) after 1 September 2018.
34 The total revenue received by Decathlon for the sale of the goods was $102,158 for basketball rings and boards and $19,726 for portable swimming pools. The total profit received by Decathlon was approximately $35,000.
[10]
Injury, Loss or Damage
35 There is no evidence that any person has suffered any injury, loss or damage as a result of Decathlon's contravening conduct.
[11]
Correspondence between Decathlon and the ACCC
36 There was extensive correspondence between the ACCC and Decathlon in relation to the relevant products and various other products supplied by Decathlon. It is unnecessary to refer to all this correspondence. However, some of it was relied upon by the ACCC to show what it submitted was a reckless disregard on the part of Decathlon to comply with the relevant standards and to respond to the concerns of the ACCC.
37 On 13 June 2018 the ACCC wrote to Decathlon outlining its concerns that two basketball rings and backboard products supplied by Decathlon may not comply with the relevant standard. The ACCC also advised Decathlon in an email dated 28 August 2018 that all products sold by Decathlon that are subject to a product safety standard must comply with all of the requirements of the relevant standard and that it is the responsibility of the supplier of the products to ensure that they are compliant.
38 On 30 August 2019, the ACCC wrote to Decathlon raising concerns that various basketball rings and backboards and various portable swimming pools supplied by Decathlon did not comply with the relevant standards. Following further correspondence, Decathlon wrote to the ACCC on 21 October 2019 advising that it had stopped supply of those products. Decathlon also provided information about unit sales of the portable swimming pools and basketball rings and backboards for the period 30 August 2019 to 17 October 2019.
39 Decathlon first accepted that the portable swimming pool products did not comply with the relevant standard in its 21 October 2019 letter. Decathlon first accepted that the basketball rings and backboards products did not comply with the relevant standard on 17 December 2019 when it submitted recall notifications to the ACCC.
40 On 19 November 2019, the Chair of the ACCC issued Decathlon with a notice to furnish information and produce documents, pursuant to s 155(1)(a) and (b) of the Competition and Consumer Act 2010 (Cth) ("the s 155 Notice").
41 Decathlon lodged voluntary recall notifications for the basketball rings and backboards and portable swimming pools with the ACCC on 17 and 18 December 2019. These notifications included a second recall notification for Item 4 which had previously been recalled by Decathlon on 21 November 2018 which was not withdrawn from sale at that time.
42 On 18 December 2019, Decathlon provided its response to the s 155 Notice. The sales information and documents Decathlon provided in response to the s 155 Notice were inconsistent with the unit sales and last dates of supply for the basketball rings and backboards and portable swimming pool products contained in its recall notifications.
43 In addition to complying with the s 155 notice, Decathlon responded to three voluntary information requests issued by the ACCC in March, May and June 2020. The ACCC accepts that Decathlon attempted to negotiate with the ACCC in good faith prior to the commencement of this proceeding.
[12]
The Product Recalls
44 Section 128(2) of the ACL requires suppliers voluntarily recalling products for safety related reasons to provide written notification of the recall to the Commonwealth Minister responsible for consumer affairs within two days of initiating the recall.
45 Voluntary recall notifications were lodged with the ACCC on the following dates:
46 On 21 November 2018 Decathlon undertook a voluntary recall of Item 4 of the Identified Products by lodging a recall notification to the ACCC on 30 August 2018. The recall required Decathlon to provide updated installation instructions and a warning label to be affixed to the backboard. The recall required Decathlon to provide updated installation instructions and a warning label to be affixed to the backboard. However, Decathlon did not remove this product from sale until nearly a year later. The same product was the subject of a second recall notification on 17 December 2019. An Equivalent Product was also the subject of a recall notice on that date.
[13]
The Decathlon Group
47 When Decathlon commenced business in Australia in 2016 it had no adequate processes in place to ensure that the products it intended to sell complied with the ACL and the relevant product safety standards.
48 Decathlon continued to supply products until February 2020 without adequate processes in place to ensure that the products supplied by it in Australia complied with relevant safety standards.
49 At all material times Phillip Auzout was the supply manager, and Lucille Hourez was the quality and compliance leader at Decathlon. Neither of them had knowledge of the requirements of the ACL or the required Australian safety standards.
50 The persons within the Decathlon group who were said by Decathlon to be responsible for product labelling and compliance with product safety standards were persons apparently based in France. They are said to have relied upon information about the mandatory standards and the ACL provided by external lawyers for Decathlon France. It is not apparent from the evidence who those lawyers were or what advice they provided prior to December 2019.
51 The evidence does not disclose what involvement other entities within the Decathlon group had in responding to correspondence from the ACCC including the correspondence sent by the ACCC to Decathlon in June and August 2018. That correspondence should have alerted Decathlon (and other members of the Decathlon group) to the fact that the processes it had in place at that time for ensuring compliance with the relevant product standards in Australia were inadequate and had resulted in the company supplying products that did not comply with the relevant standards.
[14]
DECATHLON'S SIZE AND FINANCIAL POSITION
52 Decathlon submitted that its operation in Australia is relatively new, modest in scale and has produced significant losses in each year since it commenced business in Australia. It says it has a 1% market share and competes with other major sporting retailers in Australia, including Rebel Sport.
53 During the Relevant Period, Decathlon's turnover and revenue/losses were as follows:
(a) for the 2016 calendar year, a total turnover of $508,922.00 with a loss of $2,010,782.00;
(b) for the 2017 calendar year, a total turnover of $3,622,866.00 with a loss of $8,766,428.00;
(c) for the 2018 calendar year, a total turnover of $17,289,970.00 with a loss of $10,797,391; and
(d) for the 2019 calendar year, a total turnover of $31,872,761 with a loss of $20,426,867.
54 Decathlon France provided a letter of financial support to Decathlon on 7 February 2020. The letter of financial support is for a period of no less than 12 months from 6 August 2020.
55 Financial statements for Decathlon France show that it is a very substantial company and that the company and its wholly owned subsidiaries made a profit of approximately 458 million Euros for the year ending 31 December 2019. Decathlon is one of many wholly owned subsidiaries through which Decathlon France operates across many jurisdictions. One curious aspect of the evidence is that those financial statements do not show Decathlon in Decathlon France's list of subsidiaries nor does it show what profit or loss Decathlon France attributed to Decathlon.
[15]
MR ROBINET'S EVIDENCE
56 Mr Robinet is the CEO of Decathlon. He was appointed to that position on 15 August 2016. He gave some evidence as to the size of the Australian business which now operates five retail stores, two in Sydney and three in Melbourne, and directly employs 277 staff. He said that he considers it is very likely the civil penalty will have a significant impact on Decathlon's net income and its ability to continue operating in Australia.
57 Mr Robinet also gave evidence as to an internal system operated within the Decathlon group known as the PACE system which informs members of the Decathlon group whether a particular product has been assessed for compliance in the jurisdiction in which it is to be supplied. His evidence was that the PACE system indicates to a user whether a product is cleared for supply in a particular jurisdiction and that, in the event that the product was shown as not cleared, then the system was designed to automatically block supply to that jurisdiction.
58 According to Mr Robinet, during the relevant period, with the exception of one product (one of the portable swimming pool products), all of the products the subject of this proceeding, were recorded in the PACE system as non-compliant. All of the products were recorded as compliant with mandatory standards applicable in other jurisdictions including Europe and Singapore.
59 According to Mr Robinet, the supply chain manager at Decathlon, Mr Phillipe Auzout, was responsible for purchasing products to be supplied by Decathlon in Australia through a Singapore warehouse operated by another member of the Decathlon group. Mr Robinet explained that due to a problem in the PACE system, the PACE system failed to prevent Mr Auzout from placing orders for the non-compliant products. Mr Robinet's evidence, which was said to reflect his understanding of what occurred, was that Mr Auzout understood that the products complied with the relevant standards.
60 According to Mr Robinet, in around February 2020, Decathlon agreed to voluntarily implement an ACL compliance program. As part of the compliance program, Decathlon appointed a compliance and quality officer with legal qualifications in February 2020 whose role is to oversee the development, implementation and maintenance of the compliance program and to ensure that Decathlon's products comply with relevant standards. In August 2020, Decathlon retained a consultant that specialises in assisting businesses to comply with their obligations under the ACL. This consultant has provided advice to Decathlon in relation to its compliance program. In September 2020, Decathlon appointed its first general counsel who is responsible for ensuring that Decathlon has a comprehensive understanding of Australia's legal and regulatory obligations in Australia. Additionally, changes were made to the PACE system in April 2020 with a view to ensuring that products cannot be distributed to Australia unless they are compliant with the applicable laws and regulations, including the safety standards.
61 It is apparent from Mr Robinet's evidence that he is taking a close and direct interest in the compliance program. He is now a member of the recently established compliance committee along with Mr Auzout, the general counsel, the chief financial officer and various other senior employees.
[16]
WHAT IS THE APPROPRIATE PECUNIARY PENALTY?
62 Decathlon submitted that its contraventions did not result in Decathlon receiving significant revenue, were not a dominant or significant cause of an increase in momentum behind the Decathlon brand or the product offering in Australia over time, and did not assist Decathlon's entry into the Australian market.
63 Decathlon also submitted that the Court should take into account the costs incurred by Decathlon in implementing its compliance program in the amount of approximately $289,587.00, which does not include the costs incurred in removing the products from sale or the voluntary recall. It is apparent from the breakdown of those costs that a large part of this amount covers wages and consultants fees for the whole of the business and rectification costs relating to different products (ie. bikes). In the 2019 calendar year, Decathlon had a turnover of almost $32 million. In that context, there is no reason to think that the compliance costs are out of the ordinary.
64 I accept Decathlon's submission that the profits made on the sale of the relevant products were relatively modest. I also accept that this is not a case in which there has been any "cynical calculation" of the kind referred to by the Full Court in Singtel Optus at [33]. However, I would not give any significant weight to the matter of compliance costs. Most of those costs reflect the ordinary costs of conducting any business involving the importation and sale of consumer products that are covered by product safety standards.
65 As previously mentioned, the ACCC suggested that the conduct of Decathlon was reckless and that the pecuniary penalty should be assessed on that basis. In my opinion, the evidence does not establish that Decathlon acted recklessly. In this regard, I note there was no cross-examination of Mr Robinet in relation to his account of the operation of the PACE system and the circumstances in which the relevant products came to be made available for sale in Australia.
66 None of that is to say that Decathlon's conduct in supplying the relevant non-compliant products in Australia was not careless. A difficulty I have with Mr Robinet's evidence is that it does not explain why the problems with the PACE system did not come to his attention, or that of Mr Auzout, much earlier than they did. Although Mr Robinet's evidence explains how Decathlon came to acquire non-compliant products for distribution in Australia, it does not explain when or how the problem in the system first came to their notice. This is a significant matter in circumstances where the evidence shows that many of the non-compliant products were being supplied for months, in some cases more than a year, after the ACCC contacted Decathlon. There is no evidence to show that Decathlon took any steps to understand how it came to be supplying non-compliant products in Australia until the company was served with the s 155 notice.
67 The ACCC letter of June 2018 does not appear to have been acted on in any effective or comprehensive way across a range of basketball rings and backboard products that were later supplied by Decathlon. The sale of products by Decathlon that did not comply with the relevant standards was not merely attributable to some technical deficiency in the PACE system, but was also the result of a general lack of attention to its legal responsibilities coupled with a failure to take effective and timely action in response to correspondence received from the ACCC that drew attention to compliance problems in relation to a range of products.
68 I accept that Decathlon has evinced a willingness to cooperate with the ACCC in relation to this proceeding. It has admitted its contraventions and reached an agreement with the ACCC in relation to appropriate relief save in respect of pecuniary penalty. I have also noted the steps it has taken to ensure compliance with the relevant standards in the future including by the establishment of a compliance committee, the employment of additional staff with relevant expertise, and the engagement of an outside consultant to provide advice in relation to compliance issues.
69 I also accept that the profit made by Decathlon from the sale of the non-compliant products was relatively small in the context of its annual turnover, that the company is not profitable, and that the CEO considers that a significant pecuniary penalty will involve serious hardship for it and may even lead to Decathlon France closing down its Australian operation. As to that latter possibility, I do not give it much weight. The Australian operation appears to have operated at a substantial loss since its inception. Although the evidence indicates that the Australian operation is unprofitable, there is no evidence to indicate what profit Decathlon France or its other subsidiaries make from the manufacture and supply of products to the Australian company. There is no evidence from Decathlon France as to what its future intentions may be.
70 The relevant standards are aimed at preventing serious injury or death. Many persons using the products in question are likely to have been infants or young children. In the case of the swimming pool product, they were specifically intended for use by infants and young children many of whom would be at great risk of drowning in the event they were not properly supervised. In relation to the basketball rings and backboard products, I have previously mentioned that the instructions for use on some of these plainly suggested that they were suitable for installation against a brick wall in circumstances where the relevant standard required that consumers be expressly advised not to install the product against a brick wall.
71 The fact that the relevant products may have complied with European safety standards is a matter that I have taken into account. This is not a case where the relevant products were not accompanied by any relevant warning. However, there are material differences between the European standards and the relevant Australian standards that are likely to exist for good reason. In this regard, I have already commented on the greater prominence that the relevant standards give to some of the warnings and some additional warnings required under the relevant standards that are not found in the European standards.
72 I have taken into account the need for a pecuniary penalty to provide specific deterrence. This is a matter that I have given some weight but I do so having regard to the steps to which I have previously referred that Decathlon has taken toward the establishment of an effective compliance program and statements of contrition made by its CEO and counsel on Decathlon's behalf.
73 General deterrence in my view is a significant consideration in this case. The pecuniary penalty to be imposed should send a clear message to other traders that non-compliance with mandatory safety standards, especially in relation to products that are to be supplied for use by children, will in appropriate cases attract significant penalties. That this is the intention of legislature is apparent from the substantial maximum penalty that it has provided for in s 224 particularly in relation to contraventions occurring after 1 September 2018.
74 In my opinion it is also important that the pecuniary penalty to be imposed in this case send a clear message to suppliers of products made overseas that it is not sufficient that those products comply with mandatory safety standards adopted in other jurisdictions where they are materially different to what is required under the relevant standards applicable to the supply of such products in Australia. It is the responsibility of the importer to ensure that they comply with relevant Australian standards.
75 Finally, I think the pecuniary penalty to be imposed in this case should also signal the need for importers and suppliers of non-compliant products to respond to concerns raised by the ACCC in relation to a suspected lack of compliance with relevant mandatory safety standards in an effective and timely manner.
76 Both parties accepted that it was appropriate for me to fix a single pecuniary penalty in respect of all of the proven contraventions which is what I propose to do. In my opinion an appropriate penalty is $1.5 million.
77 There was agreement between the parties in relation to the form of the appropriate declarations and injunctive relief.
78 There will be orders accordingly.
I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Nicholas.