Australian Competition and Consumer Commission v Dell Australia Pty Ltd - [2023] FCA 983 - FCA 2023 case summary — Zoe

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Australian Competition and Consumer Commission v Dell Australia Pty Ltd

[2023] FCA 983

Federal Court of Australia|2023-08-14|Before: Jackman J

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Court

Federal Court of Australia

Decision date

2023-08-14

Before

Jackman J

Source

Original judgment source is linked above.

Judgment (22 paragraphs)

[1]

Introduction 1 On 5 June 2023, I gave judgment in these proceeding on issues concerning liability and non-pecuniary relief: Australian Competition and Consumer Commission v Dell Australia Pty Ltd [2023] FCA 588 (Initial Judgment). I found that in the period from 1 August 2019 to 16 December 2021 (the Relevant Period), Dell Australia Pty Ltd (Dell) engaged in conduct in contravention of ss 18 and 29(1)(i) of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL). I made declarations in relation to those contraventions and orders relating to consumer redress, Dell's compliance program and the issuing of corrective notices. I have adopted the same defined terms in this judgment as in the Initial Judgment. 2 The issues remaining to be determined relate to pecuniary penalties for the contraventions of s 29(1)(i) of the ACL and costs. The Australian Competition and Consumer Commission (ACCC) and Dell have agreed proposed orders with respect to these issues. In summary, the parties jointly propose, and I accept, that Dell should be ordered to pay: (a) pecuniary penalties of $10 million in aggregate pursuant to s 224(1) of the ACL in respect of its contraventions of s 29(1)(i) of the ACL (as described in the Initial Judgment); and (b) a contribution to the costs of the ACCC fixed in the amount of $250,000 pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth). In these reasons, I have drawn extensively and gratefully on the thorough written submissions, which were made jointly by the ACCC and Dell, in explaining why these orders are appropriate. 3 In support of the proposed orders, the ACCC relies on an affidavit of Kevin James John Love affirmed 29 June 2023 (Love Affidavit) together with annexures. Dell relies on an affidavit of Angela Thasanee Payne Sands affirmed 22 May 2023 (Sands Affidavit) together with Exhibit AS-1 and Annexure AS-2, an affidavit of Michael Collins affirmed on 25 May 2023 (Collins Affidavit) together with annexures, and an affidavit of Richard John Flitcroft sworn 13 July 2023 (Flitcroft Affidavit) together with annexures. The parties also rely on the Further Amended Agreed Background Facts and Admissions filed 2 June 2023 (SOAF), the Supplementary Statement of Agreed Facts filed 27 June 2023 (SSOAF) and the Joint Aide Memoire filed 27 June 2023 (Joint Aide Memoire), and I have adopted the defined terms used in those documents.

[2]

Legal Principles 4 Deterrence, both specific and general, is the primary, if not sole, objective for imposing pecuniary penalties under s 224 of the ACL: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 274 CLR 450 (Pattinson) at [9] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ), followed in Viagogo AG v Australian Competition and Consumer Commission [2022] FCAFC 87 (Viagogo) at [129] (Yates, Abraham and Cheeseman JJ); see also Australian Competition and Consumer Commission v Employsure Pty Ltd [2023] FCAFC 5; (2023) 407 ALR 302 (Employsure) at [49] (Rares, Stewart and Abraham JJ), citing Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (Fair Work) at [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ). The penalty must be fixed at a level that ensures that neither the contravener, nor would-be contraveners, would regard it as "an acceptable cost of doing business": Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 at [64] (French CJ, Crennan, Bell and Keane JJ). That said, a penalty is appropriate if it is "no more than is reasonably necessary to deter further contraventions" by the respondent and others: Pattinson at [9]. 5 The principles that apply when parties agree and jointly propose a pecuniary penalty were summarised in Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49; (2021) 284 FCR 24 (Volkswagen) at [125]-[129] (Wigney, Beach and O'Bryan JJ). First, the Court must be persuaded that the penalty is appropriate: Volkswagen at [125]. The agreement of the parties is not binding on the Court. Second, it is "highly desirable in practice" for the Court to accept the parties' proposal if the Court is persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty is an appropriate remedy in all the circumstances: Volkswagen at [126]. Predictability of outcome encourages respondents to acknowledge contraventions, thereby avoiding lengthy litigation. Third, there is no single appropriate penalty. Rather, there is a permissible range of penalties determined by all the relevant facts and consequences of the contravention and the contravener's circumstances: Volkswagen at [127]. An agreed penalty may be considered an appropriate penalty if it falls within that range. Fourth, in considering whether a penalty is appropriate, the Court should generally recognise that an agreed penalty is most likely the result of compromise and pragmatism on the part of the regulator and reflects the regulator's considered estimation of the penalty necessary to achieve deterrence and the risks and expense of the litigation had it not settled: Volkswagen at [129]. 6 In determining the appropriate penalty under s 224(1), the Court must have regard to all relevant matters, including the following matters in s 224(2): (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; (b) the circumstances in which the act or omission took place; and (c) whether the contravener has previously been found by a court in proceedings under Ch 4 or Pt 5-2 of the ACL to have engaged in any similar conduct. 7 The loss or damage to be considered by the Court is not limited to financial harm. It could be non-pecuniary, such as a lost opportunity to make a different purchasing choice with accurate information: Initial Judgment [32]; Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 (Coles) at [57] (Allsop CJ). The Court must assess the nature and extent of the harm even if quantifying the harm is difficult and "requires broad or rough estimation": Australian Competition and Consumer Commission v Uber B.V. [2022] FCA 1466 (Uber) at [34] (O'Bryan J). 8 The maximum penalty for a contravention of s 29(1)(i) of the ACL (being a provision within Pt 3-1) by a body corporate during the Relevant Period was the greater of: (a) $10 million; (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, three times the value of that benefit; and (c) if the Court cannot determine the value of that benefit, 10% of the annual turnover of the body corporate during the 12 month period ending at the end of the month in which the act or omission occurred: s 224(3), item 2 and s 224(3A). 9 The prescribed maximum penalty is one yardstick that ordinarily must be applied and must be treated as one of a number of relevant factors: Pattinson at [54]. Unlike the criminal law, the concept that a penalty must be proportionate to the seriousness of the offence such that the maximum penalty is reserved for the most serious examples of misconduct has no place in the civil penalty context: Pattinson at [10]. Considerations such as deterrence and the public interest may justify the imposition of the maximum penalty where no lesser penalty will be an effective deterrent against future contraventions of a similar kind: Pattinson at [50]; Viagogo at [131]. What is required is a "reasonable relationship between the theoretical maximum and the final penalty imposed": Pattinson at [10]. That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 224, namely specific and general deterrence of future contraventions of a like kind by the contravener and by others: Pattinson at [10]. This may be established by reference to the circumstances of the contravener and the contravening conduct: Pattinson at [55]. 10 Further, in cases where thousands of false or misleading representations are made, the arithmetic maximum penalty in aggregate may become so disproportionately large that it is not helpful to the Court. Precise calculation therefore becomes unnecessary: Coles at [82]; Australian Competition and Consumer Commission v Samsung Electronics Australia Pty Ltd [2022] FCA 875 at [45] (Murphy J), citing Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68 at [143]-[145] (Dowsett, Greenwood and Wigney JJ); Australian Competition and Consumer Commission v Google LLC (No 4) [2022] FCA 942 at [28]-[29] (Thawley J); Uber at [27]. 11 Two principles or tools of analysis that can assist the Court in determining an appropriate penalty for multiple contraventions are the course of conduct principle and the totality principle: Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243 (Yazaki) at [226] (Allsop CJ, Middleton and Robertson JJ). These "concepts … may assist in the assessment of what may be considered reasonably necessary to deter further contraventions": Pattinson at [45]. 12 The course of conduct principle is commonly referred to as recognising that where there is an interrelationship of legal and factual elements of multiple contraventions, care must be taken to ensure that the contravener is not punished twice for what is essentially the same wrong: Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] FCAFC 159; (2017) 258 FCR 312 at [421]-[428] (Middleton, Beach and Moshinsky JJ); Yazaki at [234]. In applying the course of conduct principle, it is not appropriate or permissible to treat multiple contraventions as just one contravention, nor does the principle constrain or reduce the theoretical maximum penalty: Yazaki at [229]-[232]. The Court is also "not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of the contraventions": Yazaki at [235]. Rather, it may be used as a tool of analysis, particularly when the number of contraventions is large: Coles at [82]-[85]. 13 The totality principle is that the total penalty for related contraventions should not exceed what is proper for the entire contravening conduct involved: Australian Competition and Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336; (2014) 234 FCR 343 at [102] (Middleton J). This can be used by the Court as a tool of analysis to ensure that the penalty is no more than reasonably necessary for deterrence: Pattinson at [45]. The exercise of the totality adjustment "is directed to the overall impact of the accumulated effect of otherwise acceptable penalties to ensure that the whole is not greater than the sum of the parts": Australian Competition and Consumer Commission v GlaxoSmithKline Consumer Healthcare Australia Pty Ltd (No 2) [2020] FCA 724 (Glaxo) at [61] (Bromwich J). It is typically used as a "final check": Glaxo at [62]. 14 Other commonly relevant factors to consider in determining a penalty were articulated by French J in Trade Practices Commission v CSR Ltd [1990] FCA 762; (1991) 13 ATPR 41-076 at [42]. However, these must not be considered a "rigid catalogue of matters for attention": Pattinson at [19]. In Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 44; [2016] ATPR 42-521 (Woolworths) at [123]-[126], Edelman J set out the commonly relevant matters, other than those in s 224(2), as follows: (a) the size of the contravening company; (b) the deliberateness of the contravention and the period over which it extended; (c) whether the contravention arose out of the conduct of senior management of the contravener or at some lower level; (d) whether the contravener has a corporate culture conducive to compliance with the ACL as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; (e) whether the contravener has shown a disposition to co-operate with the authorities responsible for the enforcement of the ACL in relation to the contravention; (f) whether the contravener has engaged in similar conduct in the past; (g) the financial position of the contravener; (h) whether the contravening conduct was systematic, deliberate or covert; (i) the extent of contrition; (j) whether the contravening company made a profit from the contraventions; (k) the extent of the profit made by the contravening company; and (l) whether the contravening company engaged in the conduct with an intention to profit from it. 15 The size of a contravener is relevant because, all other things being equal, a greater financial incentive will be necessary to persuade a well-resourced contravener to abide by the law than a poorly resourced contravener: Pattinson at [60]. In some cases, the circumstances of the contravener may be more significant in terms of the extent of the necessity for deterrence than the circumstances of the contravention: Pattinson at [60]. The size of the contravener's parent company also cannot be ignored when determining the penalty that should be imposed: Australian Competition and Consumer Commission v Oakmoore Pty Ltd (No 2) [2018] FCA 1170 at [105] (Gleeson J), citing Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169 (ABB) at [40]. In ABB, Finkelstein J said: While I am not imposing a punishment on the parent, the size of the parent cannot be ignored when assessing the penalty that should be imposed upon its subsidiary. If the position were otherwise, corporations could easily organise their affairs so that if found guilty of criminal conduct, the penalty would be kept to a minimum. For example, there are many markets where the competitors are major public companies. If they combine to engage in anti-competitive behaviour, the penalties imposed upon them will be similar. Is it to be supposed that if one of these public companies establishes a small subsidiary that will trade in the market instead of the parent, it will attract a lesser penalty because it has a lower capital and a smaller turnover? Of course this would be intolerable. Where the contravener is a distinct legal entity within a broader corporate structure, it is appropriate to take into account that broader structure in assessing deterrence, including where the contravener is part of a much larger, internally coordinated and wealthy group: Australian Securities and Investments Commission v Westpac Banking Corporation (Omnibus) [2022] FCA 515; (2022) 407 ALR 1 (Westpac) at [128] (Beach J). 16 The extent to which the conduct was deliberate is relevant because the demands of specific deterrence are greater for deliberate conduct, in contrast to careless, isolated conduct which was not concealed, "because the demands or requirements of specific deterrence are generally more acute in the case of contraveners who have engaged in deliberate or systematic conduct over lengthy periods, or where covert or concealed contraventions which are difficult to detect are involved" : Volkswagen at [151]. While a contravention that is consequent upon a "process failure" is not necessarily a mitigating factor, the Court should examine the reason for the contraventions and examine the cause of the failure to comply with the ACL: Australian Competition and Consumer Commission v Telstra Corporation Limited [2010] FCA 790; (2010) 188 FCR 238 at [237]-[238] (Middleton J). It is for the party asserting a particular state of mind, whether it be "deliberate flouting of the law, recklessness, wilful blindness, 'courting the risk', negligence, or innocence or any other characterisation of state of mind", to prove the assertion. If neither party establishes any particular state of mind, the Court determines the penalty on no more than the fact of the proscribed nature of the conduct: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 (Reckitt) at [131] (Jagot, Yates and Bromwich JJ). The Full Court in Reckitt considered at [131]: …if any degree of awareness of the actual or potential unlawfulness of the conduct is proved then, all other things being equal, the contravention is necessarily more serious. 17 Remediation can be relevant to the assessment of the appropriate penalty, both as evidence of contrition and also as a separate factor because it attempts to redress, in the limited manner in which money can do it, the consequences of the contraventions: Woolworths at [166]-[167], citing Australian Competition and Consumer Commission v AGL Pty Ltd [2015] FCA 399; (2015) 146 ALD 385 (AGL) at [35] (White J). The extent to which compensation will be mitigatory depends on all the circumstances. White J put it as follows in AGL at [34]-[38]: 34 In the criminal law, steps taken, or to be taken, by offenders to make good the losses caused by their crimes are relevant to the imposition of sentence, and are usually mitigatory: R v Wirth (1976) 14 SASR 291 at 294. … 37 The extent to which the making of reparation will be mitigatory depends on all the circumstances. Reparation which involves substantial sacrifice on the part of a defendant is particularly mitigatory: R v Phelan (1993) 66 A Crim R 446 at 448. On the other hand, the making of reparation by a well‑resourced defendant which is little more than a recognition of the inevitable is usually less significant. The economic consequence to a defendant of making reparation will not usually be material by itself but, in conjunction with other circumstances, may be mitigatory. 38 Many of these principles are also apposite in relation to the imposition of penalties under s 224. The court should encourage the voluntary making of appropriate reparation. This will facilitate the protection of consumers, which is a significant objective of the provisions in the ACL. On the other hand, the court should be careful not to allow the making of reparation to be given undue significance when it amounts to little more than a disgorging by a contravenor of profits achieved through the contravening conduct and, in effect, is a recognition of the inevitable. In particular, the court should exercise caution before allowing the economic consequence to a contravenor of making reparation, considered by itself, to be regarded as mitigatory: Australian Competition and Consumer Commission v Origin Energy Ltd [2015] FCA 55 at [55]. 18 The extent to which the contravener has conceded liability and cooperated with the investigating authority is relevant to determining penalties and typically results in a discount off the penalty that otherwise would have been imposed. This reflects the fact that such discounts increase the likelihood of cooperation in the future by contraveners and free up the ACCC's resources: Australian Competition and Consumer Commission v Optus Internet Pty Limited [2022] FCA 1397 at [33] (Moshinsky J).

[4]

Strikethrough Representations 21 There were three types of Strikethrough Representations described in [46] of the Initial Judgment: Savings Representations, Prior Price Representations and Standard Price Representations. Each of the Strikethrough Representations arose from the display of a Strikethrough Price, together with a Discounted Purchase Price, on the Dell Website: Initial Judgment [8]. Rather than the Strikethrough Price being the Retail Price, which was the price described by Dell as the "everyday price" for products offered for sale on the Dell Website, a price known as the List Price (or another price which was below the List Price but not a price at which the monitor was offered for sale) was used as the Strikethrough Price during the Relevant Period: Initial Judgment [9]-[10]. The List Price was not intended by Dell to be displayed to consumers on the Dell Website: Initial Judgment [10]. 22 The Strikethrough Representations were false or misleading to consumers in that they overstated the extent of the discount received by the consumer. This representation about the overstatement was either express (because in some cases there was an express statement of the discount as either a percentage or dollar figure described as "Total Savings"), or implied (because a consumer could calculate the difference between the Strikethrough Price and the Discounted Purchase Price). The extent of the overstatement was significant. When compared to Dell's intended strategy, whereby the average difference (i.e. intended saving to be shown) between the Retail Price and the Discounted Purchase Price would have been 8% or 16% (depending on the calculation methodology used), the average difference (i.e. represented saving) between the Strikethrough Price and Discounted Purchase Price actually displayed during the Relevant Period was approximately 45-46%: SSOAF [4]-[7]. (The figures of 8% and 46% are the result of the ACCC's preferred approach of analysing the extent of discounts based on the date of Add-on Monitors which were offered, whereas the figures of 16% and 45% are the result of Dell's preferred approach based on the data of Add-on Monitors which were sold during the Relevant Period. It is not necessary to decide which approach is preferable in light of the closely comparable results of the two modes of analysis.) The level of the overstatement, on average, reflects the serious nature of the contravening conduct. The conduct prompted at least 23 consumers to make a complaint about the conduct to Dell, including by reference to significantly overstated discounts: SOAF, [64]; Annexure F. 23 Further, the Strikethrough Representations also conveyed to consumers that the Strikethrough Price was the price at which the Add-on Monitor was offered for sale to consumers before the discount was applied (through the Prior Price Representation) and that it was the standard price at which the Add-on Monitor was offered for sale to consumers absent any discounts (through the Standard Price Representation): Initial Judgment [46]. As explained in the Initial Judgment at [50] and [51], these representations were false or misleading because they did not represent what a consumer would have paid prior to the application of the discount, or the "everyday price". 24 By reference to the purchases of Add-on Monitors alone, Dell's conduct in making the Strikethrough Representations comprised at least thousands of contraventions. For example, a total of 4,320 consumers purchased 5,335 Add-on Monitors after viewing one or more false or misleading Strikethrough Representations: SOAF [59]. However, it is not possible to quantify the total number of consumers to whom the false or misleading Strikethrough Representations were made for at least three reasons. First, Dell is unable to provide accurate data about the number of consumers who visited the relevant pages of the Dell Website: Initial Judgment [61]. Second, it is agreed that 219,000 consumers purchased a Computer through one or other of the relevant purchase pathways on the Dell Website during the Relevant Period. Each of those consumers would have visited at least one of the relevant webpages (SOAF [52] and Section F). However, with the exception of the Computers purchased through the purchase pathways known as the Special Events Platform, it is not known how many of those consumers had the representations displayed to them, because depending on the nature and size of their screen, Add-on Monitors may not have been displayed without scrolling down: SOAF [32] and Section F; Initial Judgment [6], [40(c)], [48(c)], [61]. Third, it is possible there may also have been other consumers who browsed the Dell Website and had the representations displayed to them, but did not ultimately purchase a Computer.

[5]

Purchase Price Representations 25 There are two types of Purchase Price Representations: the Bundling Representation and the Best Price Representation: Initial Judgment [39], [42]. The Bundling Representation conveyed to consumers that the purchase price displayed for an Add-on Monitor was at least equal to the cheapest price at which the monitor was available to consumers on a Standalone Basis: Initial Judgment [39]. It was conveyed by a combination of express statements, such as "Includes [x]% off" and "Total Savings", and the context of the structure and display of the webpage in each purchase pathway: Initial Judgment [40]. Dell made the Bundling Representation throughout the Relevant Period in respect of Add-on Monitors offered for sale in each of the three purchase pathways: Initial Judgment [5], [39]. The Best Price Representation was made between October 2020 and 16 December 2021 on one of the purchase pathways, being the Special Events Platform: Initial Judgment [42]. It conveyed to consumers that the purchase price was the "best price" at which the Add-on Monitor was available to consumers on the Dell Website: Initial Judgment [42]. It was distinct from the Bundling Representation because it arose from the following express statement on the Dell Website visible to all consumers who purchased an Add-on Monitor on the Special Events Platform: "Get the best price for popular accessories when purchased with this product": Initial Judgment [13(e)]. 26 On certain dates during the Relevant Period, and for certain models of Add-on Monitors, the Bundling Representations and Best Price Representations were false and misleading: Initial Judgment [45]; SOAF, [30], [45], [46], Annexure E. However, it is not possible to determine what number of false or misleading Best Price Representations were made, including for the same reasons that are set out above and because, except for limited instances, Dell did not track the particular pathway used by each particular consumer when purchasing an Add-on Monitor in the Relevant Period: SOAF [32]. 27 Dell made false or misleading Purchase Price Representations to consumers on at least 1,351 occasions, being the occasions when a consumer purchased an Add-on Monitor at a price higher than the equivalent model available on a Standalone Basis: Initial Judgment [44] and [63(a)], SOAF [30]. These were occasions on which false or misleading Bundling Representations, and possibly also Best Price Representations, were made. As with the Strikethrough Representations, although false or misleading Purchase Price Representations may have been made to some consumers who ultimately did not purchase an Add-on Monitor, it is not possible to quantify how many.

[7]

Financial harm 29 It is not possible to determine the precise financial harm suffered by consumers who purchased an Add-on Monitor the subject of this proceeding: SOAF [60]. However, the parties agree that Dell's conduct was likely to cause consumers to suffer financial loss in an amount likely lower than, but no higher than, the amount they paid for their Add-on Monitor: SOAF [60], Initial Judgment [58]. In the case of consumers who purchased Add-on Monitors subject to a false or misleading Purchase Price Representation, the financial loss caused by that false or misleading representation can be quantified. Excluding the 27 Nominal Consumers (described in SOAF [53]), these 1,324 consumers paid $101,357.36 more for Add-on Monitors than if they had purchased the equivalent monitor on a Standalone Basis: SOAF [55]. This equates to an average overcharging of $76.55 per consumer: SOAF [55]. 30 Further, it is possible that some of these consumers may not have purchased an Add-on Monitor at all were it not for the Purchase Price Representations (although each individual consumer's position has not been investigated). In such cases, the consumer may have suffered some additional loss. There is no uniquely correct way to quantify such loss. In most cases of statutory misleading conduct, the tort measure of damages will provide the best guide, but analogies with the common law do not limit the measure of loss: Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 at [40]-[41] (McHugh, Hayne and Callinan JJ); Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at [130] (McHugh J, with whom Gummow J agreed). In this case, the exercise would need to take into account both how the consumer would have acted differently, and the fact that they received a new monitor for which they paid the Add-on Monitor purchase price. In the case of consumers who purchased Add-on Monitors subject to a Strikethrough Representation, it is reasonable to assume that some of them may not have purchased an Add-on Monitor at all were it not for the misleading inflated discount displayed. While it is not possible to quantify the financial harm that such consumers suffered (because it is impractical in the circumstances to investigate each consumer's individual position), the same principles mentioned in the context of the Purchase Price Representations would apply.

[9]

Dell's remediation program 32 In this context, it is also necessary to have regard to the nature and extent of Dell's remediation program: SOAF, Section I. The effect of both stages of the remediation is that: (a) consumers who purchased Add-on Monitors during the Relevant Period subject to false or misleading Strikethrough Representations have been (or will be) offered full refunds (that is, all but 28 of the consumers): SOAF, [59], Section I; and (b) the 28 consumers who purchased Add-on Monitors during the Relevant Period subject to false or misleading Purchase Price Representations, which are not captured in the category above, have been offered partial refunds: SOAF [81]. The partial refund represents the difference between the amount paid for the Add-on Monitor and the amount that would have been paid for the equivalent monitor on a Standalone Basis. 33 The total amount expected to be paid to consumers, or donated to charity, by Dell is $2,026,420: SOAF [68]. This level of remediation is favourable to consumers, with assumptions made in their favour to ensure that they are compensated for any financial loss they are likely to have suffered as a result of Dell's contravening conduct. Additionally, the remediation amounts offered to consumers also contain an interest component, which is the Reserve Bank cash rate plus 6%: Annexure A to the Order made in this proceeding on 5 June 2023 at [7]; SOAF [72] and [74]. 34 Dell's remediation of affected consumers is a relevant mitigating factor in the assessment of penalty, including because it moderates the significance of the loss and damage likely to have been suffered by consumers. In particular, the comprehensive nature of Dell's remediation program should ensure that all consumers who purchased an Add-on Monitor subject to a false or misleading representation are offered redress in an amount that at least compensates them for any financial loss or damage they are likely to have suffered, and that Dell will have disgorged any benefit that it received from consumers as a result of its contravening conduct. The remediation program is also evidence of genuine and substantial contrition on the part of Dell.

[10]

Circumstances in which the acts took place (s 224(2)(b)) 35 The contravening conduct took place in the context of online purchase pathways that sought to encourage consumers to purchase additional items, including Add-on Monitors, that may have complemented their primary purchase: SOAF [17]. That is, when a consumer selected a Computer for purchase on the Dell Website, the consumer was offered the option of purchasing additional products determined by Dell, including Add-on Monitors, before completing the transaction: SOAF [18]-[19]. It also took place in the context of a general strategy by Dell to incentivise consumers to purchase an Add-on Monitor using strikethrough pricing to display discounts, however Dell's underlying strategy that the price of an Add-on Monitor should be the same or better than the price at which the same monitor was offered for sale on a Standalone Basis was not implemented by Dell in respect of the Add-on Monitors relevant to this proceeding: SOAF [25]. That arose in circumstances where, contrary to Dell's strategy, the Strikethrough Prices for Add-on Monitors were drawn from a different information source to that for monitors on a Standalone Basis, and planned and ad hoc pricing adjustments for monitors on a Standalone Basis were incorrectly not applied to the Add-on Monitors: SOAF [25], [29]. In configuring its website to include purchase pathways that encouraged consumers to purchase additional items, it was incumbent on Dell to ensure those pathways were operating as intended so that they did not contain any false or misleading representations, including as to price. Dell failed to do that. 36 It was also incumbent on Dell to take action to address the pricing issues when it became aware of them, and cease making the false or misleading representations. As discussed below, Dell failed to do this in circumstances where Dell's senior management were aware to varying degrees from at least 29 May 2020 of the "pricing issues" described in paragraphs [28] to [30] of the SOAF, and of potential legal implications and customer complaints related to those pricing issues.

[15]

Deliberateness 45 There is no evidence, nor any suggestion by either party, that Dell set out in August 2019 (or earlier) to mislead consumers by drawing internal mapping data for the Dell Website from a different source for the Add-on Monitors, or by failing to correctly apply planned and ad hoc pricing adjustments to Add-on Monitors. However, as set out below, from May 2020, some senior managers of Dell were aware to varying degrees of "pricing issues" with Add-on Monitors on the Dell Website which had potential legal consequences. Notwithstanding that level of awareness from May 2020 onwards, Dell failed to disable the relevant functionality of the Dell Website until 14 December 2021, when the ACCC contacted Dell: SOAF [84]. In other words, Dell knew to some degree for at least 20 months before the intervention of the ACCC about the pricing issues on the Dell Website which gave rise to the contravening conduct, but did not adequately address them. Although there may well have been a number of factors which contributed to that failure, Dell accepts that it was to some extent influenced by a concern about change resulting in reduced sales or a lack of preparedness to commit resources to resolving the problem. 46 The varying degrees of awareness of the pricing problem that developed over time mean that Dell's failure to stop the contravening conduct from continuing can, in accordance with authority discussed above, be characterised as deliberate. This is a factor that increases the need for deterrence, because it is not a case where a contravener merely overlooked a systemic issue or inadvertently turned a blind eye to it. Senior management of Dell failed to treat the problem during the Relevant Period with the importance and urgency that it deserved, even though they had the ability to fix it (even if with a less than optimal solution). There is thus a need for the penalty to be fixed with a view to deterring companies like Dell from failing to address systemic issues that cause false or misleading representations. It is incumbent on businesses which interact with consumers to ensure their pricing systems are operating consistently with the ACL and particularly to address issues relating to misleading pricing information when they become aware of them.

[16]

Knowledge of senior management 47 At least three senior managers of Dell were aware of the "pricing issues" described in paragraphs [28] to [30] of the SOAF to varying degrees, from at least 29 May 2020, and a director of Dell was aware from at least early December 2020: Initial Judgment [68(b)]. 48 In particular, on 6 May 2020, Senior Manager 1 (SM-1) was asked for advice about how to respond to a consumer whom it can be inferred saw a misleading Strikethrough Representation and had asked Dell "[w]hat kind of spam was shown when buying the monitor with the laptop?": SSOAF, Annexure A, pp 5-6. SM-1 responded that Dell should honour the displayed discount on the purchase price for an equivalent monitor on a Standalone Basis and stated "[l]et's look into how we can fix this moving forward": SSOAF, Annexure A, pp 5-6. While SM-1 encouraged Dell staff to identify a solution for the issue, he was aware from this date of at least one instance of the pricing issue in respect of discounts displayed on Add-on Monitors and that it was a problem needing to be "fixed". 49 On 29 May 2020, there was a meeting attended by Senior Manager 2 (SM-2) and other employees of Dell or related entities to Dell about "how we could solve the issue of APOS price [monitors offered for sale on a Standalone Basis] being cheaper than POS [Add-on Monitors]": SSOAF, Annexure A, p 14. The outcome of the meeting was reported to Senior Manager 3 (SM-3) and SM-1: SSOAF, Annexure A, p 14. That report states the "issue" caused customer complaints and "potentially legal issues" and outlines a recommended solution. However, the proposed solution would only solve "a small portion of the problem", so it was left to SM-2 and SM-3 to consider what changes should be made. In response, SM-2, copying SM-3 and SM-1, gave direction about adjustments and said he would continue to work "on the greater IT issue": SSOAF, Annexure A, pp 13-14. 50 On 13 October 2020, SM-2 raised with SM-1, copying SM-3, the fact that the "inflated commercial list price" was still appearing on the Dell Website "causing confusion to the customer": SSOAF, Annexure A, p 19. SM-2 expressed a preference for selecting a solution that would both "drive the right message online" and "keep our online business optimal". 51 On 10 December 2020, SM-2 asked whether the Strikethrough Price could be removed from the Dell Website: SSOAF, Annexure A, p 22. The subsequent emails indicate that a director of Dell had given guidance that the Dell Website should show only the discounted purchase price: SSOAF, Annexure A, pp 21-22. It should be inferred that from this time, consistently with the admission made by Dell, that the director was aware to some degree of a problem with the pricing of Add-on Monitors, including the Strikethrough Prices that were being displayed for them. 52 On 11 December 2020, SM-2 described the difference in pricing of Add-on Monitors and monitors offered for sale on a Standalone Basis as a "disconnect" and based on a conversation with the director, advised that the displayed price of the Add-on Monitor (POS) must be lower than the equivalent monitor on a Standalone Basis: SSOAF, Annexure A, p 25. In response, an employee of a related entity of Dell outlined the inquiries that had been made to fix the issue and confirmed they were looking into potential solutions: SSOAF, Annexure A, p 24. 53 On 4 February 2021, SM-2 described the matter as a "critical issue" and gave three reasons why the list price needed to be removed including that it presents potential legal exposure. He again suggested removing the Strikethrough Price: SSOAF, Annexure A, p 33. This email was copied to SM-3 and SM-1: SSOAF, Annexure A, p 32-33. 54 On 4 March 2021, SM-2 sent an email to consultants employed by related entities of Dell who had been considering how to resolve the problem: SSOAF, Annexure A, p 36. What are the recommended next steps to this issue we have? We cannot remove pricing completely but we need to remove the list price because it is a false indication to the value of the product. Reason why this list price is on the product is because it is used offline to indicate a level of discount to large commercial customers. This pricing has no place on the Dell.com.au site. For that reason we need to remove visibility of the list price online. We need to resolve this asap because of legal liability and exposure to misleading pricing to our customers. 55 On 17 March 2021, SM-2 sought advice about navigating the "legal issue of misleading the customer": SSOAF, Annexure A, p 46. One of the solutions discussed was to "hide the whole pricing section", however this was not recommended as customers would not be able to see any prices: SSOAF, Annexure A, p 47. SM-2 also raised the problem with a merchandising employee of Dell Australia: SSOAF, Annexure A, p 55; Joint Aide Memoire [29]. On 22 March 2021, that employee advised SM-2 that unfortunately she could not offer a "quick solution" as "its [sic] on [sic] issue that's been long identified with Dell.com and the back end data set up", that SM-3 and SM-1 were aware of the issue and "efforts have been made to fix it but with little joy as it requires some additional resources": SSOAF, Annexure A, p 55. 56 SM-3, described as the Director of "Inside Sales" of Dell, was copied to a significant proportion of the correspondence to and from SM-2: SSOAF, Annexure A, pp 13-14, 19, 24, 32, 55. 57 On 14 December 2021, after the ACCC contacted Dell about its concerns, Mr Collins (President of the Global CSB Unit, Dell Technologies) was made aware of the ACCC's concerns and made the decision to disable the functionality on the Dell Website that had led to the misleading Representations being made: Collins Affidavit [15]; SSOAF, Annexure A, pp 88-89.

[17]

Solutions offered but not adopted 58 From May 2020, when instances of the pricing issues were first escalated to senior management, employees of Dell and its related entities were proposing solutions to the senior management of Dell: SSOAF, Annexure A, p 14. Dell accepts that it was responsible for the content on the Dell Website: SOAF [11]. In those circumstances, Dell was responsible for the actions of employees of related entities to Dell who worked on, or made decisions in respect of, the Dell Website. 59 In September 2020, in response to another customer complaint, a suggestion was made to "turn off all POS [Add-on] monitors with systems [Computers] for now until we have a solution to this issue": SSOAF, Annexure A, p 16. That request was not taken up. A suggestion was also raised in December 2020 that the Strikethrough Price be turned off, but, for whatever reason, was not adopted: SSOAF, Annexure A, p 20. 60 In February 2021, SM-2 was asked if his team or the "Pricing team" could align the prices for Add-on Monitors and monitors offered for sale on a Standalone Basis: SSOAF, Annexure A, p 31. SM-2's response was "no chance at this point" because they were controlled by different teams. He also noted "a risk of lost sales" if the pricing were aligned by switching to the commercial pricing model. 61 On 26 February 2021, a consultant advised SM-2 that "[t]he only short term fix at this point would be to hide the price completely (both online and discount), but that would make the purchase decision hard for our users and lead to bad UX [user experience]": SSOAF, Annexure A, p 36. In response, SM-2 said he would not remove pricing completely, but that they needed to resolve the issue: SSOAF, Annexure A, p 36. 62 In May 2021, discussions occurred about the technical solution to the pricing issues: SOAF, Annexure A, p 65-70. The challenges and concerns in proceeding with the proposed solution included the team's "bandwidth concerns" and "resource constraints", as well as "backend complexity" and the need to have input and agreement from multiple teams: SSOAF, Annexure A, p 65. 63 The proposals in May 2021 were not taken up. In October 2021, a merchandising employee (who had advised SM-2 in March 2021) was seeking to "start a conversation" on Add-on vs Standalone monitor pricing (emphasis added): SSOAF, Annexure A, p 82. She was advised that the only solution would be "a vey [sic] manual + time-consuming task that required multiple teams": SSOAF, Annexure A, p 82. 64 These documents demonstrate that on multiple occasions potential solutions to the pricing issues, even if they were not ideal long term solutions, were proposed to senior management or circulated among employees of Dell. These included disabling the functionality entirely, which Dell ultimately was able to do within two days of contact being made by the ACCC: SOAF [84]. It is not always clear in the internal communications at Annexure A to the SSOAF why the solutions proposed were not taken up. There is some suggestion in these internal communications that at times there may have been concern about the loss of sales and the resources required to implement the proposals. It also appears from those documents that some employees were in search of a perfect solution, and thought there were technical barriers and complexities that needed to be overcome, including the need for cross-team collaboration and input. 65 Although Dell's internal communications demonstrate that some attempts were made by employees to address the issue, this does not excuse Dell's failure to do so until December 2021. As the response of Dell following contact from the ACCC demonstrates, if Dell had been committed to addressing the issue and ensuring compliance with Australian consumer law, it could have done so swiftly. While a decision not to engage in any pricing promotions at all once the ACCC contacted Dell in December 2021 was a somewhat blunt solution, it was nevertheless a feasible practical solution that Dell could have implemented much earlier in order to avoid the contravening conduct until a better solution was developed: Collins Affidavit [15]-[16].

[19]

Culture of compliance 68 Dell had an ACL compliance program during the Relevant Period called the "ACL Program": Sands Affidavit: [6]. It included relevant Dell group employees, contractors and agents (Team Members) and covered aspects of the ACL and the associated risks involved with non-compliance. The ACL Program included specific content in relation to the ACL prohibitions on misleading or deceptive conduct and false or misleading representations, particularly in relation to pricing and promotions. The content of the ACL Program had been progressively updated and improved over time to reflect new developments and improve effectiveness: SOAF [88]-[89], Sands Affidavit [9]. 69 However, the ACL Program did not prevent the contraventions of the ACL in the Relevant Period the subject of this proceeding. The contraventions occurred over a lengthy period of time. Dell employees failed to take prompt action to address the pricing issues once they were discovered. As noted above, there were at least 6 individuals employed by Dell, including senior managers and a director, and at least 17 others employed by related entities of Dell who were aware of the pricing issues to varying degrees at various points in time prior to 14 January 2021, with some being aware from at least May 2020: SOAF [83]. In some cases, employees specifically raised potential compliance issues in internal correspondence: SSOAF, Annexure A, pp 16, 20, 69. Further, many of the consumer complainants specifically raised compliance-related concerns to employees in their complaints: e.g. SOAF, Annexure F, [6] (Complaint C), [10] (Complaint E), [27], [32], [34] (Customer M), [41] (Complaint P). It therefore can be inferred that Dell lacked an adequate system in place to manage the final resolution of systemic compliance problems beyond the efforts of individual staff members. 70 The state of Dell's compliance culture in the future is also relevant, because it indicates that Dell now has an improved disposition towards compliance and that specific deterrence is less of a concern. There are three relevant matters in this regard. First, it is expected that following the orders made in the Initial Judgment, Dell's culture of compliance will be improved. 71 Second, Dell has implemented a number of improvements to its ACL Program since December 2021: Sands Affidavit [21]-[22], [23], [25]. Dell's ACL program has two separate eLearning training modules appropriately tailored to the Team Members receiving the training: Sands Affidavit [11]. In 2023, Modules 1 and 2 of the ACL Program were further supplemented by the inclusion of additional material and training to address the following factors, which are relevant to the conduct which is the subject of these proceedings: Sands Affidavit [22], AS-1 Tab 12: a. factors to consider when Dell is promoting savings - including specific updated slide content relating to "strikethrough" or "was" and "now" price comparisons, and the importance of sales having been achieved at the "was" price, and that items have been advertised or available for a reasonable period at the strikethrough price, before being placed on promotion; b. updated script and slide content making clear that if a Team Member sees the same issue arising regularly with several consumers, this should be identified when the complaint is escalated. The purpose of this is to ensure that whilst staff may provide a solution to an individual consumer's issue, the fact that the same issue arises may indicate an underlying bigger issue requiring consideration; and c. the key takeaways of the training, including how to escalate concerns about Dell's conduct. 72 Dell has also implemented the following changes to further supplement its ACL Program (Sands Affidavit [23]-[24]): a. ANZ eLearning Training on Price Practices and Discount Claims: This voluntary online module launched in May 2022 closely examines the key principles set out in the Dell ANZ "Price Affecting Guidelines"… and provides practical examples. … The [Price Affecting Guidelines] provide practical advice on pricing practices in Australia in an easy-to-read format, including: i. general principles relating to the duration and frequency of promotions and discount offers; ii. guidelines on the use of coupons; iii. guidelines on new product or services launches; iv. basic requirements when promoting a sale; and v. a checklist for discount offers. … c. Bi-Quarterly Marcom & CSB Meetings: In January 2022, legal counsel in the ANZ Legal team commenced conducting quarterly meetings with Team Members supporting CSB, Marketing and Dell's website for the ANZ business (including from the PGTM and Online Experience teams). Participation in these meetings is voluntary. The purpose of these meetings is to provide ongoing education on topical issues to address key compliance ACL risks. A total of six legal training workshops were created in 2022 to support these meetings. 73 Third, Dell has taken significant steps to improve its control of pricing on the Dell Website: Collins Affidavit [21]-[38]. The Dell group has started using a pricing workflow tool called "Nebula", which became live in Australia on 14 November 2022: Collins Affidavit [21]. Nebula is a preventive tool that identifies and blocks sales promotions before they go live which, by reference to internally developed rules and guidance, would be at risk of contravening the ACL. The legal validation rules which are applied focus on the following aspects: (a) The requirement for a strikethrough price to be based on actual sales and promotional data. (b) A fixed period between when items are on and off promotion to ensure that a representation as to discount is by reference to sales occurring at that price, which has applied continuously at least for each of the previous 28 days. (c) A prohibition on a product being discounted within the first 8 weeks of it being offered for sale. (d) A prohibition to ensure that a product, for example during a quarterly period, is not discounted for longer than it is offered at full price. (Collins Affidavit [25]-[36]) 74 Nebula performs a validation check on all new pricing promotions displayed on the Dell Website. If a proposed pricing promotion is identified by Nebula as being non-compliant, the promotion cannot be actioned on the Dell Website. The aim of Nebula is to help ensure that pricing and promotional practices are consistent, compliant and increasingly automated across the Dell group, and to reduce the risk of manual intervention affecting pricing practices or pricing errors occurring. 75 In addition, in March 2023, Dell implemented a new "Everyday Pricing" model for the Dell Website: Collins Affidavit [17]-[18]. The Everyday Pricing model, in comparison to Dell's previous strategy, ensures that the Dell Website displays an "everyday" price for the product and involves less frequent promotions. Promotions will be limited to select occasions only (such as holiday sales or end of life offers for particular products). This will result in consumers being presented with fewer circumstances of comparative pricing, and, combined with the Nebula tool, will further systematise the pricing validation process and accompanying representations. 76 The parties submit, and I accept, that these improvements are significant, because they indicate that Dell now has a strong disposition towards compliance and that there is a lower likelihoodof Dell engaging in similar contravening conduct again. This weighs against the need for a greater penalty than is currently proposed to achieve specific deterrence.

Australian Competition and Consumer Commission v Dell Australia Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (22 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (48)

Cited By (7)