Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd - [2015] FCA 274 - FCA 2015 case summary — Zoe

CTHFCA

Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd

[2015] FCA 274

Federal Court of Australia|2015-03-27|Before: Gordon J

View original source

At a glance

Source facts

Court

Federal Court of Australia

Decision date

2015-03-27

Before

Gordon J

Source

Original judgment source is linked above.

Judgment (49 paragraphs)

[1]

INTRODUCTION 1 EnergyAustralia Pty Ltd (EnergyAustralia) is a retailer of electricity and gas. Bright Choice Australia Pty Ltd (Bright Choice) is not currently engaged in any business activities but was, in the relevant period, a telemarketing company. From 4 April 2012 until 23 October 2013, EnergyAustralia engaged Bright Choice, under a services agreement, to sell by way of telemarketing, EnergyAustralia's plans for electricity and gas to consumers in defined "sales territories". 2 There are two proceedings. The ACCC proceeding (VID 701 of 2014), concerns consumers in New South Wales, Queensland and Victoria, and was brought by the Australian Competition and Consumer Commission (ACCC). EnergyAustralia admits that its conduct in respect of those consumers contravened ss 18, 29(1)(d) and 29(1)(m) of the Australian Consumer Law (ACL), as set out in Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA). Bright Choice admits that its conduct in respect of those consumers contravened ss 18 and 29(1)(m) of the ACL. 3 The AER proceeding (VID 702 of 2014) concerns consumers in South Australia and the Australian Capital Territory (ACT), and was brought by the Australian Energy Regulator (AER). The National Energy Retail Law (NERL) set out in the Schedule to the National Energy Retail Law (South Australia) Act 2011 (SA) applies in South Australia pursuant to s 4(3) of that Act as the National Energy Retail Law (SA) (NERL SA) and in the ACT pursuant to s 6 of the National Energy Retail Law (ACT) Act 2012 (ACT) as the National Energy Retail Law (ACT) (NERL ACT). EnergyAustralia admits that its conduct in dealing with those consumers in South Australia and the ACT breached ss 38(a) and 38(b) of the NERL SA and the NERL ACT. 4 These reasons for judgment will consider the factual background, the applicable principles and then turn to consider the individual circumstances of (including the relief sought against) EnergyAustralia and Bright Choice.

[2]

[4]

2.1.2 Bright Choice 10 Section 2.1.2 is relevant to Bright Choice only. 11 Between around April 2012 and October 2013, Bright Choice marketed EnergyAustralia's electricity and gas plans to consumers. From 23 September 2011 until 26 April 2012, it had the registered company name "Utility Choice Pty Ltd" and from 27 April 2012, has had the registered company name "Bright Choice Australia Pty Ltd". Since around November 2013, Bright Choice has not carried on any business activities. 12 Bright Choice is a dormant company with two directors, one of whom also serves as a company secretary. Initially, the directors were not identified and did not provide any evidence, and no information was provided about the identity of its shareholders. 13 Bright Choice's Financial Report for the year ended 30 June 2013 and its Draft Management Accounts as at 31 December 2014 were annexed to an agreed Statement of Facts about its financial position: see [5] above. Those financial statements were unsatisfactory. There was no evidence that the Financial Report for the year ended 30 June 2013 was adopted by "Ehab Abdou", the named director. It was not signed. Both profit and loss statements recorded that the largest expense item was "Management Fees". In the year ended 30 June 2013, approximately $14.6m in income was earned and approximately $10.6m (or 72.6%) was spent on management fees. For the period ended 31 December 2014, $598,821 was earned in commissions and $526,730 (or 87.96%) was spent on management fees. 14 As noted in [5] above, after the hearing, Bright Choice was invited to provide short written submissions and any further supporting documents in relation to the following questions: 1. Who are the shareholders of Bright Choice; and 2. In relation to Bright Choice's Financial Report for the year ended 30 June 2013 and the Draft Management Accounts as at 31 December 2014: a. Was Bright Choice's Financial Report for the year ended 30 June 2013 signed by the director, Mr Ehab Abdou (see page 6)?; b. What period do the Draft Management Accounts as at 31 December 2014 cover?; c. In the year ended 30 June 2013, $14.6m in income was earned and $10.6m (or 72.6%) was spent on management fees. For the period ended 31 December 2014, $598,821 was earned in commissions and $526,730 (or 87.9%) was spent on management fees. When were those management fees paid and to whom? 15 On 18 March 2015, an affidavit sworn by Mr Ehab Abdou (Mr Abdou) and a supplementary submission was filed on behalf of Bright Choice. Mr Abdou's sworn evidence was that he was Bright Choice's director and that since September 2011, Bright Choice has had three corporate shareholders. A Current Company Extract for Bright Choice from the Australian Securities and Investments Commission was exhibited. The extract recorded that two of the three corporate shareholders had the same registered address as Bright Choice. The other shareholder's registered address was recorded as being the same as Mr Abdou's address. No further details of the shareholders were provided. 16 Mr Abdou then exhibited a copy of Bright Choice's Financial Report for the year ended 30 June 2013 which had been signed by him. Mr Abdou explained that the signed Financial Report had one difference to that previously provided to the Court. In the signed version, the line items "Commissions Paid" and "Management Fees" had been consolidated into one line item "Commissions Paid". 17 Mr Abdou explained that the line item "Management Fees" in the Financial Report and the Draft Management Accounts is a reference to monthly management fees payable by Bright Choice to Business Service Brokers Pty Ltd (BSB) from August 2012 to September 2013. The commercial agreement was not provided but was described by Mr Abdou in the following terms: The management fees were paid to BSB pursuant [to] a commercial agreement between Bright Choice and BSB in consideration of BSB enabling retail distribution for the energy plans, procuring sales of energy plans, enabling Bright Choice to have BSB's franchisees procure sales of energy plans and providing Bright Choice with management services in respect of those sales activities, BSB's franchisees and the operations of Bright Choice's telemarketing contractors. 18 Mr Abdou then explained that the line item "Commission[s] Paid" in the Financial Report and the Draft Management Accounts is a reference to commissions Bright Choice periodically paid to a number of telemarketing contractors between October 2012 and December 2013 - Today Telecom Pty Ltd, Horrus Pty Ltd, V Perform Pty Ltd, Direct Sales Force Australia Pty Ltd and franchisees of BSB. No further details were provided. 19 Finally, Mr Abdou stated that as at the date of the affidavit, Bright Choice does not trade and does not intend to trade in the near future. In the supplementary submission, Bright Choice repeated some of the matters stated in the affidavit. It noted that in the period between October 2012 and June 2013, Bright Choice also paid nearly $4 million in sales commissions to parties other than BSB (see [18] above). The submission stated that the management fees and commissions were paid prior to Bright Choice being put on notice of any investigation against it by the ACCC, and as such were paid in the course of Bright Choice's business. Bright Choice submitted that its present size, dormant status and financial position were of most relevance in imposing an appropriate penalty. This will be addressed further in Sections 4.2.7.7 and 4.2.7.8 below.

[5]

2.1.3 Relationship between EnergyAustralia and Bright Choice 20 From 4 April 2012 until 23 October 2013, EnergyAustralia and Bright Choice were parties to a Services Contract dated 4 April 2012, as amended from time to time, by which EnergyAustralia agreed to pay Bright Choice a fee on each occasion where a consumer contracted to enter into a new plan to purchase electricity or gas from EnergyAustralia as a result of Bright Choice's marketing (Services Agreement). Bright Choice's representatives were remunerated based on a wage plus commission. 21 Pursuant to the Services Agreement, EnergyAustralia engaged Bright Choice to sell EnergyAustralia's electricity and gas plans as described in EnergyAustralia's campaign briefs and to target consumers in the defined "sales territory", which relevantly included consumer premises located in New South Wales, Queensland, Victoria, South Australia and the ACT: cl 1 and the definition of "Services" in cl 27.1 read with Sch 2 of the Services Agreement. 22 It is necessary to say something about the terms of the Services Agreement. The Services Agreement imposed a number of compliance obligations on Bright Choice, including, but not limited to, the requirement that Bright Choice: (1) Exercise the standard of care, skill and judgment that would be expected of a professional contractor experienced in the performance of services of a similar nature to those under the Services Agreement (cl 1.3(a)); (2) Comply with all applicable laws and standards necessary to perform the services (cl 1.6(a)); and (3) Ensure its service team members conduct outbound telemarketing calls in accordance with mandatory scripting approved by EnergyAustralia for those outbound sales calls (cl 1.14) (addressed further in [24] below). 23 Bright Choice was also required to establish, implement and maintain and comply with a quality assurance and control program (Quality Assurance Program) which was subject to EnergyAustralia's approval: cl 1.10 of the Service Agreement. A requirement of Bright Choice's Quality Assurance Program was that Bright Choice carried out quality assurance checks and monitoring to ensure compliance with the program by the "Service Team Members" - Bright Choice and the employees, contractors, consultants and agents used by Bright Choice to provide the Services. 24 In addition to the Quality Assurance Program, Bright Choice was required to develop a training program that utilised training materials developed by EnergyAustralia and that outlined the requirements for compliance with the applicable laws and standards: cl 1.11. One essential element of that program was that it outlined "the requirements in order to obtain Explicit Informed Consent from customers": cl 1.11. The issue of Explicit Informed Consent and Call Recording was addressed in cl 1.14 of the Services Agreement as follows: (a) [Bright Choice] must: (i) make call recordings of all outbound telemarketing calls and all telephone discussions with Customers in which Explicit Informed Consent of a Customer is obtained; (ii) … (iii) only use current scripts which have been approved by [EnergyAustralia] for such calls and call recordings, and otherwise comply with [EnergyAustralia's] directions; (iv) retain all such recordings for a minimum of 2 years after the applicable call was made (or such longer period as may be required by any applicable law); and (v) immediately provide an audible copy to [EnergyAustralia] of each such call recording when requested to do so by [EnergyAustralia]. (b) Quality Assurance Checks (i) [Bright Choice] must listen and evaluate a sample of call recordings made for the purposes of this clause 1.14 to check that the recording is audible and to identify any systemic issues. (ii) For the purposes of clause 1.14(b)(i), [Bright Choice] are required to listen to at least 2% of the total number of call recordings that are created every calendar month for Customers from the Sales Territory. 25 Schedule 2 of the Services Agreement set out the process that Bright Choice had to follow when obtaining explicit informed consent, which involved ensuring that the Bright Choice sales representative: (1) Informed the customer prior to any recording being made that the telephone call would be recorded; (2) Disclosed all necessary information required to establish a Product Agreement as specified in the relevant Campaign Brief; (3) Disclosed all Product Agreement terms and conditions and answered all of the customer's queries in relation to the terms and conditions; (4) Obtained the customer's informed consent to transfer from its current gas or electricity retailer to EnergyAustralia, or any other documentation required by the regulations or by EnergyAustralia; (5) Disclosed all necessary information and obtained necessary consents required to ensure compliance with Privacy Laws; and (6) Informed the customer of the implications of consenting to enter into an agreement. 26 In addition, the Services Agreement contained a detailed provision addressing customer complaints (cl 1.15) and provided that EnergyAustralia had the right to audit Bright Choice's marketing activities to ensure compliance with the regulatory, legal, scripting and product requirements under the Services Agreement (cl 1.16). 27 On appointing Bright Choice under the Services Agreement, EnergyAustralia conducted "train the trainer" sessions for Bright Choice senior sales managers in March 2012 and provided training materials to Bright Choice following the training session in March 2012 and updated training materials in July 2012 (Training Materials). The Training Materials covered legal and regulatory compliance topics (among others), including obtaining the customer's explicit informed consent in accordance with the requirements under s 38 of the NERL SA and the NERL ACT and misleading or deceptive conduct. The Training Materials also included instructions in relation to sales techniques to be used, and to be avoided, by Bright Choice sales representatives, including ensuring that the customer had a full understanding of what they were agreeing to and not misleading or deceiving a customer or saying anything which was likely to mislead or deceive them. 28 EnergyAustralia also provided Bright Choice with questionnaires that were designed to test the adequacy of Bright Choice's training program and which were required to be successfully completed by Bright Choice personnel before they conducted any telemarketing. 29 On 28 March 2013, the Services Agreement was amended. EnergyAustralia agreed to pay an additional "bonus fee" to Bright Choice, conditional upon Bright Choice achieving 9,000 new sales per month for five months from 1 April 2013. The bonus fee was $75 for each gas sale and $35 for each electricity sale. The bonuses were significant sums by reference to the base fee which was $80 for each gas sale and $120 for each electricity sale. The amending agreement re-stated EnergyAustralia's requirement that Bright Choice obtain the customer's explicit informed consent for each sale. 30 During the period of the Services Agreement, representatives of Bright Choice contacted consumers who were, at the time, acquiring electricity and/or gas from retailers other than EnergyAustralia as well as existing customers of EnergyAustralia and attempted to procure those consumers to enter into new plans with EnergyAustralia for the supply of electricity and/or gas. 31 For the purposes of these proceedings, for each consumer listed in Annexures A, B and C to these reasons for judgment (Consumers), Bright Choice and its representatives were: (1) Authorised by EnergyAustralia to contact those Consumers for the purpose of marketing EnergyAustralia's plans for the supply of electricity and/or gas; (2) Authorised by EnergyAustralia to negotiate with those Consumers regarding agreements for the supply of electricity and/or gas; (3) Agents of EnergyAustralia acting within the scope of their actual authority in relation to the conduct described in (1) and (2) above; (4) Agents of EnergyAustralia acting within the scope of their apparent authority in relation to the conduct described at [32]-[34], [39]-[40] and [44] below; and/or (5) Acting on behalf of EnergyAustralia, and the conduct of Bright Choice and its representatives is taken to have been engaged in also by EnergyAustralia pursuant to s 139B(2) of the CCA.

[6]

2.2.1 General 32 The next three paragraphs are admitted by Bright Choice only in so far as they concern consumers located in New South Wales, Queensland and Victoria. 33 Between August 2012 and May 2013, representatives of Bright Choice contacted Consumers located in New South Wales, Queensland, Victoria, South Australia and the ACT on behalf of EnergyAustralia by telephone for the purpose of marketing EnergyAustralia's plans for the supply of electricity and/or gas. 34 During the course of these telephone calls, Bright Choice did not obtain the consent of any of the Consumers to enter into an EnergyAustralia electricity or gas plan, or to have their supply of electricity or gas transferred to EnergyAustralia. It will be necessary to return to consider the details of the conversations below. 35 Following the telephone calls, Bright Choice submitted a sale report to EnergyAustralia for each Consumer. 36 It is admitted by EnergyAustralia that, on the basis of the sale report received from Bright Choice, EnergyAustralia caused contractual documents to be sent to each Consumer. 37 For those Consumers in New South Wales, Queensland and Victoria (where the conduct is subject to the ACL): (1) EnergyAustralia admits that it engaged in conduct that was misleading and deceptive, or was likely to mislead and deceive, in contravention of s 18 of the ACL, made false and misleading representations that particular persons had agreed to acquire goods or services, namely electricity and/or gas, in contravention of s 29(1)(d) of the ACL and made false and misleading representations concerning the existence, exclusion or effect of a condition or right in contravention of s 29(1)(m) of the ACL; and (2) Bright Choice admits that it engaged in conduct that was misleading and deceptive, or was likely to mislead and deceive, in contravention of s 18 of the ACL and made false and misleading representations concerning the existence, exclusion or effect of a condition or right in contravention of s 29(1)(m) of the ACL. Under s 29(1)(m), the representation concerned the existence of a right to make a decision to receive a supply of electricity and/or gas from EnergyAustralia and to enter into a new plan for the supply of electricity and/or gas after the telephone call from Bright Choice and after receiving further information. 38 For those Consumers in South Australia and the ACT (where the conduct is subject to the NERL SA and the NERL ACT), EnergyAustralia admits that it breached ss 38(a) and 38(b) of the NERL SA and the NERL ACT, because without the explicit informed consent of customers, it entered them into market retail contracts, and in some cases, transferred (or initiated the transfer of) their electricity and/or gas supply from their existing retailer to itself.

[7]

2.2.2 Dealings with Consumers in New South Wales, Queensland and Victoria 39 Between 2 August 2012 and 15 April 2013, representatives of Bright Choice contacted each consumer listed in Annexure A (Annexure A Consumers) by telephone and in the course of those telephone conversations, Bright Choice's representatives made statements to the following effect: (1) They were calling on behalf of EnergyAustralia, on or behalf of Telechoice which had "partnered" with EnergyAustralia; (2) They could offer the consumer a discount on the consumer's current electricity and/or gas bills; (3) The consumer was invited to agree to receive information, described as a "Welcome Pack" or an "Information Pack" (except Annexure A Consumers 18, 19, 20 and 21, where the information would contain details of an offer of a new plan for the supply of electricity and/or gas with EnergyAustralia); (4) The consumer would be able to consider the information and decide whether or not to receive a supply of electricity and/or gas from EnergyAustralia and enter into a new plan for the supply of electricity and/or gas; (5) In the case of Annexure A Consumers 1, 3, 4, 6, 14 and 15, if the consumer wanted to accept the offer, he or she should contact EnergyAustralia and unless they did make contact, they would not be treated as having agreed to enter into a new plan for the supply of electricity and/or gas; and (6) In the case of Annexure A Consumers 2, 5, 7, 8, 9, 10, 12, 13, 16 and 17, the offer would not commence, and they would not be treated as having agreed to a new plan for the supply of electricity and/or gas until the consumer had accepted the offer, the terms and conditions of which would be described in the "Welcome Pack". 40 In none of the telephone calls with the Annexure A Consumers did the Bright Choice representative tell the consumer that after the telephone call, without any further communication between the consumer and EnergyAustralia, they would be treated by EnergyAustralia as having agreed to enter into a new plan with it for the supply of electricity and/or gas. 41 By engaging in the conduct described in [39]-[40] above, Bright Choice, as agent of EnergyAustralia, represented to each Annexure A Consumer that: (1) The consumer was not, at the time of the telephone call, being taken by Bright Choice or EnergyAustralia as having agreed to enter into a new plan for the supply of electricity and/or gas with EnergyAustralia; (2) The consumer could decide, after the telephone conversation, whether or not to enter into a new plan with EnergyAustralia for the supply of electricity and/or gas upon receipt of the "Welcome Pack"; and (3) EnergyAustralia and Bright Choice would not, without further communication with the consumer, treat the consumer as if he or she had agreed to enter into a new plan for the supply of electricity and/or gas with EnergyAustralia, (together, the Telephone Representations). 42 The Telephone Representations were made in trade or commerce and in connection with the supply or possible supply of, or in connection with the promotion of the supply of, electricity and/or gas. The Telephone Representations were made by a number of different Bright Choice representatives: see Annexure A. 43 The Telephone Representations were false, misleading and deceptive because, following the telephone conversation, Bright Choice acted and EnergyAustralia in fact dealt with each Annexure A Consumer as if they had agreed to enter into a plan with EnergyAustralia for the supply of electricity and/or gas, when they had not. In particular: (1) Following the telephone conversation, Bright Choice acted and EnergyAustralia dealt with each of the Annexure A Consumers as if they had agreed to enter into a plan with EnergyAustralia for the supply of electricity and/or gas; (2) The process followed in each case where the Annexure A Consumer was not an existing customer of EnergyAustralia, was that without further action or consent from the consumer, EnergyAustralia transferred the consumer's supply of electricity and/or gas from the consumer's existing retailer to itself, unless the consumer informed EnergyAustralia within 10 business days of receiving information sent to the consumer by EnergyAustralia that they did not want their electricity and/or gas supply to be transferred to EnergyAustralia; (3) The process followed in each case where the Annexure A Consumer was an existing customer of EnergyAustralia, was that without further action or consent from the consumer, EnergyAustralia switched the consumer from their existing plan with EnergyAustralia to a new plan with EnergyAustralia, unless the consumer informed EnergyAustralia within 10 business days of receiving information sent to the consumer by EnergyAustralia that they did not want to switch from their existing plan with EnergyAustralia; and (4) In each case EnergyAustralia treated a sale report submitted by Bright Choice as evidence that the Annexure A Consumer had agreed to enter into a new plan for the supply of electricity and/or gas with EnergyAustralia. 44 On around 18 February 2013, a representative of Bright Choice contacted the consumer listed in Annexure B (Annexure B Consumer) by telephone and had a conversation with that consumer in which the representative and the consumer said words to the following effect: (1) The representative told the consumer that she was calling because EnergyAustralia had a new offer of a discount of 13% off bills, which AGL was not offering and that the representative could send out some information about the offer; (2) The consumer said that last time that occurred she had been signed up to EnergyAustralia and that she did not want to be with EnergyAustralia; and (3) The representative replied that was fine and thanked the consumer. 45 Paragraphs [45] to [51] are admitted by EnergyAustralia only. Between 1 November 2012 and 29 April 2013 after the telephone conversations described in [39] and [44] above, and on the basis of the sale report provided to it by Bright Choice, EnergyAustralia caused a Welcome Pack to be sent to each Annexure A Consumer (except for consumers 1, 6, 11 and 21, see [47]-[48] below) and the Annexure B Consumer. 46 The Welcome Packs contained the following statements: (1) On the front page: (a) you've made a great choice; (b) thank you for choosing [name of EnergyAustralia plan] for your [gas and/or electricity]; (c) the full details of your plan are listed in the enclosed Energy Plan Details. We have also enclosed the Terms and Conditions, which together with the Energy Plan Details, form your contract with us; (d) to help you understand how your account is transferred to us, here's a quick run-down of the process; (e) the transfer will start at the end of the cooling off period of 10 business days; (f) we look forward to providing you with your energy needs; and (g) if at any point you'd like more information about your plan ... ; (2) On the second page - [consumer's address] (the accounts will be sent to this address); (3) On the third page: (a) Energy Plan details and Written Disclosure Statement; and (b) Please turn over for further information about your plan, (the Welcome Pack Statements). 47 On around 2 August 2012, and after the telephone conversation with Annexure A Consumer 1 described in [39] above, EnergyAustralia caused an Online Acceptance Email to be sent to that consumer. The Online Acceptance Email contained the following statements: (1) In the text of the email: (a) Thank you for choosing TRUenergy for your energy needs; (b) Included as attachments to this email are the details of your plan, Terms and Conditions and a link to the TRUenergy Terms and Conditions. These form your energy agreement with us; (c) A confirmation pack will be sent to you by post within 5 business days, detailing your energy agreement; and (d) In case you change your mind, you have a cooling-off period of 10 business days from the date on the confirmation pack; (2) In the attached document entitled "Quotes2DataTermsAndConditions81038_TRUenergy_Market Retail Contract.pdf": (a) TRUenergy Market Retail Contract Terms and Conditions (on pages 1, 2 and 4); (b) This contract is a market retail contract. It is about the sale of energy to you at your premises. This Contract is made up of these Contract Terms and Conditions, the Explanation of Benefits and your Energy Plan Details; and (c) This contract is between TRUenergy ... and You ... , (the Email Statements). 48 Between 10 April 2013 and 12 April 2013 and after the telephone conversations described in [39] above, EnergyAustralia caused a Confirmation Pack to be sent to each of Annexure A Consumers 6, 11 and 21. The Confirmation Packs contained the following statements: (1) On the front page: (a) Confirmation of your [electricity and/or gas] contracts; (b) Thank you for choosing EnergyAustralia for your [electricity and/or gas]; and (c) This confirmation pack contains important information about your future supply arrangements with us, including your cooling-off rights; (2) On the second page: (a) The following confirms details of the Contracts you entered into with EnergyAustralia over the telephone on [date] ... ; (b) Contract Start Date [date]; and (c) Each Contract commences on the Contract Start Date shown above, which is the day that you accepted our market offer to supply energy to you by giving us your verbal acceptance over the telephone; (3) On the final page - 1. Only complete this form and send it if you want to cancel this contract(s): I [blank] wish to cancel the contract I made on [blank] to receive from you the services identified below ..., (the Confirmation Pack Statements). 49 By making the Welcome Pack Statements, the Email Statements and the Confirmation Pack Statements, EnergyAustralia represented to each Annexure A Consumer and the Annexure B Consumer that the consumer had previously agreed: (1) To enter into a contract to acquire electricity and/or gas from EnergyAustralia; (2) If the consumer was not an existing customer of EnergyAustralia, to acquire electricity and/or gas from EnergyAustralia; and (3) If the consumer was an existing customer of EnergyAustralia, to switch from the consumer's existing plan with EnergyAustralia to a new plan for the acquisition of electricity and/or gas from EnergyAustralia, (together, the Contract Representations). 50 The Contract Representations were made in trade or commerce and in connection with the supply or possible supply of, or in connection with the promotion of the supply of, electricity and/or gas. 51 The Contract Representations were false, misleading and deceptive, because in fact: (1) None of the Annexure A Consumers nor the Annexure B Consumer had agreed to enter into a contract to acquire electricity and/or gas from EnergyAustralia; (2) Of the consumers who were not existing customers of EnergyAustralia, none had agreed to acquire electricity and/or gas from EnergyAustralia; and (3) Of the consumers who were existing customers of EnergyAustralia, none had agreed to switch from their existing plan with EnergyAustralia to a new plan for the acquisition of electricity and/or gas from EnergyAustralia.

[8]

2.2.3 Dealings with Customers in South Australia and the ACT 52 Section 2.2.3 is admitted by EnergyAustralia only. Between 28 November 2012 and 1 May 2013, representatives of Bright Choice contacted each customer listed in Annexure C (Annexure C Customers) by telephone and had conversations over the telephone with those customers. 53 During the conversations, Bright Choice did not obtain the explicit informed consent of any Annexure C Customer to transfer their supply of electricity and/or gas to EnergyAustralia or enter into a market retail contract with EnergyAustralia. 54 After these telephone conversations, and on the basis of the sale report provided to EnergyAustralia by Bright Choice, EnergyAustralia, without having obtained explicit informed consent from the affected customers: (1) Transferred the electricity and/or gas supply of Annexure C Customers 1, 2, 3, 5, 7 and 9 located in South Australia, and Annexure C Customers 20, 21, 22, 24, 25 and 27 located in the ACT, from their existing retailer (which was not EnergyAustralia) to itself; (2) Initiated the transfer of the electricity and/or gas supply of Annexure C Customers 7, 16, 17, 18 and 19 located in South Australia from their existing retailer (which was not EnergyAustralia) to itself by submitting a change request and/or transfer request to the Australian Energy Market Operator (AEMO), which, absent interruption, would lead to the customer's supply of electricity and/or gas being switched to EnergyAustralia, but which was subsequently cancelled before the customer's electricity and/or gas supply was switched to EnergyAustralia; (3) Entered Annexure C Customers 1-19 located in South Australia, and Annexure C Customers 20-27 located in the ACT into market retail contracts by sending the customers letters which: (a) attached documents entitled "EnergyAustralia Market Retail Contract Terms and Conditions" and "Energy Plan Details" (Contract Documents) which provided, relevantly, that the contract would start on the date on which the customer accepted EnergyAustralia's market offer to supply energy to the customer (terms and conditions clause 4.1), and acceptance of EnergyAustralia's market offer could occur by the customer giving verbal acceptance of the market offer (terms and conditions clause 4.1); and (b) stated that the Contract Documents comprised a contract between the customer and EnergyAustralia in respect of the supply of electricity and/or gas to the customer's premises.

[9]

2.2.4 Investigation by EnergyAustralia and Subsequent Steps 55 Paragraphs [55] to [57] are admitted by EnergyAustralia only. On 7 December 2012, EnergyAustralia commenced an investigation into Bright Choice's telemarketing practices. 56 On 28 March 2013, EnergyAustralia received details of concerns with Bright Choice's telemarketing practices, including a failure to obtain explicit informed consent. In April and May 2013, EnergyAustralia identified an increased number of customer complaints and cancellations from telesales made by Bright Choice. EnergyAustralia commenced an investigation into Bright Choice's conduct which involved EnergyAustralia reviewing a sample of call recordings. EnergyAustralia identified that Bright Choice representatives were not obtaining explicit informed consent from customers or following the scripts provided to them by EnergyAustralia. 57 EnergyAustralia suspended all telesales on 23 May 2013. EnergyAustralia then conducted compliance and training sessions with Bright Choice representatives and implemented monitoring procedures in respect of Bright Choice. After this further compliance training, the suspension was lifted on 21 June 2013. 58 The training materials used during these training sessions included an express warning that: A customer consenting to receive a Welcome Pack only, is NOT obtaining the Customer's Explicit Informed Consent. Explicit informed Consent must be obtained in relation to the Customer entering into a retail transfer or market retail contract with EnergyAustralia. 59 On 23 September 2013, EnergyAustralia terminated the Services Agreement, with effect from 23 October 2013. EnergyAustralia required Bright Choice to cease all sales calls in relation to EnergyAustralia products from 23 September 2013. 60 This paragraph is relevant to EnergyAustralia only. Under s 274 of the NERL SA and the NERL ACT, EnergyAustralia is required to submit certain information to the AER relating to compliance with the requirements of the NERL, the National Energy Retail Regulations (National Regulations) and the National Energy Retail Rules (Rules). In accordance with those obligations, EnergyAustralia reported the conduct the subject of these proceedings to the AER in September 2013 and subsequently to the ACCC in October 2013, at the recommendation of the AER. EnergyAustralia also co-operated with the ACCC's and the AER's investigations by voluntarily providing, in a timely manner, information and documents to the ACCC and the AER when requested to do so. 61 In around November 2013, EnergyAustralia voluntarily implemented a consumer remedial program (at its own cost, of $958,085.00) under which EnergyAustralia sought to contact remaining customers of EnergyAustralia originating from Bright Choice. Specifically, EnergyAustralia: (1) Identified all current, active EnergyAustralia customers (including those customers who were in the process of being transferred to EnergyAustralia) who had originated from Bright Choice since April 2012 and who had not made a complaint to the relevant state or territory energy ombudsman (as those complaints were already being attended to by EnergyAustralia). There were 35,886 such customers identified in total; (2) Established a dedicated telephone line; (3) Made two attempts to contact such customers by telephone; (4) Wrote to those customers who were not contacted by telephone after two attempts. 62 EnergyAustralia offered each of the active EnergyAustralia customers identified in [61(1)], either over the telephone or in a letter sent to the customers, a choice of being transferred back to their previous retailer without any termination fees being charged, or staying with EnergyAustralia on a product which was at least equivalent to the product they had at the time of their dealing with Bright Choice. It is not certain that every affected consumer was contacted as part of the remedial program. For example, customers who had cancelled their contracts during the 10 day cooling off period were excluded. 63 EnergyAustralia has also implemented a process to safeguard against new customers being transferred to EnergyAustralia or entered into a market retail contract without having provided their explicit informed consent to the entry into a contract or transfer from their existing retailer, as the case may be. This process involves EnergyAustralia causing an SMS or email to be sent to every new customer that is entered into a contract with EnergyAustralia following an unsolicited outbound telemarketing sales call, and who provides a mobile number or email address, to confirm that the customer has in fact requested the transfer to, and entry into a market retail contract with, EnergyAustralia. 64 Since terminating the Services Agreement and reporting the conduct the subject of these proceedings, EnergyAustralia has made significant improvements to its compliance program to align it with the principles of the Australian Standard for Compliance Programs (AS3806) and under which compliance with EnergyAustralia's obligations under s 38 of the NERL, is nominated as a "critical regulatory obligation". EnergyAustralia has agreed to maintain this compliance program for two years. The improvements have involved: (1) Undertaking a quarterly certification and a risk assessment of express informed consent compliance across the business, including by, each quarter, reassessing the effectiveness of business practices and processes against express informed consent obligations; (2) Providing regular (at least once a year) and practical training for all directors, officers, employees, representatives and agents of EnergyAustralia, whose duties could result in them being concerned with conduct that may contravene EnergyAustralia's obligations to obtain express informed consent; (3) Appointing a Compliance Officer with the responsibility of ensuring its compliance program is effectively designed, implemented and maintained; (4) Appointing a Compliance Advisor to conduct a CCA risk assessment; (5) Establishing a monthly scorecard process to assess performance of third party vendors in relation to complaints, cancellations and compliance with EnergyAustralia's ACL and NERL obligations; and (6) Requiring all third party telesales vendors to record the entirety of all calls, and to provide EnergyAustralia with copies of telesales call recordings randomly selected by EnergyAustralia for quality assurance review.

[10]

3.1 ACL 65 The applicable legal principles in respect of contraventions of ss 18 and 29(1) of the ACL are well-known: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2014] FCA 634 at [35]-[47]; Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2014] FCA 1369 at [60]-[62]. Conduct is likely to mislead or deceive if there is a "real or not remote chance or possibility" that it will do so: Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [10] citing Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 87. The conduct must be capable of leading a person into error and the error or misconception must result from the conduct: Dukemaster at [10]. 66 Spoken words must be proven with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in the proved circumstances: see Watson v Foxman (1995) 49 NSWLR 315 at 318-319, cited with approval in Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151 at [73]. Here, the relevant spoken words have been admitted by EnergyAustralia and Bright Choice (see [39]ff above), and were contrary to the true position: see [43] above. 67 EnergyAustralia and Bright Choice admit, and I find, that between 2 August 2012 and 15 April 2013, by reason of the matters set out in [39]-[43] above (in relation to the Telephone Representations), in trade or commerce, and in connection with the supply or possible supply of, or in connection with the promotion of the supply of, electricity and/or gas, EnergyAustralia and Bright Choice: (1) Engaged in conduct that was misleading and deceptive or was likely to mislead and deceive in contravention of s 18 of the ACL; and (2) Made false and misleading representations concerning the existence, exclusion or effect of a condition or right in contravention of s 29(1)(m) of the ACL. 68 EnergyAustralia admits, and I find, that between 2 August 2012 and 29 April 2013, by reason of the matters set out in [45]-[51] above (in relation to the Contract Representations), in trade or commerce, and in connection with the supply or possible supply of, or in connection with the promotion of the supply of, electricity and/or gas: (1) Engaged in conduct that was likely to mislead and deceive in contravention of s 18 of the ACL; (2) Made false and misleading representations that particular persons had agreed to acquire goods or services, namely electricity and/or gas, in contravention of s 29(1)(d) of the ACL; and (3) Made false and misleading representations concerning the existence, exclusion or effect of a condition or right in contravention of s 29(1)(m) of the ACL.

[11]

3.2 NERL 69 Section 38 of the NERL SA and the NERL ACT provides, relevantly, that a retailer must obtain the explicit informed consent of a small customer for certain transactions including: (1) the transfer of the customer to the retailer from another retailer (s 38(a)); and (2) the entry by the customer into a market retail contract with the retailer (s 38(b)). A "small customer" includes a residential customer: s 5(2)(a) of the NERL SA and NERL ACT. 70 Section 39 of the NERL SA and the NERL ACT provides that "explicit informed consent" is given where the retailer, or a person acting on the retailer's behalf, has clearly, fully and adequately disclosed all matters relevant to the consent of the customer, including the purpose or use of the consent, and the customer gives consent. Consent by the consumer must be given in writing signed by the customer, verbally (provided it is evidenced in such a way that it can be verified), or by electronic communication generated by the customer. 71 Section 38 of the NERL SA and the NERL ACT is a civil penalty provision: s 4(1) of the NERL SA and the NERL ACT. A civil penalty provision that provides that a person may only do something in certain circumstances is taken to impose an obligation on the person not to do the thing except in those circumstances: s 298(4)(a) of the NERL SA and the NERL ACT. Civil penalty is defined in s 2(1) of the NERL SA and NERL ACT to mean in the case of breach of a civil penalty provision by a body corporate, an amount not exceeding $100,000 and an amount not exceeding $10,000 for every day during which the breach continues. Under s 297(2) of the NERL SA and the NERL ACT, a person is not liable for more than one civil penalty in respect of the same conduct. 72 These provisions have not previously been considered by a Court. 73 Section 44AAG(1)(b) of the CCA provides that on application by the AER on behalf of the Commonwealth, the Court may make an order declaring that a person is in breach of a State/Territory energy law. A State/Territory energy law includes the NERL: see s 4(1) of the CCA. If the Court makes an order declaring that a person is in breach of a State/Territory energy law, the Court may order that the person pay a civil penalty determined in accordance with the law: s 44AAG(2)(a) and Australian Energy Regulator v Snowy Hydro Limited (No 2) [2015] FCA 58. 74 EnergyAustralia entered into market retail contracts with customers, and in some cases, transferred customers to itself, having communicated with those customers only by the telephone calls made by Bright Choice. EnergyAustralia has admitted that explicit informed consent was not obtained from any customers the subject of the AER Proceeding, for the transfer of those customers from their existing retailer to EnergyAustralia or for their entering into market retail contracts with EnergyAustralia. EnergyAustralia also admitted that on the basis of sales reports received from Bright Choice, it caused contractual documents to be sent to the consumers and transferred (or initiated transfers of) their gas and/or electricity supply from their existing retailer to itself. 75 EnergyAustralia admits, and I find, that, by reason of the conduct outlined in Section 2.2.3 above, between 16 January 2013 and 9 October 2013, EnergyAustralia breached s 38(a) of the NERL SA and the NERL ACT by transferring customers from their existing retailer to itself on the basis of a report provided to EnergyAustralia by its agent Bright Choice, without obtaining the explicit informed consent of those customers to do so. 76 EnergyAustralia admits, and I find, that, by reason of the conduct outlined in Section 2.2.3 above, between 28 November 2012 and 26 July 2013, EnergyAustralia breached s 38(b) of the NERL SA and the NERL ACT by entering customers into market retail contracts with EnergyAustralia on the basis of a report provided to EnergyAustralia by its agent Bright Choice, without obtaining the explicit informed consent of those customers to do so.

[13]

4.1 Declarations 79 The Court has a wide discretionary power to grant declarations under s 21 of the FCA: Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 97-9. The Court also has power, on application by the AER, to declare that a person is in breach of a State/Territory energy law (as defined in s 4(1) of the CCA) including the NERL SA and the NERL ACT under s 44AAG(1)(b) of the CCA. 80 The Court does not lack jurisdiction or power to grant declaratory relief merely because the relief is sought by the consent of the parties: IMF (Australia) Ltd v Sons of Gwalia Ltd (admin apptd) (2004) 211 ALR 231 at [47] and Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 at [30]. When a declaration is sought with the consent of the parties, the Court's discretion is not supplanted, but nor will the Court refuse to give effect to the terms of settlement where the orders sought are within the Court's jurisdiction and are otherwise unobjectionable: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [75]. 81 However, before making declarations, three requirements should be satisfied: (1) The question must be a real and not a hypothetical or theoretical one; (2) The applicant must have a real interest in raising it; and (3) There must be a proper contradictor: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8. 82 Considerations relevant to the exercise of the discretion to make declarations in the present proceedings include whether the declaration will have any utility, whether the proceeding involves a matter of public interest and whether the circumstances call for the marking of the Court's disapproval of the contravening conduct: Tobacco Institute at 99-100; Australian Competition and Consumer Commission v Powerballwin.com.au Pty Ltd [2010] FCA 378 at [41] and Forster v Jododex at 437-8. 83 Declarations are not made as a matter of course. Where it is appropriate for a declaration to be made, attention must be given to the form of the declaration, so that it is at least informative as to the basis on which the Court declares that a contravention has occurred. The declarations should contain appropriate and adequate particulars of how and why the impugned conduct is a contravention of the Act: Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [89]-[90]; Australian Competition and Consumer Commission v Francis (2004) 142 FCR 1 at [113] and BMW Australia Limited v Australian Competition and Consumer Commission [2004] FCAFC 167 at [35]. 84 So what is the position here? First, the contravening conduct is admitted: see Sections 2.2.1-2.2.3 above. The contraventions are admitted: see [67]-[68] and [75]-[76] above. This provides a sufficient factual foundation for the making of the declarations: see ACCC v Coles [2014] FCA 1405 at [79] and the cases cited. The proposed declarations relate to conduct that contravenes the ACL, the NERL SA and the NERL ACT and the matters in issue have been identified and particularised by the parties with precision: MSY Technology at [35]. There can be no doubt that the declarations sought here will have utility. In the absence of them, the contravening conduct would not otherwise be clearly identified. 85 Second, it is in the public interest for the ACCC and the AER to seek to have the declarations made and for the declarations to be made. The ACCC and the AER are public regulators and have a genuine interest in seeking the declaratory relief. Third, EnergyAustralia and Bright Choice are proper contradictors as they have a genuine interest in opposing the declaratory relief. Fourth, and no less importantly, the declarations sought are appropriate because they serve to record the Court's disapproval of the contravening conduct, vindicate the ACCC's and the AER's claim that EnergyAustralia contravened the ACL, the NERL SA and the NERL ACT and Bright Choice contravened the ACL, assist the ACCC and the AER in carrying out their duties in the future, assist in clarifying the law and act as a deterrent to other persons and corporations from contravening the ACL, the NERL SA and the NERL ACT. 86 The threshold requirements for making a declaration have been met, and the declarations sought in both proceedings should be made.

[14]

4.2.1 Agreed penalties - Principles 87 An approach to penalties sought by consent was described by the Full Court in Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [51] as follows (and see further [53]-[58]) (in relation to s 76 of the Trade Practices Act 1974 (Cth) (TPA)), now the CCA, but the same principles apply for s 224(2) of the ACL, see ACCC v Coles [2014] FCA 1405 at [84]): (i) It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the [TPA] in respect of a contravention of the [TPA]. (ii) Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another. (iii) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed. (iv) The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC's views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more "subjective" matters. (v) In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so. (vi) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court's view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range. Those principles were described as emerging from the reasoning in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285. The views in Mobil Oil and NW Frozen Foods have been adopted in later decisions including Fair Work Ombudsman v A Dalley Holdings Pty Ltd [2013] FCA 509; Tax Practitioners Board v Shanahan [2013] FCA 764; Australian Competition and Consumer Commission v AGL Sales Pty Ltd [2013] FCA 1030; Australian Competition and Consumer Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653; Australian Competition and Consumer Commission v P & N Pty Ltd [2014] FCA 6 and Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2014] FCA 336 (ACCC v EnergyAustralia). (Cf Australian Securities and Investments Commission v Ingleby (2013) 93 ACSR 274 where the Court of Appeal of the Supreme Court of Victoria recently criticised as incorrect the approach applied by the Full Federal Court in Mobil Oil and NW Frozen Foods in considering whether to make orders for pecuniary penalties sought by agreement). 88 The phrase "permissible range" refers to that range that would be permitted by the Court, which is neither manifestly inadequate nor manifestly excessive: Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [129]. 89 The principles that might be applied in the imposition of penalties when they have been agreed between a regulator and respondent were also addressed in Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCA 1014 at [8]-[9] and [32]-[33] where I stated: [8] It is not unusual in modern litigation for proceedings commenced by a regulator against a defendant to be resolved and for the parties to jointly approach the Court with an agreed statement of facts. The beneficial consequences of such a resolution are well known: see, by way of example, [NW Frozen Foods at 290-1]. It has been suggested that cases which involve serious contraventions of the law cannot be "settled" by agreed facts that do not present a fair and accurate picture of the relevant offending to the Court: cf [Ingleby] at [31]. So much may be accepted. When this proceeding was settled, the only documents filed with the Court were the originating application and a statement of claim. As a result, in assessing whether the agreed facts and admissions present a fair and accurate picture of the offending conduct, the Court, in the exercise of its judicial power, must satisfy itself that it has sufficient facts and matters to enable it to assess and impose an appropriate penalty: cf Ingleby at [33] citing with approval [Mobil Oil] at [79]. If the Court forms the view that it does not have sufficient facts and matters, it can and should request the parties to provide additional evidence or information: Mobil Oil at [79]. [9] Consistent with the exercise of judicial power, the first question to be asked is whether the Court does have sufficient facts and matters to enable it to assess and impose a penalty in the proper exercise of that judicial power? …. ... [32] The parties have agreed the penalties. The Court's approach to agreed penalties has been the subject of considerable judicial ink: see, by way of example, Mobil Oil at [47]-[60]; Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57 at [45]; and Ingleby. [33] In the end, the principles to be applied may be simply stated. First, the question of an appropriate penalty for a proven contempt or an established breach of a statutory prohibition is a matter for, and function of, the Courts in the exercise of judicial power. Secondly, contrary to statements in some cases, the role of the Court in addressing an agreed penalty is not to exercise an "appellate" role: Ingleby at [29] and [99]. The role of the trial judge is to give such weight to an agreed penalty as is appropriate and to treat the joint submission as it is - a joint submission - to be considered as a factor, an important factor, in the exercise of judicial power of fixing the appropriate penalty in the circumstances of the particular case. These principles are consistent with the observations of Lockhart J in Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Ltd (1996) ATPR 41-457 at 41,581-41,582. The role of the Court is to assess what it would do itself based on the facts. Whether the Court assesses for itself what is the appropriate penalty and then tests that against the agreed penalty, or the Court asks itself whether the agreed penalty is broadly in accord with what the Court would have done acknowledging that the fixing of quantum - the task is not an exact science. The role of the Court is the same - to impose a penalty that is proportionate to the gravity of the contravening conduct. Much of the current debate about the appropriate approach has descended into a debate about which goes first - the Court assessing the penalty having regard to the agreed penalty or assessing whether the agreed penalty is within the appropriate range. For my part, that debate is distracting. It is distracting because it ignores the important role of the fundamental principles of sentencing that must be considered by a trial judge. 90 I remain of the view there expressed - the role of the Court is to assess what it would do itself based on the facts. What penalty would the Court impose that is proportionate to the gravity of the contravening conduct? There is no prescribed method. The method will inevitably vary depending on the facts. 91 Before turning to the imposition of pecuniary penalties under the ACL and then the NERL, it is necessary to say something about the High Court decision in Barbaro v The Queen (2014) 88 ALJR 372 where the majority of the Court held that criminal prosecutors should not be permitted to make submissions to a sentencing judge as to the "available range" of sentences. The majority held that such a submission was no more than a statement of opinion that could not properly be taken into account by a sentencing judge: at [6]-[7], [22]-[23], [36]-[39], [42]-[43] and [49]. Barbaro does not to apply to civil penalty proceedings. It has been held that Barbaro did not overrule the principles in NW Frozen Foods and Mobil Oil, and that Barbaro was concerned with criminal custodial sentencing and the role of the crown in that process, not about the imposition of civil penalties: see, for example, ACCC v EnergyAustralia at [113]-[152] and Matthews v The Queen [2014] VSCA 291 at [29]. 92 The Court's approach to agreements on proposed pecuniary penalties to be imposed under s 44AAG(2)(a) of the CCA is the same: see Snowy Hydro Limited (No 2) at [126]-[137].

[16]

4.2.3 Penalties under the ACL - Considerations 96 Section 224 of the ACL empowers the Court to impose pecuniary penalties with respect to conduct that contravenes ss 29(1)(d) and/or 29(1)(m) of the ACL. Pecuniary penalties are not a remedy available for contraventions of s 18 of the ACL. 97 In determining the appropriate pecuniary penalty for relevant contraventions of the ACL, s 224(2) of the ACL requires the Court to have regard to all relevant matters, including (but not limited to): (1) The nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; (2) The circumstances in which the act or omission took place; and (3) Whether the person 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. 98 Section 224 of the ACL was preceded by, and is in substantially identical terms to, s 76E of the TPA. The principles relevant to the imposition of a civil penalty under the former s 76 of the TPA (relating to restrictive trade practices, which is similar in terms to s 76E) have application to s 76E(2) of the TPA and now s 224 of the ACL, unless the context of the infringements makes it plain that it cannot be so: see Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 at [114]-[119]. Other considerations may be relevant to an assessment of pecuniary penalty. 99 Courts have typically accorded significance to the following factors (see Australian Competition and Consumer Commission v Pepe's Ducks Ltd [2013] FCA 570 at [17]): (1) The size of the contravening company; (2) The deliberateness of the contravention and the period over which it extended; (3) Whether the contravention arose out of the conduct of senior management of the contravener or at some lower level; (4) 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; (5) 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; (6) Whether the contravener has engaged in similar conduct in the past; (7) The financial position of the contravener; and (8) Whether the contravening conduct was systematic, deliberate or covert. 100 For the purpose of imposing a penalty, relevant impact on consumers is not restricted to financial loss or damage. Inconvenience to, and intrusion into the lives of, affected consumers, may be relevant. However, the absence of quantifiable loss or damage can be a mitigating factor: ACCC v EnergyAustralia at [41]-[42]. 101 Matters of deterrence, determining a penalty figure, the parity principle, and the totality principle will be considered in the following subsections.

[18]

4.2.3.2 Determining penalty figure 103 The process applied in arriving at a particular penalty figure was considered by the High Court in the context of criminal sentencing in Markarian v The Queen (2005) 228 CLR 357. That process is also applicable to the assessment of pecuniary penalties under s 224 of the ACL: see Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] ATPR 42-070 at [68]. 104 In Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ held: (1) Assessment of the appropriate penalty is a discretionary judgment based on all relevant considerations (at [27]); (2) "[C]areful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick" (at [31]); (3) It will rarely be appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum (at [31]); (4) The Court should not adopt a mathematical approach of increments to or decrements from a predetermined range of sentences, or single out some of the considerations and attribute specific numerical or proportionate value to some features (at [37]); (5) It is not appropriate to determine an 'objective' sentence and then adjust it by some mathematical value given to one or more features such as a plea of guilty or assistance to authorities (at [37]); (6) The Court "may not add and subtract item by item from some apparently subliminally derived figure" to determine the penalty to be imposed (at [39]); and (7) Since the law strongly favours transparency, accessible reasoning is necessary in the interests of justice, and, while there may be occasions when some indulgence in an arithmetical process will better serve the end, this will not be the case where there are numerous and complex considerations that must be weighed (at [39]).

[23]

4.2.6.1 Nature, extent and duration of conduct and circumstances in which it took place 110 EnergyAustralia acknowledged that its contravening conduct was of a serious nature and should not have occurred. EnergyAustralia is responsible for its own conduct and the conduct of the third parties it engages to market its plans to consumers. EnergyAustralia acknowledged that it is no excuse that the contraventions admitted by EnergyAustralia stem from the conduct engaged in by Bright Choice. 111 Nevertheless, the conduct of each party is relevant to the appropriate relief. 112 As we have seen, the Services Agreement imposed a number of compliance obligations on Bright Choice: see [20]-[26] and [29] above. In addition, under the Services Agreement, EnergyAustralia conducted "train the trainer" sessions for Bright Choice senior sales managers in March 2012 and provided the Training Materials to Bright Choice: see [27] above. 113 Those Training Materials covered legal and regulatory compliance topics and included instructions in relation to sales techniques to be used, and to be avoided by Bright Choice sales representatives: see [27] above. EnergyAustralia also provided Bright Choice with questionnaires that were designed to test the adequacy of Bright Choice's training program and which were required to be successfully completed by Bright Choice personnel before they conducted any telemarketing: see [28] above. 114 Next, it is important to place the admitted contravening conduct in context. As we have seen, after the problems were exposed, EnergyAustralia identified all current active EnergyAustralia customers (including those customers who were in the process of being transferred to EnergyAustralia) who had originated from Bright Choice since April 2012 and who had not made a complaint to the relevant state or territory energy ombudsman. A large number of customers - 35,886 - were identified: see [61] above. Of course, there may have been other customers who had since left EnergyAustralia. But to the extent known, the contravening conduct concerns 49 customers across both proceedings, or less than 1%. 115 So where did EnergyAustralia fall short? The ACCC and the AER submitted (and I accept) that it is reasonable to conclude that the presence of a significant financial incentive (see [29] above) at least increased the risk that sales calls to consumers would occur without all proper processes being observed. It is what EnergyAustralia did in response to the increased risk which is significant. 116 The additional "bonus fee" was agreed on 28 March 2013: see [29] above. As we have seen, the bonuses were significant sums by reference to the base fee for each gas and electricity sale. The timing of the increased bonuses is unfortunate. It is around four months after EnergyAustralia commenced its investigation into the conduct of Bright Choice and the very same day EnergyAustralia received details of concerns with Bright Choice's telemarketing practices, including its failure to obtain explicit informed consent from customers: see [55]-[56] above. 117 This unfortunate timing exposes a potential flaw in EnergyAustralia's internal processes. As we have seen, the Services Agreement imposed obligations on Bright Choice and contained within it mechanisms to ensure those obligations were discharged. A conclusion to be drawn is that despite the Services Agreement expressly providing for these mechanisms, EnergyAustralia did not, or did not adequately, exercise its audit powers under cl 1.16 of the Services Agreement: see [26] above. Although an investigation was commenced on 7 December 2012, it was only after identifying an increased number of customer complaints and cancellations from telesales made by Bright Choice in April and May 2013, that EnergyAustralia commenced an investigation into Bright Choice's conduct in which it actually reviewed a sample of call recordings. EnergyAustralia then identified that Bright Choice representatives were not obtaining explicit informed consent from customers or following the scripts provided to them by EnergyAustralia. There was nothing to suggest that EnergyAustralia had reviewed call recordings at any time prior to April or May 2013. Given the size of the commissions being paid by EnergyAustralia and the numbers of telesales made by its agent, Bright Choice, EnergyAustralia's internal procedures were deficient. 118 Put simply, the processes EnergyAustralia has now implemented to safeguard against new customers being transferred to EnergyAustralia or entered into a market retail contract without having provided their explicit informed consent (see [63] above), should have been in place from the outset. 119 EnergyAustralia's contraventions of the ACL affected 22 consumers. Relevantly, the Telephone Representations were made to 21 consumers and the Contract Representations were made to 22 consumers (comprising the same 21 consumers affected by the Telephone Representations, and one additional consumer). The ACCC and EnergyAustralia submitted, and I accept, that when considering the total penalty to be imposed, it is appropriate to characterise the conduct in relation to each affected consumer as a single course of conduct. The oral and written representations made to each consumer essentially concerned the same subject matter and were directed to the same issue and the same circumstances - namely, whether the consumer would be free to decide, after the telemarketing call, whether or not to enter into a new energy plan with EnergyAustralia. 120 EnergyAustralia's breaches of the NERL SA and the NERL ACT affected 27 customers. All 27 customers were entered into market retail contracts in breach of s 38(b) and 16 of the customers were transferred in breach of s 38(a). As with the ACCC proceeding, it is appropriate to characterise the conduct in relation to each affected consumer as a single course of conduct. The act of entering into a market retail contract and "transferring" that customer's electricity and/or gas supply can be readily seen as part of the same dealing by EnergyAustralia with that customer.

[31]

4.2.6.9 Proposed penalty 137 The ACCC, the AER and EnergyAustralia submitted that the proposed penalties of $1 million on EnergyAustralia in the ACCC Proceeding and $500,000 in the AER Proceeding are appropriate, being neither excessive nor inadequate. I agree. The amount of the penalty is in each case sufficiently high to serve as a deterrent (both specific and general), and to mark the fact that the conduct is accepted by EnergyAustralia, the regulators, and the Court as serious conduct. At the same time the penalties are set at a level which acknowledges the mitigatory aspects of EnergyAustralia's conduct, in particular the fact that it took concrete action to stop and remedy the infringing conduct, and that it cooperated with the ACCC and the AER in a real and timely way. That co-operation is a significant factor in the appropriateness of the agreed penalty amount. As noted earlier, but for that co-operation a higher penalty would have been imposed. 138 The penalty sought in the ACCC Proceeding is a lesser proportion of the maximum possible penalty than that sought in the AER Proceeding (see [71] and [93] above). The parties submitted that comparing the relative proportions of the maximum penalty sought in each case is not a particularly instructive exercise. The regimes are different. Civil pecuniary penalties for consumer contraventions of the ACL have been imposed by the Court since the amendments to the law in April 2010. This is the first time a penalty will be imposed on a company under the NERL regime. The possible penalty range for ACL matters is much broader than under the NERL regime. The provisions of the ACL are broadly expressed and intended to be flexible to catch a wide range of conduct, particularly as commercial behaviour changes over time. The maximum penalty available in a proceeding for contravention of the ACL will reflect a wider range of possible outcomes. The NERL regime is more specific and directed to particular marketing behaviour and the relevant maximum penalty reflects a narrower range of possible outcomes. 139 The contraventions were serious and the amount of the penalty is in each case appropriate, having regard to the applicable factors and principles. In my view, the differences between the two regimes make it difficult to compare penalty outcomes by reference to a proportion of the maximum. Having said that, it is important to recognise that the requirement that energy retailers obtain the explicit informed consent of consumers to contract with them and to transfer from another retailer (or from one market retail contract to another), goes to the very core of the stability and transparency of the energy markets, when considered from the perspective of consumer confidence. All participants in the industry must not only understand the central importance of the need to obtain the explicit informed consent of consumers but ensure that they have procedures in place which ensure that this is achieved.

[39]

4.2.7.8 Proposed penalty 156 The parties submitted that the proposed penalty of $100,000 is appropriate. The parties also proposed that Bright Choice pay that penalty by instalments. I reject that proposal. 157 The principal, if not the sole, purpose of imposing a pecuniary penalty is to act as a personal deterrent and as a general deterrent to others against engaging in the type of conduct that is the subject of the contravention: Australian Competition and Consumer Commission v High Adventure Pty Limited [2005] FCAFC 247 at [11]; Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [65]-[66]. Moreover, although size of a contravener at the time when the penalty comes to be imposed is relevant (Australian Competition and Consumer Commission v BAJV Pty Ltd [2014] FCAFC 52 at [42]-[43]), capacity to pay is not decisive in relation to the imposition of penalty: Australian Competition and Consumer Commission v TF Woollam & Son Pty Ltd (No 2) [2011] FCA 1216 at [29]-[30]. As the Full Court explained in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513 at [20]: … a court may impose a penalty on a company in liquidation if, to do so, would clearly and unambiguously signify to, for example, companies or traders in a discrete industry that a penalty of a particular magnitude was appropriate (and was of a magnitude which might be imposed in the future) if others in the industry sector engaged in the same or similar conduct. See also Australian Competition and Consumer Commission v SIP Australia Pty Limited [2003] FCA 336 at [59]. 158 In the circumstances of this case, including but not limited to the amount of revenue raised by Bright Choice over the relevant period and the amount of "management fees" paid by it to third parties (whose ultimate owners were not disclosed) over the same period (see [13]-[18] above), a penalty of $100,000 payable by instalments over 12 months is not a pecuniary penalty of appropriate deterrent value. The penalty for contravention of the Act must be fixed with a view to ensuring that the penalty is not such as to be regarded by Bright Choice or others as an acceptable cost of doing business. The possibility that an offender will become insolvent must not prevent the Court from doing its duty, otherwise the important object of general deterrence will be undermined: High Adventure at [11]. A pecuniary penalty of $100,000 will be imposed but it is to be paid within 30 days.

[45]

Associate: Dated: 27 March 2015 ANNEXURE A ACCC Proceeding (ACCC, Consumer number Date of telephone call 1 2 August 2012 Electricity and gas 2 14 March 2013 Electricity and gas 3 22 February 2013 Electricity and gas 4 22 March 2013 Electricity and gas 5 22 March 2013 Electricity 6 10 April 2013 Electricity and gas 7 13 March 2013 Electricity and gas 8 14 March 2013 Electricity and gas 9 3 January 2013 Electricity and gas 10 14 February 2013 Electricity and gas 11 8 April 2013 Electricity and gas 12 11 April 2013 Electricity and gas 13 12 March 2013 Electricity and gas 14 1 February 2013 Electricity and gas 15 29 October 2012 Electricity and gas 16 7 March 2013 Electricity 17 15 March 2013 Electricity and gas 18 15 March 2013 29 April 2013 (gas) 19 15 April 2013 Electricity and gas 20 21 December 2012 Electricity 21 4 April 2013 Electricity and gas EnergyAustralia and Bright Choice) - New South Wales, Queensland and Victoria Bright Choice representative State or Territory where customer located Date of Welcome Pack and whether for electricity, gas or both Date of Confirmation Pack and whether for electricity, gas or both Date of online acceptance email and whether for gas, electricity or both Peter Vic - - 2 August 2012 Winnie Vic 27 March 2013 - - Cayden Vic 27 February 2013 - - Jack Vic 2 April 2013 - - Robyn Vic 4 April 2013 - - Sean NSW - 12 April 2013 - Winnie NSW 21 March 2013 - - Howard NSW 21 March 2013 - - Winnie Qld January 2013 - - Charlotte Vic 21 February 2013 - - Winnie Vic - 12 April 2013 - Howard NSW 15 April 2013 - - Winnie NSW 21 March 2013 - - Illias NSW February 2013 - - Sally NSW 1 November 2012 - - James NSW 21 March 2013 - - Jack NSW 25 March 2013 - - David NSW 25 March 2013 (electricity) - - Rebecca Vic 17 April 2013 - - Evan NSW 7 January 2013 - - Robyn NSW - 10 April 2013 -

[47]

ANNEXURE C AER Proceeding (AER and EnergyAustralia only) - South Australia and ACT Table 1: Completed transfers and/or Contract Documents - South Australian Customers Customer number Date of call State or Territory in which customer located Date of completed transfer by EnergyAustralia from another retailer to itself and whether in respect of electricity, gas or both Date of contractual documents sent to customer and whether for electricity, gas or both 1 5 April 2013 SA 20 June 2013 24 April 2013 Electricity Electricity 2 15 March 2013 SA 24 May 2013 25 March 2013 Gas Gas 3 23 April 2013 SA 21 June 2013 7 May 2013 Gas Gas 4 15 March 2013 SA Transfer not initiated 25 March 2013 Electricity 5 5 March 2013 SA 2 April 2013 (electricity) 13 March 2013 19 April 2013 (gas) Electricity and gas 6 13 March 2013 SA Transfer not initiated 19 March 2013 Electricity 7 13 March 2013 SA 27 May 2013 27 March 2013 Electricity Electricity and gas (gas transfer was not completed - see table 2) 8 26 March 2013 SA Transfer not initiated 10 April 2013 Electricity 9 1 May 2013 SA 13 June 2013 13 May 2013 Electricity Electricity 10 23 April 2013 SA Transfer not initiated 6 May 2013 Electricity 11 30 April 2013 SA Transfer not initiated 26 July 2013 Gas 12 4 April 2013 SA Transfer not initiated 24 April 2013 Gas 13 5 April 2013 SA Transfer not initiated 24 April 2013 Electricity and gas 14 10 April 2013 SA Transfer not initiated 24 April 2013 Electricity and gas 15 23 April 2013 SA Transfer not initiated 7 May 2013 Electricity and gas

[48]

Table 2: Transfers initiated and cancelled before switch of supply, and Contract Documents - South Australian customers Customer number Date of call State or Territory in which customer located Date of initiation of transfer by EnergyAustralia of the customer's supply of electricity/gas from another retailer to itself, and whether in respect of electricity or gas or both Date of cancellation of initiated transfer request Date of contractual documents sent to customer and whether for electricity, gas or both 7 13 March 2013 SA 11 April 2013 5 July 2013 27 March 2013 Gas Electricity and gas (the electricity transfer was completed - see table 1). 16 18 March 2013 SA 9 October 2013 1 November 2013 7 May 2013 Electricity Electricity 17 11 April 2013 SA 1 May 2013 15 May 2013 17 April 2013 Electricity Electricity 18 23 April 2013 SA 20 May 2013 (electricity) 27 May 2013 (electricity) 7 May 2013 21 May 2013 (gas) 22 May 2013 (gas) Electricity and gas 19 5 April 2013 SA 21 May 2013 30 May 2013 8 May 2013 Electricity Electricity

[49]

Table 3: Completed Transfers and/or Contract Documents - ACT customers Customer number Date of call State or Territory in which customer located Date of completed transfer by EnergyAustralia from another retailer to itself and whether in respect of electricity, gas or both Date of contractual documents sent to customer and whether for electricity, gas or both 20 27 March 2013 ACT 6 July 2013 2 May 2013 Electricity Electricity 21 10 January 2013 ACT 27 March 2013 15 January 2013 Gas Gas 22 28 November 2012 ACT 27 February 2013 (electricity) 28 November 2012 2 March 2013 (gas) Electricity and gas 23 10 December 2012 ACT Transfer not initiated 13 December 2012 Electricity and gas 24 7 March 2013 ACT 19 April 2013 (electricity) 14 March 2013 24 July 2013 (gas) Electricity and Gas 25 21 December 2012 ACT 15 March 2013 (electricity) 7 January 2013 15 March 2013 (gas) Electricity and gas 26 29 November 2012 ACT Transfer not initiated 4 December 2012 Electricity and gas 27 29 November 2012 ACT 16 January 2013 (electricity) 5 December 2012 18 April 2013 (gas) Electricity and gas

Parties

Applicant/Plaintiff:

Australian Competition and Consumer Commission

Respondent/Defendant:

EnergyAustralia Pty Ltd

Legislation Cited (8)

Australian Consumer Law Competition and Consumer Act 2010(Cth)

Act 2012(ACT)

Trade Practices Act 1974(Cth)

Evidence Act 1995(Cth)

Federal Court of Australia Act 1976(Cth)

National Energy Retail Law (South Australia) Act 2011(SA)

Competition and Consumer Act 2010(Cth)

Federal Court Rules 2011(Cth)

Cases Cited (46)

6 Australian Competition and Consumer Commission v Francis (2004) 142 FCR 1 Australian Competition and Consumer Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653 Australian Competition and Consumer Commission v High Adventure Pty Limited [2005] FCAFC 247 Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] ATPR 42-070 Australian Competition and Consumer Commission v Mitsubishi Electric Australia Pty Ltd [2013] FCA 1413 Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 Australian Competition and Consumer Commission v P & N Pty Ltd [2014] FCA 6 Australian Competition and Consumer Commission v Pepe's Ducks Ltd [2013] FCA 570 Australian Competition and Consumer Commission v Powerballwin.com.au Pty Ltd [2010] FCA 378 Australian Competition and Consumer Commission v Reebok Australia Pty Ltd [2015] FCA 83 Australian Competition and Consumer Commission v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135 Australian Competition and Consumer Commission v SIP Australia Pty Limited [2003] FCA 336 Australian Competition and Consumer Commission v Telstra Corporation Ltd [2010] FCA 790 Australian Competition and Consumer Commission v TF Woollam & Son Pty Ltd (No 2) [2011] FCA 1216 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 Australian Energy Regulator v Snowy Hydro Limited (No 2) [2015] FCA 58 Australian Securities and Investments Commission v Ingleby (2013) 93 ACSR 274 Barbaro v The Queen (2014) 88 ALJR 372 BMW Australia Limited v Australian Competition and Consumer Commission [2004] FCAFC 167 Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39 Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCA 1014 Fair Work Ombudsman v A Dalley Holdings Pty Ltd [2013] FCA 509 Forster v Jododex Australia Pty Limited (1972) 127 CLR 421 Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 IMF (Australia) Ltd v Sons of Gwalia Ltd (admin apptd) (2004) 211 ALR 231 Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151 Markarian v The Queen (2005) 228 CLR 357 Matthews v The Queen [2014] VSCA 291 Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 Tax Practitioners Board v Shanahan [2013] FCA 764 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 Trade Practices Commission v Stihl Chain Saws (Aust.) Pty Ltd (1978) ATPR 40-091 Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 Watson v Foxman (1995) 49 NSWLR 315

[2014] VSCA 291

(1997) 145 ALR 36

(2007) 161 FCR 513

(2004) 142 FCR 1

(2012) 201 FCR 378

(2013) 250 CLR 640

(2014) 88 ALJR 372

(1972) 127 CLR 421

(1984) 2 FCR 82

(2004) 211 ALR 231

(2005) 228 CLR 357

(1996) 71 FCR 285