Australian Competition and Consumer Commission v Grays Ecommerce Group Limited

Introduction 1 In this proceeding the applicant ("the ACCC") seeks declarations and a pecuniary penalty, amongst other orders, against the respondent ("Grays") in respect of contravention by Grays of various provisions of the Australian Consumer Law ("ACL") in the period between 1 July 2020 and 30 June 2022 ("Relevant Period"). Grays has admitted the alleged contraventions and consents to the declarations in a form agreed with the ACCC. It has also agreed to pay a pecuniary penalty of $10 million (and a timetable for its payment) and a contribution to the ACCC's costs. 2 The contraventions admitted by Grays, and the facts giving rise to those contraventions, are recorded in the Amended Statement of Agreed Facts and Admissions dated 5 July 2024 ("SOAFA") and are also described in the joint written submissions filed on behalf of the ACCC and Grays. I have drawn from both documents when recording the agreed facts and legal principles. 3 Grays admits that representations it made on an online auction platform published at www.grays.com ("Online Auction Platform") during the Relevant Period about the condition and characteristics of a large number of motor vehicles were false, misleading or deceptive, or liable to mislead, and that, as a consequence, it contravened ss 18, 29(1)(a), 29(1)(g), 29(1)(m) and 33 of the ACL. Grays has already also given, and the ACCC has accepted, an undertaking ("Undertaking") pursuant to s 87B of the Competition and Consumer Act 2010 (Cth)("CCA"). The Undertaking sets out the actions that Grays will take to compensate consumers affected by false or misleading representations made by Grays on its Online Auction Platform.

Grays' Conduct DURING THE RELEVANT PERIOD 4 Grays operates the Online Auction Platform, which is used by vendors seeking to sell, among other things, motor vehicles. Vendors delivered the motor vehicles they sought to sell on the Online Auction Platform to one of Grays' yards around Australia, where Grays took possession of them. Grays would then prepare listings to be published on the Online Auction Platform. To prepare listings, Grays conducted its own visual inspection of each motor vehicle and collated information from third party sources. Those responsible for conducting the inspection were not required to test whether each feature or accessory in the motor vehicle was in working order and did not conduct a mechanical inspection. 5 Potential buyers interested in purchasing a motor vehicle could go to the Online Auction Platform and search for a motor vehicle. By default, the Online Auction Platform displayed listing summaries for 40 motor vehicles per page. Each listing summary comprised an extract from the listing. Buyers could access the listing by clicking on the summary. Each listing contained a standardised set of information relating to the listed motor vehicle. 6 The auction of a motor vehicle offered for sale via the Online Auction Platform commenced once Grays published a listing. Potential buyers could submit bids using the 'Place Bid' function on the Online Auction Platform. The majority of motor vehicle auctions would run for an average of five days. The highest bidder at the end of the auction period would be successful. 7 By publishing a listing, Grays represented to persons who viewed the listing that: (1) The motor vehicle was manufactured in the year specified in the listing, was the make and model specified in the listing, had the fuel and transmission type specified in the listing, and had the Vehicle Identification Number ("VIN") and engine number specified in the listing ("the Identifying Characteristics Representations"). (2) The motor vehicle had the odometer reading, road worthy check ("RWC") and registration status specified in the listing, was not listed on the Written Off Vehicle Register ("WOVR") or subject to the Takata airbag recall, was sold with its owner's manual or service history and with clear title, as specified in the listing ("the External Verifications Representations"). (3) The motor vehicle had the features and accessories specified in the listing, including that the features and accessories specified in the listing worked ("the Features & Accessories Representations"). (4) The motor vehicle's 'Paint and Panel', 'Seats and Upholstery' and 'Controls and Dash' were in 'Good', 'Fair', or 'Poor' condition, as specified and that other statements regarding the condition of the interior and exterior of the motor vehicles were true and correct ("Condition Representations"). 8 Grays made the Identifying Characteristics Representations in 103 listings when, in fact, the motor vehicle offered for sale was: (1) not manufactured in the year stated in the listing; (2) not the make stated in the listing; (3) not the model stated in the listing; (4) not the fuel type stated in the listing; (5) not the transmission type stated in the listing; and/or (6) had a different VIN and/or engine numbers to those described in the listing. 9 Grays made the External Verifications Representations in 250 listings when, in fact, at the time of publishing the listings: (1) the odometer reading recorded in the listing was inconsistent with the actual odometer reading of the motor vehicle; (2) Grays knew or ought to have known that a vehicle's odometer reading was incorrect and failed to disclose this in the listing; (3) the motor vehicle was a written-off vehicle that was listed on the WOVR; (4) the motor vehicle did not have a valid and current RWC; (5) the registration details of the motor vehicle (including whether the motor vehicle was registered, and if so, the registration number, state of registration, date of registration expiry and number of registration plates) differed from those specified in the listing; (6) the owner's manual or service history were not sold with the motor vehicle; (7) there was no clear title; and/or (8) the motor vehicle was subject to the Takata airbag recall. 10 Grays made the Features & Accessories Representations in 80 listings when, in fact, the motor vehicle did not have each of the features or accessories referred to in the listing and/or the features and accessories specified in the listing did not work. 11 In 45 listings, Grays : (1) made the Condition Representations and represented that a motor vehicle's 'Paint and Panel', 'Seats and Upholstery' or 'Controls and Dash' was in a 'Good' or 'Fair' condition when it was objectively apparent that it was in a 'Poor' condition; and (2) made the Condition Representations regarding the condition of the interior and exterior of a motor vehicle which were not objectively true and correct. 12 In some cases, Grays did not include in the listing a written description and/or photograph, or included either a description or photograph but not both, of certain issues ("the Identifiable Issues") that buyers or potential buyers would reasonably expect a listing to disclose, including: (1) the fact that warning indication lights were showing on the dashboard indicating a fault with, for example, the engine or airbags of the motor vehicle; (2) the fact that the engine did not turn over; (3) the fact that there was identifiable corrosion, smoke, oil leaks, engine noise or hail damage; (4) the fact that there was an observable major mechanical issue that could be identified without a mechanical inspection; and/or (5) the fact that there was an issue with the condition of the vehicle in circumstances where there was a reasonable expectation of disclosure, for example, cracked or broken windows, damage to the motor vehicle's interior (including, to the seat belts, upholstery, airbags, dashboard or entertainment system), water damage and damage to the motor vehicle's exterior. 13 By publishing a listing without disclosing an Identifiable Issue, Grays represented that the motor vehicle in the listing did not have the Identifiable Issue ("the Identifiable Issues Representations"). Grays made the Identifiable Issues Representations in 372 listings for motor vehicles that had Identifiable Issues. 14 The specific listings to which I have referred were made during the months of August 2020, November 2020, March 2021, July 2021, September 2021, November 2021, March 2022 and June 2022. In total, there were 753 listings published during those months which the parties agree contained false or misleading representations. The difference between that number and the number of false or misleading representations said to have been made (which total 850) is presumably attributable to the fact that some listings included more than one false or misleading representation. 15 Grays admits that its contravening conduct continued through the whole of the Relevant Period and that it is likely that the actual number of listings containing false or misleading representations during the Relevant Period is higher than the 753 listings to which I have referred. However, it has not been able to quantify that number. It is also not known how many consumers viewed the listings, or on how many occasions.

Approach to settlement agreement 16 The Court has power to order payment of a pecuniary penalty in respect of contraventions of ss 29 and 33 of the ACL, pursuant to s 224(1) of the ACL. However, the effect of s 224(4) of the ACL is that a contravenor cannot be penalised twice for the same conduct even if the conduct contravenes both s 29 and s 33. Section 224(2) of the ACL requires the Court to have regard to "all relevant matters" in determining an appropriate penalty for the contravention. 17 In Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 the plurality (French CJ, Kiefel, Bell, Nettle and Gordon JJ) observed at [57] that "it is entirely consistent with the nature of civil proceedings for a court to make orders by consent and to approve a compromise of proceedings on terms proposed by the parties, provided the court is persuaded that what is proposed is appropriate". There is, as explained at [46], "an important public policy involved in promoting predictability of outcome in civil penalty proceedings" through receiving and, if appropriate, accepting agreed penalty submissions. This predictability "assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention". Their Honours also observed at [58]: Subject to the court being sufficiently persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and … highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty. (Original emphasis) Their Honours also observed at [60] that in proceedings involving a regulator "it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance". 18 In Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission (2021) 284 FCR 24 ("Volkswagen") the Full Court explained at [127] that 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 contravenor's circumstances. An agreed penalty may be considered an appropriate penalty if it falls within that range and is unlikely to be considered an appropriate penalty if it falls outside that range. Where a jointly proposed penalty is within the acceptable range, "the public policy consideration of predictability of outcome would generally provide a compelling reason for the Court to accept the proposed penalty": Volkswagen at [131]. 19 When considering whether an agreed penalty is appropriate the Court should "recognise that the agreed penalty is most likely the result of compromise and pragmatism on the part of the regulator, and to reflect, amongst other things, the regulator's considered estimation of the penalty necessary to achieve deterrence and the risks and expense of the litigation had it not been settled": Volkswagen at [129]. However, the Full Court also emphasised that the public policy consideration of predictability "cannot override the statutory directive for the Court to impose a penalty that is determined to be appropriate": Volkswagen at [126]. The regulator's submissions must still be assessed on their merits: see Volkswagen at [129]. 20 In determining what is an "appropriate" penalty in a civil penalty case, the primary objective is deterrence: see Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 ("Pattinson") at [9], [15], [40]-[41] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). The relevant deterrence is deterrence of contraventions "of a like kind" to those found by the Court by the contravenor (specific deterrence) and by others (general deterrence): Pattinson at [10]; see also Australian Competition and Consumer Commission v BlueScope Steel Ltd (No 6) [2023] FCA 1029 at [25]. 21 In Pattinson the majority referred at [40] with approval to the following passage in the judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 293: [I]nsistence upon the deterrent quality of a penalty should be balanced by insistence that it "not be so high as to be oppressive". Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression. Whether a penalty is "oppressive" in the relevant sense turns on whether it exceeds what is necessary to achieve specific and general deterrence. 22 In Pattinson, the majority explained that the maximum penalty is but one "yardstick" to be applied and must be treated "as one of a number of relevant factors" to be considered: see [53]-[54] citing the Full Court of the Federal Court's reasoning in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 at [155]-[156]. The maximum penalty "does not constrain the exercise of discretion … beyond requiring "some reasonable relationship between the theoretical maximum and the final penalty imposed" … [which] may be established by reference to the circumstances of the contravenor as well as by the circumstances of the conduct involved in the contravention": Pattinson at [55]. 23 In circumstances where there are a large number of contraventions, Beach J noted in Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 at [19] that "it is an arid exercise to engage in a mere arithmetical calculation multiplying the maximum penalty by the number of contraventions even if one could theoretically quantify that latter number". In Australian Competition and Consumer Commission v Google LLC (No 4) [2022] FCA 942 ("Google") at [38], Thawley J referred to the totality principle as a tool that may be useful "in determining whether a penalty strikes a reasonable balance between deterrence and oppressive severity in circumstances where there is a multiplicity of offences". His Honour said at [36]: The totality principle, as applicable in the civil penalty context … requires that the total penalty imposed on a person found to have committed multiple contraventions must bear a proper relationship to the overall conduct involved in all of the contraventions after having regard to all of the relevant circumstances and the object for which the penalty is imposed, namely deterrence. 24 The factors relevant to the determination of an appropriate penalty include the following factors identified by French J in Trade Practices Commission v CSR Ltd [1991] ATPR ¶41-076 at 52,152 - 52,153: 1. The nature and extent of the contravening conduct. 2. The amount of loss or damage caused. 3. The circumstances in which the conduct took place. 4. The size of the contravening company. 5. The degree of power it has, as evidenced by its market share and ease of entry into the market. 6. The deliberateness of the contravention and the period over which it extended. 7. Whether the contravention arose out of the conduct of senior management or at a lower level. 8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention. 9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention. 25 Those factors are not exhaustive of the matters that may be relevant, nor are they mandatory considerations in each case. As the majority explained in Pattinson at [19]: It is important, however, not to regard the list of possible relevant considerations as a "rigid catalogue of matters for attention" as if it were a legal checklist. The court's task remains to determine what is an "appropriate" penalty in the circumstances of the particular case. (Footnotes omitted) 26 Sections 224(3) and 224(3A) of the ACL provide the maximum pecuniary penalty payable by a body corporate for each contravening act or omission of a provision of Part 3-1. During the Relevant Period, the maximum pecuniary penalty payable was the greater of: $10,000,000; if the court can determine the value of the benefit obtained directly or indirectly and that is reasonably attributable to the act or omission, three times the value of that benefit; and if the court cannot determine the value of that benefit, 10% of the annual turnover of the body corporate during the 12-month period ending at the end of the month in which the act or omission occurred or started to occur.

Calculation of maximum penalty for each contravention 27 Grays received a financial benefit in circumstances where a consumer purchased a motor vehicle from the Online Auction Platform and the listing contained a false or misleading representation. Grays estimates that its net revenue generated from all customers during the Relevant Period who required remediation under the ACL was approximately $2.2 million, not accounting for buyers who were remediated at the time of purchase. However, it is not clear whether each buyer would have made the purchase in the absence of the relevant misrepresentation. It follows that the benefit attributable to Grays' conduct is not readily capable of valuation. In these circumstances, having regard to s 224(3A) of the ACL, it is necessary to consider whether the turnover criterion is applicable. 28 The parties submitted, and I accept, that the annual turnover figure for the financial years ending 30 June 2021 and 30 June 2022 serve as an appropriate approximation of the annual turnover at the end of each of the months during which the contraventions occurred. This is in circumstances where the actual turnover figures at the end of those months are unknown. The annual turnover figure for the financial year ending 30 June 2021 was $149 million and $163 million for the financial year ending 30 June 2022. I am satisfied that 10% of those figures is the appropriate measure of the maximum pecuniary penalty to adopt in this case, because the value of the benefit to Grays cannot be accurately determined and because the relevant amounts of $14.9M and $16.3M exceed $10 million.

Nature and seriousness of Grays' conduct 29 Grays has admitted that there were 753 listings which contained one or more false or misleading representations during the specified periods within the Relevant Period. It is not known how many people viewed each of these listings, or how many times each of these people viewed each of these listings. Further, as I have stated above, the contravening conduct continued throughout the Relevant Period, and it is likely that the actual number of listings containing false or misleading representations is higher than 753. In the circumstances, multiplying the number of contraventions by the maximum penalty would result in a figure that is of no assistance in determining an appropriate penalty. 30 The following matters are of particular relevance to the determination of an appropriate penalty in this case: the conduct that produced the listings containing false and misleading representations took place over two years. During the Relevant Period, senior managers (some of whom are no longer at Grays, including Grays' then CEO and COO) were aware that Grays had received complaints concerning misdescriptions in the listings of motor vehicles offered for sale on the Online Auction Platform. Grays was also aware that there were deficiencies in how complaints were being addressed by the customer service team. As is apparent from the nature of the conduct outlined above, Grays' conduct resulted in buyers being misled about the quality, features, characteristics and/or legal title of a motor vehicle. Many buyers received a motor vehicle that was different from Grays' description in the listing, including by: - having a different year of manufacture, make, model, fuel or transmission type, VIN or engine number, to that described in the listing; - having a different odometer reading, WOVR status, RWC status and/or registration status to that described in the listing; - not being sold with its owner's manual and/or service history, with clear title, or being subject to the Takata airbag recall contrary to what was stated in the listing; - having different features and accessories to those stated in the listing and/or the features or accessories referred to in the listing did not work; - having Identifiable Issues which were not stated in the listing; - having conditions (i.e. 'Paint and Panel', 'Seats and Upholstery', and/or 'Controls and Dash') which were in a condition inferior to that stated in the listing; and/or - having an interior or exterior condition described in a way that was not objectively true and correct. Grays was solely responsible for ensuring the accuracy of listings for motor vehicles sold through the Online Auction Platform. To prepare listings, Grays conducted its own visual inspection of each motor vehicle and collated information from third party sources. Grays booking officers started the engine but were not required to test whether each feature or accessory in the motor vehicle was in working order. During the Relevant Period, Grays had policies and procedures in place relating to the preparation of listings. However, these policies and procedures were not consistently followed or enforced. In some cases, the listings failed to include details of issues with the motor vehicle which would have been reasonably expected to have been detected as part of the booking officer's visual inspection. In some cases, members of senior management were aware of process issues and system errors which resulted in incorrect information being used to populate listings, and failed to correct the processes that led to these errors. Grays' conduct partly coincided with the COVID-19 pandemic. In this period, buyers were at times unable to inspect vehicles in person and were especially reliant on the descriptions of motor vehicles given in the listings. Grays' customer service staff were trained to advise buyers who complained of a misrepresentation that they could resell the motor vehicle through Grays. If buyers elected to relist the motor vehicle, Grays would retain the Buyer's Premium from the first sale and, unless fees were waived, would receive an additional Buyer's Premium (and in some cases a Seller's Commission) from the additional sale. In some cases, where a person chose to relist a motor vehicle following the denial of a refund, or Grays took ownership of a motor vehicle and relisted it, Grays would fail to update the listing to correct the relevant misdescription, meaning Grays repeated its contraventions of the ACL. Grays' conduct occurred in the following context: - Grays received many complaints from customers asserting they had been misled by the listings; - Grays was the subject of investigations or enforcement action in 2019, 2020 and 2021 by the ACCC, NSW Fair Trading and the Queensland Office of Fair Trading in connection with the Takata recall and for misleading representations about the effects of a warranty; - Between December 2018 and June 2022, Grays was party to 10 proceedings in various State-based Tribunals where it was found that Grays breached the ACL in the context of its motor vehicle sales. Grays' conduct resulted in certain buyers suffering significant financial and non-financial loss. In some cases, buyers who purchased a motor vehicle which had been the subject of a listing containing a misrepresentation suffered loss because the motor vehicle they received was worth less than what they had paid Grays. Some buyers suffered financial loss in re-selling the motor vehicle for less than they purchased it. For example, some buyers who re-sold a motor vehicle without the same false or misleading representation in the listing re-sold it for an amount less than the amount for which they purchased it, or incurred additional expenses to repair the motor vehicle, which were directly related to repairing a misrepresentation. It is not known how many consumers faced these forms of detriment, or the average amount of likely loss. Grays has admitted it is likely its conduct caused consumers to suffer loss of around $3.86 million. In some cases, buyers suffered loss in the form of renting temporary vehicles or using rideshare or public transport at significant cost and inconvenience while waiting for Grays to resolve a complaint they had made about the motor vehicle they had purchased. Grays' misrepresentations also caused buyers to suffer forms of non-financial loss. For example, Grays' conduct meant that buyers lost the opportunity to make a different purchasing choice (such as bidding less for the motor vehicle or not purchasing the motor vehicle) and the loss of opportunity to purchase a different motor vehicle. Some buyers had to invest significant time and energy persuading Grays to provide a remedy where a listing had contained a misrepresentation and were often made to wait months for a resolution. Some buyers could not afford to purchase a replacement motor vehicle until they received a refund from Grays. Some buyers were denied a remedy after purchasing a motor vehicle for which there had been a misrepresentation in the listing. For buyers who received a remedy, some spent months with a motor vehicle that could not be driven or was unsafe to drive and could not afford alternative forms of transport. Buyers experienced significant distress and frustration as a result.

Size and financial position of Grays 31 Grays is a large business which generates substantial revenue. I was told by Senior Counsel for Grays that it currently employs 331 people full-time. In the 2020-21 financial year Grays generated $149.264 million in revenue, and $93.891 million in gross profit; in the 2021-22 financial year Grays generated $163.994 million in revenue and $93.558 million in gross profit. Grays' net profit after tax for the 2020-21 financial year was $4.114 million and its net profit after tax for the 2021-22 financial year was $3.380 million. Grays is majority owned by the Quadrant Private Equity Investment Pty Ltd ("Quadrant") which I was told owns more than 90% of Grays' issued share capital.

Financial benefit to Grays 32 Grays received a financial benefit from the sale of a motor vehicle in the form of the Buyer's Premium, Seller's Commission, and other fees. Grays would receive the benefit of a further Buyer's Premium as well as, in some cases, a second Seller's Commission where buyers elected to relist a motor vehicle following a complaint about the inaccuracy of a listing. Where a misrepresentation in a listing inflated the value of a motor vehicle, Grays received a benefit in the form of a higher Buyer's Premium than it would have had the listing not contained the misrepresentation. 33 In response to the ACCC's investigation, Grays commenced a remediation program. Grays estimates that its net revenue generated from all customers during the Relevant Period who required remediation under the ACL was approximately $2.2 million, not accounting for buyers who were remediated at the time of purchase. Grays estimates that, once remediation is complete, it will have completely disgorged any financial benefit from its contravening conduct.

Role of corporate culture and senior management 34 Grays did not have a corporate culture conducive to compliance with the ACL. In particular, it did not have a formal ACL compliance program, or adequate structures to ensure its officers and employees complied with the ACL. Senior managers were aware of a material number of complaints from buyers concerning the misrepresentations in listings, but did little to address the problem at its source. Worse still, Grays encouraged its customer service team to decline refunds to buyers who had been misled about the characteristics and conditions of the motor vehicles they had purchased. For example, Grays' policies directed staff to "say no" to buyers requesting a remedy where listings failed to disclose dents and damage on vehicles, where buyers had complained that the damage was not discernible in the photos or where the buyer complained that the condition of a vehicle was "poor" but had been described in a listing as "good". 35 There were also members of Grays' senior management and staff who were aware of the following: (1) from at least November 2019, that an increasing number of buyers were complaining that motor vehicles did not match the description given in a listing; (2) process issues and system errors meant incorrect information was being included in listings, buyers were being provided with incorrect items and there were deficiencies in how complaints were being addressed; and 36 Grays' employees had raised suggestions to address misdescriptions in listings but, despite this, there were no changes to Grays' policies or processes. Grays' Board was also made aware (although to a more limited extent) of complaints that listings contained misdescriptions. Despite senior managers, staff and, to a lesser extent, the Board, having the knowledge summarised above, the contravening conduct continued until at least June 2022.

Cooperation and contrition 37 Grays has cooperated with the ACCC by (inter alia) agreeing to the facts and making relevant admissions, agreeing to approach the Court to make the proposed orders, fully cooperating with the ACCC's investigation, and responding to at least three voluntary information requests from the ACCC from as early as August 2021. Grays has also acknowledged that it should have taken more appropriate action sooner and the seriousness of its past conduct. 38 Grays has voluntarily committed to a remediation program covering buyers who purchased a motor vehicle during the Relevant Period and has entered the Undertaking pursuant to s 87B of the CCA. As at October 2023, Grays had paid over $1.1 million in refunds to customers and will continue to pay around a further $2.7 million.

Conclusion 39 I have had regard to the various matters referred to in these reasons including, in particular, the seriousness of Grays' contraventions and the harm likely to have been caused to customers who were misled by inaccurate listings about matters fundamental to their purchase decisions and willingness to pay the agreed price. I have had regard to the failure of Grays' senior management during the Relevant Period to take steps to correct what Grays knew were serious deficiencies in its systems and procedures with respect to the compilation and verification of information included in the listings and the handling of customer complaints. I have also had regard to the cooperation that Grays has displayed, avoiding the need for further expenditure of time and resources by the ACCC in a contested hearing and steps taken by Grays to compensate its customers. In the circumstances, I am satisfied that the agreed penalty of $10 million is within the range necessary to achieve deterrence of contraventions of a like kind by both Grays and others.

Time to pay 40 The parties jointly propose that the pecuniary penalty of $10 million be paid in the instalments of $0.5 million by June 2025, $1.5 million by each of June 2026, September 2026 and December 2026, and $2.5 million by each of March 2027 and June 2027. The proposed orders provide for Grays to update the ACCC as to its financial position each year that the payment plan remains in place, including by providing copies of its audited financial statements, re-evaluating its financial capacity to pay, and preparing an affidavit deposing to whether it is in a financial position to pay the balance sooner than initially contemplated. They also include a safeguard against non-compliance with the payment plan which requires that, in the event Grays does not comply with the payment schedule, the parties are to seek to agree in good faith an alternative payment plan, failing which the balance of the payments are to be made within 60 days. 41 David Mullins, a partner of Ernst and Young, was engaged by Grays' solicitors in October 2023 to provide an opinion on whether Grays will have the financial capacity to pay particular pecuniary penalty amounts over timeframes. His opinion is based on an analysis of Grays' financial forecasts and the assumptions set out in his report. Mr Mullins' opinion is that Grays would not have the capacity to pay the pecuniary penalties within the timeframes he was instructed to consider. Mr Mullins considered that Grays would have the capacity to pay a penalty of $10 million payable from June 2025 to June 2027 in the following instalments: (1) $0.5 million in June 2025; (2) $1.5 million in each of June 2026, September 2026 and December 2026; and (3) $2.5 million in each of March 2027 and June 2027. Mr Mullins' opinion is supported by a detailed analysis of projected cashflows. 42 There is one other matter that arose during the course of the hearing that I will mention. The evidence shows that an unsecured loan of around $25 million from Quadrant to Grays was repaid by Grays on 25 June 2021. The loan was for a fixed term expiring on 31 July 2028 and was repaid around seven years early. It appears from the financial statements that the loan (with accrued interest) was discharged using an unsecured facility provided by Westpac Banking Corporation. I was informed by Senior Counsel for the ACCC that the ACCC's investigation of Grays commenced in August 2021. It was not suggested by the ACCC that the loan repayment was prompted by the ACCC's investigation. 43 In some cases it may be necessary to consider whether any related party transactions have contributed to a party's inability to make a timely payment of an agreed penalty and whether what amounts to a very leisurely instalment plan should be approved by the Court. However, the re-financing transaction to which I have referred would appear to have substantially reduced Grays' borrowing costs because the interest rate payable under the Westpac facility was substantially less than that accruing under the Quadrant loan. Senior Counsel for the ACCC submitted that the ends of specific and general deterrence favour allowing Grays the time it seeks to pay the agreed penalty in full, which would be preferable to the destruction of the company and its capacity to pay. In light of Mr Mullins' evidence, I accept that the time to pay provided for under the proposed orders is necessary if the agreed penalty is to be paid in full.

OTHER MATTERS 44 In light of the SOAFA and Grays' admissions, I agree that declarations in the form proposed by the parties should be made. The parties also seek orders pursuant to s 246(2)(b) of the ACL requiring Grays to establish, implement and maintain an ACL compliance program for three years in accordance with the requirements set out in the proposed orders. I agree that such orders should be made. The parties have also agreed that Grays contribute $100,000 to the ACCC's costs of the proceeding.

DISPOSITION 45 I will make the declarations and orders proposed by the parties in their joint submissions. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Nicholas.