106 Section 224(2) of the ACL prescribes three matters which the Court must have regard to in determining the appropriate penalty:
(a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and
(b) the circumstances in which the act or omission took place; and
(c) whether the person has previously been found by a court in proceedings under Chapter 4 or this Part to have engaged in any similar conduct.
107 In addition to those factors, the Court must have regard to all other matters relevant to the assessment of penalty. Such matters often include those stated by French J in CSR Ltd at 52,152-52,153, in the context of contraventions of provisions of Pt IV of the Trade Practices Act 1974 (Cth). Those factors, which have been referred to often in the assessment of civil penalties and have become known as the "French Factors", are as follows:
(a) the size of the contravening company;
(b) the deliberateness of the contravention and the period over which it extended;
(c) whether the contravention arose out of the conduct of senior management or at a lower level;
(d) 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;
(e) whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention;
(f) whether the contravenor has engaged in similar conduct in the past; and
(g) the financial position of the contravenor.
108 The French Factors are not exhaustive of the matters that may be relevant in a particular case. They have "a degree of overlap" with the mandatory considerations in s 224(2) of the ACL, but "do not necessarily exhaust potentially relevant considerations" or "regiment the discretionary sentencing function": Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540 at [9] (per Allsop CJ).
109 The penalty is determined by an "intuitive" or "instinctive" synthesis of all relevant factors. Instinctive synthesis is the method by which the Court identifies all the factors that are relevant to the penalty and, after weighing all of those factors, reaches a conclusion that a particular penalty is the one that should be imposed: Employsure at [42], [50] and [53] (per Rares, Stewart and Abraham JJ).
6.5.1 Size and financial position of Qantas
110 Qantas' size and market position is a critical matter in considering the appropriate penalty in the present case.
111 Qantas is a large, publicly listed company incorporated in Australia. It is Australia's largest domestic and international airline. As noted above, as at June 2024, Qantas held 38% of Australia's domestic airline passenger market and together with its subsidiary Jetstar, held 63% of the market.
112 During the Relevant Period, Qantas carried many millions of passengers (over 45 million in FY2022/23), reported over $19 billion in annual revenue and held over $20 billion in total assets. In FY2022/23, it reported a record profit of $2.5 billion, and in FY2023/24, it reported a profit of $2.08 billion.
113 The size of a contravening corporation is particularly relevant in determining the size of the pecuniary penalty that would operate as an effective deterrent.
114 In terms of specific deterrence, the sum required to achieve that object will generally be larger where the company is well-resourced: Volkswagen at [154] (per Wigney, Beach and O'Bryan JJ). The parties submit that the proposed total penalty reflects Qantas' substantial size, significant resources and market position.
115 In order to achieve general deterrence, a higher penalty will be required in cases involving large companies, in order to deter other large companies who may be tempted to engage in similar contravening conduct. It is also essential that the penalties are beyond an amount that might be considered to be an acceptable cost of doing business for a company of Qantas' size and resources. The parties submit that the proposed total penalty is sufficiently large to be more than an acceptable cost of business, and by reason of Qantas' prominence, any penalty imposed on it will likely attract significant attention.
6.5.2 Duration, extent and nature of offending
116 Qantas engaged in the Continued Sale Conduct from 21 May 2021 until 26 August 2023 in respect of flights scheduled to depart between 1 May 2022 and 10 May 2024.
117 During that period:
(a) 70,543 flights (69,237 domestic/trans-Tasman and 1,306 international) were affected by the Continued Sale Conduct;
(b) whilst the total number of consumers exposed to the representations arising from the Continued Sale Conduct cannot be quantified, it at least included consumers who made bookings on, or were re-accommodated to, a flight that Qantas had already decided to cancel;
(c) 86,597 consumers made bookings on, or were re-accommodated to (after the flight they had booked was cancelled), a flight that Qantas had already decided to cancel (81,238 of those consumer bookings related to a domestic/trans-Tasman flight and 5,359 related to an international flight). In respect of bookings that were ticketed, the total amount paid by consumers in relation to those tickets was $17.9 million; and
(d) on average, tickets on the Continued Sale Conduct Flights were offered for sale for approximately 11 days after Qantas had decided to cancel the flight, and in some cases, for up to 62 days after Qantas had decided to cancel the flight.
118 Qantas engaged in the Delayed Notification Conduct from 21 May 2021 until 26 August 2023 in respect of flights scheduled to depart between 1 May 2022 and 1 May 2024.
119 During that period:
(a) 60,297 flights (57,274 domestic/trans-Tasman and 3,023 international) were affected by the Delayed Notification Conduct;
(b) the Manage Booking Pages of up to 883,977 consumers were subject to the Delayed Notification Conduct (806,406 of those consumers held bookings on a domestic/trans-Tasman flight and 77,571 held bookings on an international flight). In respect of bookings that were ticketed, the total amount paid by consumers in relation to those tickets was $170.9 million; and
(c) on average, it took approximately 11 days for consumers who had purchased tickets on these flights to be notified that a cancellation decision had been made regarding their flight, and in some cases, up to 67 days after a cancellation decision had been made.
6.5.3 Knowledge of senior managers
120 Senior managers responsible for different aspects of Qantas' systems and operations separately knew of at least one of the following matters:
(1) that flights the subject of a cancellation decision were not immediately removed from sale;
(2) that some consumers could and did make bookings on flights after those flights had been the subject of a cancellation decision;
(3) that consumers who had made bookings on flights that were the subject of a cancellation decision were not notified of that decision immediately; and
(4) that the Manage Booking Pages for flights that were the subject of a cancellation decision were not updated to reflect that decision promptly.
121 Although no single person knew all these matters, Qantas was aware of the way in which its system operated in relation to the removal of cancelled flights from sale, and the notification of consumers regarding flight cancellations.
6.5.4 Impact of Qantas' offending
122 Qantas' Continued Sale Conduct caused some consumers to make bookings on flights that had been cancelled, based on false and misleading information. Some of those consumers may have lost the opportunity to choose a different flight, including at a lower cost, either with Qantas or a different carrier. For example, some consumers may have paid a higher fare to fly at a particular chosen time, and may not have done so, or may have sought to travel at a different time or date or with an alternative airline, if they had been aware that a decision had been made to cancel the flight they were booking.
123 Further, some consumers may have suffered loss as a result of making travel or other arrangements based upon expected flight schedules. For example, consumers may have paid for travel arrangements which were not flexible or refundable, or which became non-refundable in the period between the date on which the consumer booked the relevant flight and the date on which Qantas notified the consumer that the flight had been cancelled.
124 As a consequence of the Delayed Notification Conduct, consumers may have incurred greater costs in making alternate arrangements closer to their scheduled departure date and may have had more alternative options available to them than if they had been promptly notified of the cancellation.
125 Qantas offered re-accommodation options to passengers on cancelled flights. Many of those re-accommodation offers were for an alternative flight which was close to the departure time of the consumer's original flight. For some consumers, re-accommodation of this kind may have limited or ameliorated the harm suffered as a result of Qantas' contravening conduct. However, for other consumers, the offered re-accommodation option may have been inconvenient or unsuitable, for example because it involved travel by an indirect route and/or an arrival time inconsistent with the purpose of the travel. Further, the offer of re-accommodation options for some consumers did not address the harm associated with a consumer's loss of opportunity.
6.5.5 Resources at Qantas' disposal
126 It is not in dispute that Qantas is a large corporate entity which generates substantial revenue and plays a large role in the Australian economy. Qantas is very well-resourced company, and as such was more than sufficiently positioned to have introduced the changes outlined at [53]-[58] above. Had these measures been introduced in a timely fashion, the contravening conduct would not have occurred, or would have been at least minimised as it would have been recognised and stopped much earlier.
6.5.6 Qantas' prior conduct
127 On 8 June 2002 (varied on 20 November 2004), the ACCC accepted an undertaking for the purposes of s 87B of the CCA from Qantas to address the ACCC's concerns regarding the manner in which airlines advertised airfares in relation to the disclosure of charges, levies and taxes, as part of an industry-wide change intended to minimise any possible risk of confusion to consumers. Pursuant to that undertaking, Qantas is required to advertise airfares that are inclusive of all amounts payable by a consumer in respect of the fare.
128 On 14 December 2018, the ACCC accepted an undertaking for the purposes of s 87B of the CCA from Qantas in relation to misleading or deceptive conduct and the making of false or misleading representations concerning the nature and potential application of the consumer guarantees to flights sold by Qantas, including about the remedies that consumers may be entitled to in the event of flight delays or cancellations. Pursuant to that undertaking, Qantas was required to take various steps to review and update its compliance program and policy, and make updates to its website.
129 Qantas' subsidiary, Jetstar, has been found to have contravened the ACL on two occasions.
130 In 2015, this Court found that Jetstar had made false or misleading representations on its website on 14 May 2013 and its mobile site on 21 March 2014 in contravention of ss 18(1), 29(1)(i) and 29(1)(m) of the ACL: Australian Competition and Consumer Commission v Jetstar Airways Pty Limited [2015] FCA 1263. The representations concerned the price Jetstar would charge for particular flights where those representations did not disclose the existence of certain booking and service fees which applied. Jetstar was ordered to pay a penalty of $545,000: Australian Competition and Consumer Commission v Jetstar Airways Pty Limited (No 2) [2017] FCA 205.
131 In 2019, this Court ordered Jetstar to pay a penalty of $1.95 million in respect of contraventions of ss 18(1) and 29(1)(m) of the ACL between 10 April 2017 and 13 March 2018: Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd (2019) 136 ACSR 603. The conduct concerned false or misleading representations on Jetstar's website regarding consumers' rights under the consumer guarantees in the ACL. Jetstar admitted to the contraventions.
132 Notwithstanding the above, Qantas has not previously been found by a court to have engaged in a breach of the ACL.
6.5.7 Mitigating factors
133 Qantas raised eight mitigatory matters in its defence to justify the proposed quantum of the pecuniary penalty.
134 First, while the ACCC had initially alleged contraventions of s 36 of the ACL concerning wrongful receipt of payment at the commencement of these proceedings, this particular allegation was not pressed at in conclusion. Qantas submitted that the omission of this claim reduces the species of conduct in which it is alleged to have engaged in and means that this Court is not called upon to penalise conduct of that kind.
135 Second, the contravening conduct was mitigated to some degree in respect of some, but not all, consumers, by reason of the re-accommodation flights offered by Qantas, which were close in time to that of the cancelled flight.
136 Third, Qantas has since sought to remedy the system deficiencies that led to the contraventions. Since the proceedings commenced, Qantas has implemented the Automated Closure Solution (discussed above at [54]), which, depending on the volume of the cancellation decisions, usually takes between minutes and hours to complete. Qantas has introduced training programs to ensure that its employees are trained within these systems. Qantas has also begun implementing a new "flight cancellation pending" marker (discussed above at [58]). Qantas accepts that, while these steps could have been introduced earlier, its willingness now to implement these changes and reform practices indicates its desire to avoid contraventions of this kind in the future. Qantas submits that the implementation of these initiatives soften the call for specific deterrence.
137 Fourth, Qantas' commitment to implementing change can be observed from the undertaking given to and accepted by the ACCC pursuant to s 87B of the CCA (the Undertaking). In accordance with the Undertaking, Qantas will:
(a) provide remediation up to the total amount of approximately $20 million to passengers who made a booking, or were re-accommodated onto, flights the subject of the Continued Sale Conduct;
(b) where it decides to cancel a flight on or after the commencement date of the Undertaking:
(i) send a communication to all existing ticketholders informing them of the cancellation and update the Manage Booking Page of all existing ticketholders as soon as practicable and in any case within 48 hours of the cancellation decision; and
(ii) cease offering tickets for sale for that flight as soon as practicable and in any case within 24 hours of the cancellation decision;
(c) procure all relevant subsidiaries of Qantas based, or operating, in Australia (including Jetstar) to comply with the requirements in the above sub-para; and
(d) review and amend its compliance program to minimise the risk of future breaches of the ACL and to ensure its awareness of the responsibilities and obligations in relation to the requirements of the ACL.
138 Fifth, Qantas has taken extensive steps to improve its compliance systems. As part of the Undertaking, Qantas has agreed to review and amend its Competition and Consumer Law Compliance Program, being amendments designed to minimise Qantas' risk of future breaches of the ACL, and to ensure its awareness of its responsibilities and obligations in relation to the requirements of the ACL.
139 Sixth, Qantas has agreed to procure all of its relevant subsidiaries based or operating in Australia and including, importantly, Jetstar, to comply with certain requirements of the Undertaking. In takings its commitment to reform seriously, Qantas has designed, implemented and committed to whole of business improvements concerning notification of cancellations to customers.
140 Seventh, Qantas has cooperated with the ACCC to resolve this proceeding and in doing so has saved the time and resources of the Court as well as those of the regulator. This cooperation has been further demonstrated by Qantas entering into its Undertaking.
141 Eighth, Qantas is contrite and, as put by its senior counsel, deeply regrets the harm inflicted on the affected consumers and the Australian economy at large. Qantas has attempted to redirect its remorse by creating and partaking in initiatives aimed at redressing some of the harm it has caused.