Australian Competition and Consumer Commission v Scoopon Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 402 of 2013

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

JUDGE: GREENWOOD J DATE: 8 AUGUST 2014 PLACE: BRISBANE

REASONS FOR JUDGMENT 1 These proceedings were commenced by the Australian Competition and Consumer Commission ("ACCC") on 3 July 2013. 2 After negotiations between the parties, agreement was reached as to a range of foundation and contextual facts concerning the contraventions. The matter was listed before the Court on 17 December 2013 for argument as to the scope of the relief to be granted by the Court and the determination of an appropriate pecuniary penalty in the exercise of the Court's discretion having regard to the statutory factors. 3 On the hearing of the matter, the parties put to the Court joint submissions and a statement of agreed facts and admissions to be made pursuant to s 191(3)(a) of the Evidence Act 1995 (Cth). Having regard to the nature of the contraventions, the matter was listed for determination in December so as to bring the matter to resolution, rather than allocating a listing date in 2014. The question of the scope of the relief and the pecuniary penalty to be imposed in respect of the contraventions was fully argued on 17 December 2013 and the Court made orders that day. At the conclusion of the making of the orders, I indicated that I would probably provide written reasons in relation to the matter notwithstanding that the matter was fully argued on the day and all issues in relation to the exercise of the discretion were fully ventilated and examined. 4 These reasons reflect the relevant considerations bearing upon the exercise of the discretion in making the range of orders made on 17 December 2013. 5 The respondent in the proceeding is Scoopon Pty Ltd ("Scoopon"). In the proceeding, the ACCC alleges contraventions by Scoopon of ss 18, 29(1)(g), 29(1)(i) and 29(1)(m) of the Australian Consumer Law ("ACL") which is Sch 2 to the Competition and Consumer Act 2010 (Cth) ("CCA"). Those provisions are, relevantly, in these terms: 18 Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1). 29 False or misleading representations about goods or services (1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services: … (g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or … (i) make a false or misleading representation with respect to the price of goods or services; or … (m) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); 6 For the purposes of the proceeding only, and in order to resolve the allegations made by the ACCC, Scoopon admits that the conduct in which it engaged gave rise to the contraventions described in the joint submission. For the purposes of s 191 of the Evidence Act and particularly s 191(3)(a) of that Act, the ACCC and Scoopon have reached agreement as to the following matters: The Conduct 8. Scoopon is an online group buying company which was incorporated in March 2011, and, on 6 May 2011, took over the operations of the preceding owner of the business, which was a company bearing the same name. It is a wholly owned subsidiary of Catch Group Pty Ltd, which owns several other online retail businesses. 9. Since it commenced operations, Scoopon has carried on business supplying services to both suppliers of goods and services (merchants) and consumers. Scoopon operates a website, http://www.scoopon.com.au/ (the Website), which functions as a platform for merchants to offer various types of goods and services to consumers as deals at discounted prices. The goods and services are offered to consumers who access the Website and subscribe to its mailing list. 10. During the period from 6 May 2011 to 20 April 2013 (the Relevant Period), Scoopon promoted itself as providing the means for businesses to, among other things, increase their customer base. Scoopon assists merchants to develop deals, offering the merchants' goods and services to consumers at a discount from usual pricing. Scoopon and the merchant enter into an agreement pursuant to which Scoopon advertises and promotes the deals to its consumer members by email, social media such as Facebook and Twitter, and on the Website. 11. Scoopon facilitates the purchase of those deals by consumers through the Website. The consumer purchases a voucher from Scoopon that can be redeemed with the relevant merchant for specified goods or services. Scoopon collects the payments for the voucher deals, retains a percentage of those payments as its commission, and remits the remaining revenue to merchants. It also handles enquiries and complaints from consumers in relation to the deals. The proportion of a voucher price retained by Scoopon by way of commission depends upon the agreement reached with the merchant, but is generally in the order of 30% to 35% of the purchase price of a voucher. 12. In addition, Scoopon advertises products through the Website for which consumers can place orders to purchase directly from Scoopon and, if the order is accepted, the orders are fulfilled and the product is supplied by Scoopon. 13. The contravening conduct admitted by Scoopon can be divided below into two categories: conduct directed at merchants, and conduct directed at consumers. Conduct directed to the merchant Cheeky Skin - redemption rates 14. One of the features of the Scoopon business model, which was promoted to merchants in around May 2011, was that merchants would retain the revenue, excluding the commission, of any vouchers sold to consumers that were not redeemed by the consumer for the merchants' goods or services. 15. On 31 May 2011, a member of Scoopon's sales team2 represented to a merchant, Cheeky Skin, in the course of promoting the services Scoopon provided to merchants, that if Cheeky Skin engaged Scoopon to offer a deal for vouchers to provide Cheeky Skin's services to consumers [2 The member of Scoopon's sales team was an employee acting within the scope of his actual or apparent authority. The employee's conduct was therefore also the conduct of Scoopon pursuant to s 139B(2) of the CCA.]: 15.1. in the order of 30% of vouchers that would be sold for the proposed deal would not be redeemed by consumers; and 15.2. as a result, Cheeky Skin would receive a windfall of the revenue paid to it for approximately 30% of the vouchers, being those sold and not redeemed. 16. The representations in paragraph 15 were made by Scoopon to Cheeky Skin on the basis of information Scoopon obtained from the internet about the redemption rates experienced by group buying websites in the United States, the United Kingdom and China, which information indicated that the redemption rates experienced by merchants were around 50 to 80 per cent, with the majority of information indicating redemption rates of around 70 per cent. They were made at a time when Scoopon did not have in place any means to accurately determine or record how many vouchers had been redeemed for its voucher deals and could therefore only use the information that it had obtained regarding the experiences of overseas group buying sites to make assumptions about, but not predict, how many vouchers would be sought to be redeemed by consumers of the Cheeky Skin deal. When making the representation referred to in paragraph 15, Scoopon did not know whether or not the overseas experience was applicable to the deal offered to consumers by Cheeky Skin and did not disclose to Cheeky Skin the basis on which it made the representation. 17. Scoopon admits that, by making the representations in paragraph 15 when it did not have reasonable grounds for doing so, in trade or commerce and in connection with the supply or possible supply of its services to merchants, Scoopon: 17.1. engaged in conduct that was misleading or deceptive, and likely to mislead or deceive, in contravention of s 18 of the ACL; and 17.2. made a false or misleading representation that its services had particular benefits which they may not have had in contravention of s 29(1)(g) of the ACL. Conduct directed to merchants - costs and risks of doing business with Scoopon The representations on Scoopon's website 18. At all material times, as part of its promotional activities referred to in paragraph 10, Scoopon maintained a page on the Website which was directed to merchants (the Merchant Page). The Merchant Page set out information for merchants as to how the Scoopon business model operated and the benefits of Scoopon's services and contained a combination of written statements and audio visual representations presented in an embedded video. 19. Between 6 May 2011 and 31 August 2011, Scoopon was offering between 80 and 100 deals per week nationally. 20. From 6 May 2011 to 31 May 2013, Scoopon made the following written statement on the Merchant Page: No risk, big reward. Amazingly, it costs nothing to be involved with Scoopon. Compare that with traditional advertising and you can see why it's so popular amongst businesses [Emphasis added]. 21. This statement was made in conjunction with the following audio statement made in the embedded video, which played automatically when the Merchant Page was opened: By running a Scoopon campaign, your business can tap into one of the country's largest customer databases and spread the word about your business with no up-front costs. If you run a business, then you will already know that traditional advertising on television, radio and in newspapers is not only expensive but there's no way of knowing who sees your ad, there's no guarantee of results and for all of the risk involved, you still need to pay up-front. 22. From January 2013 to 29 October 2013, the Merchant Page stated: No more gambling on a wink and a prayer. You don't have to risk anything to get your business involved with Scoopon. We just take a small percentage of each Scoopon we sell, so it's really a win-win with Scoopon. Compare that with traditional advertising and you can see why Scoopon's so popular with all sorts of businesses. [Emphasis added] 23. By making the statements set out in paragraphs 20 and 22 on the Merchant Page, Scoopon represented to merchants that if they acquired Scoopon's services: 23.1. they would not be at risk of a financial cost or loss over and above the costs and fees disclosed by Scoopon; and 23.2. all of the costs incurred by Scoopon in relation to providing its services for which a merchant would be liable were included in Scoopon's commission. Scoopon's standard supplier terms and conditions 24. From 6 May 2011 to approximately November 2011, clause 5.1 of the standard terms and conditions that Scoopon entered into with merchants provided (the Clause 5.1 Period): 5.1 The Supplier indemnifies Scoopon against all loss, costs, expenses, actions or claims directly or indirectly suffered by Scoopon: … (d) where Scoopon (in its absolute discretion) determines to refund to consumers the amounts paid by them for vouchers issued by Scoopon in relation to the Product where the Supplier has either: (i) failed to supply the Product; (ii) repeatedly failed to honour the voucher issued in respect of the Product despite it being validly presented for redemption; or (iii) supplied the Product which was either not of merchantable quality nor fit for the purpose for which it was intended or which it has not met the consumer's reasonable expectations. (clause 5.1) The effect of clause 5.1 25. The representations in paragraph 23 were made by Scoopon in circumstances where from 6 May 2011 to 31 August 2011 (a subset of the Clause 5.1 Period), Scoopon's practice was to rely on clause 5.1 in such a way that if Scoopon refunded a voucher in the circumstances described in clause 5.1 (for example, in circumstances where Scoopon considered that a merchant had breached their obligations and refused to honour a consumer's voucher , and the consumer had complained to Scoopon), it would subsequently invoice the merchant for the amount of the entire voucher purchase price. If the merchant paid the invoice (which in most cases it did not), this would mean that the merchant would pay the amount of Scoopon's commission (which was usually in the order of 30% to 35% of the voucher purchase price) because this had already been deducted from the revenue forwarded to the merchant by Scoopon. 26. Merchants were provided with a copy of, and executed a deal sheet incorporating, the standard terms and conditions before a deal was offered to consumers. Accordingly, although clause 5.1 was disclosed to all merchants, its precise effect was not incorporated into, or noted as a qualification to, the representations made on the Merchant page, as set out in paragraph 23. Approximately 40% of merchants that sought Scoopon's services did so through the Merchant Page. Approximately 60% of those merchants entered into agreements with Scoopon after viewing the statements on the Merchant Page in paragraphs 20 and 22. 27. Scoopon admits that, by making the representations in paragraph 23 in the circumstances described in paragraphs 24 to 26, in trade or commerce and in connection with the supply or possible supply of its services to merchants, Scoopon: 27.1. engaged in conduct that was misleading or deceptive, and likely to mislead or deceive, in contravention of s 18 of the ACL; 27.2. made false or misleading representations that its services had particular benefits they did not have, in contravention of s 29(1)(g) of the ACL; and 27.3. made false or misleading representations with respect to the price of its services, in contravention of s 29(1)(i) of the ACL. Conduct directed to consumers - remedies for dishonoured vouchers 28. At all material times, consumers could purchase and use Scoopon vouchers in the manner described in paragraph 11. The purchase of vouchers by consumers was subject to particular terms and conditions. Those terms and conditions comprised the terms and conditions stated on the relevant voucher and Scoopon's membership terms and conditions as they applied at the date a consumer purchased the voucher. Scoopon vouchers listed a validity period in which consumers could redeem the relevant good or service. 29. From 6 May 2011 until 31 October 2011 (the First Time Period), Scoopon's membership terms and conditions contained clauses to the following effect: 29.1. "All services promoted on the website are offered by providers subject to availability"; 29.2. "For the redemption of all vouchers, we recommend makings bookings at least 2 weeks in advance"; 29.3. "Peak times (such as weekends and holidays) should be booked further in advance"; and 29.4. "We do not guarantee that services will be available at your preferred date and time" (the Original Terms and Conditions). 30. From 1 November 2011 to 31 October 2012 (the Second Time Period), Scoopon's membership terms and conditions expressly provided, in addition to the clauses in paragraph 29, that refunds of the voucher purchase price would not be available where a consumer unsuccessfully tried to book the relevant service in the last 2 weeks of the Scoopon voucher validity period and had not tried to book the service in the period before the last 2 weeks of the Scoopon voucher validity period (the Amended Terms and Conditions). Scoopon's membership terms and conditions did not contain a similar clause during the First Time Period. 31. During the Second Time Period, when consumers who had purchased a voucher during the First Time Period for goods or services to be supplied by a merchant unsuccessfully sought to redeem the voucher in the last 2 weeks of the validity period and sought a refund from Scoopon because the merchant represented that it did not have the availability to service the voucher, Scoopon represented to those consumers that, solely because they had sought to redeem their voucher in the last 2 weeks of the validity period, the Amended Terms and Conditions applied and therefore: 31.1 the merchant had no obligation to honour the voucher or provide a refund for the voucher; 31.2 the consumer had no right or remedy against the relevant merchant; 31.3 Scoopon would not assist the consumer to obtain a refund of the voucher purchase price or other remedy from the merchant; and 31.4 Scoopon would not provide the consumer with a refund of the voucher purchase price or other remedy because the consumer did not meet the criteria necessary for the application of Scoopon's refund policy. 32. The sole fact that a consumer had only sought to redeem their voucher in the last 2 weeks of the validity period did not have the consequences represented in paragraphs 31.1 to 31.4 with respect to vouchers purchased prior to 1 November 2011. This was because the terms and conditions applying to vouchers purchased in the First Time Period were the Original Terms and Conditions, not the Amended Terms and Conditions. As such, these representations did not always accurately reflect the rights of consumers. 33. Scoopon admits that, by making the representations in paragraph 31 in the circumstances described in paragraphs 28 to 30 and 32, in trade or commerce and in connection with the supply or possible supply of its services to consumers, Scoopon: 33.1 engaged in conduct that was misleading or deceptive, and likely to mislead or deceive, in contravention of s 18 of the ACL; and 33.2 made false or misleading representations concerning the existence, exclusion or effect of a right or remedy in contravention of s 29(1)(m) of the ACL. Conduct directed to specific consumers - remedies for dishonoured vouchers 34. Scoopon also admits that it engaged in this conduct in relation to specific consumers identified by the ACCC who sought refunds for vouchers purchased for two separate deals, as follows. In February and March 2012, which was during the Second Time Period, Scoopon represented through its customer service staff to 5 consumers who had purchased vouchers during the First Time Period for goods and services to be supplied by the merchant "Fiorentina" and 2 consumers who had purchased vouchers during the First Time Period for goods and services to be supplied by the merchant "Soulfly", to the effect that because each of those consumers had attempted to redeem their vouchers in the final 2 weeks of the redemption periods, the Amended Terms and Conditions applied and therefore : 34.1 Fiorentina and Soulfly were not obliged to honour the vouchers or provide a refund for the vouchers held by the consumers, and the consumers had no right or remedy against either Fiorentina or Soulfly; 34.2 Scoopon would not assist the consumers to obtain a refund of the voucher purchase price or other remedy from the merchant; and 34.3 Scoopon would not provide the consumers a refund of the voucher purchase price or other remedy, because the consumers did not meet the necessary criteria for the application of Scoopon's refund policy. 35. The sole fact that the 5 consumers who had purchased vouchers for goods and services to be supplied by the merchant Fiorentina, and the 2 consumers who had purchased vouchers for goods and services to be supplied by the merchant Soulfly, sought to redeem their vouchers in the last 2 weeks of the validity period of the relevant deal did not have the consequences represented in paragraphs 34.1 to 34.3 as the Original Terms and Conditions, not the Amended Terms and Conditions, applied to the vouchers purchased by those customers. As such, these representations did not always accurately reflect the rights of these consumers. 36. Scoopon admits that, by engaging in the conduct described in paragraphs 34 and 35 above in relation to each of the 7 identified consumers who had purchased vouchers for goods and services from Fiorentina and Soulfly, Scoopon has: 36.1 engaged in conduct in trade or commerce and in connection with the supply of its services to consumers that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL; and 36.2 made false or misleading representations concerning the existence, exclusion or effect of a right or remedy in contravention of s 29(1)(m) of the ACL. Conduct directed to consumers - advertisements to consumers 37. At all times during the Relevant Period, Scoopon by email advertised product deals to consumers who were both members of Scoopon and who were subscribed to its mailing list. The email advertisements contained a list of product deals available, together with a picture and short description of each deal, the retail price or stock levels of the particular product and the price at which the consumer could obtain each deal from Scoopon. Each email advertisement was sent to between 597,839 and 705,151 email subscribers. 38. If a consumer clicked on the particular deal in the email, they were taken to the Website which contained a more detailed description of the deal and the terms on which the deal could be purchased. If consumers wished to purchase the deal they had to do so via the Website. 39. On 2 September 2012, Scoopon sent an email to its subscribers containing a product deal for Ugg Boots. The email was sent to 597,839 subscribers, 425,155 of which opened the email and 66,790 of which clicked on the deal. The relevant part of the email depicted a pair of calf-length Ugg Boots and specified a price of $45, without any qualification. As a result of this email, Scoopon sold 174 vouchers for Ugg Boots. 40. By sending the email. Scoopon represented to consumers that a pair of calf-length Ugg Boots was priced at and could be purchased from it for $45. 41. In fact, when a consumer clicked on this deal in the email, they were taken to the Website which presented a selection of different sizes of Ugg Boots for purchase at different prices. The deal available on the Website was that only a smaller style of Ugg Boots could be purchased for $45, and the calf-length Ugg Boots depicted in the email were only available for purchase at the price of $99. 42. On 24 February 2013, Scoopon sent an email to its subscribers containing a product deal for Samsonite luggage. The email was sent to 690,126 subscribers, 101,541 of which opened the email and 12,646 of which clicked on the deal. The relevant part of the email depicted a 3-piece set of Samsonite luggage, stated "3-piece set" and specified a price of $155, without any qualification. As a result of this email, Scoopon sold 142 vouchers for Samsonite luggage. 43. By sending the email, Scoopon represented to consumers that a 3-piece set of Samsonite luggage was priced at and could be purchased from it for $155. 44. In fact, when a consumer clicked on this deal in the email, they were taken to the Website which presented a selection of different sizes of Samsonite luggage for purchase at different prices. The deal available on the Website was that only the single smallest piece of Samsonite luggage could be purchased for $155, and the 3-piece set of Samsonite luggage depicted in the email was only available for purchase at the price of $499. 45. On 12, 17 and 20 April 2013, Scoopon sent emails to its subscribers which contained a product deal for electric blankets. The emails were sent to approximately 705,000 subscribers. In total the emails were opened 370,342 times, and the deal was clicked on 49,188 times. The relevant part of the email stated "Single, King Single, Double, Queen, King Delivered - Fitted Electric Blankets" and specified a price of $29 without any qualification. Scoopon sold 1,563 vouchers for electric blankets. 46. By sending the emails, Scoopon represented to consumers that each of the sizes of electric blanket were priced at and could be purchased from it for $29. 47. In fact, when a consumer clicked on this deal in the email, they were taken to the Website which presented a selection of different sizes of electric blankets for purchase at different prices. The deal available on the Website was that only the smallest electric blanket, in single bed size, could be purchased for $29, and the other sizes of electric blanket were only available for purchase at prices ranging from $35 to $55. 48. Scoopon admits that, by making the representations in paragraphs 39 to 40, 42 to 43 and 45 to 46, in the circumstances referred to in paragraphs 41, 44 and 47, on each occasion in trade or commerce and in the course of supplying its services to consumer members, Scoopon on each occasion: 48.1 engaged in conduct that was misleading or deceptive, and likely to mislead or deceive, in contravention of s 18 of the ACL; and 48.2 made false or misleading representations with respect to the price of goods in contravention of s 29(1)(i) of the ACL. 7 The ACCC and Scoopon have also reached agreement as to these matters: Nature, extent and duration of conduct / circumstances in which conduct took place 97. The admitted conduct occurred at various times between May 2011 and April 2013. The contraventions affected merchants and consumers generally as well as 7 identified consumers and 1 identified merchant. In particular, the misleading representations made by way of email advertisements were each sent to between 597,839 and 705,151 email subscribers. The parties' submissions in relation to which of the contraventions arise from the same facts and which are separate, for penalty purposes, are at paragraph 127 below. 98. The contraventions were serious. They involved Scoopon making false and misleading representations in the course of promoting its services to merchants, in dealing with requests and complaints from customers and in its advertisements to consumers. The business systems and processes that Scoopon relied on at the time did not prevent the contraventions from occurring. Conduct directed to the merchant Cheeky Skin - redemption rates 99. The representation to Cheeky Skin about the likely redemption rate, referred to in paragraph 15 above, was part of a sales conversation in which Scoopon was seeking to persuade Cheeky Skin to offer a deal through the Website. It was made on the basis of research conducted of information available on the internet about the redemption rates experienced by group buying websites in the United States, the United Kingdom and China, which is referred to in paragraph 16 above. When the representation was made, Scoopon did not know whether or not the overseas experience was applicable to the deal offered to consumers by Cheeky Skin. The origin of the likely rate of non-redemption nominated by Scoopon was also not disclosed to the merchant Conduct directed to merchants - costs and risks of doing business with Scoopon 100. The representations about the costs and risks of doing business with Scoopon, which appeared on the Merchant Page of Scoopon's website, referred to in paragraphs 20 and 22 above, were misleading during the period in which Scoopon enforced clause 5.1 of the merchant terms and conditions in the way described in paragraph 25 above; that is from May 2011 to August 2011. During that period, the representations would have been read by a substantial number of merchants: around 40% of merchants contacting Scoopon during that period did so through the Merchant Page. The prominent representations were made in circumstances where Scoopon knew about the contractual provision referred to in paragraph 24 above, but did not specifically draw it to the attention of merchants. Those representations were directed to small business owners who were typically not legally represented. Conduct directed to consumers - remedies for dishonoured vouchers 101 The representations to consumers about their remedies for dishonoured vouchers, referred to in paragraph 31 above, involved Scoopon denying refunds to consumers and issuing a pro-forma response to complaints, without adequately taking into account each consumer's circumstances. These representations also occurred over an extended period of time; that is, from November 2011 to October 2012. Conduct directed to consumers - advertising to consumers 102 The representations to consumers about the price of products in Scoopon's email advertisements, referred to in paragraphs 40, 43 and 46 above, induced some consumers into visiting Scoopon's website in the belief that the relevant goods could be obtained for the price listed in the advertisement. When consumers visited the website it became apparent that the goods - as they were depicted in the email - were not in fact available at the price advertised in the email. This meant that consumers initially clicked through to the Website with inaccurate information. The representations were made in 3 deals that were emailed to subscribers between September 2012 and April 2013. As noted above, the emails containing the offending advertisements were sent to a significant number of consumers. Amount of loss caused and profit gained Conduct directed to the merchant Cheeky Skin - redemption rates 103. Since the conduct occurred, Scoopon has been able to actively monitor its redemption rates. The average redemption rate for deals that commenced after 1 September 2012, and expired on or before 30 June 2013, was approximately 72%; which is compared to the 70% redemption rate represented to Cheeky Skin. It is not known whether Cheeky Skin would have done business with Scoopon if it was told of the basis on which the estimated redemption rate was provided to it, however, it is possible that it may not have. Conduct directed to merchants - costs and risks of doing business with Scoopon 104. Whether any merchants suffered any loss or damage by reason of reliance on the representations on the Merchant Page would depend upon the specific circumstances of the merchants, including whether any invoices for refunds were issued and actually paid by the merchant, and the circumstances surrounding the refund. As noted in paragraph 25 above, merchants rarely paid the invoice. For merchants that did pay an invoice, it would depend on whether, in the individual circumstances of that merchant, the merchant relied upon the representations of the webpage in deciding to contract with Scoopon and would not have contracted with Scoopon had they been aware of the effect of clause 5.1. Conduct directed to consumers - remedies for dishonoured vouchers 105. In relation to the misrepresentations to consumers with respect to the remedies for dishonoured vouchers , the loss or damage suffered by the 7 specific consumers as a result of Scoopon's misrepresentations about their rights to refunds was small, as the cost of the vouchers for the Fiorentina and Soulfly deals was $19 and $39 respectively . 106. Because Scoopon runs many deals and sells many vouchers it is likely that other consumers (beyond the 7 specific consumers) who purchased a voucher before 31 October 2011 and unsuccessfully sought to redeem it between 1 November 2011 and 31 October 2012, in the last two weeks of the validity period of the relevant deal, were told that they did not have a right to a refund solely because they had sought to redeem their voucher in the last two weeks of the validity period. Depending on the particular circumstances of those consumers, in the context of the particular deal and the particular merchant's conduct, that may not have been correct. It is therefore likely that some of those consumers suffered the loss of the purchase price of the relevant voucher. Conduct directed to consumers - advertising to consumers 107. As consumers who sought to avail themselves of the deals offered at specific prices were not in fact able to obtain the deals at those prices, they were not out of pocket as a result. However, Scoopon sold a total of 1,879 vouchers for the products in the advertisements and may have obtained some of those sales in circumstances where the consumer would not have clicked on the deal but for the misrepresentation. 108. Further, by engaging in this conduct, Scoopon contributed to an unlevel competitive playing field. Retailers who advertised these products in a way that was consistent with the ACL could have been disadvantaged in comparison to Scoopon, and so may have lost potential customers who were instead drawn to Scoopon's website by the representations in the emails. Whether the respondent has engaged in similar prior conduct 109. The Court has not previously found Scoopon to have contravened the ACL or the CCA. Size of contravener & its financial position 110. Section 224 of the ACL does not include a provision such as that incorporated into section 76(1A) of the CCA, which measures maximum penalty by reference to 10% of the annual turnover of the company in the relevant period, as an alternative to assessing the pecuniary benefit to the company flowing from the contravention. However, capacity to pay any penalty imposed is a relevant factor for the Court to consider, as is the level of the penalty necessary to achieve deterrence in relation to a company of a particular size. 111. During the relevant period, Scoopon was one of the larger group buying businesses in Australia. Scoopon has grown rapidly since it commenced operations in 2011 and currently employs over 100 staff across Australia. 112. For the 2012 and 2013 financial years, Scoopon's total revenue, expenses and profits were as follows: Year 2011/12 financial year 2012/13 financial year Revenue $50.71M $31.72M Expenses $42.86M $18.70M Profit before tax $9.14M $6.02M Profit after tax $6.32M $4.17M

113. As at 30 June 2013, Scoopon's total assets were valued at $99.14 million and its total liabilities at $18.72 million. The deliberateness of the contravening conduct 114. Scoopon did not intend to mislead, deceive or cheat any of the merchants or consumers by the conduct set out in this document. However, the representations were deliberately made in the course of promoting its services to merchants and consumers: Conduct directed to the merchant Cheeky Skin - redemption rates 114.1 Scoopon made a representation to the merchant, Cheeky Skin, about voucher redemption rates, in the course of promoting its services to Cheeky Skin; Conduct directed to merchants - costs and risks of doing business with Scoopon 114.2 Scoopon made representations to merchants about the costs and risks of doing business with Scoopon for the purpose of promoting its services to merchants; Conduct directed to consumers - remedies for dishonoured vouchers 114.3 Scoopon made representations to consumers about their right to a remedy when a merchant would not honour a voucher by way of pro forma responses that did not take into account each consumer's particular circumstances. These responses were subject to complaints from consumers; and Conduct directed to consumers - advertising to consumers 114.4 the three separate representations in Scoopon's email advertisements to consumers were made between September 2012 and April 2013 in the course of promoting Scoopon's services to consumers. Involvement of senior employees or management 115. With the exception of the conduct referred to in paragraphs 116 and 117 below, the conduct in question was not engaged in by senior employees or management. However, it did arise because Scoopon, both in its initial start-up phase and as its business grew, did not have adequate business systems and processes necessary to prevent the conduct from occurring. Responsibility for the design and implementation of Scoopon's business systems and processes resided with senior management. Senior management have since been involved in implementing improvements to Scoopon's business systems to help ensure that Scoopon complies with its obligations to merchants and consumers. Conduct directed to merchants - costs and risks of doing business with Scoopon 116. Scoopon's senior management did not make the decisions to invoice individual merchants the amount of the entire voucher purchase price. However senior management authorised the content on the Merchant Page and the merchant terms and conditions. Conduct directed to consumers - remedies for dishonoured vouchers 117. Senior management did not make the decisions to deny refunds to consumers in the circumstances listed in paragraphs 31, 32, 34 and 35. However, Scoopon staff were following procedures and business systems put in place by the General Manager of Operations, a senior manager in Scoopon. Senior management failed to direct Scoopon staff to properly apply the consumer terms and conditions that were on the Website at the time that a consumer purchased a dishonoured voucher. Culture of compliance and corrective measures in response to contravention 118. As a result of reviews of its operations both as the business has developed and in response to specific customer feedback and complaints, and as result of its engagement with the ACCC before and as result of this proceeding, Scoopon has recognised the need to design and implement improved compliance measures, to educate its staff about the requirements of the ACL, and to change its business practices to improve both consumers' and merchants' experiences. Some of the steps that Scoopon has taken to improve its processes over time include the following: 118.1 in November 2011, Scoopon became a founding member of the ADMA Group Buying Code of Conduct, a voluntary industry code which sought to create awareness of and encourage compliance with relevant laws to the industry, including the ACL; 118.2 in February 2012, Scoopon introduced the 'Deal Tracker' system which has since been used to record the sale, redemption and (where applicable) refund of vouchers and therefore Scoopon has access to more accurate information than it had previously as to likely redemption rates. The Deal Tracker also enables Merchants to manage deals by tracking numbers of vouchers sold, redeemed, cancelled, and refunded. 118.3 Scoopon has introduced additional operational, risk management and support roles in order to improve its risk management and compliance capabilities including: 118.3.1 a General Manager of Operations role in September 2011. The General Manager of Operations manages the day-to-day operations of the business, reviews existing policies and practices, identifies the need for new policies and develops and implements compliance policies and strategies; 118.3.2 a Compliance Officer role in May 2011. The Compliance Officer handles escalations from customer service, develops escalation handling procedures and training; ensures appropriate communication between the customer service and Sales teams and conducts post-deal reviews; 118.3.3 a Risk Advisor role in November 2011, and a Risk Manager role in March 2012. The Risk Advisor and Manager vet deals to ensure regulatory and legal compliance and formulate strategies and policies to resolve any issues identified; 118.3.4 an Advertising Vetting role in July 2013. This role involves reviewing all advertising material prior to publication to ensure that the material is accurate, clear and easy to understand and otherwise compliant with the ACL ; 118.4 since 22 November 2011, Scoopon re-trained its customer service team on handling requests for refunds and audits compliance through reviews of the records of five complaints resolved by each customer service agent each fortnight and the records of one complaint addressed by each team leader each week. Each agent and team leader receives feedback based on this review; 118.5 Scoopon has developed and delivered a series of training for its staff members on compliance with the ACL which has included training delivered in July 2012 by external legal counsel, training delivered in January and June 2013 by internal legal counsel and training delivered in May 2013 in conjunction with the introduction of the new ADMA code; 118.6 from October 2011, Scoopon started to introduce altered payment terms with merchants so that they are paid in instalments during the validity period, rather than in a lump sum at the point at which the sale of the deal closed (that is, when all vouchers for the deal have been sold to consumers but prior to merchants having to service the vouchers), in order to encourage and provide incentives for merchants to service all customers that seek to redeem their voucher; 118.7 since July 2013, Scoopon sends automated emails to Scoopon customers at the mid-way point of the validity period to remind customers to use their Scoopon and to help avoid the rush of attempted bookings towards the end of the validity period. 119. While a number of the reforms were made either before or during the Relevant Period, those reforms failed to prevent instances of the conduct that post-date those reforms. This is partly because the reforms did not have and, by their nature could not have had, an immediate effect on the operation of the business. Co-operation and contrition 120. Before the commencement of proceedings and after the ACCC discussed the conduct with Scoopon, Scoopon took steps to engage with the ACCC in a constructive and open process to seek to resolve the matters arising from the ACCC's investigation. After that investigation was completed and this proceeding was commenced, Scoopon continued that process. It has made admissions, and has reached agreement with the ACCC as to the relevant facts and the proposed terms of relief, at an early stage, and shortly after proceedings were instituted. Scoopon's cooperation, and desire to improve its compliance processes (including the steps already taken as set out in paragraph 118 above), is a mitigating factor in favour of Scoopon. 121. Scoopon's cooperation has avoided the need for a contested hearing in the matter, which would consume time and resources of the Court and regulator, as well as requiring affected consumers and merchants to provide evidence. 122. The proposed penalty includes a significant discount for voluntary acknowledgement of liability and co-operation. Had Scoopon not cooperated and had liability been established following a contested trial, the ACCC would have sought significantly higher penalties. 8 I have taken into account all of the admitted facts relating to each contravention and all of the contextual considerations relating to those contraventions and matters relevant to the relief sought by the applicant. 9 As to the penalty, one of the important considerations (ACCC v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 at 309 [39]) is that the penalty must be of sufficient magnitude to achieve general deterrence within the industry relating to "group buying" practices. The parties jointly submit that the proposed penalty, which is a significant penalty, together with the other orders proposed, sufficiently deters repetition of the contravening conduct. 10 The maximum penalty for a body corporate for each act or omission that relates to a provision of Part 3-1 of the ACL, which includes s 29 of the ACL, is $1.1 million (see Item 2 of s 224(3) of the ACL). The statutory maximum penalty necessarily invites comparison between that class of case which reflects the worst possible case, and the case presently before the Court. The maximum penalties selected by the Parliament for the class of conduct in question necessarily provide a degree of measurement of the Parliament's view as to the seriousness of the contraventions in question. That factor must be weighed in the balance with all other relevant factors: Markarian v The Queen (2005) 228 CLR 357 at 372 [31]. 11 The total number of contraventions of s 29 of the ACL recited in the proposed declarations is 14 contraventions. These contraventions comprise two contraventions of s 29(1)(g) of the ACL, four contraventions of s 29(1)(i) of the ACL and eight contraventions of s 29(1)(m) of the ACL. However, the parties have put the following joint submission to the Court (leaving aside footnotes) which I accept: 127. Pursuant to s 224(4)(b) of the ACL, Scoopon's admissions give rise to 12 contraventions of ss 29(1)(g), (i) and (m) of the ACL in relation to which penalties are sought. The contraventions of ss 29(1)(g) and 29(1)(i) referred to in paragraph 27 [quoted earlier in these reasons] arise out of the same conduct and therefore Scoopon is only liable to one penalty in respect of that conduct. The parties also consider that the contravention of s 29(1)(m) in paragraph 33 [quoted earlier in these reasons] overlaps with the conduct in paragraph 36 [also quoted earlier in these reasons] and as such, pursuant to s 224(4)(b) of the ACL Scoopon is liable for penalties in respect of seven contraventions arising from representations made to seven individuals, rather than eight, separate contraventions of s 29(1)(m) of the ACL. 12 It follows that the maximum penalties under consideration in respect of the conduct are $1.1 million for each of 12 contraventions of s 29 of the ACL and thus the total maximum penalty would be $13.2 million. 13 In determining the appropriate penalty in respect of the various contraventions, it is important to take into account the totality principle and thus the total penalty for related contraventions ought not exceed what is proper for the entire contravening conduct: ACCC v Australian Safeway Stores Pty Limited (1997) 75 FCR 283 at 243; TPC v TNT Australia Pty Ltd (1995) ATPR 41-375 at 40,169; and ACCC v Baxter [2010] FCA 929 at 22. 14 The aim of applying the totality principle in the assessment of a pecuniary penalty is to ensure that the overall penalty is appropriate and that the sum of the penalties imposed for each of the several contraventions does not result in the total of the penalties exceeding a penalty which is proper and proportionate having regard to the totality of the contravening conduct under examination. The approach to be adopted is to assess an appropriate penalty for each contravention and then weigh in the balance overall, a consideration of the sum of the penalties thus determined to ensure proportionality having regard to the totality of the contravening conduct. 15 In assessing a pecuniary penalty in relation to each of the contraventions and particularly in relation to the contraventions described at paras 37 to 98 of the joint submission which concerned conduct in relation to products called Ugg Boots, Samsonite luggage and electric blankets, I note the concession that the conduct was serious. 16 I also note that it is common ground between the parties at para 114 of the joint submission that Scoopon "did not intend to mislead, deceive or cheat any of the merchants or consumers by the conduct" set out in the joint submission. 17 I also note that the representations were, however, "deliberately made in the course of promoting its services to merchants and consumers". 18 Having regard to all of the relevant factors, I am satisfied that the appropriate penalties are these:
     1. In relation to the contravention of s 29(1)(g) of the ACL concerning the non-redemption rates described in para 17 of the joint submission, the penalty is $100,000.00.
     2. In relation to the contravention of either s 29(1)(g) or s 29(1)(i) of the ACL concerning the costs and risks of doing business with Scoopon described in para 27 of the joint submission, the penalty is $180,000.00.
     3. In relation to each of the seven contraventions of s 29(1)(m) of the ACL concerning the consumer specific representations about remedies for dishonoured vouchers described in para 36 of the joint submission, the penalty is $90,000.00 constituting a total penalty for the seven contraventions of $630,000.00.
     4. In relation to each of the three contraventions of s 29(1)(i) of the ACL concerning Scoopon's advertisements to consumers described in para 48 of the joint submission, the penalty is $30,000.00 constituting a total penalty for the three contraventions of $90,000.00. 19 I am satisfied that a total pecuniary penalty in the amount of $1 million ought be imposed upon Scoopon pursuant to s 224 of the ACL as an appropriate total penalty for the admitted contraventions. 20 I am satisfied that it is appropriate to make the declarations and grant the injunctions sought by the parties and make the other orders as sought by the parties jointly concerning the compliance program to be undertaken by the respondent, the undertaking of a community service program and the payment of costs in a fixed amount. 21 Orders will be made in terms of the orders proposed jointly by the parties. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.