Australian Competition and Consumer Commission v Valve Corporation

Australian Competition and Consumer Commission v Valve Corporation - [2016] FCA 1553 - FCA 2016 case summary — Zoe

Between 1 January 2011 and 28 August 2014, the respondent, in trade or commerce, in connection with the supply of goods, represented to consumers located in Australia (Australian Consumers) in the Steam Subscriber Agreement (SSA), which was displayed on http://store.steampowered.com (Steam Website) and on the Steam delivery platform (an application that an Australian Consumer can download from the Steam Website and install on their computer (Steam)), that the respondent had no obligation to offer a refund for digitally downloaded video games they had purchased: 1.1 when, in fact, by s 259(3) and s 263(4) of the Australian Consumer Law, those consumers had an entitlement to a refund at the consumer's election in the event of a major failure in complying with the consumer guarantee of acceptable quality in s 54 of the Australian Consumer Law and where the consumer had rejected the goods, and by s 64 of the Australian Consumer Law that consumer guarantee and the rights to which it gave rise could not be excluded, restricted or modified by contract, 1.2 and thereby: (a) engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and (b) made false or misleading representations concerning the existence, exclusion or effect of a consumer guarantee in contravention of s 29(1)(m) of the Australian Consumer Law.
Between 1 January 2011 and 28 August 2014, the respondent, in trade or commerce, in connection with the supply of goods, being digitally downloaded video games, represented to Australian Consumers in the SSA, which was displayed on the Steam Website and on Steam, that it had excluded statutory guarantees and/or warranties of acceptable quality: 2.1 when, in fact, by s 64 of the Australian Consumer Law it is not possible for a supplier of goods to exclude the consumer guarantee of acceptable quality in s 54 of the Australian Consumer Law, 2.2 and thereby: (a) engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and (b) made misleading representations concerning the existence, exclusion or effect of a consumer guarantee in contravention of s 29(1)(m) of the Australian Consumer Law.
From around 1 January 2011 to around July 2014, the respondent, in trade or commerce, in connection with the supply of goods, represented to Australian Consumers on the Steam Website through the Steam Refund Policy that the respondent had no obligation to offer those consumers a refund for digitally downloaded video games they had purchased from the respondent: 3.1 when, in fact, by s 259(3) and s 263(4) of the Australian Consumer Law, those consumers had an entitlement to a refund at the consumer's election in the event of a major failure in complying with the consumer guarantee of acceptable quality in s 54 of the Australian Consumer Law and where the consumer had rejected the goods, and by s 64 of the Australian Consumer Law that consumer guarantee and the rights to which it gave rise could not be excluded, restricted or modified by contract, 3.2 and thereby: (a) engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and (b) made misleading representations concerning the existence, exclusion or effect of a consumer guarantee in contravention of s 29(1)(m) of the Australian Consumer Law.

[5]

In respect of the contraventions of s 29(1)(m) of the Australian Consumer Law (as set out in the Competition and Consumer Act 2010 (Cth), Sch 2) and the subject of declarations 1, 2 and 3 above, the respondent pay to the Commonwealth within 30 days the sum of $3 million by way of pecuniary penalty under s 224(1) of the Australian Consumer Law.
The respondent, whether by itself, its servants, agents, or otherwise, is restrained for a period of 3 years from the date of these orders in connection with the supply or possible supply of digitally downloaded video games, from representing in communications to Australian Consumers, in trade or commerce, whether in the Steam Subscriber Agreement or on the Steam Website, that the respondent: (a) is under no obligation to offer refunds to Australian Consumers for video game subscriptions acquired from the respondent; (b) is under no obligation to refund the subscription fee paid for any video games made available to Australian Consumers which are not of acceptable quality; (c) does not, with respect to its dealings with Australian Consumers, regard itself as being subject to the consumer guarantees of acceptable quality in s 54 of the Australian Consumer Law; or (d) is able, with respect to its dealings with Australian Consumers, to exclude, restrict or modify the consumer guarantee of acceptable quality in s 54 of the Australian Consumer Law.
For a period of 12 months after 20 February 2017, for the benefit of Australian Consumers logging onto the Steam Website from a computer with an Australian IP address (based on the IP look up table available to the respondent current as at the consumer's login), the respondent will publish on the home page of the Steam Website a link, in a typeface of at least 14 point Times New Roman, reading "IMPORTANT NOTICE ABOUT CONSUMER RIGHTS IN AUSTRALIA", which directs them to a notice in the terms set out in Annexure A1 ("Consumer Rights Notice").
Pursuant to s 246(2) of the Australian Consumer Law, the respondent is: (a) within 90 days of this order, to establish and implement an Australian Consumer Law Compliance Program to be undertaken by each employee of the respondent or other person involved in the respondent's business who deals or who may deal with Australian Consumers, being a program designed to minimise the respondent's risk of future contraventions of s 18 and s 29 of the Australian Consumer Law in relation to the operation of the consumer guarantees under Part 3-2, Division 1 of the Australian Consumer Law; and (b) for a period of 3 years from the date of this order, maintain and continue to implement the Australian Consumer Law Compliance Program referred to in order 4(a) above.
The parties, and any other interested party, have liberty to apply for the continued suppression, or for publication, of the two amounts referred to in [53] in the reasons for decision concerning penalty. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[7]

EDELMAN J: Introduction [1] Background and liability findings [4] The appropriate declarations [5] Pecuniary penalties [7] Legal principles [8] The particular factors raised by the parties [19] (i) The nature and extent of the contraventions including the period of the contraventions [19] (ii) The nature and extent of any loss or damage suffered and the profits "caused by" contraventions [24] (iii) Valve's culture of compliance [38] (iv) Deliberateness of the contraventions and the involvement of senior management [46] (v) The size of Valve, market share, and its financial position [50] (vi) Co-operation with the ACCC, admission of culpability, compensation and contrition [56] (vii) Previous contraventions and previous conduct [65] Comparable cases and conclusion [66] Injunctions [74] Disclosure and advertisement orders [80] Non-party consumer redress [93] Compliance program [96] Conclusions and costs [103]

[12]

Legal principles 8 The legal principles to apply in relation to pecuniary penalties were not in dispute. Section 224(2) of the Australian Consumer Law provides that, in determining the appropriate pecuniary penalty, the court must have regard to all relevant factors including: (i) the nature and extent of the act or omissions and of any loss or damage suffered as a result of the act or omission; (ii) the circumstances in which the act or omission took place; and (iii) whether the person has previously been found by a court in proceedings under Chapter 4 or Part 5-2 to have engaged in any similar conduct. 9 Section 224(3) of the Australian Consumer Law has the effect that the maximum penalty for each act or omission involving a contravention of s 29(1)(m) of the Australian Consumer Law is $1.1 million. 10 A number of cases have described a non-exhaustive list of additional factors: see Trade Practices Commission v CSR Limited (1991) ATPR 41-076, [52,152]-[52-153] (French J); NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285, 292 (Burchett and Kiefel JJ); and Australian Competition and Consumer Commission v Woolworths [2016] FCA 44 [124]-[126]. Apart from the circumstances of the conduct generally, the particular factors upon which the parties in this case focussed were: (i) the nature and extent of the contraventions including the period of the contraventions; (ii) the nature and extent of any loss or damage suffered and the profits associated with the contraventions; (iii) Valve's culture of compliance; (iv) deliberateness of the contraventions and the involvement of senior management; (v) the size of Valve, market share, and its financial position; (vi) co-operation with the ACCC, admission of culpability, compensation and contrition; and (vii) previous contraventions and previous conduct. 11 Each of these factors is considered below. However, two preliminary points should be made about the assessment of the factors generally. The first concerns deterrence and the second concerns courses of conduct. 12 As to deterrence, Burchett and Kiefel JJ said in NW Frozen Foods that "[t]he Court should leave no room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay" (294-295). The deterrent must be effective which requires that it be set at a "meaningful level": Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169, 174 [18] (Finkelstein J). 13 As to the "course of conduct" principle, this principle requires consideration of whether multiple contraventions arise out of the same course of conduct and, if so, the proportionality of the penalty to the conduct. I discussed this principle in some detail in Australian Competition and Consumer Commission v Woolworths [116]-[121]. It is, however, important to emphasise, as Beach J did in Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 [24] that the penalty should still reflect the seriousness of the contraventions and the principle does not require the penalty to be limited by the prescribed statutory maximum penalty for any single contravening act or omission (i.e. $1.1 million) where the course of conduct involves a series of contraventions. His Honour continued, at [25]: Further, the "course of conduct" principle does not have paramountcy in the process of assessing an appropriate penalty. It cannot of itself operate as a de facto limit on the penalty to be imposed for contraventions of the ACL. Further, its application and utility must be tailored to the circumstances. In some cases, the contravening conduct may involve many acts of contravention that affect a very large number of consumers and a large monetary value of commerce, but the conduct might be characterised as involving a single course of conduct. Contrastingly, in other cases, there may be a small number of contraventions, affecting few consumers and having small commercial significance, but the conduct might be characterised as involving several separate courses of conduct. It might be anomalous to apply the concept to the former scenario, yet be precluded from applying it to the latter scenario. The "course of conduct" principle cannot unduly fetter the proper application of s 224. 14 The ACCC accepted that the differing representations in the Steam Subscriber Agreement constituted a single course of conduct. But it said that the representation in the Steam Refund Policy constituted a distinct course of conduct for three reasons: (1) the representations were made in different documents; (2) the Steam Subscriber Agreement and Steam Refund Policy were displayed to consumers at different stages in the overall transaction and consumer experience. The Steam Subscriber Agreement was the "front line" document displayed to every consumer during every transaction, as well as when that consumer downloaded the Steam Client software and established a Steam account. Consumers were generally directed back to the Steam Subscriber Agreement when they sought a refund. In contrast, the Steam Refund Policy was a webpage on the Steam website which consumers had to search for and then elect to access; and (3) the representations made in the Steam Subscriber Agreement and the Steam Refund Policy respectively were made over different time periods. 15 In contrast, Valve submitted that all of its representations should be characterised as a single course of conduct for seven reasons: (1) the Contractual Exclusion of Statutory Guarantee Representation and Contractual Modification of Statutory Guarantee Representation are effectively contractual manifestations of the No Entitlement to Refund Representation; (2) the No Refund Policy Representation is a summarised version of the No Entitlement to Refund Representation, the Contractual Exclusion of Statutory Guarantee Representation and the Contractual Modification of Statutory Guarantee Representation; (3) the No Entitlement to Refund Representation, Contractual Exclusion of Statutory Guarantee Representation and the Contractual Modification of Statutory Guarantee Representation consist of contractual provisions which reflect Valve's business policy decision of not offering refunds to consumers for digitally downloaded video games acquired from Valve; (4) the contractual provisions formed part of the same Steam Subscriber Agreements which attracted the Court's adverse findings; (5) the four misrepresentations were directed to the same outcome, namely not to offer consumers any refunds from Valve for digitally downloaded video games purchased from Valve; (6) the conduct involved in making the four representations were very closely related in that they each sought to give effect to Valve's business policy of not offering consumers any refunds for digitally downloaded video games acquired from Valve; and (7) despite the fact that the No Entitlement to Refund Representation, Contractual Exclusion of Statutory Guarantee Representation, and Contractual Modification of Statutory Guarantee Representation were published on the Steam Subscriber Agreement while the No Refund Policy Representation was published on the Steam website, ultimately all the representations: (a) were only available on, and formed part of, the Steam website; (b) were to the same effect - namely, that Valve did not offer consumers any entitlement to refunds from Valve for digitally downloaded video games acquired from Valve; and (c) were misleading for the same reason - they conveyed to consumers that they were not entitled to a refund when in fact, under Australian law, they might have been. 16 Ultimately, the difference in characterisation makes little difference in this case. As counsel for the ACCC pointed out, in her cogent and extremely helpful submissions, this was a case where there were potentially many thousands of contraventions. The statutory maximum penalty, if one were to attempt to calculate it, would be at least hundreds of millions of dollars. 17 In determining the penalty which is proportionate to the contraventions it is relevant that all of the representations ultimately derive from Valve's policy decision not to offer consumers an entitlement to refunds. At that high level of generality the representations might be described as involving one course of conduct. Nevertheless, the representations which were made on the Steam website and in the Steam Subscriber Agreement were made in different places, potentially seen by different consumers, and involved different wording. At that lower level of generality they involved two courses of conduct. 18 If it were necessary to decide this point I would conclude that there are sufficient differences in the conduct for the appropriate characterisation to be that there were two courses of conduct, and I have imposed separate penalties to reflect that, aggregated in the single order. However, all of the factors mentioned by the parties are relevant considerations in the assessment of penalty and its proportionality to the contravening conduct. In calculating the total penalty I do not consider that anything turns upon whether the label "one course of conduct" or "two courses of conduct" is attached to the conduct in this case.

[13]

(i) The nature and extent of the contraventions including the period of the contraventions 19 Valve submitted that the contravening conduct took place in a "relatively narrow time period". It is unclear what this means. The misrepresentations in both the Steam Subscriber Agreement and on the Steam website all took place over more than three and a half years. I explain below that although it is impossible to calculate the precise number of consumers who were affected by the misrepresentations, a significant number of consumers would have been affected by it. 20 As I also explain below, although I am not satisfied that the misrepresentations would even have been read by many of Valve's consumers (by which I mean a significant proportion of Valve's consumers), in the context of an approximate figure of 2.2 million subscriber accounts, even if a very small percentage of Valve's consumers had read the misrepresentations then this might have involved hundreds, possibly thousands, of consumers being affected. 21 Although I have referred to a unitary figure of 2.2 million subscriber accounts in these reasons, this is just a broad approximate figure which changed over the relevant period. Further, a person could hold more than one subscriber account, although some evidence suggested that the range of customers holding active subscriber accounts with items of value was between 876,188 customers (in 2011) to 1,834,726 customers (in 2015). Although the number of subscriber accounts was not the same as the number of customers, it is convenient to use that figure (which the parties had used in evidence). The figure came from the evidence given at the liability hearing by Valve's General Counsel, Mr Quackenbush. 22 Over the three and a half year period, every customer who purchased or accessed a game on Steam was required to agree to the terms and conditions in the Steam Subscriber Agreement. The box signifying this approval by an Australian customer was ticked 24.9 million times over the relevant period. Further, when an Australian consumer attempted to seek a refund, the consumer would often be directed by Steam support staff back to the terms of the Steam Subscriber Agreement. 23 The misrepresentations involving contraventions were significant. As Perram J said in Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) [2011] FCA 382; (2011) 279 ALR 609, 630 [96]: It is appropriate that it should be made plain to retailers in the position of companies such as the respondents that misrepresenting to consumers what their warranty rights are is an unacceptable form of commercial conduct and illegal. It is appropriate, therefore, to encourage retailers not to give consumers the impression either that their statutory rights are curtailed or non-existent or that warranties can only be obtained through payment.

[14]

(ii) The nature and extent of any loss or damage suffered and the profits "caused by" contraventions 24 Valve submitted that there was no evidence from which a conclusion could be confidently drawn that any Australian consumers were adversely affected by the contravening conduct and that there was no evidence of profits to Valve or loss to consumers. I accept this submission. The ACCC expressly stated that it had not sought to quantify the actual loss and damage to consumers caused by the contravening conduct. This does not mean that Australian consumers might not have suffered losses, or that Valve might not have profited from the contraventions. It means only that it was not proved that this was the case. The contrary was also not proved. 25 It was appropriate that the ACCC did not attempt to prove any causally related profits. I have likewise not attempted to do so. However, I do not accept Valve's submission that any effect on consumers was "minimal". In order to explain why I conclude that Valve's conduct had a substantial effect on consumers (although I cannot reach any conclusion about causation), it is necessary to explain a very important distinction between, on the one hand, labels such as "common sense", "contribution" or "material contribution", and, on the other hand, the label "causation". These labels are sometimes erroneously conflated. It is essential in this context, as well as in the context of non-party consumer redress below, to keep the concepts separate. 26 The High Court has said on a number of occasions that "it is doubtful whether there is any 'common sense' approach to causation which can provide a useful, still less universal, legal norm": most recently, see Comcare v Martin [2016] HCA 43; (2016) 91 ALJR 29, 35 [42] (the Court). The concept of common sense is further abused if it is used to treat contribution and causation as though they were the same concept. As a matter of metaphysics, for which no authority could be required, contribution is different from causation. The former signifies merely involvement in a process, without being necessary for the outcome. Something which makes no difference to an outcome does not "cause" the outcome. Causation requires that the event is necessary for the outcome. If authority is needed then, as Heydon J said in Amaca Pty Ltd v Booth [2011] HCA 53; (2011) 246 CLR 36, 91 [149], referring to March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 515-516, the "but for" test is a necessary test of causation (although it is not always sufficient for liability). 27 In summary, to speak in this context of the "contribution" of events (involving contravention) to an outcome (profits or loss) is to accept that but for the events the profits or loss might have happened in any event. In this sense, "contribution" says little more than that the contributing event was part of the process involved in the business. It is a basic error to describe a "contributing" event in the language of "causation" which suggests the more serious consequence that the profits would not have been made but for the contravening conduct. Counsel for the ACCC, in carefully and thoughtfully formulated submissions, did not make this error. In this section I explain why the misrepresentations by Valve were a part of its business process involved in making profits although such causally related profits, and corresponding loss to consumers, cannot be determined (in any proper sense of the word "causation"). 28 On the one hand, the misrepresentations by Valve were unlikely to induce any consumer to make a purchase that he or she would not otherwise have made. If they had any effect prior to a purchase, which I doubt, it would have been the opposite. A consumer who read and relied upon the misrepresentations might not have made a purchase. 29 On the other hand, a loss that might have been suffered, and profit that Valve might have made from its contraventions, arose if a consumer was deterred from seeking a refund to which he or she might otherwise have been entitled or if a consumer were refused a refund for reasons based upon the misrepresentations. I am satisfied, based on the combination of evidence at the liability hearing and the penalty hearing, that a significant number of consumers would have read either the terms and conditions in the Steam Subscriber Agreement or the terms of the Steam Refund Policy. This is particularly so if the consumers had a problem with games that they purchased. I reach this conclusion for three reasons in combination. 30 First, as I have explained above, over a three and a half year period, the box signifying a customer's approval to the Steam Subscriber Agreement was ticked 24.9 million times over the relevant period in Australia. 31 Secondly, when an Australian consumer attempted to seek a refund, the consumer would often be directed by Steam support staff back to the terms of the Steam Subscriber Agreement. 32 The number of Australian consumers who attempted to seek refunds during the relevant period was likely to be in the thousands, and potentially more than 20,000 (even ignoring any potential consumers who were deterred from seeking refunds by the Steam Subscriber Agreement or Steam Refund Policy). This inference is based upon Valve's answer to interrogatory 7, which was as follows: …The only source of information available to Valve to make an estimate of the number of refund requests during the period are the records of support communications with subscribers, which are captured in Valve's system in the form of electronic "tickets". Support tickets that include a refund request are not captured and isolated from the tens of millions of other communications Valve receives from its subscribers. These tickets take the form of unstructured text similar to an email. The tickets are not tagged or organized by jurisdiction, game or subject. While it is possible to sort tickets by their date, it is not possible to reliably identify the country of origin of those tickets. In order to make an estimate of the number of refund requests Valve has received from Australian consumers during the period, Valve's IT team has endeavoured to interrogate its ticketing system by undertaking a three-step search: first, to identify tickets from the relevant time period; second, to identify those tickets which include an IP address listed as Australian; and third, to undertake a Boolean word search for occurrence of the English language word "refund" in the text of the tickets meeting the first two criteria. Based on this search methodology, Valve has isolated 21,124 tickets sourced from consumers with Australian IP addresses which contain the English word "refund".… 33 It is likely that a large proportion of these 21,124 tickets involved requests for refunds. Indeed, Valve gave refunds to 15,127 Australian subscribers during this period. Valve's evidence on this point, which I accept, was that it gave refunds in circumstances where it could determine that a customer was unable to install a game, or unable to play it, or where a subscriber purchased the wrong version of a game by mistake. Two of the three complainants who gave evidence at the liability hearing were given refunds. 34 Thirdly, although two of the three consumers who gave evidence in these proceedings did not refer to the Steam Subscriber Agreement in their correspondence or their evidence, the Steam Refund Policy was easily accessible on the Steam website and some consumers were likely to have viewed it if they had problems with games. Two of the consumers who gave evidence had apparently read the Steam Refund Policy. Mr Miller said in his affidavit that although he thought that he would not be able to obtain a refund, he thought that he would try anyway. Versions of the Steam Refund Policy also referred back to the Steam Subscriber Agreement, with reference to the specific sections concerning refunds. 35 Despite the existence of a significant number of consumers who I conclude, based on the evidence from the liability and penalty hearings, would have read the terms and conditions or the Steam Refund Policy, I am not satisfied that any profit to Valve or loss to the consumers was proved to have been caused by these contraventions. 36 Any profit to Valve from its contravening conduct would have been in relation to those consumers who were entitled to a refund but were (i) deterred from even seeking a refund by the contravening conduct, or (ii) sought a refund but were not given one as a result of the misrepresentations and who then abstained to take any enforcement action. 37 Even if it could be assumed, in relation to (ii), that the 5,997 consumers who referred to a refund in their communications with Valve were refused it and had been referred to the misrepresentations, there would only be a relevant causal loss to the consumer or causal profit to Valve if the consumer was entitled to the refund under the provisions of the Australian Consumer Law including s 262(1). But there was no evidence from which any inferences about entitlement could be drawn and the ACCC did not seek to draw any such inference. It is impossible to reach any conclusion about any number of consumers who would have suffered loss or the amount of profit involved. However, for the reasons I have given, the misrepresentations were a significant part of Valve's business process involved in making profits.

[15]

(iii) Valve's culture of compliance 38 Valve's culture of compliance was, and is, very poor. Valve did not put before the Court any evidence of any written compliance policy. The evidence suggests that at least prior to the involvement of the ACCC in April 2014, Valve had little regard for Australian law. Even at the date of this penalty hearing, there were aspects of the evidence from Mr Quackenbush that were disturbing. 39 Prior to, or during, the period of contraventions until the involvement of the ACCC in April 2014, Valve did not obtain legal advice about its position in Australian law. In something of an understatement, Mr Quackenbush said that Valve "certainly could have afforded that advice". He said that Valve could have sought it "if it had occurred to us". However, he said that he did not turn his mind to whether Australia legal guarantees applied to Valve because of the "way we think about our legal position in the world" (ts 11). 40 Mr Quackenbush had therefore formed his view about the applicability of Australian law, and Valve had reached conclusions about its "legal position in the world" including Australia, without having obtained any legal advice in Australia. Mr Quackenbush went further. He said that he was not even sure that Valve would have done anything different even if it had received legal advice that Valve was subject to Australian law (ts 11). Even in hindsight, Mr Quackenbush did not accept that it would have been prudent to obtain legal advice about Valve's position in Australian law (ts 11). 41 This bespeaks a very poor culture of compliance in relation to Australian operations. Valve is a United States company with 2.2 million Australian accounts which received 21,124 tickets in the relevant period containing the word "refund" from consumers with Australian IP addresses. Yet it had a culture by which it formed a view without Australian legal advice that it was not subject to Australian law, and it was content to proceed to trade with Australian consumers without that advice and with the view that even if advice had been obtained that Valve was required to comply with Australian law the advice might have been ignored. 42 It would not have taken much research for Valve to have discovered that there was a significant view in Australia that overseas corporations are not immune from Australian law. The ACCC produced significant evidence of press releases that it had published such as one on 6 May 2010 which included: ACCC chairman Graeme Samuel said these proceedings showed the ACCC's willingness to pursue proceedings against overseas corporations when such corporations engaged in conduct in Australia which affected Australian consumers. 43 Mr Samuel continued, "International corporations are on notice that if they mislead or deceive Australian consumers they will risk similar court action by the ACCC". Another matter concerning a culture of compliance about which Mr Quackenbush was cross-examined related to the extent to which Valve's 50 support staff were given written guidance. That guidance was very limited. They had quick text templates such as "As with most software products, we do not offer refunds or exchanges for purchases made on our website or through the Steam Client". But these were produced by the support team. Pursuant to an order for discovery in March 2015, Valve said that it did not have any training manuals or other documents used in providing training to Steam support staff in the relevant period relating to requests for refunds made by Australian consumers for video games or subscriptions supplied by Valve. 44 On 11 August 2016, the ACCC issued Valve with a notice to produce documents recording directions or instructions given by Mr Quackenbush to Steam support staff in relation to the rights of Australian consumers. Valve's response was that it had nothing to produce. Mr Quackenbush said in evidence that he gave the support staff only oral compliance instructions (which had been based on legal advice that he received from K&L Gates) because "They're a pretty efficient bunch. A very mature bunch" (ts 19). In written submissions Valve maintained that it did not need to provide any written guidance about the Australian Consumer Law to its 50 support staff because "verbal [by which was meant oral] tuition is a perfectly valid and effective means of providing staff training". 45 Valve's attitude to compliance was not one of a culture of proactive compliance. It was instead one in which it would take steps toward compliance if a regulator or court required it or sought it. Hence, Valve submitted that "[w]here Valve becomes aware that it is subject to specific jurisdictional requirements, it is prepared to ensure compliance". In Europe, it has specific compliance measures because it became "aware that by having a subsidiary located in [that] jurisdiction it is required to implement specific compliance measures". In New Zealand it updated its Steam Subscriber Agreement on 1 January 2016 after an inquiry from the New Zealand Commerce Commission. Valve's approach was, and continues to be, only reactive.

[16]

(iv) Deliberateness of the contraventions and the involvement of senior management 46 The contraventions were not covert or deliberate in the sense of being in wilful disregard of Australian law although, as I have explained above, Valve did not attempt to determine what Australian law might be. Valve's contravening representations were made in worldwide generalised agreements and policies. It would not have been difficult to modify the worldwide agreement for Australia. As I have explained, in 2012 specific carve outs were made for countries within the European Union (albeit where consumers contracted with a Valve subsidiary). And in 2016 an updated Steam Subscriber Agreement was created with a carve out for New Zealand. 47 I accept that Valve believed, albeit without obtaining local legal advice, that it was not subject to local law despite having servers in Australia, 2.2 million subscriber accounts in Australia, and tens of thousands of dollars of expenses in Australia. The belief was based upon matters including the locus of Valve's operations being within Washington State and its operations being conducted through the internet. There was also no evidence that Valve's policies were inconsistent with the laws of Washington State. 48 I do not consider that the issues concerning the application of the Australian Consumer Law to overseas corporations in Valve's position were so clear that, despite the absence of any determinative judgment on the point, overseas corporations must have known that they were subject to local law. This reduces the extent of general deterrence that is required. It might be expected, therefore, that other things remaining equal, subsequent penalties on corporations in Valve's position will be higher. Nevertheless, Valve did not obtain any legal advice and, as I have explained, even if Valve had decided to obtain legal advice it might not have followed it if the legal advice had informed it that it was subject to Australian law. 49 The incautious approach by Valve, and its lack of a culture of compliance, was one which permeated from the levels of senior management. As Valve submitted, it operated, and operates, a flat management structure. Valve's approach to compliance, and its lack of concern to obtain any legal advice about local law, came from as high up as its General Counsel, Mr Quackenbush, who reviewed the Steam Subscriber Agreement from time to time and who assumed responsibility for amendments to it between 2011 and 2015.

[17]

(v) The size of Valve, market share, and its financial position 50 Prior to this remedies hearing Valve made applications for confidentiality orders concerning its financial information. The background and reasons why those applications were dismissed are explained in my reasons for decision in Australian Competition and Consumer Commission v Valve Corporation (No 6) [2016] FCA 1348. It suffices to say that there was hot dispute about whether any of the information which Valve claimed to be confidential was anything more than non-public information and, in some instances, information about which public estimates had been made and about which rivals had published their details. 51 During the oral hearing my initial impression was that it was not necessary to refer to any of Valve's financial details in my reasons for decision. This was because counsel for Valve accepted in open court that the evidence was such that a proposed penalty such as $250,000 was, for Valve, "next to nothing" (ts 57). However, on reflection, the financial data was a matter which I took into account in reaching my conclusion and transparency requires that I should set out the most relevant information. Although Valve's evidence about prejudice to it from disclosure of the information in the paragraph which follows was generally vague, I accept that the information to which I refer is not publicly available and that prejudice to Valve is possible and would be very difficult to measure or quantify. At the moment I consider that in the administration of justice the financial information in paragraph [53] should be suppressed for twelve months. If Valve asserts that disclosure of the historical information would cause prejudice to it after that time then before the expiry of that time it can apply, with more adequate evidence in support, for further suppression. But, at the moment, I find it very difficult to see why further suppression beyond a year would be necessary. 52 In some respects, Valve is an enormous corporation. Although Valve's market share was not estimated, and was said not to be measurable, Valve acknowledges that it is one of the leading global online entertainment platforms for video games, albeit in a competitive market. Valve's size is enormous if measured by its customer base where Valve had, on one estimate, 100 million subscriber accounts worldwide at times during the period of contraventions (and approximately 118 million in 2015). At the relevant times it had around 2.2 million subscriber accounts in Australia. There was some dispute about these numbers, including the precise number of active accounts and the number of accounts which contained anything of value. But, on any view, the number was enormous, with more than 60 million active accounts of value by 2014. 53 Valve's revenue and net income worldwide is also massive. The approximate net income (ie income after expenses), in United States dollars, derived by Valve from all sources between 2011 and August 2014 (very roughly approximated by dividing the income for 2014 in half) is around [SUPPRESSED]. The massive net income of Valve worldwide is a relevant factor, but it is also relevant that the contravening conduct all incurred in Australia where its net income was much smaller. Approximate net income, calculated on the same basis arising from purchases by Australian subscribers between 2011 and August 2014 is around [SUPPRESSED]. 54 In other respects, Valve might be said to be smaller. It has only 325 employees and 324 of these operate from a single office in the State of Washington. Its European subsidiary has one permanent staff member and its German subsidiary will have one permanent staff member. 55 Valve's streamlined size relative to its massive customer base means that its terms and conditions and policies assume considerable importance. As Valve submitted, in 2014 it processed nearly 3 million transactions per week. This requires Valve to engage an external company called BluePrint, which has 200 staff, to assist with enquiries from subscribers. As Valve acknowledged, the number of personnel employed and engaged, and the number of different languages used by subscribers, means that telephone support is not practical.

[18]

(vi) Co-operation with the ACCC, admission of culpability, compensation and contrition 56 The extent to which a penalty which I would impose could be mitigated by factors such as co-operation with the ACCC, admission of culpability, compensation, and contrition is seriously limited. 57 As for an admission of culpability, Valve remained resolute that it was not liable. Although Valve amended its 2014/2015 refund policy on its website from 1 June 2015, clarifying that its policy was subject to local law, and although the new refund policy has not been the subject of any complaint by the ACCC, this was not done due to contrition or any acceptance of responsibility. 58 As to contrition generally, it was unclear in Mr Quackenbush's evidence at the remedies hearing whether he even accepted the decision of this Court (ts 10). Eventually, in response to a leading question in re-examination he agreed that "as at today's date in light of the court's judgment that as things presently stand, Valve is bound by the court's rulings" (ts 36). There was no evidence that Valve was contrite for its contraventions. It is not therefore necessary to descend into the detail of the extent to which, as the ACCC alleged, Valve continued to publish on its website (as at 1 July 2016) a version of the Steam Subscriber Agreement that made the same misleading representations that had been found at the liability hearing, or the extent to which its new policy on refunds might still contravene the Australian Consumer Law. 59 As to co-operation, Valve proceeded through a contested trial, as was its liberty to do. Valve contested liability on almost every imaginable point, including jurisdictional issues. 60 The ACCC also alleged that Valve took an obstructive approach to discovery. Mr Quackenbush was cross-examined in the remedies hearing including about Valve's approach to discovery. Although I consider that Mr Quackenbush's evidence was generally honest, he became very evasive when dealing with questions about discovery. For instance, despite the number "zero" next to the category, he claimed not to know that no documents were produced in response to a request for: Documents which are or record contracts or arrangements in place from 1 January 2011 to 28 August 2014 between Valve Corporation and third parties whereby servers located in Australia are made available on behalf of Valve Corporation for use by persons supplied with video games and or video game subscriptions by Valve Corporation. 61 A second round of discovery led to these documents being produced but not before the ACCC had issued a notice to admit facts including that "Valve has contracts, arrangements or understandings in place with third parties pursuant to which servers located in Australia are made available on behalf of Valve for use by persons supplied with video game subscriptions by Valve". Even when Mr Quackenbush was cross-examined on this point he remained evasive and unwilling to answer clear and plain questions. 62 None of these matters increases Valve's culpability, but the discount which it should receive for co-operation is minimal in light of these matters. The limited co-operation to which Valve pointed included: (i) its willingness as a foreign corporation to accept service despite its (incorrect) opinion that the Australian Consumer Law did not apply to it; (ii) its attendance at a mediation after the commencement of proceedings; and (iii) evidence given on its behalf by two witnesses who were generally found to be honest and reliable. In the general run of cases, these matters are extremely minimal levels of co-operation. During the hearing Valve also accepted that, subject to rights of appeal, it would not resist the payment of any penalty on the ground that a penalty was a penal order which could not be enforced against it overseas (ts 76). Whether or not this concession was one which was a practical inevitability given Valve's operations in Australia and use of servers in Australia (as to which no submissions were made), I take it into account but, nevertheless, the level of co-operation remains very minimal. 63 Although Valve's level of co-operation was minimal, which entitles it to very little discount, Valve's approach does need to be understood in light of the approach taken by the ACCC which was that any negotiation was to continue in the shadow of litigation which it had commenced. On 16 July 2014, Valve wrote to the ACCC saying that K&L Gates had been engaged to provide an Australian Consumer Law training package which Valve intended to provide to its support staff. The letter also attached a draft of a revised Steam Subscriber Agreement which provided in capital letters: For Australian customers, this section 7 does not exclude, restrict or modify the application of any right or remedy conferred by the Australian Consumer Law (as contained in the Competition and Consumer Act 2010 (Cth) (the "ACL") or equivalent State and Territory Laws in Australia. 64 Valve concluded its letter on 16 July 2014 saying that it hoped that its response answered the ACCC's concerns, and asked the ACCC to let Valve know if any further issue required clarification. On 19 August 2014, the ACCC replied saying that it welcomed the changes that Valve had made in relation to the Steam Subscriber Agreement but that it was "of the view that a court based outcome is appropriate in this case and has made a formal decision to institute proceedings".

[20]

Comparable cases and conclusion 66 The discussion above concerning the particular factors illustrates the common difficulty that arises when relying upon the penalty imposed in a very small number of allegedly comparable cases which do not disclose any range of penalties. That is a difficulty of incommensurability, to which I referred in Australian Competition and Consumer Commission v Woolworths [129]-[132]. This does not mean that other cases are irrelevant, but it means that their utility is seriously restricted as isolated instances. 67 The ACCC relied upon two cases, and Valve relied upon two cases and an additional line of cases which were bizarrely added together and said, jointly, to be a comparison case. The circumstances involved in some of those cases are radically different. For instance, the line of cases relied upon by Valve concerned false or misleading claims made by Harvey Norman franchisees. Counsel for Valve submitted that these cases were "useful comparators". The franchisees in the cases were made the subject of penalties of amounts including $10,000, $28,000 and $32,000. The first comparator relied upon by Valve was Australian Competition and Consumer Commission v Avitalb Pty Ltd [2014] FCA 222. In that case the franchisee's contravention involved oral statements made by a sales representative to a consumer who bought a laptop. The statements involved a contravention of s 29(1)(m) of the Australian Consumer Law. In summary, the representations were made over a day, not three and a half years. They were made to a single consumer, not hundreds of thousands of consumers. The net assets of the franchisee were $10 (ie ten dollars), not millions or billions of dollars. The franchisee was involved in substantial compliance training, not none at all. The consumer was given a full refund. The franchisee admitted liability; it did not contest a trial, putting almost every issue in dispute. It is difficult to imagine circumstances that could be more different from this case. 68 The second comparison case relied upon by Valve was Australian Competition and Consumer Commission v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393. In that case a pecuniary penalty of $200,000 was imposed on each of Fisher & Paykel Customer Services Pty Ltd and Domestic & General Services Pty Ltd for misrepresentations about consumer warranties in letters to 1,326 consumers over a 23 month period. Fisher & Paykel had significant net revenue although fairly modest net profits in the circumstances. Its shareholder was a very large corporation. Both respondents fully co-operated with the ACCC investigation, including voluntarily providing information and voluntarily offering full refunds. Fisher & Paykel immediately contacted Domestic & General Services to cease its conduct when contacted by the ACCC. Liability was admitted shortly before trial. The parties agreed to a penalty of $200,000 for each respondent which the primary judge considered to be appropriate. 69 The third comparison case relied upon by Valve was Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited (No 2) [2016] FCA 144. In that case, a pecuniary penalty of $200,000 was imposed for misrepresentations, which occurred over several years, that customers could not cancel a lay-by agreement once an order was fully paid, and before delivery. Chrisco significantly co-operated with the ACCC. When the matter went to trial, Chrisco took only a small legal point on this issue about the meaning of a "lay-by agreement". Chrisco was a fraction of the size of Valve. 70 The ACCC submitted that the best comparison case was Australian Competition and Consumer Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653. In that case, the respondent committed six contraventions of s 29(1)(m) of the Australian Consumer Law for representations to consumers and retail suppliers concerning remedies for goods supplied. The six contraventions appear, actually, to have been six series of contraventions, with four of them concerning different categories of statement made by staff at the respondents' helpdesks. The other two series of contraventions were for representations made by staff to retail suppliers, and for representations on a webpage of the respondent's online store. However, they were treated as involving six contraventions only, with a maximum penalty of $6.6 million. Liability was admitted by the respondent. The respondent was a wholly owned subsidiary of a corporation with more than $120 billion in turnover but there was no information in the judgment about the income or profit of the respondent other than that the respondent is one of the largest providers of computer products in Australia. A penalty of $3 million was imposed, representing $500,000 for each of the six contraventions ([13]). 71 This case has a number of matters in common with Valve's contraventions. Valve submitted that the case was different because Hewlett Packard's shareholder (parent company) was larger than Valve. This is a distinction of little consequence. There was no evidence about the wealth of Valve's shareholder or shareholders. Both Valve and Hewlett Packard (as well as its parent) were large companies. Much more constraining was the assumed statutory maximum in Hewlett-Packard (but not a statutory maximum in this case) of $6.6 million. Valve also submitted that five of the six representations made by Hewlett-Packard were made in person rather than online. But, on the treatment of those representations as single contraventions, equivalent to a single occasion, it hardly assists Valve to distinguish the case on the basis that five representations were made in person in Hewlett-Packard rather than potentially thousands being made online. Valve also submitted that Hewlett-Packard's website was aimed at and targeted only to Australian consumers. Again, it is difficult to see how it assists Valve to distinguish a case on the basis that the contravening misrepresentations in Hewlett-Packard were specifically targeted at Australian consumers. Finally, Valve submitted that the penalty in Hewlett-Packard was made by consent. This is true, but it was found by the primary judge to be appropriate. 72 The other case comparison relied upon by the ACCC was the decision in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330; (2015) 327 ALR 540. The circumstances of that case were quite different. In that case, Coles engaged in four different contravening courses of conduct involving packaging and signage of bread products. Coles engaged in the conduct with the clear purpose of improving its market share vis-à-vis its competitors. The conduct occurred over three years and the earnings before interest and tax derived from the products to which the contraventions contributed was $7.28 million. There was a need for specific deterrence, although not affecting the level of the penalty, because Coles had previously breached the Australian Consumer Law. The primary judge imposed a penalty of $2.5 million which stripped Coles of over one third of its earnings before interest and tax from the products (562-563 [103]). 73 As I have explained, there are differences between this case and all of the cases above. In any event, the penalty in a single case, which does not establish a range, cannot provide more than the most general of guidance. Ultimately, in this case, my conclusion is that the appropriate pecuniary penalty is $3 million, which was also the amount sought by the ACCC. If the conduct were characterised at a high level of generality as a single course of conduct, then taking into account all the matters described by Valve including that all contraventions broadly involved the same policy by Valve, the penalty would be a single amount of $3 million. However, at the lower level of generality, and reflecting the different circumstances of the two groups of contraventions, it is appropriate that the penalties be comprised of $2.2 million for the contraventions involving the Steam Subscriber Agreement, and $800,000 for the contraventions involving the Steam Refund Policy.

[21]

Injunctions 74 Following exchanges between the bench and counsel, the ACCC amended the wording of its proposed injunction during a break in the hearing. The new wording was as follows: The Respondent is restrained for a period of 3 years from the date of these orders, whether by itself, its servants, agents or otherwise howsoever, from representing to Australian Consumers, in trade or commerce in connection with the supply or possible supply of digitally downloaded video games that: 9.1 a consumer supplied with such goods by the Respondent has no entitlement to a refund for or replacement of those goods in any circumstances; 9.2 the Respondent has in relation to those goods excluded, restricted, or modified the consumer guarantee of acceptable quality in section 54 of the ACL; 9.3 the Respondent has no obligation to provide a refund to a consumer in any circumstances where those goods are not of acceptable quality; 9.4 statutory guarantees and/or warranties of acceptable quality do not apply in relation to the supply by the Respondent of computer games to Australian Consumers; 9.5 a consumer's entitlement to claim a refund is limited to a particular period of time after purchase or where the video game has been played for no longer than a specified number of hours. 75 Valve's primary submission was that an injunction was unnecessary. Valve submitted that it had modified its refund policy in June 2015 and that no complaint had been made by the ACCC at the liability hearing concerning its new refund policy. I do not accept Valve's submission for two independent reasons. 76 First, s 232(1) of the Australian Consumer Law is not limited to injunctions concerning prospective contraventions. It also provides a power to order an injunction if the court is satisfied that a person has engaged in the contravening conduct. This is a case where an injunction, without more, is appropriate to restrain a foreign corporation in Valve's position from the contravening conduct which was committed. Section 232(4) provides: The power of the court to grant an injunction under subsection (1) restraining a person from engaging in conduct may be exercised: (a) whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of a kind referred to in that subsection; and (b) whether or not the person has previously engaged in conduct of that kind; and (c) whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind. 77 Secondly, even putting to one side the dispute between the ACCC and Valve about whether its current terms and conditions and policy are compliant with the Australian Consumer Law, the lack of a compliance culture within Valve makes it particularly appropriate to order an injunction in this case. 78 As to the form of the injunction, the proposed injunction from the ACCC suffers from several difficulties. The first is the formal difficulty I have described above which is the lack of clarity arising from the switching in language between obligation and entitlement. The second is that the expression of the proposed injunction leaves too much which is uncertain. In the words of counsel for the ACCC, it leaves for "Valve to determine for itself whether it has done something which could be construed as either wholly or partly excluding the consumer guarantee" (ts 86). An injunction which is backed by the sanction of contempt should leave as little as possible uncertain and should be tied as closely as possible to the reasons for decision. The third difficulty is that paragraph [9.5] is not tied to the reasons for decision but, instead, introduces new questions concerning potential liability for the new representations by Valve. 79 The alternative form of the injunction, as proposed by Valve, is not substantially different but overcomes all of these problems with the exception of one issue, pointed out by counsel for the ACCC, which is the description of the representations as being "directed to" Australian consumers. At best, this "directed to" requirement is shorthand for "directed from one place to another place where it is known or even anticipated that it will be received". At worst it introduces an unnecessary lack of clarity. The appropriate form of injunction is as follows: The respondent, whether by itself, its servants, agents, or otherwise, is restrained for a period of 3 years from the date of these orders in connection with the supply or possible supply of digitally downloaded video games, from representing in communications to Australian Consumers, in trade or commerce, whether in the Steam Subscriber Agreement or on the Steam Website, that the respondent: (a) is under no obligation to offer refunds to Australian Consumers for video game subscriptions acquired from the respondent; (b) is under no obligation to refund the subscription fee paid for any video games made available to Australian Consumers which are not of acceptable quality; (c) does not, with respect to its dealings with Australian Consumers, regard itself as being subject to the consumer guarantees of acceptable quality in section 54 of the Australian Consumer Law; or (d) is able, with respect to its dealings with Australian Consumers, to exclude, restrict or modify the consumer guarantee of acceptable quality in section 54 of the Australian Consumer Law.

[22]

Disclosure and advertisement orders 80 Section 246 of the Australian Consumer Law relevantly provides that on the application of the ACCC, and upon contravention of provisions including s 29(1)(m), the following power arises: (2) The court may make the following orders in relation to the person who has engaged in the conduct: … (c) an order requiring the person to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to; (d) an order requiring the person to publish, at the person's expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order. … 81 Valve's primary submission was again that no disclosure or advertisement order should be made. That submission was a single line simply asserting that it was not warranted. I do not accept that submission. The nature of Valve's contraventions, their effect in misleading or being likely to have misled consumers, and the importance of the consumer guarantees within the scope of the Australian Consumer Law make the disclosure and advertisement orders appropriate in this case. 82 The ACCC proposed disclosure orders in the following terms: An order pursuant to section 246(2) of the ACL that the Respondent is, within 14 days of the date of this order, for a period of 3 years: (a) to publish in a prominent place on the home page of the Steam Website and on the home page of Steam and any other URL used by the Respondent to market and supply computer games in a typeface of at least 14 points Times New Roman typeface a link reading "IMPORTANT NOTICE ABOUT CONSUMER RIGHTS IN AUSTRALIA", which directs to a notice in the terms set out in Schedule A ("Consumer Rights Notice") or in such other terms as the Court thinks fit; and (b) to publish as part of the Steam Subscriber Agreement, a notice that consumers in Australia have a statutory entitlement to reject computer games supplied by the Respondent (whether or not they are developed by the Respondent) that are not of acceptable quality and request a refund or replacement of the computer games from the Respondent. 83 In contrast, Valve's proposed disclosure order (in its alternative submission) was as follows: For a period of 12 months after the date of this order, for the benefit of Australian Consumers logging onto the Steam Website from a computer with an Australian IP address (based on the IP look up table available to the Respondent current at the consumer's login), the Respondent will publish on the home page of the Steam Website a link reading "IMPORTANT NOTICE ABOUT CONSUMER RIGHTS IN AUSTRALIA", which directs them to a notice in the terms set out in Annexure A1 ("Consumer Rights Notice"). 84 Broadly, this part of Valve's order is to be preferred. One difference between the two orders is that Valve submitted that the term of the order ought only to be for a period of 12 months and that it should be confined to giving notice to Australian consumers rather than "any other URL used by [Valve]". I accept these submissions. A period of 12 months should be sufficient to draw to the attention of Australian consumers, especially those over the past three and a half years, the matters in the Consumer Rights Notice. Unless there were further proceedings based upon Valve's current Steam Subscriber Agreement terms and conditions or refund policy, I consider 12 months to be appropriate. If further proceedings were commenced, and if they were successful, then new notices could be ordered. 85 Another difference between the orders arose because the ACCC submitted during the hearing that the words "or Steam" should be inserted into Valve's proposed order after the reference to "Australian Consumers logging onto the Steam Website". The difficulty with this addition is that, as counsel for Valve submitted, the Steam application directs any online consumer to the Steam website. It would either be unnecessary or potentially productive of confusion or frustration if, every time a consumer opened the Steam application, the Steam application provided a Consumer Rights Notice in addition to the Consumer Rights Notice contained on the Steam website to which the consumer was directed. 86 As to part (b) of the ACCC's proposed order, the parties proceeded on the assumption that the power in s 246(2) of the Australian Consumer Law extended to requiring the insertion of a provision or a notice into a contract. However, I do not consider that (b) is appropriate. In the circumstances of this case, including the dense form of the Steam Subscriber Agreement and the uncertainty concerning whether many consumers had read or were likely to read the terms of the Steam Subscriber Agreement, I do not consider it appropriate to make a disclosure order which either alters the nature of the contractual relationship between Valve and its customers, or inserts a new notice into the terms of that contractual relationship. The provision of a notice on the Steam website would be more accessible, simpler, and a more cogent method of communicating the information to Australian consumers. 87 As for the form of the Consumer Rights Notice to be published, the ACCC proposed a Consumer Rights Notice which broadly had two parts. The first part of that Notice was as follows: On 24 March 2016, the Federal Court of Australia found that Valve Corporation had engaged in misleading conduct contrary to the Australian Consumer Law in representing to Australian consumers via the Steam Subscriber Agreement and Steam Refund Policy that consumers had no entitlement to a refund in any circumstances and that Valve had excluded, restricted or modified statutory guarantees of acceptable quality. A link to the Federal Court judgment appears here: [http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca0196]. When you buy goods from Valve Corporation as a consumer located in Australia, the goods come with guarantees under the Australian Consumer Law that cannot be excluded, including a guarantee that the goods are of acceptable quality. You are entitled to a replacement or refund from the retail supplier of the goods for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced by the retail supplier of the goods if the goods fail to be of acceptable quality and the failure does not amount to a major failure. Certain other rights are available directly against manufacturers that cannot be excluded or limited. The test for acceptable quality is whether a reasonable consumer, fully aware of the state and condition of the goods, would find them: a. safe, durable and free from defects; b. acceptable in appearance and finish; and c. fit for all the purposes for which goods of that kind are commonly supplied. This must take into account the nature and price of the goods, and any statements on packaging or labelling. 88 There was little dispute about this first part of the Notice. Valve accepted that the difference in wording of this first part, compared with Valve's proposed wording, was a matter of semantics and the issue was simply one of the language that would be best understood by a consumer. I consider that the wording of the first part proposed by the ACCC is more appropriate, although as I put to counsel for the ACCC, the words "video games" are more appropriate language than "goods", and I have amended the proposed order in that respect. 89 The second part of the Consumer Rights Notice was more contentious. The ACCC proposed that this second part should provide for circumstances in relation to a computer game supplied via Steam where: (i) a person thought that he or she was entitled to a remedy in respect of a consumer guarantee; or (ii) a person believed that he or she had been denied a statutory right or remedy by Valve in the past; or (iii) a person did not pursue a remedy because of representations made by Valve. The ACCC's proposed Consumer Rights Notice provided for an email and web address for the consumer to contact Valve in these circumstances. 90 Valve submitted that this procedure would require it to create a new regime, separate from its well established "ticket" regime. The ticket regime was put in place to deal with the millions of transactions per week that Valve deals with internationally. The ticket regime has not been the subject of any complaint or allegation by the ACCC. It is appropriate that consumer complaints arising from a Consumer Rights Notice should be mediated through that existing ticketing process. The Consumer Rights Notice proposed by Valve to give effect to that process is appropriate. 91 On the basis of these submissions, the order should therefore be as follows: For a period of 12 months after 20 February 2017, for the benefit of Australian Consumers logging onto the Steam Website from a computer with an Australian IP address (based on the IP look up table available to the Respondent current at the consumer's login), the respondent will publish on the home page of the Steam Website a link, in a typeface of at least 14 point Times New Roman, reading "IMPORTANT NOTICE ABOUT CONSUMER RIGHTS IN AUSTRALIA", which directs them to a notice in the terms set out in Annexure A1 ("Consumer Rights Notice"). Annexure A1: Consumer Rights Notice On 24 March 2016, the Federal Court of Australia found that Valve Corporation had engaged in misleading conduct contrary to the Australian Consumer Law in representing to Australian consumers via the Steam Subscriber Agreement and Steam Refund Policy that consumers had no entitlement to a refund in any circumstances and that Valve had excluded, restricted or modified statutory guarantees of acceptable quality. A link to the Federal Court judgment appears here: [http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca0196]. When you buy video games from Valve Corporation as a consumer located in Australia, the video games come with guarantees under the Australian Consumer Law that cannot be excluded, including a guarantee that the video games are of acceptable quality. You are entitled to a replacement or refund from the retail supplier of the video games for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the video games repaired or replaced by the retail supplier of the video games if the video games fail to be of acceptable quality and the failure does not amount to a major failure. Certain other rights are available directly against manufacturers that cannot be excluded or limited. The test for acceptable quality is whether a reasonable consumer, fully aware of the state and condition of the video games, would find them: a. safe, durable and free from defects; b. acceptable in appearance and finish; and c. fit for all the purposes for which video games of that kind are commonly supplied. This must take into account the nature and price of the video games, and any statements on packaging or labelling. If you: a. think that you are entitled to a remedy in respect of a consumer guarantee; and b. believe that you have been denied a remedy by Valve Corporation in relation to a video game subscribed to via Steam between 1 January 2011 and 28 August 2014, or did not pursue a remedy in respect of such a video game because of representations made by Valve Corporation in the period between 1 January 2011 and 28 August 2014, please submit your request for a remedy via Steam Support at https://support.steampowered.com identifying yourself with the prefix [Insert AU reference] and the basis for your request, on or before 20 February 2018, which will be assessed by Valve Corporation. For further information on consumer rights in Australia, visit www.consumerlaw.gov.au and www.accc.gov.au/consumerguarantees. 92 However, following the provision of these reasons, in draft, to the parties last night to permit efficient submissions about costs and other related matters, counsel for the ACCC properly submitted that there may be doubt about the power of the Court to make the order requiring publication of the material concerning submission of a remedy request to Valve. Although Valve had not opposed the order on this basis, I consider that there are questions concerning whether this part of the content ordered is properly characterised as an "advertisement", particularly given the specific terms of s 239. Since no submissions have been made on this issue, I will not make this part of the proposed order.

[23]

Non-party consumer redress 93 The ACCC sought an order that Valve establish and implement a non-party consumer redress system, pursuant to s 239 of the Australian Consumer Law. That section relevantly provides: 239 Orders to redress etc. loss or damage suffered by non‑party consumers (1) If: (a) a person: (i) engaged in conduct (the contravening conduct) in contravention of a provision of Chapter 2, Part 3‑1, Division 2, 3 or 4 of Part 3‑2 or Chapter 4; or (ii) is a party to a contract who is advantaged by a term (the declared term) of the contract in relation to which a court has made a declaration under section 250; and (b) the contravening conduct or declared term caused, or is likely to cause, a class of persons to suffer loss or damage; and (c) the class includes persons who are non‑party consumers in relation to the contravening conduct or declared term; a court may, on the application of the regulator, make such order or orders (other than an award of damages) as the court thinks appropriate against a person referred to in subsection (2) of this section. (2) An order under subsection (1) may be made against: (a) if subsection (1)(a)(i) applies - the person who engaged in the contravening conduct, or a person involved in that conduct; or (b) if subsection (1)(a)(ii) applies - a party to the contract who is advantaged by the declared term. (3) The order must be an order that the court considers will: (a) redress, in whole or in part, the loss or damage suffered by the non‑party consumers in relation to the contravening conduct or declared term; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the non‑party consumers in relation to the contravening conduct or declared term. (4) An application under subsection (1) may be made at any time within 6 years after the day on which: (a) if subsection (1)(a)(i) applies - the cause of action that relates to the contravening conduct accrued; or (b) if subsection (1)(a)(ii) applies - the declaration is made. 94 In order for the power to make these orders to be enlivened, the court must be satisfied that (i) the contravening conduct or declared term caused a class of persons to suffer loss or damage, or (ii) the contravening conduct is likely to cause a class of persons to suffer loss or damage: s 239(1)(b). The ACCC did not put its case on the basis that consumer loss was caused. Rather, it relied on there being a likelihood of loss being caused to be suffered by a class of Australian consumers (ts 92). 95 I proceed, without deciding, on the basis that "likely" in this context does not mean "more probable than not": James Hardie Industries NV v Australian Securities and Investments Commission [2010] NSWCA 332; (2010) 274 ALR 85, 128 [184] (the Court); and Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023 [632]-[634]. However, for the reasons explained above at [25]-[37], I am not satisfied that the ACCC has proved that Valve's contravening conduct has caused loss to be suffered by Australian consumers. As I have explained, the ACCC did not contend otherwise. I also do not accept that the contravening conduct, which is likely not to be continuing, could be likely to cause loss in the future (loss likely to be suffered) if it has not been proved to have caused loss in the past. The proposed non-party consumer redress order should not be made.

[24]

Compliance program 96 The ACCC seeks an order for implementation of a compliance program pursuant to s 246(2) of the Australian Consumer Law. That section relevantly provides: (1) A court may, on application of the regulator, make one or more of the orders mentioned in subsection (2) in relation to a person who has engaged in conduct that: (a) contravenes a provision of Chapter 2, 3 or 4; or (b) constitutes an involvement in a contravention of such a provision. (2) The court may make the following orders in relation to the person who has engaged in the conduct: (a) an order directing the person to perform a service that is specified in the order, and that relates to the conduct, for the benefit of the community or a section of the community; (b) an order for the purpose of ensuring that the person does not engage in the conduct, similar conduct, or related conduct, during the period of the order (which must not be longer than 3 years) including: (i) an order directing the person to establish a compliance program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to such conduct; and (ii) an order directing the person to establish an education and training program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to such conduct; and (iii) an order directing the person to revise the internal operations of the person's business which led to the person engaging in such conduct; … 97 The ACCC's proposed order would require Valve to: (1) establish and implement an Australian Consumer Law compliance program to be undertaken by each Valve employee or persons involved with Valve who deals or may deal with Australian consumers; and (2) maintain and continue to implement the compliance program for a period of three years. 98 Valve submitted that an order for a compliance program is not warranted because: (i) it said that the scope of the compliance program is far broader than the contraventions found, and is therefore not proportionate; (ii) the Steam Subscriber Agreement has been modified and staff have been made aware of Australian consumers' rights, and therefore there is no clear benefit to be derived from an order for a compliance program; (iii) it is impractical for Valve to establish and implement an Australian-specific Australian Consumer Law compliance program, especially given Valve engages a third party to assist in the management and processing of customer inquiries; and (iv) the ACCC has not suggested that there is any deficiency or inadequacy in Valve's Steam support facility which might warrant the introduction of a compliance program. 99 I do not accept that the compliance order is too broad or that it is not proportionate. The wording of the compliance program order proposed by the ACCC is deliberately broad. Significantly more comprehensive consumer law compliance programs have been ordered in numerous other cases, including: (1) by the Full Court against Google for engaging in misleading and deceptive conduct (Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49; (2012) 201 FCR 503, 527 [117], Annexure A (the Court)); (2) against Ozsale, an online shopping club, for offering to supply and supplying different items of childrens' nightwear that failed to comply with fire hazard standards (Australian Competition and Consumer Commission v Ozsale Pty Limited [2016] FCA 1049 [31], Annexure A to the orders (Robertson J)); (3) against Woolworths for engaging in misleading or deceptive conduct, making false or misleading representations, and failing to report, or inadequately reporting, incidents of serious injury or illness (Australian Competition and Consumer Commission v Woolworths Limited [191], Annexure B to the orders); and (4) against Hewlett-Packard Australia Pty Ltd for engaging in misleading and deceptive conduct and making false or misleading representations about goods or services through representations made by staff (Australian Competition and Consumer Commission v Hewlett-Packard Australia [11]-[12], Annexure D to the orders (Buchanan J)). 100 Although the order is not tailored to the particular contraventions, the breadth of the order provides considerable latitude for Valve to create a program which will suit its purposes without requiring it to limit its program only to the matters involved in the contraventions. 101 I also do not accept that it is impractical for Valve to establish and implement a compliance program, especially given the latitude that the ACCC's proposed order permits. Indeed, some steps have already been taken by Valve in this direction. In cross-examination, Mr Quackenbush said that he engaged the law firm K&L Gates to prepare an Australian Consumer Law training package that he intended to provide to Valve's support staff (ts 15). K&L Gates prepared material for Valve outlining the Australian Consumer Law (ts 15). Mr Quackenbush said that he used the information to train Steam support staff, but that he did not convert that information into any documents that he or anyone else from Valve provided to those staff members (ts 15). He later repeated that he caused Valve Steam support staff to be made aware of Australian consumer rights under the Australian Consumer Law, but did not put this training into writing (ts 17). In light of Valve's approach to compliance, I have doubts about the efficacy of Valve's oral training. 102 For the reasons explained above in relation to Valve's compliance culture, I consider that there would be clear benefit to Valve, and to consumers, by requiring Valve to undertake a compliance program.

At a glance

Court

Decision date

Before

Source

Judgment (25 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (28)