Australian Competition & Consumer Commission v Econovite Pty Ltd

In respect of the Econovite Mineral Block and the Econovite Dry Feed Block the labels also asserted that each product was registered under the Veterinary Preparations and Animal Feeding Stuffs Act. 4 When blocks covered by these representations were tested on 25 March 2002, 29 January 2003 and in March 2003, it was found that the information on the labels as to their composition was not correct. It was also the case that neither the Econovite Mineral Block nor the Econovite Dry Feed Block was registered under the Veterinary Preparations and Animal Feeding Stuffs Act between March 2002 and March 2003. 5 On 27 June 2003 the ACCC instituted the present proceedings seeking declaratory and injunctive relief and other orders against Econovite on account of the misrepresentations which were said to contravene ss 52, 53(a), 53(c) and 55 of the Trade Practices Act 1974 (Cth). The parties have agreed facts whereby Econovite admits the contraventions alleged against it. A copy of the agreed statement of facts is attached to these reasons. Consent orders have been proposed. 6 The proposed consent orders comprise in summary: 1. A declaration that, by virtue of the incorrect labelling of the products, in relation to their composition, Econovite engaged in misleading or deceptive conduct in contravention of s 52 and falsely represented that the products were of a particular quality and composition in contravention of s 53(a). 2. A declaration that, by virtue of the misrepresentation on its labels that the Econovite Mineral and Dry Blocks were registered under the Veterinary Preparations and Animal Feeding Stuffs Act, Econovite engaged in misleading and deceptive conduct in contravention of s 52 and represented that the products had an approval they did not have contrary to s 53(c). 3. An injunction for a period of three years restraining Econovite from: (i) representing that the Mineral Block, Dry Feed Block and Cattle Block products have ingredients that they do not have or a composition that they do not have;` (ii) representing that the Mineral Block or the Dry Feed Block is registered under the Veterinary Preparations and Animal Feeding Stuffs Act if it is not. 7 In addition to these conventional orders there is a number of community service orders proposed under s 86C of the Act: 1. An order that Econovite within ninety days produce 5,000 copies of a pamphlet on cattle nutrition which will not have on it any logo or promotional material relating to Econovite. The pamphlet is to be drafted by an independent cattle nutrition expert and is to include information on the following matters: (i) mineral nutrients that can be used as livestock supplements in Western Australia; (ii) signs of deficient mineral intake in livestock; (iii) signs of excessive mineral intake in livestock; (iv) indicators as to when mineral supplements should be used in livestock production; (v) ways of providing minerals to livestock including the use of oral, injection and 'bullet' methods; (vi) the advantages and disadvantages of mineral supplementation for livestock. Under this order Econovite would also be required to use all reasonable endeavours to have the Royal Agricultural Society of WA Inc. and Future Farmers Network Ltd distribute the pamphlets to consumers of livestock feed supplements by inserting them at Econovite's expense into the next mailouts to members by the Society and the Network. 2. An order that within six months Econovite, at its own expense, arrange for an expert in the field of animal nutrition to deliver at least three seminars informing livestock producers of each of the matters which it is required to set out in the pamphlet. These seminars are to be no less than forty minutes in duration and to be delivered at Royal Agricultural shows and field days throughout Western Australia including, but not limited to: (i) the Perth Royal Show in October 2003; (ii) the Narrogin Fair and Bull Trial in November 2003; and (iii) the Yates Bull Sale at Bindoon in January 2004. 3. An order that Econovite, at its own expense, produce 250 copies of a laminated wall chart to provide livestock producers with a simple guide to the nutrient supplementation requirement of cattle including, but not limited to: (a) names of mineral and trace elements suitable for supplementation; (b) recommended daily intake for those minerals and trace elements; and (c) options for providing the supplements such as 'bullet', injection or oral preparations. Econovite would be required to use all reasonable endeavours to have retailers of the products distribute the wall charts free of charge to consumers of livestock feed supplements. It would provide the wall charts to retailers and advise them that they are to be provided free of charge to consumers of livestock feed supplements. 4. It is further proposed that by way of 'probation order' Econovite be required, at its own expense, to implement for all of its officers, employees and agents a Trade Practices Corporate Compliance Program designed to ensure their awareness of their responsibilities and obligations in relation to the contravening conduct and similar and related conduct. The program is to be consistent with Australian Standard AS-3806 addressing the provisions of ss 52 and 53 of the Act. It is to be implemented by an independent external professional or organisation with trade practices law experience which is acceptable to the ACCC. By this proposed order Econovite is required to cause a review of its trade practices corporate compliance program to be undertaken annually for a period of three years from the date of these orders. The audits of the compliance programs are to be conducted by an independent external professional or organisation with trade practices law experience who is acceptable to the ACCC and shall report to the ACCC within thirty days of each annual audit to confirm that it has been conducted. 5. There follow disclosure orders pursuant to s 86C of the Act. Under these orders Econovite is required to write a letter in agreed terms to retailers that purchased its products between March 2002 and March 2003. The disclosure letter essentially involves disclosure of the declarations made and the fact of the injunctions and other orders. Econovite is also to be required to publish, at its own expense, an advertisement which discloses the contravention and the general nature of the orders made. Statutory Framework 8 Section 52 of the Trade Practices Act provides: '52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).' Section 53 provides: '53. A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services: (a) falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; … (c) represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have….' 9 Declaratory relief is available under the general remedial powers of the Federal Court conferred upon it by s 21 of the Federal Court of Australia Act 1976 (Cth). The Court is also empowered by s 80 of the Trade Practices Act to award injunctions, the provisions of that section, relevant for present purposes, being as follows: '80(1) Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: (a) a contravention of any of the following provisions: (i) a provision of Part IV, IVA, IVB, V or VC; (ii) section 75AU or 75AYA; … the Court may grant an injunction in such terms as the Court determines to be appropriate. 80(1AA) Where an application for an injunction under subsection (1) has been made, whether before or after the commencement of this subsection, the Court may, if the Court determines it to be appropriate, grant an injunction by consent of all the parties to the proceedings, whether or not the Court is satisfied that a person has engaged, or is proposing to engage, in conduct of a kind mentioned in subsection (1). … 80(4) The power of the Court to grant an injunction 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 that kind;' 10 Section 86C of the Act authorises the Court to make various forms of 'non-punitive order' comprising community service orders, probation orders, disclosure orders and corrective advertisement orders. The section provides: '86C(1) The Court may, on application by the Commission, make one or more of the orders mentioned in subsection (2) in relation to a person who has engaged in contravening conduct. 86C(2) The orders that the Court may make in relation to the person are: (a) a community service order; and (b) a probation order for a period of no longer than 3 years; and (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; and (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. 86C(3) This section does not limit the Court's powers under any other provision in this Act. 86C(4) In this section: community service order, in relation to a person who has engaged in contravening conduct, means an order directing the person to perform a service that: (a) is specified in the order; and (b) relates to the conduct; for the benefit of the community or a section of the community. contravening conduct means conduct that: (a) contravenes Part IV, IVA, IVB, V or VC or section 75AU or 75AYA; or (b) constitutes an involvement in a contravention of any of those provisions. probation order, in relation to a person who has engaged in contravening conduct, means an order that is made by the Court for the purpose of ensuring that the person does not engage in the contravening conduct, similar conduct or related conduct during the period of the order, and includes: (a) 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 the contravening conduct, similar conduct or related conduct; and (b) 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 the contravening conduct, similar conduct or related conduct; and (c) an order directing the person to revise the internal operations of the person's business which lead to the person engaging in the contravening conduct.' Whether the Proposed Orders Should be Made 11 The Court has, over many years, accepted as a general principle that it should encourage fair and appropriate settlements to reduce the burdens of litigation on public and private resources. In 1978 in Trade Practices Commission v Milreis Pty Ltd (No 2) (1978) 32 FLR 234 at 243, Franki J said: 'I do not think it is the function of the court to impede a settlement between parties legally represented and presumably well able to understand and evaluate the desirability of agreeing to a settlement, nor do I think it the function of the court to refuse to give effect to terms of settlement by refusing to make orders or to accept undertakings where those orders or undertakings are within the court's jurisdiction to make and accept and are otherwise unobjectionable.' In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 290-291, Burchett and Kiefel JJ referred to the important public policy consideration that lengthy and complex litigation is often avoided when corporations acknowledge contraventions. So, provided that a pecuniary penalty agreed to by the parties is within a permissible range, the Court will not depart from it merely because it might have been disposed to select some other figure. The same proposition applies to other orders agreed between the ACCC and an admitted contravenor. Where consent orders are proposed which are within power and are within the range of an appropriate disposition of the case the Court will not simply substitute its own view of the orders which it would have made on the agreed or conceded facts - Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1995) 95 FCR 114 at 131. 12 While courts are conscious of the public interest in settling cases they must also be aware that the laws they apply are public laws. Proposed consent orders must be scrutinised to determine that they are within power and appropriate. Cases in which the Court may refuse to make a proposed consent order include cases in which: 1. the order is one which the Court does not have power to make; 2. the order bears no relationship to the admitted contravention - eg a compliance program covering Parts IV and V of the Trade Practices Act is generally not appropriate where the relevant contraventions related only to Part V - Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 202 (Merkel J); Australian Competition and Consumer Commission v Office Link (Aust) Pty Ltd (1997) 19 ATPR 41-598; 3. an injunctive order is too vague or imprecise or requires continuing supervision by the Court; 4. a multiplicity of overlapping injunctions and/or declarations is proposed which involve unnecessary repetition and may give rise to confusion about the scope of the obligations being imposed pursuant to the orders. 13 The consent order as first proposed in the present case contained a number of overlapping declarations which have now been reduced. I am satisfied that both the declarations and negative injunctions proposed are within the power of the Court and are appropriate. 14 The agreed community service orders would mandate the provision of brochures, the conduct of seminars and the preparation and distribution of wall charts, all of which would provide advice to livestock producers on matters related to cattle nutrition. The proposed pamphlet is required to be drafted by an independent cattle nutrition expert and is to include information on a number of matters set out earlier. The seminars 'by an expert in the field of animal nutrition' are to inform livestock producers of each of the matters to be included in the proposed brochures. The wall charts are to provide livestock producers with a simple guide to the nutrient requirements of cattle including but not limited to: (a) names of mineral and trace elements suitable for supplementation; (b) recommended daily intake for those minerals and trace elements; (c) options for providing the supplement such as 'bullet', injection or oral preparations. The proposed pamphlets, wall charts and seminars require the provision by Econovite of what amounts to general advice to livestock producers concerning cattle nutrition. In the case of the pamphlets and seminars that general advice is to be provided by third parties. It is advice which, according to the terms of the proposed order, cannot be attributed to Econovite on the written material, for Econovite is not permitted to use its logo or any promotional material relating to it on the pamphlets or on the wall charts. 15 There is a threshold question whether the proposed service relates to the contravening conduct and is therefore within the scope of the authority conferred by s 86C. The contravening conduct comprised mis-statements about the composition of Econovite nutrient blocks and the registration of its products under State law. The range of services that may 'relate' to contravening conduct for the purposes of this form of order is no doubt wide. However it is debatable whether mandated general advice about the provision of mineral supplements to livestock is a service that relates to conduct involving mis-statements about the composition of nutrient blocks. The examples of community service orders provided in the statute itself suggest something with a corrective element in relation to the contravention. By way of further example, in Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 I made, by consent, a community service order requiring the respondent in that case to create an internet site. The site was to be maintained for a period of six months and was to explain to consumers the obligations, under the Trade Practices Act, of advertisers promoting mobile telephones, mobile telephone services and/or SMS including obligations with respect to ss 52, 53 and 53C of the Act. In the present case, absent argument to the contrary, and having regard to the width of the language used in the section, I am prepared to assume, although not without reservation, that the proposed community service orders require the performance of services that relate to the contravening conduct. Section 86C(2)(a), read with the definition of 'community service order' in s 86C(4), authorises an order directing a contravenor to 'perform a service' that is specified in the order and that 'relates to' the contravening conduct for the benefit of the community or a section of the community. 16 That assumption does not dispose of the question whether the orders proposed are appropriate. They require the preparation of material embodying what amount to the opinions of third party experts for which Econovite cannot be held responsible. The fulfilment of the orders so far as they relate to the provision of educational brochures and seminars depends upon the availability and willingness of those third parties to do what is necessary in terms of the drafting of the brochures and the conduct of the seminars. The only element of the order entirely within the control, and therefore responsibility, of Econovite is the preparation of the wall charts. I am not satisfied that the community service orders relating to the brochures or seminars are appropriate. Their fulfilment depends upon matters outside the control of Econovite. I am satisfied that the proposed preparation and best endeavours distribution of a wall chart is something within the control of Econovite. There is the potential difficulty that the order assumes the existence of a settled body of knowledge capable of being reflected in 'a simple guide to the nutrient supplementation requirements of cattle'. However this is a matter in which Econovite may be assumed to have some knowledge which has informed its consent to the proposed order. There is no quality control provision in this order so I would be prepared to add a requirement that the text be first approved by the ACCC. 17 The proposed compliance program is unexceptionable except to the extent that it purports to incorporate by reference the terms of the Australian Standard AS-3806 without a best or reasonable endeavours qualification of the kind incorporated in the Virgin Mobile orders. As I have observed elsewhere, that Standard may be a valuable guide to those charged with framing and implementing compliance programs. It is however aspirational and recommendatory in terms and not appropriate for adoption as part of an order of the Court. Indeed I have, upon reflection, some reservations about incorporating the standard even on a best endeavours basis given the issues of interpretation and evaluation which that qualification might engender. However, having regard to previous orders in such terms that I have made and the agreement of the parties to implementation of a compliance program by reference to the Standard, I am prepared to make a qualified reference to it along the lines of the Virgin Mobile order. 18 The first part of the proposed compliance program requires that it be implemented by Ecnovite and by an independent external professional or organisation with trade practices law experience who is acceptable to the ACCC. I take that to mean that Econovite is required to engage such a professional or organisation for the purpose of implementing the program. I do not consider that the ACCC should have a complete veto on who that person should be. There will therefore be a qualification in respect of both elements of the compliance program orders that the relevant professional or organisation be acceptable to the applicant 'or otherwise approved by the Court'. 19 The disclosure orders and proposed advertisement are, in my opinion, within power and appropriate save that the reference to 'an industry education program' will have to be altered to a reference to 'the preparation of a simple wall chart guide to nutrient supplementation requirements for cattle'. Having regard to the views I have formed concerning the community service orders and the variations I have proposed to the orders relating to the compliance program, I will allow the parties liberty to apply within seven days should they wish to vary the orders I now propose to make. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

(1978) 32 FLR 234

(1996) 71 FCR 285

(1995) 95 FCR 114

(1997) 78 FCR 197