Submissions
32 The parties addressed a number of relevant matters in respect to the importance of a penalty which will deter other businesses who may be minded to contravene in a similar way.
33 First, given the place the representations were made, it submitted the claims play on consumers' desire to purchase goods that are manufactured in Australia to support local businesses and in a context where it is difficult for consumers to independently verify the claims. It is important that consumers have accurate information from businesses, particularly those the size and presence of KCA as to the place of origin of particular goods given the difficulty of verifying such information and to prevent businesses from wrongly benefiting from the perception that they manufacture the relevant products locally at the expense of compliant businesses. This requires a strong deterrent message which will prevent any cynical profit/risk calculus: Singtel Optus at [61]-[64]; Reckitt at [149]-[153]. In this case, the imposition of a pecuniary penalty for the contravening conduct sends the appropriate deterrent message.
34 Second, if the burden of a penalty is seen to be less than the cost of an effective compliance program, businesses may be tempted to prefer to absorb the risk of being caught over careful compliance with the ACL. That would give contravening companies an advantage over those which do take on the proper costs of compliance: see eg Reckitt at [152].
35 Third, the penalty imposed in the present case can be expected to be of interest to affected consumers, the public more broadly and to flushable wipes and toiletries manufacturers and retailers. The imposition of an appropriate deterrent penalty in the present case will validate the behaviour and efforts of compliant businesses and send a warning to non-compliant ones. The proposed penalty is not trivial when regard is had to the circumstances of the contraventions, and the fact that a penalty imposed in these circumstances sends a message of general deterrence to other businesses.
36 The parties submitted that in this case, there is a lesser need for a penalty which will deter KCA from engaging in like conduct in the future. Whilst the contraventions occurred in spite of KCA's compliance system; it took immediate steps to remove the relevant statement once the ACCC brought it to its attention; it admitted that the representations were misleading in its Concise Statement in Response dated 16 March 2017 and has agreed to the relief. It was submitted that although specific deterrence remains important, this case does not call for penalties greater than that proposed by the parties to fulfil the purpose of general deterrence.
37 It was submitted that it is appropriate to group the contraventions into one to reflect the significantly overlapping nature of the contraventions: the same representation being made by way of a static banner across the bottom of each of the relevant webpages. It was submitted that to group the contraventions in that way is not to downplay the wrongdoing. It does not convert the separate contraventions into only one contravention nor does it limit the available maximum penalty. It was submitted that in that context the cumulative total can be seen to be just and appropriate with no further discount or adjustment required to give effect to the totality principle.
38 Turning to the relevant factors.
39 In relation to the nature, extent and duration of conduct, the 'Made in Australia' representations falsely conveyed that the KCFC Wipes were manufactured or made in Australia. The KCFC Wipes were not manufactured or made in Australia but were imported by KCA and sold to wholesalers and retailers. The representations appeared at the bottom of all pages on the Kleenex Cottonelle website for approximately 4 months. Although the website provided information about the KCFC Wipes and included some webpages dedicated to those products (which were not made in Australia), it predominantly advertised KCA's Kleenex Cottonelle toilet paper products (which were made in Australia). The packaging of the KCFC Wipes did not contain the 'Made in Australia' logo or any other statement to this effect. At all relevant times, the packaging for the KCFC Wipes accurately stated the country in which the product was made.
40 The parties acknowledged that although the number of persons who viewed the relevant pages of the website during that period has not been able to be determined, it may be many hundreds. Consumers could not purchase the KCFC Wipes through the Kleenex Cottonelle website. However, consumers who did view the website were only able to determine that the representations were false by viewing the physical products and reading the packaging (which provided accurate information about the country in which the product was made).
41 As to the relevant circumstances, including deliberateness and the role of management, the contraventions occurred in circumstances where KCA sold both the KCFC Wipes and other products, including toilet paper and promoted these products on the website. The contraventions occurred as part of a desire to promote KCA's Australian made Kleenex Cottonelle toilet paper products without considering that the representations would appear in such a way that it would indicate that all products promoted on the Kleenex Cottonelle website were made in Australia. The KCFC Wipes formed a relatively small part of KCA's overall sales. It was submitted that in those circumstances it is apparent that the Made in Australia representations were not made with the intention to mislead. Nor is there evidence that they were made with an 'innocent' state of mind: see Reckitt at [131]. It was submitted that at most, the representations were made with insufficient care to the need for compliance with the ACL, and without full consideration as to the impact conveyed. The basic falsity of the representations were readily avoidable and a corporation of the size, status and resources of KCA ought to have prevented the wrongdoing at the outset. It was submitted that although a member of KCA's senior management team approved the publication of the 'Made in Australia' logo on the website, it was in the circumstances just described.
42 As to the amount of loss or damage caused it was submitted that the representations may have led consumers to purchase the KCFC Wipes based on the mistaken belief that those products were made in Australia. Although there is no direct evidence that consumers purchased the KCFC Wipes based on the representations, consumers were not able to determine whether the product was made in Australia until they were in a retail store and able to read the packaging on the KCFC Wipes. The representations may have caused consumers to choose to purchase the KCFC Wipes as they believed they were manufactured locally, in preference to another product. The amount of this loss is not readily quantifiable but it is unlikely to be substantial.
43 As to the size of the contravener and its financial position, it was acknowledge that he Kimberly-Clark group, of which KCA is a member, is a substantial and well-resourced corporate group. As at 2016, the Kimberly-Clark group had manufacturing operations in 39 countries and employed approximately 43,000 people. The overall share of the Australian flushable wipes market is apparent from the agreed facts, as is the revenue and operating profit from the sale of the KCFC Wipes and KCA more generally. It was submitted that the proposed penalty is appropriate having regard to the fact that, while the contraventions were relatively minor, the prominent position and apparent financial strength of KCA, require that a material penalty be imposed.
44 KCA has not previously been found to have contravened the ACL. During the relevant period, KCA had formal compliance policies and procedures in place to assist compliance with its ACL obligations, including regular training for advertising and sales employees. Since January 2015, KCA has also used, and continues to use, a marketing approval system which requires marketing claims to be reviewed and approved by stakeholders including members of KCA's legal team. The contraventions occasioned by the Made in Australia representations occurred notwithstanding this compliance program being in place.
45 The parties acknowledged that KCA cooperated with the ACCC at an early stage, including by making an admission that the Made in Australia representations were misleading in its Concise Statement in Response dated 16 March 2017. KCA also amended the representations as soon as concerns were raised by the ACCC in late February 2016. KCA has made full admissions, agreed to the making of all appropriate orders, agreed as to a penalty amount to recommend to the Court, and joined in the making of submissions which frankly reflect the wrongdoing. In the circumstances, the proposed penalty reflects such cooperation.
46 The parties made submissions as to the relevance of penalties imposed in cases of similar contravention. It was recognised that the differing circumstances of individual cases mean that a penalty in one case cannot dictate the penalty in a later case; as a result, comparisons with previous penalties will rarely be useful: Singtel Optus at [60]. Insofar as any comparison with other wrongdoers in other cases may be undertaken, what is sought is not numerical consistency, but the consistent application of principle: McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29; (2011) 202 IR 467 at [23]-[25], applying Hili v The Queen [2010] HCA 45; (2010) 242 CLR 520 at [48]-[49], and see R v Pham [2015] HCA 39; (2015) 256 CLR 550 at [28]-[29].
47 The parties submitted that, weighing up the above matters, a penalty of $200,000 for the Made in Australia representations is appropriate in all of the circumstances.
48 The parties submitted that a declaration should be made in the terms sought. It was submitted that the preconditions for doing so have been made out: there is a direct and important question as to whether KCA contravened the provisions of the ACL in making the Made in Australia representations; the ACCC has an obvious interest as the statutory regulator discharging its functions in the public interest in bringing the proceedings and KCA, as the entity declared to have contravened the law has an interest in opposing the relief notwithstanding its admissions and agreement. This remains so notwithstanding its admissions and agreement: see Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56; (2012) 201 FCR 378 at [30]-[33]. In this case the declaration is desirable and appropriate because it will record the Court's disapproval of the conduct, vindicate the concerns of consumers, assist the ACCC in carrying out the duties conferred on it by the Competition and Consumer Act 2010 (Cth), assist in clarifying the law, and make clear to other would-be contraveners that such conduct is unlawful: see for example, Australian Securities and Investments Commission v Axis International Management Pty Ltd [2009] FCA 852; 178 FCR 485 at [26]-[31] and [42]; Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [77]-[79].