Australian Competition & Consumer Commission v Kimberly-Clark Australia Pty Ltd

2. The respondent pay the Commonwealth of Australia a pecuniary penalty of $200,000 in total in respect of the contraventions of section 29(1)(k) of the Australian Consumer Law declared by the Court pursuant to Order 1, within 14 days of the Court's order.
3. The respondent is to pay the applicant's costs of and incidental to the penalty hearing, to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ABRAHAM J: 1 In essence, between 28 October 2015 and 24 February 2016, Kimberly-Clark Australia Pty Ltd (KCA) published a 'Made in Australia' logo as part of a static banner which appeared on the bottom of each page of its Kleenex Cottonelle website, www.kleenex-cottonelle.com.au. This website predominantly advertised KCA's Kleenex Cottonelle toilet paper products, which were made in Australia, but also included some webpages dedicated to the Kleenex Cottonelle Flushable Cleansing Cloths, which were not made in Australia. 2 By doing so, KCA represented that its Kleenex Cottonelle Flushable Cleansing Cloths products, namely the Sensitive, Cotton Fresh, Kids and Out and About products (collectively, the KCFC Wipes) were 'Made in Australia' when that was not the case and thereby made false or misleading representations in contravention of s 29(1)(k) of the Australian Consumer Law (ACL). 3 It falls to consider the appropriate relief. 4 The parties jointly seek a declaration in the following terms: Between 28 October 2015 and 24 February 2016, by publishing a Made in Australia logo at the bottom of all pages of the Kleenex Cottonelle website (www.kleenex-cottonelle.com.au), the respondent, Kimberly-Clark Australia Pty Ltd, made false or misleading representations in trade or commerce that the Kleenex Cottonelle Flushable Cleansing Cloths were made in Australia when in fact they were not made in Australia, in contravention of section 29(1)(k) of the Australian Consumer Law (ACL). 5 The parties also agree that a pecuniary penalty order be made against the respondent in the amount of $200,000. 6 In considering whether an agreed penalty provided by the parties is appropriate the Court is required to "form its own view" and does not act as a "rubber stamp" to an agreement reached: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 at [31] (DFWBII). That said, there the Court observed at [58]: …Subject to the court being sufficiently persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and, for the reasons identified in Allied Mill highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty. 7 Those observations about the desirability of acting upon agreed penalty submissions were made in the context of a broader recognition that as a civil litigant in civil proceedings, civil penalties are but one of numerous forms of relief which regulators can pursue, including by making submissions as to that relief: see DFWBII at [24], [57]-[59], [63], [103], [107]. 8 Having scrutinised the relevant material relied on in the context of the relevant legal principles, for the reasons given below, I am satisfied that it is appropriate to make the orders sought by the parties.

Agreed Facts 9 Kimberly-Clark group is a global personal care company headquartered in Dallas, Texas, USA. KCA is a proprietary company incorporated in Australia and is responsible for Kimberly-Clark's Australian operations. As at 2016, Kimberly-Clark group had manufacturing operations in 39 countries and employed approximately 43,000 people. 10 KCA manufactures products and subsequently sells those products in the local market through distributors and retailers. KCA may at times also purchase products from other entities in the Kimberly-Clark group for local sale or from external, contract manufacturers located within or outside the local market and may at times also sell products manufactured locally to other entities in the group. 11 In the period between May 2013 and May 2016, KCA promoted and supplied the KCFC Wipes, which were marketed as flushable wipes intended for personal hygiene use, in the following varieties: (1) Sensitive; (2) Sensitive (Out & About); (3) Cotton Fresh; and (4) Kids. 12 The KCFC Wipes were not manufactured or made in Australia. 13 KCA's toilet paper products were made in Australia. 14 The KCFC Wipes were supplied through a range of retailers and wholesalers, typically by delivery to the warehouses of those entities who then delivered them to retail stores, grouped as follows: (1) Major retailers such as Woolworths (including Big W) and Coles; (2) Independents such as Metcash and Campbells Cash and Carry; (3) Alternative channels which included a range of offline and online retailers; (4) Wholesale distributors; and (5) Pharmacies. 15 At all relevant times, the packaging for the KCFC Wipes accurately stated the country in which the product was made. 16 From 28 October 2015 to 24 February 2016 (Relevant Period), KCA published a logo at the bottom of KCA's Kleenex Cottonelle website (www.kleenex-cottonelle.com.au) which comprised an image of the map of Australia along with the words 'Made in Australia' (Made in Australia Logo). 17 KCA, by publishing the Made in Australia Logo on pages of the Kleenex Cottonelle website relating to KCFC Wipes, represented that the KCFC Wipes were made in Australia when in fact the KCFC Wipes were not made in Australia (Made in Australia Representations). 18 The agreed facts provided information as to KCA's market share for flushable wipe products in Australia in 2016. The Relevant Period occurred over a 4 month period in 2015/2016. Details were provided of the number of KCFC Wipes supplied by KCA in 2015 and 2016, including the revenue and operating profit earned by KCA for the wipes sold. It also provided details of the financial position of KCA (including its New Zealand operations) during the relevant period being 2015 and 2016, as well as its current financial position. It is unnecessary for the purposes of this judgment to recite those details. 19 The following persons were responsible for ultimate approval of the Made in Australia Logo on the Kleenex Cottonelle website: (1) Jacqueline Fegent-McGeachie, Director Public Affairs, Communications and Sustainability at KCA; and (2) Vanessa de la Fuente, Senior Brand Manager, Intimite Care Family Care Division at KCA. 20 On 26 February 2016, KCA amended the wording of its Made in Australia Logo on its website to "Kleenex toilet roll made in Australia". This change was made promptly after the Australian Consumer and Competition Commission (ACCC) raised its concerns in a letter dated 23 February 2016. The positioning of the amended Made in Australia Logo on the Kleenex Cottonelle website otherwise remained the same. 21 KCA admits that from 28 October 2015 to 24 February 2016, as a consequence of its conduct in making the Made in Australia Representations in paragraph 17 in the circumstances in paragraph 12, it made false or misleading representations in trade or commerce concerning the place of origin of goods, in contravention of s 29(1)(k) of the ACL.

Legal principles 22 The primary purpose of any civil penalty regime is to ensure compliance with the statutory regime by deterring future contraventions: DFWBII at [24]. The principal object of an order that a person pay a pecuniary penalty is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; (2018) 262 CLR 157 at [116]. Civil pecuniary penalties are "primarily if not wholly protective in promoting the public interest in compliance [with the statute]": DFWBII at [55], [59], [68] and [110]; and see Pattinson v Australian Building and Construction Commissioner [2020] FCAFC 177 (Pattinson) at [25]. 23 Section 224(2) of the ACL requires the Court to have regard to "all relevant matters" in determining the appropriate penalty. It specifies a number of non-exhaustive statutory factors: the nature and extent of the wrongdoing, any loss or damage suffered, the circumstances of the wrongdoing and any Court findings as to prior similar conduct. Other relevant factors have also been identified which, for the most part have their genesis in the factors set out in Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 52-135 at 52, 152. In the consumer law context a modified form of that list has been found to be helpful: see Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 (Singtel Optus) at [37]; Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330; (2015) 327 ALR 540 (Coles Supermarkets) at [8]. It includes the size of the contravener, whether the wrongdoing was deliberate or covert, the involvement (or not) of senior management, whether the contravener has a culture of compliance and any relevant prior conduct. 24 Cooperation with authorities in the course of investigations and subsequent proceedings can also reduce the penalty that might otherwise be imposed. The reduction reflects the fact that such cooperation: increases the likelihood of cooperation in future cases in a way that furthers the object of the legislation; releases and relieves the regulator's resources, thereby increasing the likelihood that other contraveners will be detected and brought to justice; and facilitates the course of justice: see eg DFWBII at [46]; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; 71 FCR 285 at 293-294. 25 The process of arriving at the appropriate civil penalty involves an intuitive or instinctive synthesis of all of the relevant factors: Coles Supermarkets at [6]; TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190; (2012) 210 FCR 277 at [145]. Instinctive synthesis is the method by which a judge identifies all the factors relevant to penalty and, after weighing all those factors, determines the particular penalty that should be imposed: Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 (Markarian) at [37], and see [51]. Although this is the imposition of a civil penalty and therefore the features of sentencing such as retribution, denunciation and rehabilitation identified in Markarian do not apply, "the approach in Markarian remains relevant as a convenient way to express an evaluative process to which many factors may be relevant in reaching a conclusion of an appropriate penalty necessary in the circumstances for the object of deterrence, without exceeding what is reasonably necessary and thus becoming oppressive, in respect of a contravention of a kind before the court": Pattinson at [112]. 26 In relation to breaches of the ACL, the courts have emphasised that the primary purpose of civil penalties is deterrence. The High Court, in applying the observations in Singtel Optus, referred to the primary role of deterrence in assessing the appropriate penalty for contraventions where commercial profit is the driver of the contravening conduct: Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 (TPG Internet) at [64]-[66]. For example, it has been made plain the need to ensure that the penalty in such cases "is not such as to be regarded by that offender or others as an acceptable cost of doing business" and will deter them "from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention": Singtel Optus at [62]. 27 It has been observed that the "critical importance of effective deterrence must inform the assessment of the appropriate penalty": Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 (Reckitt) at [153]. There the Court explained that "all other things being equal, the greater the risk of consumers being misled and the greater the prospect of gain to the contravener, the greater the sanction required, so as to make the risk/benefit equation less palatable to a potential wrongdoer and the deterrence sufficiently effective in achieving voluntary compliance": [151] and see [57], [148]-[153], [164], [176]. 28 In common with criminal sentencing, the maximum penalty fixed by Parliament remains a "yardstick" against which any process of assessment is to proceed: Markarian at [30]; Pattinson at [62]; Reckitt at [154]-[155]; Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68 at [55]. The maximum penalty for contraventions by a company of a provision in Part 3-1 of the ACL was, at the relevant time, $1.1 million: item 2 of s 224(3). This $1.1 million maximum applies to each contravention of s 29(1)(k) of the ACL by KCA. 29 It is recognised that ordinarily separate contraventions arising from separate acts should attract separate penalties. It could be said that the contravening representation was made on each occasion a consumer visited the KCFC Wipes webpages on the Kleenex Cottonelle website. However where separate acts give rise to separate contraventions which are inextricably interrelated, they may be regarded as a "course of conduct" for penalty purposes: Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243; (2018) 357 ALR 55 at [234]. This avoids double-punishment for those parts of the legally distinct contraventions which involve overlap in wrongdoing. 30 Whether the contraventions should be treated as a single course of conduct is a question of fact having regard to all of the circumstances of the case. This principle has been applied when imposing penalties for breaches of the consumer law, particularly when there is a large number of legally distinct breaches: see eg Coles Supermarkets at [82]-[85], [103]; Reckitt at [139]-[145], [157]; TPG Internet [60]- [61]; Singtel Optus [51]-[55]. 31 The principle of totality requires the Court to make a 'final check' of the penalties to be imposed on a wrongdoer, considered as a whole. In imposing penalties in respect of multiple contraventions or courses of conduct, the Court is not bound to impose the purely mathematical cumulative total of each of the penalties.

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].

Consideration 49 Having considered the facts as agreed, the joint submissions as to penalty and the relevant principles, I am satisfied that it is appropriate to make the orders and declaration sought. 50 The joint submissions reflect that the parties have given close and careful consideration to the relevant issues, with one of the parties being the ACCC, a specialist regulator, to the appropriate declarations, orders and pecuniary penalties. In that context, in DFWBII the High Court at [60]-[61] noted the relevance of the fact that submissions were being advanced by a specialist regulator able to offer "informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance", albeit that such submissions will be considered on the merits in the ordinary way. 51 I am satisfied that the basis for the approach taken by the parties, including that the conduct be considered a course of conduct is, in the circumstances, the appropriate one. It is mindful of the importance and primacy of general deterrence, and also recognises the nature of the contraventions, the circumstances in which they were committed, and by whom they were committed. I accept that the contraventions occurred by oversight, that the situation was remedied when brought to KCA's attention and it cooperated with ACCC at an early stage. 52 As the parties properly emphasised 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. This is particularly so where, as in this case, the representations were on a website, where there is a difficulty for a customer to verify the information. Such representations may be a significant influence to some customers on their choice of product. 53 It is essential to impose a penalty of sufficient size to act as a strong deterrent to ensure the respondent and others do not treat the risk of non-compliance as a mere cost of doing business. Although these contraventions occurred in a context where the representations were made with insufficient care being paid to the need for ACL compliance, as the parties accepted, the 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. 54 I am satisfied that it is in the interests of justice to make the declarations and orders and to impose the pecuniary penalties as sought by the parties. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Abraham.