CONSIDERATION - GROUND 4 (PENALTY)
146 Ground 4 is directed to demonstrating error in the imposition of a pecuniary penalty in the total sum of $7 million. viagogo did not allege that any one of the four component parts of the overall pecuniary penalty was affected by error, but rather that in aggregate the total pecuniary penalty imposed was manifestly excessive. As noted at [7], in the orders sought in the amended notice of appeal filed at the end of the hearing, viagogo sought a reduction of the pecuniary penalty in respect of the Quantity Representations contravention from $2.5 million to $1 million.
147 Ground 4 lacks precision. There is considerable overlap of the concepts addressed by it, which will become apparent. It does not in terms allege manifest excess as to the relevant error but viagogo's overarching submission is one of manifest excess directed to the total aggregate pecuniary penalty.
148 An error of manifest excess is concerned with what can be seen from the final exercise of the penalty discretion and the error must be "plainly apparent": see Dinsdale v R [2000] HCA 54; 202 CLR 321, 325 at [6] (Gleeson CJ and Hayne J), applied in Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49; 151 ACSR 407 (VW), 441 at [203] - [204] (Wigney, Beach and O'Bryan JJ) and Reckitt, 40 at [55] - [56].
149 Exercise of the penalty discretion involves imposing a penalty which is appropriate to secure specific and general deterrence through a single, evaluative or instinctive, synthesis of all matters relevant to penalty: Markarian v R [2005] HCA 25; 228 CLR 357, 373 at [37] (Gleeson CJ, Gummow, Hayne and Callinan JJ); Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; 254 FCR 68 (ABCC v CFMEU), 88 at [100] (Dowsett, Greenwood and Wigney JJ); Reckitt, 37 - 38 at [44]. The observations of the Full Court in ABCC v CFMEU at [100] neatly summarise the principles:
The fixing of a pecuniary penalty involves the identification and balancing of all the factors relevant to the contravention and the circumstances of the defendant, and making a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty. While there may be differences between the criminal sentencing process and the process of fixing a pecuniary penalty (cf Commonwealth v Director, FWBII at [56]-[57]), the fixing of a pecuniary penalty may to an extent be likened to the "instinctive synthesis" involved in criminal sentencing: TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at 294. Instinctive synthesis is the "method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case": Markarian v The Queen (2005) 228 CLR 357 (Markarian) at [51] (per McHugh J). Or, as the plurality put it in Markarian (at [37], per Gleeson CJ, Gummow, Hayne and Callinan JJ) "the sentencer is called on to reach a single sentence which … balances many different and conflicting features". Like the exercise of imposing a sentence for an offence, the process of fixing an appropriate pecuniary penalty should not be approached as a mathematical exercise involving increments to or decrements from a predetermined range of sentences: Wong v The Queen (2001) 207 CLR 584 at [74]-[76].
The resulting penalty will only be manifestly excessive if it is plain, having regard to the single instinctive synthesis of all the relevant factors, that it goes beyond that which is appropriate to secure the object of deterrence.
150 In Pattinson, the plurality observed (at [18]-[19]):
[18] In CSR [[1991] ATPR 41-076 at 52,152-52,153], French J listed several factors which informed the assessment under the Trade Practices Act 1974 (Cth) of a penalty of appropriate deterrent value:
"The assessment of a penalty of appropriate deterrent value will have regard to a number of factors which have been canvassed in the cases. These include the following:
1. The nature and extent of the contravening conduct.
2. The amount of loss or damage caused.
3. The circumstances in which the conduct took place.
4. The size of the contravening company.
5. The degree of power it has, as evidenced by its market share and ease of entry into the market.
6. The deliberateness of the contravention and the period over which it extended.
7. Whether the contravention arose out of the conduct of senior management or at a lower level.
8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
9. Whether the company has shown a disposition to co operate with the authorities responsible for the enforcement of the Act in relation to the contravention."
[19] It may readily be seen that this list of factors includes matters pertaining both to the character of the contravening conduct (such as factors 1 to 3) and to the character of the contravenor (such as factors 4, 5, 8 and 9). It is important, however, not to regard the list of possible relevant considerations as a "rigid catalogue of matters for attention" [Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 580 [91]] as if it were a legal checklist. The court's task remains to determine what is an "appropriate" penalty in the circumstances of the particular case.
151 Section 224(2) of the ACL requires the court to have regard to all relevant matters including those listed in s 224(2)(a) to (c) in determining the appropriate pecuniary penalty.
152 viagogo's focus on the primary judge's consideration of a small subset of the relevant penalty factors mischaracterises the manner in which the primary judge exercised the discretion. That is demonstrated by examining the four challenges to the primary judge's approach identified by Ground 4.
153 The first challenge (Ground 4(a)) is predicated on the success of Grounds 1, 2 and/or 3 in that it seeks to challenge the total penalty on the basis that the primary judge took into account the contraventions in relation to the representations that are the subject of the appeal on liability. Ground 4(a) falls with Grounds 1 to 3.
154 The second challenge (Ground 4(b)) seeks to demonstrate error by reference to the primary judge's findings in respect of the small profit viagogo gained by its contravening conduct (at LJ [87]) in circumstances where viagogo contends that profit is an important measure of objective seriousness and submits that the primary judge did not find that the impugned conduct was in or near the worst category of contravention.
155 The third challenge (Ground 4(c)) is viagogo's contention that the primary judge erred by making an assessment of specific and general deterrence that placed undue weight on revenue as a deterrence factor, instead of profit (at PJ [88] and [89]), did not place sufficient weight on the effect of the COVID-19 pandemic on viagogo's ongoing financial circumstances (at PJ [88]) and rejected any consideration of parity (at PJ [126] - [128]).
156 The fourth challenge (Ground 4(d)) is directed to demonstrating error in the primary judge's approach to calculating the relevant loss to consumers by reference to total ticket sales during the relevant period (at PJ [80], [82] and [89]), in circumstances where, according to viagogo, total ticket sales were not a relevant or accurate measure of loss to consumers.
157 The second, third and fourth challenges can be considered together because they relate to the primary judge's assessment of objective seriousness (Ground 4(b)) and deterrence (Ground 4(c)), by reference to his consideration of the means by which the severity of the contraventions could be judged, namely by reference to profit (Grounds 4(b)(i) and (ii)), revenue (Ground 4(c)(i)) and total ticket sales (Ground 4(d)). Ground 4 also contends that the primary judge failed to place sufficient weight on the impacts of the COVID-19 pandemic (Ground 4(c)(ii)) and failed to consider parity (Ground 4(c)(iii)) when making an assessment of general and specific deterrence.
158 It should immediately be noted that viagogo's complaints about profit, revenue and the COVID-19 pandemic are complaints about the weight the primary judge attached to those factors, and thereby do not amount to House v The King error. However, those complaints also fail for the reasons that follow.
159 viagogo submitted in relation to Grounds 4(b)(i), (ii) and 4(c), that the primary judge erroneously focussed on revenue in assessing the pecuniary penalty, which could lead to a disproportionate result in a case such as this where turnover was large but profits were small. viagogo contended that the primary judge's error in this respect is evident from the fact that:
(a) the primary judge assessed the profit earned as small (at PJ [87]) and recognised that pursuing contravening conduct for profit is at the heart of the objective of deterrence;
(b) the primary judge accepted that viagogo's Australian revenue was a more relevant consideration than its worldwide revenue;
(c) the primary judge accepted that the benefit received by viagogo may be indirectly aligned with revenue;
in circumstances where:
(d) the primary judge should have accepted viagogo's estimate of profit and its submission as to the relationship between profit and revenue.
For these reasons, viagogo contends that the total pecuniary penalty was so disproportionate relative to the relevant profit as to be manifestly excessive. viagogo relies on manifest excess as a species of House v The King error.
160 viagogo's submissions must be rejected for the following reasons.
161 First, while there are authorities which, in assessing penalty, relate specific deterrence to the profit derived from contravening conduct, they should not be construed as laying down an immutable principle that the appropriate penalty to secure specific deterrence is necessarily pegged to, or limited by, the amount of profits derived from the contravening conduct. Nor should the authorities be construed as requiring, in point of principle, that there be some linear relationship between the appropriate penalty and profit or that the penalty should only exceed the profit by a certain amount: VW, 431 at [148] - [149]. Profit is merely one factor that may be relevant among many others: ABCC v CFMEU, 89 at [103]. In many cases, including the present, reported profit may not reflect the objective seriousness of the contravention. Objective seriousness is frequently more a function of the character of the conduct, the harms caused (monetary and otherwise) by the conduct, and the deliberateness of the conduct. Indeed, reported profit may not even be the most useful measure of benefits accruing to the contravenor and such benefits may include growth of business, market recognition, advancement over competitors, and savings in compliance costs.
162 Secondly, there will be cases in which the claims of deterrence (general and specific) are so strong as to warrant a penalty that would upset any calculation constrained by profitability. That is because those engaged in trade or commerce should be deterred from conducting themselves according to the cynical cost benefit calculus where the risk of the penalty is weighed against the profits to be made from the contravention: Singtel Optus, 265 at [62] - [64], cited with approval in Pattinson at [17]. A penalty must be sufficient to achieve deterrence. If it is not, the risk is that the deterrent effect is undermined by the penalty being absorbed as a cost of making the profit attendant on the impugned conduct. The ACCC submits, and we accept, that it is a distraction to observe that the authorities often express the cost of doing business principle by reference to "profit". The word "profit" is not used in the authorities in a limited or technical way to describe the profits reported by the contravenor. Rather, profit describes the wide array of benefits flowing to the contravenor which will inform the risk/benefit calculus undertaken by the contravenor; were it otherwise, the principle would be denuded of effect except in cases where the benefits accruing to the contravenor were limited solely to the profits reported on the contravenor's balance sheet. That is why the principle is often expressed by reference to "putting a price on contraventions", or to "benefit", "gain" or "revenue": Trade Practices Commission v CSR Ltd [1991] FCA 521; ATPR 41-076, 17 at [40] (French J); NW Frozen Foods, 292 at [F]; Reckitt, 62 at [151]; Australian Securities and Investments Commission v Westpac Banking Corp (No 3) [2018] FCA 1701; (2018) 131 ACSR 585, 609 at [120] (Beach J).
163 Thirdly, the primary judge was not satisfied that the profit said to have been earned by viagogo from the viagogo Australian website was accurate because two conflicting figures were proffered by viagogo and there was no transparency as to how either figure had been calculated: PJ [27]. There is no appeal from this finding.
164 Fourthly, the primary judge made findings as to the limitations of the revenue figures which his Honour then took into account. Those findings correspond with viagogo's submissions below and on appeal.
165 Fifthly, the primary judge's reliance on revenue (at PJ [84]-[88]) rose no higher than as a measure of the size of viagogo as the contravening corporation. This is an orthodox approach to assessing the appropriate size of a pecuniary penalty necessary to achieve the objective of specific deterrence: VW, 433 - 434 at [154]. It is one of the factors which emerge from a survey of the cases and which is appropriate to the assessment of a penalty of appropriate deterrent value as identified by French J in CSR at 52,152 - 52,153 (extracted above at [150]) and confirmed by the plurality in Pattinson. The size of the contravening company is a factor that goes to the character of the contravenor which is relevant to the court's task of determining what is an appropriate penalty in the circumstances of the particular case: Pattinson at [18]-[19].
166 viagogo contended by Ground 4(c)(ii) that the primary judge placed insufficient weight on the impacts of the COVID-19 pandemic because, in his statement of taking it into account at PJ [88], the primary judge did not state how it was considered or what, if any, impact it had on the penalty.
167 This appeal ground can be dealt with shortly. viagogo did not lead any evidence of the impact of the pandemic on its Australian business, leaving the primary judge to take judicial notice of it: PJ [88]. As noted at [147] above, the court's task in assessing a pecuniary penalty involves a difficult and complex process of multi-factorial decision making by a process of instinctive synthesis addressing many conflicting and contradictory considerations. This approach often makes it difficult to identify how a matter is taken into account in the reasoning process and outcome. But to require a judge to precisely identify how and to what extent each matter is taken into account in the final outcome would amount to a mathematical approach or two-stage process that is inconsistent with principle: Markarian, 373 at [37]. The primary judge expressly took the impact of the COVID-19 pandemic into account, taking judicial notice of the fact that the entertainment industry has been devastated by the restrictions brought about by the pandemic: PJ [88]. In any event, the financial affairs of a contravenor cannot be given such weight as would lead a court to impose a penalty that would be inadequate to deter: Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247; [2006] ATPR 42-091, 44,564 (Heerey, Finkelstein and Allsop JJ). For this reason, courts regularly impose large penalties even where they may have a significant impact on a contravenor's financial circumstances: See the examples given in Federal Commissioner of Taxation v Arnold (No 2) [2015] FCA 34; 324 ALR 59, 104 - 105 at [200] - [204] (Edmonds J) and Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd (in liq) (No 7) [2016] FCA 484 at [20] - [29] (Yates J). Given the overall gravity of the wrongdoing and other circumstances viagogo has not demonstrated that the primary judge erred in not further reducing the penalties by reference to the impact of the pandemic on viagogo.
168 viagogo contended by Ground 4(d), that the primary judge erred by calculating loss to consumers by reference to total ticket sales, where that was not a relevant or accurate measure of consumer harm. viagogo submits that the primary judge purported to apply a discount for consumers that were: not "frustrated in their expectations"; obtained tickets that were otherwise not available; were alert to the fact that viagogo was a marketplace; paid less than the face value of the tickets; or received funds (PJ [81]). viagogo complains that the primary judge in his reasons failed to demonstrate how the discounting method was calculated or applied, or if it was applied. viagogo submits that the size of the penalty reveals that the primary judge erred in not taking into account the following factors:
(a) that the extent of the harm to the consumer was limited to the difference between the price the consumer paid for the ticket and the cheapest alternative available to the consumer, to the extent alternatives were available;
(b) that where consumers obtained tickets to events which were otherwise sold out, they were not harmed even if they paid a higher price than the official ticket price and therefore consumers who obtained such tickets should be eliminated from the penalty calculus; and
(c) that the frequency with which consumers paid more than the official price for tickets acquired on the viagogo Australian website could not be inferred based on the evidence of the ACCC consumer witnesses because their evidence was, as the primary judge recognised, statistically insignificant.
169 viagogo's submissions are rejected for the following reasons.
170 First, viagogo's submission that error is demonstrated by the lack of mathematical transparency in the reasons as to the way in which the primary judge applied the relevant discount is inconsistent with Markarian for the same reasons referred to in [167] above. The submission is rejected.
171 Secondly, viagogo's contention that consumers who obtained tickets to sold-out events suffered no harm even if they paid a price that was higher than the original ticket cannot be accepted. One of the ACCC consumer witnesses, Ms Burke, gave evidence of acquiring a ticket from viagogo to an event that was sold-out and of paying a price higher than the official ticket price. The primary judge's conclusion (at PJ [77]) that the ACCC consumer witnesses "paid substantially more for their tickets on the basis of those misapprehensions than they would have if they bought tickets from the authorised sellers", is not displaced by the argument based on the example of Ms Burke's experience. It is true that Ms Burke bought tickets to a sold-out event. However, she still paid substantially more than the official ticket price and when she did so, she was acting under a misapprehension as to price. The fact that there were no official tickets available does not make the primary judge's conclusion wrong when considered in context. Had viagogo made it clear that it was operating a ticket resale site, then there would have been no misapprehension by the ACCC consumer witnesses, or consumers in general, and the market price analogy upon which viagogo seeks to rely might be useful, but that was not the case with which the primary judge was faced.
172 Thirdly, viagogo's contention that the primary judge impermissibly used the evidence of the ACCC consumer witnesses misstates and selectively quotes the primary judge's findings. At PJ [77], the primary judge begins by stating that it was not possible, on the information available, to quantify the harm to consumers. In the third last sentence of PJ [77], the primary judge's finding is that, based on the large number of complaints received by viagogo, his review of the website, and the video captures, "a substantial number of consumers were likely to have entered transactions under the misapprehensions engendered by the representations". This does not amount to a finding that all of these consumers were harmed because they overpaid, but it does support the primary judge's finding (at PJ [78]) that consumers were harmed by being deprived of the opportunity to buy tickets from another source who did not misrepresent the true position. The primary judge's treatment of the evidence was not, contrary to viagogo's characterisation, a simplistic extrapolation of the evidence of ACCC's consumer witnesses to the experience of consumers in general. A fair reading of the primary judge's reasons demonstrates that the evidence of the ACCC consumer witnesses merely contributed to the broader inference which the primary judge drew from the totality of the evidence before him.
173 By Grounds 4(b)(iii) and 4(c)(iii), viagogo contends that the primary judge rejected any consideration of parity because the size of the total pecuniary penalty by reference to viagogo's financial position and profit was so substantial that it was either based on an assessment of the contraventions being of the highest order or it is evident that the primary judge did not take parity into account.
174 These grounds must also be rejected. First, at PJ [128], as the primary judge correctly stated, it is the consistent application of principle that is relevant to the assessment of penalty, rather than the range of penalties given in disparate circumstances that cannot be said to be analogous: Flight Centre, 85 at [63]. As Middleton J said in Australian Competition and Consumer Commission v Telstra Corporation Ltd [2010] FCA 790; 188 FCR 238 at [215]:
It is apparent that there are many difficulties in simply referring to penalties previously imposed for contraventions of legislation in widely differing circumstances or in circumstances where some of the factors are similar but others dissimilar to those of the present proceeding. In each case, the Court must take into account the deterrent effect of the penalty and the fact that the penalties "should reflect the will of Parliament that the commercial standards laid down in the Act must be observed but not be so high as to be oppressive": see Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd [1978] ATPR 40-091 at 17,896.
175 Secondly, the primary judge considered the cases to which viagogo referred him and concluded that none of them was closely factually related to the present case. No error has been demonstrated in respect of the primary judge's conclusion in that regard.