27/10/2011

The significant factor in this case is not necessarily what the misleading conduct was but the guidance given by the Court on the factors it used to determine the amount of the pecuniary penalty.

The conduct complained of, related to a television and print media campaign regarding broadband services.

Section 224 of Schedule 2 of the Competition and Consumer Act 2010 states the maximum pecuniary penalty against a company for each act or omission is $1.1million.

The Court held that the mandatory matters to be considered in determining a pecuniary penalty are:

1.    the nature and extent of the act or omission and of any loss or damage suffered;
2.    the circumstances in which the act or omission took place; and
3.    whether the party has previously engaged in similar conduct.

In addition, the Court stated there were “non-mandatory” factors that may be considered, including:

4.    the size of the contravening company;
5.    the deliberateness of the contravention;
6.    whether senior management were involved;
7.    whether the company otherwise has a culture of compliance with the legislation;
8.    whether the company co-operated with authorities (like the ACCC);
9.    whether the company has previously engaged in similar conduct;
10.   the financial position of the company; and
11.   whether the conduct was systematic or deliberate.

In determining the $5.26 million penalty the Court held that:

“I observe that the penalty represents a substantial proportion of the overall profits that Optus can expect to make from the plans... Such a penalty will operate as an appropriate deterrent not only to Optus but also to other traders who might be tempted by the thought that misleading advertising is a profitable strategy.  These penalties will demonstrate that it is not.”

If you have any questions in relation to your proposed advertising strategies or this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.