26/09/2012

In a recent Federal Court decision, the Court ordered an individual to pay a penalty of $50,000 for misleading the public.  The case related to selling eggs as "free-range" when they were "cage" laid eggs.  It is not a poultry lesson! Misleading the public is something all business owners must avoid.

Most business people have heard of section 52 of the Trade Practices Act that prohibits misleading or deceptive conduct.  There are however further provisions to be considered which may impose financial penalties on a business owner.

Under section 33 of Schedule 2 of the Competition and Consumer Act 2010 (formerly section 55 of the Trade Practices Act 1974), a person must not engage in conduct that is “liable to mislead the public” as to characteristics of any goods sold.

In the case of ACCC v Bruhn, the Court had to determine what penalty should be imposed on a small business operator who admitted liability and had agreed to a restraint and publishing corrective advertising to customers and a newspaper.

The Court identified the relevant matters in determining the size of a penalty to be:

1. the size of the contravening company;
2. the deliberateness of the conduct;
3. whether it was conduct at a senior management level;
4. whether there was a culture of this conduct;
5. whether there had been any cooperation with the ACCC;
6. whether there had been similar past conduct;
7. the effect on the general market for these goods; and
8. the financial position of the contravening company.
   

The Court was informed that the business operator had made $42,400 of revenue over the period in question.  The Court held, in determining that a $50,000 penalty should apply, that:

"it is necessary to impose a penalty that makes contravention unprofitable and would persuade the … [person] not to repeat the contravention, and at the same time would also dissuade any other like-minded person from contravening the Act in a similar manner."

The penalty was therefore imposed as a personal deterrence but also a general deterrence in the industry.

The case serves as a reminder that any short term windfall a business may get from conduct that misleads the public could be met with a court imposed penalty far greater than any benefit derived.

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