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Australia – Not-So-Exciting Times For Mobile Phone Company Found In Breach Of Consumer Protection Laws.

21 May, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Competition & Antitrust

 

Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] FCA 1267

 
What You Need To Know

 

  • The Federal Court has imposed significant penalties on Excite Mobile Pty Ltd (Excite Mobile), a mobile telecommunications company, for contraventions of numerous provisions of the former Trade Practices Act 1974 (Cth) (TPA). These penalties included pecuniary penalties, injunctions and disqualification orders against its directors. 
  • The case concerned various consumer protection provisions of the TPA (now superseded by the Competition and Consumer Act 2010 (Cth)).

 
What You Need To Do

 

  • This case serves as a timely reminder to businesses that Australian courts will not hesitate to impose appropriate penalties for unfair and misleading business practices and other forms of conduct which contravene consumer protection laws. 

 
In Australian Competition and Consumer Commission v Excite Mobile Pty Ltd [2013] FCA 350 (Excite Mobile No 1), the Court found Excite Mobile had contravened sections 51AB, 52, 53(c), 53(g), and 60 of the TPA. The contraventions related to Excite Mobile’s provision of mobile telecommunications services to the Australian market.

 
Following Excite Mobile No 1, Mansfield J now considered the appropriate orders to be made against Excite Mobile.

 
The Australian Competition and Consumer Commission (ACCC) sought a range of remedies, including (among others):

 

  • declaratory orders under section 21 of the Federal Court of Australia Act 1976 (Cth);
  • pecuniary penalties under section 76E of the TPA;
  • injunctive orders under section 80 of the TPA; and
  • disqualification orders under section 86E of the TPA in relation to Excite Mobile’s directors.

 
Declaratory Orders

 
There was no dispute between the parties about the declaratory orders sought by the ACCC. Accordingly, Mansfield J made these orders, which provided (among other things) that Excite Mobile’s conduct was unconscionable under section 51AB of the TPA and misleading and deceptive under section 52 of the TPA, and that Excite Mobile’s two directors were concerned in, or party to, Excite Mobile’s contraventions.

 

Pecuniary Penalties


The ACCC sought significant pecuniary penalties, including the sum of AUD 5m against Excite Mobile. The respondents argued that the penalties should be much lower, though they did not propose a specific figure.

 

Mansfield J held that the appropriate penalties should be much lower than those proposed by the ACCC. His Honour found that, in determining the penalty amounts, it is appropriate to group together a number of separate contravening acts by Excite Mobile into a smaller number of “episodes” of conduct. Under the TPA, a person is not liable for more than one pecuniary penalty in respect of the same conduct. Mansfield J found that the relevant “episodes” of conduct comprised four different categories.

 
Section 76E of the TPA was directed at imposing a pecuniary penalty for a corporation’s failure to “observe standards of conduct” (as prescribed by Part V of the TPA) in dealings with customers. His Honour held that the penalty must have a deterrent value, and should not be one which is regarded as an acceptable cost of doing business. In determining an appropriate penalty, the Court had regard to:

 

  • the nature and extent of the acts;
  • the resulting loss or damage suffered;
  • whether the contravener has previously engaged in similar conduct; and
  • the size and market share of the contravener.

 
Excite Mobile’s “egregious” conduct included imposing unfair and misleading terms on customers, providing a contact number for customer complaints which was (unbeknownst to customers) run by Excite Mobile and not an independent body, and sending threatening letters to customers from a fictitious debt collecting agent. Mansfield J accepted that Excite Mobile’s conduct caused significant loss and damage to customers, which could not be quantified with precision.

 
Excite Mobile had previously engaged in contravening conduct before 15 April 2010 (the date on which section 76E of the TPA commenced operation). Conduct prior to 15 April 2010 was not taken into account in determining the appropriate penalty.

 
Mansfield J imposed a total pecuniary penalty of AUD 455k, on the basis that although Excite Mobile’s conduct was very serious, it was a relatively small player in the market. His Honour noted that there is no “science” to this figure, and each case will need to be assessed by reference to its particular circumstances. Mansfield J also imposed smaller penalties on the two directors of Excite Mobile and another individual involved in the company.

 
Other Remedies

 
In addition, Mansfield J granted:

 

  • injunctions under section 80(1) of the TPA, restraining the directors of Excite Mobile from engaging in the contravening conduct for a period of seven years; 
  • orders disqualifying the two directors from managing, or being a director of, a corporation for two and a half to three years; 
  • orders under section 83 of the TPA (requiring the reasons for judgment as to Excite Mobile’s liability to be retained on the Court file as evidence); and 
  • orders requiring Excite Mobile and its two directors to pay the ACCC’s costs.

 

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For futher information, please contact:

 

Gordon Hughes, Partner, Ashurst
gordon.hughes@ashurst.com

 

Amruta Bapat, Ashurst
amruta.bapat@ashurst.com

 

Ashurst Competition & Antitrust Practice Profile in Australia

 

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