ETA FOR PENALTY
As of 24 July 2020, there is no newspublished by the Court as to when the penalty will be handed down. The standing orders are that parties file a draft minute of proposed orders for timetabling a hearing as to penalties by 31 July 2020. I (and no doubt others) will comment further once further news is made available.
Given the complex nature of ACL penaltyhearings, I anticipate that a hearing will not be listed for some time asparties will have to confer and file submissions and any further evidence. After the penalty hearing, the judge will then draft a further decision in respect of the penalty - even if the parties agree on the penalty amount, the Court is required to independently assess its adequacy. The decision for the KGN contraventions took over 3 months to be handed down after hearing.
Put bluntly, we may not have adecision until closer to the end of this year.
MAXIMUM PENALTY
On 1 September 2018, the maximumpecuniary penalty for false or misleading representations increased to the greaterof $10,000,000 or 10% of the annual turnover of the body corporate during the12‐month period ending at the end of the month in which the act or omissionoccurred or started to occur.
KGN’s contravening conduct tookplace on and between 27 to 30 June 2018. Accordingly, the superseded laws apply retrospectively, and the maximum penalty is $1,100,000 per contravention. This approach was adopted in Australian Competition and ConsumerCommission v Sony Interactive Entertainment Network Europe Ltd [2020] FCA 787 (see paragraph 100) where the contravening conduct occurred before and after 1 September 2018.
CALCULATION OF PENALTY
A good case illustrating how thepenalty is calculated is Australian Competition and Consumer Commission vGlaxosmithkline Consumer Healthcare Australia Pty Ltd (No 2) [2020] FCA 724,in which the Respondent was found to have contravened the ACL for selling asingle formulation of Voltaren as two different products over the counter(Emulgel vs Osteo Gel). The Court relevantly noted:
- Even though 1.4M units of Osteo Gelwere sold, and 1.4M contraventions took place with a theoretical maximumpenalty of each $1.1M, the maximum penalty is so large as to be meaninglesswhen it comes to assessment.
- Separate contraventions fromseparate acts ordinarily attract separate penalties, but where those actsare inextricably interrelated, they may properly be grouped as a single courseof conduct, so as to avoid double punishment for overlapping conduct.
In the case of KGN:
- From 27 to 30 June 2018, KGNconducted a sales promotion in respect of 78,111 products on the website,offering a 10% reduction on prices for consumers who purchased those productsand entered the promotional code “TAXTIME” at checkout.
- It was found that representationswere false or misleading in relation to 621 of the 78,111 products.
- For the reasons noted above, if eachproduct to which the promotion applied constitutes a contravention, the 621 contraventionswill be treated as a single course of conduct to avoid double punishment.
CONCLUSION & SHORT-TERM OUTLOOKSo, if you agree that the maximumpenalty per contravention is $1.1M (as opposed to being the greater of $10M or 10%of the annual turnover in the 12 months preceding the contravention), and thatthe 621 contraventions are “inextricably interrelated” such that they can begrouped as a single course of conduct, then in giving KGN the benefit of thedoubt, there is 1 contravention giving rise to a maximum penalty of $1.1M.
Since judgment having beenhanded down, the SP has been consolidating and traded volume has been graduallydecreasing. It reflects the uncertain sentiment of the market in anticipation of the penalty. Instos will capitalise on this opportunity to buy out fickle retail investors. Buyers are concerned over the seemingly misconceived consensus that news of the penalty is imminent and subject to the harsher 1 September 2018 amendments. Taking an optimistic approach, the bull pattern should continue in anticipation of earnings being released in August and the announcement of an accretive acquisition on the horizon.
Be patient, don't trust the media, DYOR, stay safe.
(20min delay)