Federal Court warns of a ‘free range’ on ACL penalties

ACCC v RL Adams Pty Ltd [2015] FCA 1016

In ACCC v RL Adams, Justice Edelman warned future defendants of an increase in the quantum of penalties that may be ordered for misleading or deceptive conduct in ‘free range’ claims. Defendants may face multiple contraventions and be subject to far greater fines to stem the tide of false ‘free range’ advertising.

Background

In December 2013, RL Adams Pty Ltd (RL Adams) began producing and selling eggs to retailers under the brands ‘Mountain Range Eggs Free Range Eggs’ and ‘Drake Supermarkets Free Range Eggs’. Those eggs were then on-sold to consumers from December 2013 to October 2014. The egg cartons included the words ‘free range’ in four different places accompanied with pictures of a flat open farm range, a mountain range and eggs sitting amongst green grass.

The RL Adams website included images of hens outdoors with such statements as ‘Mountain Range Eggs are produced by hens running freely on the farm during the day and housed at night to protect them from predators.’

Between December 2013 and October 2014, the farm that housed the RL Adams hens and produced the eggs kept the hens in two barns. Due to the elevation of the barn doors and the lack of fencing around the barns, the hens were permanently kept inside the locked barns and were not free to roam around the farm.

The proceeding

In December 2014, the ACCC brought proceedings against RL Adams alleging the following contraventions of the of the Australian Consumer Law (ACL):

• s18: misleading or deceptive conduct;
• s29(1)(a): false or misleading representations that goods are of a particular quality, history, nature and characteristic; and
• s33: misleading conduct as to the nature of goods.

RL Adams quickly co-operated with the ACCC and accepted the allegations made against it. RL Adams notionally agreed with the ACCC’s proposal to implement ACL training to its employees. The ACCC and RL Adams submitted an agreed statement of facts to the court and the ACCC proposed that RL Adams conduct should be treated by the court as a single contravention, rather than a series of contraventions.

The court was therefore asked to consider the appropriate penalty for the contravention under the ACL. Under the ACL the current maximum penalty for a single contravention by a company is $1.1million and $220,000 by an individual.

The decision

Justice Edelman’s decision reveals the Federal Court’s concern with the continuing trend of misleading ‘free range’ claims, despite incrementally increasing penalties that have been awarded for this conduct.

RL Adams co-operated quickly with the ACCC and did not waste court resources by actively defending the matter. Edelman J noted this, yet expressed his concern at the various ‘free range’ cases that have come before the court from 2010 to 2015 and the increasing penalties imposed in each case. His Honour noted that the prevalence of these cases illustrated that the previous penalties did not appear to be acting as a general deterrent to the community from engaging in this behaviour

Although the parties had agreed to this matter being prosecuted as a single contravention, Edelman J stated that defendants to ACL proceedings should not assume that the court would always treat a series of related infringements as a single contravention.  His Honour noted that ensuring that general deterrence was achieved could require the court to treat such matters as multiple contraventions and accordingly expose defendants to higher penalties.

The defendant’s counsel submitted in reply submissions that RL Adams would be ‘willing to submit to a pecuniary penalty of $250,000’. Edelman J held that such a submission was inappropriate and directly inconsistent with the decisions of Barbaro v The Queen[1] and Director, Fair Work Building Industry Inspectorate v CFMEU[2]; both cases which held it was impermissible for parties to express an opinion or submission as to the penalty that should be imposed upon a defendant.

Edelman J noted that before hearing the defendant’s penalty submission in reply, his Honour had reached a preliminary view that the appropriate penalty would be $250,000. His Honour ultimately ordered a penalty of $250,000 be imposed on RL Adams pursuant to s224 of the ACL.  As a result, his Honour was concerned that the inappropriate penalty submissions from the defendant’s counsel could have led a lay observer to surmise that RL Adams was only ordered to pay the penalty that it considered to be the price for its conduct.

Key Issues

• It remains entirely inappropriate for counsel to make submissions about the appropriate penalty to be imposed or what the defendant would “submit to”.
• Although the ACCC and a defendant may agree that conduct should be treated as a single contravention, the court may not accept repeated contraventions as one ‘contravention’. In order to achieve general deterrence the court may prosecute a matter as multiple contraventions by a defendant.
• The courts are likely to increase penalties for misleading or deceptive ‘free range’ claims in the future, as recent case law reveals that defendants do not appear to be deterred by the current quantum of damages awards.

[1] (2014) 253 CLR 58

[2] [2015] FCAFC 59