Not worth the regulatory gamble - Consumer Trading & Unfair Trading

The Federal Court has handed down penalties totalling $2.75 million for misleading "free bets" promotion on Bet365 website.

In a Federal Court judgment with significant ramifications for businesses who use online advertising, the Honourable Justice Beach has ordered Hillside (Australia New Media) Pty Ltd (trading in Australia as Bet365) (Hillside Australia) and its UK service company, Hillside (Shared Services) Limited (Hillside UK) to pay penalties totalling $2.75 million for making false representations about Bet365's 'free bets' offer to new customers.

The judgment provides guidance on how the Court will treat false representations made online for the purposes of assessing penalty under the Australian Consumer Law (ACL).

THE CONTRAVENING CONDUCT

His Honour imposed the penalties on 10 June 2016 in a proceeding issued by the Australian Competition and Consumer Commission (ACCC). The judgment follows his Honour's earlier findings in September 2015 that the respondents' promotion and advertisement of the 'free bets' offer was misleading or deceptive in contravention of s 18 of the ACL and conveyed false representations contrary to s 29(1)(b)(i) and (m) of the ACL.

In essence, his Honour had found that the respondents' promotion of a "$200 FREE BETS FOR NEW CUSTOMERS" offer to customers in Australia between March 2013 to 13 January 2014 had contravened the ACL because the headline promotion conveyed that a new customer would be entitled to $200 of free bets without limitation or restriction when there were a number of restrictions and limitations that applied to the offer. For example, participating customers were required to wager their deposit and bonus three times within 90 days of taking up the offer before being able to make a withdrawal from their new account.

MAXIMUM PENALTY AND THE TOTALITY AND SINGLE COURSE OF CONDUCT PRINCIPLES

A key issue for determination at the penalty hearing was: how many separate contravening acts were involved in communicating the 'free bets' offer via the Bet365 website? Under section 224 of the ACL the maximum penalty for each act or omission by a corporation that constitutes a contravention of s 29(1) is $1.1 million. A contravention of s 29(1) occurs each time a false representation is conveyed.

The evidence established that many consumers had accessed the Bet365 website and taken up the 'free bets' offer during the period of contravention. The ACCC submitted that a representation was made and a contravention of s 29(1) occurred each time a consumer accessed the Bet365 website and viewed the 'free bets' offer.

The respondents submitted that the generally accepted approach is to regard a single representation in a single medium as a single course of conduct which in this case could appropriately be penalised by reference to a maximum penalty of $1.1 million.

However, Justice Beach accepted the ACCC's position that as a representation is only made when there is a communication of some form from one person to another, the false representation was made each time the Bet365 website was viewed. His Honour found that:

A representation is made when there is a communication of some form. The act of placing information on a website that is yet to be accessed by downloading does not involve the making of a representation. An uncommunicated statement is relevantly no representation. In reality, the representation is made when the website is viewed by a person through downloading the relevant page.

By adopting this approach, his Honour accepted that theoretically the maximum penalty for the s 29 contraventions would be some considerable multiple of $1.1 million. But his Honour warned against the "arid exercise" of engaging in a mere arithmetical calculation multiplying $1.1 million by the number of contraventions. Instead, his Honour took into account that the theoretical maximum was two to three orders of magnitude above $1.1 million and considered the appropriate penalty through the lens of the interrelated "totality" and "course of conduct" principles.

The "totality" principle requires that the total penalty for related offences does not exceed what is appropriate for the contraventions in their entirety, while the "course of conduct" principle requires the Court to consider whether contraventions which arise from the same course of conduct should attract a single overall penalty. His Honour found that both respondents were involved in one course of conduct which led to the theoretically multiple contraventions of s 29(1) of the ACL. His Honour rejected the view that is sometimes advanced in relation to pecuniary penalties that a single course of contravening conduct will attract a maximum penalty of $1.1 million. Ultimately, his Honour imposed a penalty of $1.5 million on Hillside Australia and a penalty of $1.25 million on Hillside UK.

CONCLUSION

In the age of e-commerce, in which more and more business is conducted via the internet and many businesses (including online bookmakers) operate exclusively through a digital shop front, Justice Beach's judgment is a timely warning that those who make false representations online over an extended period may face substantial pecuniary penalties.

The judgment also provides valuable guidance about when a website representation is made for the purposes of the ACL and the proper application of the course of conduct and totality principles. The judgment makes it clear that these principles will not unduly fetter the Court's discretion in determining an appropriate penalty.

Corrs acted for the ACCC in this proceeding.

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