In Australian Competition and Consumer Commission v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 the Federal Court considered the appropriate penalties for Fisher & Paykel Customer Services Pty Ltd (F & P Customer Services) and Domestic & General Services Pty Ltd (Domestic & General) who engaged in misleading or deceptive conduct and made false or misleading representations to consumers concerning the need for extended warranties, and the existence and effect of statutory consumer guarantees in the Australian Consumer Law.

Fisher & Paykel and Domestic & General were ordered to pay a penalty of $200,000 each plus costs.

This was the first case taken by the ACCC alleging false or misleading representations regarding consumer guarantees in the context of businesses offering extended warranties.

The proceedings were brought by the ACCC under the Australian Securities and Investments Commission Act 2001 (the ASIC Act) pursuant to a delegation from the Australian Securities and Investments Commission (ASIC), as the extended warranty in this case was a financial product under the ASIC Act.

Judge Wigney said:

The agreed and admitted facts demonstrate that, in sending the extended warranty letters to consumers F & P Customer Services and Domestic & General contravened ss 12DA and 12DB(1)(h) and (i) of the ASIC Act. That is because, as earlier indicated, the letters represented that the consumer would not be protected against repair costs for the appliance after a period of 2 years from the date of purchase of the appliance unless the consumer purchased the extended warranty. That representation was false or misleading because, by reason of ss 54, 64 and 259 of the ACL, the consumer may have been protected under the ACL against repair costs for the appliance after a period of 2 years from the date of purchase of the appliance, even if the consumer did not purchase the extended warranty.

The representation in the letter concerned the need for services (the provision of the extended warranty) (s 12DB(1)(h) of the ASIC Act) and the existence and effect of a guarantee (being the guarantee arising from s 54 of the ACL) (s 12DB(1)(i) of the ASIC Act). The conduct involved in sending the letters containing the false or misleading representation was conduct that was misleading or deceptive or likely to mislead or deceive (s 12DA(1) of the ASIC Act).

F & P Customer Services and Domestic & General admit that their conduct amounted to contraventions of s 12DA and 12DB(1)(h) and (i) of the ASIC Act. …

The extended warranty letters were sent over a 23 month period from 1 January 2011 to 10 December 2012….

There is no evidence that (and no agreed or admitted fact to the effect that) either F & P Customer Services or Domestic & General intended to mislead or deceive the recipients of the extended warranty letter, or intended to misrepresent the rights of the recipients as consumers. Nor can that intention be inferred from any agreed or admitted fact. The matter should accordingly be approached on the basis that there was no such intention.

The number of consumers who purchased extended warranties was 1,326. The price of the extended warranty varied between $100 and $220. The total amount paid by consumers was therefore quite large. Domestic & General received the payments and paid a fixed fee per warranty to F & P Customer Services. This amount, which was F & P Customer Services’ revenue from the extended warranty program, was fairly modest. F & P Customer Services’ profit from the program was even more modest. Domestic & General was responsible for the costs of the program. It was also responsible for paying refunds to consumers who purchased extended warranties (as explained later). After taking into account the costs and refunds, Domestic & General’s profit from the extended warranty program was relatively modest.

F & P Customers Services has had a compliance program in place for over 10 years. Upon the introduction of the ACL in January 2011, F & P Customer Services undertook a thorough ACL compliance review of those areas of its business for which F & P Customer Services was directly responsible. However, the conduct the subject of this proceeding indicates that, at the time of the contravening conduct, F & P Customer Services obviously did not have appropriate processes in place to ensure that material prepared by its agent in relation to the extended warranty program was consistent with the ACL and was not misleading or deceptive.

Domestic & General also had a compliance program in place at all relevant times. With the introduction of the ACL in January 2011, Domestic & General undertook an ACL compliance review. However, the conduct the subject of this proceeding again indicates that, at the time, Domestic & General did not have appropriate processes in place to ensure that materials prepared by it on behalf of F & P Customer Services in relation to the extended warranty plan complied with the ACL and the ASIC Act.

The maximum penalty payable by a body corporate in respect of a contravention of s 12DB at the time of the contraventions by F & P Customer Services and Domestic & General was $1.1 million: s 12GBA(3) of the ASIC Act; s 4AA of the Crimes Act 1914 (Cth). Section 12GBA(4)(b) provides that if conduct constitutes a contravention of two or more provisions in, relevantly, Subdivision D (which includes s 12DB), a person is not liable to more than one pecuniary penalty in respect of the same conduct. …

Having regard to all the facts and circumstances, it is appropriate to order that each of F & P Customer Services and Domestic & General pay to the Commonwealth a pecuniary penalty of $200,000. In arriving at this penalty amount, regard has been had to the public interest considerations referred to earlier. Regard has also been had to the joint submissions which, as earlier indicated, persuasively deal with the applicable principles and their application to the facts of this case. It should be emphasised, however, that that is not to say that the Court has simply accepted the agreed penalty that the parties have proposed. Rather, that penalty has been arrived at as a result of the application of accepted principles to all of the relevant facts and circumstances of the case. It is the appropriate penalty.