Public Law Update - Civil penalties, inferences and loss: ACCC v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181

Public Law
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It seems that all the important judgments are handed down in late December.   ACCC v Reckitt Benckiser [2016] FCAFC 181 is no exception.

You may recall the facts from the press: Nurofen was advertising pain relief medication that targeted particular types of pain: migraine, tension headache, period and back pain.  In truth, there was no ingredient that could target pain in this way.  The products contained the same active ingredient as the standard Nurofen product (200 mg of ibuprofen), which sold at half the price. 

The $6 million civil penalty is the highest penalty ever awarded for misleading conduct under the Australian Consumer Law.  This is welcome news for those pushing for a different approach to fixing penalties in the consumer law arena.

Reckitt Benckiser is notable for other reasons. It contains welcome clarity on various matters going to the assessment of civil penalties.  The implications of the judgment will extend beyond consumer law and into other regulatory regimes. 

Assessment of penalty and inferences regarding loss

One issue was the trial judge’s assessment of the nature and extent of loss to consumers (s 224(2)(a)).  The trial judge’s concluded that “any attempt to quantify profits caused by Reckitt Benckiser’s contravening conduct and losses suffered by consumers as a result of that conduct would be impossible, so speculative as to be useless, of no assistance and neither necessary nor appropriate.” 

Implicit in that issue was the trail judge’s approach to drawing inferences. 

Courts can be cautious when drawing inferences in civil penalty assessment.  This is understandable.  Sometimes, precise evidence is not available to conduct a proper assessment of the French Factors.  How can the Court identify the impact of a marketing stratagem upon consumer choice (and thus consumer loss)?  How can the Regulator prove that the stratagem enticed consumers towards one product, and away from hundreds of other equivalent products? 

To take another example - how can the Regulator measure the loss of unlawful industrial action by a group of workers that had consequential ramifications on the work schedule for hundreds of contractors across a building site?

The basics on drawing inferences

The basic rules on drawing inferences are these:

  • Your underpinning evidence must raise a more probable inference in favour of what is alleged;
  • Where direct proof is not available, it is enough if the circumstances appearing in the evidence give rise to a reasonable and definite inference; and
  • The circumstances must do more than give rise to conflicting inferences of equal degree and probability (Holloway v McFleeters (1956) 94 CLR 470, 480).

For the Full Court in Reckitt Benckiser, the inference to be drawn was obvious.  The only inference available was that a substantial number of sales were generated by advertising the pain range products. But for that misleading conduct, consumers would have purchased standard Nurofen at half the price.  

Whilst the Full Court then went to the step of quantifying loss, this was not strictly necessary. It is clear from the judgment that the inference could have rested on logic alone.  Courts should not sentence on the basis that no loss occurred because of a lack of evidence going to loss. 

Loss can be qualitative, not just quantitative. A qualitative assessment can still be taken into account in the multifactorial approach to the assessment of penalty.

Implications

The Regulator’s task is to put all the material facts before the Court in order to assist it in the task of fixing penalties.  When identifying the material facts, Regulators should also reflect upon what inferences will need to be drawn by the Court.  Identifying the inferences at the outset will help to identify what facts are missing for the underpinnings from which definite inferences can be drawn. 

The goal is to achieve reasonable and definite inferences, and to avoid speculative ones.


Note: This post is an educational/academic discussion on matters of law. It should not be considered as legal advice.

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Leigh Howard practises in industrial relations and public law

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