INSIGHT

$24m fine for criminal cartel charge; ACCC's interim report into digital advertising services; Kogan penalised for misleading discounts; and other developments

By Jacqueline Downes
Consumer law Infrastructure Technology Telecommunications

Latest in competition and consumer law 7 min read

The Federal Court ordered Wallenius Wilhelmsen Ocean AS to pay a fine of $24 million after it pleaded guilty to a criminal cartel charge in June 2020. This decision concluded the Australian Competition and Consumer Commission (ACCC)'s investigation into the shipping cartel, which has resulted in a total of $83.5 million in fines being imposed upon three defendants.

The ACCC has released the interim report for its digital advertising services inquiry, highlighting its concerns regarding a lack of competition and transparency in the digital advertising supply chain.

Online retailer Kogan has been ordered to pay $350,000 for misleading consumers by offering a 10% off discount code while its prices were temporarily increased.

The ACCC is bringing action in the Federal Court for false, misleading or deceptive conduct against Facebook for its promotion of the Onavo Protect app.

And finally, the ACCC has initiated proceedings against activewear company Lorna Jane Pty Ltd, alleging it made false or misleading claims about its 'Anti-virus Activewear'.

Shipping cartelists in deep water: cartel fines total $83.5 million

On 4 February 2021, the Federal Court ordered Wallenius Wilhelmsen Ocean AS (WWO) to pay a fine of $24 million after it pleaded guilty to a criminal cartel charge.

The proceeding against WWO was the third and final Australian prosecution relating to a global 'roll-on, roll-off' shipping cartel which also affected routes to Australia. This cartel has now netted $83.5 million in fines in Australia after fines of $25 million and $34.5 million were previously imposed on Nippon Yusen Kabushiki Kaisha (NYK) and Kawasaki Kisen Kaisha Ltd (K-Line) respectively.

WWO admitted it had given effect to an arrangement under which the cartel participants sought to allocate major vehicle manufacturer customers between themselves, including in relation to certain shipping routes to Australia, and would not attempt to win each other's existing business. WWO has also been penalised in other jurisdictions, including the United States, Europe, Japan, China, South Africa, Mexico, Brazil and South Korea. While WWO's Australian contraventions were found to be less egregious than those of NYK and K-Line, the Federal Court considered that WWO was not entitled to any discount for cooperating with and assisting the ACCC. WWO's sentence did, however, incorporate a 20% discount for its early guilty plea.

ACCC publishes report on digital advertising supply chain

On 28 January 2021, the ACCC released the interim report for its digital advertising services inquiry, highlighting its concerns regarding a lack of competition and transparency in the digital advertising supply chain and suggesting proposals for reform.

In case you missed it, the ACCC is conducting a public inquiry into the $3.4 billion digital advertising market in Australia, with a focus on the supply of advertising technology and advertising agency services. Advertising technology (or 'ad tech') refers to technology services enabling the automated buying, selling and delivery of display advertising. The inquiry builds on the findings of the ACCC's Digital Platforms Inquiry, which delivered its final report in July 2019.

The interim report concludes that there is a lack of competition, choice and transparency in the ad tech supply chain that increases costs for businesses and will ultimately impact the prices paid by consumers.

A key concern raised by the ACCC is Google's substantial influence in the ad tech supply chain, including its data advantage. The report finds that Google is likely to have the ability and incentive to preference its own ad tech businesses at the expense of competitors.

The ACCC also raises concerns regarding opacity in the operation and pricing of ad tech services, and queries whether advertisers and publishers have access to sufficient information to make informed choices about which ad tech suppliers to use.

The report sets out several proposals for reform aimed at addressing these concerns, such as:

  • introducing conflict of interest rules to prevent self-preferencing;
  • requiring large incumbents to 'silo' user data so it cannot be used to advantage another part of their business; and
  • introducing voluntary industry standards to increase the transparency of demand-side platform services.

The ACCC is calling for feedback on these proposals by 26 February 2021, and will provide a final report by 31 August 2021.

A taxing day in court: Kogan ordered to pay $350,000 for misleading tax-time sales promotion

In December 2020, the Federal Court ordered Kogan Australia Pty Ltd to pay a penalty of $350,000 for making false or misleading representations about a tax-time sales promotion. Kogan is an online retailer with over 1.4 million customers that sells a variety of goods, including electronics, furniture and toys.

The court had previously found that Kogan had misled consumers by advertising that they could use the discount code 'TAXTIME' to reduce prices by 10% at checkout. The court considered that, in relation to 621 of the 78,111 products the subject of the promotion, any genuine 10% discount was eroded because Kogan had increased the prices of affected products before the promotion commenced and decreased the prices after the promotion ended. Kogan also used statements such as '48 hours left!' and 'Ends midnight tonight!' in some SMS messages to consumers, which created the impression that consumers had a limited opportunity to receive this discount.

Justice Davies found that Kogan's conduct was serious, because misrepresentations about discounts on products both harm consumers who believe they are getting a genuine discount and impact consumer confidence in legitimate discount promotions.

However, her Honour did not accept the ACCC's submission that a $2 million penalty ought to be imposed, as Kogan's conduct was not deliberate, there was not a culture of non-compliance and consumer harm was minimal as only a limited proportion of the products subject to the promotion were affected.

Protection or deception: ACCC alleges Facebook misled consumers when promoting app

In December 2020, the ACCC instituted proceedings in the Federal Court against Facebook Inc and two of its subsidiaries, alleging that they misled consumers in promoting the Onavo Protect app.

Onavo Protect was a free downloadable application which provided a virtual private network (VPN) service, which was generally used to protect online privacy. Onavo Protect's website stated that the app would 'save, measure and protect' user data, and advertisements on Facebook stated: 'Keep it secret. Keep it safe. Onavo Protect, from Facebook'.

The ACCC alleges that Facebook and Onova misled consumers by representing that the Onavo Protect app would keep users' personal activity data private and protected, and that the data would not be used for any purpose other than providing Onavo Protect's products. Instead, it is alleged that Onavo Protect collected and used users' personal activity data for Facebook and Onavo to use for their commercial benefit, including to support market analytics and related activities.

ACCC Chair Rod Sims stated that Facebook's conduct deprived consumers of the opportunity to make an informed choice about the collection and use of their personal activity data by Facebook and Onavo. The ACCC will be seeking declarations and pecuniary penalties.

Fitness of Lorna Jane's Anti-Virus Activewear questioned by the ACCC in court

In December 2020, the ACCC instituted proceedings in the Federal Court against activewear company Lorna Jane Pty Ltd, alleging it made false or misleading claims about its 'Anti-virus Activewear', which had been treated with a substance referred to as LJ Shield.

The ACCC alleges Lorna Jane made a number of representations about the ability of its Anti-virus Activewear to eliminate, protect wearers against, and stop the spread of, viruses and pathogens, including COVID-19.

The claims, which are alleged to have been made over a wide range of media including Instagram, email, the Lorna Jane website and in stores, included statements such as: 'Cure for the Spread of COVID-19? Lorna Jane Thinks So' and 'With Lorna Jane Shield on our garments it meant that we were completely eliminating the possibility of spreading any deadly viruses'.

The ACCC alleges that these claims gave rise to false and misleading representations, including on the basis that there was no scientific or technological basis for the claims at the time they were made. The ACCC is seeking declarations, penalties, injunctions, corrective notices and an order to implement a compliance program.

ACCC Commissioner Sarah Court said Lorna Jane's allegedly misleading claims were particularly concerning as they came at a time when there was fear in the community about a second wave of COVID-19. She warned that the ACCC is paying close attention to any possible consumer or competition issues arising from the pandemic, in particular companies seeking to take advantage of the crisis.