Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; Reckitt Benckiser (Australia) Pty Limited v Australian Competition and Consumer Commission [2017] HCASL 86

In the September 2016 edition of our Health Law Bulletin we reported on Australian Competition and Consumer Commission’s (ACCC) proceedings against Reckitt Benckiser (Australia) Pty Ltd (RB) and the judgment arising from the first substantive hearing. Since that judgment, there has been an appeal to the Full Federal Court and finally in April 2017, the dismissal of an application for special leave to appeal to the High Court of Australia by RB.

Facts

The cases concerned the marketing of the Nurofen specific pain range of products, that is, the four Nurofen specific packaged product range said to “target” migraine pain, period pain, back pain and tension headache. There was no difference in the therapeutic content of the four products, however, the products were sold with a recommended retail price of about double that of the standard Nurofen product which also provided a dose of 200mg of ibuprofen. The only difference was the packaging and the marketing. Contrary to the representations, ibuprofen does not “target” any particular kind of pain. Any representation to that fact was inherently misleading. The obvious and expected consequence of the contravening conduct was to entice consumers to pay more for the products.

Primary Judgement

The primary judge of the Federal Court imposed a civil penalty of $1.7 million on RB arising from contraventions of section 33 of the Australia Consumer Law (ACL), which is contained within Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA).

Section 33 of the ACL states that:

“A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods.”

The maximum penalty for each contravention of section 33 of the ACL is $1.1 million for corporations and $220,000 for individuals.

Full Court of the Federal Court Decision

The Full Federal Court in December 2016 set aside the $1.7 million penalty and in its place ordered a penalty of $6 million.

The Court limited the penalty to the amount sought by the ACCC, namely $6 million, which was based upon a characterisation of the conduct as involving 6 courses of contravening conduct. The ACCC submitted that the four different packages each amounted to a contravention and there were two web sites that amounted each to a contravention. The primary judge held that the conduct was characterised as amounting to two contraventions (namely publications on a web site and the representations on the packaging).

Interestingly, the appeal judges considered whether the characterisation of the contraventions as amounting to the number of times by which consumers may have been misled:

“Rather, the misleading character of the representations operated as contraventions each and every time a consumer saw the packaging.”19

Given there were 5.9 million products sold in the contravening packaging, the Court theoretically suggested the maximum penalty was a multiplier of 5.9 million by the maximum penalty per contravention of $1.1 million. However, the Court held that the assessment of the appropriate range for penalty in the circumstances of the case is best assessed by reference to other factors, as there is no meaningful overall maximum penalty given the very large number of contraventions over such a long period of time. Given this, the court considered that, to the extent that the course of conduct principle had any meaningful work to do, the better way to look at it was in terms of each of the four ”types” of packaging, each with its own consumer target audience. This proceeding really involves four types of contravention, with many individual contraventions each over the five years. The webpage contraventions can be viewed as one or two serious courses of conduct. But ultimately, this discussion itself serves to demonstrate the limited utility of the course of conduct principle in the circumstances of a case such as the present, and why such characterisation could not properly have the significance which the primary judge gave to it.20

Overall, in the particular circumstances of the case, the Court considered that one useful guide to the appropriate penalty range is loss to consumers. In this case, loss may be assessed by reference to the extra amount paid by consumers as against a product that did not suffer from any of the impugned representations, such as ordinary Nurofen.

The potential for financial gain from the contravening conduct was in excess of $20 million (on the simple proposition that the total revenue was $45 million and the products were sold at twice that of the standard products).21

The Court also considered the need for deterrence both general and specific, was substantial. The notation of deterrence in the context of this case warrants some further elaboration. In the Court of Appeal’s view, RB’s conduct was towards the high end of the range for section 33 contraventions.22

In addition, the primary judge overlooked at least one readily apparent non-monetary effect of the contravening conduct, the loss or at least serious distortion of genuine consumer choice and created the risk of double-dosing.23

The Court noted that prohibited conduct under section 33 only needs to be “liable to mislead the public”, it does not need to be misleading or deceptive, such as representations prohibited by sections 18 and 29 of the ACL.24

Overall, the judgment of the Full Federal Court suggests there was potential for the contravening conduct to have attracted penalties well exceeding the $6 million penalty sought by the ACCC and imposed by the Court. The Court noted that it could have been entitled to impose a considerably greater penalty, given the losses which it considered were occasioned by the conduct and these were serious contraventions even within the spectrum of the liable to mislead category. The Court in setting the penalty emphasised that an “ordinary and natural consequence of the conduct was the real risk that some consumers did not buy an alternative product that was in fact formulated to treat their specific pain and of double-dosing by consumers suffering from more than one of the types of pain purported to be treated by the so-called Nurofen specific pain range”.

Pharmaceutical companies and medical device companies must continually assess their compliance measures in the packaging and promotion of their there therapeutic goods. The judgment of the Full Federal Court suggests that future action for non-compliance with the ACL in the marketing to consumers of therapeutic goods may result in significantly higher penalties than have historically been imposed.

19 Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181 at [145]
20 Ibid at [157]
21 Ibid at [158]
22 Ibid at [149]
23 Ibid, para [114]
24 Ibid at [177]