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$3 million penalty for Google ad campaign

In 2021 the Federal Court found that Employsure, in its Google ads, misrepresented that it had associations with various Government agencies.  I reported on this case here. The Trial Judge imposed a fine of $1 million for these breaches of the Australian Consumer Law (ACL).  The Australian Competition and Consumer Commission (ACCC) appealed this penalty decision and the Full Court of the Federal Court has increased the penalty to $3 million – Australian Competition and Consumer Commission v Employsure Pty Ltd [2023] FCAFC 5 (8 February 2023)

How could a Google campaign cost so much?

Increase in penalties

For starters, if these Google ads were published today, Employsure’s penalty is likely to have been much greater.  Back in 2016-2018, when the ads were published, the maximum penalty for companies for false or misleading representations was $1.1 million per breach.  Today the maximum penalty per breach for companies has been increased to the greater of:

  • $50 million;
  • 3 times the value of the benefit the company gained from the breach; or
  • if the Court cannot determine this value – 30% of the company’s adjusted turnover for the period of the breach (which includes the value of supplies not only of the company in breach, but also its related bodies corporate).

We are now talking very substantial sums of money.  The aim of this increase is to make sure that penalties for misleading representations are not seen as just a cost of doing business. 

For individuals, the maximum penalty is now $2.5 million per breach.  This would apply, for example, to a sole trader or a director or employee who is knowingly concerned in a breach by their company.

How did the Full Court decide on the higher penalty?

In increasing Employsure’s penalty to $3 million the Full Court took into account factors including the following.

  1. Maximum penalty – a Court will pay careful attention to the maximum penalty for the breach, comparing the worst possible case to the case before the Court and balancing this against other relevant factors in the case. This is especially significant now that maximum penalties have been increased so substantially.
  2. Deterrence – the main aim of ACL penalties is to ensure that businesses comply with the ACL. This includes not only deterring the company being sued, but also deterring other businesses from breaching the ACL.  Deterrence in the Employsure case included the following.
    • The nature and extent of the breaches – The Full Court considered that Employsure’s conduct was very serious. Employsure had 100’s or even 1,000’s of individual breaches over a two year period – a breach each time an ad was viewed by a consumer, although the Full Court grouped the ads into three courses of conduct – one for each of the three Government agencies referred to in the ads.
    • The damage caused – unknown.
    • The circumstances – by offering free advice and an association with various Government agencies, Employsure represented that its for-profit services were of the quality of Government services. These representations were made to business owners who may have been in commercial distress (seeking employment advice) and most customers were small businesses.
    • The size of the company – Employsure had an annual revenue of about $150 million and an annual profit of about $25 million. The bigger the company, the bigger the likely penalty is needed to deter it from doing it again.
    • The deliberateness of the conduct – Employsure designed the Google Ads to lure customers to them so as to drive up traffic to its business. They chose the names of Government agencies as dynamic keywords that would respond to a search and be seen in the search results. Employsure’s name was not revealed in the ads.

 

In deciding upon a $3 million penalty, the Full Court considered that it contained a sufficient “sting” to ensure that the amount was not regarded by Employsure or others as an acceptable cost of doing business. 

In the light of the new maximum penalties of $50 million or more, ensuring that all advertising, packaging, websites and social media copy is true has become critically important.  True does not mean half truths, or true in only some circumstances, or claims with important qualifications in tiny writing that a consumer is unlikely to see or read.  It means really true.

I can review proposed marketing material to help businesses comply with the ACL.  I can be contacted here.

 

This article provides general information only, and is not intended as legal advice specific to your circumstances. Please seek the advice of a legal professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation™

© Margaret Ryan, Melbourne, Australia, 2023

$3 million penalty for Google ad campaign