In penalty proceedings before Federal Court Justice John Griffiths on Wednesday, the ACCC claimed the hefty fine was necessary to deter companies from falsely representing an affiliation with government agencies in online advertisements. The Full Federal Court found Employsure had done just that between August 2016 and August 2018.

“One of the most important matters for your Honour to give weight to is the fact the contraventions [of the Australian Consumer Law] involved Employsure representing to businesses that their advice service was either actually going to be provided by a government agency or a business formally affiliated with a government agency,” said counsel for the ACCC, Nicholas Owens SC.

“It is a most serious thing for a private, for-profit enterprise to falsely represent that it is affiliated with a government agency. Trusting government institutions in this country remains generally high and any conduct by private entities that give the effect of undermining that trust should [be subject to a high penalty].”

Justice Griffiths cautioned Owens about the importance of being “even-handed” in his penalty submission.

“If it assists you, when I saw the $5 million figure in your submissions, I gagged,” he said.

Employsure has argued for a penalty between $500,000 and $750,000, given the conduct was accepted to have been inadvertent rather than deliberate and the profits and consumer losses that resulted were “modest”.

“Employsure was not deliberately trying to lure people away from services offered by agencies such as the Fair Work Ombudsman and the Fair Work Commission,” counsel for Employsure Ruth Higgins SC said.

“There is a rational basis to conclude any loss is likely to be modest. That is, loss flowing from … the misleading and deceptive advertisements, because the consumers would likely be disabused of the misapprehension before they entered into contracts with Employsure and spent money.

“The best estimate is that the display of the six Google ads resulted in 46 contracts being executed.”

The total net profit figure for all contracts entered into by Employsure during the relevant period resulting from the advertisements came to $107,640, Higgins said.

“If it was in my pocket, I wouldn’t describe it as modest, but it is a relatively modest figure,” Justice Griffiths said.

“It’s a far cry from $5 million … Not that I’m suggesting the profit figure is the only relevant figure in the analysis.”

Owens argued $5 million was a small portion of [Employsure’s] annual profits of $24 million, and the size of the entity was an important matter that needed to be taken into account.

“When it comes to deterrence other entities need to know if they break a law they will pay a penalty which is meaningful relative to their size,” he said.

“It is a very valuable thing for them to have a person to call up and talk to them. It gives them the opportunity and that opportunity has a value, even if it doesn’t progress to a contract.

“The penalty has to be set sufficiently high to ensure businesses maintain a strong consumer law compliance program to ensure their use of services like Google ads doesn’t result in misleading representations of this kind. If the penalty is not sufficiently high that starts to alter the calculation of whether it is worth maintaining a compliance program.”

The regulator further submitted that general deterrence was paramount given Australian businesses spend in excess of $3 billion per annum on Google ads, accounting for about 45 per cent of the total amount of digital advertising spend in the country.

The ACCC sought a “motivational” injunction to prevent Employsure from engaging in further misleading conduct.

There will be a separate hearing on the question of costs, which will likely be scheduled after the expected retirement of Justice Griffiths.

“It’s totally impractical for that matter to be heard [separately] given my imminent retirement … It will have to be heard by another judge. It’s hardly fair to the other judge, I must confess,” Justice Griffiths said.

The judge admonished the regulator for failing to put on written submissions about costs, as ordered by the court.

“I find it extraordinary the ACCC doesn’t read the orders of the court,” Justice Griffiths said.

In its judgment handed down on August 13, the Full Court unanimously sided with the ACCC, ruling that Employsure breached the ACL by making misleading representations in the Google ads.

The ruling partially overturned the judgment of Justice Griffiths, who had described ACCC’s proposition as “untenable”.

The Employsure Google ads promised free advice for employers under headlines such as, ‘Fair Work Ombudsman Help’ and ‘Fair Work Commission Advice’ and appeared in response to the ‘fair work ombudsman’ search term.

The consumer watchdog described the misrepresentation as “a serious breach of trust” and said it received more than 100 complaints from small businesses that felt duped by the ads.

The ACCC is represented by Nicholas Owens SC and Danielle Forrester, instructed by Corrs Chambers Westgarth.

Employsure is represented by Ruth Higgins SC and Conor Bannan, instructed by Webb Henderson.

The case is The case is Australian Competition and Consumer Commission v Employsure Pty Ltd.

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