Facts: From August to September 2013, Alpha Flight Services (Alpha) sold 'Nano Magnetics Nanodots' to customers aboard Qantas international flights. The Nanodots were small, high-powered magnets which could be used as a game or puzzle. A permanent ban had been issued on such products in 2012, meaning that they were sold in contravention of s 118 of the Australian Consumer Law. Neither Alpha Flight Services nor Qantas were initially aware of the ban. It was brought to Qantas' attention when a passenger phoned Qantas to inform them that the products were dangerous and should not be offered for sale.
Issue: Given that both Alpha Flight Services and Qantas accepted that they had contravened s 118 of the ACL by supplying, offering to supply, possessing and controlling the prohibited goods, what was an appropriate penalty for the contravention?
Decision: Alpha was fined $50,000 and Qantas $200,000.
Reason: Section 224 of the ACL gives a court a broad discretion to determine what pecuniary penalty, if any, should be imposed. It lists a range of factors relevant to determine what is appropriate, including the nature and extent of the contravention, any loss or damage suffered as a result, the circumstances, and any history of similar conduct. The court said (at para 23):
"The fundamental cause of both Alpha and Qantas contravening the provisions lay in the absence at the time in each company of a system and process which would have prevented the contravention and which would have ensured that each complied with the obligations imposed upon them by law."
Because of Alpha's 'exemplary and prompt behaviour' once it became aware of the ban, and its inclusion of a safety warning in the original catalogue, the court held that Alpha's penalty should be only $50,000. Although Qantas had played a more limited role in the contraventions, it had attempted to 'wash its hands' of its obligations once made aware of the ban. Given this behaviour, and Qantas' 'very substantial resources', a penalty of $200,000 was imposed. In addition, the court ordered a range of non-punitive measures including Adverse Publicity Orders, refunds to all customers who purchased the goods, and the destruction and disposal of the dangerous goods with costs to be covered by Alpha and Qantas.
Note: On appeal, the Full Court of the Federal Court of Australia confirmed the appropriateness of the penalties.