Judge Casts Doubt on “Uber” Penalty
In a recent penalty hearing between the Australian Competition and Consumer Commission (ACCC) and Uber B.V. (UBV) that was expected to be a relatively uneventful affair, a judge of the Federal Court of Australia has labelled an agreed $26 million penalty “excessive” and asked the parties to gather additional evidence to justify the amount.
In refusing to rubberstamp the agreed penalty, O’Bryan J made some important comments about how the appropriate penalty is to be determined, including the need for comprehensive evidence demonstrating the impact of the contravening conduct on consumers and any benefit derived by the contravener. For example, his Honour stated that ‘[t]he data points in one direction and really I’m being asked to speculate that it could be much, much worse… [o]ne doesn’t just go for multimillion dollar penalties”. Further, his Honour’s suggestion that the proposed penalty was, potentially, more than $20 million too high is in sharp contrast to the recent trend towards higher penalties for corporate misconduct.
In April 2022, the ACCC commenced proceedings against UBV (a subsidiary of the Uber Group parent company), alleging contraventions of the Australian Consumer Law (ACL) for inaccurately calculated fares for UBV’s now deprecated UberTaxi product and incorrectly displayed cancellation messages on the Uber app and website.
The ACCC alleged that UBV had engaged in misleading or deceptive conduct (contrary to s 18 of the ACL) and made false or misleading representations with respect to price (contrary to s 29(1)(i) of the ACL) by engaging in the following two categories of conduct:
- UberTaxi Representation – until August 2020, UBV offered an UberTaxi service on the Uber platform, which allowed consumers to request rides from taxi drivers who had prior agreements with UBV. The ACCC alleged, and UBV admitted, that between 20 June 2018 and 31 August 2020, the Uber platform presented an incorrectly estimated fare range for UberTaxi – UberTaxi fees charged were in fact less than the lower range estimate approximately 89% of the time.
- Cancellation Representation – the ACCC alleged that the Uber platform incorrectly displayed a cancellation warning stating that the consumer might be charged a fee if they selected the ‘Cancel Trip’ option after booking an Uber but before it arrived. This occurred despite UBV’s terms and conditions and cancellation policies providing for free cancellation within a specified time. The period of the conduct was in between 8 December 2017 until 20 September 2021 in respect of UberX, Uber Premier or Uber Comfort, and during the period 3 April 2018 until 20 September 2021 in respect of UberPool.
In a jointly filed Statement of Agreed Facts and Admissions (SAFA), UBV admitted to contravening the ACL and indicated its agreement to the $26 million pecuniary penalties sought by the ACCC (comprised of $18 million for the Cancellation Representation and A$8 million for the UberTaxi Representation).
UBV also consented to the other relief sought by the ACCC, including declarations of contravention, an injunction with respect to the Cancellation Representation, the publication of a corrective notice, the establishment and implementation of a compliance program, and a contribution of $200,000 to the ACCC’s costs.
Penalty Hearing on 25 July 2022
During the penalty hearing, O’Bryan J acknowledged that it is often highly desirable for the Court to accept jointly agreed penalties. However, his Honour refused to make orders with respect to the $26 million agreed pecuniary penalty without further evidence from the parties. His Honour commented that based on the evidence before the Court, it would only be appropriate to order a penalty of $1 million for the UberTaxi Representation and a penalty of $3 to $4 million for the Cancellation Representation.
His Honour expressed four main concerns when considering the evidence before the Court in support of the proposed penalty.
- Evidence demonstrating the impact on consumer choice and trade or commerce
With respect to the UberTaxi Representation, O’Bryan J took issue with having to draw inferences from the information provided in the SAFA and joint submissions relating to how the UberTaxi fare was presented to consumers. For example, his Honour examined the potential impact on trade and commerce if UberTaxi trips represented less than 1% of total Uber trips taken in Sydney during the contravening period. His Honour requested that the parties adduce the following evidence:
- evidence comparing the average cost of UberTaxi to alternative rideshare services during the period the UberTaxi representation was made to determine the impact on consumer choice, if any; and
- evidence confirming or disproving that the discontinuance of the UberTaxi service was not a direct consequence of UBV receiving a statutory notice from the ACCC informing them of the UberTaxi Representation.
With respect to the Cancellation Representation, O’Bryan J carefully considered the parties’ proposition that consumers would reduce or stop their use of UBV rideshare services once they incorrectly perceived that they would be charged a cancellation fee. His Honour requested that the parties adduce the following evidence:
- evidence detailing the true cancellation fee prescribed by UBV’s terms and conditions to better quantify harm suffered by consumers; and
- evidence demonstrating that consumers who initially were incorrectly shown the Cancellation Warning were deterred from using Uber services in the future.
His Honour also generally observed that UBV’s status as a ‘global tech company’ did not mean that a higher penalty would necessarily be required to have a sufficient deterrent effect, noting that consumers are entitled to place trust in all companies to accurately convey information to them and not just large multinational companies. As such, his Honour required further evidence from the parties in addition to the size, profitability and global nature of UBV to justify the A$26 million pecuniary penalty. This is in contrast to Murphy J’s comment in the recently published ACCC v Samsung Electronics Australia judgment where his Honour found that consumer loss had occurred despite not being able to be quantified, as consumers were entitled to place trust in the advertising claims of a ‘large company like Samsung’.
- Evidence demonstrating the benefit derived by UBV
O’Bryan J emphasised that when imposing a penalty, there must be a sufficient relationship between the penalty amount and the gain by the contravening company. In that regard, his Honour requested the following evidence from the parties:
- evidence detailing revenue streams of UBV and its related companies, including how much revenue was derived from each UberTaxi trip;
- evidence detailing any revenue received by UBV from trips that were not cancelled by consumers who were shown the Cancellation Warning; and
- evidence detailing the general financial status of UBV and its related companies including where revenues and profits were distributed during the contravening periods.
- Evidence demonstrating whether UBV had knowledge that the representations were misleading
With regard to the Cancellation Representation, his Honour requested evidence from the parties as to the details of a global experiment conducted by Uber where the cancellation messaging system was changed in order to display accurate messages to consumers.
- Evidence demonstrating whether UBV deliberately engaged in making the misrepresentations
With regard to the UberTaxi Representation, his Honour observed that UberTaxi was distinct from other services provided by UBV in that it is extremely difficult to provide an accurate taxi fare upfront to consumers given the fare is impacted by traffic, time of day and other factors. Thus, in the context of assessing penalty, UBV’s conduct may have been better characterised as inadvertent rather than a deliberate attempt to mislead consumers. His Honour therefore requested evidence from the parties proving or disproving any attempt from UBV to deliberately engage in the UberTaxi or Cancellation Representations.
Despite not yet being embodied in reasons for judgment, O’Bryan J’s comments with respect to the excessiveness of the proposed penalty are something of an anomaly after many years of calls for, and the imposition of, higher penalties under the ACL. It remains to be seen whether his Honour’s inclination towards a penalty of more than $20 million below the agreed amount will be ultimately adopted following the filing of further evidence by the parties. At the very least, his Honour’s approach serves to emphasise the need to adduce detailed evidence in support of any proposed penalty, so as to enable the Court to undertake a comprehensive evaluation of the relevant factors.
This article was written by Preetha Varadharajan and James Keeves.