Australian Competition & Consumer Commission v Australian Communications Network Pty Ltd [2005] FCA 988

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Australian Communications Network Pty Ltd [2005] FCA 988

TRADE PRACTICES – pyramid selling scheme – form of declaratory and injunctive orders – whether trade practices compliance program should be ordered where scheme undertaken in awareness of provisions and on legal advice Trade Practices Act 1974 (Cth), s 65AAC, s 65AAD, s 65AAE

Australian Competition & Consumer Commission v Australian Communications Network Pty Ltd [2005] FCA 276 applied Brennan v Brennan (1953) 89 CLR 129 applied Wentworth v Rogers (No 3) (1986) 6 NSWLR 642 cited Bagshaw v Scott [2005] FCA 104 cited Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 cited My Distributors v Omaq Pty Ltd (1992) 36 FCR 578 cited Chonka v Palmer [2004] FCA 1560 cited Applicant NATI v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCA 163 cited AUSTRALIAN COMPETITION & CONSUMER COMMISSION v AUSTRALIAN COMMUNICATIONS NETWORK PTY LTD, MARTIN PAECH, GIBBSCHADE PTY LTD, JONATHAN GIBBS and KEITH JANKE SAD 231 of 2004 MANSFIELD J 20 JULY 2005 ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SAD 231 OF 2004

BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION

APPLICANT

AND: AUSTRALIAN COMMUNICATIONS NETWORK PTY LTD

FIRST RESPONDENT

MARTIN PAECH

SECOND RESPONDENT

GIBBSCHADE PTY LTD

FOURTH RESPONDENT

JONATHAN GIBBS

FIFTH RESPONDENT

KEITH JANKE

SEVENTH RESPONDENT

JUDGE: MANSFIELD J

DATE OF ORDER: 20 JULY 2005

WHERE MADE: ADELAIDE

THE COURT DECLARES THAT: 1. The marketing scheme established by the first respondent in connection with the supply of telecommunications services by the first respondent and operated by it between July 2004 and 11 April 2005 (the ACN scheme) pursuant to which: (a) members of the public were invited to make a payment of $499 plus GST to the first respondent to become participants in the ACN scheme as independent representatives of the first respondent; and (b) the payment referred to in par (a) was substantially induced by the prospect held out to new participants that they would be entitled to receive from the first respondent payments described as customer acquisition bonuses and residual override commissions (the recruitment payment) in relation to the introduction to the ACN scheme of further new participants in that the payments were payable if the independent representative sponsored, directly or indirectly, other persons to become new independent representatives and those persons acquired customers on behalf of the first respondent, and where the amount of the payments was dependent upon the number and level of new independent representatives sponsored; (c) the customer acquisition bonuses were calculated by a formula depending on the independent representative's 'level' within the ACN scheme and were calculated as described in [6](d)n.-q. of the reasons for judgment of the Court delivered on 23 March 2005 (the reasons for judgment); and (d) the residual override commissions were calculated by a formula depending on the independent representative's 'level' within the ACN scheme and were calculated on the total monthly billings of customers of the independent representatives introduced by the participant as described in [6](d)l.-m. of the reasons for judgment; constituted a pyramid selling scheme within the meaning of s 65AAD of the Trade Practices Act 1974 (Cth) (the Act). 2. The first respondent participated in the pyramid selling scheme in contravention of s 65AAC(1) of the Act and induced and attempted to induce other persons to participate in the pyramid selling scheme in contravention of s 65AAC(2) of the Act by: (a) establishing the ACN scheme; (b) promoting the ACN scheme; (c) taking part in the ACN scheme; and (d) by entering into independent representative agreements with persons who agreed to participate in the ACN scheme. 3. The second respondent aided and abetted, and was knowingly concerned in, the first respondent's contraventions of s 65AAC(1) and s 65AAC (2) of the Act as set out in the declaration in order 2 hereof in that he: (i) was aware of the details of the ACN scheme; (ii) authorised the promotion of the ACN scheme; and (iii) authorised the entering into of the independent representative agreements on behalf of the first respondent and the receipt of the payment of $499 (excluding GST) by each independent representative who entered into such agreements. 4. The fourth respondent participated in the ACN scheme in contravention of s 65AAC(1) of the Act and induced and attempted to induce other persons to participate in the ACN scheme in contravention of s 65AAC(2) of the Act by: (a) being aware of the ACN scheme; (b) promoting the ACN scheme; and (c) inviting the entering into of the independent representative agreements on behalf of the first respondent and the receipt of the payment of $499 (excluding GST) by each independent representative who entered into such agreements at its invitation. 5. The fifth respondent and the seventh respondent aided and abetted and were knowingly concerned in the contraventions of s 65AAC(1) and s 65AAC(2) of the Act by the first respondent by: (a) being aware of the ACN scheme; (b) promoting the ACN scheme.