Key takeaways from Uber penalty case

• In a rare move, Justice O’Bryan has imposed a penalty of $21m, some $5m lower than the penalty jointly proposed by the parties.
• His Honour considered the evidence initially adduced to support the proposed penalty of $26m - $8m for the “UberTaxi Representation” and $18m for the “Cancellation Representation” - was “grossly inadequate”, and the joint submissions did not sufficiently explain how the figures had been arrived at.  After the parties filed additional evidence, his Honour found that $8m for the “UberTaxi Representation” was outside the range of penalties that could be considered appropriate, instead imposing a penalty of $3m, while the $18m penalty for the “Cancellation Representation” was appropriate, albeit at the “high end” of the range. 
• While the Courts have recognised there is an important public policy in promoting predictability of outcome in civil penalty proceedings, this case serves as an important reminder that an agreement between the parties cannot bind the Court to impose a penalty which it does not consider appropriate.  The Court must be satisfied that the agreed penalty is within an appropriate range, having regard to the evidence and information. 
• In determining the appropriate penalties for Australian Consumer Law contraventions, his Honour stressed that the nature and extent of actual or potential harm caused is not only a mandatory but a central consideration.  His Honour was critical of the ACCC’s submissions that suggested the Court need not consider actual or potential harm from the conduct, and instead focused on the fact that the representations were widespread (resulting in a statutory maximum penalty in the trillions), the significant financial size of the Uber corporate group, and that the penalty was agreed. 
• This judgment may have broader implications for ACCC enforcement against digital platforms as concrete consumer harm can often be difficult to establish in instances where the conduct in question impacts consumer choice in an unquantifiable way.  It seems that the ACCC will not be able to rely on the premise that large penalties will always befall large corporations.  

The details

Uber has been ordered by the Federal Court to pay total penalties of $21 million for engaging in misleading and deceptive conduct and making false or misleading representations to consumers.  Justice O’Bryan ordered this penalty after refusing to accept the joint penalty of $26 million that the parties submitted to the Court in July this year (July hearing). 

In the July hearing, O’Bryan J stated the proposed penalty of $26 million was “outside any range [he] would order” and the figure should be “more in the range of one million [for the UberTaxi Representations] and maybe three or four million [for the Cancellation Representation]”.  The implication being that the proposed penalty was over $20 million was too high.  While the penalties ultimately ordered by O’Bryan J did not reflect the substantial reduction foreshadowed in the July hearing, the decision remains a rare instance of the Court refusing to accept a jointly proposed penalty – a circumstance which Justice O’Bryan himself stated was “quite an uncomfortable position”.

This decision affirms the complex interplay of judicial considerations when determining penalties.  His Honour referred to the significant public interest of accepting joint proposed penalty orders, but noted that in this case, there was simply insufficient evidence to justify that the proposed penalty was appropriate.  This was the case even though O’Bryan J only needed to the satisfied that the proposed penalty was in a “permissible range”, as the Court will not reject an agreed figure that it considers to be within this range, simply because it would have selected another figure.

O’Bryan J’s starting point for was s224(2) of the Australian Consumer Law (ACL) which provides that when determining a pecuniary penalty, the Court must have regard to all relevant matters, including:

(a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;

(b) the circumstances in which the act or omission took place; and

(c) whether the person has previously been found by a court in proceedings under Chapter 4 or this Part to have engaged in any similar conduct.

In determining the appropriate penalties for ACL contraventions, his Honour stressed that the nature and extent of actual or potential harm caused is not only a mandatory but a central consideration.  O’Bryan J stated that the evidence initially adduced by the parties provided no information on this central consideration, and that subsequent submissions and evidence on this point were “underwhelming”. 

His Honour was critical of the ACCC’s submissions that suggested the Court need not consider actual or potential harm from the conduct and rather, the Court could focus on the fact that representations were widespread (resulting in a statutory maximum penalty in the trillions), the significant financial size of the Uber corporate group, and the fact the penalty was agreed.  O’Bryan J stated that these factors were relevant but were, on their own, a wholly inadequate foundation for the determination of a penalty.

How did O’Bryan J determine the reduced penalty for Uber?

The conduct concerned two representations, which Uber admitted contravened the ACL prior to commencement of the proceedings, namely:

1. Uber’s algorithms over-estimated the cost that would be charged to customers using UberTaxi (UberTaxi Representations). 
2. Uber’s app wrongly alerted customers that they would be charged a cancellation fee when cancelling their Uber booking within the free cancellation period – although customers were not actually charged this fee (Cancellation Representations). 

Cumulatively, this conduct resulted in over 7 million individual misrepresentations to consumers.  

Consumer loss or damage

Despite the lack of evidence presented by the parties on this point, his Honour attempted to calculate the harm that befell consumers given he considered this factor was central to what was an appropriate penalty.

In relation to the UberTaxi Representations, the evidence was that Uber’s algorithms inflated the estimated cost to customers in 89% of cases (approximately 114,679 cases during the relevant period).  However, the ACCC was unable to satisfy his Honour of a plausible theory of harm to consumers as the most likely outcome for consumers was that they paid a cheaper fare than they had anticipated.  O’Bryan J did suggest that theoretically the UberTaxi representation could have depressed demand for UberTaxi services, thus reducing taxi driver revenue.  However, O’Bryan J stated that depressed demand would depend on the extent of the estimated price inflation and that there was no evidence before the Court regarding the extent of the over-estimation of fares and that the parties did not address this theory of harm.  Accordingly, O’Bryan J could not infer any significant loss or damage was suffered by customers or taxi drivers. 

In relation to the Cancellation Representations, the evidence showed that these representations were made over 7 million times but that customers only chose not to proceed with their cancellation in 0.4% of cases. Assuming that each of these customers derived no benefit from their trip (which is a strong assumption) and that the average Uber trip costs $25, the Court found an estimated maximum loss to customers of $700,000.  Therefore, O’Bryan J concluded there was likely “modest” loss or damage to customers.

O’Bryan stated that this evidence confirmed what was apparent from the ACCC’s initial submissions; that the contravening conduct likely resulted in limited harm.

Other factors relevant to penalties

In addition to considering the loss suffered by customers, O’Bryan J took into account:

Penalty breakdown

Justice O’Bryan determined that an appropriate penalty for the UberTaxi Representation was $3 million (compared to $8 million submitted by the parties).  This reflected O’Bryan J’s view that no significant loss or damage occurred, the conduct was not deliberate, and Uber gained no benefit from the conduct.

His Honour agreed that the penalty of $18 million proposed by the parties for the Cancellation Representation was within the permissible range, although considered this amount was at the higher end of what he considered appropriate.  This penalty reflected the fact that “modest” loss or damage was suffered by consumers and, importantly, that there was some knowledge of the conduct by senior managers of Uber and a failure to take steps to remedy the issue.   

Ultimately, it appears that O’Bryan J’s initial reluctance to order a penalty of $26 million at the July hearing was based on a lack of evidence that the conduct caused any real damage or loss to consumers - hence O’Bryan J’s comments that any loss appeared “trivial”.  However, it appears that the ACCC was able to, barely, establish some “modest” consumer loss and thereby secure a penalty higher than O’Bryan J had initially contemplated in July.  Furthermore, the knowledge and involvement (although appearing relatively minor) of senior Uber employees played a part in the larger penalty of $18 million for the Cancellation Representation.   

The digital economy as an ACCC enforcement priority

Consumer and fair-trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy have been identified by the ACCC as a key enforcement priority in 2022/2023.  Specifically, ACCC Chair Gina Cass-Gottlieb has called out digital practices, including dark patterns, that distort or disregard consumer choice. 

The ACCC has also publicly stated that it does not have the resources to tackle the majority of consumer law contraventions and that its policy is to take on cases that will attract high penalties to achieve general deterrence (to ensure that penalties for contraventions are not merely seen as the cost of doing business). 

O’Bryan J’s approach in this case may foreshadow difficulties for the ACCC in securing significant pecuniary penalties in enforcement actions against digital platforms in the future as concrete consumer loss or damage can be difficult to establish and/or quantify.  As such, this case may have broader implications for the types of cases the ACCC commences, and the evidence the ACCC will seek to obtain during its investigations, as it may not be able to rely on the premise that the Court will, as a general rule, impose large penalties on large corporations, even where the conduct is widespread, if the conduct does not cause or there is no evidence that the conduct caused actual consumer harm.