Businesses and in-house corporate counsel are frequently plagued by the question of whether the business could be found liable for another’s breach. In particular, the question often arises when the business itself is not directly involved in, nor does it have actual knowledge of the contravention. This issue is particularly relevant when the nature of the business is such that it inherently has to rely on another party to do the right thing. For example, businesses that operate platforms (marketplaces) or display third-party claims. It is also relevant to individuals and parent companies involved in making and approving decisions made by companies within a group.
This note provides a practical summary on the scope of when a party may be knowingly concerned in another’s contravention of the Competition and Consumer Act 2010 (Cth) (CCA), including an update on a recent High Court judgment that develops this concept and what it means for businesses.
A refresher on ancillary liability under the CCA
Ancillary liability refers to the circumstances under the CCA where a party can be found liable for another party’s breach. The main heads of ancillary liability are captured in s 76(1)(c)-(f) for breaches of the competition laws (anti-competitive conduct), which is mirrored by s 2 of the Australian Consumer Law (ACL) for breaches of the consumer law, being:
Aiding, abetting, counselling or procuring a person to contravene a provision.
Inducing or attempting to induce a person, whether by threats or promises or otherwise, to contravene a provision.
Being in any way directly or indirectly, knowingly concerned in, or party to, the contravention by a person.
Conspiring with others to contravene such a provision.
The head of ancillary liability that requires the least direct involvement in another’s contravention is being directly or indirectly knowingly concerned in the contravention by a person. This is the head that concerns most businesses and advisers.
Courts have considered whether parties are liable for being knowingly concerned in the following contexts:
Online platforms displaying third party claims: The leading case on this point has been Google Inc v ACCC (2013) 249 CLR 435, in which Google was found not to have engaged in misleading and deceptive conduct in merely publishing or displaying, without adoption or endorsement, misleading representations made by third party advertisers through sponsored links. The ACCC is now seeking to revisit that position in proceedings commenced against Meta in 2022, in which it has alleged that Meta engaged in false, misleading or deceptive conduct by publishing scam advertisements featuring prominent Australian public figures. It has also specifically alleged that Meta aided and abetted or was knowingly concerned in the false or misleading conduct and representations of the advertisers.
Individuals working for companies: The ACCC has pursued individuals for the conduct of companies, including in an ancillary capacity, in a string of recent cases (see e.g. ACCC v Delta Building Automation Pty Ltd [2023] FCA 880, ACCC v BlueScope Steel Ltd (2023) FCA 1029, CDPP v Aussie Skips Bin Services Pty Ltd ; Aussie Skips Recycling Pty Ltd; Roussakis [2024] FCA 122 and CDPP v Bingo Industries Ltd; Tartak [2024] FCA 121). Further, other related companies of which those individuals are directors, officers or employees may risk exposure too.
It is also relevant to the ACCC’s immunity and cooperation policy for cartel conduct . The ACCC immunity policy states that if a corporation qualifies for conditional immunity, it may seek derivative immunity for related corporate entities and / or for current and former directors, officers and employees of the corporation who were involved in the cartel conduct, including where those entities or individuals were knowingly concerned.
What does it take to be knowingly concerned?
On 14 August 2024, the High Court delivered judgment in Productivity Partners Pty Ltd v ACCC; Wills v ACCC [2024] HCA 27 . This decision provides important guidance about the principles applicable to whether a person is knowingly concerned in another person’s contraventions. It has been almost 40 years since the High Court considered accessorial liability and previous case law surrounding the requirements to be held liable for being knowingly concerned has been unsettled.
The judgment concerned proceedings commenced by the ACCC against Productivity Partners Pty Ltd, trading as Captain Cook College (College), alleging it engaged in systemic unconscionable conduct, and that the College’s parent company Site Group International Ltd (Site) and Mr Wills (the acting CEO of the College at the time and previous COO of Site) were knowingly concerned in the College’s conduct. The conduct involved the College removing safeguards that protected against claiming vocational education and training (VET) fee payments from the Commonwealth for unwitting or unsuitable students.
On appeal, the High Court unanimously found in favour of the ACCC and held:
The College engaged in systemic unconscionable conduct, finding that the College dismantled a system of controls “it knew minimised exploitation of students and did so to increase the College’s profit”.
Mr Wills was knowingly concerned in the College’s conduct, and thus, liable for that conduct.
Site was also knowingly concerned in the College’s conduct, by reason of Mr Wills’ knowledge and conduct being attributed to Site as Site’s previous COO (pursuant to section 139B of the CCA).
The High Court confirmed that to be knowingly concerned in a contravention of the statutory prohibition against unconscionable conduct, an accessory must:
“Intentionally participate” in conduct that “implicate[s] or involve[s]” them in the primary contravention - that is, they must have “assented to” “become associated with” the conduct that amounts to the primary contravention.
Have “knowledge of the essential facts constituting the contravention” (which may be facts, circumstances or states of mind), meaning “all the essential facts or circumstances which must be established in order to show " that the primary contravention was committed. This does not require knowledge that the conduct constituted a contravention at law, or indeed, that it was unconscionable. Put another way, only knowledge of the essential matters constituting the contravention is required, not knowledge of the character, quality, nature of status of those matters.
The High Court clarifying the requirement for, and definition of intentional participation is meaningful, as previous case law in the Federal Court has reserved such a requirement for aiding and abetting-style contraventions (see e.g. ACCC v SensaSlim Pty Ltd (in liq) (No 5) [2014] FCA 340 at [535]-[548]).
The High Court acknowledged the difference between essential facts and the legal characterisation of those facts (for example knowledge that the conduct amounted to a breach) can be fine, and that determining the essential facts that must be known to form the intention to participate is often difficult. However, it noted the intention and essential facts should be informed by reference to the relevant statutory provision.
Accordingly, the High Court considered the intention and knowledge requirements for the statutory prohibition on unconscionable conduct, and separately clarified the requirements in the context of misleading and deceptive conduct:
Unconscionable conduct: In line with the above principles, it is sufficient that the person knew the facts and circumstances which rendered the primary contravener’s conduct unconscionable, and not that they knew or believed the conduct to be unconscionable.
Misleading and deceptive conduct: The High Court took a narrower view in relation to misleading and deceptive conduct, determining that it is necessary to establish that the person knew that the representation was false and the circumstances in which the representation was made (a highly unsettled point in previous case law). However, the person need not have known that the conduct was misleading or deceptive within the meaning of the statutory prohibitions.
Without delving too deeply into the details, as articulated by Justice Gordon, Mr Wills was found to have been knowingly concerned in the contravening conduct (that is, knowing the essential facts constituting the unconscionable conduct and an intentional participant in the conduct) in light of:
his role in the College
his knowledge of the relevant risks
his involvement in and knowledge of the changes to the safeguards
his knowledge of the effects of those changes.
What are key takeaways for businesses?
In light of recent case law developments, in considering whether issues of ancillary liability could arise, businesses should ask themselves:
Do you have a commercial relationship with a third party where you rely on their representations for any product claims? If so, what are the systems or controls in place to verify those representations or claims, including flagging when they might be misleading?
Do you approve a subsidiary or employee’s actions either relating to representations about goods or services, or business strategy? What controls are in place to identify whether you are approving something potentially misleading or deceptive, unconscionable or anti-competitive?
Have you become aware of potentially illegal conduct being engaged in by a third party?
It may be prudent to seek legal advice on these matters.
If you have any queries, please feel free to contact the authors of this paper.