ACCC v Sony Interactive Entertainment Network Europe Limited [2020] FCA 787

On 5 June, the Federal Court of Australia in Australian Competition and Consumer Commission v Sony Interactive Entertainment Network Europe Limited [2020] FCA 787 (‘ACCC v SIENE’) declared that SIENE engaged in conduct that contravened sections 18 and 29(1)(m) of the Australian Consumer Law (‘the ACL’). The ACL is set out in Schedule 2 of the Competition and Consumer Act 2010 (Cth). Section 18 of the ACL prohibits a person, in trade or commerce, from engaging in conduct that is misleading or deceptive or is likely to mislead. Section 29(1)(m) of the ACL prohibits a person, in trade and commerce, in connection with the supply of good or services, from making a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.

Background of the Case

SIENE is a subsidiary of Sony Interactive Entertainment Europe Limited. In the relevant period (1 September 2017 to 23 May 2019), SIENE operated the PlayStation Network (“PSN”) and PlayStation Store for a number of jurisdictions including Australia. As an online entertainment service, the PSN allows account holders to purchase and download games via the PlayStation Store to play on the PlayStation console. In the relevant period, purchases could only be made using the PSN wallet. The PSN wallet contained virtual funds that could be pre-loaded with funds from the user’s preferred payment method. These virtual funds had no value outside the PSN, were non-redeemable for cash and non-transferrable. Where a purchaser indicated they wanted to purchase a game while having insufficient funds, funds would be automatically added from the user’s preferred payment method. The PlayStation Support Centre provided users with communication channels with call centre agents if they required any clarification for purchase protocol.

Terms of Services Representation

The first contravention involved clause 19 of the Terms of Service. Consumers were required to agree to the terms prior to creating an Australian PSN Account. Clause 19 relevantly stated:

Notwithstanding the qualifying words at the beginning of the clause, the Court reasoned and SIENE admitted that the clause impliedly represented that users did not have guarantees as to the quality, functionality, completeness, accuracy or performance of purchased digital games. This misrepresentation directly contravened the statutorily protected consumer guarantees relating to acceptable quality, fitness of goods for disclosed purposes and correspondence between goods and their description outlined in sections 54 to 56 of the ACL.

Representations when Adding Funds to the PSN Wallet

The second contravention involved communications regarding “confirmation of purchase” sent within the relevant period to consumers. When a user attempted to purchase an item with insufficient funds in their PSN wallet, they were directed to a “confirmation of purchase” page that stated that funds would be added from their preferred payment method and that these added funds were “non-refundable.” Similarly, the “confirmation of purchase” email relevantly stated that when a consumer made a purchase, they agreed that they would not receive a “cooling off period” and would be unable to cancel their purchase of wallet funds or get a refund. The Court reasoned and SIENE admitted that both communications falsely represented that PSN users would not be able to obtain a refund of added funds. Under the ACL, consumers are statutorily entitled to a refund of a purchased game if the game had a major failure or, a non-major failure which is not rectified in a reasonable period.

PlayStation Support Centre Representations

The final three contraventions were related to representations made by SIENE through its call centre agents through the PlayStation Support Centre. In the first instance, call centre agents made false representations to a user identified as “User JA” stating that if a game had a major failure or failed to comply with a guarantee that could not or had not been remedied, SIENE was not required to provide a refund unless User JA sought authorisation from the game publisher. In fact, the ACL provides consumers with rights to obtain redress directly from suppliers under sections 259 and 263 of the ACL. In the second instance, false representations were made to four separate users regarding the existence, exclusion or effect of any right or remedy they may have had. The representations falsely stated that refunds were unavailable after 14 days of purchase or if the game had been downloaded. The ACL provides no such limitations on consumers’ rights to redress from suppliers. In the third instance, call centre agents made false representations to a user identified as “User CK” that SIENE was not required to provide a refund in a currency or form useable outside PSN. The ACL provides that consumers are entitled to a refund in monetary form for a major failure or a non-major failure which is not rectified in a reasonable time period.

Relief

Firstly, the Court made declarations pursuant to section 21 of the Federal Court of Australia Act 1976 (Cth) that SIENE contravened ss. 18 and 29(1)(m) of the ACL.

Secondly, SIENE is to pay the Commonwealth $3.5 million in pecuniary penalties within 30 days of the date of the order. When both parties appeared before Court, they had agreed to pecuniary penalties for each of the five incidents of misleading representation and conduct which was equivalent to a cumulative sum of $3.5 million. The Court, referring to section 224 of the ACL which concerns pecuniary penalties, determined the proposed penalties to be appropriate for the admitted contraventions. The first and second contraventions attracted the most significant penalties, $2 million and $1 million respectively. For the contraventions relating to statements made by call centre agents of SIENE attracted penalties, the first and third instances both attracted penalties of $150,000 and the second instance attracted a penalty of $200,000. Notably, Justice Steward in his judgment acknowledged that as “a large enterprise with vast resources” the sum is highly unlikely to have a significant impact on SIENE’s overall financial position. His Honour asserted that pecuniary penalties “must be substantial in order to be meaningful given SIENE’s resources, but must not be so high as to be oppressive.” His Honour stated that the proposed penalties were “sufficiently high to have a deterrent quality.” His Honour went on to say that the penalties appropriately acknowledged the factors that support a lower penalty than might otherwise be imposed, referring the SIENE’s cooperation in the proceedings. His Honour cited SIENE’s amendments to its Terms of Service, “Confirmation of Purchase” communications protocol and staff instructions for the PlayStation Support Centre prior to resolution of the proceeding.

Thirdly, the Court further ordered SIENE to publish a disclosure notice on the Sony PlayStation Website at its own expense and within 21 days of the date of the order. The notice titled “Corrective Notice Ordered by Federal Court of Australia About Consumer Rights” is to remain on the website for a period of 120 days.

Finally, the Court ordered SIENE to pay the ACCC’s costs of and incidental to the proceeding in the sum of $100,000.

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Australian Competition and Consumer Commission v Sony Interactive Entertainment Network Europe Limited [2020] FCA 787 (5 June 2020)

Media Release: Sony to pay $3.5 million penalty for misrepresenting PlayStation gamers’ rights (ACCC, 5 June 2020)