Game Over: Sony to pay $3.5 million penalty for breaching the Australian Consumer Law

The Federal Court of Australia has ordered that Sony Interactive Entertainment Network Europe Limited (Sony Europe) pay AUD$3.5 million in penalties for making false and misleading representations to Australian consumers about their Australian Consumer Law (ACL) rights.[1]

Background

In May 2019, the Australian Competition and Consumer Commission (ACCC) instituted proceedings against Sony Europe and Sony Interactive Entertainment Europe Limited (SIEE) in the Federal Court for:

• engaging in conduct that is misleading or deceptive, or likely to mislead;[2] and
• making false or misleading representations concerning the existence, exclusion or effect of consumer guarantees.[3]

Sony Europe is incorporated in the United Kingdom and operates the PlayStation Network (PSN) and PlayStation Store. Sony Europe is a subsidiary of the second respondent, SIEE, which is responsible for the PSN Terms of Service that Australian consumers must agree to when creating and using a PlayStation account.

ACCC Findings and Federal Court Decision

The ACCC’s filing alleged that between October 2017 and May 2019 Sony Europe had made false and misleading representations to four Australian consumers who were seeking a refund for faulty PlayStation games purchased through its PlayStation online store.[4] Consumers complained that they encountered difficulties downloading or playing the games.

The ACCC claimed that PlayStation Support Centre’s staff informed Australian customers that Sony Europe was not required to provide refunds for faulty games if the game had been digitally downloaded, or if fourteen (14) days had passed since the purchase.[5]

In addition to these misrepresentations, the ACCC’s filing also claimed and argued that Sony Europe’s Terms of Service misled consumers as to their rights under the ACL as follows:

• Australian consumers did not have consumer guarantee rights regarding the quality, functionality, completeness, accuracy or performance of their purchased products as provided under sections 54 to 56 of the ACL;
• if Sony Europe was issuing a refund to Australian consumers for failure to deliver a purchased product, it could elect to either provide the product or refund the purchase price as a PSN wallet credit only, rather than making a refund in the form of money. Section 36(4) of the ACL provides that companies are obliged to supply the purchased product;
• Australian consumers did not have the right to a refund for goods with major failures. Under sections 54, 55, 56, 259(3) and 263 of the ACL, companies are obliged to provide a refund if the purchased product had a major failure; and
• once funds are added to the PSN wallet, Australian consumers could not obtain a refund of funds added to the PSN wallet for cash. Sections 54, 55, 56, 259(2)-(3) and 263 of the ACL provide that companies are obliged to provide a refund in the form of money if the purchased product had a major failure (or a non-major failure which was not rectified in a reasonable period of time).[6]

Sony Europe admitted to breaching the ACL by making the above false and misleading representations. In addition to the $3.5 million fine, the Federal Court ordered Sony Europe to contribute $100,000.00 towards the ACCC’s legal costs.

Key lessons

The key lesson for foreign companies is that the provisions under the ACL applies to transactions (e.g. the provision of goods and/or services) involving Australian consumers. If a consumer purchases a product online that is faulty, they are entitled to the same right to a refund, repair or replacement as if they’d purchased the product in a physical store.

The Federal Court’s decision reinforces that the ACCC is prepared to take action against overseas-based companies for breaches of the ACL.

In 2018, the High Court affirmed the Full Federal Court’s decision in the ACCC’s case against gaming retailer Valve Corporation which found games it sold online to Australian consumers were subject to the ACL despite the company being incorporated in the United States.[7] Valve Corporation was required to pay $3 million in pecuniary penalties and 75% of the ACCC’s costs.

In that same year, Apple was also fined $9 million for telling Australian iPad and iPhone owners they were ineligible to have their devices repaired because they had previously been fixed by a third party.[8]

Whether overseas-based companies are selling products to Australian consumers offline or online (particularly in COVID-19 times), they are obligated to stay up to date with the consumer rights under the ACL and ensure all customer service representatives receive comprehensive customer service training materials and procedures (such as email templates and chat scripts) that strictly comply with the ACL.

[1] Australian Competition and Consumer Commission v Sony Interactive Entertainment Network Europe Limited [2020] FCA 787; the ACL is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth).

[2] Australian Consumer Law, section 18.

[3] Australian Consumer Law, section 29(1)(m).

[4] Notice of Filing (24 May 2019).

[5] Notice of Filing (24 May 2019), page 4.

[6] Notice of Filing (24 May 2019), page 2-3.

[7] ACCC, High Court dismisses Valve’s special leave to appeal application, 20 April 2018.

[8] ACCC, iPhone and iPad misrepresentations cost Apple Inc $9 million in penalties, 19 June 2018.