Things To Think About

First: last fortnight we considered the place of consumer litigation and class actions in the enforcement of commercial laws: this fortnight, Tony Boyd for the Financial Review criticises ASIC for “relying too heavily” on class actions, and notes the rise of litigation funders bankrolling “misleading and deceptive” litigation.  This is only fair criticism if we provide sufficient funding and power to our regulators to litigate everything that might aggrieve consumers, in addition to whatever other litigation they deem necessary for market regulation.  That would be extraordinarily expensive; is it efficient?  If so, how should those funds be raised?  Are there alternatives, such as regulators providing some investigative services (for example, evidence gathering) to aggrieved consumers, but leaving litigation in their hands? How would that work in practice?  Would a US-style qui tam litigation model, incentivising whistleblower litigation, be useful?

Second: let’s think about the relationship between competition law and consumer law, and the proper purposes of each.  Last fortnight we considered the phenomenon of rising generic drug prices despite competitors in the market; this fortnight, consider the prevalence of monopoly businesses in the US.  “Monopolies don’t just dominate their own industries, Justice Louis Brandeis said in 1933; they monopolize political power as well, which allows them to protect their incumbency and stifle competition in myriad ways.”  The Atlantic’s Derek Thomson suggests that the shifting focus from promotion of competition to consumer protection in US economic law and policy helps explain the contemporary situation.  The Economist also looks at the “rise of the superstars“. Update: Chairman of the ACCC, Rod Simms, commented on these issues, responding to The Economist article above, at the RBB Economics Conference in Sydney.

Third: Last fortnight, Wells Fargo received fines from US regulators for opening millions of accounts in customers’ names without their knowledge. (See Corporate Crime Collections: Consumer Law Cases)  This fortnight, the US Senate Banking Committee examined the scandal.  While some of the reporting asserted that the bank did not want, or benefit from, the conduct of its low-level employees who opened the sham accounts, Senator Elizabeth Warren sets out how the conduct significantly benefitted the bank’s shareholders – including its own CEO.  Some of the comments made during the hearing are worth consideration this fortnight.  First, Senator Warren’s assertion that in cases like these, only jail time for senior executives can truly change corporate behaviour: taking the Wells Fargo example, what offences might a CEO or other senior executive be guilty of?  Is this a good example of the need for prosecution on the basis of “corporate culture”, whereby persons responsible for setting the culture are criminally responsible for its illegal consequences?  ASIC favours such an approach: Chairperson Greg Medcraft said earlier this year: “I believe that those who create or encourage a culture that breeds misconduct should be held accountable for it.”  The Commonwealth Criminal Code already facilitates this sort of prosecution in some contexts, it just hasn’t seen much (any?) use so far, and there’s a case for broadening its scope.  A question put to the Wells Fargo CEO by Senator David Vitter also warrants consideration: “Why isn’t this crystal clear proof that an entity as big as Wells is not only too big to fail but it’s too big to manage and too big to regulate?”  The question was prompted by Stumpf’s inability to explain how the widespread misconduct could be “unnoticed” by the bank’s board for five years.  While consumer regulators have levied fines on the bank, it remains to be seen whether there will be any enforcement action under fraud or employment law, and whether there will be any litigation, civil or criminal, against individuals involved.  No doubt class-action firms are also looking at possible action.

Law & Policy Updates

ASIC has updated the regulatory framework for charitable investment fundraisers.

Notable Litigation Actions

More jury law: the VSCA has confirmed that when empanelling jurors, the presiding judge must ensure that the accused has a reasonable opportunity to view the face of each juror, when called, before the juror takes her seat in the jury box.  Failure to do so may result, as in Anthony Cook v The Queen [2016] VSCA 231, in convictions being quashed (see [61] onwards), even if defence counsel failed to object to the irregular empanelment procedure at the time of trial.

An interesting criminal investigation in the US: did Hampton Foods commit fraud when buying back its own mayo? Or telling consumers (and investors) that each jar of its mayo saved a bathload of water?

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