Here’s Why Sony Was Fined $3.5 Million For Refusing Refunds

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Here’s Why Sony Was Fined $3.5 Million For Refusing Refunds

Sony’s been hit with an enormous $3.5 million fine, adding to the ACCC’s string of wins against companies refusing digital refunds to Australians. In the court’s ruling, Federal Court Justice Steward explained why Sony was fined so much.

In the full Federal Court ruling, the maximum fine for 21 contraventions of the Australian Consumer Law would have totalled “at least $63.9 million”, according to the Federal Court ruling. However, both the ACCC and Sony Europe’s legal representatives ended up agreeing on a $3.5 million fine, broken down as such:

  • $2 million for the Terms of Service representation;
  • $1 million for the Wallet representation;
  • $150,000 for the referral to Publisher Representation;
  • $200,000 for the No Obligation to Refund Representation;
  • $150,000 for the Refund to Wallet representation

The various representations refer to terms and conditions presented to users at various points as they tried to buy games on the PlayStation Store. A “Top Up Confirmation Email”, for instance, told users between “at least” September 1, 2017 and until September 17, 2019, that wallet funds could not be cancelled or refunded. The court could not find out how many times users received these particular emails, but they did note that “between November 2018 and May 2019”, Australians received the Top Up Confirmation email just over 8.9 million times.

The Wallet representation, meanwhile, was a notice informing users that “funds added to the wallet are non-refundable”. This notice appeared whenever a user tried to purchase a game from the PSN, but lacked sufficient funds in their PSN wallet to buy the title they wanted.

The ACCC’s case revolved around the experiences of five users — User JA, HP, BM, JS and CK — who were refused refunds by Sony support staff at different points in 2017. For three of the users, Sony submitted that “even if a game had a major failure or some other failure to comply with a guarantee that could not be, or had not been, remedied”, Sony’s support staff argued that they were not required to supply refunds if the game had been downloaded. In another instance, user CK was offered a refund, but only in the form of PSN wallet credit.

Between October 2017 and November 2017, SIENE (through its call centre agents), in trade or commerce … engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and made false or misleading representations to each concerning the existence, exclusion or effect of any right or remedy they may have had, by representing that, even if a game had a major failure or some other failure to comply with a guarantee that could not be, or had not been, remedied, SIENE was not required to refund the users more than 14 days after purchase or if the game had been downloaded, when in fact there is no such limit on consumers’ rights to obtain redress from suppliers of goods under ss. 259 and 263 of the [Australian Consumer Law], in contravention of ss.1 8 and 29(1)(m) of the [Australian Consumer Law].

In a separate instance, the judge also found Sony engaged in misleading or deception or likely to mislead or deceive conduct by telling one user that they were “not required to refund … unless User JA obtained authorisation from the publisher (or developer) of the game for the refund to be made” even though Australian consumers are entitled to obtain refunds “directly from suppliers of goods”.

The judgement also noted Sony’s instructions to support staff explaining why users could not receive refunds for digital purchases:

4.4.1 – Can I get a refund because I’m not happy with the quality of the game I purchased?

In this case, the content has been downloaded, is available to use on your console and cannot be removed, even after refunding. As the content cannot be ‘returned’, we cannot consider a refund of the purchase.

As there is no actual fault with the content we cannot consider a refund of the purchase.

Justice Steward accepted a submission from both the ACCC and Sony Europe that Sony had “not previously contravened the [Australian Consumer Law] or its predecessor, the Trade Practices Act”, which was taken to be a “significant mitigation factor” in accepting the proposed fine. Both parties also agreed that there was no evidence that Sony was deliberately attempting to contravene Australian Consumer Law, which was accepted by the judge.

In explaining the acceptance of the fine to Sony, Justice Steward wrote the following:

It is clear that Sony Interactive Entertainment Network Europe [SIENE] is a large enterprise with vast resources. Realistically speaking, a penalty in the sum of AUD$3.5 million is highly unlikely to have a significant impact on SIENE’s overall financial position. But that is not to the point.

The question is whether the size of the pecuniary penalty would operate as an effective deterrent. The penalty must be substantial in order to be meaningful given SIENE’s resources, but must not be so high as to be oppressive. In my view, the amount of the proposed penalty is in each case sufficiently high to have a deterrent quality. Further, the penalties have been set at a level which acknowledges the factors which support a lower penalty that might otherwise be imposed.

In particular, SIENE co-operated in resolving this proceeding; it has since amended the Terms of Service; it ceased to make the Wallet Statement on the Confirmation of Purchase Page and changed the Top Up Confirmation Email prior to resolution of the proceeding; and it provided updated instruction to PlayStation Support Centre staff.

Justice Steward also had a warning for other digital retailers or companies with online marketplaces:


I am also satisfied that the penalty amounts proposed make it clear to other corporations dealing in digital goods that is not acceptable to contravene the [Australian Consumer Law]. I consider they are of sufficient magnitude to deter others in the industry who may be disposed to engage in similar prohibited conduct.

Similar to the case against Valve, Sony will be required to publish a proposed notice on the PlayStation Australia website outlining users’ rights under the Australian Consumer Law. The court also thanked Sony for “voluntarily” disclosing information to the ACCC and beginning settlement proceedings, which the court said “have obviated the need for a full trial which undoubtedly would have demanded significant resources”.

Comments

  • Australian Consumer Law strikes again!

    It’s not a perfect law, but I’m glad we have it, and it always feels good when it’s successfully enforced.

    • Yeah, we’re pretty lucky.

      ACL is clear, uses pretty simple language, and cannot be overridden.

      Before we had it, retailers would constantly try to refer you the manufacturer. ACL makes it very clear that your transaction is with the seller.

      • When I worked for the Good Guys I would constantly bring up ACL when delivering goods.

        I would also tell anyone who would listen that concierge was just re-branded extended warranty and a scam.

        I don’t work for the Good Guys anymore…

        • Total scam 99% of the time. My wife wanted it once when we were younger and not as smart (and it came with a store credit at almost the whole price we were paying and we were planning another purchase) so it was essentially free.

          We recently did use it and got a brand new replacement after something small was not working.

          I still think its a scam and would never buy it.

  • Sony’s may have been hit with an ‘enormous $3.5 million fine‘ although, actually, it doesn’t sound all that enormous when you consider that ‘the maximum fine for 21 contraventions of the Australian Consumer Law would have totalled “at least $63.9 million”‘, and when you consider that in the 2018 financial year Sony recorded revenue of around $78.14 billion U.S. dollars, well.. it actually doesn’t sound so ‘enormous’ after all, more like some loose coins that Sony forgot about hidden in the back pocket of their 10 year old denims.

    Next time I get hit with a fine for speeding I look forward to bargaining the government down from $207 to $37.26.

    • Yeah, if you read the actual article the judge points out that it’s small change for Sony, and part of the reason it’s not the full $70 million is that Sony changed their policies instead of trying to tank the fine.

      • I read the actual article, thanks. The fact that the judge explained his reasons for offering a trivial fine is actually neither here nor there, and contradicts nothing I said in my initial post.

        The article kicked off by suggesting that the fine was ‘enormous‘ (literally the first sentence), then goes on in the second sentence to add that “In the court’s ruling, Federal Court Justice Steward explained why Sony was fined so much’, which also implies that the fine was substantial. In fact, the fine was exceedingly trivial in the scheme of things by nearly every angle one might reasonably look at it.

        Anyone who stopped reading after the first paragraph (as is typical) will have been left with the impression that the fine was, in fact, “enormous”. The fact that the lead directly contradicts a direct quote from the judge later in the article simply makes the lead even more inexplicable.

        Also, the fact that there the judge gave reasons for the smaller fine doesn’t change the fact that people who are not large companies don’t typically get the opportunity to bargain already trivial fines down to something even more trivial.

        • The reason why the fine was so “little” was that the judge believed that Sony was not trying to break the ACL (lol, they more than likely knew that they were breaking the ACL, this is, after all, a multibillion dollar corporation with more lawyers than most companies have employees), that Sony (apparently) remedied the situation without being forced to and basically plead guilty to what they were being charged with. Valve was fined a lot because they fought back claiming that they did not have to give refunds at all.

          My guess would be that if Sony is caught refusing a refund again that has a valid reason for it under the ACL then the judge is going to throw the book at Sony.

        • I can’t tell if you’re being wilfully ignorant or not.
          Changes to the severity of fines/charges based on the behaviour and actions of the defendant is literally how the legal system works…..
          The ACCC would’ve never gone after the full amount unless there was serious allegations of criminal conduct or blatant escalation and resistance from Sony.

          On a side note, your speeding fine comment is a perfect example since you can negotiate a speeding fine through the courts and the manner in which you do so would decide the difference between having it waived or getting additional fines and costs added to it.

        • I won’t argue whether or not the fine is enormous as that is clearly dependant upon the perspective from which you look at it. Your speeding ticket example is flawed however and suggests limited understanding of the Judge’s reasons. I won’t refer you to the article like below but I would suggest you consider reading the actual decision as it may offer you a better explanation and insight.

          A speeding fine is a nominal amount put in place for ease of imposition. To properly hear all the speeding fines in the Courts would be prohibitively expensive so the ticket is used instead. A ticket takes nothing into account of your personal circumstances or the circumstances surrounding the offence.

          In any event, when you get your speeding ticket it is actually a fraction of the maximum penalty available for the offence. I don’t know what state you live in, but in Victoria the maximum penalty for speeding is somewhere between 10 and 20 penalty units dependant on the speed (Road Safety Road Rules 2017). 1 unit is about $165 at present so your maximum fine is between $1650 to $3300 for that single offence. Consider the impact of multiple offences on those figures and you start to approach the situation in this case.

          Now, you might have noticed that a speeding ticket gives you an option to go to Court and have the matter determined there – if you did this the Court would also consider matters such as those discussed here for Sony – plea of guilty or not, past good behaviour/lack of prior offending, financial position, level of cooperation, intent or neglect and so forth. These and other factors influence the Judge’s decision as to penalty in what is called the ‘instinctive synthesis’. No one factor (e.g. the company’s total profit) dominates all others to their exclusion (for reasons that would take me longer than could reasonably be explained here).

          Some people do go into Court for speeding tickets (and every other offence in the book, frankly) and walk out with no, or significantly reduced, penalties… even those who may earn hundreds of thousands of dollars a year (and could thus easily pay a $200 fine).

          Argue it being low all you like, but your suggestion that Sony is getting some sort of leg up on the little guy is misplaced IMO. And I say that as a person who is representing the little guy in Court in 99% of my work.

      • They have basically paid for a single infringement.

        If you had 10 speeding infringements, even if you didn’t commit another offense in 3 years time, you would be paying for all 10 instead of 1.

    • Its not about the fine, its about Sony admitting fault cause if they don’t, if they refuse… they would of been banned from the Australian Market. ACCCs main job is to make ACL an absolute, each company confession cements that… refusing it means refusing to do business in Australia.

      According to 2018 stats.
      Sony Australia (all products) had an income of $550 million dollars for 2018.
      The Australian Software gaming market is worth over $3 billion dollars at the time (Playstations having the highest console sales market share). That is what Sony was protecting by confessing.

      Its why every time the ACCC serves a subpoena, these companies immediately change their refund policy (Valve, Bethesda, EA, Nintendo, Microsoft) even Sony changed it immediately… the rest of the case was just Sony plea bargaining the penalty.

  • I personally just don’t see both why and how Sony refuse to refund games if they’ve already been downloaded.

    If PSN cant verify the license to your game (or it doesnt have one, eg using a different account when the account that owns the game doesnt have the ps4 set as primary), it simply shows up with a big lock next to its name, and won’t you let you launch it, forcing you to restore licenses via account management, or switch to the account that holds the license.

    Surely, they would simply be able to delete/revoke the license for that particular game from your account after a refund request has been approved, and have that game locked in the same manner. Hell, PSN+ games work the same way when your subscription expires, they get locked too, and only get unlocked when you renew.

  • There is still no option on the PSN store to handle refunds. This is a very deliberate thing and very dodgy. The vast majority of players wouldn’t know they can get digital refunds or how to go about it.

  • I can’t say too much due to an active NDA, but whenever new recruits get trained they’re told to NOT actively bring up consumer laws at all (unless the customer does it first), even if the customer was within its boundaries, and instead pretend that we were giving them a freebie out of the goodness of our hearts

    “Oh the you’re out of warranty by one year and nine months? Hmm… We’ll cover it”

    Customer/client is therefore ecstatic, they think it’s us who gave them a freebie, instead of consumer protection laws saving their butts

    • That’s the way it works in most places unfortunately.
      Being compliant doesn’t actually mean being helpful and you’ll find a lot of companies will refuse a customer unless they know exactly what they are talking about.

  • It’s probably worth pointing out at these fines were levied under the ACL’s old penalty limits. They were increased about 10x a couple of years ago – any company doing the same today would be looking at 10 times the possible maximum fine. And yes, that means new maximum in a case identical to this one would be up around half a billion. The cooperation of Sony is a huge factor in sentencing law (its a whole body of law, judges take it super seriously), and goes a long way to explain the result here. But the new fines are law now, and it will have an impact.

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