Can related bodies corporate sleep easy? The judgment of ACCC v Emma Sleep GmbH suggests not

The recent Federal Court decision Australian Competition and Consumer Commission v Emma Sleep GmbH [2025] FCA 618 suggests that related body corporates cannot always escape liability for contraventions of the Australian Consumer Law (ACL) by hiding behind the actions of one entity.

Background

The ACCC commenced proceedings against three related entities (the Respondents) for misleading and deceptive advertising in contravention of the Australian Consumer Law. The contravening conduct involved a range of false representations made by a mattress company, Emma Sleep Pty Ltd, regarding supposed savings and discounts offered on its products.  These false representations were conveyed to Australian consumers via both online and offline advertising (the Contravening Conduct), during the period 15 June 2020 to 27 March 2023.

The three entities were:

• Emma Sleep Pty Ltd, a mattress company registered in Australia (Emma Sleep AU)
• Bettzeit Southeast Asia Inc, a company incorporated in the Philippines (Bettzeit); and
• Emma Sleep GmbH, a company incorporated in Germany (Emma Sleep GmbH).  Emma Sleep GmbH is the parent company of both Emma Sleep AU and Bettzeit – it holds 100% of the shares in Emma Sleep AU, and 99.4% of the shares in Bettzeit.

While the parties agreed that Emma Sleep AU had contravened the ACL by publishing misleading and deceptive representations, a dispute arose over whether Bettzeit and Emma Sleep GmbH were also liable for the misleading and deceptive conduct, either as principal contraveners or derivatively through the application of section 139B(2) of the Competition and Consumer Act 2010 (Cth) (CCA) (which extends liability for contraventions of the CCA). Relevantly:

• section 139B(2)(a) provides that conduct engaged in on behalf of a body corporate by a director, employee or agent of the body corporate within the scope of the actual or apparent authority of the director, employee or agent, is taken to have been engaged in also by the body corporate; and  
• section 139B(2)(b)(i) provides that where a person engages in conduct at the direction of a director, employee or agent of the body corporate, if the giving of the direction is within the scope of the actual or apparent authority of the director, employee or agent, the conduct is engaged in also by the body corporate.

Legal analysis

The ACCC ran three arguments against the Respondents.  First, that Bettzeit and Emma Sleep GmbH contravened the ACL and participated in the contravening conduct in their own right. Second, the ACCC argued that, in the alternative, if Bettzeit or Emma Sleep GmbH were not principal contraveners, then they should be considered liable because the conduct was engaged in on behalf of Bettzeit and Emma Sleep GmbH by their employees. Thirdly, the ACCC also argued that Emma Sleep AU had engaged in the misleading conduct as an agent of the Respondents, under section 139B(2)(a) of the CCA.

Bettzeit

The Court found that Bettzeit was liable under section 139B(2)(b)(i) as the representations were made by Emma Sleep AU on behalf of Bettzeit, and at the direction of a Bettzeit director.  Relevantly:

• Conduct was directed by Bettzeit employees
  
  The Australian directors of Emma Sleep AU were not involved in the day-to-day management of Emma Sleep AU's business. Instead, employees of Bettzeit, including the Managing Director, occupied leadership positions in Emma Sleep AU. Accordingly, the misleading and deceptive advertising published by Emma Sleep AU were made "at the direction" of Bettzeit directors and employees.

• Directions were within the scope of the authority of Bettzeit employees
  
  Given that the abovementioned leadership positions were also evidently responsible for the marketing and pricing strategy of Emma Sleep AU, the directions were also given "within the scope of the actual or apparent authority of the director, employee or agent."

• Conduct was on behalf of Bettzeit
  
  Bettzeit argued that it could not be held liable for the conduct under section 139B(2)(b)(i) despite the fact that its employees were involved in the contravening conduct, as the conduct was purportedly done on behalf of Emma Sleep AU. This argument was rejected by the Court. The Court held that the starting position is that one would usually expect that conduct engaged in by the employees and directors of a company is engaged in on behalf of that particular company, even if the conduct is also on behalf of another company.  
  
  Further, while the Court accepted that it was possible for entities in a corporate group to provide services to each other on a labour hire agreement, the court rejected the proposition that Bettzeit had acted for Emma Sleep AU pursuant to such an arrangement, noting that there was no evidence of payments from Emma Sleep to Bettzeit for the provision of such services.

Additionally, due to Bettzeit's close involvement, the Court also found that separately to section 139B of the CCA, Bettzeit was also liable as a principal contravener, notwithstanding the fact that Bettzeit did not publish, or add its name to, the impugned representations.

Emma Sleep GmbH

The Court held that Emma Sleep GmbH was not liable for the contravening conduct, as the directors and employees of that entity merely provided guidance at a strategic level, but did not provide any authoritative guidance or direction that could be connected to the impugned representations made by Emma Sleep AU. The Court rejected the argument that the conduct was engaged on behalf of Emma Sleep GmbH, despite it wholly owning Emma Sleep AU.

No Agency

The Court also rejected the proposition that Emma Sleep AU was acting as an agent on behalf of Bettzeit or Emma Sleep GmbH, noting that there was insufficient evidence to show an agency relationship existed.

Key takeaways

Companies should be aware that:

• The court observed that, as a starting position, one would usually expect that conduct engaged in by employees and directors of a company is engaged in on behalf of that company (even if that conduct is also purportedly done on behalf of another company) (see [115]).  The same conduct can be engaged in on behalf of multiple entities.  
• While it is possible for employees of one company to act on behalf of another company pursuant to a labour hire agreement or similar arrangement, companies should ensure that there is clear evidence showing this (such as contractual documents and payments). In circumstances where these resource-sharing arrangements are informal and lack a strong paper trail, courts may be hesitant to find that a particular employee was merely acting on behalf of one entity.  
• An entity may be principally liable for the misleading and deceptive advertising if its employees, directors, or agents were closely involved in the preparation of those representations, even if it is not the entity that ultimately publishes the representations. It is not necessary for an entity to publish or put their name on the misleading representations in order to be liable for "making" the representations.

While ultimately findings of extended liability for breaches of the ACL turns on the facts of each case, and parent companies will not necessarily be held liable for the conduct of its subsidiaries, this judgment serves as a clear warning to company groups that liability for marketing contraventions cannot simply be pinned on one entity if employees of other entities have been closely involved in the development and approval of the marketing.  

For more information or assistance, please contact our Competition and Regulation team.

Authors

Mandi Jacobson | Partner | +61 2 9020 5690 | mjacobson@tglaw.com.au

Danielle Kuti | Special Counsel | +61 2 9020 5661 | dkuti@tglaw.com.au

Bonnie Liu | Associate | +61 2 9020 5688 | bliu@tglaw.com.au

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