FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Dell Computer Pty Limited [2002] FCAFC 434
TRADE PRACTICES – Trade Practices Act 1974 (Cth) s 53(e) – whether false or misleading representations with respect to price – nature of obligation undertaken by vendor – whether goods sold were delivered goods – payment of delivery charge compulsory – whether delivery charge part of price
TRADE PRACTICES - Trade Practices Act 1974 (Cth) s 53C – whether failure to specify cash price – whether necessary to give single figure price - compulsory delivery fee not included in figure given prominence in advertisement
WORDS & PHRASES – “price”, “specify”
Trade Practices Act 1974 (Cth) ss 4, 53(e), 53C
Trade Practices Revision Bill 1986 (Cth)
Castlemaine Tooheys Limited v Williams and Hodgson Transport Proprietary Limited (1986) 162 CLR 395 referred to
Trade Practices Commission v Autoways Pty Limited (1990) ATPR 41-051 referred to
Macquarie Dictionary, 2nd edition
AUSTRALIAN COMPETITION & CONSUMER COMMISSION v DELL COMPUTER PTY LIMITED (ACN 003 855 561)
N 735 of 2002
BRANSON, EMMETT & STONE JJ
20 DECEMBER 2002
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
N 735 of 2002 |
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ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
AUSTRALIAN COMPETITION & CONSUMER COMMISSION APPELLANT
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DELL COMPUTER PTY LIMITED (ACN 003 855 561) RESPONDENT
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BETWEEN: |
DELL COMPUTER PTY LIMITED CROSS-APPELLANT
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AND: |
AUSTRALIAN COMPETITION & CONSUMER COMMISSION CROSS-RESPONDENT
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JUDGES: |
BRANSON, EMMETT & STONE JJ |
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DATE: |
20 DECEMBER 2002 |
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PLACE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The appeal be stood over to a date to be fixed for the purpose of making orders, including an order or orders as to costs;
2. The parties to provide to the Associate of Branson J by 12 February 2003 an agreed minute of the orders to be made (including the order or orders to be made as to costs) and if agreement has not by then been reached, the minutes of order for which they will respectively contend and brief outlines of submissions in support of the orders.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
N 735 of 2002 |
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ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
AUSTRALIAN COMPETITION & CONSUMER COMMISSION APPELLANT
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AND: |
DELL COMPUTER PTY LIMITED (ACN 003 855 561) RESPONDENT
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BETWEEN: |
DELL COMPUTER PTY LIMITED CROSS-APPELLANT
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AND: |
AUSTRALIAN COMPETITION & CONSUMER COMMISSION CROSS-RESPONDENT
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JUDGES: |
BRANSON, EMMETT & STONE JJ |
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DATE: |
20 DECEMBER 2002 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
branson j
Introduction
1 I have had the advantage of reading the reasons for judgment of Emmett J in draft form. I gratefully adopt his Honour’s outline of the background to this appeal including his Honour’s summary of the reasons for decision of the primary judge.
2 In these reasons for judgment I utilise expressions as defined or explained by Emmett J.
Statutory Provisions
3 This appeal raises for consideration the proper construction of ss 53(e) and 53C of the Trade Practices Act 1974 (Cth) (‘the Act’). These provisions respectively provide:
‘53. False or misleading representations
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:
…
(e) make a false or misleading representation with respect to the price of goods or services;
…
53C Cash price to be stated in certain circumstances
A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the corporation also specifies the cash price for the goods or services.’
4 The Act contains a number of definitions which, in my view, relevantly impact on the construction of the above provisions. Section 4 contains the following relevant definitions:
‘price includes a charge of any description; …
services includes any rights …, benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, …
but does not include rights or benefits being the supply of goods or the performance of work under a contract of service.
supply, when used as a verb, includes:
(a) in relation to goods — supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and
(b) …
and, when used as a noun, has a corresponding meaning, …’
5 Section 4C relevantly provides:
‘In this Act, unless the contrary intention appears:
…
(c) a reference to the supply or acquisition of goods includes a reference to the supply or acquisition of goods together with other property or services, or both; …’
SECTION 53(e)
6 I agree with Emmett J that there is no conceptual difficulty in dividing the obligations of Dell with respect to a computer product ordered by a customer into several component parts. The obligations include, in a practical sense, manufacturing a computer according to the customer’s specification and delivering that computer to the premises nominated by the customer as the place of delivery. The issue, to my mind, is whether it is appropriate in the context of the Act, and in particular ss 53 and 53C or either of them, to so divide the obligations of Dell.
7 Castlemaine Tooheys Limited v Williams and Hodgson Transport Proprietary Limited (1986) 162 CLR 395 (‘Castlemaine Tooheys’) concerned an alleged contravention by Castlemaine Tooheys Limited of s 47(6) of the Act by exclusive dealing with respect to cartage services. Although concerned with different provisions of the Act than those which this Court is required to construe, the approach to the Act adopted in the respective judgments of the members of the High Court is, in my view, instructive for present purposes. Wilson J, with whom Dawson J agreed, at 402 observed that:
‘The Act clearly contemplates that services may accompany the supply of goods in such a way as to constitute a single transaction properly described as a supply of goods. It follows that an act or series of acts, once characterised for the purposes of the Act as a supply of goods, cannot also be a supply of services. … Thus a contract for the supply and fitting of a windscreen to a motor vehicle has been held to fall within a market in which persons supply goods rather than services: … It may not always be easy to make the characterization, the task being to identify, from all the circumstances of the case, the precise legal obligation undertaken by the supplier of the goods.’ (citations omitted)
Brennan J, with whom Deane J agreed, at 405 said:
‘Once it is appreciated that the beer transported by QRX is supplied by the brewer to a licensee only at the licensee’s premises, it is impossible to suppose that the transport services rendered by QRX are acquired by the licensee. The beer supplied at the licensed premises may be described as “delivered beer” to distinguish it from beer at the brewery door, but the delivery services supplied by QRX are acquired by the brewery, not by the licensee. The licensee acquires only delivered beer. …’
8 In my view, although it appears that the case of the appellant before the learned primary judge was not clearly so put, the obligation undertaken by Dell when a customer orders a computer is an obligation to supply to the customer, at the customer’s nominated place of delivery, a computer having the specifications nominated by the customer. That is, a purchaser of a Dell computer acquires a delivered computer. The obligation assumed by Dell is, in my view, a single obligation to supply to its customer at the nominated place of delivery the computer specified by the customer.
9 It is by reference to that obligation, in my view, that s 53 requires consideration to be given to whether Dell, by the advertisements in the first and second categories identified by the primary judge, made a false or misleading representation with respect to the price of goods.
10 As Emmett J has pointed out, the word ‘price’ ordinarily means the consideration in money payable in respect of a sale. I see no reason to conclude that the word ‘price’ is not used in this sense in ss 53 and 53C of the Act. However, where, as in this case, what is sold is a ‘delivered’ product, the money payable in respect of the sale will, in my view, comprehend the cost of delivery. For this reason I do not regard as significant the fact that a fee for delivery is commonly characterised as a ‘charge’ for the service of delivery.
11 The Dell advertisements in the first and second categories identified by the primary judge gave prominence to a figure (often being a figure like $1,999, $2,999 or $3,699) apparently being the price for a particular computer, but did not disclose that an additional amount, described in small print as ‘delivery’, was required to be paid for the supply of that computer.
12 Having regard to the obligation which Dell would assume in respect of the sale of a computer so advertised, I conclude that the figure given prominence in the advertisements was not the price payable by the customer in respect of the supply of the computer so advertised. It was not the consideration in money payable in respect of the obligation to be undertaken by Dell; the promised supply of the computer could not be obtained for that sum. Dell did not propose to, and did not undertake an obligation to, sell a non‑delivered computer. The price for the goods which it did propose to sell (i.e. delivered computers) included the amount characterised in its advertisements as ‘delivery’.
13 It is immaterial, on the approach which I consider appropriate, that the total amount apparently received by Dell in respect of the amounts described as ‘delivery’ bears a relatively close relationship to its costs of importing computers from Malaysia and delivering them to its Australian customers. I also consider that it is immaterial that the appellant did not contend that the delivery ‘charge’ was anything but a bona fide fee for the delivery of the goods in question. Dell did not, in my view, provide to its customers a delivery service which was additional to its obligation to supply to the customer the relevant computer; its obligation was to supply a delivered computer. The issue of whether, if it did provide to its customers a delivery service, any charge for the delivery service would form part of the ‘price’ of the goods within the meaning of the Act, should, in my view, be determined in a case which calls for the issue to be determined.
14 I conclude that the publication by Dell of the advertisements in the first and second categories of advertisements identified by the primary judge resulted in contravention of s 53(e) of the Act. The advertisements in these categories, unlike the advertisements in the third category, did not disclose the compulsory nature of the charge categorised by the advertisements as ‘delivery’. Their publication resulted in the making of a false or misleading representation that the figure given prominence was the price of the advertised computer when in fact the price of the advertised goods included an additional amount ordinarily being $99.00.
Section 53C
15 Section 53C was introduced into the Act by the Trade Practices Revision Bill 1986 (Cth). Paragraph 93 of the explanatory memorandum to the Bill stated:
‘The new s 53C prohibits a corporation advertising part only of the consideration payable for goods or services without disclosing the total consideration for which the goods or services may be purchased outright. This provision is directed at a trader advertising that a consumer may buy a product for a low deposit without disclosing the total price payable.’
16 In Trade Practices Commission v Autoways Pty Limited (1990) ATPR 41-051 Pincus J at 51,676 observed:
‘the policy [of s 53C] is to cause advertisers to tell the whole story and at least in one respect – if selling goods on time payment – they must say how much you could buy the goods for by paying the cash price. This is likely to be of assistance, particularly to the less sophisticated buyers, in determining whether a purchase is desirable, and also in comparing the desirability of one purchase against that of another.’
17 The appellant argued that although s 53C is primarily directed to achieve the purpose identified by Pincus J, ‘the words of the section equally clearly apply to the circumstances involved in the present case’.
18 There is an obvious ambiguity in s 53C. The section can be read as covering:
(a) representations with respect to amounts that, in fact, would, if paid, constitute a part only of the consideration for the supply of the goods or services; or
(b) representations with respect to amounts that it is represented would, if paid, constitute part only of the consideration for the supply of the goods or services.
19 It is plain that s 53C was not necessary to address the mischief of part‑payments represented to be full consideration. Section 53(e) was quite adequate to proscribe any such practices. It seems likely that s 53C was intended to address a more specific problem. I conclude that the better view is that s 53C is concerned with representations explicitly concerning part‑payments. That is, that it is concerned with representations with respect to an amount that it is represented would constitute a part of the consideration for the supply of goods or services. A representation that an amount is the whole consideration for the supply of goods or services when in fact it will constitute only part of the consideration falls squarely with the terms of s 53(e); I do not consider that it also falls within the terms of s 53C.
20 The vice which the appellant identified in the advertisements in the first and second categories identified by the primary judge was that they represented that a specified sum of money was the whole consideration for the sale and purchase of a computer when, in fact, the sum so specified constituted only part of the consideration. In my view, once the advertisements in the first and second categories are so characterised, it is plain that their publication does not result in a contravention of s 53C of the Act.
21 The advertisements in the primary judge’s third category make it clear, as his Honour found, that the payment of a specified delivery fee was compulsory. Consequently, the advertisements in this category contained a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods within the meaning of s 53C. The issue in respect of this category of advertisement is therefore whether the advertisements specified the cash price for the computer.
22 The Macquarie Dictionary contains the following definition of ‘specify’:
‘1. to mention or name specifically or definitely; state in detail.
2. to give a specific character to.
3. to name or state as a condition.
4. to make a specific mention or statement.’
23 It was implicit in the submissions of the appellant, as it seems to me, that a cash price for goods or services will only be ‘specified’ if it is given as a single figure. I am not persuaded that the word ‘specified’ should be so understood in the context of s 53C. The above definition provides support for this approach. In my view, a cash price for goods and services is mentioned specifically if it is definitely identified as the aggregate of two nominated figures. Thus, a cash price identified as, for example, $1,999 plus $99, is, I consider, a cash price ‘specified’ in the amount of $2,098 within the meaning of s 53C of the Act. There is no reason to think that a consumer interested in purchasing a computer would be in any doubt as to the price of the delivered computer. Similarly, to adopt an analogy referred to in argument, a representation by a corporation in the fast food business that a pizza will cost, for example, $10 (being the price of a basic pizza) plus $1 for each of a number of ‘extras’ (eg anchovies, olives etc) will not, in my view, involve a contravention of s 53C simply because the full cash price of every potential combination is not given.
24 It is not easy to state an exhaustive test of the circumstances in which a cash price will be specified within the meaning of s 53C and I do not consider it necessary to attempt to do so. A measure of judgment is, in my view, involved. Where a cash price could only be identified by the performance of a complicated calculation, or where the cash price was stated in a manner pregnant with ambiguity, a conclusion that the cash price was not specified might readily be reached.
25 In my view, the publication of the advertisements in the third category identified by the primary judge did not result in a contravention of s 53C of the Act.
Relief
26 In my view the appellant is entitled to a declaration that the publication of the advertisements in the first and second categories identified by the primary judge resulted in a contravention of s 53(e) of the Act. The parties should have the opportunity to give consideration to the precise form that such declaration should take and as to whether the appellant has demonstrated an entitlement to any other relief.
27 On the approach to the appeal which I have adopted the cross‑appeal has even less strength than it has on the approach adopted by Emmett J. In my view the cross‑appeal should fail.
28 The appropriate orders, in my view, are:
1. The appeal be stood over to a date to be fixed for the purpose of making orders, including an order or orders as to costs;
2. The parties to provide to the Associate of Branson J by 12 February 2003 an agreed minute of the orders to be made (including the order or orders to be made as to costs) and if agreement has not by then been reached, the minutes of order for which they will respectively contend and brief outlines of submissions in support of the orders.
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I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. |
Associate:
Dated: 20 December 2002
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
N735 of 2002 |
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ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
AUSTRALIAN COMPETITION & CONSUMER COMMISSION APPELLANT
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AND: |
DELL COMPUTER PTY LIMITED RESPONDENT
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BETWEEN: |
DELL COMPUTER PTY LIMITED CROSS-APPELLANT
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AND: |
AUSTRALIAN COMPETITION & CONSUMER COMMISSION CROSS-RESPONDENT
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JUDGES: |
BRANSON, EMMETT & STONE JJ |
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DATE: |
20 DECEMBER 2002 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
EMMETT J:
29 The appellant, Australian Competition & Consumer Commission (‘the Commission’), commenced a proceeding in the Court against Dell Computer Pty Limited (‘Dell’) seeking injunctions, declarations and orders pursuant to ss 80, 86C and 86D of the Trade Practices Act 1974 (Cth) (‘the Act’). The Commission asserted that, in connection with advertisements promoting computer products to the public, Dell engaged in conduct that contravened ss 52, 53 and 53C of the Act.
30 All of the advertisements in question had a prominent display or statement of the price for computer products and, elsewhere in the advertisement, a reference to an additional charge for delivery. The gravamen of the complaint by the Commission was that the advertisements did not make it sufficiently clear to potential customers that the delivery fee that was charged by Dell was compulsory and not optional.
31 On 2 July 2002, for reasons published on that day, a judge of the Court:
· declared that, during the period from approximately June 1994 to approximately 30 November 2001, Dell, in trade or commerce, had engaged in conduct that was misleading or deceptive or likely to mislead or deceive, by advertising that its computer products were available at specified prices without clearly stipulating that the products were available only by way of delivery from Dell at a compulsory delivery charge.
· ordered that Dell be restrained, in connection with the supply or possible supply of its computer products, or in connection with the promotion, by any means, of the supply of those products, where the products are sold upon the basis that a compulsory delivery charge is payable, from advertising prices for the said products without clearly and expressly stating that the products are only available at a specified delivery charge.
· ordered that Dell pay the Commission’s cost of the proceeding.
· ordered Dell to publish a corrective advertisement, in the terms set out in his Honour’s judgment, on two successive days, in ‘The Australian’ newspaper and one major newspaper circulating in each capital city in Australia.
32 However, the primary judge declined to make other orders sought by the Commission. In particular, his Honour declined to make orders that the conduct engaged in by Dell contravened ss 53(e) and 53C of the Act. The Commission now appeals from the refusal of the primary judge to grant relief in respect of alleged contraventions of ss 53(e) and 53C. Dell also appeals, by way of cross-appeal, from the order for costs made by the primary judge. The appeal and the cross-appeal were heard together.
BACKGROUND FACTS
33 Dell has had a presence in Australia since September 1992. Dell is a subsidiary of Dell Computer Corporation, which has its corporate headquarters in Austin, Texas, USA and has regional headquarters in England, Singapore and Japan. Through Dell and associated entities, Dell Computer Corporation has been servicing individuals, businesses, governments and large organisations in the Asia-Pacific region since the early 1990s.
34 Historically, Dell has been distinguishable from its competitors because it sells its computer products directly to its customers. That is to say, it does not sell through a reseller such as a retail store. A further distinguishing feature of the Dell business model is that Dell does not maintain stock or inventory of completed computer products. Rather, the manufacturing process for Dell’s computer products does not commence until a customer has placed an order for such computer products. The computer products are then manufactured to a customised configuration, being a combination of hardware and software as requested by the customer.
35 Because Dell does not sell through re-sellers, Dell arranges for computer products ordered by the customer to be delivered direct to the customer. In most instances, Dell charges a delivery fee for that delivery. However, not infrequently, Dell sells to its customers at a price that is less than the advertised price. For example, during the period 12 December 1998 to 6 May 2002, 13.4 per cent of orders of computer products involved a discount to the customer. The average percentage discount given on total sales during that period was two per cent.
36 It has been the practice of Dell, from time to time, to instruct telephone sales staff to close deals by offering free delivery. Thus, a proportion of the discounts given to customers represent the waiver or reduction by Dell of the delivery charge. In addition to such discounts, Dell frequently conducts ‘Free Delivery’ promotions. During those promotions the computer products purchased by the customer are delivered at no additional cost. ‘Free delivery’ promotions, have been conducted at various times during the period from 20 November 2000 to 14 April 2002.
37 During the period from September 1992 to 5 May 1999, the delivery fee, if any, charged by Dell was not a standard fee. In the period from September 1992 to 12 December 1998, various freight delivery charges were made. The variation in charges represented variable fees that were levied according to the place of delivery. Higher charges were made for either expedited delivery or delivery to remote areas. During the period 12 December 1998 to 4 May 1999, if a delivery fee was charged, it was one of several fixed fees according to the place of delivery.
38 Delivery charges applied irrespective of the computer products that were being delivered and it was not mandatory for the telephone sales staff to charge the delivery fee to the customer. However, that was usually done through the levying of one of the variable charges just referred to.
39 From 5 May 1999, the delivery fee was standardised in respect of all of Dell’s computer products. For example, most home and small business sales were in respect of the ‘DIMENSION’ and ‘INSPIRON’ computer products. A standard delivery charge for those computer products applied as follows:
· to August 2000 $75
· September 2000 to January 2001 $85
· from February 2001 $99
40 The advertisements that are the subject of the proceeding were directed towards home and small business users. In view of the fact that Dell has no retail or other outlets, all of its completed transactions are made by way of direct sales. Accordingly, Dell’s advertisements did not refer prospective customers to a reseller. Rather, prospective customers were directed either to log on to Dell’s Internet site or to call a designated telephone number.
41 If the prospective customer logged on to the Internet site, he or she was able to order computer products online without speaking to a representative of Dell. Since approximately February 1997, a prospective customer who clicked on an appropriate spot would be linked automatically to ‘the home store configurator’, which quoted the price of the relevant computer products and the applicable delivery charge. Accordingly, any order placed by a consumer online since the inception of the Internet site could only have been so placed once the consumer had already been informed of a price for the computer products, which included delivery.
42 If a prospective customer rang the designated telephone number, it would be answered by an automated voice response system. The caller was asked to press a certain number if he or she was interested in home or home office computer products or to press another number if the call related to a potential purchase of computer products for a small business. If the first option was chosen, the caller was linked to a telephone sales representative in Malaysia. If the second option was chosen, the caller was linked to Dell’s centre in Frenchs Forest near Sydney.
43 Telephone operators received training that encouraged consistency and uniformity in all communications with customers or potential customers. Computer products are adaptable and, by paying more, a consumer could purchase a bundle that need not necessarily accord with that shown in an advertisement that prompted the enquiry from the prospective customer. The primary function that a telephone sales operator performed was to discuss with the prospective customer what configuration or ‘bundle’ of computer products was wanted. The total price charged for computer products depended upon the configuration chosen by the customer.
44 Once the configuration and the total price were established with the customer over the telephone, the sales representative recorded the relevant address and contact details of the customer and, in most cases, subsequently forwarded a quotation to the customer. The quotation specified the features chosen by the customer and the total cost, including delivery. The delivery fee was described in the quotation as ‘standard delivery’. If the customer requested that the computer products be made available more expeditiously, the additional fee was shown.
45 Within the sales quotation system used by Dell, delivery was not recorded as a separate charge. Instead, the delivery charge was included in the full quoted list price of the computer products. The amount allowed for delivery in the sales quotation was the then current specified charge by type of computer product. The actual charge for delivery that would be allocated to a particular customer depended upon the discount, if any, negotiated with the customer. The amount of such discounts, if any, varied, as did the reason for the discount.
46 All computer products are shipped to Australia from Malaysia, where they are manufactured, to premises in
· Danya, Queensland;
· Tullamarine, Victoria;
· Kewdale, Western Australia; or
· Alexandria, New South Wales.
The computer products are then delivered from one of those locations to the customer’s address in Australia.
47 The total amount invoiced and collected by Dell for delivery charges for the period from February 1999 to March 2002 was $11,145,818. The cost to effect delivery to customers during that period was $11,569,409, resulting in a net loss of $423,591.
the advertisements in question
48 There were three categories of advertisement in question in the proceeding. All of the advertisement in the first category displayed the cost of the computer products (excluding delivery) in a prominent typeface. The reader of the advertisements was then directed, by way of an asterisk, to small print that conveyed to any reader, who chose to study it, that delivery was additional. In the first category of advertisements, the amount of the delivery charge was not specified.
49 The difference between the first and second categories of advertisement is that, in the second category, there was a reference to the existence of an additional delivery charge, which was specified. Typical wording was:
‘Additional delivery charge of up to $99 (including GST) applies.’
and
‘An additional standard delivery charge of $99 (including GST) applies.’
50 The third category of advertisement that was the subject of the proceeding, after quoting the price in bold print, went on to say, in smaller, but reasonably clear print, that the computer products were available by delivery only, with a standard delivery fee of $99. The Commission conceded that the third category of advertisement made it sufficiently clear that the specified delivery fee was compulsory.
the decision of the primary judge
51 The primary judge found that the relevant section of the public, by reference to which Dell’s conduct was to be tested, included ‘the astute and the gullible, the intelligent and the not so intelligent’. The relevant section of the public comprised potential customers for computer products for home and small business use. His Honour found that that was a fairly wide range of persons. In considering whether or not the conduct of Dell contravened s 52 of the Act, his Honour took into account the fact that readers of the advertisements would not be expected to pause and analyse the advertisements but that they would have absorbed the general thrust of them.
52 His Honour concluded that the words that were used in the first and second categories of advertisement were sufficiently imprecise to leave open, on any reasonable interpretation of the advertisements, the possibility that a purchaser could collect the goods without paying a delivery charge. His Honour considered that there was nothing in the advertisements that would have enabled any member of the relevant section of the public to work out, for herself or himself, that the unexcluded possibility, that is to say, free personal collection, was not available. His Honour concluded that the publication of the advertisements in the first and second categories constituted conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive the relevant section of the public, contrary to the prohibition contained in s 52 of the Act. There is no appeal from that decision.
53 However, the Commission also contended that the publication of the first and second categories of advertisement contravened ss 53(e) and 53C of the Act. The Commission also contended that the publication of the third category of advertisement contravened s 53C of the Act.
54 Sections 53(e) and 53C relevantly provide as follows:
‘53 A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods … or in connexion with the promotion by any means of the supply or use of goods…:
…
(e) make a false or misleading representation with respect to the price of goods …;
…
53C A corporation shall not, in trade or commerce, in connection with the supply or possible supply or goods…or in connection with the promotion by any means of the supply or use of goods…make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods…unless the corporation also specifies the cash price for the goods…’
55 Under s 4 of the Act, the following terms are defined as follows:
‘“price” includes a charge of any description;
…
“supply”, when used as a verb, includes, in relation to goods, supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and, when used as a noun, has a corresponding meaning.’
56 His Honour approached the question on the basis that ‘price’ means the money consideration for goods, that term being well understood in sale of goods legislation. Even though the definition of price in s 4 of the Act includes a charge of any description, the charge must be part of the money consideration for the purchase of the goods. His Honour concluded that the delivery charge was not part of the purchase price in that sense. Further, the Commission did not contend that the delivery charge was anything but a bona fide fee for the delivery of the goods in question. His Honour concluded, therefore, that the delivery charge was a fee for the service of delivering the computer products and not part of the consideration for their purchase.
57 The question that arises in relation to s 53C of the Act is whether the sums of money, which were represented in the advertisements as the price of the computer products, constituted part only of the consideration for their supply, having regard to the fact that a compulsory delivery charge was payable. The primary judge observed that, if a literal approach to the expression ‘consideration for the supply of goods’ were taken, it would follow that Dell stated part only of the consideration in the advertisements, because the delivery charge constituted the balance of the consideration payable. His Honour considered that, while it is clear that the delivery charge is not optional, the question of whether s 53C of the Act has been contravened turns on whether the delivery charge is part of the consideration for the supply of the computer products.
58 His Honour referred to the definition of ‘supply’ in s 4 of the Act and observed that there would be no contravention of s 53C of the Act unless the delivery charge were part of the consideration for the purchase of the computer products. His Honour considered that the delivery charge was not a part of the consideration payable for the purchase of the computer products but was a fee for delivery of the computer products notwithstanding that the payment of the fee was obligatory. Accordingly, his Honour was of the view that the publication of the advertisements did not contravene s 53C of the Act.
59 In view of the fact that the Commission had been substantially successful in the proceeding, his Honour ordered Dell to pay the Commission’s costs of the proceeding.
SECTION 53(e)
60 Dell accepts that it is not possible to obtain computer products from Dell otherwise than by means of delivery by Dell. Unless a discount is given in relation to the delivery charge, in the circumstances outlined above, a delivery charge will necessarily be payable as a pre-requisite for the delivery of the computer products.
61 The essence of the Commission’s contention is that, because the payment of the delivery charge is obligatory, it is not possible to sever the consideration for the sale of the computer products from the consideration for their delivery. Since the obligation of Dell is to deliver to the customer’s premises, and to vest in the customer title to, computer products, the total consideration payable by the customer must be characterised as the ‘price’ for the computer products involved. Thus, so the Commission says, ‘the price of goods’ in the circumstances of a transaction with Dell must necessarily include the amount appropriated to delivery.
62 However, there is no conceptual difficulty in dividing the obligations of Dell into several component parts, being obligations to:
· manufacture computer products according to specification;
· vest ownership of the computer products in the customer; and
· deliver the manufactured computer products to the customer’s premises.
The first and second of those obligations are performed in consideration of a sum of money that it is easy to characterise as a ‘price’. The fee for delivery is easily enough characterised as a ‘charge’ for the service of delivery.
63 The first and second obligations, coupled with the obligation to pay the price, are properly characterised as a contract for the sale of future goods. That concept is recognised by the uniform legislation dealing with sale of goods, such as s 10(3) of the Sale of Goods Act 1923 (NSW) (the “Sale of Goods Act”). That is to say, Dell’s obligation is to supply both services and materials: the ‘price’ is appropriated to those obligations. The delivery fee is separate and is appropriated to the obligation to deliver the result of the performance of the first and second of the obligations.
64 The definition of ‘price’ in s 4 of the Act does not relevantly extend the concept of price in relation to a sale of goods. The word ‘price’ is ordinarily applicable to the consideration in money payable in respect of a sale. However, the term ‘price’ is not ordinarily used in relation to the consideration in money paid for the provision of services. On the other hand, the word ‘charge’ is ordinarily so applied. Thus, the obvious purpose of the extended definition of ‘price’ in s 4 of the Act is to make it clear that the word is to apply not only to a money consideration payable for a sale, or other supply, of goods, but also to a money consideration payable for the provision, or other supply, of services.
65 It would have been possible for Dell to contract with its customers on the basis that, in consideration of the payment of a fixed amount of money, it would deliver to a given address computer products that satisfy a particular description and would vest title to those computer products in the customer. In those circumstances, it would have been possible to characterise that fixed amount of money as a ‘price’ for the goods.
66 There was no suggestion by the Commission that the delivery fee was other than a bona fide fee for the delivery of the computer products. Accordingly, it is not necessary to consider what the position might have been if there had been an appropriation of the total consideration to manufacture, vesting of ownership and delivery that did not represent a bona fide attempt at appropriate apportionment. It may be that, where there was such an appropriation, any representation as to price might be false or misleading. However, that is not this case and it is not appropriate to decide that question in this case.
67 Although it was not possible to acquire computer products without paying the charge for delivery, the arrangements between Dell and its customers clearly drew a distinction between the consideration for the sale of the computer products on the one hand and the consideration for their delivery on the other hand. The arrangements might be characterised as involving the combination of two contracts, being a contract for the sale of goods and a contract for the supply of delivery services.
68 Normally, the obligation of the seller under a contract for the sale of goods is to deliver at the seller’s premises. The buyer’s obligation is to attend at the seller’s premises and take delivery. That, of course, is not the way in which Dell contracts with its customers. Rather it undertakes to deliver the computer products to its customer. However, it appropriates a money consideration to the performance of that obligation. The mere fact that a customer cannot have one obligation without the other does not detract from the fact that the parties have apportioned the total amount of money payable by the customer to the two different aspects of Dell’s obligations, namely, sale (which includes manufacture and vesting of title), on the one hand, and delivery, on the other.
69 There is no reason to think that the use of conventional language in the Act was intended to depart from conventional usage of that language, as derived from the law merchant over several centuries and codified in the Sale of Goods Act. Price is the money consideration payable by a buyer under a contract of sale. The fact that additional money consideration is payable for the performance of an additional, albeit obligatory, obligation by the seller does not make the price apportioned to that additional obligation part of the price for the goods.
70 The vice that the Commission seeks to prevent in a situation such as that presently under consideration is prevented by s 52 of the Act, as the primary judge held. Thus, it was misleading or deceptive for Dell to offer the computer products, at a particular price, without making clear that it was a prerequisite for obtaining the computer products at that price that the customer must also pay an additional charge for delivery. However, there has been no false or misleading representation with respect to the price of the computer products. Further, there has been no complaint concerning any representation as to the ‘price’ of or ‘charge’ for, the service of delivering the computer products.
SECTION 53C
71 The analysis that leads to the conclusion that there was no contravention of s 53(e) of the Act also leads to the conclusion that there was no contravention of s 53C. That is to say, the arrangements that were entered into by Dell with its customers, or the arrangements that Dell offered to enter into with its customers, entailed there being a consideration for supply of goods as well as a consideration for the supply of services. The cash price for the goods, being the computer products, was specified in the advertisement. No representation was made in the first or second categories of advertisements with respect to an amount that would constitute a part of the consideration for any services. In relation to the third category of advertisement, the cash price for the services was specified.
72 The definition of ‘supply’ in s 4 of the Act draws a distinction between supply in relation to goods and supply in relation to services. Supply in relation to goods does not include delivery. On the other hand, supply in relation to services includes the provision of services. The distinction between the consideration for the supply of the computer products by way of sale and the consideration for the supply of services, in the sense of provide the services, accords with conventional usage. In the present case, there was no failure to specify the cash price for the computer products. On the other hand, in the case of the first and second categories of advertisement, there was no representation with respect to the amount that would constitute a part of a consideration for the supply of the services comprising delivery. There has been no contravention of s 53C of the Act.
THE CROSS-APPEAL
73 It is true that the Commission failed to secure all of the relief claimed in the application. Specifically, it failed to obtain all of the declarations and injunctions sought. Perhaps more significantly, it failed to obtain the orders that it sought for refund of delivery fees in an amount in excess of eleven million dollars. However, it is clear enough that Dell strenuously opposed the claim for relief in respect of contravention of s 52 of the Act. Dell failed in that regard and was required to publish correcting advertisements as well as suffering a declaration in respect of the contravention and an injunction restraining further contraventions. The determination of the issues in respect of which the Commission failed did not require any significantly additional evidence. Dealing with those questions would not have appreciably increased the time for the hearing. The primary judge made no error of principle in the exercise of his discretion. Nor did his Honour base the exercise of his discretion on any misapprehension of the facts relating to the proceeding. The cross-appeal should therefore fail.
CONCLUSION
74 The appeal by the Commission should be dismissed with costs. The cross-appeal by Dell should be dismissed with costs.
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I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. |
Associate:
Dated: 20 December 2002
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
N 735 of 2002 |
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
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BETWEEN: |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPELLANT
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AND: |
DELL COMPUTER PTY LIMITED RESPONDENT
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BETWEEN: |
DELL COMPUTER PTY LIMITED CROSS-APPELLANT
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AND: |
AUSTRALIAN COMPETITION & CONSUMER COMMISSION CROSS-RESPONDENT
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JUDGES: |
BRANSON, EMMETT & STONE JJ |
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DATE: |
20 DECEMBER 2002 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
STONE J
75 I have had the advantage of reading, in draft, the judgments in this appeal of Branson and Emmett JJ. It is an appeal from a single judge of this Court who found that the respondent, Dell Computers (‘Dell’) had, through its published advertisements, between June 1994 to March 2002, engaged in conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (‘the Act’). His Honour, however, rejected the submissions of the appellant, the Australian Competition and Consumer Commission (‘ACCC’), that Dell had also contravened ss 53(e) and 53C of the Act. It is not necessary for me to summarise his Honour’s reasons or describe in detail the background to this appeal. Both are sufficiently set out in the judgment of Emmett J whose summary and description I gratefully adopt.
76 I agree with the reasoning and conclusions of Branson J both as to the appeal and the cross-appeal. I would, however, like to make a few observations concerning the application of s 53(e) of the Act.
77 The fundamental issue as to the application of s 53(e) in this matter is the characterisation of the contract. The issue is whether it is correct to view the obligation of Dell as:
(a) a unitary obligation, being to supply the computer ordered by the customer to the delivery address nominated by the customer; or
(b) a two-fold obligation, being,
(i) to assemble the computer ordered by the customer, and
(ii) to deliver that computer to the address nominated by the customer.
78 It was not contended that Dell’s customers could obtain a Dell computer other than by having it delivered. Despite Dell’s insistence on differentiating between the cost of the computer and the cost of delivery, the substance of the matter is that purchasing the computer without delivery was simply not on offer to Dell’s customers. In those circumstances commercial common sense dictates that the obligation of Dell be characterised as being to supply a ‘delivered’ computer; that is a computer, assembled in accordance with the customer’s specifications, delivered to the nominated address. The ‘price’ of the goods, being the consideration payable in respect of the sale, was therefore the total sum that the customer was required to pay to obtain the delivered computer including the amount that Dell attributed to delivery.
79 The prominence given to the cost excluding delivery and the inadequate indication that delivery by Dell was necessary for the customer to acquire the computer together amount, in my view, to a false or misleading misrepresentation with respect to the price of the goods being sold and therefore a breach of s 53(e) of the Act.
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I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone. |
Associate:
Dated: 20 December 2002
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Counsel for the Appellant: |
Mr B McClintock SC and Mr P Renehan |
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Solicitor for the Appellant: |
Phillips Fox |
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Counsel for the Respondent: |
Mr B Walker SC |
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Solicitor for the Respondent: |
Clayton Utz |
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Date of Hearing: |
18 November 2002 |
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Date of Judgment: |
20 December 2002 |
