CATCHWORDS
TRADE PRACTICES - breaches of s53(e) and s79 of the Trade Practices Act 1974 (Cth) - pleas of guilty - matters to be taken into consideration - refusal of Commission to accept undertakings - effect on penalty of publicity initiated by Commission.
Trade Practices Act 1974 (Cth)
Crimes Act 1914 (Cth)
Eva v Southern Motors Box Hill Pty Ltd (1977) 30 FLR 213
Thompson v J T Fossey Pty Ltd (No 2) (1978) 20 ALR 503
TRADE PRACTICES COMMISSION Prosecutor
- and -
CUE DESIGN PTY LTD and CUE & CO PTY LTD Defendants
O'LOUGHLIN
ADELAIDE
22 MARCH 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIAN DISTRICT REGISTRY )
)
GENERAL DIVISION ) No: SG 76 of 1995
BETWEEN:
TRADE PRACTICES COMMISSION
Prosecutor
- and -
CUE DESIGN PTY LTD and CUE & CO PTY LTD
Defendants
JUDGE MAKING ORDER : O'LOUGHLIN J
WHERE MADE : ADELAIDE
DATE OF ORDER : 22 MARCH 1996
MINUTES OF ORDER
THE COURT ORDERS:
1. That in respect of counts 1, 3, 5, 7, 9, 11, 13, 15, 17, 19, 21, 23, 25, 27, 29, 31, 33, 35, 37, 39, 41, 43, 45, 47, 49, 51, 53, 55, 57 and 59 convictions be recorded against Cue Design Pty Ltd and against Cue & Co Pty Ltd.
2. That in respect of the aforesaid counts one fine of $37,500 is imposed on Cue Design Pty Ltd and one fine of $37,500 is imposed on Cue & Co Pty Ltd pursuant to subs4K(4) of the Crimes Act 1914 (Cth).
3. That the several fines of $37,500 be paid within three calendar months of this date: in default, distress.
4. That Cue Design Pty Ltd and Cue & Co Pty Ltd jointly pay the costs of the Trade Practices Commission to be taxed in default of agreement.
Note: Settlement and entry of order is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIAN DISTRICT REGISTRY )
)
GENERAL DIVISION ) No: SG 76 of 1995
BETWEEN:
TRADE PRACTICES COMMISSION
Prosecutor
- and -
CUE DESIGN PTY LTD and CUE & CO PTY LTD
Defendants
REASONS FOR PENALTY
Coram: O'Loughlin J.
Place: Adelaide
Date : 22 March 1996
An information was laid in this court on 26 October 1995 alleging that the defendants Cue Design Pty Ltd ("Cue Design") and Cue & Co Pty Ltd ("Cue & Co") had committed 60 breaches of subs79(1) of the Trade Practices Act 1974 (Cth) (the "TPA"). The defendants pleaded guilty to 30 counts in the information and, as a consequence, the remaining counts, all of which had been laid as alternative charges, were withdrawn.
The relevant provisions of s79 are as follows:
"79(1) A person who-
(a) contravenes;
...
a provision of Part V other than section 52, 65Q or 65R or sub-section 65F(9) is guilty of an offence punishable on conviction-
...
(g) in the case of a person being a body corporate - by a fine not exceeding $200,000."
Section 53 (which section is within Part V of the TPA) provides:
"53.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;..."
The first count in the information and the particulars specified in respect of that count was as follows:
"1. On about the 20th day of December 1994 at Adelaide in the State of South Australia, the defendants, being corporations within the meaning of the Trade Practices Act 1974, did commit an offence against section 79(1) of the said Act, in that in contravention of section 53(e) of the said Act, they did in trade or commerce in connection with the promotion by advertising of the supply of women's fashion apparel make a misleading representation with respect to the price of an item of the said apparel.
Particulars
(a) The second named defendant displayed for sale in the Cue store at Myer Centre Adelaide an item of women's fashion apparel, namely a pair of shorts, to which was attached a swing tag marked with the style number 2266/2095 and bearing the following representation as to price
price
$52
$39
(b) The higher price was crossed through and the lower price written in.
(c) The
first named defendant had earlier determined that the above two price
representation would be made in this manner and
arranged with the second named defendant to display the said item of fashion
apparel with the above representation.
(d) The said representation would have led a reasonable person to believe that it referred to the selling price of the item of apparel to which the swing tag bearing it was attached.
(e) The said representation would have led such a person to believe that the garment had previously been offered for sale at the higher price marked on the tag and was now being offered for sale at the lower price.
(f) The said representation would have led such a person to believe that they were obtaining a saving which amounted to the difference between the higher and lower price.
(g) The said representation was misleading in that the garment had never previously been offered for sale at the higher price."
The remaining twenty nine (29) counts followed a pattern; in some situations the item of apparel differed as did the price but in other respects the substantive details of the defendants' conduct and the consequences flowing from it were the same. The offences occurred between 20 and 22 December 1994 in different outlets for Cue products in Western Australia, South Australia, Tasmania, Victoria, Queensland and the Australian Capital Territory.
The gravamen of each count was the same: the defendants had used dual-priced swing tags with the higher price struck out in a manner that would have led a reasonable person to believe that a particular garment "had previously been offered for sale at the higher price marked on the tag and was now being offered for sale at the lower price": see par(e) of the particulars of the offence. All such representations were misleading in that the various garments had never previously been offered for sale at the higher price.
The defendants are part of a group of companies that has operated out of Sydney for thirty years or so as a manufacturer, wholesaler and retailer of women's clothing. Cue Designs manufactures and designs women's garments and then wholesales them to Cue & Co. Cue & Co retails the garments Australia wide through its 52 retail outlets and a further 28 franchises; it also supplies these fashion garments to about 120 Australian and 20 New Zealand independent retailers.
On about 20 December 1994, an officer of the Trade Practices Commission purchased two garments from a Cue store in Adelaide. She noted the dual-priced swing tags and also noticed a sign describing the garments as new stock. She reported her observations to her superiors and, as a result, inquiries were conducted throughout Australia. Those inquiries established that a pattern of dual-priced tags was in operation in the stores which are identified in the 30 counts.
In December 1994 Cue's senior
management had resolved that, in order to promote sales [of the garments that
are referred to in the information] in the competitive Christmas
period, it was necessary for the Cue Group to depart from its usual pricing
formula. A decision was made that the
price that ordinarily would have been charged for a garment would be written on
a price tag, immediately crossed out and a lower price written underneath; all
this would be done before garments were displayed for sale. That decision was communicated to the stores
and acted upon.
The first shipment of the relevant garments arrived in the stores on about 15 December and the latest on about 20 December 1994. Cue's head office closed for the Christmas break between 22 December 1994 and 3 January 1995 and no shipments took place after those that were despatched on about 19 December (to arrive in stores on 20 December). I accept that on 3 January 1995 Cue first became aware of the concerns of the Trade Practices Commission and immediately instructed the stores to remove the dual-priced tags. I also accept in the interests of both defendants that neither of them has a previous conviction for any offence against any statute and that both of them entered pleas of "Guilty" as soon as reasonably possible. They have both previously been good corporate citizens.
There are other mitigating
factors that must be mentioned. For
example, it is not suggested that the higher prices on the swing tags were
false prices. They were the prices at which
the garments would have been offered for sale
were it not for the December management decision to change the sales policy for
the Christmas period. In addition, there
was no advertising campaign accompanying that decision. The only signs (Ex D3) that were used in
relation to the garments (in addition to the swing tags) were promotional aids
within the shops such as "Cue Design
Just Arrived", "New
Cue" and "Cue Design Specially priced". It should also be mentioned that there is no
suggestion that staff were instructed or encouraged to engage in any
subterfuge. This was clear from some of
the witness statements in which staff readily disclosed that it was recently
arrived stock.
There was no evidence or other information placed before the court to establish what specific sign or signs appeared in a particular store nor can any finding be made about their location or the impact that such signs might have had upon a shopper. However, the sign that read "Cue Design Just Arrived" should not be overlooked in assessing the primary submission of the defendants; that submission, as set out in the written submissions that were filed on behalf of the defendants, was as follows:
"... Cue did not intend to cause customers to think that the garments had been offered for sale for any substantial period of time at the higher price."
Later in those submissions it was set out that Cue "had no intention to mislead or deceive". However, those submissions were not accepted by the prosecution. The Trade Practices Commission rejected the proposition that a penalty should be imposed based upon a submission that Cue, by using dual-priced tags, had only intended to inform interested purchasers that the higher prices were those at which the garments would ordinarily have been offered for sale.
Ms Debra Rolle, the defendants' Product Manager was called to give evidence on their behalf. She had been employed by the Cue Group for 15 years and had held her present position for 8 years. She acknowledged that she was the person who had issued the instruction for the dual-priced swing tags. In evidence-in-chief she was asked about the intention of this instruction at p27:
"Now, what did you intend to convey by putting the higher price on the swing tag, crossed out, then inserting a lower price?---I wanted our customers to see the reduction that they were getting.
What reduction did you mean them to see?---That the higher price that was crossed through was the price that they would normally expect to pay under our normal circumstances but that it was a special offer and they could see the difference between the prices. The prices that they were today going to pay."
But, I regret to say, that evidence sits uneasily with concessions that she made during her cross-examination as appears from the following passage:
"Ms Rolle, when you gave that instruction about writing a higher price on the tag you would have appreciated as a person working in a retail industry that normally shopkeepers only write a price on a tag if they are intending at that time to sell it at that price. That speaks for itself to a large extent, but I just want to make it clear. You understood that that is why people normally write a price on a tag, would you not?---Yes.
You understood that a retailer usually only crosses out a price that he or she has previously written on a tag because they have changed their mind about the price they are going to sell it at? You understood that. It is pretty obvious really, is it not?---Yes."
I find myself unable to rely on Ms Rolle's evidence. She was asked during evidence-in-chief about the promotional signs, Ex D3:
"Now, firstly, could I just be shown the bundle of advertisements, your Honour. Firstly, there is one there entitled: Cue design just arrived?---Yes.
What did you intend to convey by that description?---That the stock was brand new stock and had just arrived in the store.
There is another advertisement which says: New Cue, what did you intend to convey by that advertisement?---The stock again was new stock, brand new stock."
Her answers to those questions created the impression that she had a direct and personal involvement in their preparation; her answers suggested that she was informing the court of what she intended to convey in compiling those signs. But that evidence was contradicted in her cross-examination:
"Ms Rolle, did you design the signs which were D3, which Mr Douglas showed you a moment ago?---I didn't design them, no.
Did you decide upon the words that would be contained in them?---No.
Did you have anything to do with any instructions given to retail stores about the use of those signs?---No.
Certainly then you are not aware of any instruction that might have been given to stores about which of the three signs to display?...No.
Not aware of anything like that?---No.
So when you gave the instruction about the marking of the swing tags you had no idea what signs any individual store might chose to put on the racks. You had no idea of that, did you?---No."
Ms Rolle, as I have already said, claimed in her evidence-in-chief that the higher of the two prices was that which would normally have been the recommended retail price of the garment. That evidence was, however, contradicted in part by Ex P1 which included an invoice dated 12 October 1994 that was issued from the Cue Group to a Cue store in Melbourne. That invoice showed the prices for six garments, three of which had the product numbers C3039, 1824 and 3616. The same three product numbers were part of the garments included in the December sales program and their lower December price, the alleged special price, was the same as the October recommended retail price. Ms Rolle could not offer an explanation for this aberration.
What I need to determine, for the purpose of assessing penalty, is Cue's motive in involving itself in the dual-priced swing tags in the manner in which it did.If Ms Rolle truthfully stated that it did not occur to her that members of the buying public would infer from the two prices that the garments had been on sale at the higher prices for any substantial period of time then she is either very naive or recklessly indifferent to the perceptions of the buying public. Ms Rolle did not give me the impression of naivety. She had worked for Cue for 15 years and was currently employed as Product Manager, a position which she has held for 8 years. Naivety about the buying public and the fashion industry would not be an appropriate description of a person of that experience. Ms Rolle was decidedly ill at ease during the course of her evidence. At times her voice drifted away to the point that I had difficulty in hearing some of her answers. On other occasions where the issue was non-contentious the change in her voice power was noticeable. The overall impression which she created was of one who was very much ill at ease in answering some of the more embarrassing questions during the course of her cross-examination.
In my opinion, the natural and probable consequence of a dual-priced swing tag is that members of the buying public would assume that the garment had previously been offered for sale at the higher of the two prices and was now available at the lower price. I am unable to accept the submission on behalf of the defendants that they were unaware of that consequence. I intend to impose penalties upon the premise that the defendants had reasonable cause to believe that the effect of the two-priced swing tag was that which I have just summarised.
Counsel for the defendants
submitted that the breaches of the TPA
were only technical breaches and that this was a case for the utilisation of
s19B of the Crimes Act 1914
(Cth).
That section allows (inter alia) for the discharge of offenders without
proceeding to conviction. In my opinion,
my rejection of Ms Rolle's evidence about the reason for the dual-priced swing
tag and my finding that the defendants had reasonable cause to believe that
members of the buying public would have assumed that the garments had earlier
been offered for sale at the higher prices, places these offences into a
category that makes the application of s19B wholly inappropriate. These offences were committed in
circumstances where the defendants, through their agent, had cause to believe
that members of the buying public might be misled. The offences cannot be classed as accidents;
nor were they trivial or committed under extenuating circumstances (they being
two of the matters for the court to consider when contemplating the application
of s19B to particular offences).
The defendants complained that
it was not necessary for these proceedings to have been instituted. There is provision in the TPA in s87B whereby the Commission may
accept a written undertaking given by a person; this procedure is well known as
an alternative to prosecution and it was explored by the parties without
success before these proceedings were instituted. In my opinion, it is not for the court to
express a view that the Commission should have or should not have proceeded
under s87B; the section clearly states that it is the Commission who "may accept a written undertaking"
(s87B(1)). The court has no involvement
until (if at all) it
is satisfied, on application made by the Commission, that a person has breached
an undertaking (s87B(4)). Probably, as a
matter of practical reality, the court would consider the application of s19B
of the Crimes Act more readily in a
case where the defendant complained, with cause, that the Commission had failed
to accept a proffered undertaking. That
is not the case here; the parties discussed but were unable to agree the terms
of an undertaking. For my part, I
decline to express a view on those terms.
The defendants complained that they have been adversely affected in their sales by publicity about this prosecution. I am prepared to accept that submission. They tendered a video - tape of a news report program which I have viewed. The name of "Cue" featured in the report briefly. The report was not devoted to Cue or to this prosecution; it dealt with the topic of two-price advertising in a generally derogatory manner and passing mention was made of the fact that Cue was being prosecuted for such conduct. Newspaper clippings were also placed before the court. They were, in the main, small items and it could not be said that they unfairly represented the defendants' position. It would seem that they originated as a result of a News Release that was issued by the Trade Practices Commission on 18 September 1995. The body of that release was as follows:
"T.P.C. ALLEGES MISLEADING TWO-PRICE ADVERTISING BY CUE COMPANIES
The Trade Practices Commission has launched
proceedings in the Adelaide Federal Court against Cue Design Pty. Ltd. and Cue
& Co. Pty. Ltd.
The TPC has alleged that Cue Design and Cue & Co made false or misleading representations with respect to price in contravention of section 53(e) of the Trade Practices Act.
The Cue group of companies design and manufacture fashion garments and sell the garments at approximately 75 retail outlets across Australia.
It is alleged that in the week before Christmas 1994, Cue released a new range of clothing nationally and immediately advertised on the swing tags attached to each garment that the selling price was discounted from a former higher price. The TPC alleged that the garments, in fact, had never been offered for sale before. The allegations involve Cue stores in Adelaide, Perth, Melbourne, Brisbane, Canberra and Hobart.
A directions hearing is set for Friday, 6 October 1995 in the Adelaide Federal Court."
Accepting, as I do, that the Cue Group has suffered financially as a result of the publicity given to these proceedings, the question is whether it is a factor to be taken into account in fixing penalty. Normally one would think that this sort of publicity is the usual consequence of a prosecution of this nature. Counsel for the defendants relied, however, on the remarks of Smithers J in Eva v Southern Motors Box Hill Pty Ltd (1977) 30 FLR 213 at 222-223. In a long passage which addressed in detail the consequences of publicity initiated by the prosecuting authority, his Honour said:
"It was urged that the court should take into account, with a view to the imposition of but a moderate penalty, losses suffered by the defendant because of publicity given to these proceedings.
It was pointed out the Trade Practices Commission itself gave wide press publicity in February 1976 to the fact that the summonses in these proceedings had been issued, and also summonses against Southern Motors Pty Ltd and stated in a press release particulars of the matters which the commission would allege, namely that 'the companies sold the car twice as an "ex-GMH executive car" when in fact it was an ex-rental car'. At that stage these particulars had not been delivered to the defendant company or to Southern Motors Pty Ltd. When particulars were given they did not contain all that were contained in the press release. When the cases were called on for hearing those against Southern Motors Pty Ltd were withdrawn.
It may well be that considerations of policy justify wide publicity being given to the issuance of summonses but where what is involved are court proceedings in which the defendants are regarded as innocent until the contrary is proved, appropriate restraint in tone and content is required.
In assessing appropriate punishment for a crime the court is required to have in mind not only the nature and extent of the offence itself but also a wide variety of associated circumstances. Such circumstances constitute a context in which to view the penalty. Adverse publicity is often one of the inevitable consequences of wrongdoing and in most cases is without influence in the assessment of the appropriate penalty.
But adverse publicity initiated by the prosecuting authority itself requires special consideration. If the matter is publicized ahead of the trial, and widely, and in terms likely to induce public censure of the parties concerned and those parties are in day-to-day business relationships with the public, then there is obvious danger of injury to the lawful business of the parties which from a practical point of view may have the effect of effectuating a cumulative punishment: cf. Fisse, 'The Use of Publicity as a Sanction Against Business Corporations'. (1971) 8 Melbourne University Law Review, at pp107, 109. In such a case an element has been injected into the situation which subjects the parties to more than the natural and probable consequences of mere publication of the fact that they are being prosecuted for named offences. In my view this is a case in which, by reason of the press release of the prosecuting authority, the danger of cumulative punishment along these lines is real and should be treated as part of the background against which the penalty should be assessed. And I have so treated it."
The views expressed by Smithers J about publicity initiated by the prosecutor were adopted by Franki J in Thompson v J T Fossey Pty Ltd (No 2) (1978) 20 ALR 503 at 505. He said:
"Assuming, without deciding, that the publicity associated with these proceedings has had an adverse effect on the defendant's business I am, with respect, inclined to follow the views expressed by Smithers J in Eva v Southern Motors Box Hill Pty Ltd (1977) 15 ALR 428 at 437 that adverse publicity, unless initiated by the prosecutor, is often one of the inevitable consequences of wrong doing and in most cases is without influence in the assessment of the appropriate penalty."
With all due respect, I do not think that the remarks of his Honour in Eva v Southern Motors Box Hill are apposite to this case. I regard the use of the word "adverse" as meaning something more than fair reporting of the commencement of a prosecution. I take it to mean the importing of some unfair or incorrect element into the publicity. I would have thought that a moderately worded, accurate news release, such as that published by the Commission in this case, serves a very useful purpose. To use the words of Smithers J it showed "appropriate restraint in tone and content". Without it, the media is left to make its own inquiries and compile its own summaries. In doing that there is an increased risk that, by accident, inaccuracies might occur and greater harm could be done to a defendant.
It is also useful to bear in mind the context in which Smithers J made his remarks in Eva v Southern Motors Box Hill (supra). First, the Commission had given "wide press publicity" to the intended charges. That is not the case here. Secondly, the publicity contained details that were not included in the particulars of the charge when they were ultimately served on the defendant. That also is not the case here. Thirdly, the publicity included references to an associated company and the charges against that company were withdrawn. Likewise that is not the case here. It seems to me that it would be incongruous that a defendant's penalty would be reduced if the prosecuting authority initiates publicity through a moderately worded, accurate News Release but the penalty will not be reduced if, without involvement by the prosecutor, the defendant is unfairly reported in some branch of the media. In my opinion, the conduct of the Commission in publishing the News Release was reasonable. The attendant publicity was a consequence of the defendants' conduct. I do not intend to reduce penalties because of the consequences of such publicity.
In fixing penalty, it was
submitted on behalf of the defendants, and not disputed by the prosecution,
that this was a case for the application of subs79(2) of the TPA.
That provision avoids a multiplicity of penalties when the court is
satisfied, and I am so satisfied, that the offences appear to have been of the
same nature and to have occurred at or about
the same time. I also am of the opinion
that it is appropriate to deal with this matter as if there had been one
offender but to acknowledge the existence of the two defendants by imposing
upon each a penalty equal to 50% of the whole.
In reality, what happened was the implementation of one sales strategy
by one business house. It would be
unfair to impose a multiplication of penalties because of the number of outlets
or the number of the companies in the group.
On the other hand, it is proper to observe, in fixing penalty, that the sales strategy was wide-spread: it was not an isolated event. Contrary to the submissions of counsel for the defendants, I regard the conduct of the defendants as serious breaches of the TPA. It was conduct that preyed on the gullibility of the public. I believe that this type of conduct is viewed with distaste by the public. So much is evident from the significant drop in sales that the defendants suffered; their conduct calls for penalties that will reflect that distaste and constitute a deterrent to others.
Convictions will be recorded against each defendant on the 30 counts to which they have pleaded Guilty. One fine of $37,500 will be imposed on Cue Design Pty Ltd and one fine of $37,500 will be imposed on Cue & Co Pty Ltd pursuant to subs4K(4) of the Crimes Act 1914 (Cth). Each defendant can have three calendar months within which to pay its fine: in default, distress.
The defendants must jointly pay the prosecutor's costs which are to be taxed in default of agreement.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Justice O'Loughlin.
Associate
Dated:
Counsel for the Trade Practices
Commission : Mr C Kourakis and Ms G F Lian
Solicitors for the Trade Practices
Commission : Australian Government Solicitor
Counsel for the defendants : Mr F Douglas QC and Mr R J Wright
Solicitors for the defendants : Thomsons as agents for Blake Dawson Waldron
Date of Hearing : 23 February 1996
