Catchwords                         CATCHWORDS

TRADE PRACTICES - Misleading or deceptive conduct, Comparative television advertising - Whether advertising comparing prices for long distance telephone calls is misleading - Application for interlocutory injunctions - Whether a television advertisement which may not contain an inaccurate statement or representation when its constituent parts are considered separately might be misleading or deceptive because of the first impressions conveyed - Whether omission to state the facts that make the comparison fair is misleading.

Trade Practices Act 1974 (Cth) s.52

Bullock and Others v. The Federated Furnishing Trades Society of Australasia and Others (No 1) (1985) 5 FCR 464

Stuart Alexander & Co. (Interstate) Pty. Ltd. v. Blenders Pty. Ltd. (1981) 37 ALR 161

Tobacco Institute of Australia Limited v. Australia Federation of Consumer Organisations Inc. (1992) 38 FCR 1

Kalwajtys v. Federal Trade Commission 237 F2d 654

Fraser v. NRMA Holdings Ltd. (1994) 52 FCR 1 and on appeal (1995) 55 FCR 432

Hoover (Australia) Pty. Ltd. v. Email Ltd. (1991) 104 ALR 369

Sterling Winthrop Pty. Ltd. v. The Boots Company (Australia) Pty. Ltd. (1995) ATPR 41-433

VG677\96 TELSTRA CORPORATION LIMITED V. OPTUS COMMUNICATIONS PTY. LIMITED AND OPTUS NETWORK PTY. LIMITED

MERKEL J.

MELBOURNE

22 NOVEMBER 1996

Orders

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION                           VG 677 of 1996

BETWEEN:

TELSTRA CORPORATION LIMITED

(ACN 015 775 556)                               Applicant

and

OPTUS COMMUNICATIONS PTY. LIMITED

(ACN 052 833 208) and

OPTUS NETWORK PTY. LIMITED

(ACN 008 570 330)                               Respondents

CORAM:    MERKEL J

PLACE:    MELBOURNE

DATE:     22 NOVEMBER 1996

                      MINUTES OF ORDERS

1.   Upon the usual undertakings being given to the Court by Counsel on behalf of the applicant the Court restrains the respondents, whether by themselves, their servants or agents or howsoever otherwise until the trial of the proceeding or further order, from causing to be broadcast, published or transmitted within Australia the television commercials referred to in paragraphs 6 and 11A of the Amended Statement of claim herein, being Exhibits CB5 and CB17 to the affidavits of Christopher Carmelo Bellomo sworn on 8 and 13 November 1996 respectively.

2.   The costs of the applicant and the respondents be reserved.

NOTE:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ReasonsIN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION                           VG 677 of 1996

BETWEEN:

TELSTRA CORPORATION LIMITED

(ACN 015 775 556)                               Applicant

and

OPTUS COMMUNICATIONS PTY. LIMITED

(ACN 052 833 208) and

OPTUS NETWORK PTY. LIMITED

(ACN 008 570 330)                               Respondents

CORAM:    MERKEL J

PLACE:    MELBOURNE

DATE:     22 NOVEMBER 1996

                    REASONS FOR JUDGMENT

Introduction

Over recent years the applicant ("Telstra") and the respondents ("Optus") have engaged in vigorous competition in providing a range of telephone services to customers throughout Australia.

The obvious similarity and overlap between the telephone services provided by each competitor has resulted in price competition becoming a major factor in attracting or retaining custom.

The present case involves two Optus television advertisements. The first, which has been referred to as the Guarantee commercial, has been shown nationally on television in its present form as from about 22 October 1996. The commercial forms part of a national advertising campaign by Optus in relation to an Optus offer entitled "The Optus Guarantee". The second, which has been referred to as the International commercial, has been shown nationally on television as from about 27 October 1996.

Although the commercials relate to different subject matters, in essence, Telstra's complaint is that in each commercial Optus is falsely representing that Optus' prices for long distance or international calls are cheaper than Telstra's prices. Optus disputes that any such representation is being made and contends that each representation conveyed by the commercials was true.

On 8 November 1996 Telstra issued proceedings against Optus seeking, inter alia, injunctions restraining the further publication of the Guarantee commercial. On 14 November 1996 Telstra amended its proceedings by seeking the same relief in respect of the International commercial. Telstra alleges that the conduct of Optus in publishing the commercials breached ss.52 and 53(g) of the Trade Practices Act 1974 (Cth) ("the TPA").

On 14 November 1996 Telstra applied for interlocutory injunctions restraining the further publication of the two commercials until the trial of the action. Optus opposed the application submitting that there was no serious issue to be tried, the balance of convenience was in its favour and in any event, relief should be refused on discretionary grounds.

Optus has proffered undertakings to the Court to desist from causing any further publication of the commercials prior to 4.15 p.m. on 22 November 1996.

Pricing for long distance calls

Section 190 of The Telecommunications Act 1991 (Cth) provides for telecommunications carriers to file with the Australian Telecommunications Authority ("Austel") a written tariff of the carriers' charges for basic carriage services ("BCF tariff"). Pursuant to s.197 Telstra, as the dominant carrier under the Act, is required to charge for its tariff services in accordance with its BCF tariff. By reason of s.198 Optus, as the non-dominant carrier, is not entitled to exceed the charges in its BCF tariff but is free to offer discounts on those charges.

The long distance calls, which are relevant to the present case, are either domestic or international calls. The domestic long distance calls are calls from a fixed telephone to another fixed telephone within Australia which are not local
calls. International calls are calls from a fixed telephone within Australia to a fixed telephone overseas.

Telstra's current BCS tariff includes the Public Switched Telephone Service tariff ("PSTF") tariff which relates to the supply of telecommunications services over Telstra's fixed network. The PSTS tariff, inter alia, sets out Telstra's standard charges for its calls and its optional calling plans ("Flexi-Plans") under which customers are entitled to receive discounts on the standard long distance call charges during the period the customer subscribes to the plan. The rates for long distance calls differ depending on the circumstances of each call. Telstra also provides "Spot Specials" which are temporary discounts offered from time to time to all customers.

Optus' current BCF tariff sets out its standard charges for domestic and international long distance calls. As with Telstra, Optus has standard charges for all long distance calls which involve a fixed flag fall but with variable rates per second applicable to the circumstances of the particular call. A discount, called the Optus Instant Saver, is provided by Optus to customers who have chosen it as their long distance carrier.

Optus' standard charges are cheaper than Telstra's standard charges. The standard charges are filed with Austel. The range and variety of discounts made available by Telstra to its customers make any comparison between the prices charged by or the billings of each carrier for long distance calls a task which is fraught with difficulty. Telstra's evidence, which was not disputed by Optus was:

      COMPARISONS BETWEEN TELSTRA'S AND OPTUS' LONG DISTANCE BILLS

            In order to compare the prices for long distance calls contained in a bill to a customer of either carrier, with the prices which the customer would have been charged by the other carrier for the same billing period, it is necessary to calculate the applicable charges for the calls taking into account the following:

            (a)   the time of day and day of the week upon which each call was made;

            (b)   in the case of international long distance (IDD) calls, the destination country of each of the calls;

            (c)   in the case of domestic long distance (STD and community) calls, the origin and destination of the calls (for the purpose of determining whether an inter-capital rate, or a community rate, applied), and distances between those two points (for the purpose of determining which distance-based rate applied);

            (d)   the Telstra Flexi-Plan or Optus discount to which the customer was or could have been entitled for the month in which the calls were made, based upon the total value of eligible calls in the month (to determine the applicable discount);

            (e)   the effect of any Telstra Spot Specials which were in force in relation to any of the calls.

There is some dispute between the parties about whether certain categories of calls were cheaper using a certain Telstra Flexi-Plan or the Optus Instant Saver. It is sufficient, for present purposes, to say that in significant categories of long distance calls, Telstra customers subscribing to one of its Flexi-Plans will receive cheaper prices than an Optus customer on its Instant Saver Plan. However, in other significant categories of long distance calls the Optus customer will enjoy cheaper prices than the Telstra Flexi-Plan customer.

These difficulties in relation to price comparisons are significant as in excess of 2.5 million of Telstra's customers subscribe to one of its major Flexi-Plans.

In addition, Telstra has other Flexi-Plans available to smaller numbers of customers offering substantial discounts. In total, about 25 retail Flexi-Plans, of which 18 provide discounts for international calls, are available. The Flexi-plans resulted in significant discounts and overall savings for customers.

There was little dispute between the parties on the problems involved in general price comparisons. Telstra's evidence was that the variables:

      affecting the prices charged by Telstra and Optus respectively for long distance telephone calls make impossible any general price comparison between Telstra and Optus. For any comparison even in a particular case to be accurate and meaningful the detailed assumptions as to the relevant variables must be clearly stated.

Optus' evidence was that Telstra's complicated cost savings plans led to it becoming:

      "very difficult for customers to compare "like with like".

Billing by each carrier is on a periodic basis and comprises the total billing for all telephone calls and services provided during the relevant period after taking into account the discounts to which the particular customer is entitled.

The Optus Guarantee

Optus' evidence concerning the introduction of the guarantee was:

      The Optus Guarantee was devised as a product to help customers to be confident that in switching their long distance services to Optus, they would not be worse off financially. In the initial stages of competition with Telstra, Optus had attempted to carry out rate comparisons with Telstra in order to demonstrate those areas in which Optus offered cheaper rates. Over time, it became increasingly difficult for customers to compare Optus and Telstra because Telstra had introduced a range of more complicated savings plans such as the rate reducer plan which discounted calls according to their duration, spot specials and a series of discounts based on customer expenditure. Ultimately it became very difficult for customers to compare "like with like". In order, therefore, to avoid confusing comparisons, Optus' marketing campaign began to focus on the aggregate bill amount as opposed to individual call rate comparisons. Hence the Optus Guarantee was developed as a means by which customers could be assured of "bottom line" savings, that is, savings on the total bill.

The guarantee provided -

      The Optus Guarantee promises that you will save on your total Long Distance bill compared to Telstra.

      Here, quite simply, is how it works.

      To take advantage of the Guarantee, call us and we'll arrange a bill comparison. We will compare your Total Optus Long Distance bill against the same calls made over the same period with Telstra, including any Flexiplans you tell us you were on.

      If your bill would have been lower with Telstra, for the same calls over the same period, we will credit your account with twice the difference shown in the comparison.

      To take advantage of the Optus Guarantee, you will need to have switched to Optus as your preferred Long Distance carrier.

Although the "Terms and Conditions" were set out on the reverse side of the guarantee, their detail is not relevant to the issues raised on the present application.

The guarantee has been promoted extensively by Optus since it was launched in November 1994. The evidence is replete with
examples of its promotion on television, in the print media and various other forms of customer promotion.

For customers to become entitled to the benefits of the guarantee they must become a preselected Optus customer. This involves signing an Authority to Change Long Distance Carrier form. When that has occurred the customer receives a "Welcome Pack" which contains the Optus guarantee and the following description of it in the accompanying brochure:

      Under the Optus Guarantee, we promise you'll pay less than you would with Telstra for the same calls, regardless of flexiplans or specials, or we'll credit your account with double the difference.*

      All you have to do is call us and we'll arrange a bill comparison that shows exactly how much you've saved.

                                    *^{See enclosed Guarantee}

                                                          ^{Certificate for full details}

The evidence does not disclose how often Optus customers have availed themselves of the entitlement provided by the guarantee. However, to obtain the benefit of the offer a customer must make a request in relation to a specific bill and must have provided details of the Telstra Flexi-Plan to which that customer had subscribed. Optus was then able to calculate the difference and provide the appropriate credit if its

      "promise you'll pay less than you would with Telstra for the same calls regardless of flexi-plans or specials"

is not fulfilled.

The Guarantee commercial

A Guarantee television commercial was first shown nationally on 29 April 1996. After correspondence between the solicitors for Telstra and Optus in relation to whether the advertisement breached s.52 of the TPA, the commercial was not shown after June 1996.

The commercial was screened as part of a general advertising campaign for the Optus Guarantee. The objectives of the campaign were stated by Optus to be -

      .     To create awareness of the Optus Guarantee amongst

            prospective & existing customers.

      .     For prospective Optus customers; to generate a favourable predisposition to switch to Optus.

      .     To assure prospective customers that - they can be confident in Optus' performance & that Optus is cheaper across the bill than Telstra.

      .     To make them aware that the savings are genuine and worthwhile.

      .     To develop trust/confidence amongst Optus customers.

Optus' internal instructional material described the guarantee as follows:

      The Optus Guarantee is a promise or reassurance to our switched customers and to potential customers to encourage them to switch, that they will be better off with Optus than with Telstra for Long Distance.

      "If you switch to Optus and take advantage of the Optus Guarantee,we promise that your total Optus Long distance bill will be less than your Telstra bill would have been for the same calls - regardless of Flexiplans which you tell us you had been on or Specials - or we'll credit your account with double the difference".

Written material sent by Optus to its customers contained the same description but, without emphasis.

That material also stated:

      The Optus Guarantee is a tool that can be used in two ways:

      1)    To encourage non Optus customers to switch to Optus for Long Distance.

      2)    To reassure existing Optus customers that they made the right choice when they chose Optus.

Optus' documents, to which I have referred, demonstrate the dilemma confronting it in advertising its guarantee. Two different approaches might be taken. If it was advertised as a -

      "promise you'll pay less than you would with Telstra for the same calls, regardless of flexi-plans or specials, or we'll credit your account with double the difference"

it ran a real risk of inaccurately representing that Optus' long distance prices were cheaper than Telstra's prices. But, it would also have the added benefit of reassuring existing Optus customers.

However, if it was advertised as -

      "If you switch to Optus and take advantage of the Optus Guarantee, we promise that your total Optus Long Distance bill will be less than your Telstra bill would have been for the same calls - regardless of Flexi-plans which you tell us you had been on or Specials"

there was little or no risk of inaccuracy.

In the correspondence between solicitors concerning the Optus Guarantee commercial shown between April and June 1996 Telstra's solicitors contended that the commercial falsely represented that Optus' long distance prices, and consequently bills, were cheaper than Telstra's prices and bills. Optus denied making any such representation. It contended that the advertisement accurately represented the Optus Guarantee to customers switching to Optus.

A rerun of the commercial was almost certain to provoke litigation. It did. The rerun commenced on 22 October 1996 and was identical to the earlier commercial, save that it contained a disclaimer, shown at the bottom of the screen, stating:

      "Or we'll credit you with double the difference".

The transcript for the commercial was as follows:

Operator:   Hello, Optus Customer Service.

Customer:   Hi. I've got an ad here for your Optus Guarantee.

Operator:   Yes sir.

Customer:   It says you'll guarantee I'll save on the total Optus long distance bill.

Operator:   ....compared to Telstra, that's right.

            (Disclaimer at bottom of Screen:

            "Or we'll credit you with double the difference".)

Customer:   But you can't do that can you? I'm on a flexi plan.

Operator:   It doesn't matter sir, Switch to us and take advantage of the Optus Guarantee and you will save.

Customer:   Really?

Operator:   Its an old fashioned kind of guarantee.

            (Disclaimer at bottom of screen:

            "Conditions apply. Not applicable to mobiles".)

Customer:   How's that?

Operator:   We mean it.

Customer:   Umm

Screen fades: logo appears   -   Operator turns and says "Yes".

[Disclaimer at bottom of screen:

"Available most areas. Call **** - for details".]

The commercial was a mix of the two approaches to advertising of the Optus Guarantee, to which I have referred above. It guaranteed total bill savings or a credit of double the
difference and stated that if you switch and take advantage of the guarantee the customer will save.

The commercial raises the issue of whether a television advertisement, which may not contain an inaccurate statement or representation when its visual, audio and written constituent parts are carefully considered, can nevertheless breach s.52 of the TPA because the impression its interacting constituent parts conveys is misleading or deceptive or is likely to mislead or deceive.

The International commercial

A similar, but not identical, problem arises in respect of the International commercial. The transcript for that commercial is as follows:

As with the Guarantee commercial the International commercial was part of a broader campaign designed to take advantage of the fact that Optus' standard International rates are cheaper than Telstra's standard International rates. Advertisements forming part of the campaign, and the commercial, use "normal" instead of "standard" in respect of the BCS tariff rates for international calls. In that context it is my view that no relevant distinction would be drawn by consumers in respect of
the use of either word. Put another way, the use of "standard" or "normal" rates would be likely to be taken by the consumer to mean the standard non-discounted rate for international calls.

The International commercial raises two interrelated issues. The first is whether the example of "normal" rates which was given, whilst accurate in itself, is misleading in that the overall impression created by the commercial is that Optus offers cheaper prices generally for international calls. Clearly, such an impression is broader than the example given. The second issue is whether the failure to state that the comparison might not apply to Telstra Flexi-Plan users makes the commercial misleading.

Interlocutory injunctions

The principles applied by the Court in an application for an interlocutory injunction are well established: see Bullock and Others v. The Federated Furnishing Trades Society of Australasia and Others (No 1) (1985) 5 FCR 464.  The Court is required to be satisfied that the evidence establishes that there is a serious question or issue to be tried, that the balance of convenience is in favour of the grant of injunctive relief and that there are no discretionary reasons for refusing the grant of the relief sought. Once the Court is satisfied that there is a serious issue to be tried, the strength or weakness of the applicant's case may become a relevant factor but only in relation to considerations touching on the balance of convenience or the exercise of the discretion. In that regard in Bullock Woodward J (in a judgment concurred in by Smithers and Sweeney JJ), after discussing the two legs of, a serious issue to be tried and balance of convenience, said at 472:

      The only point I would wish to add for myself is that, when it becomes necessary to consider the balance of convenience, it is, I believe, quite proper to continue to bear in mind the apparent strength of the applicants' case; the two legs of the test need not be considered in isolation from each other. Thus an apparently strong claim may lead a court more readily to grant an injunction when the balance of convenience is fairly even. A more doubtful claim (which nevertheless raises "a serious question to be tried") may still attract interlocutory relief if there is a marked balance of convenience in favour of it. This view received support from the High Court in Beecham's case at the page cited above.

In assessing the strength of the applicant's case the Court does not forecast the result at trial; it assesses the strength of the case on the basis of the evidence and submissions before it at that interlocutory stage.

I have approached the resolution of the issues arising for determination on the present application in the light of these principles.

Section 52 and Television Advertising

Section 52 provides:

      52.   (1)   A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

            (2)   Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of sub-section (1).

As s.52 is broader in scope than s.53(g) I have confined my decision at this interlocutory stage to s.52. 

The first issue is identification of the relevant conduct. In that regard each of the parties has accepted that the conduct in issue is Optus' conduct in causing the publication of the two commercials on national television. That conduct must be viewed in that context as well as in the context of the national advertising campaigns, of which the television commercials formed a part. As was said by Gibbs CJ in Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) 149 CLR 191 at 199:

      The conduct of a defendant must be viewed as a whole. It would be wrong to select some words or act, which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading. It is obvious that where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words. The same is true of acts.

In Stuart Alexander & Co. (Interstate) Pty. Ltd. v. Blenders Pty. Ltd. (1981) 37 ALR 161 at 163 Lockhart J made some pertinent observations as to how a Court should approach a television advertisement in the context of a claim under s.52:

.    His Honour placed considerable weight on the importance of the first impressions conveyed by the advertisement as these impressions will most closely approximate the impact of the advertisement on the viewer;

.    His Honour also observed that:

            However, I think a robust approach is called for when determining whether television commercials of this kind are false, misleading or deceptive. The public is accustomed to the puffing of products in advertising. Although the class of persons likely to see this commercial is wide, it is inappropriate to make distinctions that are too fine and precise.

In Tobacco Institute of Australia Limited v. Australia Federation of Consumer Organisations Inc. (1992) 38 FCR 1 at 4 Sheppard J said:

      It is not appropriate to take part of an advertisement such as the one in question here and endeavour to ascertain in isolation the meaning of each of the critical words or phrases which is used. Rather an attempt should be made to measure the veracity of its message by reading it in context. One needs also to take into account the fact that many readers would not make a close study of the advertisement but would read it fleetingly and absorb its general thrust.

In Kalwajtys v. Federal Trade Commission 237 F2d 654 at 656 the U.S. Court of Appeals, 7th Circuit said -

      A statement may be deceptive even if the constituent words may be literally or technically construed so as to not constitute a misrepresentation. Rothschild v. Federal Trade Commission, 7 Cir., 200 F.2d 89, 42; D.D.D. Corporation v. Federal Trade Commission, 7 Cir., 125 F.2d 679, 681. The buying public does not weigh each word in an advertisement or a representation. It is important to ascertain the impression that is likely to be created upon the prospective purchaser. See Aronberg v. Federal Trade Commission, 7 Cir., 182 F.2d 165, 167.

E.W.K. Kintner in Primer on the Law of Deceptive Practices 2nd ed. New York 1978 said at 101:

      Thus, even though every sentence considered separately is true, the advertisement as a whole may be misleading because factors are omitted which should be mentioned or because the message is composed to highlight the appealing aspects.

I have applied these principles to the Optus commercials. They will be seen by the casual but not overly attentive viewer viewing a free-to-air program with only a marginal interest in the advertisements shown between the segments of the program. In that context it will be the first impressions conveyed to that viewer, rather than an analysis of the cleverly crafted constituent parts of the commercial, which will be determinative.

The observations I have referred to above are of particular relevance to television advertising where the message is basically one of the impression conveyed. In television and print advertising where a false dominant impression is conveyed, its message will not be ameliorated by the accuracy of the detailed message which is derived from a careful analysis of all of the constituent parts of the advertisement. An example of the application of that principle is Fraser v. NRMA Holdings Ltd. (1994) 52 FCR 1 and on appeal (1995) 55 FCR 432.

Comparative Advertising

In Stuart Alexander & Co. at 163 Lockhart J said:

      When a person produces a television commercial that not only boosts his own product but, as in this case, compares it critically with the product of another so that the latter is shown up in an unfavourable light by the comparison, in my view he ought to take particular care to ensure that the statements are correct.

That passage has been cited in the Court on numerous occasions. In my view Hill J in Trade Practices Commission v. Telstra Corporation Ltd. 1993 ATPR 41-256 at 41, 454 was correct in stating that the point being made in the cases discussing comparative advertising is not that it attracts a higher burden to show the accuracy of the comparison. Rather, his Honour said -

      The point being made is that errors in comparative advertising may have a greater potential to mislead consumers than statements made in ordinary advertising which may be perceived as mere "puffs".

      It is unnecessary to elevate what is said in those cases into a principle of law. Whether conduct is misleading or deceptive must depend upon all the facts and those facts include, in the case of advertising, the entire context in which the advertising appears.

However, there are obviously greater dangers in the "half truth" or the unqualified literal truth in comparative advertising. As was said by Gummow J in Hoover (Australia) Pty. Ltd. v. Email Ltd. (1991) 104 ALR 369 at 375:

      In the circumstances of the particular case, a "half truth" may be misleading or deceptive: Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd. (1988) 79 ALR 83 at 95. A comparison between goods or services may be rendered misleading by the omission of material that would be necessary to render the comparison fair: Collier Constructions Pty. Ltd. v. Foskett Pty. Ltd. (1990) 97 ALR 460 at 479, affirmed (1991) ATPR (Digest) 46-071. In Duracell Australia Pty. Ltd. v. Union Carbide Australia Ltd. (1988) ATPR 40-918 at 49-861, Burchett J said that an inaccurate statement or an ambiguously qualified statement may often be found to be misleading. His Honour continued:

      "In the area of comparison advertising, it has repeatedly been said that particular care is required. An unfair comparison may, quite simply, because it is unfair, be misleading. It may mislead a consumer into thinking there is a basis for a choice where, in truth, there is not; or that a choice may be made on grounds which are not truly valid..."

In Sterling Winthrop Pty. Ltd. v. The Boots Company (Australia) Pty. Ltd. (1995) ATPR 41-433 at 40,877 Tamberlin J, after referring to the difficulty inherent in omitting material that would be necessary to make the comparison fair, added:

      It can be misleading for a corporation which disseminates information not to put forward sufficient information to avoid the possibility that the recipient may be misled.

Did the Guarantee commercial contravene s.52 ?

I have viewed the commercial several times. My first impression, which remained with me until I dissected and carefully analysed the constituent parts of the advertisement, was that it conveyed the message that:

.    Optus' guaranteed that its long distance telephone prices and consequently its bills, were cheaper than Telstra's;

.    Optus would credit the customer with double the difference if it was wrong.

Implicit in that message is a representation by Optus that its long distance telephone prices were cheaper than Telstra's prices. For the reasons outlined earlier that general price comparison is misleading. Optus' own case accepts that a general price comparison cannot be accurately or fairly made.

After considering the extensive evidence adduced and the submissions made on behalf of the parties I can accept that upon careful analysis of the entire transcript, the representation made might be taken to relate to the total Optus bill being cheaper, if a customer switches to Optus and if advantage is taken of the Optus guarantee to credit double the difference.

However, that conclusion does not assist Optus. It merely might afford an example of a false dominant impression not being ameliorated by the accuracy of the detailed message after careful analysis of its constituent parts. The false dominant message is conveyed in the first part of the advertisement which contains a guarantee of total bill savings "Or we'll credit you with double the difference". In my view it is not ameliorated by the later statement that if you "Switch to us and take advantage of the Optus guarantee you will save".

For the reasons I have set out above it is the first impressions conveyed upon viewing the commercial, rather than the representation that might be discerned after close analysis, that is determinative in a case such as the present.

The same conclusion can be arrived at by a different route. Optus' material demonstrates that it was cognisant of the subtle distinction involved in the two approaches to advertising the guarantee, to which I have already referred. It may have been attractive to Optus for its television commercial to leave the line between the two approaches blurred. However, in doing so it ran the risk that the advertisement was likely to be misleading or deceptive by failing to state clearly to the consumer that taking advantage of the Optus guarantee, rather than cheaper prices, produced savings for the Telstra Flexi Plan customer switching to Optus. In my view, in that respect, Optus omitted material that was necessary to make the comparison fair.

Accordingly, I am of the view that, not only is there a serious issue to be tried but, a strong prima facie case for relief has been made out by the applicant on the evidence adduced before me in respect of the Guarantee commercial.

Optus' case is not assisted by the care otherwise taken to ensure accuracy by stating that the offer was "Available most areas".

Did the International commercial contravene s.52 ?

Similar principles lead to the same result in respect of this commercial. The impression conveyed is that Optus' prices for international calls will be cheaper "to anywhere at any time" so it is worthwhile for a Telstra international call customer to switch to Optus.

The example proffered of cheaper "normal" rates was accurate, but the conclusion it is said to support is inaccurate. As with the Guarantee commercial this commercial is also misleading in that it omitted the statement that was necessary to make the comparison fair and therefore accurate. That statement is that Optus is cheaper "to anywhere at any time" unless the customer is on a Telstra Flexi Plan. The omitted statement is necessary as a Telstra Flexi-Plan might result in a Telstra international call being cheaper than the equivalent Optus call depending on the time and other circumstances of the call.

The care taken in respect of other disclaimers is again not helpful to Optus' case. The commercial identifies that it is "Available most areas" and "Excludes operator assisted calls and calls to and from mobiles". The presence of these disclaimers and the absence of a disclaimer relating to Telstra Flexi-Plan customers contributes to the misleading quality of the commercial. It lulls the viewer into a false sense of security to the effect that save for the disclaimers
the message, without any other exception, can be taken to be accurate.

Accordingly, I am of the view that, not only is there a serious issue to be tried but, a strong prima facie case has also been made out in respect of the International commercial.

Balance of convenience

Two major factors are said by Telstra to be in favour of the grant of the injunctive relied sought by it. They are the need to protect -

.    the public from being misled and thereby making decisions to switch carriers on a false premise.

.    Telstra's goodwill and customer base from harm.

It was submitted that each category of harm or loss was incalculable and irreparable as, in a practical sense, it will not be possible to determine whether customers switched to and remained with Optus by reason of the misleading conduct alleged against it. I accept Telstra's submissions on both factors.

Optus' counsel submitted that its guarantee protects the public from suffering loss as a result of switching. I do not accept that submission. Optus desisted from adducing evidence which might demonstrate if, and to what extent, customers in fact take advantage of its guarantee and, when they do, the quantum of the benefit they derive. In the absence of such evidence I infer that there might be a significant gap between the existence of an entitlement to the guarantee and the exercise of that entitlement. The practical reality is that once a person switches to Optus that customer is unlikely to have any idea whether the equivalent Telstra bill would have been cheaper. Further, given my view as to the message conveyed by the commercials, those customers will have no reason to suspect they would have been better off with Telstra. Accordingly, customers have little incentive and no occasion to call up their entitlement to "double the difference". The failure of Optus to adduce evidence, which only it can adduce, on this issue entitles me to be somewhat bolder in drawing that inference.

However, there is a shorter and simpler answer to the point made by Optus. In my view, for the reasons set out above, the continued publication of the commercials in their present form is likely to result in a serious risk of harm to the public. Optus has not satisfied me that, by reason of the Optus Guarantee, the public will not, or is unlikely to, suffer harm or loss if the commercials continue.

A number of factors were submitted by Optus as favouring it on the balance of convenience. The first was the loss of the very substantial sums it had committed to the campaigns. However, that loss is quantifiable and is protected by the usual undertaking as to damages. The second factor was the loss of the opportunity to obtain custom that Optus is entitled to attract by use of its commercials during the period any injunction is to run. One aspect of this loss will be the loss of momentum in Optus' more general campaigns, of which the commercials formed a significant part.

In one sense I accept that the relief may be final in effect as Optus' ability to attract custom by use of the commercials will be lost for the duration of the injunctions. Further, that loss is likely to be incalculable as is Telstra's loss if the commercials continue.

However, two significant matters tell against Optus on this issue. First, the injunctions sought will not prevent advertising of the Optus Guarantee which does not sail on the wrong side of, or too close to, the s.52 wind. In particular, advertisements will not be misleading if they state clearly that it is by a customer taking advantage of the Optus Guarantee, rather than cheaper prices, that will result in cheaper total bills. Secondly, I have found that a strong prima facie has been made out by Telstra. Accordingly, the balance of convenience on this issue, as well as in respect of harm to the public, swings in Telstra's favour.

It was next submitted that loss will be suffered by the public who will be deprived of the opportunity to obtain the benefits of the Optus Guarantee if they switch to Optus by reason of the commercials. In my view the reasons set out above answer this factor. Optus is not being deprived of the opportunity to advertise the Optus Guarantee. Likewise, the injunctions will not deprive the public of the opportunity to become entitled to participate in and take advantage of the Optus Guarantee.

Finally, the absence of consumer complaint was relied upon. I do not regard that aspect as having significance in the present case. Consumers would not be aware of the matters which might make the commercials misleading and no occasion for complaint will have arisen for them.

I am satisfied that the balance of convenience is in favour of the grant of the injunctions sought.

Discretion

A great deal of evidence was filed on the issue of discretion.

It was submitted on behalf of Optus that Telstra delayed in bringing its application for relief and that by proceeding at this late stage, Telstra should be seen to be doing so for tactical reasons. The main basis for the submission was the similarity between the advertising now complained of and past Optus advertising. In my view the similarity argued for does not relate to the advertising now complained of by Telstra. 

A subtle but important change occurred in Optus' advertising in that it departed from the more cautious basis of its previous advertising and moved to creating an impression of a general price comparison. Further, the Optus advertising which most closely resembled that now complained of has been the subject of prior complaint by Telstra's solicitors.

It was next submitted that there had been a failure to disclose the nature and extent of past advertising on the application for urgent interim relief. That application was not made ex parte as I directed that notice be given to Optus of the application. Accordingly, Optus was represented by senior counsel who opposed the grant of relief. Evidence of past advertising was adduced by Optus before me. In these circumstances the occasion for applying the duty of disclosure on an ex parte application did not arise: see Thomas A. Edison Ltd. v. Bullock (1913) 15 CLR 679 at 681-3. Further, in the events which occurred there was no relevant non-disclosure.

Finally it was submitted that Optus acted properly in raising the advertisements with the Australian Consumer and Competition Commission. In my view that matter does not constitute a basis for refusing to exercise my discretion to grant relief.

Conclusion

Telstra has satisfied me that there is a serious issue to be tried, the balance of convenience favours the grant of interlocutory relief and there are no discretionary reasons for refusing relief.

Accordingly, upon the usual undertakings being given to the Court by Counsel on behalf of Telstra I grant injunctions until the trial of the proceeding or further order, restraining the respondents, whether by themselves, their servants or agents or howsoever otherwise from causing to be broadcast, published or transmitted within Australia the television commercials referred to in paragraphs 6 and 11A of the Amended Statement of Claim, which are Exhibits CB5 and CB17 to the affidavits of Christopher Carmelo Bellomo sworn on 8 and 13 November 1996 respectively.

                   I certify that this and the preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel

                   Associate:

                   Dated:

Heard:        14 November 1996

Place:        Melbourne

Judgment:     22 November 1996

Appearances:  Mr. G. Nettle Q.C. with Mr. P. Anastassiou instructed by Mallesons Stephen Jaques appeared for the applicant.

              Mr. J. Sher Q.C. with Mr. M. Wheelahan instructed by Minter Ellison appeared for the respondents.