FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Target Australia Pty Ltd (ACN 004 250 944) [2001] FCA 1326

TRADE PRACTICES – misleading and deceptive conduct – false or misleading representations with respect to the prices of goods – final consent orders for remedies where contravenor has admitted breaches.

Federal Court of Australia Act 1976 (Cth) s 21

Trade Practices Act 1974 (Cth) Pt IVB, V; ss 52, 53(e), 79, 80, 80A(1)(b)

Miller’s Annotated Trade Practices Act 2001, 22^nd Ed

Trade Practices Commission v Santon Ltd [1993] ATPR 41-221 referred to

Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1993) 41 FCR 89 referred to

RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 referred to

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 referred to

Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563 referred to

ACCC v Real Estate Institute of WA Inc [1999] ATPR 41-719 referred to

Annand & Thompson Pty Ltd v Trade Practices Commission (1979) 40 FLR 165 referred to

AUSTRALIAN COMPETITION & CONSUMER COMMISSION v TARGET AUSTRALIA PTY LTD (ACN 004 250 944)

W 153 OF 2000

LEE J

PERTH

25 JUNE 2001

THE COURT ORDERS THAT:

1. The Respondent have leave to amend the Amended Defence in the terms set out in the Minute of Proposed Re-Amended Defence received by the Court on 19 June 2001.

2. The Minute of Proposed Re-Amended Defence to stand as the Re-Amended Defence and service be dispensed with.

3. It be declared that the Respondent by:

(a)     causing to be broadcast on television stations in Western Australia, New South Wales, Victoria, Queensland, South Australia, Tasmania, the Northern Territory and the Australian Capital Territory, on or about each of the days of and between 25 June 2000 and 29 June 2000, advertisements for the sale of its clothing containing:

(i)                  the visual representation “25% off all clothing”, whereas the price of all clothing was not reduced by 25%; and

(ii)                the verbal representations “we are dropping the price of all mens’, ladies’ and kids’ clothes by a massive 25%” and “that’s right, 25% off every stitch of clothing”, whereas the price of all clothing was not reduced by 25%; and

(b)     failing to disclose and/or failing to sufficiently disclose by those advertisements that the price of some items of clothing would not be so reduced,

the Respondent has, in trade or commerce:

(A)    engaged in conduct that was misleading or deceptive or was likely to mislead or deceive contrary to section 52 of the Trade Practices Act 1974 (“the Act”); and

(B)     in connection with the supply or possible supply of, or with the promotion of the supply of goods, being clothing, made false or misleading representations with respect to the price of goods or services contrary to section 53(e) of the Act.

4. It be declared that the Respondent by:

(a)    causing to be published in Western Australia, New South Wales, Victoria, Queensland, South Australia, Tasmania, the Northern Territory and the Australian Capital Territory, between about 26 June 2000 and 28 June 2000, advertisements for the sale of its clothing containing the express representation “25 – 40% off every stitch of clothing”, whereas the price of some items of clothing including ties, scarves, gloves, hats, underwear, socks and hosiery was not reduced by 25 – 40% or at all; and

(b)    failing to disclose and/or failing to sufficiently disclose by those advertisements that the price of some items of clothing would not be so reduced,

the Respondent has, in trade or commerce:

(A)    engaged in conduct that was misleading or deceptive or was likely to mislead or deceive contrary to section 52 of the Act; and

(B)     in connection with the supply or possible supply of, or with the promotion of the supply of goods, being clothing, made false or misleading representations with respect to the price of goods or services contrary to section 53(e) of the Act.

5. It be declared that the Respondent by:

(a)     causing to be broadcast on television stations in Western Australia, New South Wales, Victoria, Queensland, South Australia, Tasmania, the Northern Territory and the Australian Capital Territory, on or about 16 July 2000, advertisements for the sale of its housewares containing:

(i)                  the visual representation “15 to 40% off all housewares”, whereas the price of items of manchester was not reduced by 15 to 40% or at all; and

(ii)                the verbal representation “we are taking 15 to 40% off all housewares”, whereas the price of items of manchester was not reduced by 15 to 40% or at all; and

(b)     failing to sufficiently disclose by those advertisements that the price of items of manchester would not be so reduced,

the Respondent has, in trade or commerce:

(A)  engaged in conduct that was misleading or deceptive or was likely to mislead or deceive contrary to section 52 of the Act; and

(B)  in connection with the supply or possible supply of, or with the promotion of the supply of goods, being housewares, made false or misleading representations with respect to the price of goods or services contrary to section 53(e) of the Act.

6. It be declared that the Respondent by:

(a)     causing to be published in newspapers in Western Australia, New South Wales, Victoria, Queensland, South Australia, Tasmania, the Northern Territory and the Australian Capital Territory, on or about 17 July 2000 advertisements for the sale of its housewares containing the express representation “15 to 40% off housewares”, whereas the price of items of manchester was not reduced by 15 to 40% or at all; and

(b)     failing to disclose by those advertisements that the price of items of manchester would not be reduced,

the Respondent has, in trade or commerce:

(A)    engaged in conduct that was misleading or deceptive or was likely to mislead or deceive contrary to section 52 of the Act; and

(B)     in connection with the supply or possible supply of, or with the promotion of the supply of goods, being housewares, made false or misleading representations with respect to the price of goods or services contrary to section 53(e) of the Act.

7. It be declared that the Respondent by:

(a)         representing on its website that “rainchecks” were offered “on all advertised merchandise except where notification has been given to Consumers, in the relevant advertisement, that no rainchecks will be given on specific merchandise”;

(b)         causing to be broadcast on television stations in Western Australia, New South Wales, Victoria, Queensland, South Australia, Tasmania, the Northern Territory and the Australian Capital Territory, between about 1 May 2000 and 5 August 2000, advertisements for the sale of its goods at discounted prices;

(c)         causing to be published in newspapers in Western Australia, New South Wales, Victoria, Queensland, South Australia, Tasmania, the Northern Territory and the Australian Capital Territory, between about 1 May 2000 and 5 August 2000, advertisements for the sale of its goods at discounted prices; and

(d)         failing to disclose or failing to sufficiently disclose by those advertisements that no “rainchecks” were available,

the Respondent has, in trade or commerce, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive contrary to section 52 of the Act.

8.                  An injunction restraining the Respondent, whether by itself, its servants, agents or otherwise howsoever, from, in trade or commerce in Australia, supplying, or offering to supply, to any person, clothing or goods for the home, advertised at a discounted price where no discount applies, for a period of four years from the date of these orders.

9. An injunction restraining the Respondent, whether by itself, its servants, agents or otherwise howsoever, in connection with the supply or possible supply of, or the promotion of the supply of, clothing or goods for the home, from making representations as to price without clearly and prominently disclosing all relevant conditions which apply or may apply to the price, for a period of four years from the date of these orders.

10. An injunction restraining the Respondent, whether by itself, its servants, agents or otherwise howsoever, in connection with the supply or possible supply of, or the promotion of the supply of, clothing, toys or goods for the home, from making representations as to the availability of rainchecks on merchandise without clearly and prominently disclosing where rainchecks do not apply in relation to specified items for a period of four years from the date of these orders.

11.              The Respondent cause to be published at its own expense an advertisement in each of the newspapers contained in the First Newspaper List annexed to the minute of orders and marked “A”, in the form annexed to the minute of orders and marked “B”, and further that such advertisement shall be:

(i)                  of a size not less than 280mm x 4 columns;

(ii)                in text which is in the type not less than 9 point;

(iii)               published on a right hand page of the newspaper;

(iv)              published within the first half of the newspaper; and

(v)                published according to the First Advertising Schedule annexed to the minute of orders and marked “C”.

12.              The Respondent cause to be published at its own expense an advertisement in each of the newspapers contained in the Second Newspaper List annexed to the minute of orders and marked “D”, in the form annexed to the minute of orders and marked “B”, and further that such advertisement shall be:

(i)                  of a size not less than 280mm x 4 columns;

(ii)                in text which is in the type not less than 9 point;

(iii)               published on a right hand page of the newspaper;

(iv)              published within the first half of the newspaper; and

(v)                published according to the Second Advertising Schedule annexed to the minute of orders and marked “E”.

13.              The Respondent cause to be published at its own expense an advertisement in each of the newspapers contained in the First Newspaper List annexed to the minute of orders and marked “A”, in the form annexed to the minute of orders and marked “B”, and further that such advertisement shall:

(i)                  be of a size not less than 380mm x 7 columns;

(ii)                be in text which is in the type not less than 12 point;

(iii)               be published on a right hand page of the newspaper;

(iv)              be published within the first half of the newspaper;

(v)                be published according to the First Advertising Schedule annexed to the minute of orders and marked “C”; and

(vi)              contain the Target rondel.

14.              The Respondent cause to be published at its own expense an advertisement in each of the newspapers (with the exception of the Bunbury Mail) contained in the Second Newspaper List annexed to the minute of orders and marked “D”, in the form annexed to the minute of orders and marked “B”, and further that such advertisement shall:

(i)                  be of a size not less than 380mm x 7 columns;

(ii)                be in text which is in the type not less than 12 point;

(iii)               be published on a right hand page of the newspaper;

(iv)              be published within the first half of the newspaper;

(v)                be published according to the Second Advertising Schedule annexed to the minute of orders and marked “E”; and

(vi)              contain the Target rondel.

15.              The Respondent cause to be broadcast at its own expense the advertisement described in the material annexed to the minute of orders and marked “F” and contained on the video cassette annexed to the minute of orders and marked “G” on the television stations contained in the Television List annexed to the minute of orders and marked “H”, and further that such advertisement shall be:

(i)                  broadcast for the first time within 14 days of the making of these orders;

(ii)                broadcast between the hours of 7.30pm and 9.30pm; and

(iii)               broadcast according to the Advertising Schedule annexed to the minute of orders and marked “C”; and

16.              The Respondent will use its best endeavours to ensure that its Trade Practices Corporate Compliance Program is consistent with AS3806 by 31 July 2001, and provide evidence to the Applicant of that fact by 14 August 2001.

17.              The Respondent pay the Applicant’s costs of the action in the agreed sum of $65,000.00.

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

REASONS FOR JUDGMENT

1                     On 25 June 2001 I made final orders by consent in this matter. I now provide my reasons for making those orders.

2                     On 5 September 2000 the applicant (“ACCC”) filed an application alleging contraventions by the respondent (“Target”) of s 52 (misleading or deceptive conduct) and s 53(e) (false or misleading representations with respect to the prices of goods) of the Trade Practices Act 1974 (Cth) (“the Act”).

3                     On 19 June 2001 the parties presented to the Court a minute consenting to the making of final orders in the matter. At the same time, Target sought leave to file a re-amended defence conditional upon the Court making orders in terms of the minute.

4                     The parties did not file an agreed statement of facts. The relevant facts are those admitted in the pleadings and the minute and may be summarised as follows.

5                     In June 2000, in connection with a sale of clothing, Target published in a number of locations, television and newspaper advertisements. In relation to the television advertisements, a mixture of images and sound was used. The principal visual image was of the Target trademark rondel transforming to the words “25% off all clothing”, represented by stitching from a sewing machine, after which appeared the name “Target” and the Target rondel together with the advice, “Excludes underwear, socks & hosiery. Includes Target Country & Baby Target”. The exclusionary statement of reduced price appeared for approximately 1.75 seconds, or approximately 12 percent of the length of time of the advertisement. It measured less than one-tenth of the screen height, but 25 percent of the size of the word “Target” under the Target rondel. The voiceover relayed the following: “Until Friday at Target we are dropping the price of all mens’, ladies’ and kids’ clothes by a massive twenty five percent. That’s right. Twenty five percent off every stitch of clothing. So see you at Target.” In relation to the newspaper advertisements, the advertisements represented that there was “25-40% off every stitch of clothing”. At the foot of the advertisement appeared the Target rondel with the name “Target” next to it. Immediately beneath the rondel and name appeared the following statement in print not less than two millimetres in height: “On sale until Friday 30 June. Includes Sleepwear. Excludes underwear, socks & hosiery. Off regular prices. No rainchecks.” There also appeared, in print of the same size, additional qualifying statements concerning the application of “GST” to lay-bys and rainchecks.

6                     It is conceded by Target that the clothing offered for sale at reduced prices did not include underwear, socks, hosiery, ties, scarves, gloves or hats. Target admits that the representations made in the television advertisements were false or misleading in that the price of all clothing in its stores was not reduced by 25 percent and in that it failed to disclose to consumers adequately that the representation as to reduction of prices was qualified. It was conceded that with the inadequate duration of the display and of the size of the qualification in the advertisement, and the failure of the voice-over statements to bring the existence or contents of the qualification to the attention of consumers, it was reasonable for consumers to conclude that the statement that the price of clothing was reduced was unqualified. It is admitted that the foregoing conduct constituted contraventions of ss 52 and 53(e) of the Act. Similarly, Target admits that in respect of the newspaper advertisements, the representation “25-40% off every stitch of clothing” was misleading or deceptive in that the price of all clothing in Target’s stores was not reduced by 25-40 percent. Again, it is admitted that such conduct constituted a breach of ss 52 and of 53(e) of the Act.

7                     On about 16 July 2000, Target published television and newspaper advertisements in respect of a sale of housewares. Again, the advertisements had national distribution. The television advertisements consisted of visual and sound content. The advertisement commenced with the following appearing on the screen: “15% to 40% OFF HOUSEWARES”. These words grew larger in size and then returned to their original size. A Target rondel changed into the shapes of a table setting with a fork and knife; a table; a kitchen blender “whizzing”; a frying pan with eggs sliding about; and a lamp with a Target rondel as the base. The voiceover stated, “At Target we are taking 15 to 40 percent off all housewares including tableware, furniture, kitchen appliances, cookware and lighting. But only until Sunday.” The advertisements concluded with the Target rondel and name accompanied by the words, “Excludes Manchester. Includes Target Home & Baby Target.” This qualifying advice appeared on the screen for approximately two seconds or approximately 12 percent of the length of time of the advertisement and in print less than one-tenth of the screen height but 25 percent of the height of the print used for the name Target next to the rondel. The newspaper advertisements consisted of the following: “15% to 40% off Housewares. (Includes tableware, furniture, kitchen appliances, cookware and lighting.)” The words in brackets were about 5.5 millimetre size print.

8                     It is agreed that the price of manchester was not reduced.

9                     Target admits that the statement “15 to 40 percent off all housewares” in the television advertisements was misleading or deceptive in that the price of items of manchester had not been reduced and in that Target had failed to disclose to consumers that the representation as to reduced price was qualified in respect of manchester. It was conceded that by the inadequate duration of display and size of the advice of such qualification, and by the failure of the voice-over statements to bring the qualification to the attention of consumers, it was reasonable for consumers to conclude that the statement as to reduction in prices of housewares was unqualified. It is admitted that the foregoing conduct constituted contraventions of ss 52 and 53(e) of the Act. Similarly, Target admits that in respect of the newspaper advertisements, the representation that the price of “Housewares” in Target’s stores was reduced by 15 to 40 percent without stating that manchester was excluded, was misleading or deceptive and constituted contraventions of ss 52 and 53(e) of the Act.

10                  In the conduct of its business Target had promoted a “raincheck” policy. At all material times, Target stated on its website that rainchecks would be “offered on all advertised merchandise except where notification has been given to Consumers, in the relevant advertisement, that no rainchecks will be given on specific merchandise.” Pursuant to this policy, where retail goods are advertised at a specified price and the goods are not available in a particular store on a particular date within the period to which the advertised price relates, Target will offer to supply to the consumer, within a reasonable period of time thereafter, either: (1) the advertised goods at the advertised price; or (2) equivalent goods at that price. Notwithstanding the foregoing, Target states that it had an overriding general policy that where a particular item was advertised for sale at a particular price and that item was not available on a particular date in a particular store in the period of time to which the advertised price related, and a consumer asked for a “raincheck” on the relevant item, Target, subject to the good or a reasonable alternative good being available, would provide a “raincheck” even if it were a good to which a “raincheck” did not apply, being a good excluded therefrom in the relevant advertising material.

11                  Before and after, and in addition to, the advertisements described above, Target published other advertisements (through the same television stations and newspapers) for the sale of its merchandise. Those advertisements did not specify the items on which “rainchecks” would not be available but stated simply “no rainchecks”.

12                  Target admitted that the advertisements contravened s 52 of the Act in that Target failed to disclose, or failed to disclose sufficiently, that it was unable to provide “rainchecks” in a manner consistent with its policy on some of the items promoted for sale in the advertisements.

13                  The remedies sought for Target’s admitted breaches of the Act consisted of declarations, injunctions, corrective advertising and improvements to Target’s Trade Practices Compliance Program. No pecuniary penalty was sought to be imposed pursuant to s 79 of the Act.

14                  In respect of the orders for declarations, ACCC relied upon s 21 of the Federal Court of Australia Act 1976 (Cth). The wide power of the Court to make declarations of right under s 21, including declarations that particular conduct has been misleading or deceptive, has been firmly established in a number of Full Court decisions of this Court (see: Trade Practices Commission (TPC) v Santos Ltd [1993] ATPR 41-221; Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1993) 41 FCR 89; RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164). Being confined by the boundaries of judicial power, the Court must consider whether the declarations are otherwise appropriate – that is, that there be a real controversy between the parties to be determined, that it be clear in whose favour the Court has or would determine the issue in dispute, and that the declarations accordingly reflect this (see: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, per Mason CJ, Dawson, Toohey and Gaudron JJ at 22).

15                  In the instant matter I am satisfied that the material before the Court is sufficient to establish the case as pleaded by ACCC and that a real controversy exists requiring resolution by court order. In relation to the television advertisements, the impression to be gained by consumers from the advertisements was that no item of clothing or houseware was excluded from the respective sales. The voice-over, which often in television advertisements adopts an authoritative and informative role, did not mention that any item would be excluded. That impression was reinforced by the voice-over statement “25 percent off every stitch of clothing”, and “15 to 40 percent of all housewares including tableware, furniture, kitchen appliances, cookware and lighting”. The effect created by this latter statement was reinforced by the listing of items that constituted part of the class of goods on sale. Consumers who relied on the sound content of the television advertisements, not attentively watching the television, would not have known that any item was excluded. As far as the visual images were concerned, the size of the words containing the qualifying advice, compared with the size of the Target name and rondel, was not sufficient to distract attention from the latter. That information was given at the end of each advertisement when the viewer’s attention may not have been as keen as at the beginning. Furthermore, it is often the case that the first impression will be the lasting impression.

16                  It is also clear that the newspaper advertisements were misleading. No information was provided to the effect that manchester was excluded from the houseware offered at reduced prices. It would have been reasonable for a consumer to conclude that manchester was included in the broad category of “housewares”.

17                  With respect to the advertisements which included the simple statement “no rainchecks”, it is likely, considering the size of the qualifying advice in the context of the whole advertisement, that the advice would have been overlooked. It is also to be borne in mind that with Target’s promotion of its “raincheck” policy, consumers would have expected that notification of exclusion of a “raincheck” would have been prominent and specific.

18                  There is a public interest in the Court making declarations in cases involving admitted breaches of either s 52 or s 53(e) of the Act. In the circumstances I have considered it appropriate that declarations be made in terms of the minute of consent orders.

19                  Injunctions may be ordered by the Court pursuant to s 80 of the Act. The power of the Court under s 80 is particularly broad. For instance, subs (1AA) states that “where an application for an injunction under subsection (1) has been made, whether before or after the commencement of this subsection, the Court may, if the Court determines it to be appropriate, grant an injunction by consent of all the parties to the proceedings, whether or not the Court is satisfied that a person has engaged, or is proposing to engage, in conduct of a kind mentioned in subsection (1)”. Despite the wide discretion, the Court should be careful to consider firstly, that in the circumstances of the case injunctions are an appropriate form of relief, and secondly, that the terms of the injunctions are appropriate. For reasons of the objects of the Act and the power of the Court to make such orders, the conduct identified in the injunctions must be within the scope of that prohibited by the Act. There is also the issue of the injunctions being able to be clearly and practicably complied with, as the result of not being able to do so is that the matter will be dealt with by the summary process of contempt rather than by way of prosecution under the Act (see: Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563 at 575).

20                  In the present case, I was satisfied that the injunctions sought were appropriate. The conduct to be restrained was that admitted to have constituted a breach of the Act. Conduct not in accordance with that encompassed by the injunctions would clearly amount to conduct in contravention of the Act.

21                  Section 80A(1)(b) of the Act provides for particularised corrective advertisements to be published where the Court is satisfied that the person has engaged in conduct constituting a contravention of a provision of Part IVB or V. The purpose sought to be achieved by corrective advertising is to raise public awareness - for both consumers and competitors - as to the type of conduct that may contravene the Act, and as to the outcome of the particular litigation (see: ACCC v Real Estate Institute of WA Inc [1999] ATPR 41-719). Corrective advertising may be a particularly appropriate remedy where the conduct that breached s 52 consisted of media advertisements. Matters to be considered in the present case were that the advertisements were broadcast nationally, and repetitively, to a large number of consumers. The nature and prominence of the advertisements presents the inference that a number of people may have been misled or deceived, such people being unaware the conduct was misleading or deceptive and being unaware of their right to a remedy (see: Annand & Thompson Pty Ltd v Trade Practices Commission (1979) 40 FLR 165, per Fisher J at 115).

22                  I was satisfied corrective advertisements were appropriate in this case, and that the advertisements particularised and agreed to in the minute of consent orders have clearly shown the facts constituting the conduct in breach of the Act and the consequences flowing therefrom.

23                  As noted above, ACCC had also sought an order with respect to Target’s Trade Practices Compliance Program. The figure “AS3806” referred to is an Australian Standard, published by Standards Australia to provide principles for the development, implementation and maintenance of effective compliance programs in both public and private organisations: Miller’s Annotated Trade Practices Act 2001, 22^nd Ed, at p. 581. As the agreed order refers to the Respondent’s Trade Practices Corporate Compliance Program being consistent with AS3806, it appears Target had an existing compliance program before and at the time of the advertisements. Due to the conduct being varied and amounting to more than one isolated instance, it would seem Target’s compliance program was deficient. I considered that the terms of the order relating to Target’s compliance program were reasonable and appropriately defined.

24                  In conclusion, I mention the role of the Court in making consent orders in matters under the Act. It is the Court’s duty in receiving consent orders in any matter to scrutinise such orders as to their appropriateness. However, after being satisfied as to the appropriateness of the orders, the Court should be slow to impede final settlement of such matters, particularly those involving public interest considerations. Moreover, the public has an interest in the mutual resolution of litigation, and subject to the foregoing the Court should be careful not to refuse to make orders simply because the orders may have been different had it been the Court’s task to formulate them.

Associate:

Dated: