FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v

Woolworths Limited (No 2) [2002] FCA 1046

PRACTICE AND PROCEDURE – appropriate form of relief – appropriate costs order – finding that newspaper advertisement was misleading or deceptive– advertisement some eighteen months ago – no application for interlocutory injunction – no threat of repetition – whether final injunction should be granted – whether order for corrective advertising should be made – contravener had offered inter partes undertaking and corrective advertisement – applicant obtained only declaration of contravention – whether applicant should have its costs

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v

WOOLWORTHS LIMITED (ACN 000 014 875)

N 1465 OF 2001

LINDGREN J

20 AUGUST 2002

SYDNEY

THE COURT DECLARES THAT:

1.         In the period from and including 22 February 2001 to and including 1 March 2001, the respondent in trade or commerce:

(a)        in contravention of s 52 of the Trade Practices Act 1974 (Cth) (“the Act”) engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, namely, the conduct described in (i) and (ii) in the Schedule below; and

(b)        in contravention of s 53(eb) of the Act, in connexion with the promotion of the supply of goods, made the false or misleading representation concerning the place of origin of goods, described in (i) in the Schedule below:

SCHEDULE

(i)         representing in a newspaper advertisement that all the cattle which provided the beef the respondent offered for sale in its Armidale, Gunnedah, Inverell, Moree, Muswellbrook, Narrabri, Scone and Tamworth stores came from one hundred and fifty local suppliers in the area of North West New South Wales and New England;

(ii)        representing in a newspaper advertisement that all those cattle were fed with grain supplied by the grain industry in the area of North West New South Wales and New England.

THE COURT ORDERS THAT:

1.         The respondent pay the applicant’s costs of the proceeding except the costs referred to in Order 2 below.

2.         There be no order as to the costs of the hearing on Tuesday 20 August 2002 to the intent that the parties bear their own respective costs of that hearing.

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

REASONS FOR JUDGMENT (No 2)

introduction

1                     On 12 August 2002 I delivered reasons for judgment on contravention, postponing for consideration today the question of relief and the question of costs.  I will take my reasons of 12 August 2002 as read.

background

2                     The advertisement was published between 22 February and 1 March 2001 in four country newspapers, twice in each of two of those newspapers.  On 9 August 2001 Woolworths wrote to the Australian Competition and Consumer Commission (“the Commission”) advising that it did not intend to repeat the advertisement as it related to the opening of the Cargill meat processing plant in Tamworth, an event by then long since past.  In the letter, Woolworths also said it did not accept that the advertisement was misleading in the context in which it had appeared in the newspapers.

3                     The Commission commenced the proceeding on 29 October 2001 seeking declarations, injunctions, orders for corrective advertising and costs, but not interlocutory relief.  The form of corrective advertisement sought was annexed to the application which commenced the proceeding.  On the hearing, the Commission conceded that in one minor respect that form of advertisement was inappropriate: the Commission did not press for the sentence, “Further the number of local suppliers used was not 150”.

4                     On 31 October 2001, two days after the proceeding was launched, Woolworths’ solicitors wrote to the Commission advising that Woolworths was prepared to settle the proceeding on the following basis:

“(a)     our client will publish in the manner and prominence suggested in the Statement of Claim, a suitable corrective advertisement in a form to be agreed between our respective clients.  We do not envisage that this would be substantially different from that annexed to the Statement of Claim.  We will forward a draft if the Commission was seriously minded to entertain this proposal;

(b)       the proceedings would be dismissed with no order as to costs;

(c)        without admissions, our client would give an undertaking not to repeat or otherwise make representations to the effect of those in the subject advertisement or as alleged in the ACCC proceedings.”

5                     In the letter, the solicitors claimed that the matter did not warrant the attention of the Court and that it was in the interests of both the Commission and Woolworths to settle the matter appropriately and promptly, particularly since eight months had passed since the advertisement had appeared. 

6                     It will be noted that the form of the advertisement remained to be proposed and agreed upon and that the proceeding was to be dismissed with no order as to costs.  Apparently the undertaking referred to in par (c) was to be inter partes rather than to the Court. 

7                     The Commission replied promptly on 5 November 2001 advising that it rejected the offer of settlement and that it would consider settlement only if Woolworths agreed to orders similar to those specified in the application. 

8                     On 11 January 2002 Woolworths filed its defence, to which I referred and which I summarised in my earlier reasons for judgment.  Woolworths admitted many of the allegations in the statement of claim.  The defence had the beneficial effect of concentrating attention on the substantial issue between the parties, which was as to the true meaning and effect of the advertisement.

9                     On 8 April 2002, through its solicitors, Woolworths made an offer of compromise under O 23 of the Federal Court Rules (“the Rules”).  The notice of offer of compromise was to the effect that Woolworths would cause to be published in the four newspapers, on the right hand facing page within the first five pages, a corrective statement in accordance with annexure A to the notice of offer.  As well, the offer included a term that Woolworths would undertake not to make representations, publish or broadcast in North West New South Wales or New England that the cattle used in all of its beef products came from local suppliers when cattle from outside those areas were used in some beef products, that the cattle used for its beef products came from a stated number of local suppliers when the number was less than the stated number, or that its beef products were from cattle fed with grain supplied by the local grain industry when some cattle were fed with grain supplied from elsewhere.  Finally, by its offer, Woolworths offered to pay the Commission’s cost of the proceeding taxed on a party and party basis up to and including the date of the offer.  The Commission did not accept the offer.

10                  The hearing took place on 13 June 2002, my last day in Sydney before hearing a Native Title case in Western Australia over seven weeks beginning on Monday 17 June.  I delivered reasons for judgment on 12 August 2002 as mentioned previously.

reasoning

11                  The matters to be resolved this morning relate in a minor respect to the form of declaratory relief and in major respects to the questions of injunction, corrective advertising and costs.

The form of the declaration

12                  The minor point in relation to the form of the declaration arises out of the fact that the parties did not give separate attention to the pleaded contravention of s 53(eb) of the Trade Practices Act 1974 (Cth) (“the Act”).  Woolworths fairly concedes, however, that it was inherent in my finding of contravention of s 52 that Woolworths also contravened s 53(eb) by making a false or misleading representation concerning the place of origin of goods, namely, the beef Woolworths offered for sale in the stores in question.  I think there should be a declaration of contravention of s 53(eb) as well as of s 52 of the Act.

Injunction

13                  Woolworths points out that the contravening conduct happened a long while ago, as it did, and that there is no evidence of a threat of repetition, as there is not.  It also observes that the Commission did not seek an interlocutory injunction, apparently being satisfied that there was no likelihood of repetition.

14                  Not only is there no evidence of a threat of repetition; I am satisfied that there is evidence that Woolworths does not intend to repeat the advertisement or otherwise to repeat the misrepresentations which I identified in my earlier reasons for judgment.  I refer to the letter of 9 August 2001 and the notice of offer of compromise under O 23 of the Rules, to both of which I also referred earlier.  As well, there is the fact that the evidence showed that the advertisement was prompted by events touching the opening of the Cargill meat processing plant in Tamworth, an event now long since passed.

15                  The Court’s injunctive power may be exercised whether or not there is an intention to repeat the contravening conduct (subs 80(4) of the Act) but this does not mean that the absence of that intention is irrelevant to the exercise of discretion.

16                  Having regard to all the circumstances mentioned, I think an injunction is not called for and that the proper exercise of discretion is not to grant one.

Corrective advertisement

17                  Woolworths submits that for several reasons the case is not an appropriate one for an order for a corrective advertisement.

18                  Again there is the fact that the advertisement appeared within a fairly narrow period a long time ago – 22 February 2001 to 1 March 2001.  There is a question as to precisely what would be achieved by corrective advertising now – some eighteen months later. 

19                  As I noted in par 25 of my earlier reasons, the Commission did not attempt to establish and did not in fact establish that the advertisement was misleading or deceptive in so far as it represented that Woolworths supported the local economy in the area of North West New South Wales and New England.  The form of advertisement proposed by the Commission, however, could well suggest that the Court had found it to have been misleading in this very respect, because the Commission’s proposed form refers to the impugned advertisement as Woolworths’ “Beefing Up the Local Economy” advertisement in two prominent places.  The form of any corrective advertisement would have to direct attention to the precise respects in which I found the advertisement to be misleading or deceptive.  But it is to be questioned whether there will be readers of the corrective advertisement who read the original advertisement some eighteen months earlier who would retain any impression of it other than that it claimed that Woolworths, in respect of its beef products, supported the local economy.  That is to say, it is questionable whether readers of the original advertisement would retain a recollection of the more specific statements of the ways in which Woolworths claimed it supported the local economy which I found to be misleading or deceptive, and in respect of which a corrective advertisement might have a useful function to perform.

20                  Senior counsel for the Commission submits that correction of an abiding recollection is not the only function to be served by corrective advertising but I think it is an important one.

21                  Another factor relied on by senior counsel for Woolworths is that since I delivered my reasons for judgment on 12 August, the Commission has distributed two hundred and forty eight copies of a Press Release dated 12 August 2002 informing readers of it that the Court had accepted that the Commission had established that Woolworths had engaged in misleading or deceptive advertising in the respects in question.  As a result, publicity of the Court’s finding has appeared in seven newspapers and been broadcast twice on the radio in the Tamworth area.  Accordingly, it is asked rhetorically, what further purpose would now be served by a corrective advertisement?  No doubt it would be possible to find people who remain unaware of Woolworths’ contravention, but I think the fairly widespread publicity of my finding of 12 August 2002 is a factor to be taken into account in favour of Woolworths in relation to the question whether it should now be ordered to publish a corrective advertisement.

22                  I think that for the reasons mentioned, in this particular case an order for corrective advertising should not be made.

23                  (It was not disputed that the Court had power to make the order for corrective advertising.  The Commission referred in its written submissions to s 80A of the Act.  That section was repealed and “replaced” by subss 86C(1) and (2)(d) on 26 July 2001 by the Trade Practices Amendment Act (No 1) 2001 (Cth) (No 63 of 2001); see ss 2(1), 3, Schedule 1, Items 16 and 24.  But s 86C was available only in relation to conduct after the commencement of Item 24, which was on 26 July 2001.  It follows that unless there is any other legislative provision of which I am not aware, neither s 80A nor s 86C was available to support the making of the order sought.  In the absence of argument, I do not address the question of whether other provisions of the Act were available to give power to make the order sought.)

Costs

24                  I have found the question of costs somewhat difficult, although my conclusion is that the ordinary rule should apply, giving the Commission its costs.

25                  Senior counsel for the Commission points out that the litigation is public interest litigation and submits that there is a public interest in the Commission’s securing a finding of contravention by the Court, as distinct from simply coming to a private arrangement with an alleged contravener.  Senior counsel for Woolworths submits, on the other hand, that there is also a public interest in the Commission’s not wasting money but coming to a speedy resolution of a case where the alleged contravener promptly offers to give undertakings and to publish a correction. 

26                  I would not wish to be thought to accept that in all cases the Commission is justified in ignoring an offer of compromise and in persisting to the point of hearing but I think that on the particular facts of this case it was entitled to do so.  My reason for this view is, in summary, that Woolworths did not offer, at any time, to submit to a Court order of any kind and the Commission has obtained a finding by the Court of contravention which it has been able to publicise, no doubt in the hope that this will have a salutary effect on other traders.

27                  I turn to particular aspects of Woolworths’ two offers.

28                  The first matter to note in relation to the letter from Woolworths’ solicitors sent on 31 October 2001 is that the form of corrective advertisement remained to be proposed and agreed, and I do not know to what form Woolworths was prepared to submit.  Secondly, the offer required the proceeding to be dismissed with no order as to costs, but the Commission would have been at least entitled to its costs up to the date of the letter.  Thirdly, the undertaking offered was an inter partes one and not an undertaking to the Court, which, if breached, had the potential to give rise to a remedy for contempt of Court. 

29                  The notice of offer of compromise of 8 April 2002 also had shortcomings.  Although a precise form of corrective advertisement was proposed, it was headed “Woolworths Clarifies Cattle Statement” rather than, for example, the more forthcoming “Woolworths Corrects Beef Advertisement”.  The form of the proposed advertisement and the repeated use of the word “inadvertently” tend to direct the reader’s attention away from the errors in the original advertisement.  Similarly, the form commences by stating factors favouring Woolworths rather than drawing attention to the purpose of the document, namely, to draw attention to, and to correct, misleading or deceptive aspects of the original advertisement.  Finally, the undertaking offered was apparently again an undertaking not to the Court, but to the Commission.  It would have been possible for Woolworths to offer a without admissions undertaking to the Court, but it did not do so.

30                  Order 23 r 11 of the Rules requires the Court to determine which is more favourable to the offeree:  the terms of the offer, or the judgment obtained.  Making that determination presents no difficulty when all that have to be compared are two amounts of money.  But the position is otherwise where, as here, an offer of a range of terms is to be compared with a declaration of contravention.  The difficulty is all the greater by reason of the public interest role of the Commission. 

31                  I am not prepared to conclude that a judicial declaration of contravention and its consequences in terms of the publicity the Commission was able to give to it, represent a less favourable result from the Commission’s viewpoint than the terms of either of the two offers which Woolworths made.

32                  If Woolworths had gone further by offering to consent, albeit without admissions, to an injunction and an order for corrective advertising, both in appropriate terms, I may have departed from the usual costs order, but in the circumstances I think the Commission should have its costs.

[There followed short argument as to the costs of today]

33                  The parties had equal success on today’s hearing.  There will be no order as to the costs of today.

conclusion

34                  There will be a declaration of contravention of ss 52 and 53(eb) of the Act and an order that Woolworths pay the Commission’s costs, except the costs of today, as to which will be no order as to costs.

Associate:        

Dated:              23 August 2002