FEDERAL COURT OF AUSTRALIA

Telstra Corporation Limited v SingTel Optus Pty Ltd [2007] FCA 824

TRADE PRACTICES – misleading or deceptive conduct – comparative advertising – mobile telephone plans – whether advertisements should be prevented by interlocutory injunction – whether serious question to be tried – whether advertisements misleading or deceptive – comparison between plans with different monthly prices and different features – competitors had more directly comparable plans – whether obligation to compare like with like – balance of convenience – applicant’s potential damages calculable – damages not calculable if respondents required to enforce undertaking as to damages – principle of freedom of speech – difficulties of framing injunction

Trade Practices Act 1974 (Cth)

Gillette Australia Pty Ltd v Energizer Australia Pty Ltd [2002] FCAFC 223 (2002) 193 ALR 629 followed

TELSTRA CORPORATION LIMITED (ACN 051 775 556) v SINGTEL OPTUS PTY LTD (ACN 052 833 208), OPTUS NETWORKS PTY LTD (ACN 008 570 330) AND OPTUS MOBILE PTY LTD (ACN 054 365 696)

VID 388 OF 2007

GRAY J

15 MAY 2007

MELBOURNE

THE COURT ORDERS THAT:

1.         The application for an interlocutory injunction be dismissed.

2.         The applicant pay the respondents’ costs of the application for interlocutory relief, including the costs reserved in the order of Jessup J made on 11 May 2007.

3.         The proceeding be placed in the docket of a judge and be listed for directions on a date to be fixed by the docket judge.

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

REASONS FOR JUDGMENT

1                     This case has something of a familiar flavour about it.  It is a case in which one of two competitors in the same market invokes the misleading and deceptive conduct provisions in the Trade Practices Act 1974 (Cth) against the other competitor, seeking to establish that the other competitor has engaged in conduct that is misleading or deceptive or is likely to mislead or deceive consumers.  In this case, the two competitors are in the market of mobile telephones and their associated plans.  The applicant is Telstra Corporation Limited (“Telstra”) and the respondents are SingTel Optus Pty Ltd, Optus Networks Pty Ltd and Optus Mobile Pty Ltd, all of whom together might be described conveniently as “Optus”.

2                     Each of these two competitors offers a variety of methods of payment for mobile telephone communications that are described as “plans”.  The present case relates to what are called “post-paid plans”, which are distinguished from “pre-paid plans”, on the basis that the consumer usually receives a periodical bill, generally monthly, charging the consumer for the calls actually made during the preceding period.  The other relevant terminology is that, in part, this case relates to what are called “post-paid capped plans”.  These are plans under which a specified amount is allocated to calls of a particular kind or kinds, which are not otherwise chargeable at a per-call or per-unit rate, until the cap amount is exceeded.

3                     Optus has recently embarked on an advertising campaign, which involves comparative advertising between one of its plans and one of Telstra’s plans.  The advertisements have appeared on television and in print media.  In the course of argument this morning, concentration has been on a particular version that appeared as a full-page advertisement in the weekend newspapers last weekend.  The advertisement features, at the top by way of headline, a black panel in which appear in white letters the words, “FOR THE FIRST TIME IN BLACK & WHITE”.  Below that is another panel, divided down the middle, so that the left half has a white background and the right half has a black background.  Straddling the border between the two halves appears the abbreviation for the word “versus” in the form of the letters “vs”.  On the left-hand side, the white half, appears the name “OPTUS” and on the right-hand side, the black half, appears in white lettering the word “TELSTRA”.  Underneath “OPTUS” appears “$49 CAP Plan”; underneath “TELSTRA”, “$40 Phone Plan”.  There are then four bullet points underneath each.  The Optus bullet points are as follows: 

■         $300 of voice calls and text per month ^

■         Which equals up to 153 2-minute voice calls anytime between 8.00am         and 7.00pm, to any home or mobile number in Australia 

■         Call rate (per 30 sec) 40¢, flagfall 35¢,national text 25¢

■         A Nokia N73 valued at $809rrp

The Telstra bullet points are as follows: 

□         $35 of monthly included voice calls and text plus $5 of included              Data/GPRS

□         Which equals up to 19 2-minute voice calls between 8.00am and     7.00pm, to any home or mobile number in Australia,^# (more if you     choose the My Hour option and you call during your selected hour) 

□         Call rate (per 30 sec) 38¢, flagfall 27¢, national text 25¢ (unless Text        option selected)

□         A Motorola RAZR MAXX V6 valued at $729rrp⁺

At the foot of each half of this panel is the image of a mobile telephone receiver, presumably, in the case of Optus, the Nokia receiver and, in the case of Telstra, the Motorola receiver.

Under the divided panel appear the words:

If you’re on the Telstra $40 Phone Plan and want to make two-minute voice calls, to any home or mobile number in Australia^#, compare it with Optus $49 Cap plan.  Do the maths and switch to Optus Mobile today.

There then follow the words in capitals and larger font:

HURRY INTO YOUR LOCAL OPTUS SHOP OR VISIT WWW.OPTUS.COM.AU AND MAKE UP YOUR OWN MIND 

4                     This description is of the relevant features of the advertisement.  There is some small print at the very foot of the page and there are some images appearing on the left and right-hand side towards the foot of the page, one of which is the Optus brand featuring its slogan word “yes” in inverted commas.

5                     Telstra seeks an interlocutory injunction to restrain the continued publication of advertisements in this form.  It does so on the basis that it says that the comparison is a false, or an unfair, or a misleading one, because the comparison is not between like products.  It turns out, from the material submitted, that Optus has what is called the “Optus $39 ‘yes’ Plan” which has features, in many respects, similar to the “Telstra $40 Phone Plan”.  Telstra also has its own $49 Cap Plan, which has a number of features similar to the Optus $49 Cap Plan. 

6                     The major obstacle to Telstra’s application for an interlocutory injunction seems to me to be the principle that underlies the judgment of the Full Court in Gillette Australia Pty Ltd v Energizer Australia Pty Ltd [2002] FCAFC 223 (2002) 193 ALR 629.  That case concerned an advertising campaign by one battery manufacturer, in which it compared the particular feature of its alkaline battery with the same feature of the other battery manufacturer’s different product, its carbon zinc battery.  The major issue was whether this was a misleading comparison, when it did not inform the consumer that the second manufacturer also had its own alkaline battery.  The Full Court made it very clear that it was open to the advertiser to choose with which product it compared, and to choose the feature on which it made a comparison.

7                     At [21]-[22], Heerey J rejected the argument that comparison would be meaningful and fair only where it compared products which were approximate peers, or were like products.  At [22], his Honour said:

Provided the factual assertions are not untrue, or misleading half-truths, an advertiser can lawfully compare a particular aspect of its product or service favourably with the same aspect of a competitor’s product or service.

At [28], his Honour said:

There is no doubt on the evidence that the Eveready Super Heavy Duty battery, the highest selling carbon zinc battery in Australia, competes head to head with Duracell’s alkaline battery.  Duracell is entitled, in my opinion, to point out truthfully to consumers a feature of its product which is superior to that of a rival product.  If viewers think that Energizer has no other batteries which are more powerful than the Eveready Super Heavy Duty, then that belief would spring from their own mistaken assumptions and not from anything Duracell has told them in the advertisement.  The appropriate remedy is for Eveready to correct such mistaken assumptions, if they exist, by its own advertising.  There is no legal or ethical obligation on a trader to publicise the full range of a competitor’s products, and reasonable viewers would not think otherwise.

8                     Lindgren J expressed his views somewhat differently.  In a lengthy paragraph, numbered [53], he dealt with a number of the considerations that the trial judge had dealt with.  In the course of that discussion, at p 645 of the report in the Australian Law Reports, his Honour said:

In my opinion, it is important not to apply a “policy” thought to underlie the prohibition of misleading or deceptive conduct in place of the words of the provision.  Moreover, the present case illustrates a particular difficulty to which such an approach can give rise.  Policy may be thought to require that Duracell be able, by means of comparative advertising, to inform viewers that the Eveready SHD battery does not give value for money.  But does policy permit it to do so without also informing them of the availability of Energizer alkaline batteries of the same size?  I do not understand how any answer to this question can be confidently arrived at.

At 646, his Honour said:

It cannot be accepted as a general proposition that in order not to be misleading or deceptive, comparative advertising must refer to all of the criteria by reference to which the goods might be compared.  Most goods have several “selling features” and consumers understand that a comparative advertisement referring to only one of them does not necessarily exhaust the field.  Consumers understand that the advertiser has selected a feature which favours the advertised product, in the hope that that feature will be so important to consumers that they will not be interested to inquire into other potential bases for comparison.

The present product is unusual in that it has only two selling features:  power and price.  Its power is indicated by how long it lasts.  The modified advertisement tells a viewer something about the only criterion other than price by reference to which he or she might choose a non-rechargeable battery.

But I do not think the viewer would understand the commercial to represent that the compared batteries are equal or approximately equal in price.  There are other equally likely possibilities, such as, that the price of the Duracell battery will not be more than “up to three times greater” than the price of the Eveready SHD battery, or that the price of the Duracell battery will not be so much greater than the price of the Eveready SHD battery that a buyer of the Duracell battery will get value for money.

9                     Merkel J also agreed in the result.  At [85], his Honour agreed, for the reasons given by Heerey and Lindgren JJ, that:

the impression that is likely to be created upon the viewer is that the modified advertisement compares the power of the Duracell alkaline battery and the Eveready Super Heavy Duty battery and not their price or value.

His Honour did not accept that the advertisement made any representation as to price or value, but left the potential purchaser to make his or her own choice on those matters at the point of sale.  At [90], his Honour said:

The modified advertisement makes representations about two battery types.  It does not make any representation about, or comparison between, the two brands or their respective ranges of batteries.  Thus, the modified advertisement does not represent that the Eveready Super Heavy Duty battery is the only direct competitor (within the Eveready range of batteries) of the Duracell alkaline batteries.  It does no more than represent in graphic terms the power difference between two specified batteries which are direct competitors in the market place.  In the absence of a representation, implication or impression that the Eveready Super Heavy Duty battery is the only Eveready competitor, I do not think that the disclosure of other competitive products in the Eveready alkaline range, having similar performance characteristics to Duracell's alkaline battery, is necessary to prevent the comparison from being misleading.  The position might have been otherwise if the two comparators were not competitors or if the comparison were for some other reason inappropriate.  That however, is not the situation in the present case.

10                  It seems to me that the principle underlying this case tends very strongly against the case put by Telstra.  There can be little doubt that the two products specified in the Optus advertising campaign are products that compete one with the other.  That being the case, it is legitimate for Optus to make a truthful comparison of whatever feature or features of them it chooses to compare, without it being obliged to inform consumers that the product with which it makes comparison is not the only product in the Telstra range.  It is open to Optus to select whichever feature or features it wishes to compare, and as long as it makes a truthful comparison, it does not have to correct any mistaken assumptions on the part of the consumer about the choice of the product with which the comparison is made.

11                  Counsel for Telstra sought to distinguish the Gillette case on the basis that here there is reference to price, whereas in the battery advertising there was no reference to price or indeed to value.  The Optus advertising is all about value and certainly specifies price.  In my view, those features do not take the Optus advertising campaign outside the principle laid down by the Full Court in the Gillette case.  If anything, the specification of price and the reference to value in the present case makes Telstra’s case even weaker than was the case in relation to the battery comparisons.  In the first place, it is clearly specified that the comparison is between the Optus $49 Cap Plan and the Telstra $40 Phone Plan.  Plainly, the monthly price of the two plans is specified to be different.  Plainly also, in the use of the phrase “Cap Plan” and the phrase “Phone Plan”, there will be conveyed to the reasonable consumer at least the possibility that the comparison is between two different styles of plan.  There may well be consumers who understand the difference between a “Cap Plan” and a “Phone Plan”.  Even those who do not will have conveyed to them that there is likely to be some difference. 

12                  Despite this manifest differentiation, counsel for Telstra has been driven to suggesting that there is some kind of subtle message in the Optus advertisements that in reality the two products that are being compared are the directly competitive products.  I do not think that is the case.  I have pressed counsel for Telstra repeatedly to tell me how much clearer the advertisement could make it that there was a comparison between plans of different prices and with different descriptions, and therefore likely to have different features.  Counsel for Telstra has been unable to suggest ways in which such differentiation might be made more plainly.  In my view, it is more than amply plain.  In any event, even if there were a subtle message that the two were directly competitive, there is no misleading of the consumer into believing that the Telstra $40 Phone Plan is Telstra’s only product, and no suggestion that Telstra does not have a $49 Cap Plan which could be compared with Optus.

13                  The advertisements are very plainly aimed at those who make a lot of use of their mobile telephones to initiate communications with other people.  There is no suggestion that there is any untruth about the assertion that there would be greater value for a consumer who wants to make a lot of two-minute voice calls to any home or mobile number in Australia.  There would be greater value because of the $300 cap, which presumably, on any calculation, if the amount of the cap were used fully or some amount close to it were used, would more than offset the additional $9 per month that would be paid for the plan.

14                  In my view, therefore, Telstra does not succeed in making out even a serious question to be tried on the evidence as it stands.  Additionally, the material suggests that the Optus advertising campaign is only intended to last for a relatively short period, until 31 May.  The reality is that there will be no trial of this proceeding.  If an injunction were to be granted to Telstra today, that would effectively end the Optus advertising campaign, or force it to be recast, and would provide a victory to Telstra.  Such a victory, on the basis of a mere serious question to be tried and the balance of convenience, would be an inadequate response on the part of the Court.  Counsel for Telstra accepted that he ought to be able to satisfy me that there would be a high probability of Telstra succeeding at any trial before he should be entitled to his injunction.  Accepting that standard, I am in no doubt that Telstra falls well short of it on the material as it presently stands.

15                  Even if there were a serious question to be tried, Telstra would be in great difficulty in relation to the balance of convenience.  For practical purposes, it seems to me that Telstra would not have any real difficulty at a trial in establishing, with some degree of precision, what loss and damage it had suffered from the Optus advertising campaign.  Telstra would be able to show from its records those of its customers who had abandoned their $40 Phone Plans.  By means of discovery of Optus’s records, it would be able to compare the numbers of people who took up the Optus $49 Cap Plan.  From that sort of data, it would be reasonably easy to make an assessment of the impact of the advertising campaign in respect of existing Telstra customers.  It would be possible to extrapolate from that, at least with the precision necessary for any award of damages, the impact of the advertising campaign in the market generally.

16                  By contrast, if an injunction were to be granted and Telstra were to give the usual undertaking in damages, if it were to fail at the trial and Optus were then to be left to enforce the undertaking in damages, there would be great practical difficulty in Optus proving that it had suffered any specific loss.  It would be reduced to the supposition that, because its advertising campaign was not able to continue, it had not procured as many customers for its $49 Cap Plan as it would have if the advertisements had continued.  The numbers of missed customers would be a matter purely for speculation, to the extent that Optus would be unlikely to be able to recover anything if it should be enforcing the undertaking in damages.  This practical comparison must weigh powerfully against Telstra in the balance of convenience.

17                  Another powerful consideration, in my view, is that it is undesirable for the Court to enter upon the process of censoring advertisements.  The underlying principle of freedom of speech must be capable of being invoked for good or for ill.  Those who wish to sell their products are entitled to exercise the right of free speech, just as much as those who wish to spread their ideas or opinions.  Commercial invocation of the right of free speech may be irksome, but attempts to trespass too far on those rights, in the case of commercial people, give rise to the risk that free speech will be a right wound back in the case of those who seek to spread their ideas and opinions.  For this reason, in my view, the Court should be very slow to grant an injunction, on the basis of a serious question to be tried, that restrains people from advertising, especially where it can be seen that the remedy of damages after the event is available.  In my view, the balance of convenience tends heavily against Telstra in the present case. 

18                  There is yet another reason why the granting of an injunction would be extremely difficult in the present case, as a practical matter.  In effect, Telstra invites the Court simply to ban the existing form of advertisement.  Leaving aside the fact that there may be variations between televised versions and print media versions, and even among those versions, there is considerable difficulty about making an order in those terms.  It might well lead to an argument that there has been no contravention of the injunction because some minor changes have been made to an advertisement in the future.  That in turn might lead to a proliferation of litigation, which would be most undesirable.

19                  It is a fundamental principle of the law relating to injunctions that they should be expressed with precision.  A person against whom an injunction is made should be told precisely what can or cannot be done, so that that person can conduct their affairs in full knowledge of what they can do, or what they must not do, in order to avoid contravening the injunction and risking punishment for contempt of court.  As I see it, it would be extraordinarily difficult to frame an injunction in a case such as the present.

20                  Plainly, there is nothing wrong with comparative advertising.  Plainly, the basis for comparison is the choice of the advertiser who makes the comparison.  Plainly, any misleading effect that might occur can be overcome in any number of ways.  Banning the advertising of a comparison between the Optus $49 Cap Plan and the Telstra $40 Phone Plan would go far beyond what might be necessary in order to prevent any misleading or deceptive conduct.  For instance, it might be perfectly possible to include in any advertisement something that makes the comparison abundantly clear.  It might be possible to overcome any problem with a footnote that says, “Telstra has a $49 Cap Plan which provides a direct comparison with the Optus $49 Cap Plan.”  If that were done, there could be no argument that the advertising campaign was misleading or deceptive.  How, then, could an injunction be framed that said that Optus was only to make the comparison if it said something additional to avoid being misleading or deceptive?  The very use of words such as “misleading” or “deceptive” in the text of an injunction is itself productive of vagueness so that the person bound by the injunction cannot know precisely what conduct is to be avoided.  In these circumstances, for that reason alone, the Court ought to be very reluctant to enter upon the grant of an injunction.

21                  For all of these reasons, I am of the view that the Telstra application for an interlocutory injunction must fail.  In my view, there is no serious question to be tried about any entitlement of Telstra to relief in respect of the Optus advertising campaign as it presently exists.  The balance of convenience is decidedly against Telstra, and the difficulties of framing an appropriate injunction, in any event, seem to me to be insuperable.  For those reasons, the application for an interlocutory injunction must be dismissed.

22                  The orders that I make are:

1.         The application for an interlocutory injunction be dismissed.

2.         The applicant pay the respondent’s costs of the application for interlocutory relief, including the costs reserved in the order of Jessup J made on 11 May 2007.

3.         The proceeding be placed in the docket of a judge and be listed for directions on a date to be fixed by the docket judge.

Associate:

Dated:         28 May 2007