FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Audi Australia Pty Ltd [2007] FCA 1990

TRADE PRACTICES – misleading and deceptive conduct – conduct liable to mislead the public – false representations that goods are of a particular standard or quality – false representations that goods have performance characteristics, uses or benefits – when advertisement as to purchase price is misleading – whether advertisement must state specified feature is non-standard

PRACTICE AND PROCEDURE – declarations by consent or on admissions on matters relating to public rights where supported by evidence, within power, and in the public interest

Trade Practices Act 1974 (Cth) ss 52, 53(a), 53(c), 53(e), 55, 86D(2)

Australian Competition and Consumer Commission v Econovite Pty Ltd [2003] ATPR 41-959 cited

Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] ATPR 41-840 cited

Australian Securities and Investment Commission v Rich (No 2) (2004) 22 ACLC 1232 cited

BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 51 ALR 401 cited

Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 followed

Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221 cited

Metzger v Department of Health and Social Security [1977] 3 All ER 444 cited

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 cited

Termijtelen v Van Arkel [1974] 1 NSWLR 525 cited

Wallersteiner v Moir [1974] 3 All ER 217 cited

Williams v Powell [1894] WN (Eng) 141 cited

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v AUDI AUSTRALIA PTY LTD (ACN 86 077 092 776)

VID 1018 OF 2007

GORDON J

7 DECEMBER 2007

MELBOURNE

Upon the Respondent, by its counsel, UNDERTAKING to the Court that:

(1)        it will not, for a period of three years from the date of the making of these orders, whether by itself, its servants, agents or otherwise howsoever, in connection with the supply or possible supply of, or the promotion by any means of the supply of, the Audi Q7 Series of motor vehicles (the “Audi Q7 Series”) make representations to the effect that a motor vehicle in the Audi Q7 Series is available for purchase at, or from, a particular price when:

(a)        the motor vehicle is not available for purchase at, or from, that price;

(b)        there is a fee or charge to be paid in addition to that price to purchase the motor vehicle and the existence of the additional fee or charge is not identified; or

(c)        there is a fee or charge to be paid in addition to that price for particular features of the motor vehicle and the existence of the additional fee or charge is not identified;

(2)        it will not, for a period of three years from the date of the making of these orders, whether by itself, its servants, agents or otherwise howsoever, in connection with the supply or possible supply of, or the promotion by any means of the supply of, the Audi Q7 Series make representations to the effect that a motor vehicle in the Audi Q7 Series has a specified feature as a standard feature, when the specified feature is not a standard feature;

(3)        it will continue to administer the trade practices compliance program developed by the Federal Chamber of Automotive Industries in conjunction with Gilbert & Tobin (the “Trade Practices Compliance Program”), to all senior management, marketing and sales staff employed by Audi;

(4)        within one month of the date of the making of these orders, it will engage an independent legal firm, Piper Alderman in Sydney, to advise and audit the Trade Practices Compliance Program;

(5)        it will implement and administer the Trade Practices Compliance Program for a period of three years from the date of the making of these orders; and

(6)        within three months of the date of the making of these orders, it will provide a written report to the Applicant on the contents of the Trade Practices Compliance Program and provide a further report to the Applicant in respect of the implementation and administration of the Trade Practices Compliance Program at the conclusion of each period of 12 months during the first three years which the program is being implemented and administered.

THE COURT DECLARES THAT:

1.         The Respondent, by making statements to the effect that the Audi Q7 3.6 SE motor vehicle (the “Audi Q7 3.6 SE”) is a “7 seat SUV” with “7 adult seats” in one or more of the following ways:

(a)        advertisements published in The Age newspaper on 23 June 2007, 7 July 2007, 14 July 2007, 28 July 2007, 4 August 2007, 11 August 2007 and 18 August 2007; and

(b)        an advertisement published in The Sydney Morning Herald newspaper on 30 June – 1 July 2007,

thereby represented that the Audi Q7 3.6 SE is a motor vehicle with 7 seats as a standard feature, when in fact:

(c)                7 seats is not a standard feature for the Audi Q7 3.6 SE; and

(d)               the standard seating for the Audi Q7 3.6 SE is 5 seats,

has in trade or commence:

(e)                engaged in conduct that was false, misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act 1974 (Cth) (“the Act”);

(f)                 in connection with the supply of goods or possible supply of goods or in connection with the promotion of the supply of goods:

(i)                  falsely represented that goods were of a particular standard or quality in contravention of s 53(a) of the Act; and

(ii)                represented that goods had performance characteristics, uses or benefits that they did not have in contravention of s 53(c) of the Act; and

(g)                engaged in conduct that was liable to mislead the public as to the nature, the characteristics and the suitability for their purpose of goods in contravention of s 55 of the Act.

2.         The Respondent, by making statements to the effect that the Audi Q7 Series motor vehicles are “7 seat SUV’s” in one or more of the following ways:

(a)        advertisements published in The Sydney Morning Herald newspaper on

7 – 8 July 2007 and 21 – 22 July 2007;

(b)         information published on the Audi Australia website http://www.audi.com.au/content/Model.aspx?s=1875; and

(c)          a brochure dated August 2006 setting out the specifications for the Audi Q7 Series which was available in or about August 2007 at Audi Australia dealerships and published on the Audi Australia website http://www.audi.com.au,

thereby represented that the Audi Q7 Series are motor vehicles with 7 seats as a standard feature, when in fact:

(d)         7 seats is not a standard feature for the Audi Q7 Series; and

(e)          the standard seating for the Audi Q7 Series is 5 seats,

has in trade or commence:

(f)           engaged in conduct that was false, misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Act;

(g)          in connection with the supply of goods or the possible supply of goods or in connection with the promotion of the supply of goods:

(i)         falsely represented that goods were of a particular standard or quality in contravention of s 53(a) of the Act; and

(ii)        represented that goods had performance characteristics, uses or benefits that they did not have in contravention of s 53(c) of the Act; and

(h)          engaged in conduct that was liable to mislead the public as to the nature, the characteristics and the suitability for their purpose of goods in contravention of s 55 of the Act.

3.         The Respondent, by making pictorial representations of an Audi Q7 Series motor vehicle with a 7 seat configuration in one or more of the following ways:

(a)          a brochure dated August 2007 setting out the specifications for the Audi Q7 Series motor vehicle published on the Audi Australia website at http://www.audi.com.au/content/Model.aspx?s=1875; and

(b)         a brochure dated August 2006 setting out the specifications for the Audi Q7 Series motor vehicle which was available prior to August 2007 at Audi Australia dealerships and published on the Audi Australia website http://www.audi.com.au,

thereby represented that the Audi Q7 Series are motor vehicles with 7 seats as a standard feature, when in fact:

(c)          7 seats is not a standard feature for the Audi Q7 Series; and

(d)         the standard seating for the Audi Q7 Series is 5 seats,

has in trade or commence:

(e)          engaged in conduct that was false, misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Act;

(f)           in connection with the supply of goods or possible supply of goods or in connection with the promotion of the supply of goods:

(i)         falsely represented that goods were of a particular standard or quality in contravention of s 53(a) of the Act; and

(ii)                represented that goods had performance characteristics, uses or benefits that they did not have in contravention of s 53(c) of the Act; and

(g)          engaged in conduct that was liable to mislead the public as to the nature, the characteristics and the suitability for their purpose of goods in contravention of s 55 of the Act.

4.         The Respondent, by making statements to the effect that the Audi Q7 3.6SE is a motor vehicle available for a purchase price from $79,900 in one or more of the following ways:

(a)          advertisements published in The Age newspaper on 23 June 2007, 7 July 2007, 14 July 2007, 28 July 2007, 4 August 2007 and 11 August 2007; and

(b)         an advertisement published in The Sydney Morning Herald newspaper on 30 June - 1 July 2007;

thereby represented that the Audi Q7 3.6 SE is a motor vehicle available for a purchase price of $79,900, when in fact:

(c)          all mandatory components of the total price payable for the Audi Q7 3.6 SE had not been identified, in that the existence of dealer delivery and statutory charges had not been identified; and

(d)         the price of $79,900 was the recommended retail price for the Audi Q7 3.6 SE with 5 seats, excluding dealer delivery and statutory charges,

has in trade or commerce:

(e)          engaged in conduct that was false, misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Act; and

(f)           in connection with the supply of goods or possible supply of goods or in connection with the promotion of the supply of goods made a false or misleading representation with respect to the price of goods in contravention of s 53(e) of the Act.

5.         The Respondent, by making statements to the effect that the Audi Q7 3.6 SE is a motor vehicle with 7 seats available for a purchase price from $79,900 in one or more of the following ways:

(a)          advertisements published in The Age newspaper on 23 June 2007, 7 July 2007, 14 July 2007, 28 July 2007, 4 August 2007, 11 August 2007 and 18 August 2007; and

(b)         an advertisement published in The Sydney Morning Herald newspaper on 30 June - 1 July 2007;

thereby represented that the Audi Q7 3.6 SE with 7 seats was a motor vehicle available for a purchase price of $79,900, when in fact:

(c)          the price of $79,900 was the recommended retail price for the Audi Q7 3.6 SE with 5 seats, excluding dealer delivery and statutory charges;

(d)         the qualification of the recommended retail price in respect of the additional charge for the optional 7 seat capacity was not prominent and was not in close proximity to the advertised price of $79,900; and

(e)          the price of an Audi Q7 3.6 SE with 7 seats was $81,600 (being the sum of the recommended retail price of $79,900 for a 5 seat standard vehicle and the optional extra 2 seats at a cost of $1,700), plus dealer delivery and statutory charges,

has in trade or commerce:

(f)           engaged in conduct that was false, misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Act; and

(g)          in connection with the supply of goods or possible supply of goods or in connection with the promotion of the supply of goods made a false or misleading representation with respect to the price of goods in contravention of s 53(e) of the Act.

THE COURT ORDERS THAT:

6.         The Respondent publish at its own expense within 28 days of the date of this order an advertisement in the terms and form of Annexure 1 to this order in The Age and The Sydney Morning Herald newspapers and further that the Respondent shall use its best endeavours to ensure that such advertisement shall be:

(a)          of a size no less than 15cm x 20cm;

(b)         in text which is in type not less than 12 point; and

(c)          placed within the first 8 pages of the relevant newspapers.

7.         The Respondent, at its own expense, publish a notice in the form of Annexure 2 to this order within 21 days, and to remain continuously in place for 60 days, on the homepage of the website http://www.audi.com.au.

8.         The Respondent file and serve on the Applicant within 45 days of the date of this order an affidavit verifying that it has carried out its obligations under paragraphs 6 and 7 above.

9.         The Respondent pay the Applicant’s costs of and incidental to the proceeding fixed at $25,000 within 14 days of the date of this order.

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

REASONS FOR JUDGMENT

INTRODUCTION

1                     Audi Australia Pty Ltd (“Audi”) is the Australian importer and wholesaler of Audi motor vehicles to Audi dealers located throughout Australia.  This proceeding concerns an advertising campaign conducted by Audi in relation to the Audi Q7 Series of motor vehicles, including the Audi Q7 3.6 SE motor vehicle. 

2                     The advertising campaign was conducted between 23 June 2007 and 18 August 2007 by way of seven advertisements on broadsheet pages in “The Age” and 3 half broadsheet pages in the “Sydney Morning Herald”, a brochure entitled the “2006 Specification Brochure” available from its dealerships and on its website and, finally, the Audi website which included the 2006 Specification Brochure (collectively “the Advertising Material”). 

3                     By application dated 8 November 2007, the Australian Competition and Consumer Commission (“the ACCC”) alleged that Audi, by publishing the Advertising Material, engaged in conduct in contravention of ss 52, 53(a), 53(c) and 55 of the Trade Practices Act 1974 (Cth).  On 27 November 2007, the ACCC and Audi agreed to compromise the proceeding and submitted to the Court orders which the parties sought by consent.  The proposed orders were submitted by consent on the basis that Audi also gave certain undertakings to the Court. 

4                     As a general principle, a court does not make declarations on matters relating to public rights by consent or on admissions, but only if it is satisfied by evidence: ASIC v Rich (No 2) (2004) 22 ACLC 1232 at [10]; Williams v Powell [1894] WN (Eng) 141; Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221 at 225–227; Termijtelen v Van Arkel [1974] 1 NSWLR 525; Wallersteiner v Moir [1974] 3 All ER 217; Metzger v Department of Health and Social Security [1977] 3 All ER 444 at 451; BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 51 ALR 401; Young P W, Declaratory Orders (2nd ed, 1984) [601].

5                     The evidence adduced in support of the resolution of the proceeding on the terms of the proposed consent orders was a copy of the Advertising Material.  These reasons for decision record why, in my view, it is appropriate for the Court to make orders in terms of the proposed consent orders.

FACTS

6                     The facts are not in dispute.  The Advertising Material was published; each of the advertisements was published either in the Age or the Sydney Morning Herald, the 2006 Specification Brochure was available from Audi’s dealerships and on its website and the 2007 Specification Brochure was available on its website.

7                     The ACCC submits that Audi made representations in the Advertising Material that:

(1)       the Audi Q7 3.6 SE is a motor vehicle with 7 seats as a standard feature (“the 7 Seat Representation”);

(2)       motor vehicles in the Audi Q7 Series have 7 seats as a standard feature (“the 7 Seat Series Representation”);

(3)        the Audi Q7 3.6 SE is a motor vehicle available for a purchase price of $79,900 (“the Price Representation”);

(4)        the Audi Q7 3.6 SE is a motor vehicle with 7 seats available for a purchase price of $79,900 (“the 7 Seat Price Representation”);

(collectively “the Representations”).

8                     I have carefully reviewed the Advertising Material several times and have sought to assess the likely effect of each on potential customers.  In reviewing the Advertising Material I had at the forefront the caution from Lindgren J in Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 at [47] regarding television advertising.  Of course, similar caution must be adopted when reviewing the Advertising Material. 

9                     I accept that the following Representations were conveyed in the following Advertising Material:

10                  Next, the ACCC submits that the Representations were false, misleading or deceptive on the basis that:

(1)       the Audi Q7 Series motor vehicles including the Audi Q7 3.6 SE have 5 seats as a standard feature;

(2)       7 seats is an option available in the Audi Q7 Series motor vehicles including the Audi Q7 3.6 SE;

(3)       the Audi Q7 3.6 SE is not available for purchase as a 7 seat vehicle at or from $79,900;

(4)        the Audi Q7 3.6 SE is not available for purchase at or from $79,900;

(5)       there is a fee or charge to be paid in addition to the price of $79,900 to purchase an Audi Q7 3.6 SE vehicle for mandatory components including dealer delivery and statutory charges; and

(6)       there is a fee or charge to be paid in addition to the price of $79,900 for the 2 optional extra seats (in order to have 7 seats).

7 Seat and 7 Seat Price Representations

11                  Audi admits that:

(1)       by making the 7 Seat Representation, it engaged in conduct in contravention of ss 52, 53(a), 53(c) and 55 of the Act; and

(2)       by making the 7 Seat Price Representation, it engaged in conduct in contravention of ss 52 and 53(e) of the Act.

The declarations in paragraphs 1 and 5 of the Orders are directed to these contraventions.

7 Seat Series Representations

12                  Audi admits that by making the 7 Seat Series Representation, it engaged in conduct in contravention of ss 52, 53(a), 53(c) and 55 of the Act.  The declarations in paragraphs 2 and 3 of the Orders are directed to these contraventions.

Price Representations

13                  Audi admits that by making the Price Representation, it engaged in conduct in contravention of ss 52 and 53(e) of the Act.  The declaration in paragraph 4 of the Orders is directed to these contraventions.

ORDERS

14                  As already noted, the proposed Orders provide for declarations in relation to Audi’s admitted contraventions of ss 52, 53(a), 53(c) and 55 of the Act.  The proposed Orders also provide for a publication order pursuant to ss 86D(2)(a) and (b) of the Act and for Audi to pay the costs of the ACCC fixed in the sum of $25,000.  In addition to the proposed Orders, Audi offered to give undertakings to the Court to the effect that it will not repeat the contravening conduct in respect of the Audi Q7 Series of motor vehicles and it will continue to administer and review its trade practices compliance program.

15                  In my view, it is appropriate for there to be orders in accordance with the minute of proposed orders.  The orders are within power and otherwise appropriate:  ACCC v Target Australia Pty Ltd [2001] ATPR 41-840 at [24] and ACCC v Econovite Pty Ltd [2003] ATPR 41-959 at [12].  Moreover, in the circumstances, it is in the public interest that these proceedings be settled:  see Kiefel J in NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at 291.  

16                  In the circumstances, I will make orders in accordance with the minutes of proposed orders in conjunction with the undertakings to be given by Audi to the Court.

Associate:

Dated:         18 December 2007

ANNEXURE 1

Proposed form of advertisement to be published in newspapers pursuant to Publication Orders

Audi Australia Pty Ltd ABN 86 977 092 776 (Audi Australia)

Following civil proceedings instituted by the Australian Competition and Consumer Commission (ACCC), the Federal Court of Australia declared on 7 December 2007 that a number of newspaper advertisements published by Audi Australia in The Age and The Sydney Morning Herald newspapers were in breach of the Trade Practices Act 1974 (the TPA).

The Court also made declarations that certain statements and pictorial images on the Audi Australia website (www.audi.com.au ) and in the 2006 and 2007 Specifications brochures were in breach of the TPA.

The Court declared that Audi Australia engaged in misleading or deceptive conduct and made false or misleading representations in breach of the TPA by representing that:

(a)    the Audi Q7 3.6 SE is a motor vehicle with 7 seats as a standard feature, when in fact the standard seating is 5 seats;

(b)   the Audi Q7 Series are motor vehicles with 7 seats as a standard feature, when in fact the standard seating is 5 seats;

(c)    the Audi Q7 3.6 SE is a motor vehicle available for a purchase price at or from $79,900, when in fact it failed to identify the existence of dealer delivery and statutory charges that were payable as mandatory components of the total purchase price; and

(d)   the Audi Q7 3.6 SE with 7 seats is a motor vehicle available for a purchase price of $79,900, when in fact:

                                 i.            the price of $79,900 was the recommended retail price for the Audi Q7 3.6 SE motor vehicle with 5 seats, excluding dealer delivery and statutory charges;

                               ii.             the price for an Audi Q7 3.6 SE motor vehicle with 7 seats included an additional fee or charge of $1,700 for the 2 additional seats; and

                              iii.            the reference to the additional fee or charge of $1,700 was not prominent or likely to come to the attention of persons reading the advertisements.

The Court also declared that by making these representations Audi Australia misled the public regarding the price of the Audi Q7 3.6 SE and the standard or quality, the nature, the characteristics and the suitability for their purpose of the motor vehicles in the Audi Q7 Series, including the Audi Q7 3.6 SE. 

Further, the Court declared that Audi Australia had represented that motor vehicles in the Audi Q7 Series had performance characteristics, uses or benefits that they did not have.

Audi Australia has given undertakings to the Court that it will not make representations to the effect that a motor vehicle in the Audi Q7 Series is available for purchase for, or from, an advertised price when:

a)      the specified motor vehicle is not available for purchase for, or from, the advertised price;

b)      there is a fee or charge to be paid in addition to that advertised price and the existence of the additional fee or charge is not identified; or

c)      there is a fee or charge to be paid in addition to that advertised price for particular features of the advertised motor vehicle and the existence of the additional fee or charge is not identified.

Audi Australia has also given undertakings to the Court that it will not make representations to the effect that a motor vehicle in the Audi Q7 Series is available with a specified feature as standard, when the specified feature is not a standard feature.

Audi Australia has been ordered by the Court to publish this notice to raise general public awareness, as well as specific awareness within the market for the sale of motor vehicles, of the conduct that has contravened the TPA and to redress the breaches the subject of the civil proceedings brought by the ACCC.

For more information on pricing of motor vehicles see the ACCC “Guidelines for Pricing in the Motor Vehicle Industry” available at ACCC website at www.accc.gov.au .

[Australian Coat of Arms]                                                [ACCC logo]

ANNEXURE 2

Proposed form of notice to be placed on Audi Australia website at www.audi.com.au

Audi Australia Pty Ltd ABN 86 977 092 776 (Audi Australia)

Following civil proceedings instituted by the Australian Competition and Consumer Commission (ACCC), the Federal Court of Australia declared on [insert date] that a number of newspaper advertisements published by Audi Australia in The Age and The Sydney Morning Herald newspapers were in breach of the Trade Practices Act 1974 (the TPA).

The Court also made declarations that certain statements and pictorial images on the Audi Australia website (www.audi.com.au ) and in the 2006 and 2007 Specifications brochures were in breach of the TPA.

The Court declared that Audi Australia engaged in misleading or deceptive conduct and made false or misleading representations in breach of the TPA by representing that:

a)      the Audi Q7 3.6 SE is a motor vehicle with 7 seats as a standard feature, when in fact the standard seating is 5 seats;

b)      the Audi Q7 Series are motor vehicles with 7 seats as a standard feature, when in fact the standard seating is 5 seats;

c)      the Audi Q7 3.6 SE is a motor vehicle available for a purchase price at or from $79,900, when in fact it failed to identify the existence of dealer delivery and statutory charges that were payable as mandatory components of the total purchase price; and

d)      the Audi Q7 3.6 SE with 7 seats is a motor vehicle available for a purchase price of $79,900, when in fact:

                                   i.          the price of $79,900 was the recommended retail price for the Audi Q7 3.6 SE motor vehicle with 5 seats, excluding dealer delivery and statutory charges;

                                 ii.          the price for an Audi Q7 3.6 SE motor vehicle with 7 seats included an additional fee or charge of $1,700 for the 2 additional seats; and

                                iii.          the reference to the additional fee or charge of $1,700 was not prominent or likely to come to the attention of persons reading the advertisements.

The Court also declared that by making these representations Audi Australia misled the public regarding the price of the Audi Q7 3.6 SE and the standard or quality, the nature, the characteristics and the suitability for their purpose of the motor vehicles in the Audi Q7 Series, including the Audi Q7 3.6 SE. 

Further, the Court declared that Audi Australia had represented that motor vehicles in the Audi Q7 Series had performance characteristics, uses or benefits that they did not have.

Audi Australia has given undertakings to the Court that it will not make representations to the effect that a motor vehicle in the Audi Q7 Series is available for purchase for, or from, an advertised price when:

a)      the specified motor vehicle is not available for purchase for, or from, the advertised price;

b)      there is a fee or charge to be paid in addition to that advertised price and the existence of the additional fee or charge is not identified; or

c)      there is a fee or charge to be paid in addition to that advertised price for particular features of the advertised motor vehicle and the existence of the additional fee or charge is not identified.

Audi Australia has also given undertakings to the Court that it will not make representations to the effect that a motor vehicle in the Audi Q7 Series is available with a specified feature as standard, when the specified feature is not a standard feature.

Audi Australia has been ordered by the Court to publish this notice to raise general public awareness, as well as specific awareness within the market for the sale of motor vehicles, of the conduct that has contravened the TPA and to redress the breaches the subject of the civil proceedings brought by the ACCC.

For more information on pricing of motor vehicles see the ACCC “Guidelines for Pricing in the Motor Vehicle Industry” available at ACCC website at www.accc.gov.au .