FEDERAL COURT OF AUSTRALIA

Specsavers Pty Ltd (ACN 097 147 923) v The Optical Superstore Pty Ltd (ACN 095 737 894) [2009] FCA 692

SPECSAVERS PTY LTD (ACN 097 147 932) v THE OPTICAL SUPERSTORE PTY LTD (ACN 095 737 894)

VID 431 of 2009

RYAN J

25 JUNE 2009

MELBOURNE

THE COURT ORDERS THAT:

1.         The time for service of this application and the affidavits in support be abridged to allow service to be effected on 12 June 2009.

2.         The application for interlocutory injunctions be refused.

3.         Subject to any further or other direction of the docket Judge there be a speedy trial of the application herein.

4.         There be a directions hearing herein on a date and at a time to be fixed by the docket Judge.

5.         The costs of each party of and incidental to the application for interlocutory relief be costs in the cause.

6.         Liberty be reserved to either party to apply on not less than 48 hours notice in writing to the other party.

Note:       Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                          The applicant, Specsavers Pty Ltd (“Specsavers”), seeks an interlocutory injunction, so far as is relevant, in the following terms:

‘10.      An order that until the final determination of this proceeding or further order, the Respondent be restrained whether by itself, its directors, officers, employees, agents or otherwise howsoever, from publishing, causing to be published or making available to customers the advertisements contained in Annexure A, Annexure B, Annexure C and Annexure D to the affidavit of Lynne Elizabeth Anne Peach, sworn on 12 June 2009.

11.       An injunction restraining the Respondent, whether by itself, its directors, officers, employees, agents or otherwise howsoever, from publishing, causing to be published or making available to customers an advertisement or other marketing or promotional material which represents that goods are available for purchase from the Respondent at a “% off” unless, for at least one month prior to the offer contained in that advertisement, the Respondent has sold or offered for sale the relevant goods at the higher prices implied by those advertisements or other marketing or promotional material.

12.       An injunction restraining the Respondent, whether by itself, its directors, officers, employees, agents or otherwise howsoever, from publishing or causing to be published an advertisement or other marketing or promotional material which represents that a good is offered for sale or available to customers by way of sale at a price less than its usual price for a continuous period of more than 3 months.

13.       An injunction restraining the Respondent, whether by itself, its directors, officers, employees, agents or otherwise howsoever, from representing that the Respondent has or offers for sale a complete set of glasses containing frames and prescription lenses for particular prices, unless the representation is true.’

Background

2                          Each of Specsavers, and the respondent, The Optical Superstore Pty Ltd (“The Optical Superstore”) is a commercial retail supplier of spectacles. Each also offers from its various premises the services of optometrists who can prescribe corrective lenses which are then fitted to spectacle frames offered for sale respectively by Specsavers and The Optical Superstore.

3                          Since January 2009 (and, in similar form, since January 2007), The Optical Superstore has been publishing advertisements, to which the present application is directed. The text of the advertisement recites:

‘Why buy 2 pairs of spectacles when you can usually buy
1 pair for the price of 2 pairs elsewhere’

‘70% off all frames up to $200*
*with the purchase of prescription lenses. Offer valid to 31/12/09. Not available with any other offer’

‘40% of all frames above $200*
*with the purchase of prescription lenses. Offer valid to 31/12/09. Not available with any other offer’

‘Buy Better Elsewhere?
I DON’T THINK SO!’

4                          Specsavers claims that advertisements in those terms embody, individually or collectively, representations that The Optical Superstore is offering frames at a “sale” or “discount” of 40% or 70% less than prices at which it offered the same frames immediately before the sale period. That representation is said to contravene ss 52, 53(e) and 75AZC(1)(g) of the Trade Practices Act 1974 (Cth) (“the TPA”), which are concerned with misleading, deceptive or false conduct or representation in trade or commerce.

5                          In an affidavit sworn on 17 June 2009, Ms Douglas, the company secretary of The Optical Superstore, has described as follows the practice in its business:

‘23.      A customer of The Optical Superstore has the choice of:

(a)        purchasing frames alone, at the price marked on the frames (being the Full Price); or, alternatively,

(b)        purchasing the frames at the relevant advertised discount to the Full Price, provided that they also purchase lenses.

That is, the discounts offered on frames are contingent upon the customer also purchasing lenses. In the event that the customer does not also purchase lenses, then the customer pays the Full Price for the frame. For example, if a customer was to buy frames with a Full Price of $150, but not buy any lenses with them, then that customer would pay $150. If, however, that customer was also to buy lenses with those frames, then that customer would pay $45 for the frames plus the cost of the lenses (emphasis added).’

That evidence makes it clear that The Optical Superstore is still offering frames for sale at the full marked price in the circumstances described by Ms Douglas.

What representation is made by The Optical Superstore’s advertisements?

6                          Specsavers’ primary contention is that references in the advertisements to “40% off” and “70% off” necessarily convey representations that the goods are “on sale” for the relevant percentage discount off their “normal” price, or the price at which the goods had been sold or offered for sale for a reasonable period before the publication of each advertisement.

7                          Specsavers’ contentions depend in part upon authorities establishing the proposition that an advertisement capable of conveying several reasonably open representations will be in breach of the TPA if just one of those representations is a contravening representation. In Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1, a Full Court of this Court (Sheppard, Foster and Hill JJ) said at 50:

Where, as in the present case, the advertisement is capable of more than one meaning, the question of whether the conduct of placing the advertisement in a newspaper is misleading or deceptive conduct must be tested against each meaning which is reasonably open. This is perhaps but another way of saying that the advertisement will be misleading or likely to mislead or deceive if any reasonable interpretation of it would lead a member of the class, who can be expected to read it, into error:  Keehn v Medical Benefits Fund of Australia Ltd (1977) 14 ALR 77 at 81 per Northrop J and cf the approach taken by Mason J in Parkdale [(1982) 149 CLR 191].

It is a trite proposition that s 52 and the other provisions of the TPA to similar effect have been framed to protect “the inexperienced as well as the experienced, and the gullible as well as the astute”:  Parkdale Custom Built Furniture v Paxu Pty Ltd (1982) 149 CLR 191 per Gibbs CJ at 199. But it should not be forgotten, as the learned Chief Justice went on to point out in the same case, none of the provisions contemplates the protection of persons acting unreasonably or contrary to their own interests.

8                          The question is therefore whether the evidence currently before the Court reveals that The Optical Superstore’s advertisements contain any contravening representation of the relevant type. In my view, they do not. It is plain on the face of each advertisement that the percentage of discount or reduction comes “off” when the consumer elects to purchase lenses and spectacles as a package. It is true that the words “with the purchase of prescription lenses” appear at the bottom of the “box” format of each advertisement but that is not unusual and the words are clearly legible. Attention is drawn to them in the body of the text by way of asterisk. In my view, on the present state of the evidence, a prospective purchaser acting reasonably and in pursuit of his or her own interests would not be misled or deceived by anything conveyed by each advertisement read as a whole.

9                          It is important in this context to have regard to the nature of the merchandise to which the advertisements are related. The purchase of spectacle frames, with or without lenses, will not ordinarily occur on impulse or more frequently than about once a year. That makes it likely that prospective purchasers will come to The Optical Superstore advertisements with some knowledge of comparative prices in the relevant market or, at least, will have an opportunity to acquaint themselves with those comparative prices or pricing policies. Frequent changes in styles or fashions of spectacle frames also make it unlikely that frames identical to those to which a particular advertisement relates would have been in stock for a significant time before publication of the advertisement.

10                        A subsidiary contention advanced by Mr Jopling QC, who appeared with Mr J Moore for Specsavers was that the impugned advertisement does, or is designed to, “entice consumers into the marketing web”: see Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326, per Tamberlin J where his Honour observed, at 340:

‘I am not persuaded that any or all of the post-broadcast steps leading to signing of the contract would dispel the impression generated by the misleading message in the television broadcast in all or most cases. Once the impression is engendered by the advertisement, an interested viewer would normally be led to make further inquiries of Optus or its representatives. If this occurs, the viewer will probably be led to take those actions as the result of the attractive but misleading publicity set out in the television broadcast. The viewer is enticed into the marketing web by the advertisement: cf the comments of Beaumont J in Tec & Thomas (Australia) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28 at 38:

"In my view, to induce the introduction of such a dealing is conduct which contravenes s 52, even if, ultimately, the consumer becomes aware that the equipment he is purchasing is not that of the Hattori Seiko group, the deception having occurred at an earlier stage: what is relevantly induced is the dealing or the negotiations, as distinct from the subsequent purchase itself."’

I am not persuaded by the evidence as it presently stands in this case that an interested reader of The Optical Superstore’s advertisement would, even prima facie, be likely to conclude that the advertised discounts of 70% and 40% were available without the purchase of prescription lenses or represented a reduction from some previous or normal price at which The Optical Superstore had offered or sold the relevant frames.  

11                        Counsel for Specsavers also referred to a line of authority concerned with “strike-through” pricing, culminating with ACCC v Prouds Jewellers Pty Ltd [2008] FCAFC 199 and Ascot Four v ACCC [2009] FCAFC 61, and a Canadian case to which reference was made in those authorities, Commissioner of Competition v Sears Canada (2005) 37 CPR (4^th) 65. Both Prouds and Ascot Four examined “strike through” pricing in jewellery catalogues – that is, the showing of a “was” price and a “now” price, where the “now” price was substantially lower than the “was” price. Each of the catalogues at issue in those cases contained offers explicitly limited in time and the retailer’s purpose in each case, clearly enough, was to increase sales by creating the impression that the discount offered would be available for a limited time only, after which the “now” price would cease to be on offer, and the price payable by the customer for the relevant item would revert to the “was” price.

12                        There were findings in each of those cases that none of the relevant items of jewellery had genuinely been on offer for any period of time at the “was” price. For that reason, the representation embodied by the “strike through” price was held to be misleading: see Prouds especially at [42];  Ascot Four especially at [32].

13                        On their facts, then, the “strike-through” cases are clearly distinguishable from the present. In those cases, the representation was that an item was available at a lower than normal price for a limited time, although in fact it had never been sold or offered for sale at what purported to be the normal price. Here, the representation is that an item (the frame) is available at a lower price if the consumer chooses to buy it at the same time as, or in conjunction with, another item (the lenses). The offer is of quite a different nature. As well, the evidence before the Court in the “strike-through” cases demonstrated the misleading nature of the representations in those cases. No such demonstration is discernible from the evidence so far adduced in the present case.

14                        Counsel for Specsavers also brought to my attention an English case, Office of Fair Trading v The Officers Club Limited [2005] EWCA 1080 (Ch). In that case all goods were initially marketed at “Red Star” prices in a very limited number of the defendant’s stores for 28 days and were then sold throughout all or most of the defendant’s stores at a 70% discount off the “Red Star” prices. The trial judge, Etherton J, made, amongst others, these findings of fact:

‘15.      By way of example, on 31 May 2003 only 19 of TOC’s 159 stores offered “full price” items.  None of those 19 stores offered more than 0.36% of its stock at the full price, none offered more than 3 styles at the full price, and none offered more than 2 sizes of a particular style at the full price.  Three of the stores stocked a total of only 4 individual items at the full price, constituting respectively 0.05%, 0.04% and 0.05% of those stores’ total stock.

16.       It is common ground that the position as at 31 May 2003 provides a fair reflection of the position generally.

17.       During the period from 1 September 2002 to 28 June 2003, only 0.15% of the total number of items sold in TOC’s stores were at the “full price”

18.       The Kingston store did not either on 6 September 2001 or on 31 May 2003 offer any “full price” items.

19.       It is common ground, as illustrated by those facts, that TOC’s standard prices were in fact those marketed as being “70% off”.’

15                        His Lordship, after extensive examination of statutory and regulatory material, the evidence of witnesses from the retail industry and authorities from three foreign jurisdictions, namely Canada, the United States of America and New Zealand, concluded, at [140], that “the previous price comparison in TOC’s notices promoting the ‘70% off’ strategy was not ‘fair and meaningful’, within para. 1.2.3(i) of the Code” [of Practice for Traders on Price Indications], which had been approved in November 1988 pursuant to s 25 of the Consumer Protection Act 1987 (UK).

16                        Not only was that case decided after a full trial on all issues, including final relief, but it involved the interpretation of statutory and legislative instruments which were different in their terms from the provisions of the TPA which have been invoked by Specsavers in the present case. More significantly, in this case, The Optical Superstore’s “40% and 70% off” strategy did not involve a previous price comparison. On the face of the advertisements, it involved a continuing comparison between the price of a particular spectacle frame without the purchase of prescription lenses and the discounted price of the same frame with the purchase of lenses.

17                        Counsel for Specsavers also referred to two “guidance documents” published by the Australian Competition and Consumer Commission (“the ACCC”), one in March 2005 and the other on 12 June 2009.  Those publications have apparently been designed to furnish information or guidance to retail traders on how price comparisons may legitimately be employed in their businesses.  The guidance document for March 2005 recited;

‘Comparative pricing, by which retailers compare current selling prices to their former or future prices, can be a powerful marketing tool and, as with all forms of advertising, must comply with the Trade Practices Act.  Whether a price comparison is expressly stated as in ‘Was $7-Now $6’ or merely implied with ‘Save 50%’ or ‘30% Off’, the claims must be honest and accurate and must not mislead or deceive consumers.  If the claimed price saving is not genuine your business runs a serious risk of breaching the law.’

18                        However, on the view which I consider would most readily be taken by an ordinary reader of The Optical Superstore’s advertisements, they do not compare prices of the relevant spectacle frames with “their former or future prices”.  As indicated at [16] above, the comparison which more readily suggest itself is between the price of a particular frame without the purchase of prescription lenses and the discounted or “% off” price of the same frame purchased together with prescription lenses.  Counsel for Specsavers similarly contended that in the view of the ACCC “a % off” advertisement is just as much a representation about former prices as a “was / now” or “strike through” price.  That was based on this extract from the introduction to the guidance document of 12 June 2009;-

‘What is price comparison advertising?

Price comparisons can be explicit – for example, ‘Was $7/Now $6’ – or they can use strike-through pricing, where the higher price of a product is crossed out and a second lower price is stated.  They can also be implied – for example, by advertising ‘Save 50%’ or ‘340% off’.’

19                        The question in each case is, what is the comparison which the advertisement invites?  If it is with a fictional or illusory “previous” or “normal” price as was found in Prouds (supra) and Ascot Four (supra), then a contravention of the relevant provisions of the TPA can be made out.  In the present case, by contrast, the comparator is not fictional or illusory.  As explained at [8] above it is the continuing price of the same spectacle frame when purchased without prescription lenses.

20                        In short, I am not persuaded by the evidence so far before the Court that any consumer acting reasonably and in pursuit of his or her own interests would be misled or deceived by the advertisements of The Optical Superstore.  The differences between those advertisements and the representations illustrated by the cases and other material to which I have been taken by Counsel for Specsavers is sufficiently striking to force me to rely, for present purposes, on my own impression of the impugned advertisement unaided by analogies or comparisons drawn from other contexts.

21                        I turn now to the question of what, if any, interlocutory relief should be granted.

Interlocutory Relief

22                        The principles governing the grant or withholding of interlocutory injunctions are well-known. They have recently been restated in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, where the High Court endorsed what had earlier been said in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622-3, where two matters were identified as relevant to the discretion to grant or withhold an interlocutory injunction;

‘The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.’

As was emphasised by Gummow and Hayne JJ in O’Neill, (supra), at 84, the two matters identified in Beecham, (supra), are not to be evaluated in isolation from one another. Rather, as their Honours said, the governing consideration is that “the requisite strength of the probability of ultimate success depends upon the nature of the right asserted and the practical consequences likely to flow from the interlocutory order sought”.

23                        For the reasons outlined above, I consider that the probability of Specsavers’ ultimately succeeding in proving a contravention of a relevant provision of the TPA is weak. That is not to say that, in the light of evidence from, for example, marketing experts, regulators (if the ACCC chooses to intervene at trial) or actual or prospective purchasers of spectacle frames and with the benefit of more research and analysis of the authorities bearing upon the pertinent sections, the position may not change. However, I have to examine the existence of a serious question to be tried in the light of the evidence so far adduced.  Even if that examination reveals a relatively weak or doubtful claim, such a claim “may still attract interlocutory relief if there is a marked balance of convenience in favour of it”: see Bullock v The Federated Furnishing Trades Society of Australasia (No 1) (1985) 5 FCR 464 per Woodward J at 472.

24                        In my view, the balance of convenience in this case turns largely on whether the usual undertaking as to damages, which would be extracted from Specsavers as a condition of the grant of an interlocutory injunction, would adequately compensate The Optical Superstore if, ultimately, it were successfully to defend this action. Evidence has been directed to this issue by the affidavit of Ms Douglas where it is deposed that;  

‘55.      A grant of the interim injunctive relief sought by the Applicant would cause significant inconvenience and loss to the Respondent. For example:

(a)  The Respondent’s current advertisements would have to be withdrawn and its in-store promotional material removed.

(b)  All of the Respondent’s current marketing material, such as posters, brochures and flyers, would have to be destroyed.

(c)  The Respondent presently has about 200,000 frames in its possession and considerable time and expense would need to be spent in developing a new and cost effective strategy by which to advertise and sell those frames.

(d)  Once a new marketing strategy had been developed, new marketing materials, such as posters, brochures and flyers, would need to be printed and distributed.

(e)  The Respondent would lose the benefit of the investment that it has made in its current marketing strategy

(f)  There would be significant loss in sales pending development of another effective marketing strategy.’

25                        Even allowing for the possibility that Ms Douglas has overstated the extent of the disruption which would be caused to The Optical Superstore’s business by an interlocutory injunction, it is obvious that the detrimental effects of such a restraint would be substantial.  Moreover, the loss flowing to The Optical Superstore if an interlocutory injunction were granted and dissolved after trial would not all be readily measurable in money.  Some of the expenses detailed by Ms Douglas could be measured in that way as could the value thrown away of promotional material rendered useless and the cost of developing new material to replace it.  However, the effect of the suspension of The Optical Superstore’s present advertising techniques on its volume of business and profit margins would be far from easy to quantify.  For that reason, The Optical Superstore would be severely inconvenienced if it had to enforce the presumptive undertaking as to damages after an interlocutory injunction had been dissolved.

26                        On the other hand, the detriment to Specsavers, if an interlocutory injunction be refused, will consist largely in the continued use by a significant competitor of an advertising technique which Specsavers believes to be misleading or deceptive.  The loss occasioned to Specsavers by that presumptive contravention of the TPA would also be difficult, if not impossible, to quantify in pecuniary terms.  That is because the loss would be borne distributively by Specsavers and a multitude of other optical retailers throughout Australia.  Although these considerations as to the inadequacy of damages provide some weight to the claim for an interlocutory injunction, I do not consider that they balance the countervailing inconvenience which interlocutory relief would occasion to The Optical Superstore.

27                        I do not regard this as a case in which the public interest militates in favour of interlocutory relief.  Cases in which that element can be a factor were described in these terms by von Doussa J in Glev Pty Ltd v Kentucky Fried Chicken Pty Ltd [1994] FCA 79, (unreported, 17 February 1994);

‘However, it must be remembered that these proceedings are brought under the umbrella of the Trade Practices Act which is an Act for the protection of consumers.  There is an element of public interest involved.  That being so, the Court will be slower to withhold relief than would be an equity court in a suit involving individual interests alone.  The “unclean hands” argument is a matter to be taken into account, but it may not be a matter that would lead to the withholding of a remedy if the public interest appeared to require a remedy to protect consumers.’

28                        In the present case, as I already noted, I regard as slight the risk of prospective purchasers of spectacles being misled by the subject advertisements.  On the other hand, the advertisements identify The Optical Superstore as what is popularly called a “discount” supplier.  There is no suggestion that the marked prices on its spectacle frames from which it deducts its discounts of 70% or 40% are substantially or regularly above the prices at which similar frames are offered for sale in the relevant retail market.  There could therefore be a positive detriment to the public interest if prospective purchasers were deprived, during the period of an interlocutory injunction, of the information, presumably true, that The Optical Superstore’s outlets are “discount stores”.

29                        In a similar context, I have been influenced to refuse interlocutory relief by the unanimity of the parties that they will co-operate in having this application listed for speedy trial and that such a trial should not be of long duration.  I shall make a direction to give effect to that measure of agreement between the parties.

30                        The advertisements which it is sought to restrain have been published more or less continuously since January 2009 and the evidence establishes that The Optical Superstore has utilised broadly similar forms of advertising since January 2007.  This may be thought to afford some scope for application of the equitable doctrine of laches.  Of that doctrine, Lord Blackburn in Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 said, at 1279;

‘And a Court of Equity requires that those who come to it to ask its active interposition to give them relief, should use due diligence, after there has been some notice or knowledge as to make it inequitable to lie by.’

31                        On the present application, neither party has placed much reliance on the doctrine in its pure form.  Mr Elliott SC, who appeared with Mr Heerey for The Optical Superstore, contented himself with referring to the relevant paragraph from Spry, Principles of Equitable Remedies (7^th ed, 2007) at 434-435.  Mr Jopling QC for Specsavers, noted that authorities such as Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192 per Hill J, at [47], establish that equitable principles are not always given unrestricted application in litigation brought under the TPA.

32                        Although on one view there has been a substantial delay by Specsavers in seeking an interlocutory injunction and that delay is so far unexplained, it is not a matter to which I have attached significant weight in evaluating the balance of convenience.

Conclusion

33                        For the reasons outlined above, I have come to a clear view that interlocutory injunctive relief should not be granted.  The motion for that relief must therefore be refused.  I shall give directions for a speedy trial of the application and order that the costs of each party of and incidental to the motion for interlocutory relief be costs in the cause.  I shall reserve liberty to apply.

Associate:

Dated:         25 June 2009