FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Clarion Marketing Pty Ltd (No 2) [2009] FCA 1558

 TRADE PRACTICES – scratch cards published by the respondent previously held to have contravened ss 52 and 53(e) of the Trade Practices Act 1974 (Cth) – relief – declarations and injunctions – nature of corrective advertising to be undertaken by respondent – SMS message to be sent to all consumers who subscribed to the respondent’s mobile telephone premium content service in response to scratch cards – orders for verification by respondent of its compliance with order for corrective advertising – costs

 Trade Practices Act 1974 (Cth) s 86C

AUSTRALIAN COMPETITION AND CONSUMER COMMISSIONER v CLARION MARKETING AUSTRALIA PTY LTD (ACN 128 028 642)

NSD 486 of 2009

NICHOLAS J

22 DECEMBER 2009

SYDNEY

THE COURT:

1.                  Makes the declarations set out in paragraphs 1 to 3 of the Schedule to these Reasons for Judgment.

2.                  Makes the orders set out in paragraphs 4 to 11 of the Schedule to these Reasons for Judgment.

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                     My previous Reasons for Judgment in this proceeding were published on 4 December 2009.  In paragraphs 80 to 99 I dealt with the question of relief.  I reserved for further consideration the appropriate form of declarations and injunctions.  I also reserved for further consideration the nature and form of corrective advertising that should be ordered under s 86C of the Trade Practices Act 1974 (the Act).

2                     Each party has filed written submissions and a proposed minute of orders in accordance with the orders made on 4 December 2009.  At the request of the Respondent the proceedings were re-listed for oral submissions in relation to the form of orders.  A directions hearing took place on 18 December 2009.  Some further argument occurred on that occasion.  Neither party sought any further hearing. 

3                     On 16 December 2009 the Respondent filed a further affidavit of Lesley Francis Hynes sworn the previous day.  At the hearing on 18 December 2009 Mr Bevan, who appeared for the Respondent, indicated that the Respondent wished to rely upon that affidavit.  Mr Bevan accepted that his client could only do that if it was granted leave to re-open.  Ms Higgins, who appeared for the Applicant, indicated that it would oppose any such leave being granted.  I will return to the affidavit shortly. 

4                     As to the appropriate form of declarations and injunctions, there were few differences between the parties and none which I would regard as of any real substance.  The declarations and injunctions which I think are appropriate are set out in paragraphs 1 to 4 in the Schedule to these Reasons for Judgment.  They do not mirror either party’s proposed orders.  I had regard to what both parties put forward before settling upon what I considered most appropriate. 

5                     I now return to the further affidavit of Ms Hynes.  As I have mentioned, the affidavit was sworn on 15 December 2009 and filed the following day.  The affidavit stated in paragraph 36 that Ms Hynes “… is leaving Sydney on Wednesday, 16 December 2009 at 3.00pm to go to Ireland for a personal holiday.”  It states that she had booked this holiday on 22 October 2009.  The affidavit did not disclose when she would return. 

6                     The affidavit was mainly directed to showing what costs would be incurred by the Respondent in complying with the orders for corrective advertising sought by the Applicant.  It also made reference to the revenue generated by the Respondent from subscriptions to the Moby Planet service but only for the period August 2009 to October 2009.  It therefore presented an incomplete account of revenue received by the Respondent as a result of the scratch card promotion. 

7                     More troubling were the financial statements exhibited to the affidavit.  They included what appeared to be a specially prepared balance sheet as at 8 December 2009.  As best as I could judge from that document, the Respondent is most likely insolvent.  In any event, Ms Hynes, the deponent of the affidavit, does not appear to be in any position to verify the accuracy of the balance sheet.  When I enquired of Mr Bevan whether it might not be more appropriate for such evidence to be given by one of the directors of the Respondent, I was informed that they too had left for Ireland. 

8                     I came to the conclusion that I would not grant leave to the Respondent to re-open its case for the purpose of receiving the affidavit of Ms Hynes.  Quite apart from the fact that she was not available for cross-examination, it is clear that much of the material in her affidavit is inadmissible in any event. 

9                     One matter of significance that emerged from the parties’ written submissions was the fact that the Respondent is apparently able to send a “corrective” SMS to each person who sent an SMS in response to the invitation conveyed by the scratch cards.  The way in which the case was presented by the parties up until the time those written submissions were filed suggested to me that such messages could only be sent to those people who continued to subscribe to the Moby Planet service.  Apparently that is not the case.

10                  The written submissions filed by the Respondent suggest that I make an order requiring a “corrective” SMS to be sent to past and present subscribers who took out subscriptions as a consequence of the scratch card promotion.  Ms Higgins pointed out that there was no evidence that the Respondent could send a “corrective” SMS to both past and present subscribers. That is true. But given that the Respondent has informed the Court that it can comply with an order requiring it to do that, I do not think it matters that there is no evidence to that effect. If the Respondent does not comply with any order for corrective advertising that I make it will be guilty of contempt.

11                  Ms Higgins also submitted that, in addition to sending such an SMS, the Respondent should be ordered to publish corrective advertisements in a wide range of newspapers and magazines.  Some of the relevant publications were identified by me in paragraph 7 of my earlier Reasons for Judgment.  She submitted that there were likely to be people who were misled by the scratch cards but who did not subscribe.

12                  There may have been people misled momentarily who came to understand that they would incur subscription costs if they attempted to collect a prize in the manner specified in the scratch cards.  Whether those people were misled or deceived in any relevant sense is doubtful.  In any event, it is impossible to see what damage they would have suffered as a result of the Respondent’s contravention of the Act.

13                  As I stated in paragraph 98 of my earlier Reasons for Judgment, in this case an order for corrective advertising should be aimed at bringing the key findings of the Court to the attention of people who took out subscriptions to the Moby Planet service including those people who terminated their subscriptions.  Since it now appears that this can be achieved by requiring a “corrective” SMS message to be sent to all 114,418 people who subscribed to the Moby Planet service in response to the scratch card promotion, I do not see any justification for an order for corrective advertising in any other form. 

14                  The Applicant also proposed that there be some form of verification provided for in my orders.  I invited the parties to attempt to agree upon an appropriate form of order but nothing has eventuated.  Accordingly, I have settled the orders myself which appear in paragraphs 7 to 10 of the Schedule. 

15                  The Respondent did not contest the provisional view expressed by me in paragraph 100 of my earlier Reasons for Judgment concerning costs.  The Applicant has had a large measure of success and I think the Respondent should pay its costs of this proceeding. 

16                  The orders I propose to make are as set out in the Schedule to these Reasons for Judgment. 

Associate:

Dated:         22 December 2009

SChedule

DECLARATIONS

1.                       Declare that the publication by the Respondent of the scratch card in the form of Appendix A (the Yellow Scratch Card) and Appendix B (the Red Scratch Card) to the Reasons for Judgment published on 4 December 2009 was conduct, in trade and commerce, that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act 1974 (Cth) in that the scratch cards represented to consumers that:

(a)           upon scratching the latex panel on the front of the scratch cards, consumers would become players in a game of chance the outcome of which depended upon exposing three matching symbols when, in fact, every scratch card contained three matching symbols;

(b)          upon scratching the latex panel on the front of the scratch cards and revealing three matching symbols, consumers would be entitled to a prize which could be claimed by sending an SMS message to the designated telephone number without adequately or sufficiently disclosing to consumers that by doing so they would be subscribing to the Respondent’s Moby Planet mobile telephone premium content services at a cost of $10 every six days billed to the consumer’s mobile telephone account; and

(c)           the available prizes included holiday vouchers which, in fact, did not entitle their holders to holidays of any description and were of a value to most consumers that was substantially less than the cost of subscription to the Respondent’s Moby Planet mobile telephone premium content service.

2.                       Declare that the publication by the Respondent of the Yellow Scratch Card was conduct, in trade or commerce, that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act in that the front of the scratch card represented to consumers that the available prizes included an Apple 3G iPhone when, in fact, the available prize was an Apple iPod Touch.

3.                       Declare that the publication by the Respondent of the Yellow Scratch Card was conduct, in trade or commerce, that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act and was a false or misleading representation with respect to price in contravention of s 53(e) of the Trade Practices Act in that the Yellow Scratch Card represented that the cost of claiming a prize was limited to “standard carrier charges” when, in fact, in claiming their prize, consumers incurred the cost of subscribing to the Respondent’s Moby Planet mobile telephone premium content service at a cost of $10 per six days plus the cost of a standard SMS message.

ORDERS

4.                       Order that the Respondent, whether by its servants or agents or otherwise, in relation to any competition promoting the Respondent’s mobile telephone premium content services, be restrained from, in trade or commerce:

(a)           representing, expressly or impliedly, that a consumer is participating in a genuine game of chance to determine whether he or she will win a prize in circumstances where his or her entitlement to a prize does not depend upon the outcome of any such game of chance;

(b)          failing to clearly and prominently state a requirement, if there is such a requirement, that consumers subscribe to the Respondent’s mobile telephone premium content services in order to claim a prize;

(c)           failing to clearly and prominently state the cost to be incurred by a consumer in claiming a prize, including the cost of any subscription to the Respondent’s mobile telephone premium content services; and

(d)          making any representation, expressly or impliedly, that is misleading or deceptive or likely to mislead or deceive in relation to the nature or value of the available prizes.

5.                       Order that by no later than 22 January 2010, the Respondent send to all persons who subscribed to the Respondent’s Moby Planet mobile telephone premium content services in response to the scratch cards an SMS message, in the following form:

[FreeMsg] Federal Court finds MobyPlanet scratch cards misleading after ACCC action.  If you think you were misled, visit www.mobyplanet.net or call 1300558851

6.                       Order that, immediately prior to sending any SMS in accordance with Order 5 above, the Respondent publish on the front page of its website, for a continuous period of not less than 90 days:

(i)                  a brief summary of the Court’s findings that is accurate and in plain and easily understood language;

(ii)                a brief summary of how consumers who believe that they were misled may apply for a refund that is accurate and in plain and easily understood language;

(iii)               a copy of, or link to, these orders as entered; and

(iv)              a copy of, or link to, the Court’s Reasons for Judgment published on 4 December 2009.

7.                       Order that by 5 February 2010, the Respondent file and serve an affidavit made by a director of the Respondent verifying compliance with Orders 5 and 6 above.

8.                       Order that the Respondent establish and maintain an accurate summary of telephone calls, SMS messages, emails and other communications it receives from consumers regarding the scratch cards, including the consumer’s name and telephone number and which provides details of any action taken by the Respondent in response to such communications.

9.                       Order that no earlier than 9 April 2010 and no later than 16 April 2010, the Respondent file and serve an affidavit made by a director of the Respondent, verifying compliance with Order 8 above and providing an accurate summary of the communications received to date and the action taken by the Respondent in response to such communications.

10.                   Order that the parties have liberty to apply on 7 days notice in relation to any question that might arise in relation to the operation of Orders 5 to 9 above.

11.                   Order that the Respondent pay the Applicant’s costs of this proceeding.