FEDERAL COURT OF AUSTRALIA

Luxottica Retail Australia Pty Ltd v Specsavers Pty Ltd (No 2) [2010] FCA 644

THE COURT DECLARES THAT:

1.         The respondent has engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) by:  

(a)        causing the broadcast of the television commercials copies of which are exhibits KAR-1 and KAR-2 to the affidavit of Katrina Rathie sworn 7 April 2010 / exhibits SH-1 and SH-4 to the affidavit of Simon Hawkins affirmed 21 April 2010 (respectively);  and

(b)       publishing or communicating the advertisement on its website at www.specsavers.com.au, the screenshot of which is annexure B to the affidavit of Katrina Rathie sworn 7 April 2010. 

AND THE COURT ORDERS THAT:

2.         The respondent pay the applicant’s costs of the proceedings to date which may be taxed forthwith.

3.         The matter be stood over for further directions on 30 June 2010 at 9.30am in relation to the preparation of the damages case.

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 Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                                             On 5 May 2010 I held that the respondent Specsavers Pty Ltd had engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) (“the Act”) by reason of a 30 second television commercial widely broadcast on national television in February and March of this year.  Following that determination there now appear to remain three issues between the parties:

(a)        whether an injunction should be granted restraining Specsavers from further advertising;

(b)       whether there should be an order for corrective advertising;  and

(c)        costs.

2                                             The advertisement in question was said by the applicant, OPSM, to be misleading in three ways but I upheld only one of those contentions.  The commercial suggested that the average price paid by OPSM customers for their spectacles was $480.00.  This figure was said in the commercial to be based upon a survey conducted by Roy Morgan Research.  In fact, what the survey revealed was that the average amount spent by OPSM customers on their last visit to an OPSM store was $480.00 and this was not, by any means, limited to customers who only bought a single pair of spectacles.

3                                             I turn then to the questions which arise.

Injunction

4                                             At paragraph [41] in Luxottica Retail Australia Pty Ltd v Specsavers Pty Ltd [2010] FCA 423 I dealt with the issue of  remedy in these terms:

I turn then to the question of remedy.  The issue of damages has been deferred.  The two immediate questions are whether there should be a permanent injunction to restrain a further breach from occurring and whether corrective advertising should be ordered.  As to the first, the advertisement has now run its course; broadcasting ceased on 13 March 2010 and the internet advertisement finished on 1 April 2010 some 34 days ago.  There was no evidence which suggested that a repetition was contemplated.  However the terms of s 80 of the Act make plain that an injunction may be issued in respect of a past contravention and even, as subsection (5) emphasises, if there is no intention on the part of the respondent to repeat the conduct.  There may be circumstances when it will be appropriate to grant such an injunction where, for example, future breaches may be expected not because of deliberate conduct but rather by reason of deficient systemic controls.  So too, a court may feel that there is a risk that without an injunction a respondent may be tempted into contravention.  In this case, whilst I am of the view that Mr Hawkins, in all likelihood, knew that the advertisement was misleading, or at least knew that there was a real risk that it was, I do not think that I can deduce therefrom a future risk of repetition.  It would, I think, be wrong to impose an injunction in order to punish perceived deliberate wrongdoing – this is not the point of s 80.  It is, however, appropriate to grant declaratory relief in the form set out in prayer 4 of the application.

5                                             Two aspects of that deserve emphasis.  First, I noted that the issue of damages had been separated from the hearing and was to be dealt with later.  Secondly, I concluded that declaratory relief was appropriate.  I do not read this paragraph – and I did not intend – that these remarks were preliminary or that the issue of the injunction was to be resolved later.  There was an issue which did need to be determined at a later stage and this was the issue of corrective advertising.  Indeed, it is that issue which was stood over for formal argument following the first judgment.

6                                             In that circumstance, the question of the injunction has already been determined adversely to OPSM and there is no occasion for it now to be revisited.  I accept, of course, that because no final orders have yet been made I retain a power to revise my earlier reasons.  However, the exercise of that power would not ordinarily be appropriate absent some particular matter such as the Court having over-looked an argument, fresh evidence having become available or some other issue indicating the necessity for a diversion from ordinary trial procedure.   No such matter was present in OPSM’s application.

7                                             I turn then to the question of corrective advertising. 

Corrective advertising

8                                             It is useful first to outline the significant factual aspects of the present debate:

(a)        The two commercials were broadcast to very large audiences during prime time and in between popular programmes over a period from 7-20 February 2010 and 5-13 March 2010 (with slightly different dates in Perth).  The commercial was national in reach appearing in every capital city and in regional Australia too.  Commensurate with that reach was its cost which, in advertising fees, was around $1 million.  The extent of the depth and reach of the commercial is commensurate with the size of the markets in which both OPSM and Specsavers compete: see Luxottica v Specsavers [2010] FCA 423 at [2].

(b)       The commercials were designed to encourage members of the public to deal with Specsavers rather than OPSM.  Mr Hawkins (Specsavers’ “Director of Special Projects-Marketing”) expressed the opinion in cross-examination that Specsavers was content with the outcome of the campaign.  I infer, therefore, that the commercial has successfully diverted custom to Specsavers which otherwise would have gone to OPSM.

(c)        The television campaign ended on 13 March 2010 which is about three months ago.  I have no doubt that its effects lingered in the public mind for sometime thereafter.  Specsavers maintained its internet version of the commercial until 1 April 2010 specifically, as I found at paragraph [22] of Luxottica v Specsavers [2010] FCA 423, to capitalise on those whose curiosity might have been piqued by the television campaign. 

(d)       The commercial in question is not the only spectacles commercial which has been on television in the period since February.  For example, Specsavers has run one commercial in April 2010 under the banner “30% off for over 60’s [sic]” and another in May 2010 “2 Pairs No Gap”.  Leaving aside the engaging question of whether the first advertisement was in breach of s 14 of the Age Discrimination Act 2004 (Cth), the point is that the effects of the earlier Specsavers advertising campaign is likely to have been diminished in the ongoing clamour of advertising in the spectacles market.

(e)        The commercial was misleading in two related ways.  It wrongly suggested that the survey upon which it was based supported the proposition that OPSM customers had paid over $480.00 for their last pair of spectacles whereas, in fact, that survey only supported the notion that those customers had paid over $417.59 for such a pair.  At the same time, however, the advertisement also suggested that OPSM customers had paid over $114.00 more than Specsavers customers for their last pair of spectacles whereas, in fact, the true figure was $212.62.  The advertisement, therefore, wrongly suggested that OPSM customers paid more for a pair of spectacles than in fact they did but at the same time, it also wrongly suggested that Specsavers customers paid only $114.00 less than OPSM customers whereas in fact the difference was actually $212.62.  A correct version of the commercial would have substituted $417.00 for the reference to $480.00 and $212.00 for the reference to $114.00.  The commercial was misleading in ways which were advantageous and disadvantageous to both parties:  OPSM’s price per pair of spectacles was overstated but Specsavers’ margin over OPSM was understated.

(f)        That doubly misleading nature is likely to have drawn customers potentially in opposite directions.  The false statement about OPSM’s spectacles price might well have tempted some OPSM customers into the enticing interior of a Specsavers store.  On the other hand, the understatement of Specsavers’ price advantage over OPSM is likely also to have resulted in some OPSM customers who might otherwise have been lead down the path of temptation to remain stolidly in the OPSM camp.

9                                             The question then is whether a corrective advertising order should be made.   Section 86C(2)(d) of the Act authorises such orders but only at the suit of the Australian Competition and Consumer Commission.  However, it is established that the power of this Court to grant injunctions under s 80 of the Act is sufficiently ample in its plenitude to authorise a mandatory injunction that the respondent correct any lingering impression left by its misleading and deceptive conduct: see Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 20 [49] per Stone J (Moore and Mansfield JJ agreeing).  There is authority too for the proposition that corrective advertising might alert consumers to the fact of the misleading or deceptive conduct and inform them that they may have some remedy provided there can be seen to be a nexus between the conduct and the order: Medical Benefits Fund v Cassidy 135 FCRat 22 [54].  The same case supports the notion that corrective advertising may aid in the enforcement of the primary order and prevent repetition of the conduct. 

10                                          I approach the application of those principles to the facts this way.  At the time of the trial on 29-30 April 2010 there was likely to be the possibility of some vague recollection of the advertisement in the public mind.  I propose to use that date as the relevant one because it is at that date that the issue of corrective advertising would have been determined but for the issue by Specsavers of a notice to produce which resulted in the adjournment of the proceeding to a later time.  That notice was then withdrawn.  The extent of public recollection was, however, minor.  This was reflected in the fact that Specsavers itself took down its internet commercial on 1 April 2010 which I take to be a contemporaneous and reliable assessment of the ongoing effects and impacts of the campaign. 

11                                          Granted then that the viewing public might, at that date, have had some vague recollection of the advertisement I cannot be satisfied that its recall would extend to a grasp either of the detail of the advertisements themselves or of the overall impressions thereby conveyed.  At best, it is likely to be a dim recollection of a comparative advertisement about OPSM and Specsavers possibly by Specsavers, probably bluish in colour and maybe involving a pair of spectacles.   I am fortified in that conclusion by the comments of Merkel J in Telstra Corporation Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 at 523-524 who, discussing the nature of the advertisement viewer, said:

They will be seen by the casual but not overly attentive viewer viewing a free-to-air program with only a marginal interest in the advertisements shown between the segments of the program.  In that context it will be the first impressions conveyed to that viewer, rather than an analysis of the cleverly crafted constituent parts of the commercial, which will be determinative.

12                                          This is one of those cases where the detail of the deception has, in substance, been lost with the passage of time.  Accordingly, I decline to order corrective advertising.  

Costs

13                                          The ordinary rule is that costs follow the event.  Mr Cobden SC submitted on Specsavers’ behalf that the ordinary rule should be displaced in this case.  This was because OPSM had lost on two of their principal causes of action and had succeeded only on a ground added at the heel of the hunt.  To that observation one might add that OPSM had also failed to secure any corrective advertising orders.  

14                                          It is true that OPSM succeeded only on a cause of action added late in the piece.  However, the claim based on the survey material only became available when Specsavers disgorged that material.  It was substantial in volume and was disclosed in soft copy only on 15 April 2010 and only after considerable effort on OPSM’s part to extract it from Specsavers.  I have already concluded that Mr Hawkins either knew or was recklessly indifferent to the misleading and deceptive way in which the survey was to be used: Luxottica v Specsavers [2010] FCA 423 at [41].  Specsavers’ conduct thereafter in resisting in a lively fashion the production of that material bespeaks an understandable, although not acceptable, forensic concern about where the proceeding might end up if the material were produced.  Whilst it might be possible to separate out the issues in the proceedings as Mr Cobden suggests, Mr Hawkins’ approach to the litigation suggests that Specsavers’ position has generally been an opportunistic one not to be encouraged.  In those circumstances, the respondent is to pay the applicant’s costs of the proceedings to date which may be taxed forthwith.  I make the following orders:

1.         Declare that the respondent has engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 by:  

(a)        causing the broadcast of the television commercials copies of which are exhibits KAR-1 and KAR-2 to the affidavit of Katrina Rathie sworn 7 April 2010 / exhibits SH-1 and SH-4 to the affidavit of Simon Hawkins affirmed 21 April 2010 (respectively);  and

(b)       publishing or communicating the advertisement on its website at www.specsavers.com.au, the screenshot of which is annexure B to the affidavit of Katrina Rathie sworn 7 April 2010. 

2.         The respondent pay the applicant’s costs of the proceedings to date which may be taxed forthwith.

3.         Stand over for further directions on 30 June 2010 at 9.30am in relation to the preparation of the damages case.

Associate:

Dated:         23 June 2010