FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272

THE COURT ORDERS THAT:

1.                  The parties bring in short minutes of order by 5:00 pm Monday, 22 November 2010 reflecting the reasons for judgment contained herein. 

2.                  The matter be listed for further directions on 23 November 2010 at 9:30 am.

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

I - Introduction

1                     On 29 October 2010 I determined that Optus had engaged in a misleading and deceptive fashion by conducting an advertising campaign to sell certain of its internet broadband plans: Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2010] FCA 1177 (Optus No. 1) and on 2 November 2010 I made orders enjoining Optus from further engaging in that campaign: Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2010] FCA 1200 (Optus No. 2).  The Commission now seeks orders that would require Optus to carry out corrective advertising and to pay a civil penalty to the Commonwealth for the conduct.  The issue of corrective advertising was argued before me on 5 November 2010 and the question of penalty remains yet to be argued.  These reasons deal with the issue of corrective advertising.

II – Principles

2                     The provisions of Part V of the Trade Practices Act 1974 (Cth) constitute a set of proscriptions aimed at corporations.  At their heart, exemplified by the terms of s 52 itself, is the prohibition on corporations engaging in misleading and deceptive conduct or conduct which is likely to mislead or to deceive.  The prohibition thus disclosed is cast sufficiently wide to catch those remarks which, though strictly correct, are nevertheless likely to mislead.  As the Minister for Manufacturing Industry said to the House of Representatives on the introduction of Trade Practices Bill 1974 (Cth)“[t]he untrained consumer is no match for the businessman who attempts to persuade the consumer to buy goods or services on terms and conditions suitable to the vendor” (Parliamentary Debates 89 House of Representatives p 226).

3                     This case is not concerned with the general question of whether a mandatory injunction may be obtained under s 80 of the Act by one trader to compel another trader to put in place a series of corrective advertisements following a course of misleading and deceptive conduct.  Instead, the Commission seeks relief under s 86C of the Act which applies in a number of circumstances including those obtaining where, as here, there have been breaches of ss 52 and 55A of the Act.  Where it applies, s 86C(2)(d) authorises the Court to make an order “requiring the person to publish, at the person’s expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order”.  This power is limited in its application to “advertisements” which, by its ordinary connotation and proximity to the word “publish”, is likely to bear a meaning which is limited to paid-for statements made to the general public or some relevant segment of the general public.  It is, in that circumstance, unlikely to extend to an order which requires a trader to write to its own customers informing them of its wrongdoing and of their concomitant rights arising therefrom.  Such a letter is not an advertisement.  However, s 86C(2)(c) fills that gap by providing a power to the Court to make an order “requiring the person to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to”.  Such a power is sufficient to extend to the writing of corrective letters to consumers who may have been misled by a course of advertisements. 

4                     Section 86C is headed “Non-punitive orders” and the orders contemplated by it are not available to be used as instruments of punishment.  So much is likely to be the case simply from the language of s 86C(2)(c) and (d).  The interaction of the heading and s 86C(2)(a) and (b) (which deal, in contrast, with “community service orders” and  “probation orders”) does not presently arise for consideration.  In the context of corrective statements the fact that a remedy is appropriately adapted to the end of removing confusion from the public mind is likely to mean that it is not punitive in the requisite sense and this will be so even if the remedy in question acts as a deterrent.  It is only when the extent of a remedy moves beyond that which can be seen as being reasonably related to addressing the underlying infringement does the question of whether an order is punitive arise.

5                     The power thus conferred directs attention, at least, to the position of consumers, although other interests, such as the need to avoid market distortions, may also be relevant.  It follows that one aim of such an order is to protect the public interest by dispelling the false impression which has been engendered by the advertisement: Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 20 [49] per Stone J; another is to inform consumers of the conduct in question and of the possible existence of a remedy: Cassidy 135 FCR at 22 [54].  There will be cases where the making of such an order may properly be seen as adjunctive to the primary order restraining the original conduct (Australian Competition and Consumer Commission v Real Estate Institute (WA) Inc (1999) 95 FCR 114 at 133 [49] per French J cited in Cassidy 135 FCR at 21 [51]).  On the other hand, the correction of market distortions caused by the provision of inaccurate information to consumers may also justify orders whose end is the alleviation of that distortion and the restoration of a fair and fully informed marketplace.  So much flows from the fact that the norms established by Part V are not limited by the heading “Consumer Protection”: Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 601-602 per Mason CJ, Deane, Dawson and Gaudron JJ.  Economic concepts of efficiency are, therefore, legitimate concerns under s 86C.

6                     In each case, the nature of the original conduct must be carefully considered and an assessment made of the continuing presence in the public’s mind of the deception (where the expression “the public mind” is understood as a convenient shorthand for the ordinary class of consumers of broadband products less those afflicted by reactions which are extreme or fanciful: Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 86 [105] per the Court). With the passage of time the capacity of any advertisement or campaign to mislead will nearly always diminish.  By the same token, however, the length of the original campaign and its intensity will almost inevitably be relevant concerns.  A long campaign, present across multiple media and of medium intensity may well be likely to have a more substantial or enduring impact on the public mind than a brief and intense campaign.  Further, where campaigns across multiple media are concerned, attention must always be directed to the ways in which the advertisements comprising the campaign interact with each other.  Separate advertisements in different media may reinforce each other through similar get-ups and the cessation of one form of the advertisement may lead seamlessly into the commencement of the next.  It follows that a campaign may be more than the sum of its parts.  Where such multifaceted campaigns are concerned, the nature of any internet advertising must also be carefully considered.  Often enough, an internet site will form a catchment into which consumers attracted by advertisements in other media are drained.  Because of the more intense and interactive nature of internet pages, the internet component of a campaign may need to be understood as its ultimate expression and the final destination at which many (but of course not all) consumers may be expected to arrive.  But this does not mean that an internet page will save a multimedia campaign from being deceptive in its other forms – in a sense, by the time the consumer gets to the website the damage is done for the consumer will have already been “enticed into the marketing web”: Tec & Thomas (Australia) Pty Ltd v Matsumiya Computers Co Pty Ltd (1984) 1 FCR 28 at 38 per Beaumont J.

7                     Where television commercials are concerned there needs to be a recognition of the frequently low attention devoted by consumers to them and their essentially transient nature.  (“[The advertisements] 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”:  Telstra Corporation Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 at 523-524 per Merkel J cited with approval in Cassidy 135 FCR at 23 [60]).  There will be some consumers who will not be watching television live and will fast-forward through all of the commercials.  Amongst those who do not take that course there will be many who are not paying especially close attention to what is happening.  This is not to say that television commercials are not very effective in their own way but rather to underscore that they may not be ideal for the delivery of complicated information.  One may well establish brand awareness using a constant diet of brand references or striking images but the delivery to consumers of detailed information requiring cognition is unlikely to be effective: people watching television commercials are rarely in a contemplative or thinking mood.  This observation is relevant not only to gauging the impact of the initial advertisement but also to the capacity of corrective advertising – with its complex message – to operate effectively: cf. Cassidy 135 FCRat 24 [62]-[63].

III - The extent of the campaign

8                     The campaign in question consisted of advertising in metropolitan and local area newspapers, on television, on the internet, by means of flyers and also using billboards.  The essential difficulty with each advertisement was the same and is explained in detail in Optus No. 1 but may be summarised by observing that the advertisements suggested that consumers would receive, for example, 150GB of broadband made up of a certain amount of peak usage and a certain amount of off-peak usage when, in fact, they would not receive 150GB unless they were astute to use all of their off-peak allowance before exhausting their peak allowance.  This was because after the peak allowance was reached the service was throttled back to 64kbps not only for the peak allowance but also, significantly for present purposes, for the off-peak allowance too.  The off-peak allowance was not, therefore, actually a separate allowance but was an entitlement which was intimately associated with the extent of the consumer’s use of the peak allowance.  An argument by Optus that that effect was dispelled by the use of a small print disclaimer “Speed limited once peak data exceeded” failed because ordinary consumers would simply not grasp the further implication that this applied to the off-peak usage in view of the overriding message of the advertisement that what the consumer would get would be 150GB of broadband internet.  That overriding message was conveyed by the use of very large print for the words “150GB” and through the use of other motifs apt to emphasise the size of the plans.  Advertisements for other plan sizes with a different break-up between peak and off-peak usage were also involved but the essential point was the same in each case.  The basic vice was not that the disclaimer was invisible but that the subtlety and sophistication of its message would have eluded most consumers apart from those who were “exceptionally gifted”: Optus No. 1 at [25].  This was particularly so where the size of the explanatory words – though visible – was dwarfed by the font and colour of the plan size (ie 150GB).

9                     My conclusion in Optus No. 1 was that this basic feature of all of the advertisements was misleading.  In the case of the television commercials I found Optus’ conduct to be “seriously” misleading: Optus No. 1 at [33].  This was because the disclaimer was concealed in such a fashion during the advertisements that, unlike the other media, it was essentially invisible.  There were two versions of the television commercial.  One involved a moose and the other an ostrich (although Optus adhered throughout the trial to the position that it was an emu).  The moose commercials were broadcast from 25 April 2010 to 14 June 2010.  They were replaced by the ostrich commercials on 15 June 2010 which then ran until 8 September 2010.  These advertisements were run on free-to-air- television in the off-peak period which runs from 6 am to 6 pm and were run usually many times each day.  The same commercials also appeared on subscription television between 6 am and 9.30 pm.  To give some flavour to the extent of this coverage, the fine print schedule of advertising slots is 196 pages in length and encompasses over 15,400 programmes shown in various cities on free-to-air and subscription television in which the advertisements appeared (often more than once).

10                  The print theatre of the campaign was also extensive.  The 150GB plan was advertised using the moose.  As might be expected it was run most intensively in Sydney and Melbourne.  In Sydney it was run on 7 days between 27 April 2010 and 20 May 2010 in major Sydney newspapers and in Melbourne on 6 days in a similar fashion.  It ran for one day in April in Brisbane and for one day each in May and June in Perth and Adelaide.

11                  However, the flyer campaign was closely related to the print campaign because the flyers were not only “door dropped” but also inserted into newspapers.  This latter aspect should be emphasised because the flyers were, of course, coloured and inherently more likely to be noticed than a regular monochrome print advertisement.  The 120GB flyer (featuring the ostrich and appearing as annexure B to the reasons in Optus No. 1) was inserted into Sydney metropolitan and district newspapers on 8 days between 20 July 2010 and 18 August 2010;  for 7 days between 21 July 2010 and 19 August 2010 in Melbourne metropolitan and district newspapers; for 4 days between 21 July 2010 and 18 August 2010 in Brisbane metropolitan and district newspapers; for 2 days on 27 July 2010 and 16 August 2010 in Perth and once in Adelaide on 21 July 2010 in a similar way.

12                  The 150GB flyer (which featured the moose) was more extensively inserted.  I will not set out its substantial circulation in district newspapers other than to note that it was included in 33 such publications on essentially single days between 4 May 2010 and 29 June 2010.  These included the Sydney papers known as the North Shore Times, the Parramatta Advertiser and City News.  In the mainline papers the 150GB flyer appeared on 6 days between 12 May 2010 and 23 June 2010 in Sydney, 7 days in Melbourne between 11 May and 29 June 2010, twice in Adelaide on 9 June 2010 and 16 June 2010 and once in Perth on 11 May 2010.  In addition both the 120GB and 150GB flyers were door dropped on a number of days in May through to September 2010. 

13                  The internet campaign referred to in Optus No. 1 suffered from the same defect as the other media.  I infer that it became available when the campaign commenced on Anzac day.  The evidence before me on the corrective advertising application showed that it had ceased by 30 September 2010.

14                  Finally, there was a billboard campaign.  Between various dates in May and July 2010 there were up to 44 billboards in New South Wales, 14 in Victoria, 7 in Queensland, 3 in South Australia and 9 in Western Australia.  These billboard advertisements deployed the moose.  Subject to one matter, the last of these was removed by the end of July 2010.  Optus gave evidence, which I accept, that one errant billboard remained in place until 5 October 2010 but this was without its knowledge or approval.

IV – Characterisation of the campaign

15                  It would be a mistake to treat each of the advertisements in the various media as separate.  The advertisements were part of a coordinated series of promotions and they deployed, as part of that series, the same common features.  Recurrent themes in all of them were the sizes of the plans, the use of large exotic animals and, generally although not invariably, the expression “Think Bigger”.  The appearance of those themes in multiple media must have been intended to raise significantly the profile of Optus’ broadband plans.  Further, the extent of the campaign was substantial and was likely to have been encountered by a very large proportion of the population.

16                  That is consistent with an inference that I am prepared to draw that Optus intended this campaign to have a substantial impact in the broadband market.  Such an inference flows from the amount of money which Optus spent on the campaign which was placed in evidence before me.  Optus has argued, and I have accepted, that that information should remain confidential since it would place its advertising procurer at a disadvantage with its other customers.  I will record, however, that the amount of money spent on advertising these plans was very substantial indeed.

17                  However, not only did Optus intend that the profile of its broadband plans should be lifted but the fact is that that profile was lifted.  There was evidence before me as to the effect that campaign had on the number of its customers on the 120GB and 150GB plans.  I will not set those numbers out.  It suffices to observe that they record between a thirteen-fold and sixteen-fold increase in customer numbers between April and October this year.  The relevance of the inference concerning intention which I had drawn above is that it allows me more comfortably to conclude that the effect of the campaign was substantial:  that which it intended to pass is more likely to have passed: Campomar Sociedad Limitada v Nike International Ltd 202 CLR at 63 [33].

18                  What was involved, therefore, was a large and very expensive advertising campaign spread over nearly five months and involving multiple media.  Further it was very far from unsuccessful.  Having regard to the nature of the deceptive conduct referred to in Optus No. 1 it is likely that a substantial number of people were misled by the campaign.  Optus noted that there was no evidence that any consumer had complained to the Commission but I do not read too much into that fact.  Many people may not yet have encountered the problem; others may have encountered it but stoically accepted the matter blaming themselves for not reading the advertisement more carefully; others may have encountered the problem but may have misunderstood what was taking place as some form of internet outage rather than the effect of speed throttling.  Of those who fully understand the problem there is no particular reason to think that they would immediately have called the Commission.  There was no evidence before me as to any complaints made to Optus itself or to the Telecommunications Ombudsman.  In the circumstances, I read little into the fact that no complaints have been made to the Commission.  In particular, I do not embrace the subtext of the submission that the deception complained of by the Commission was, at best, technical.

19                  Of those who were in fact misled two observations may be made.  First, some will have, in fact, signed up with Optus to buy the plans and thus constitute the very class who have acted to their detriment.  As a practical matter, however, each of those persons may readily be contacted by Optus without the need for any form of public advertising.  Secondly, there will be a class of persons who will have been drawn to consider acquiring an Optus broadband plan by the advertisements but who will not yet have made their final decision.  To use the language of Beaumont J, these are persons who have been enticed into the marketing web.  Whether the deception is active in all, or any, of those persons’ minds is a question with no ready answer.  Some, no doubt, will have no recollection of the campaign beyond some distant memory of an advertisement for an internet plan involving a moose or ostrich (or maybe even an emu).  Others will have a more acute recollection that what was on offer were substantial plans of the order of 120GB to 170GB at a particular rate.  There will be some – most likely those who saw the television commercials – whose recollection is likely to be hazier given their transient nature.  Others yet may have seen the flyers fall colourfully from a newspaper and visited the website where the impression would have been reinforced.  And, of course, there will be many who have been exposed to more than one aspect of the campaign.

20                  It is artificial to seek to identify what might have been the effect on each sliver of the public mind of such a multi-media campaign.  Instead, it is better in such a case to take an aggregate approach and to ask, at the cessation of the campaign and thereafter, what impression the campaign was likely to have left in the public mind.  Viewed from that perspective the course of the campaign consisted of the constant thread of the internet advertisements right up until 30 September 2010.  Customers whose interest was piqued by the other commercials at any time between Anzac Day and 30 September 2010 could visit the site and there the misleading point would be repeated.  The campaign opened on 25 April 2010 and the television campaign featuring either the moose or ostrich was in play until 8 September 2010.  There was at all times in the background, therefore, the consistent advertising of the plans on television and the internet.  Those aspects of the campaign were supported by briefer and temporary bursts in the print media.  Those short episodes were substantial and repeated.  Starting shortly after Anzac Day and extending through May, June, July and into August there were forays into printed press by way of print advertisements and by the insertion of flyers.  In May to July there was additionally the billboard campaign.

21                  Given the extent of the campaign it is likely, in my opinion, that there were many people who at 9 September 2010 (the last day of the television commercials) had been misled by the campaign.  I infer, by reason of the internet advertisements’ continuation until 30 September 2010 that it was expected that the prior effect of the campaign in the other media was still expected to result in consumers visiting the website until at least that date.  It should be noted that was some weeks after the commencement of these proceedings by the Commission.

22                  In my opinion, there are still likely to be some consumers who are thinking about buying a broadband plan from Optus and who still have in their mind the idea that they can acquire plans of the specified sizes for the amounts of money referred to in Optus’ advertisements; for example, it seems to me quite likely that there are still persons who will have been persuaded by the campaign that Optus is providing 150GB plans for $59.99 with a peak and off-peak component.  Many of those will have signed up already (in fact the evidence suggests that those people are very numerous) but not all will have done so.  Mr Williams SC for the Commission was astute to observe that Optus’ survey evidence had suggested that for many people the decision to acquire a broadband plan is a relatively slow decision-making process and, based on that observation, he submitted that the class of persons misled by the campaign but who had not yet signed up was likely to be substantial.  I accept this submission.  The success of the campaign was such that there will be significant numbers of such persons who might still be, as Mr Finch SC put it, percolating through the system.  Such persons are likely to continue to exist in substantial numbers until the end of the year.  It follows that I accept, in principle, the need for some form of corrective order. 

VI – The form of the relief

23                  Plainly, Optus must inform all persons who have acquired plans in the relevant period of the deception which has occurred. In principle, Optus accepted as much.  The Commission suggested a form of letter with which Optus, save for one matter, was content.  The one matter concerned the appropriate greeting to the customer.  Optus contended that it should be entitled to address the consumers by their first name and the salutation “Dear”.  The Commission, on the other hand, submitted that the official nature of the communication and its seriousness would be undermined by such an informal approach.  I accept the Commission’s submission.  The letter should be in the form advocated by the Commission.

24                  The more difficult question concerns whether there needs to be some form of multimedia corrective advertising.  I have accepted that there is still a class of persons who even now remain en route to a purchasing decision and who is affected by the deception engendered by the advertisements. The relevant inquiry is one whose focus is, for present purposes, on the reversal – if possible – of that confusion and the corresponding avoidance of putative purchases.

25                  There is a significant difficulty in ordering a regime of television and newspaper commercials.  The first is there can be no guarantee that the consumers who remain confused will see the corrective advertisements.  Unless the corrective campaign is pitched essentially at a saturation point it is quite possible that consumers who have been misled simply will not see the corrective advertisements.  Even those that encounter such an advertisement physically may not grasp it mentally.  This is particularly so in the case of television commercials where the viewer’s attention is unlikely to be especially focussed in any cognitive sense on the commercial but applies, with less force perhaps, to print advertisements too where the reader simply may not assimilate the presence or meaning of the corrective commercial.  And, unless the corrective campaign involves a large number of commercials the probability that any particular deceived consumer will see any of them will be correspondingly low.  A corrective advertisement broadcast once per hour in prime time for a week will not necessarily be seen by any given consumer. 

26                  On the other hand, there can be little doubt that some of the consumers who have been affected will see the corrective advertising and that in their cases, as Mr Williams SC put it, the corrective advertising will “break the spell”.  In a case where it was not possible to contact each consumer who made a purchase it might be that a substantial corrective advertising campaign in multiple media would be appropriate.  In such a case, the only way in which contact could be made with the class of the deceived would be through those media.  The inefficiencies in that process should readily be admitted but may nevertheless justify the imposition of a broad campaign fashioned to reach as many consumers as possible.  Although such a campaign might well be very burdensome to a respondent it would be unlikely to be punitive because it would remain the only way in which the effect of the conduct might be reversed.

27                  Where, however, it is possible to contact every person who has purchased the product or service in question such an approach may be disproportionate.  In that kind of case, targeted provision of information to identified consumers may be a more efficient way of correcting the confusion.  Further, where such an alternative regime is available the imposition of a heavy programme of corrective advertising in the general media may be more susceptible to characterisation as punitive.

28                  In this case it is possible to order Optus to inform every person who purchases the plans in question through to the end of the year of the fact of the deceptive advertisement and to offer any person affected by that deception the option of being relieved of the burden of the contract.  It is also possible to require corrective advertising more proximately at points of sale.  Unlike corrective advertising published in media such as television and print, such commercials will be encountered by consumers when the very questions involved are likely to be in mind.  Further, being close to a point of sale, the message will be much more likely to hit its target audience.

29                  In this case, the relevant points of sale consist of Optus’ stores and its various websites.  Because Optus operates substantially in markets having nothing to do with broadband internet (telephony for example) it would be excessive to require, as the Commission submits, a corrective advertisement on the home page of each site.  It is not disproportionate, however, to require a notice on those pages dealing with broadband internet.  The Commission suggested that such an advertisement should appear on entry to the page in question and also by means of a pop-up.  I accept this submission.  The notice should be in the form suggested by the Commission.  The same conclusion should be reached in relation to the proposed in-store statements.  The Commission submitted that a laminated A3 sized notice would be appropriate in each store and I accept this.  I also accept the proposed form.

30                  The existence of these alternative and effective means of contacting consumers militates against the ordering of more substantial corrective advertising.  But for the fact that consumers can be directly contacted in this targeted way, however, I would have ordered a substantial regime of corrective advertising across each of the original media involved and for a sufficient period of time to provide some statistical comfort that most consumers involved would see and grasp the point.  The sheer size of the present campaign would have afforded no other option.

31                  The corrective orders I will make will require:

(a)                    corrective letters to all purchasers of the plans since 25 April 2010 through to 31 December 2010 in the form proposed by the Commission.  The letter presently proposed by the Commission will need to be adjusted to make clear that the advertising campaign in question ran from 25 April 2010 until 30 September 2010.

(b)                    the internet corrective advertisement suggested by the Commission save that it need only be placed on those parts of the website dealing with broadband internet plans.  The advertisement is to persist until 31 December 2010.

(c)                    the in-store advertisement suggested by the Commission through to 31 December 2010.

32                  The parties are to bring in short minutes of order by 5 pm Monday, 22 November 2010.  The matter will be listed for further directions on Tuesday 23 November 2010 at 9.30 am to address any issues arising from these reasons, including costs, together with the making of orders for preparation of the penalty hearing.

Associate:

Dated:         19 November 2010