FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Global One Mobile Entertainment Limited (No 2) [2011] FCA 670

THE COURT:

Declarations

1.    Declares that the First Respondent (Global One), from 14 February 2010 to 22 May 2010, while engaged in trade or commerce, contravened ss 52 and 53(e) of the Trade Practices Act 1974 (the Act) by causing an advertisement promoting mobile telephone premium content services (Content Services) (by offering the song “One Time” by Justin Bieber as a mobile phone ringtone) to be published on television (the First Advertisement) which represented that any consumer responding to the First Advertisement by sending an SMS message would purchase a one-off service at a one-off cost when in fact the consumer was subscribing to a service with an initial sign-up fee and an ongoing subscription fee.

2.    Declares that the Second Respondent (6G), while engaged in trade or commerce, contravened ss 52 and 53(e) of the Act by causing:

a.    an advertisement promoting content services (by offering entry into a mobile phone quiz game) to be published on television from 7 March 2010 to 17 April 2010 and from 30 May 2010 to 12 July 2010 (the Second Advertisement);

b.     an advertisement promoting content services (by offering the Space Invaders game to consumers on their mobile phone) to be published on television from 21 March 2010 to 24 April 2010 (the Third Advertisement); and

c.     an advertisement promoting content services (by offering the Doodle Jump game to consumers on their mobile phone) to be published on television from 25 May 2010 to 12 July 2010 (the Fourth Advertisement); each of which represented that any consumer responding to the particular advertisement by sending an SMS message would purchase a one-off service at a one-off cost when in fact the consumer was subscribing to a service with an initial sign-up fee and an ongoing subscription fee.

Injunctions

3.    Orders that Global One, whether by itself, its servants, agents or otherwise howsoever, be restrained from causing the First Advertisement to be transmitted.

4.    Orders that 6G, whether by itself, its servants, agents or otherwise howsoever, be restrained from:

a.    causing the Second Advertisement to be transmitted;

b.     causing the Third Advertisement to be transmitted; and

c.     causing the Fourth Advertisement to be transmitted.

Penalty

5.    Orders Global One to pay to the Commonwealth of Australia within 28 days a pecuniary penalty in the amount of $150,000 in respect of the contravention of s 53(e) of the Act declared at paragraph 1 above.

6.    Orders 6G to pay to the Commonwealth of Australia within 28 days pecuniary penalties as follows:

a.    in the amount of $75,000 in respect of the contravention of s 53(e) of the Act by the Second Advertisement declared at paragraph 2 above;

b.    in the amount of $75,000 in respect of the contravention of s 53(e) of the Act by the Third Advertisement declared at paragraph 2 above; and

c.    in the amount of $75,000 in respect of the contravention of s 53(e) of the Act by the Fourth Advertisement declared at paragraph 2 above.

BY CONSENT THE COURT ORDERS THAT:

Compliance Program

Global One:

7.    Within 3 months, Global One establish and implement a trade practices compliance program in accordance with the requirements set out in Annexure 1 to these orders for its employees, being a program designed to minimise Global One's risk of future contraventions of sections 18 and 29(1)(i) of the Australian Consumer Law (ACL) (which are the current equivalent statutory provisions to ss 52 and 53(e) of the Act) and to ensure an awareness of its responsibilities and obligations in relation to the requirements of ss 18 and 29(1)(i) of the ACL.

8.    For a period of 3 years, Global One maintain and continue to implement the trade practices compliance program referred to in order 7 above.

9.    Within 14 days of completion of the training, Global One provide to the Applicant (ACCC) a written statement or certificate from the trade practices professional who conducts the training referred to in Annexure 1 verifying that such training has occurred.

6G:

10.    Within 3 months, 6G establish and implement a trade practices compliance program in accordance with the requirements set out in Annexure 1 to these orders for its employees, being a program designed to minimise 6G's risk of future contraventions of ss 18 and 29(1)(i) of the ACL and to ensure an awareness of its responsibilities and obligations in relation to the requirements of ss 18 and 29(1)(i) of the ACL.

11.    For a period of 3 years, 6G maintain and continue to implement the trade practices compliance program referred to in order 10 above.

12.    Within 14 days of completion of the training, 6G provide to the ACCC a written statement or certificate from the trade practices professional who conducts the training referred to in Annexure 1 above verifying that such training has occurred.

Costs

13.    Global One and 6G pay the ACCC's costs of and incidental to the proceeding as agreed or, in lieu of agreement, as taxed.

THE COURT ORDERS THAT:

Stay

14.    Provided that the Respondents file a Notice of Appeal within 21 days of the date of these orders, Orders 5, 6 and 13 be stayed until the determination of that appeal.

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.

Annexure 1

TRADE PRACTICES COMPLIANCE PROGRAM

Global One and 6G will establish a Trade Practices Compliance Program (Compliance Program) that complies with each of the following requirements:

1.    Appointments

1.1.    Within one month of the date of the Order coming into effect Global One and 6G will appoint a Director or a Senior Manager of the business to be responsible for the development, implementation and maintenance of the compliance program (Compliance Officer).

2.    Compliance Officer Training

2.1.    Global One and 6G will ensure that, within three months of the Order coming into effect, the Compliance Officer attends practical trade practices training focusing on Division 1 of Part 3-2 of the Australian Consumer Law (which is Schedule 2 to the Competition and Consumer Act 2010 (CCA), particularly as it relates to sections 18 and 29(1)(i) of the Australian Consumer Law (Relevant Provisions).

2.2.    Global One and 6G shall ensure that the training is administered by a suitably qualified compliance professional or legal practitioner with expertise in trade practices law;

2.3.    Global One and 6G, within 14 days of completion of training, will provide the ACCC with a written statement from the compliance professional or legal practitioner confirming the completion of the training conducted in accordance with paragraphs 2.1 and 2.2 above.

3.    Staff Training

3.1.    Global One and 6G will cause all employees of Global One and 6G whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions to receive regular (at least once a year) practical training administered by the Compliance Officer (once trained) or a qualified, compliance professional or legal practitioner with expertise in trade practices law, that focuses on the Relevant Provisions.

4.    Complaints handling

    Global One and 6G will:

4.1.    develop procedures for recording, storing and responding to trade practice complaints within 2 months of the Order coming into effect; and

4.2.    provide the ACCC with an outline of the complaints handling system within 2 months of the Order coming into effect.

5.    Global One and 6G will ensure that the Compliance Officer reports to their director(s) or governing body every 12 months on the continuing effectiveness of the Compliance Program.

6.    If requested by the ACCC, Global One and 6G shall, at their own expense, provide copies of documents and information in respect of matters which are the subject of the Compliance Program.

7.    Review

7.1.    In the event the ACCC has sufficient reason to suspect that the Compliance Program is not being implemented effectively, Global One and 6G shall, if requested by the ACCC, at their own expense, cause a review of the Compliance Program elements (the Review) to be carried out in accordance with each of the following requirements:

7.2.    Scope of the Review – Global One and 6G shall ensure that the Review is broad and rigorous enough to:

7.2.1.    provide Global One and 6G and the ACCC with a supportable verification that Global One and 6G have in place a Compliance Program that complies with the requirements of the Undertaking and is suitable for the size and structure of Global One and 6G;

7.2.2.    provide the Review Report and opinions detailed at point 8 below.

7.3.    Independence of Reviewer – Global One and 6G shall ensure that the Review is carried out by a suitably qualified, independent compliance professional with expertise in trade practices law (the Reviewer). The Reviewer will qualify as independent on the basis that he or she:

7.3.1.    did not design or implement the Compliance Program;

7.3.2.    is not a present or past staff member or director of Global One and 6G;

7.3.3.    has not acted and does not act for Global One and 6G in any trade practices related matters;

7.3.4.    has not and does not act for or consult to Global One and 6G or provide other services on trade practices related matters other than Compliance Program reviewing; and

7.3.5.    has no significant shareholding or other interests in Global One and 6G.

7.4.    Evidence - Global One and 6G shall use their best endeavours to ensure that the Review is able to be conducted on the basis that the Reviewer has access to all relevant sources of information in Global One and 6G’s possession or control, including without limitation:

7.4.1.    enquiries of any employees, representatives, agents and stakeholders of Global One and 6G;

7.4.2.    documents created by Global One and 6G’s consultants, legal practitioners and accountants for use in Global One and 6G’s Compliance Program.

7.5.    Global One and 6G shall ensure that the Review is completed within three months of written request from the ACCC.

8.    Reporting

8.1.    Global One and 6G shall use their best endeavours to ensure that the Reviewer sets out the findings of the Review in a Compliance Program Review Report, which will provide particular and specific information regarding the scope of the Review and the effectiveness of the Compliance Program including:

8.1.1.    details of the evidence gathered and examined during the Review;

8.1.2.    the name and relevant experience of the person appointed as GlobalOne and 6G Compliance Officer;

8.1.3.    the Reviewer’s opinion on whether Global One and 6G has in place effective staff training, complaints handling programs that comply with the requirements of the Undertaking; and

8.1.4.    actions recommended by the Reviewer to ensure the continuing effectiveness of Global One and 6G’s Compliance Program.

8.2.    Global One and 6G shall ensure that each Compliance Program Review Report is completed and provided to Global One and 6G within one month of completion of the Review.

8.3.    Global One and 6G will cause the Compliance Program Review Report to be provided to the ACCC within 14 days of its receipt from the Reviewer.

8.4.    Global One and 6G shall implement promptly and with due diligence any recommendations made by the Reviewer or required by the ACCC that are reasonably necessary to ensure that Global One and 6G maintain and continue to develop the Compliance Program elements in accordance with the requirements of this Undertaking.

REASONS FOR JUDGMENT

1    On 21 April 2011 I delivered judgment in these proceedings: Australian Competition and Consumer Commission v Global One Mobile Entertainment Limited [2011] FCA 393 (Reasons). I found that the respondents (Global One and 6G) had contravened both ss 52 and 53(e) of the Trade Practices Act 1974 (Cth) (the Act). In respect of the s 53(e) contraventions, I imposed a penalty of $150,000 on Global One and $225,000 on 6G. I found that it was appropriate to make declarations as to the contravention of the Act but gave the parties the opportunity to agree on the form of the declarations to be made. I also gave the parties the opportunity to make further submissions as to the appropriateness of injunctions and compliance plans as a form of relief for the contraventions.

2    The parties have agreed on the wording of proposed orders with respect to pecuniary penalty, the compliance plan and costs.

3    The parties have not agreed on the wording of the proposed declarations and the extent of any injunctions. The parties have each proposed orders and made submissions on these issues.

4    In their proposed orders and submissions, Global One and 6G sought a stay of the Court’s orders in respect of costs and pecuniary penalties, contingent on Global One and 6G filing an appeal within 21 days of the orders being entered. Global One and 6G also indicated that if the Court ordered injunctions in the form proposed by the applicant (the Commission), Global One and 6G would also seek a stay of those orders. As a result of my findings below on the form of the injunctions, it appears that the parties are in agreement on the form of the stay to be granted.

Declarations

5    The Commission proposes detailed declarations that identify with precision the facts that led the Court to the conclusion that contraventions had occurred. Global One and 6G propose a form of declaration which declares that Global One and 6G’s conduct contravened ss 52 and 53(e) of the Act in respect of each of the four advertisements the subject of the proceedings (the Advertisements), but nothing more.

6    In support of their submission that their proposed declaration is sufficient, Global One and 6G rely on the statement of Gray, Branson and North JJ in Warramunda Village Inc v Pryde (2001) 105 FCR 437 at [8] that:

The remedy of a declaration of right is ordinarily granted as final relief in a proceeding. It is intended to state the rights of the parties with respect to a particular matter with precision, and in a binding way. The remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment. This is even more strongly the case when the conclusion is not one from which any right or liability necessarily flows.

7    Global One and 6G submit that the “legal rights of the parties” as determined by the Court were that Global One and 6G’s conduct contravened ss 52 and 53(e). According to Global One and 6G, the Commission’s proposed declarations seek to have subordinate contentions or findings recorded as part of the declarations made, which would go beyond declaring the legal rights of the parties as determined by the Court. The Commission’s proposed declarations, say Global One and 6G, contain findings that were not made by the Court at all or, alternatively, findings from which no ‘right or liability necessarily flows’.

8    Global One and 6G point out that their approach is consistent with Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89, where the Full Court made a declaration in terms that the published advertisement in that case was ‘misleading and deceptive contrary to the provisions of s 52 of the [Act]’.

9    However, in Australian Competition and Consumer Commission v Francis (2004) 142 FCR 1, Gray J observed that it was clear that the vagueness of the declaration in Tobacco Institute was in part attributable to the result of the different views taken by the members of the Full Court as to the precise misleading or deceptive effect of the advertisement concerned. Indeed, in Tobacco Institute, after referring to the differences of reasoning among the members of the Full Court, Hill J stated at 113:

I have considered whether there was some possibility of making declarations which sought to spell out the relevant meaning of the words used, but… I have reached the conclusion that the making of such a declaration could itself give a false impression of what actually was decided by the Court

10    In Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53, the High Court expressed disapproval of the making of declarations in the barest terms. In Rural Press, the trial judge had made declarations that the appellants had contravened or been directly or indirectly knowingly concerned in the contravention of ss 45 and 46 of the Act. The appellants did not appeal the content of the declarations to the Full Court or the High Court. Justices Gummow, Hayne and Heydon (with whom Gleeson CJ and Callinan J agreed) stated at [89]-[90]:

The declarations spoke merely of “an arrangement” having a purpose and effect, without giving any content to that expression and without indicating the gist of the findings of the primary judge identifying the arrangement.

These declarations provide a bad precedent and were of a kind which the trial judge should not have agreed to make even if urged to do so by the parties. Close attention to the form of proposed declarations, particularly those “by consent”, should be paid by primary judges.

11    Their Honours set aside the declaration of the Full Court and replaced it with a more detailed declaration of the contravention that had occurred.

12    In Francis, Gray J was of the view that the majority of the High Court in Rural Press had indicated that the making of declaratory orders by a ‘mechanical process’ should not continue. His Honour said that attention must be given to the form of the declaration, so that it is ‘at least informative as to the basis on which the court declares that a contravention has occurred’ (at [113]). Justice Gray made the following relevant observations:

    A declaration must be of significance; what is declared must have some effects on the rights and obligations of the parties to the proceeding in which the declaration is pronounced.

    The mere expression of a conclusion in the form of a declaration, particularly a conclusion as to the facts, will generally fall short of this requirement.

    It is difficult to see how an issue is resolved by an order which is not comprehensible except by recourse to the reasons for judgment.

    It is difficult to see how the rights of a member or members of the public under the Act can be vindicated by the mere recording of the conclusion that a contravention has occurred.

13    In BMW Australia Ltd v Australian Competition and Consumer Commission (2003) 207 ALR 452, the appellant was alleged to have failed to comply with a prescribed product safety standard for vehicle jacks and specified safety instructions accompanying vehicle jacks. The trial judge had made a general declaration that the appellant’s conduct had contravened s 65C(1)(a) of the Act. The Full Court was of the view that the form of the declaration made by the trial judge was a ‘bad precedent’. At the very least, the Full Court said, the declaration should have disclosed the basis on which the vehicle jack and the owner’s manual supplied failed to comply with the prescribed consumer product safety standard relating to vehicle jacks (at [35]).

14    It is clear from these authorities that the declarations proposed by Global One and 6G, which merely express that contraventions of ss 52 and 53(e) of the Act have occurred, are inappropriate. However, I am also of the view that most of the details contained in the Commission’s proposed declarations, including the precise cost of the subscription fees and ongoing fees, the SMS number to which the consumer was required to respond and the method by which the consumer could end his or her subscription, are unnecessary and unsuitable for the terms of the declarations in question. Excluding these details from the form of the declarations will have little impact on the utility of the declaratory relief. Effects such as the promotion of awareness among other content service providers of what constitutes a contravention of the Act and the protection of consumers from misleading conduct will still be obtained with a shorter form of declarations.

15    Accordingly, the declarations that I will make include the detail of the sections of the Act contravened and provide the basis for the contravention, being the representation in each of the Advertisements that ‘any consumer responding to the [particular] Advertisement by sending an SMS message would purchase a one-off service at a one-off cost when in fact the consumer was subscribing to a service with an initial sign-up fee and an ongoing subscription fee’.

Compliance program

16    Global One and 6G have agreed to introduce a trade practices compliance program in accordance with that proposed by the Commission within 3 months (the program). The Commission says that the program is designed to minimise Global One and 6G’s risk of future contraventions of ss 18 and 29(1)(i) of the Australian Consumer Law (the Law), being the current statutory provisions equivalent to ss 52 and 53(e) of the Act. The program is also said by the Commission to ensure awareness on the part of each company of its responsibilities and obligations in relation to the requirements of the Law. The proposed orders require Global One and 6G to maintain and continue to implement the program for 3 years.

17    I am satisfied that it is appropriate for each company to introduce and implement the program. In particular, it is apparent that the acknowledgement by MobileActive, the parent company of Global One and 6G, of the Mobile Premium Services Code implemented by and applicable to participants in the mobile premium services industry has been insufficient to ensure past compliance with the Act (Reasons at [121]). In those circumstances, the proposed compliance program is appropriate to ensure future compliance.

Injunctions

18    Global One and 6G do not dispute that it is appropriate to grant injunctions in respect of the Advertisements. I accept that such orders are appropriate.

19    The Commission seeks orders that each of Global One and 6G:

Whether by itself, its servants, agents or otherwise howsoever, be restrained from

supplying or offering to supply, or promoting the supply of a Content Service to any

person without clearly and prominently disclosing to that person:

1.     the nature of the Content Service being provided, including as to whether a subscription service will be provided;

2.     all of the actual charges to be incurred by the consumer in acquiring the Content Service; and

3.     all relevant conditions which apply or may apply to the provision of the Content Service, including the price.

20    The Commission submits that those proposed orders are directed specifically towards the impugned conduct, that they are clear and that they do not expose Global One or 6G unfairly to further proceedings to determine whether they have breached the terms of the orders.

21    The Commission does not contend that there is evidence of a threat by either Global One or 6G to continue to engage in the contravening conduct but submits that, nevertheless, there is the power to make such an order (s 232 of the Competition and Consumer Act 2010 (Cth) (the CCA)). The Commission points to the potential harm to the public if there were repetition of the contravening conduct.

22    Section 232 of the CCA provides that a court may grant an injunction if satisfied that the person has engaged, or is proposing to engage, in conduct that constitutes or would constitute a relevant contravention. There is no evidence that either Global One or 6G proposes to engage in such conduct, although s 232 is not so limited in its scope. If the public interest requires it, an injunction can be granted whether or not the likelihood of such conduct is established.

23    The Commission contends that the injunctions should extend to the supply or offer of supply by Global One and 6G of content services generally. The Commission submits that their proposed orders work together with the program, that injunctions prevent repetition and that the program facilitates organisational change and provides the means to ensure that the conduct does not re-occur. The Commission submits that the injunctions will stop Global One and 6G from continuing to engage in the conduct and will thereby protect consumers and ‘mark the Court’s disapproval of the contraventions’.

24    I do not accept that it is necessary or appropriate in the present case to grant the injunctions proposed by the Commission. The orders proposed by Global One and 6G include injunctions restraining each of them from causing the Advertisements or ‘any substantially similar advertisement’ from being transmitted. The findings in respect of the Advertisements were fact specific and related primarily to presentation rather than, strictly, content.

25    I do see some difficulties with an order that refers to an advertisement “substantially similar” to an existing advertisement. The Advertisements are complex. An order restraining Global One and 6G from transmitting an advertisement substantially similar to each of the Advertisements could give rise to uncertainty. For example, is an advertisement for a ring tone for another song by another artist substantially similar to the advertisement involving the Justin Bieber ring tone? Is an advertisement in which the same information as to subscription is clearly and prominently displayed substantially similar to the Advertisements? Is an advertisement concerning a mobile phone quiz game that does not involve subscription to content services substantially similar to the advertisement involving the quiz game?

26    I appreciate that Global One and 6G have also proposed an order that includes the reference to a restraint on transmitting advertisements substantially similar to the Advertisements. However, in my view, the terminology, in the present context, makes the orders unclear or sufficiently vague that it exposes Global One and 6G unfairly to further proceedings to determine whether they have breached them (cf Australian Competition and Consumer Commission v Boost Tel Pty Ltd [2010] FCA 701 at [111] per Siopis J). The declarations that I propose to make, which reflect the reasons given for the making of the declarations and orders, together with the fact that Global One and 6G have ceased to cause the Advertisements to be transmitted and that there is no evidence of likely further contravention, are sufficient. The declarations and orders should provide sufficient incentive to ensure that Global One and 6G ensure that future advertisements do not contravene the Law.

27    In my view, there is no sufficient basis for the injunctions proposed by the Commission, which are broad and potentially uncertain in scope. While that potential uncertainty may be warranted in cases where there is evidence of likely further contravening conduct (Francis at [123]) or evidence of misleading advertising practices in the industry (cf Boost), that is not the case here. The proposed orders go beyond the issues determined and may affect advertisements that are different in content and/or presentation from the Advertisements. The declaration and penalties imposed mark the Court’s disapproval and provide a deterrent to repetition of the contravening conduct.

Stay

28    As stated above, Global One and 6G seek a stay of the orders in respect of costs and pecuniary penalties contingent upon them filing an appeal within 21 days of the orders being entered. That application is not opposed and I am of the view that, if those parties file an appeal within 21 days of the date of the making of the orders, it is appropriate to grant a stay of those orders until the determination of the appeal.

Associate:

Dated:    15 June 2011