Australia: ACCC v TPG Internet Pty Limited: High Court rules on claims of misleading headline advertising

Last Updated: 19 December 2013
Article by Kathryn Edghill and Megan Edwards

On 12 December 2013 the High Court handed down judgment in the matter of ACCC v TPG Internet Pty Ltd. Truman Hoyle represented TPG in the proceedings from their commencement as a Federal Court application by the Australian Competition and Consumer Commission (ACCC) for an urgent injunction which was successfully defended in 2010, through the hearing at first instance before Murphy J, a successful appeal to the Full Federal Court and the ACCC's appeal to the High Court.

In a joint judgment of French CJ, Crennan, Bell and Keane JJ (Gageler J dissenting), the High Court reinstated the judgment of Murphy J at first instance, finding that TPG breached what was then the Trade Practices Act (1974) (TPA) and, later, the Competition and Consumer Act (2010) (CCA), by engaging in misleading and deceptive conduct, making false or misleading representations and not prominently displaying a single price for the advertised service. The judgment will have far reaching consequences for advertisers across all industries, especially those who use headline messages in their advertisements.

What was the case about?

On 25 September 2010, TPG commenced a national print campaign for its Unlimited ADSL2+ and home phone bundle, and, in the days that followed, added a radio, television and online campaign advertising (Initial Advertisements). On 4 October 2010 the Australian Competition and Consumer Commission (ACCC) wrote to TPG raising concerns that the advertising was misleading and deceptive in breach of the TPA and, as a result, on 7 October 2010, TPG ceased to publish the Initial Advertisements (which ran for, at most, 13 days), replacing the campaign with a revised campaign which covered a broad range of media, specifically television and radio, cinemas, newspapers and magazines, outdoor advertising (including billboards, buses and trams) and the Internet (Revised Advertisements).

The High Court's findings relate principally to the use in the Revised Advertisements of the headline "Unlimited ADSL2+ $29.99" with an immediate reference below it in print of substantial but smaller font size, and after it when spoken, which said that this price was available when the ADSL2+ service was bundled with home phone rental for $30.00. The ACCC alleged that the use of the headline or dominant message did, or was likely to mislead and deceive consumers into thinking that they would pay only $29.99 per month for the bundled product, when in fact the cost was $59.99 per month. This was despite the fact that there was a dearth of evidence that any consumer was misled or deceived.

What happened in the proceedings leading up to the High Court decision?

From the time the ACCC raised its first concerns about the Initial Advertisements, TPG attempted to resolve those concerns. It considered that it had done so with the Revised Advertisements. The ACCC, however, disagreed and filed an application before the Federal Court on 16 December 2010, seeking an urgent interlocutory injunction restraining publication of the Revised Advertisements. That application was heard before Ryan J on 22 December 2010 (Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2010] FCA 1478). Ryan J dismissed the application, stating that the ACCC's case was a weak one.

During the course of the hearing before Ryan J TPG prepared a number of alternative advertisements as a precautionary matter. One of those prepared contained a reference to the total monthly amount for the bundle – ironically, taking this precautionary action (which was never used) was later to be used against TPG as evidence that its advertisements were misleading.

The matter proceeded to a hearing on the application for final orders, the liability aspects of which were heard before Murphy J on 20 and 21 June 2011. At that hearing, the Court was required to determine whether TPG's conduct in publishing the Initial Advertisements, and the continued publication of the Revised Advertisements, was in breach of sections 52, 53(e), 53(g) and 53C of the TPA and, following its introduction, sections 18, 29(1)(i) and 29(1)(m) of Schedule 2 of the CCA (ACL).

Judgment on liability was handed down by Murphy J on 4 November 2011 (Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2011] FCA 1254). His Honour found that TPG had:

  1. misled consumers by not adequately disclosing in the Initial Advertisements and Revised Advertisements, that the consumer was required to purchase the ADSL2+ product as a bundle for a price of $29.95 per month plus the home phone line rental for an additional fee of $30.00 per month,;
  2. misled consumers by not adequately disclosing that set-up fees were required to be paid for the TPG service in the Initial Advertisements; and
  3. breached section 53C of the TPA by not prominently stating the single price of the product in the newspaper, television and internet media in the Initial Advertisements.

Following Murphy J's judgment, TPG removed the Revised Advertisements from market.

What followed was a separate hearing on penalty before Murphy J on 19 and 20 December 2011, resulting in a judgment on 15 June 2012 (Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629) in which his Honour ordered injunctions restraining TPG from running the Initial and Revised Advertisements, a pecuniary penalty of $2 million and costs be paid by TPG and ordered TPG to undertake a corrective advertising campaign and compliance program. In setting that penalty, among other things, Murphy J found that the fact that TPG had given a section 87B Undertaking to the ACCC some years before in relation to an unrelated factor was a matter which should weigh in favour of a higher penalty.

TPG appealed from the decisions of Murphy J to Full Federal Court, which appeal was heard on 12 and 13 November 2012.

The Full Federal Court handed down its decision on 20 December 2012 (TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190). The Full Federal Court unanimously allowed the majority of TPG's appeal finding only that TPG had misled consumers by not adequately disclosing that the consumer was required to pay the bundled price for the ADSL2+ product bundled with home phone line rental, and by not adequately disclosing that set-up fees were required to be paid in the Initial television advertisement only. The Full Court determined that the remaining advertisements were not otherwise misleading or deceptive in breach of the TPA or ACL.

The Full Federal Court handed down its decision on penalty on 4 April 2013 (TPG Internet Pty Ltd v Australian Competition and Consumer Commission (No 2) [2013] FCAFC 37. The Full Court ordered only that TPG pay a penalty of $50,000 and that the ACCC pay TPG 75% of its costs of and incidental to the appeal, the proceedings at first instance and the injunction. It was from the Full Federal Court's decisions on liability and penalty that the ACCC sought and was granted leave to appeal to the High Court.

On what basis did the ACCC appeal to the High Court?

The grounds on which the ACCC appealed to the High Court can be summarised fairly simply. The ACCC claimed that Murphy J at first instance was correct when he assessed TPG's advertisements having regard to the dominant message conveyed by the headline message of "ADSL 2+ $29.99" and that the misleading nature of that dominant message was not cured by use of the references in smaller print to the need to, and cost of the bundle with a home phone line. The ACCC also argued that the Full Court erred in rejecting Murphy J's finding that a reasonable consumer to whom the advertisements were directed would not have had sufficient understanding of the nature of ADSL2+ (and the way in which it was delivered, including as a bundle). Finally, the ACCC claimed that the Full Court failed to give sufficient weight to deterrence as a factor in setting the penalty of $50,000.

TPG argued vigorously against each of these points, noting that the advertisements had to be assessed having regard to their context and not by reference to a dominant message alone, that consumers to whom the advertisements were targeted would know that delivery of ADSL would commonly require it to be bundled with a home phone line rental, and that the Full Court had had sufficient regard to deterrence as a factor in assessing penalty when regard was had to the fact that TPG had incurred considerable costs and had been required to contact each customer to offer them the opportunity to obtain a refund for their contract, following Murphy J's judgments.

What did the High Court decide?

The majority of the High Court (French CJ, Crennan J, Bell J, and Keane J) allowed the ACCC's appeal, stating "It was not open to the Full Court, in the proper exercise of its appellate function to hold that TPG's advertisements were not misleading" (at [58]) . In granting the appeal, the High Court reinstated those of the orders made at first instance by Murphy J which had not already been exhausted.

The majority of the High Court found the Full Court erred in the following ways (at [45]):

First, the Full Court erred in holding that the primary judge was wrong to regard the "dominant message" of the advertisements as of crucial importance.... Secondly the Full Court erred in failing to appreciate that the tendency of TPG's advertisements to mislead was not neutralised by the Full Court's attribution of knowledge to members of the target audience that ADSL2+ services may be offered as a "bundle".

The majority placed emphasis on the fact that the TPG advertisements were not viewed by a target audience "focused on the subject matter of their purchase in the calm of the showroom to which they had come with a substantial purchase in mind" but were advertisements which were "an unbidden intrusion on the consciousness of the target audience" (at [47]). They found that the audience could not have been expected to pay close attention to the advertisements in those circumstances (at [47]) and that if they did only pay perfunctory attention that did not amount to a failure to take reasonable care of their interests (at [47]).

The majority also found that the Full Court erred in failing to recognise that an advertisements could have a tendency to mislead not only because it was apt to induce consumers to enter contracts with TPG but also because they were apt to lead them into negotiations with TPG rather than with one of its competitors (at [48]).

At the heart of the majority's finding that TPG's advertisements had been misleading was the finding that the "tendency of TPG's advertisements to lead consumers into error arose because the advertisements themselves selected some words for emphasis and relegated the balance to relative obscurity" (at [51]). This dominant message, the majority held, would override any specific knowledge of the target audience that ADSL 2+ was commonly offered as a bundle (at [53]).

When reinstating the $2 million penalty awarded at first instance, the High Court said (at [65]):

"General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct."

The majority found that the Full Court erred in failing to take account of the fact of the section 87B Undertaking which had been given by TPG, saying that it failed to "appreciate the relevance of the undertaking in relation to the claims of personal deterrence upon the sentencing discretion" and finding that "The fact that the undertaking had not been sufficient to secure TPG's adherence to the requirements of the TPA indicated that a more severe penalty was necessary to accomplish the task of securing that adherence" (at [64]).

Gageler J, in dissent, agreed with the Full Federal Court's approach to the case, finding "The Full Court correctly recognised that it was in as good a position as the primary judge to reach its own conclusion on this question" (at [73]) and, in doing so, correctly exercised its appellate function. His Honour agreed with the Full Court when it found that an ordinary consumer of broadband services would also be aware that DSL broadband internet services were often bundled with home telephone line rental and commonly had a set-up fee (at [76]). He went on to find that such a consumer would not be misled by a headline reference to "Unlimited ADSL 2+ $29.99 per month" but would look to the whole of the advertisement.

His Honour framed the question not as "whether the fine print of an advertisement was sufficient to dispel a "dominant message" conveyed by its headline", but as whether "the ordinary reasonable consumer or potential consumer of broadband internet services, looking with an open mind to the whole of the advertisement, would be likely to have formed an impression that what was being advertised was a stand-alone DSL broadband internet service for a stand-alone price of $29.99 per month" (at [76]). His Honour found that such a consumer would not be misled and that TPG was justified in focussing in its advertisements on the component of its bundle which differentiated it from its competitors, being the cost of the ADSL2+ component at $29.99 (at [83])

Gageler J also accepted TPG's argument that the Full Federal Court had had regard to the deterrence factor in setting the penalty at $50,000 (at [84]).

What does the High Court's decision mean for advertisers?

The High Court's judgment has wide reaching implications for advertisers in all industries. In particular:

  • The High Court¡¦s judgment puts in question the long adopted approach of the use of disclaimers in advertisements to support headline messaging and to communicate relevant terms and conditions of the product being advertised. Advertisers will need to carefully assess what ¡¥dominant message¡¦ or ¡¥general thrust¡¦ of an advertisement is conveyed wherever emphasis is placed on an aspect of an advertisement or a headline is used. They will need to assess whether words which further explain or, in some cases, disclaim the headline need to be brought into the headline so as to avoid creating a misleading dominant message or headline. It is worthwhile noting that, in TPG¡¦s case, its reference to the fact, and additional cost of bundling ADSL2+ with a home phone line rental was not placed in the fine print, but was still a prominent feature of the advertising.
  • Reliance on the specific knowledge of a targeted customer/potential customer base to which the advertisement is directed, may be insufficient to ¡¥defuse¡¦ any tendency of an advertisement to be misleading in breach of the ACL, if the dominant message of the advertisement requires the consumer to draw on that knowledge. This means that the only safe approach may be to assess what the ¡¥ordinary reasonable consumer¡¦ having no assumed knowledge of the product would interpret from the advertisement.
  • The production of alternative versions of advertisements, especially those which place a different emphasis on matters which are not given the same prominence in the final version of the advertisements used, may be used as evidence, not of an intention to mislead (which is irrelevant) but of the fact that the final version of the advertisement conveyed an impression which would not have been created had the alternative version been used.
  • Once an advertiser has provided a section 87B Undertaking to the ACCC, the fact of such an undertaking¡¦s existence will likely be successfully used as evidence before the Court in an entirely separate matter, for the purposes of assessing penalty.
  • Deterrence will play a ¡¥primary role¡¦ in assessing penalty for a breach of not only the CCA but also other legislation if the driving force behind the impugned conduct is commercial gain.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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