High Court reinstates $2 million penalty against TPG

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18 December 2013

Australian Competition & Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54

The High Court’s decision against TPG reinforces that businesses must take great care when using a “dominant message” advertising strategy, or risk being subject to significant penalties.

In particular, businesses must ensure that advertisements adequately disclose the full meaning of the advertiser’s message, ensuring that important and complex details associated with the advertised product are not buried away in fine print qualifiers.

Businesses also cannot make assumptions about, or rely on, the levels of assumed knowledge its customers should have about products it advertises, nor rely on customers later appreciating the true state of affairs, to neutralise misleading headline claims.

On 12 December 2013, French CJ, Crennan, Bell, and Keane JJ of the High Court (with Gageler J in dissent) overturned the Full Federal Court’s decision and reinstated the trial judge’s $2 million penalty against TPG for publishing online, print and radio advertisements that were misleading.

THE DECISION AT FIRST INSTANCE

The trial judge found that TPG had engaged in nine separate contraventions of the Trade Practices Act (TPA) (for conduct TPG engaged in prior to 1 January 2011) and the Australian Consumer Law (ACL) (for conduct TPG engaged from 1 January 2011) by publishing two sets of misleading advertisements on a number of media platforms offering to provide customers with “unlimited” ADSL 2+ for $29.99 a month, when the service could only be acquired as part of a “bundled service” with other additional costs.

Specifically, Murphy J found that:

  • the advertisements constituted conduct by TPG that was misleading or deceptive, or likely to mislead or deceive, in breach of s 52 of the TPA and s 18 of the ACL;
  • the advertisements contained false representations in relation to the price of goods or services, and in relation to the existence of a condition, in breach of sections 52(e) and (g) of the TPA and sections 29(1)(i) and (m) of the ACL; and
  • a number of the advertisements did not specify the minimum charge in a prominent way as a single price, in breach of s53C of the TPA.

As a result, Murphy J made orders for declarations, injunctions, corrective advertising and pecuniary penalties totalling $2 million.

THE DECISION ON APPEAL

TPG appealed the orders made by Murphy J, with the exception of the order relating to TPG’s breach of the single price provision under s 53C of the TPA in relation to its initial television advertisements.

The Full Court upheld the trial judge’s decision that the initial television advertisements were misleading. However, in relation to the other advertisements, the Full Court held that Murphy J had erred by:

  • not appropriately considering consumers’ knowledge of bundling practices and set-up charges when determining the nature of the ordinary or reasonable consumer who would be misled. The Full Court found that a reasonable consumer was sophisticated enough to understand the practice of bundling and the applicable additional set-up fees.
  • finding that the ordinary reader would be misled unless a misleading “dominant message” was corrected by a sufficiently clear and prominent statement. Rather, the Full Court found that the bundling requirement and additional charges were adequately disclosed and that the advertisements should be considered in their full context.

The Full Court, therefore, accepted TPG’s submissions that TPG had engaged in only three contraventions, being breaches of sections 52, 53(e) and 53(g) of the TPA in relation to its initial television advertisements and s 53C of the TPA in relation to its initial television, print and online advertisements.

In considering the appropriate penalty and other relief, the Full Court also found that the trial judge had erred in holding that an undertaking that TPG provided to the ACCC pursuant to s 87B of the TPA in 2009 was of relevance to the pecuniary penalties and injunction, and finding that it had been breached.

Following the receipt of submissions on relief from the parties, the Full Court ordered TPG to pay a penalty of $50,000, ordered the ACCC to pay 75% of TPG’s legal costs, and set aside the remainder of the trial judge’s orders for relief.

HIGH COURT DECISION

In overturning the Full Court’s decision the High Court found that TPG’s advertisements across each of the media platforms were, or were likely to be, misleading, as the “dominant message” conveyed in its headline claim did not adequately disclose the bundling requirements and other charges that applied.

The High Court found that the Full Court erred in deciding that the “dominant message” of advertisements was not of crucial importance as:

  • the function of the headline strategy advertisements was to “arrest the attention” of the target audience, focusing the target audience’s attention on the “general thrust” of the advertisement, such that the audience could not be expected to pay close attention to the overall advertisement;
  • the tendency of the advertisements to mislead should have been determined, not by asking whether they would induce consumers to enter into contracts with TPG, but by asking whether they were apt to bring consumers into negotiation with TPG rather than one of its competitors. The fact that those consumers who entered into a contract with TPG would eventually appreciate the nature of their obligations to TPG, including the true cost of the service, does not make the advertisements any less misleading; and
  • TPG’s advertisements selectively emphasised words that reflected the attractive aspect of TPG’s invitation and “relegated the balance to relative obscurity”, being the less attractive conditions. The fact that the Full Court recognised that many viewers would only absorb the “general thrust” recognises the effectiveness of TPG’s selective presentation of information.

Further, the Full Court was found to have erred in failing to appreciate the fact that the “dominant message” in TPG’s advertisements was not neutralised by the level of the audience’s assumed knowledge of how ADSL 2+ services are typically offered. This finding reiterates a similar finding by the Full Court in its recent decision concerning Zamel’s[1] as to the level of knowledge Zamel’s target audience could be expected to have.

Lastly, in determining that the appropriate penalty should be reinstated to $2 million, the High Court found that the Full Court failed to appreciate the relevance of TPG’s 2009 undertaking not to engage in misleading or deceptive conduct generally, and the need for the penalty to be a deterrent.

Although additional orders were made in the trial decision, the ACCC accepted that, with the passage of time and TPG’s refraining from engaging in further contraventions, it was no longer necessary to reinstate the injunctions, corrective advertising and compliance programs ordered by the trial judge.

IMPLICATIONS AND NEXT STEPS

Prior to the publication and distribution of advertising, particularly headline advertising, businesses need to carefully consider how they present their services, ensuring they do not use a strategy that:

  • focuses the audience’s attention on a dominant message, such that the audience is unlikely to appreciate the overall message of the advertisement;
  • relies on the fact that consumers will later understand the true nature of the business’s offer;
  • emphasises the attractive aspects of the business’s offer in the dominant message and hides the less attractive conditions; or
  • makes unreasonable assumptions of what a reasonable consumer would understand about the advertised product.

This decision reinforces how tough the law is on misleading or deceptive conduct. Consequently, this may encourage the ACCC to launch further prosecutions, particularly in areas where a “dominant message” can disguise important and complex details, such as bundling requirements and set up costs.

Businesses can mitigate these risks by implementing a process by which any promotions that utilise a “dominant message” strategy are systematically reviewed and approved to ensure that they legitimately represent the full meaning of the advertisement to consumers, and, unlike TPG, do not contravene the ACL.


  [1]The Jewellery Group Pty Ltd (Zamel’s) v Australian Competition & Consumer Commission [2013] FCAFC 144


The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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