The High Court of Australia has provided important guidance for companies advertising their services to the public in holding that TPG had engaged in misleading and deceptive conduct and had made false or misleading representations in advertisements for its ADSL2+ broadband services.
On 26 June 2012, we reported that the Australian Competition and Consumer Commission (ACCC) was successful in obtaining orders in the Federal Court penalising TPG $2 million for running advertisements on television, radio, newspapers and various websites promoting its new internet plan.1
The advertisements stated in large and prominent print that customers could obtain ‘Unlimited ADSL2+’ for $29.99 per month. Also in the ads, but significantly less prominent, were the conditions that the customer had to incur set-up costs and bundle the internet plan with a $30 per month phone line rental.
After that ruling, TPG appealed to the Full Court of the Federal Court of Australia who largely overturned the decision finding that the relative prominence of the conditions was not important because advertisements needed to be read as a whole, not just for their ‘dominant message’. Based on this, the Full Court found all but three of the advertisements to be compliant and the pecuniary penalty was reduced from $2 million to $50,000. 2
The ACCC appealed to the High Court.
The High Court’s decision
The majority of the High Court (French CJ, Crennan, Bell and Keane JJ, Gageler J dissenting) found that the Full Court was wrong to set aside the findings of the primary judge and held that the primary judge’s assessment of the pecuniary penalty of $2 million should be restored.
The High Court’s decision was based on restoring the ‘dominant message’ approach taken by the judge in the original decision.
The primary judge found that an ordinary or reasonable consumer would take in the dominant message of ‘Unlimited ADSL2+ for $29.99 per month’ and might not have taken in the further message regarding the additional charges that would be incurred. Such a consumer would be left with the (misleading) impression that the entire cost of the service was $29.99 per month.
The High Court reaffirmed previous statements it had made to the effect that the consumer protection provisions of the Trade Practices Act (now the Australian Consumer Law) do not protect consumers who act unreasonably or fail to protect their own interests.3 The High Court also noted that, where parties have equal bargaining strength, there is no obligation to point out adverse aspects of a proposed agreement.4
However, in this case the High Court did not accept that either of those principles relieved TPG of its obligation to ensure that any conditions or qualifications that attached the dominant message of an advertisement were sufficiently prominent so that an ordinary and reasonable consumer would understand the qualification and not be left with a misleading impression.
The High Court agreed with the primary judge that the qualification in the advertisement was not given sufficient prominence to counter the effect of the headline claim and restored the $2 million penalty that had been originally imposed.
Tips for compliance
In upholding the primary judge’s decision, the High Court reinforced the importance for businesses in taking care when advertising their products and services.
Based on the approach taken by the High Court in this case, one could suggest a four-step process for determining whether an advertisement is misleading:
- First, identify the ‘dominant message’ or ‘headline claim’ of the advertisement.
- Second, determine whether the dominant message, without any qualification, conveys a misleading impression.
- Third, if it would be misleading, identify whether the advertisement also contains any qualification or condition which corrects the misleading impression given by the dominant message.
- Finally, consider whether the qualification or condition is given sufficient prominence in the advertisement so that an ordinary and reasonable consumer would notice the qualification and be disabused of the misleading impression from the dominant message.
The fourth step will involve a judgment call and it is impossible to set down fixed guidelines for what will be compliant. It is a question on which opinions may differ. Indeed, the dissenting judge in the High Court, Gageler J, agreed with the majority’s statement of legal principle, but disagreed about the application of that principle to TPG’s advertisements.
It is possible to identify a number of factors that a court will consider in making their determination, however. These include:
- The extent to which the ‘dominant message’ is misleading – the more misleading the headline claim, and the more important the qualification, the more prominence the qualifying message will need to be given.
- The nature of the product being advertised – advertisements for products about which consumers ordinarily do a lot of research before purchasing (e.g. the purchase of a car) may not require prominent qualifications because the court will assume that the consumer will take the time to find out the terms and conditions on which the product is offered.
- The nature of the target audience of the advertisement – if an advertisement is pitched at a particularly savvy group of consumers (such as advertisements that run in trade journals or are targeted at regular users of the services), there may not be a need for prominent qualifications, especially if the qualification is ‘standard’ or ‘routine’ in the industry.
- The medium in which the advertisement is placed – qualifications in print advertisements may require less prominence because the consumer will have an opportunity to review the entire ad if they are interested in the product being offered; however significant qualifications in television, radio or billboard advertisements may need to be very prominent because of the limited time the audience has to process the information.
If you would like more information on these issues, please contact Rocco Russo or Justin Ditton on +61 7 3231 2444.