ACCC v TPG Internet Pty Ltd [2013] HCA 54 (12 December 2013)

Companies advertising and marketing their business were given a reminder by the High Court of Australia recently that they will be held to account for producing advertisements where the “dominant message” is or is likely to be misleading.

The High Court overturned the decision of the Full Court of the Federal Court, thereby reinstating the orders of the primary judge in a case where internet service provider TPG Internet Pty Ltd (TPG) was found to have engaged in misleading or deceptive conduct under s 52 and 53 of the Trade Practices Act1974 (Cth) (TPA), now s 18 and s29 of the Australian Consumer Law (ACL) respectively.

Background

From September 2010 until November 2011, TPG engaged in an advertising campaign via various media offering to customers a price for their ADSL2+ broadband internet service. The campaign prominently displayed an offer to supply ADSL2+ for $29.99 per month. Much less prominently, the advertisements qualified the offer stating that the price was on the basis that the broadband service was bundled with a home telephone service provided by TPG for an additional $30 per month. In addition, a setup fee and a deposit for telephone charges were required.

The ACCC brought proceedings in the Federal Court of Australia under the TPA alleging that the advertisements were misleading and deceptive by reason of the disparity between the prominent headline offering the ADSL2+ service and the less prominent qualification of the offer. It also alleged a breach of s 53C(1)(c) of the TPA by failing to specify a single, minimum price for the package of services offered by TPG.

The primary judge found in favour of the ACCC and made a number of orders against TPG including the imposition of a $2 million fine. The judge found that the ordinary or reasonable consumer would rely on the advertisement for information regarding the service and would not have any assumption as to whether the service provided was independent of, or bundled with, TPG’s telephone services. In this respect, it was held that, due to the dominant message of the advertisement, the ordinary and reasonable customer would have the impression that the entire cost of TPG ADSL2+ broadband is $29.99 per month with no further charges or obligations, which was false.

TPG successfully appealed to the Full Court of the Federal Court of Australia which reduced the fine to $50,000 by setting aside the primary judge’s findings that TPG had engaged in misleading conduct (the fine related primarily to the breach of s 53C(1)(c) of the TPA).

The ACCC was granted special leave to appeal to the High Court. By a 4-1 majority, the Court overturned the Full Court decision, upholding and affirming the decision of the primary judge. In agreeing with Justice Murphy, the High Court placed particular importance on the dominant message (also referred to in the judgment as the “general thrust”) of an advertisement on “an ordinary and reasonable person”.

Misleading or likely to mislead

TPG agued that consumers could, acting out of self interest, ascertain the actual pricing situation prior to signing up to the service and no loss would be suffered by the consumer. However, the High Court noted that “the question of characterisation as to whether conduct is misleading is logically anterior to the question whether a person has suffered loss or damage thereby”. Applying that logic, the majority held that even if a consumer came to understand the true position before the conclusion of the transaction, it did not detract from the fact that the advertisements and inducements were initially misleading.

Dominant message and the ordinary person

The majority of the High Court held that consumers would or may be led into error “because the advertisements themselves selected some words for emphasis and relegated the balance to relative obscurity”. The primary judge found, and the High Court affirmed, that many people will only capture the dominant message or general thrust of an advertisement and that, by TPG accentuating the attractive aspect of its offer, it created a situation where consumers may be misled.

They went on further to explain that even if the hypothetical reasonable consumer might know that ADSL2+ services are commonly bundled with telephone services, that of itself was “not apt to defuse the tendency of the advertisements to mislead” especially where the consumer is left only with the dominant message after the passing of the advertisement.

Conclusion

It will be interesting to see what effect the decision has on advertising and whether the ACCC will pursue analogous cases given its success against TPG in the High Court. It has long been a strategy of the advertising industry to accentuate the favourable aspects of goods or services whilst leaving the fine print to qualify the offer. However, this decision appears to place a heavier burden on advertisers to afford a greater balance between the dominant message and the qualification of an advertisement where it is “an unbidden intrusion on the consciousness of the target audience”.

The Court made it abundantly clear that the dominant message approach formulated by the primary judge was of crucial importance. It also re-emphasised that the misleading and deceptive conduct provisions of the ACL can be breached despite the fact that the consumer does not subscribe to the service because they later become aware of the further obligations (ostensibly creating no loss or damage). It is sufficient that the consumer might be misled.

Although not specifically dealt with by the High Court, the primary judge did state that the medium on which the claims were made would be relevant. In this respect, Justice Murphy accepted that consumers would read a brochure more carefully than a newspaper and therefore any false impression created by a headline is less likely to be misleading as the information provided further along would correct the initial impression.

The penalties handed to TPG further highlight that advertisers must be vigilant and increasingly careful with any claims and assumptions they make in marketing products or services. The majority endorsed the severity of the $2 million penalty and warned that the court must make it apparent to the market that “the cost of courting a risk of contravention cannot be regarded as an acceptable cost of doing business”.

Further, the case makes evident that placing an advertisement in different forms of media, and running multiple versions of the same advertisement, increases risk and the level of exposure to pecuniary penalties (which could have been as high as $9.9 million in this case). Perhaps more than ever, great care needs to be taken when undertaking a cross-media advertising campaign involving elements that might potentially mislead or deceive your customers and we recommend any campaigns of this kind are carefully scrutinised before their launch.

Ben McKinley