The High Court has handed down its judgment yesterday in the long running TPG Internet case, restoring the November 2011 judgment of Justice Murphy of the Federal Court that found a series of TPG advertisements relating to its unlimited broadband internet ADSL2+ offering amounted to misleading and deceptive conduct.1   

In a 4 to 1 majority judgment, the High Court also restored Justice Murphy’s original $2 million pecuniary penalty in lieu of the $50,000 penalty imposed by the Full Federal Court, and ordered TPG to pay the ACCC’s court costs relating to the Federal Court and High Court appeals. Given the lapse in time since that original judgment, the Court did not restore the injunctions and corrective advertising that were originally imposed.

The advertisements

TPG Internet Pty Ltd (TPG) ran an advertising campaign in two phases: “initial advertisements” and, after giving an 87B undertaking to the ACCC regarding those initial advertisements, “revised advertisements”, over the period from 25 September 2010 to 29 November 2011. The advertisements involved a number of media streams (television, radio, newspapers, billboards and various websites) to promote TPG’s new “$29.99 per month” unlimited ADSL2+ broadband internet plan.

In significantly smaller print, the advertisements stated that the customer was required to bundle the service with a home phone rental for an additional $30 per month (with a minimum 6-month requirement), and incur an overall minimum fee of $509.89 including an initial set-up fee of $129.95 and $20 deposit against telephone calls.

The ruling of Justice Murphy, restored by the High Court, found that both phases of the advertisements (except for brochure publications in both phases) conveyed a representation that the broadband internet  service was available without the need to bundle, and that the initial advertisements conveyed a representation that there would be no initial set-up fee. All the advertisements were therefore held to be misleading and deceptive, breaching section 52 and 53 of the Trade Practices Act and the successor provisions in sections 18 and 48 of the Australian Consumer Law.2

The exclusion of the brochure publications was based on the premise that consumers would read a brochure more carefully than the other advertising mediums, such that any misleading impression created by the “$29.95 per month” headline offer would likely be corrected by the balance of information.

The dominant message and the average consumer – how sophisticated are they?

The foundation of Justice Murphy’s judgement was his Honour’s finding that the dominant message of the advertisements was the representation that TPG would provide “unlimited ADSL2+ for $29.99 per month”. The lack of clarity and lesser prominence of the qualifying information failed to correct the false impression that was created by the strength and clarity of the dominant message.

The Federal Court appeal decision turned on whether the advertisements would still be misleading if the primary judge had considered the overall impact of the advertisements in their full context, taking into account the attributes of the hypothetical ordinary or reasonable consumer. In their view, the target consumer to whom the advertisements were directed was a person with some familiarity of the market, who would know about the common commercial practices of bundling and set-up charges. Viewed through this prism, the Full Court ruled that the advertisements were not misleading because the bundling condition could not be missed except by “perfunctory” viewing or listening, or would be known as a common commercial practice to the consumer, or both.

The majority High Court judgment supported the primary judge’s view that the dominant message is of crucial importance and rejected the appeal Court’s view that the tendency of the advertisements to mislead was cured by the knowledge of a more sophisticated consumer. In their words:

…the circumstance that many consumers might know that ADSL2+ services are commonly offered as a “bundle” was not apt to defuse the tendency of the advertisements to mislead, especially where the target audience is left only with the general thrust or dominant message after the evanescence of the advertisement.

Furthermore, the Court asserted that the appeal judgment failed to appreciate that, even if the misleading dominant impression would be neutralised upon a consumer engaging with TPG to sign up to the service, it would have already played its part in leading the consumer to engage with TPG rather than one of its competitors.

Penalties

The High Court majority judgment also made some interesting comments on the assessment of appropriate penalties for misleading and deceptive conduct, including that it was appropriate for the primary judge to consider advertising via each type of medium to constitute a separate contravention. The Court held that the $2 million penalty did not exceed what was reasonably appropriate to serve as a deterrent to TPG and its competitors, in a context where TPG’s 13-month advertising campaign had cost $8.9 million, generating customer growth from 9,000 to 107,000, revenue of approximately $59 million and estimated profit of $8 million. Of course, the total penalty to TPG will also include its own legal costs plus those of the ACCC for the 2 appeals.

Telecommunications advertising

It should be noted that telecommunications service providers are now subject to the Telecommunications Consumer Protections Code that came into effect on 1 September 2012. The advertising restraints included in the Code did not apply at the time of the TPG advertisements in question. These restraints include prohibitions on:

  • advertising a periodic price for a telecommunications product without prominently displaying the “single price”.
  • use of the term “unlimited” in reference to usage without qualification unless use is genuinely unlimited; and
  • headline representations for a price or offer that is qualified by fine print terms and conditions;

Lessons

The outcome of the High Court appeal has arguably removed a degree of uncertainty created by the Full Court appeal judgment, which appeared to adopt a somewhat circumstantial approach to the determination of whether conduct will be considered misleading, rather than one of strict compliance.

It will come as no surprise to any goods and service providers that the case reinforces the need to balance the commercial desire to make a selective presentation of the attractive parts of an offer or its pricing in advertising against what is an accurate impression of the overall offering.

However the more specific points that can be taken from the TPG case in preparing advertising materials are:

  • The advertising party cannot assume a level of consumer sophistication as to how products or services in a particular class are typically offered, such as internet broadband being bundled with line rental or involving set up fees, to correct a misleading impression.
  • The fact that a misleading impression created by advertising is corrected before a consumer signs up to purchase a product or service will not change the misleading and deceptive nature of the advertisement.
  • The medium used for the advertising will be relevant. For example, additional information included in a brochure may impact on the overall impression, while similar less prominent details in newspapers, radio or TV may not have the same effect.