11 Apr 2013

Making advertising comply with the Australian Consumer Law: Court finds answers in TPG's fine print

by Matthew Battersby, Michael Corrigan

It is the overall impact of an advertisement and not just the dominant message which must be considered when determining if an ordinary consumer would be misled. To meet the requirement to state the total "all inclusive price" prominently, an advertised single price needs to stand out, be conspicuous, be easily seen or very noticeable in the context of the overall message conveyed and not merely confined to 'small print'. Consumer protection in the telecommunications sector remains a focus for the ACCC in 2013.

TPG Internet has been largely successful in its two-year battle with the ACCC concerning advertisements about its Unlimited ADSL2+ bundle which were published since September 2010. However the ACCC is seeking leave to further appeal this case to the High Court of Australia.

The Full Court of the Federal Court overturned the primary judge's decision in part and found that most of TPG's advertisements were not misleading or deceptive. The Full Court last week reduced the pecuniary penalty imposed on TPG from $2 million to $50,000 (TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190 and (No. 2) [2013] FCAFC 37).

This is another important decision for advertisers in understanding the extent of their obligations under the Australian Consumer Law (ACL). The Full Court decision in the TPG case follows Google's successful High Court appeal in the AdWords caseearlier this year.

TPG's advertising campaign

TPG ran an $8.9 million advertising campaign starting on 25 September 2010. It offered an unlimited ADSL2+ broadband service for $29.95 per month where a consumer bundled this with a TPG home phone service for a total of $59.95 per month. This bundling condition, setup charges and the total cost over the life of the contract were displayed less prominently than the headline representation.

Advertisements were featured on television, radio, various websites, billboards, at cinemas and in newspapers and magazines. TPG revised its advertisements on 7 October 2010 after the ACCC identified some concerns with the advertisements.

On 16 December 2010, the ACCC commenced proceedings against TPG in the Federal Court claiming that the advertisements were still misleading or deceptive. The trial judge agreed and found that most of the advertisements misled consumers into believing that there was no setup fee and no additional monthly charge above the $29.95. The trial judge also agreed with the ACCC that TPG had not specified in a prominent way and as a single figure the total price of the broadband service.

The importance of examining an advertisement in its full context

The outcome of misleading or deceptive conduct cases concerning advertisements frequently turns on the prominence of qualifying material. The primary issue in the TPG case was whether qualifying material disclosing the bundling condition and setup fees was sufficiently prominent to prevent the Unlimited ADSL2+ for $29.95 per month statement from being misleading.

The Full Court emphasised that the "overarching rule" or "critical question" which must be examined is whether the whole of the advertisement in its full context was misleading, and not just the dominant message conveyed by the advertisement. In this case, the Court held that the full context included consumer knowledge about "the “bundling” method of sale commonly employed with this type of service, as well as knowledge that setup charges are often applied".

Apart from the initial television advertisement which ran for 12 days before it was revised, the Full Court held that none of the other advertisements were misleading because:

  • the qualifying material could be seen and heard and was sufficiently prominent;
  • consumers must be taken to have read or viewed the advertisements with knowledge of the commercial practices of bundling and setup charges; and
  • the ACL does not operate for the benefit of consumers who fail to take care of their own interests, including those who do not pay attention to the whole advertisement.

The Full Court's decision is a significant one for advertisers and clarifies the scope of their obligations under the ACL.

What does it mean to "prominently display" a single price for bundled products?

The Full Court agreed that TPG's advertisements did not comply with section 48 of the ACL (formerly section 53C of the TPA) which requires the single price of a bundled product to be "specified in a prominent way and as a single figure".

Most of TPG's advertisements set out the single price of $509.89 but not in a prominent manner. To be prominent, the Full Court reiterated that a single price needs to "stand out, be conspicuous, be easily seen or very noticeable" in the context of the overall message conveyed. Our article on the TPG decision at first instance provides further guidance on the single price requirement.

Outcome of the Full Court decision

The Full Court reduced the pecuniary penalty payable by TPG from $2 million to $50,000 and set aside the injunction, corrective advertising and compliance program ordered by the trial judge. The ACCC was ordered to pay 75% of TPG's costs.

The Full Court thought that a penalty of $125,000 was appropriate in the circumstances but discounted this to take account of the reputational and financial damage which TPG said it has suffered as a result of having to write to affected customers and terminate an advertising campaign which was subsequently held not to have infringed the ACL.

Lessons learned

The TPG case serves as a useful reminder for advertisers to ensure that qualifying statements accompanying headline representations are displayed in a prominent manner so as not mislead consumers, particularly where the representation is about price. The ACCC continues to focus on such advertisements.

While only one of the initial TPG advertisements was found to be misleading under the ACL, a number still contravened the single price requirement in section 48 of the ACL because the total price of the broadband service was not displayed in a prominent way. Internal compliance programs should factor in these checks before advertisements are cleared for publication.

ACCC's focus on the telecommunications sector

Whilst consumer protection remains one of the ACCC's enforcement priorities in 2013, the telecommunications sector is likely to receive particular attention. If your business operates in this sector, there is a need to remain vigilant and ensure that your advertising campaigns comply with the requirements of the ACL.

In February, the ACCC released its updated Compliance and Enforcement Policy for 2013 which singled out consumer protection in the telecommunications and energy sectors as a particular focus area. Rod Sims, Chairman of the ACCC, has made it clear that "strong enforcement by the ACCC is at the top of the list" and referred to the TPG case as "the type of interventions you can continue to expect from the ACCC".

In March, the ACCC released a report following its recent investigation into standard form contracts which contained what it perceived to be unfair contract terms prohibited by Part 3-2 of the ACL. Again, the telecommunications sector was a focus of this report. The ACCC has said that it is currently considering whether any court action is warranted and that "the report marks the end of the compliance emphasis with the ACCC’s unfair contracts terms work and the transition to a more enforcement focused approach".

In addition to their obligations under the ACL, some telecommunications companies are also required to comply with the Telecommunications Consumer Protection Code which came into effect in September 2012. The Code contains a number of specific requirements around price advertising, including publishing a Critical Information Summary and prominently displaying the cost of a standard calls, text messages and data usage in advertisements containing the price/dollar value of post-paid plans.

There is often a fine line between commercially savvy advertisements and those which may breach the law. The ACCC's current enforcement priorities and the TPG case highlight the need for companies to take a proactive approach to monitoring promotional activities.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.