Australian Competition and Consumer Commission v AGL South Australia Pty Ltd
[2014] FCA 1369
•15 December 2014
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2014] FCA 1369
Citation: Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2014] FCA 1369 Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v AGL SOUTH AUSTRALIA PTY LTD File number: SAD 355 of 2013 Judge: WHITE J Date of judgment: 15 December 2014 Catchwords: CONSUMER LAW – misleading or deceptive conduct – false or misleading statements – electricity consumers offered energy plans featuring percentage discounts off of energy usage charges – consumers on energy plans with discounts had their rates increased differentially – whether later representations that consumers’ discounts continued to apply were false or misleading – whether omission to disclose certain information about rate increases was misleading or deceptive Legislation: Competition and Consumer Act 2010 (Cth) ss 4(2), 155, Sch 2 ss 18, 29
Evidence Act 1995 (Cth) s 140
Trade Practices Act 1974 (Cth), ss 52 and 53Cases cited: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470
Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2008] FCA 607
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634
Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682
Australian Competition and Consumer Commission v Jewellery Group Pty Ltd [2012] FCA 848; (2012) 293 ALR 335
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2011] FCA 1254
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592
Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12, (2000) 202 CLR 45
Clifford v Vegas Enterprises Pty Ltd [2011] FCAFC 135
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452
Google Inc v Australian Competition and Consumer Commission [2013] HCA 1; (2013) 249 CLR 435
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592
Jewellery Group Pty Ltd v Australian Competition and Consumer Commission [2013] FCAFC 144
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572; (2000) 104 FCR 564
McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455
Medical Benefits Fund of Australia Ltd v Cassidy [2003] FCAFC 289; (2003) 135 FCR 1
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357
National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90
New South Wales Lotteries Corporation Pty Ltd v Kuzmanovski [2011] FCAFC 106, (2011) 195 FCR 234
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165Date of hearing: 1-3 September 2014 Place: Adelaide Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 302 Counsel for the Applicant: Mr D Star with Mr T Besanko Solicitors for the Applicant: Corrs Chambers Westgarth Counsel for the Respondents: Mr RJ Whitington QC with Mr CE Bannan and Mr JA Redwood Solicitor for the Respondents: Ashurst Australia
Table of Corrections 22 May 2015 In paragraph 58 “Section 29” has been replaced with “Section 29(1)”. 22 May 2015 In paragraph 170 “Hayden” has been replaced with “Heydon JJ”.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 355 of 2013
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND: AGL SOUTH AUSTRALIA PTY LTD
Respondent
JUDGE:
WHITE J
DATE:
15 DECEMBER 2014
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
Introduction........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........
[1]
Market and Standing Contracts........ ........ ........ ........ ........ ........ ........ ........ ........ .......
[8]
Category 3 and Category 5 Consumers........ ........ ........ ........ ........ ........ ........ ........ ...
[22]
The 2012 and 2013 Rate Increases........ ........ ........ ........ ........ ........ ........ ........ ........ ...
[32]
The False or Misleading Statements Alleged........ ........ ........ ........ ........ ........ ........ ..
[40]
Issues for determination........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....
[56]
The legislation........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....
[58]
Relevant principles........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....
[60]
The Initial Representation........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........
[64]
The CSR Statements........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......
[65]
The Welcome Pack Statements........ ........ ........ ........ ........ ........ ........ ........ ........ ......
[73]
The classes of consumer to whom the statements were made........ ........ ........ .......
[80]
Characteristics of the Category 3 and Category 5 Consumers........ ........ ........ .....
[88]
The origins of the Category 3 and Category 5 Consumers........ ........ ........ ........ ...
[96]
Is the Initial Representation nonsensical?........ ........ ........ ........ ........ ........ ........ ....
[115]
Is the Initial Representation ambiguous?........ ........ ........ ........ ........ ........ ........ ......
[124]
A representation that the SRC rate would apply?........ ........ ........ ........ ........ ........ .
[132]
The information as a whole and in context........ ........ ........ ........ ........ ........ ........ ...
[140]
The Dominant Message........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..
[148]
“Your” rates and “Your” usage charges........ ........ ........ ........ ........ ........ ........ .......
[173]
Consumer assumptions........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...
[179]
AGL’s right to vary the rates........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..
[191]
Compliance with the regulatory regime........ ........ ........ ........ ........ ........ ........ ........ .
[194]
AGL’s construction of the Initial Representation........ ........ ........ ........ ........ ........ .
[198]
Conclusion with respect to Initial Representation........ ........ ........ ........ ........ ........
[205]
The Mid-2012 Discount Representation........ ........ ........ ........ ........ ........ ........ ........ ..
[212]
Did AGL make the Mid-2012 Discount Representation?........ ........ ........ ........ .....
[217]
Was the Mid-2012 Discount Representation false or misleading?........ ........ .......
[224]
The sub-class (i) and (ii) consumers........ ........ ........ ........ ........ ........ ........ ........ ......
[232]
The sub-class (iii) consumers........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
[239]
Omission to disclose the Mid-2012 Rate Increase Information........ ........ ........ .....
[251]
Silence and sub-classes (i) and (ii)........ ........ ........ ........ ........ ........ ........ ........ ........ .
[256]
Silence and sub-class (iii)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......
[269]
The Mid-2013 Discount Representation........ ........ ........ ........ ........ ........ ........ ........ ..
[274]
Did AGL make the Mid-2013 Discount Representation?........ ........ ........ ........ .....
[276]
Omission to disclose the Mid-2013 Rate Increase Information........ ........ ........ .....
[288]
Conclusion........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..
[299]
Introduction
The respondent, AGL South Australia Pty Ltd (AGL) is a retailer of electricity to residential consumers in South Australia. It is the largest such retailer, supplying approximately 50% of the residential market.
The Australian Competition Consumer Commission (ACCC) alleges that, on separate occasions in 2012 and 2013, AGL engaged in misleading or deceptive conduct, or made false or misleading statements, in respect of discounts from its charges for the electricity supplied to residential customers. The misleading statements are said to have been made when AGL notified certain customers of rate increases. The misleading or deceptive conduct is said, in part, to have occurred by AGL’s omission to inform those consumers of particular information relating to the rate increases.
Essentially, the ACCC case is that, having induced residential consumers in 2012 to contract with it for the supply for their electricity on the basis that they would receive discounts, AGL increased the rates applicable to those particular consumers with the consequence that the effect of the discounts was reduced or eliminated. It contends that AGL misrepresented the true position to consumers when informing them in mid-2012 of the rate increases which had these effects by telling them that they would continue to receive the agreed discounts and in mid-2013 by not informing them that there had been any change.
The ACCC seeks declarations that AGL contravened ss 18(1) and 29(1)(g) and (i) of the Australian Consumer Law (ACL) contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the CC Act). In addition, the ACCC seeks the imposition of penalties, the grant of injunctions and other relief. This judgment concerns the claim for declarations as I directed that those claims be heard and determined in advance of the remaining claims.
The evidence in the trial was entirely documentary. The ACCC tendered some 28 documents, many of which it had obtained from AGL pursuant to s 155 of the CC Act, and relied on several facts which it had agreed with AGL. AGL relied on affidavits from seven witnesses as well as other documentary material. None of the witnesses was required for cross-examination.
For the reasons which follow, I uphold the ACCC’s claim in relation to the statements made by AGL in mid-2012. However, I am not satisfied that the mid-2013 statements were misleading or deceptive. I also reject the ACCC’s allegations that AGL engaged in misleading or deceptive conduct by omitting to disclose certain information to its customers at the time of the mid-2012 and mid-2013 rate increases.
In order to provide the context to ACCC’s claims, I record some matters which were uncontentious.
Market and Standing Contracts
Until 1 February 2013, the supply of electricity to residential consumers in South Australia was regulated by the Essential Services Commission of South Australia (ESCOSA) under the Essential Services Commission Act 2002 (SA) (the ESC Act). Consumers were able to choose their retailer but ESCOSA regulated both the price at which electricity could be sold and the terms of the contracts between the retailers and consumers.
Retailers supplied electricity under two forms of contract: standing contracts and market contracts. Under standing contracts the price was that fixed from time to time by ESCOSA and the contract terms and conditions were those set out in the Energy Retail Code (ERC) published by ESCOSA under s 28 of the ESC Act.
Market contracts, on the other hand, were required to have the minimum terms and conditions set out in the ERC but could also include other terms and conditions agreed between the retailer and the consumer. ESCOSA did not fix the price of electricity under market contracts.
The South Australian Government deregulated the supply of electricity to residential consumers with effect from 1 February 2013. There had been an earlier form of deregulation in 2003 with the introduction of Full Retail Contestability. Since 1 February 2013, retailers in South Australia have been able to supply electricity to residential consumers by standard retail contracts and market retail contracts. Standard retail contracts have the standard terms and conditions as set out in the National Energy Retail Rules made pursuant to Pt 10 of the National Energy Retail Law (which is Schedule 10 to the National Energy Retail Law (South Australia) Act 2011 (SA). The rates under these are set by the retailers (subject to some qualifications which are not presently material). By s 22 of the National Energy Retail Law, all retailers are obliged to offer a standard retail contract and, by s 23, to publish their standing offer prices on their websites. A retailer may be nominated as a “designated retailer” for the supply of electricity in defined areas. A designated retailer is obliged, amongst other things, to offer to supply electricity to small customers at the retailer’s standing price and on the terms of the retailer’s standard retail contract.
Market retail contracts must have the minimum terms and conditions set out in the National Energy Retail Rules but other terms and conditions may vary from contract to contract.
During 2012, and before the deregulation which came into effect on 1 February 2013, AGL supplied electricity to residential consumers in South Australia pursuant to both standing contracts and market contracts. Its standing contracts were in the terms of the contract forming part of the ERC and the single set of rates which it charged for electricity under those contracts was that fixed from time to time by ESCOSA.
Since the deregulation which came into effect on 1 February 2013, AGL has continued to supply electricity to residential consumers under both standing and market contracts. Its standard retail contracts have contained the minimum terms required by the National Energy Retail Rules but AGL itself has determined the price of electricity supplied under those contracts. Except when it is necessary to make the distinction, I will use the abbreviation “SRC” to refer to both AGL’s standing contracts and its standard retail contracts.
AGL is a “designated retailer” for the whole of South Australia.
In 2013 AGL commenced two categories of rates in its SRCs: the rates applicable to those SRCs which commenced on or before 31 January 2013 (the Lower SRC Rates), and higher rates which were applicable to those SRCs which commenced on or after 1 February 2013 (the Higher SRC Rates) (collectively, the 2013 SRC Rates). The Lower SCR Rates and the Higher SCR Rates were approximately 9.1% and 4.5% respectively less than AGL’s then current standing contract rates and, by agreement with the South Australian Government, AGL agreed (subject to some qualifications) to maintain those rates for a period of two years. AGL and the South Australian Government agreed on these reductions as part of the decision of the latter to deregulate electricity prices with effect from 1 February 2013. Both the deregulation and AGL’s reduction in SCR rates were the subject of publicity in December 2012 and January 2013.
Before 1 February 2013, AGL’s market contracts contained the minimum terms and conditions required by ESCOSA and as set out in the ERC, but had other terms and conditions which could vary from contract to contract. The rates under its market contracts were not fixed by ESCOSA. Since deregulation on 1 February 2013, AGL’s market contracts have contained the prescribed minimum terms and other conditions which may vary from contract to contract.
The number of consumers on SRCs has been declining. Presently, about 20% of all residential customers continue on SRCs with AGL. About 30% of all residential consumers have market contracts with AGL.
The calculation of the amount which AGL charges consumers on market contracts for electricity usage varies according to three principal factors:
(a)The rates (being the price per unit of electricity (c/kWh)) charged by AGL for the consumer’s electricity usage. Those rates generally increase on a graduated scale (tariff steps) as the consumer’s usage increases. This case does not concern the manner of determination of those rates.
(b) The customer’s usage of electricity at the various steps.
(c)The percentage discount, if any, to which the consumer is entitled from the product of (a) and (b).
In the case of SRCs, the amount charged to the consumer is the product of (a) and (b) as AGL does not offer discounts in those contracts.
AGL has developed several different categories of rates which govern the amount charged in a given consumer’s case. As at December 2012, it had some 17 rate categories although six of these applied only to residential premises of an atypical kind. The rates in several of the remaining categories were identical. AGL determined the rates in each of these categories.
A consumer will, in addition, pay a supply charge which is payable irrespective of the consumer’s actual usage. Other than in minor respects, the supply charge was not material to the matters in issue in these proceedings.
Category 3 and Category 5 Consumers
The ACCC allegations concern those consumers who commenced on market contracts with AGL in the period commencing on 1 January 2012 and concluding on 6 December 2012 (the Relevant Period) by accepting AGL’s offer of an “energy plan”. The principal features of the plans were that the consumers committed to obtain their electricity from AGL for a fixed period, usually two years, in exchange for an identified discount in their electricity usage charges. In the Relevant Period, AGL offered energy plans with 12 different percentage discounts. The particular energy plan which a consumer agreed with AGL depended on what AGL offered to the consumer and, to an extent, on the consumer’s willingness and ability to negotiate.
Consumers commenced energy plans with AGL by a number of different means, including: in telephone calls made by the consumer to AGL when the consumer spoke to a Customer Service Representative (CSR); in telephone calls to consumers by third parties; during visits to their homes by third parties; by using AGL’s website; and by “automatically recontracting” upon expiry of their previous energy plan. The ACCC case is limited to AGL’s statements to consumers who entered into energy plans with AGL following a telephone call made by those consumers to AGL in the Relevant Period.
Consumers who agreed on an energy plan with AGL entered into a market contract. Subject to exceptions to be mentioned shortly, AGL assigned its Rate Category 3 to consumers commencing on energy plans in the period 1 January 2012 to 18 July 2012. There were some 75,633 customers in this Category. Of these, 31,451 (42.9%) agreed to commence an energy plan in a telephone conversation with a CSR. This was the principal means by which consumers became Category 3 Consumers. The remainder commenced on energy plans by some other sales channel. As indicated, the ACCC’s claim presently concerns only the 31,451. Except when otherwise indicated, I will refer to these as the “Category 3 Consumers” even though they are only a portion of the total number to whom the Category 3 Rates applied.
Again subject to some exceptions, AGL assigned its Rate Category 5 to those consumers commencing on market contracts under energy plans between 19 July 2012 and 6 December 2012. It created Rate Category 5 for this purpose and “retired” Rate Category 3 so that new consumers could not be assigned to it. There were some 72,213 customers assigned to Category 5. Of these, 30,472 (42.8%) agreed to commence an energy plan with AGL during a telephone conversation with a CSR. Again, the ACCC’s present claim concerns only these persons. Except when otherwise indicated, I will refer to these too as the “Category 5 Consumers” even though they are a portion only of the total number to whom the Category 5 Rates applied.
The principal exceptions in each case were consumers who were employees of AGL or one of its related entities, and multi-site customers. In the period from 1 January 2012 to 18 July 2012, those customers were allocated to Rate Category 7 and, in the period from 19 July 2012 to 6 December 2012, to Rate Category 12. AGL described Rate Categories 7 and 12 as “Mirror Rates”, perhaps because at their commencement they “mirrored” the SRC rates and Rate Categories 3 and 5. In about January 2013, AGL consolidated Rate Category 12 into Rate Category 7. Those consumers who had previously been allocated to Rate Category 12 were then allocated to Rate Category 7 with the effect that, from January 2013, there were no consumers remaining in Rate Category 12.
The remaining exceptions do not need to be mentioned separately.
The evidence did not disclose whether, as with Category 5, AGL had created Category 3 so that consumers commencing on energy plans after 1 January 2012 could be allocated to it.
Subject to a qualification to be mentioned later, between 1 January 2012 and July 2012, the rates in Category 3 matched both the SRC rates and the Category 7 rates, and between 19 July 2012 and January 2013, the rates in Category 5 matched both the SRC rates and the rates in Categories 7 and 12.
AGL described Rate Categories 3, 5, 7 and 12 as its “active” rate categories in the Relevant Period and its other Rate Categories as “non-active”. The non-active categories continued to apply to the consumers to whom they had been assigned in the past, but could not be assigned to consumers commencing on energy plans in 2012. Rate Categories 3 and 7 became inactive on 19 July 2012 so that they could not be assigned to consumers commencing on energy plans after that date.
The discounts to which the 75,633 customers in Rate Category 3 were entitled depended upon the particular energy plan which they had agreed with AGL. Those plans provided for discounts which varied between 3% and 15%. The employees of AGL or one of its related entities and multi-site customers in Category 7 received a 25% discount. The discounts which the 72,213 customers in Category 5 received also varied from 3% to 15%. Again, employee customers and multi-site customers in Category 12 received a higher discount. As with Category 3 Consumers, the size of the discount which each consumer received varied according to the particular energy plan which the consumer had agreed with AGL.
The 2012 and 2013 Rate Increases
In July 2012, AGL increased the rates in Rate Category 3 (the Mid-2012 Rate Increase). It also increased the SRC Rates (with effect from 1 July 2012) and the Category 7 Rates but not as much as the Category 3 Rates. In addition, in July 2012 AGL introduced Categories 5 and 12 with rates which matched the new SRC and Category 7 Rates but which were less than the new Category 3 Rates. The effect was that AGL fixed higher rates in respect of those with whom it had already agreed an energy plan, but lower rates in respect of new customers with whom it wished to negotiate an energy plan or to have enter into a SRC.
As noted earlier, the 2013 SRC Rates introduced in January 2013 had the effect of reducing AGL’s then current SRC Rates with the greater reduction applying to those who commenced on an SRC in or before January 2013.
AGL increased both the Category 3 and Category 5 Rates in about July and August 2013 (the Mid-2013 Rate Increase). After 1 August 2013, the rates in Categories 3 and 5 were higher than both AGL’s 2013 SRC Rates and higher than its Category 7 Rates.
Table One contains a comparison of AGL’s Category 3 Rates with its SRC and Category 7/12 Rates, as applicable from time to time.
TABLE ONE
Tariff Steps
1 January 2012 1 July 2012 July 2012
(Mid-2012 Rate
Increase)
1 January 2013 1 February 2013 July/August 2013
(Mid-2013 Rate Increase)
1 August 2013 Categ 3 SRC
Categ 7SRC Categ 3 Categ 7 Lower SRC Rates
Categ 7/12 Rates
Higher SRC Rates Categ 3 Categ 5 Categ 7 Lower SRC Rates Higher SRC Rates WINTER First 3.2877 kWh/day 27.159 27.159 32.043 33.253 32.043 29.117 30.591 34.430 33.176 29.733 29.733 31.372 Next 7 6712 kWh/day 27.665 27.665 32.648 33.825 32.648 29.667 31.174 35.013 33.803 30.294 30.294 31.966 Next 16 4384 kWh/day 31.669 31.669 37.367 38.379 37.367 33.957 35.684 39.688 38.643 34.650 34.650 36.553 Next 27.3973 kWh/day 34.353 34.353 40.535 41.426 40.535 36.839 38.709 42.834 41 .910 37.598 37.598 39.644 Thereafter 34.353 34.353 40.535 41.426 40.535 36.839 38.709 42.834 41.910 37.598 37.598 39.644 SUMMER First 3.2877 kWh/day 28.622 28.622 33.770 34.914 33.770 30.690 32.241 36.135 34.958 31.328 31.328 33.055 Next 7.6712 kWh/day 31.196 31.196 36.806 37. 840 36.806 33.451 35.145 39.160 38.093 34.133 34.133 36.025 Next 16.4384 kWh/day 35.211 35.211 41 .547 42 .394 41 .547 37.763 39.677 43.846 42.966 38.522 38.522 40.645 Next 27.3973 kWh/day 37.895 37.895 44.715 45.441 44.715 40.645 42.702 46.981 46.233 41.459 41.459 43.725 Thereafter 37.895 37.895 44.715 45.441 44.715 40.645 42.702 46.981 46.233 41.459 41.459 43.725 All the rates are expressed in cents per kiloWatt hour (c/kWh).
Table 2 shows a comparison of the rates in Category 5 with AGL’s SRC Rates and the Category 7 and 12 Rates.
TABLE TWO
Tariff Steps
19 July 2012 1 January 2013 1 February 2013 July/August 2013
(Mid-2013 Rate Increase)1 August 2013 SRC Categ 5 Categ 12 Lower SRC Rates
Categ 7/12 RatesHigher SRC
Rates
Categ 3 Categ 5 Categ 7 Lower SRC Rates Higher SRC Rates WINTER First 3.2877 kWh/day 32.043 32.043 32.043 29.117 30.591 34.430 33.176 29.733 29.733 31.372 Next 7 6712 kWh/day 32.648 32.648 32.648 29.667 31.174 35.013 33.803 30.294 30.294 31.966 Next 16 4384 kWh/day 37.367 37.367 37.367 33.957 35.684 39.688 38.643 34.650 34.650 36.553 Next 27.3973 kWh/day 40.535 40.535 40.535 36.839 38.709 42.834 41 .910 37.598 37.598 39.644 Thereafter 40.535 40.535 40.535 36.839 38.709 42.834 41.910 37.598 37.598 39.644 SUMMER First 3.2877 kWh/day 33.770 33.770 33.770 30.690 32.241 36.135 34.958 31.328 31.328 33.055 Next 7.6712 kWh/day 36.806 36.806 36.806 33.451 35.145 39.160 38.093 34.133 34.133 36.025 Next 16.4384 kWh/day 41.547 41.547 41.547 37.763 39.677 43.846 42.966 38.522 38.522 40.645 Next 27.3973 kWh/day 44.715 44.715 44.715 40.645 42.702 46.981 46.233 41.459 41.459 43.725 Thereafter 44.715 44.715 44.715 40.645 42.702 46.981 46.233 41.459 41.459 43.725 Again, all the rates are expressed in terms of cents per kiloWatt hour (c/kWh).
In relation to Table One and the Category 3 Rates, the ACCC relied on the following:
(a)In January 2012 when consumers commenced agreeing energy plans with CSRs to which the Category 3 Rates applied, the Category 3 Rates were the same as AGL’s SRC Rates and its Category 7 Rates.
(b)The Category 3 Rates continued to match the SRC Rates until 1 July 2012 and to match the Category 7 Rates until the Mid-2012 Rate increase.
(c)Following the Mid-2012 Rate Increase, the rates in Categories 5, 7 and 12 and the SRC Rates were identical but the Category 3 Rates were 2.6% higher than those rates. This reduced the advantage which the discounts under the agreed energy plans provided relative to other consumers.
(d)AGL reduced the SRC Rates and the Category 7/12 Rates in January 2013 but did not reduce the Category 3 Rates. This meant that the rates applicable to Category 3 Consumers were 12.9% and 7.4% higher than those applicable to consumers on SRCs who did not have any entitlement to discounts. The advantage which Category 3 Consumers had relative to SRC consumers was therefore eliminated in some cases, and considerably reduced in other cases.
(e)Following the Mid-2013 Rate Increase in the Category 3 Rates and the 1 August 2013 increase in the 2013 SRC Rates, the Category 3 Rates were 14.4% more than the Lower SRC Rates and 8.5% more than the Higher SRC Rates. The remaining advantages which Category 3 Consumers had relative to SRC Consumers were accordingly reduced still further, if not eliminated.
(f)Unlike the Category 3 Rates, the Category 7 Rates after 1 August 2013 were the same as the Lower SRC Rates.
The ACCC accepted that some qualifications to these general propositions were appropriate. The Category 3 Consumers who entered into an energy plan between 1 July 2012 and 15 July 2012 were allocated to the original Category 3 Rate. Because the SRC Rates increased from 1 July 2012, this meant that these Category 3 Consumers commenced on rates which were actually lower than the then prevailing SRC Rates. Shortly after commencing, these Consumers received the Mid-2012 Rate Increase Letter and thereafter their rates, like other Category 3 Consumers, were higher than the SRC Rates. In addition, Category 3 Consumers who agreed on an energy plan between 16 July 2012 and 18 July 2012 were immediately allocated to the Category 3 Rates which were applicable after the Mid‑2012 Rate Increase. Accordingly, those Consumers started on rates which were higher than the prevailing SRC Rates. The Consumers in this category did not receive the Mid-2012 Rate Increase Letter and their rates were not increased until Mid-2013.
In relation to Table Two and the Category 5 Rates, the ACCC relied on the following:
(a)On 19 July 2012 when consumers commenced entering into energy plans to which the Category 5 rates applied, the rates in Category 5 were the same as AGL’s SRC Rates and its Category 7 and 12 Rates.
(b)The Category 5 Rates continued to match the SRC Rates and the Category 7 and 12 Rates until January 2013.
(c)AGL reduced its SRC Rates and Category 7/12 Rates in January 2013 with the introduction of the 2013 SRC Rates, but did not reduce the Category 5 Rates. This meant that the rates applicable to Category 5 Consumers were 10% and 4.7% respectively higher than those applicable to consumers on SRCs who had no entitlement to discounts. The advantage which Category 5 Consumers had relative to SRC Consumers was therefore eliminated in some cases, and considerably reduced in other cases.
(d)Following the Mid-2013 Rate Increase in the Category 5 Rates and the 1 August 2013 Increase in the 2013 SRC Rates, the Category 5 Rates were 11.5% and 5.7% higher than the Lower SRC Rates and the Higher SRC Rates respectively. The advantages which Category 5 Consumers had relative to SRC Consumers were accordingly reduced still further, if not eliminated.
(e)Unlike the Category 5 Rates, the Category 7 Rates and the Lower SCR Rates after 1 August 2013 were identical.
The False or Misleading Statements Alleged
The ACCC case was based on what AGL told the Category 3 and Category 5 Consumers about the Mid-2012 and Mid-2013 Rate Increases. Its misleading or deceptive conduct case was also based, in part, on what it omitted to tell them.
AGL informed the Category 3 Consumers of the Mid-2012 Rate Increase by letters sent between 9 July 2012 and 16 August 2012 (the 2012 Rate Increase Letters). The Letters were in the form of one or other of two pro forma letters. The first stated (relevantly):
Important adjustment to your AGL account
As part of our review of our energy prices in South Australia, we’re writing to advise you that the rates you pay for your electricity are about to increase. Your new rates and their effective date for your site, is shown on the back of this letter. This increase is in line with the terms of your contract. Sites that have Energy Plans with discounts or rebates will continue to receive these.
The increase for an average AGL residential electricity customer in South Australia equates to around $6.80 (incl. GST) per week, however the actual impact on your bills will depend on the usage at the site shown.
(Emphasis added)
The reverse side of the letter contained a table setting out both the current and the new rates.
The second form of the 2012 Rate Increase Letter to consumers stated (relevantly):
Important information about your AGL electricity Energy Plan
Dear [Consumer]
As part of our review of our energy prices in South Australia, we’re writing to advise you that the rates you pay for your electricity will increase from [ ]. Your new rates are shown on the back of this letter. Any discounts or rebates you currently receive on your energy usage charges will continue to apply.
….
The increase for an average AGL residential electricity customer in your area equates to around $7.10 (incl. GST) per week, however the actual impact on your bills will depend on your individual usage and specific circumstances.
(Emphasis added)
Again, a table on the reverse side of the letter set out the current and new electricity rates. The evidence did not explain the different figures given for the effect of the increase on “the average AGL residential electricity consumer”.
As can be seen, both forms of these letters told consumers that they would “continue” to receive their discounts.
The ACCC alleges that both forms of the Mid-2012 Rate Increase Letters contained a representation by AGL to its Category 3 Consumers:
… to the effect that they would continue to receive their percentage discount off:
(a)AGL SA’s energy usage charges that would apply to them if they were supplied electricity by AGL SA not under an energy plan; or
(b)The energy usage charges for the supply of electricity by AGL SA to residential consumers in South Australia,
for the duration of their energy plan.
The ACCC referred to this as “the Mid-2012 Discount Representation” and it is convenient to do likewise in these reasons.
The Mid-2012 Discount Representation was said to arise from the combination of AGL’s statements to the Category 3 Consumers at the time they entered into their market contracts (both in oral statements of the CSRs and in written statements in “Welcome Packs”) and the terms of the Mid-2012 Rate Increase Letters themselves.
The ACCC alleges that the Mid-2012 Discount Representation was false or misleading for Category 3 Consumers because, contrary to the true position following the Mid-2012 Rate Increase, they would not continue to receive a discount from the charges which would apply in their case if they were not party to an energy plan or from the charges applicable to residential consumers generally. I will refer later to the way in which the ACCC particularised this allegation.
AGL used one form of pro forma letter to inform both Category 3 and Category 5 Consumers of the Mid-2013 Rate Increase. That pro forma letter said (relevantly):
Important information about your energy rates.
Dear [Consumer]
Thank you for being an AGL customer. We’re writing to notify you that your AGL electricity rates will increase from 25 July 2013. Some fees will also change on 1 August 2013 while other fees will be changing on 31 August 2013. The amount that you pay on your electricity bills is made up of your rates and your energy usage and at AGL we offer ways to help you take control of your energy usage to save money. …
Your new energy rates
Comparison tables are shown further down in this letter with your current and new rates and fees for your electricity. In summary, the impact of the new electricity rates for an average household in your area will equate to around $1.50 more per week. How the price changes will impact your bills will depend on your specific circumstances.
A footnote indicated that the figure of $1.50 per week was based on “the current average consumption of an AGL household customer in your area”. Tables attached to the letter set out the current and the new rates and the current and new fees.
As can be seen, the Mid-2013 Rate Increase Letters did not include counterparts to the statements in the two Mid-2012 Rate Increase Letters concerning the continuance of the discounts to which the consumers were entitled. Nevertheless, the ACCC alleges that the Mid-2013 Rate Increase Letters contained a representation (the Mid-2013 Discount Representation) that there had been no change to the discounts which the consumers were receiving and that this representation was made to both Category 3 and Category 5 Consumers. It alleges that in each case the representation was false or misleading in a similar, but not identical, way to the Mid-2012 Rate Discount Representation.
AGL did have another form of both the Mid-2012 Rate Increase Letter and the Mid‑2013 Rate Increase Letter which it sent to customers to whom it supplied both electricity and gas but, at least insofar as the letters notified of the increases in electricity rates, they were not materially different from the quoted letters.
The ACCC case is that the Category 3 and Category 5 Consumers were told, in effect, that the position as originally represented to them would continue after the price increases. The parties disagreed as to the effect of AGL’s original representation to these Consumers. This had the consequence that a substantial part of the submissions at the trial was directed to the appropriate characterisation of what had been represented to the Category 3 and Category 5 Consumers at the time they entered into their energy plans. For the same reason, a considerable part of this judgment is directed to this issue.
The ACCC contended in the Amended Fast Track Statement (AFTS) at [22] and [24] that, in relation to both Category 3 and Category 5 Consumers, AGL had promoted, offered and entered into energy plans with them on the basis of a representation (the Initial Representation) that, for the duration of their energy plans, they would receive a percentage discount off:
(a)AGL SA’s energy usage charges would apply to them if they were supplied electricity by AGL SA not under an energy plan; or
(b)The energy usage charges for the supply of electricity by AGL SA to residential consumers in South Australia.
As can be seen, the Initial Representation had two formulations but it is convenient generally to refer to it as a single representation.
Despite some indications in the AFTS (at [54]-[55] and [57]) to the contrary, the ACCC did not allege that the Initial Representation was false or misleading or deceptive. Instead, it said that it was “a building block” in its case relating to the Mid-2012 and Mid‑2013 Discount Representations and accepted that its allegations of false or misleading representations must fail if the Court did not accept that the statements made by AGL amounted to the Initial Representation alleged. It is established that consumer understandings or beliefs resulting from a respondent’s earlier conduct may form part of the context to be considered when determining whether a later representation is false or misleading.
In addition to its allegation that the Mid-2012 Discount Representation was false or misleading, the ACCC also alleges that the representation was misleading or deceptive in contravention of s 18 of the ACL because of AGL’s omission to disclose certain information (the Mid-2012 Rate Increase Information). I will identify that information later in these reasons.
The ACCC makes a similar but not identical allegation of misleading or deceptive conduct by silence in respect of information which AGL did not disclose to Category 3 and Category 5 Consumers at the time of the Mid-2013 Rate Increase. I will identify the information said not to have been disclosed later in these reasons.
In summary, the ACCC case is that each of the Mid-2012 and Mid-2013 Rate Increase Letters represented to consumers that, after the increase in rates which they announced, consumers would continue to receive the same discounts which had been represented to them when they had entered into their energy plans with AGL, when that was not the case.
Issues for determination
The ACCC allegations give rise to the following issues in relation to the Mid-2012 Discount Representation:
(a)Did AGL make the Initial Representation to Category 3 Consumers in the period 1 January 2012 – 18 July 2012?
(b)What did AGL represent to the Category 3 Consumers in relation to the Mid-2012 Rate Increase?
(c)Was that representation false or misleading?
(d)Was that representation misleading or deceptive for the same reasons or for the further reason that AGL did not disclose the Mid-2012 Rate Increase Information?
In relation to the Mid-2013 Discount Representation, the issues are similar but have to be considered in relation to the representations to both the Category 3 and Category 5 Consumers.
The legislation
Section 18(1) of the ACL provides:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 4(2) of the CC Act elaborates the concept of engaging in conduct as follows:
(a)A reference to engaging in conduct shall be read as a reference to doing or refusing to do any act …
…
(c) A reference to refusing to do an act includes a reference to:
(i) refraining (otherwise than inadvertently) from doing that act; or
(ii) making it known that that act will not be done.
Section 29(1) of the ACL provides (relevantly):
A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
(g)make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or
…
(i)make a false or misleading representation with respect to the price of goods or services …
The ACCC case with respect to s 29(1)(g) focused on the concept of “benefits”. It was not in dispute that the discount on AGL’s energy usage charges was a “benefit” within the meaning of s 29(1)(g). The term “price” in s 29(1)(i) is defined in general terms and includes “a charge of any description”. Again it was not in dispute that the conduct of AGL which the ACCC impugns in this case concerned the “price” at which AGL supplied electricity to consumers.
The ACCC seeks the imposition of civil penalties in relation to the contraventions of s 29(1) of the ACL which it alleges. That being so, AGL emphasised the terms of s 140 of the Evidence Act 1995 (Cth).
Relevant principles
Sections 18 and 29 of the ACL are counterparts of the former ss 52 and 53 of the Trade Practices Act 1974 (Cth). It was common ground that the case law developed in relation to ss 52 and 53 could be applied in relation to ss 18 and 29 of the ACL. It was also common ground that, despite the slight differences in language between ss 18 and 29(1) of the ACL, there was no significant difference in meaning between “misleading or deceptive” and “mislead or deceive” in s 18 and “false or misleading” in s 29(1): Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [14] cited with approval in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634 at [40].
The principles relating to a contravention of s 18 of the ACL by conduct involving the making of representations are similar to those relating to a finding that a representation is false or misleading in contravention of s 29(1)(g). However, the ACCC relied on AGL’s alleged non-disclosures only in relation to its plea of contraventions of s 18. This means that the principles relating to misrepresentation by silence do not apply in relation to the pleaded contraventions of s 29.
Many of the principles relating to the application of ss 18 and 29 were summarised by Allsop CJ in Coles Supermarkets at [35]-[47]. Drawing on that summary in particular, as well as other authorities, the following principles of present relevance can be stated:
(a)Provisions such as s 18 of the ACL are remedial in character and so should be construed so as to give the fullest relief which the fair meaning of their language will allow: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 503; New South Wales Lotteries Corporation Pty Ltd v Kuzmanovski [2011] FCAFC 106, (2011) 195 FCR 234 at [105].
(b)Conduct is misleading or deceptive if it has the tendency to lead into error. There must be a sufficient causal link between the conduct and the error on the part of the person exposed to the conduct: Coles Supermarkets at [39].
(c)The question of whether conduct, including conduct by way of representations, contravenes ss 18 or 29 of the ACL is one of fact to be determined by an objective consideration in the light of the relevant surrounding facts and circumstances: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198‑9; Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [109].
(d)The application of s 18 of the ACL requires identification of the conduct said to be misleading or deceptive or likely to mislead or deceive. Once that conduct has been identified, the Court will consider separately whether the conduct was misleading or deceptive or likely to be so: Google Inc v Australian Competition and Consumer Commission [2013] HCA 1; (2013) 249 CLR 435 at [89].
(e)Consideration of the conduct as a whole and in its proper context may include consideration of the type of market, the manner in which goods or services are sold, the habits and characteristics of purchasers in that market as well as any relevant disclaimers or explanations: Coles Supermarkets at [41]. It also includes any relevant disclaimers, qualifications or explanations: Butcher v Lachlan Elder Realty Pty Ltd at [49].
(f)In assessing advertising material, the “dominant message” of the material will be of crucial importance: Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 at [45].
(g)When the impugned contact involves representations to the public at large or to a section of the public, such as prospective retail purchasers of a product or service, regard must be had to the effect of the representations on “ordinary” or “reasonable” members of the class of prospective purchasers. The range of persons in such a class may be quite broad and may include the intelligent as well as the less intelligent and those who are well educated as well as those who are less literate. Generally speaking, the class will not include those who fail to take reasonable care for their own interests: Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12, (2000) 202 CLR 45 at [101]-[103]; Coles Supermarkets at [43].
(h)Evidence that someone was actually misled or deceived by the conduct in question is relevant and admissible but in those cases in which the conduct and representations are to the public generally and concern simple direct advertising, the absence of individuals saying that they were misled will usually be of little significance. The Court can carry out an objective assessment of the advertising and promotional material itself without evidence from individual witnesses and generally, the calling of such evidence is not cost effective: Coles Supermarkets at [45].
I will refer to the principles relating to misleading or deceptive conduct by silence in the reasons addressing that part of the ACCC case.
The Initial Representation
As previously noted, the ACCC case concerns those consumers who entered into market contracts with AGL in the Relevant Period by agreeing on an energy plan in a telephone conversation with a CSR which they themselves had initiated. It was common ground that the CSRs had made the oral statements and that AGL had made the written statements in “Welcome Packs” it sent to the consumers who agreed on an energy plan upon which the ACCC relied for its plea of the Initial Representation. AGL disputed, however, that these statements gave rise to either of the formulations of the Initial Representation alleged by ACCC. A large part of the submissions of the parties was directed to this issue.
The CSR Statements
AGL supplied its CSRs with materials containing mandatory or suggested wording for use in their discussions with consumers, sometimes described as “call scripts”. These were to assist CSRs in dealing with the 13 most common types of inbound calls by a consumer.
The call scripts included, in different places, the following six wordings for use by CSRs (collectively the CSR Statements):
(1)I can set you up on a X year plan where you’ll get a XX% discount on your energy usage charges.
(2)Are you interested in saving XX% on your energy usage charges?
(3)We can offer a XX% discount on your energy usage charges …
(4)What we could do for you today is upgrade you to a more competitive plan which is a XX% discount (maximum available plan as per campaign matrix) on your energy usage charges …
(5)Are you interested in getting a XX% discount on your energy usage charges?
(6)Today I can offer you a X plan discount on your energy usage charges.
The wording in (1), (2), (3) and (5) was mandatory in the call types in which they were included, while the wording in (4) and (6) was suggested only.
It was an agreed fact that the CSRs made at least one of the first, second, third and fifth of these statements to each person making an inbound telephone call to a CSR and who, in the Relevant Period, agreed with the CSR to enter into an energy plan. It was also an agreed fact that, in some calls, the CSRs made one or both of CSR Statements (4) and (6).
In addition, the ACCC tendered the recordings of six telephone conversations which it said had been agreed between the parties to be “a fair sample” of the telephone conversations in the Relevant Period between CSRs and consumers who became Category 3 and Category 5 Consumers. I will refer to these as Consumers One to Six respectively.
The conversation with Consumer One included the following:
CSR:Are you interested in saving 5% off your energy usage charges?
Consumer One: Yep.
CSR:Yep. I can set you up on a two year plan where you’ll get a 5% discount on your energy usage charges and an AGL Assist Voucher. …
The conversation with Consumer Two included the following:
CSR:Are you interested in saving 7% on your energy usage charges?
Consumer Two: Yes. How do I do that?
…
CSR:So, I’ll set you, I can set you up on a two year plan where you get a 7% discount on your energy usage charges. ….
The conversation with Consumer Three included the following:
CSR: …
Yep, so I can set you up on a two year plan, right? You get 5% off each energy usage charge, ok?
Consumer Three: Yep.
The conversation between the CSR and Consumer Four included the following:
CSR:… So yeah I can see at the moment you’re receiving a 5% discount. So you say it was a 11% that the other company offered? … Let’s have a look. So what I can offer you for, um, if you decide to remain with AGL I can offer you um a 12% um discount off your um sorry off your electricity usage charges as well as an AGL Assist Voucher. So, how would that sound?
Consumer Four: And what, sorry, what was the percentage?
CSR:Ah so it’s 12% discount off your electricity usage charges. … So how it will work is that um you will receive a 12% discount for a period of two years if you stay with AGL on this plan at this property or if you renew it at any other property.
The conversation with Consumer Five included the following:
CSR:[Indecipherable] So it’ll essentially be a 12% discount off your energy usage charges and an AGL Assist Voucher.
Consumer Five: So that’s 12% all up is it?
CSR:Ah, its 12% only off the electricity that you consume, not the daily supply charge.
Consumer Five: Right. Yep.
The conversation with Consumer Six with the CSR included the following:
CSR:OK … I can offer you a 15% discount off all your electricity usage on a two year plan. How does that sound?
Consumer Six: That sounds very nice thank you.
CSR:… Now I just need to advise you that if you leave AGL in this three year period that there is a maximum exit fee of $75 but as long as you stay with AGL at this property or renew it at any other property, you’ll continue to enjoy the 15% discount and this fee will not apply. Is that ok?
Consumer Six: Yes, I won’t be changing because I’ve been with them all my life, like all my adult life.
The ACCC emphasised the references in the CSR Statements and in these excerpts of conversations with consumers to discounts off the customers’ energy usage charges. I note in addition that the CSRs made statements to the effect that they could set consumers up on “a more competitive plan” and that consumers could obtain “a saving”. The tenor of the statements made by the CSRs in their conversations with the consumers was that consumers would obtain an advantage by entering into the offered energy plan with the associated commitment to take their electricity from AGL for an extended period. All the statements were made in a context of attracting consumers to contract with AGL or to remain a customer of AGL.
AGL did not contend that different CSR Statements gave rise to any relevant difference in meaning. It is accordingly unnecessary to consider the effect of the Statements individually.
The ACCC submitted that the CSR statements were also made in the Relevant Period to persons who became the Category 7 and Category 12 Consumers. However, the evidence is not sufficient to justify a finding to that effect.
The Welcome Pack Statements
The “Welcome Pack” sent to each Category 3 and Category 5 Consumer included a “Welcome Letter”, an Offer Summary, an AGL Assist Voucher, AGL’s Customer Charter, AGL’s Privacy Policy, AGL’s Dispute Resolution Policy, AGL’s Customer Service Standards, a Product Disclosure Document, a Fee Schedule, a Statement of General Terms and Conditions and a pro forma Cancellation Notice by which the consumer could exercise cooling off rights (together the Welcome Pack). Some of these documents were in the form of brochures and leaflets.
AGL had three versions of the Welcome Pack in the Relevant Period. Welcome Pack Version 2 comprised some 70 separate pages. Welcome Pack Versions 1 and 3 comprised some 50 pages. The principal reason for these differences appears to be that Versions 1 and 3 did not include an information leaflet about AGL itself and some materials which are relevant in New South Wales only.
The ACCC referred particularly to the following statements in the Welcome Packs (the WP Statements):
Welcome Pack Version 1
1Welcome Letter:
(a) “[ ]% off usage charges*”
(b) “*The discount applies to your energy usage charges and will appear as separate credit (GST exclusive) on your bills”
2Offer Summary:
(a) “[ ]% guaranteed discount”
(b) “A discount equal to [ ]% of the amount payable for your applicable energy usage charges applies as part of this energy plan and will appear as a separate credit (GST exclusive) on your bills. The discount does not apply to fixed daily energy supply charges, demand charges or AGL green choice Charges”
Welcome Pack Version 2
3Welcome Letter;
(a) “Your AGL discount [ ]% off usage charges*”
(b) “Great value – [ ]% discount off your electricity usage charges*”
(c) “The discount applies to peak, off-peak and shoulder energy usage charges, and will appear as a separate credit (GST exclusive) on your bills. The discount does not apply, for example, to fixed daily energy service charges, demand charges or AGL green choice Charges”
4Offer Summary:
(a) “A discount equal to [ ]% of the amount payable for your applicable energy usage applies as part of this energy plan and will appear as a separate credit (GST exclusive) on your bills. The discount does not apply, for example, to fixed daily energy charges, demand charges or AGL green choice Charges”
Welcome Pack Version 3
5Welcome Letter:
(a) “[ ]% off usage charges guaranteed for [ ] years”
(b) “The discount applies to your energy usage charges and will appear as a separate credit (GST excl) on your bills”
6Offer Summary:
(a) “[ ]% guaranteed discount”
(b) “A discount equal to [ ]% of the amount payable for your applicable energy usage charges applies as part of this energy plan and will appear as a separate credit (GST exclusive) on your bills. The discount does not apply to fixed daily energy supply charges, demand charges or AGL green choice Charges”
Again, AGL did not suggest that there was any relevant difference in the wording of the Welcome Packs, so that their effect does not have to be considered individually.
The context in which these statements were made in Welcome Pack Version 2, which was used by AGL in the period from 1 January 2012 to 15 June 2012, can be seen in part in the pro forma Welcome Letter sent to one consumer on 5 March 2012. In the top right hand corner, after stating the consumer’s account name and number, the letter identified the particular consumer’s energy plan as “AGL Advantage 10 – Electricity” and stated “Your AGL discount 10% off usage charges*”. The asterisk referred to a footnote stating:
The discount applies to peak, off-peak and shoulder energy usage charges and will appear as a separate credit (GST exclusive) on your bills. The discount does not apply, for example, to fixed daily energy service charges, demand charges or AGL Green Choice Charges.
The first section of the letter stated:
YOU’RE ON A GOOD THING WITH AGL AT HOME.
You’ve made a great decision to choose an AGL Advantage 10 Energy Plan for your electricity. You can feel good knowing that you’ve joined over three million account holders who have also chosen AGL for hassle free, competitively priced energy for their home. You’ll now enjoy:Ø Great value – 10% off your electricity usage charges*, plus we will source electricity equal to 10% of your consumption from Government accredited GreenPower generators.
Ø Excellent service – we can help arrange every aspect of your home energy needs, from easy ways to save energy and money on your energy bills to reliable electricians, discounts on appliances and more.
Ø Fair deals – our Movers Guarantee, Fair Pricing and Fair Contracting Promises help ensure you’ll always get a fair deal from AGL;
Ø AGL Energy Online – you can manage your energy account online with ease, just like internet banking.
The asterisk referred to the same footnote as that quoted above.
The Welcome Letter in Welcome Pack Versions 1 and 3 had a similar content, although the layout of the letters was different.
Counsel for AGL emphasised other aspects of the Welcome Packs. These included the schedule of the electricity rates applicable in the consumer’s case, the statement of the consumer’s entitlement to exercise cooling off rights, the notice to the consumers that AGL could vary the consumer’s rates, charges, tariff structure, billing frequency and the terms of the energy plan at any time by prior notice to the consumer, the notice to consumers that the respective rights and obligations of AGL and consumers were governed by AGL’s general terms as well as specific regulations and codes, and AGL’s “Fair Pricing Promise”. I will return to that Promise later in these reasons.
The classes of consumer to whom the statements were made
It is convenient to note again the ACCC’s formulation in the AFTS of the Initial Representation said to have been made by the CSR Statements and the WP Statements. It is said to be a representation that, under the nominated energy plan, the consumers would, for the duration of that energy plan, receive a discount off:
(a)AGL SA’s energy usage charges that would apply to them if they were supplied electricity by AGL not under an energy plan; or
(b)The energy usage charges for the supply of electricity by AGL SA to residential consumers in South Australia.
The AFTS at [22] pleads that the Initial Representation was partly express and partly to be implied and, in relation to the CSR Statements, gave the following particulars:
To the extent that the representation was express, it was made orally by the words comprising the CSR Statements. To the extent that the representation was implied, it was to be implied from the content of the CSR Call Script used by the Customer Service Representatives in telephone conversations with Consumers and, in particular, the CSR Statements.
The particulars of the Initial Representation said to arise from the Welcome Pack statements were in similar terms. The AFTS alleges in [24]:
To the extent that the representation was express, it was made by the words comprising the Welcome Pack Statements. To the extent that the representation was implied, it was to be implied from the entirety of the Welcome Pack and, in particular, the Welcome Pack Statements.
The claim that the Initial Representation was made expressly cannot be accepted. Neither the CSRs nor the Welcome Packs used either of the pleaded formulations of the Initial Representation. The ACCC claim must accordingly, be one of an implied representation, that is, that the words used by the CSRs and in the Welcome Packs implied in the context in which they were made one or other of the pleaded formulations of the Initial Representation.
The ACCC contended that whether consumers understood the Initial Representation in terms of formulation (a) or formulation (b) depended on their knowledge of the means by which AGL could supply electricity to them. Its submissions on this topic were not entirely clear but, as I understood the position, the ACCC contended that the way in which the ordinary and reasonable consumer understood the Initial Representation depended on that consumer’s awareness of whether AGL could supply electricity to him or her without them entering into an energy plan. On this basis, the ACCC identified three sub-classes of Category 3 and Category 5 Consumers:
(i)Consumers who were aware that AGL could supply electricity to them whether or not they agreed on an energy plan;
(ii)Consumers, being a subset of (i), who were aware in addition that the entry into a standing contract (whether or not they knew it by name) was the means by which AGL could supply electricity to them if they did not agree on an energy plan;
(iii)Consumers who were not aware that AGL could still supply electricity to them in the event that they did not enter into an energy plan. These consumers thought that they had to enter into an energy plan if they wished AGL to supply electricity to them.
The ACCC submitted that ordinary and reasonable consumers generally would have understood the Initial Representation in the second of its formulations, namely, as a representation that they would receive the discount from the energy usage charges for the supply of electricity by AGL to residential consumers in South Australia. It referred to this more shortly as a deduction from AGL’s “usual price” or from “the usual price charged [by AGL] to consumers like them”.
It then submitted that the ordinary and reasonable consumer in sub-classes (i) and (ii) would have understood the Initial Representation in the more particular way alleged in formulation (a), namely, as a representation that they would receive the discount from the “usual” energy usage charges which would apply in their case if they were supplied other than under an energy plan. Those in sub-class (ii) would, it submitted, have understood that those “usual” charges would be calculated by reference to AGL’s applicable standing contract rate. The remainder of sub-class (i) would have understood only that they would be the rates which would apply if they declined to enter into an energy plan which, as it happened, were the SRC rates.
Both counsel submitted that it was reasonable to suppose that the consumers in Category 3 and Category 5 included sub-classes with varying degrees of awareness. Counsel for AGL referred to Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2008] FCA 607 and to Australian Competition and Consumer Commission v Jewellery Group Pty Ltd [2012] FCA 848; (2012) 293 ALR 335. In Apotex, Bennett J at [57]-[58] held that pharmacists and patients may have been misled by representations on a printed stamp to be applied to medication prescriptions, but not doctors. In Jewellery Group, Lander J accepted at [31]-[32] that the class of persons reading advertisements for jewellery would comprise those who were aware of the possibility of obtaining a discount below the ticketed price and those who were not. This approach was upheld on appeal: Jewellery Group Pty Ltd v Australian Competition and Consumer Commission [2013] FCAFC 144.
Characteristics of the Category 3 and Category 5 Consumers
The very number of Category 3 and Category 5 Consumers to whom the CSR Statements and WP Statements were made suggests that the range of persons within those groups must have been diverse. They are likely to have included the experienced and the inexperienced, the astute and the not so astute, the educated and the less well educated, and the careful and the not so careful.
However, it is also reasonable to suppose that Category 3 and Category 5 Consumers had much in common: all wished to obtain or to continue a supply of electricity to residential premises; all may be taken to have known that electricity is an essential utility in every home; all may be taken to have known that the physical means by which retailers such as AGL supply electricity to homes is common, or substantially common, in all cases; all may be taken to have known that AGL was a large retailer of electricity, supplying electricity to hundreds of thousands of homes in South Australia and that, because of the volume of its customers, its supply arrangements would be of a generally similar kind; all had made a telephone call to AGL resulting in their conversations with the CSR; all must have been willing at the time of their telephone call to contract with AGL (with the possible exception of those who telephoned AGL with the intention of cancelling their supply arrangements or merely to raise a query about their existing supply or an account); and all were attracted by the notion of obtaining a saving in the amount they paid for electricity in consideration of their commitment to take their supply from AGL for a fixed period. They were not persons who entered into energy plans with AGL by other means, for example, by use of AGL’s website or by arrangements made with someone attending their premises. I also consider that all of the Category 3 and Category 5 Consumers can be taken to have been aware that they would be charged for their electricity according to their individual usage.
I accept the ACCC submission that not all of the persons who became Category 3 and Category 5 Consumers had made their telephone call to AGL for the express purpose of negotiating an energy plan. If it were otherwise, the inference would be available that all were aware of the availability of energy plans with discounts. However, as previously noted, the call scripts were a guide to CSRs in the 13 most common call types. In addition to persons ringing expressly to enquire about AGL’s rates and discounts, the call types included customers of other retailers who were seeking out a better deal; those wishing to arrange a new supply of electricity; those seeking the transfer of electricity from one home to another; those wishing to have their supply cancelled; those wishing to make a complaint; and those raising a query about their supply or their account. It is probable that many making the first type of call were ringing to negotiate an energy plan but the same cannot be said of the remaining call types. Consumers making some of the latter types of calls may simply have been ringing to arrange a supply of electricity but with no pre-existing knowledge of energy plans. Those making a complaint or raising a query were plainly not ringing for the express purpose of negotiating an energy plan. It is not possible to make a finding about the numbers of each of these kinds of callers who became Category 3 and Category 5 Consumers but it is reasonable to suppose, and I so find, that there were at least some of each.
I consider it likely that some, and probably many, of the Category 3 and Category 5 Consumers had knowledge of the electricity market at the time of their telephone call: that is, knowledge that there was more than one retailer; that retailers were competing with one another for customers; that retailers were prepared to offer discounts to attract or retain customers; that benefits could be obtained by comparing retailers’ rates and shopping around; and that by committing to take their supply from a retailer for a given period they could obtain discounts.
In this context, I refer to the evidence provided by AGL regarding the switching of customers from one retailer to another. On the basis of the evidence of the economist Mr Price, I accept that approximately 80% of residential customers in South Australia in 2012 were aware of their ability to select their own retailer; that about 20% of customers switched retailers each year; and that the extent to which consumers switch between retailers is an indication of the degree of consumer awareness of choice and of competition by retailers for their businesses. It is reasonable to suppose that these figures would also have applied to AGL customers.
The evidence of Mr Price indicates that consumers had a variety of means of identifying the rates used to calculate their electricity charges. These included schedules of rates provided to them by their retailer on the commencement of their contracts, and the rates shown on electricity accounts and on fact sheets on the various retailers’ websites which were available to consumers on request. Use of AGL’s website was one means by which consumers could have found that AGL had two or more sets of rates for the supply of electricity to residential premises. I also accept that consumers had available to them a number of means of comparing retailers’ prices in their own circumstances. These included the Residential Estimator Service published by ESCOSA on its website, as well as price comparison websites operated by energy regulators and others which were available free of charge.
I think it likely (and so find) that some consumers in the Relevant Period were aware of these means of comparing prices and of other steps taken by energy regulators (for example, the Energy Price Disclosure Code made by ESCOSA) for the purpose of facilitating comparison by consumers between retailers’ prices.
However, I also consider it likely, and so find, that large numbers of the Category 3 and Category 5 Consumers would not have been aware of these matters and would have had a relatively unsophisticated knowledge of the electricity market. Some of the audio tapes of telephone conversations between consumers and CSRs to which I referred earlier support that conclusion.
The origins of the Category 3 and Category 5 Consumers
AGL provided evidence as to the origins of all the Consumers to whom AGL assigned its Category 3 and Category 5 Rates from which some inferences about their knowledge of the means by which electricity could be supplied to residential consumers may be drawn. The report from Mr Jaski warrants the following findings concerning the origins of all the 75,633 Category 3 Consumers:
(i) 12,422 had previously been supplied electricity by AGL under a SRC;
(ii) 28,432 had previously been supplied electricity by AGL under another energy plan and, of those, 11,430 had been “automatically recontracted” by AGL upon the expiry of their previous energy plan. This means that 17,002 of the AGL consumers who had previously been on an energy plan became Category 3 Consumers by one of AGL’s sales channels;
(iii) 4,923 had previously been supplied electricity by AGL under a “No Discount Product” (a market contract with no provision for discount);
(iv) 158 had previously been supplied electricity by AGL under a “Default Contract” (the arrangement applicable under s 36AB of the Electricity Act 1996 (SA) for those consumers taking a supply of electricity without having entered into a contract with a retailer for that supply and for which AGL was responsible as the designated retailer);
(v)27,322 had not previously been supplied electricity by AGL.
Mr Jaski’s report did not indicate the origins of the remainder.
The evidence did not disclose how many in each of these categories of origin agreed on an energy plan with a CSR in the course of an inbound telephone conversation, but it is reasonable to suppose that a significant proportion of each did so.
Mr Jaski’s report also indicated that, of the Category 3 Consumers, some 2,867 had exercised their cooling off rights within 13 days after agreeing on their energy plan, and that some 66,024 and 44,466 had remained as Category 3 Consumers at 9 July 2012 and 15 July 2013 respectively. Again, the evidence does not permit a finding as to how many of these were consumers who had agreed on an energy plan with a CSR. However, if the proportion of these consumers of all Category 3 Consumers remained constant, there would have been approximately 27,000 and 18,000 consumers at 9 July 2012 and 15 July 2013 respectively who had agreed on their energy plan with a CSR during the course of an inbound telephone conversation between 1 January 2012 and 18 July 2012. These are the consumers who would have received the Mid-2012 and Mid-2013 Rate Increase Letters.
In relation to the 72,213 Category 5 Consumers, Mr Jaski’s report warrants the following conclusions:
(i) 13,002 had previously been supplied electricity by AGL under a SRC;
(ii) 32,763 had previously been supplied electricity by AGL under another energy plan and, of these, 3,374 had been “automatically recontracted” by AGL upon expiry of their previous energy plan. This means that 29,389 consumers had become a Category 3 Consumer by one of AGL’s sales channels;
(iii)5,754 had previously been supplied electricity by AGL under a “No Discount Product” (other than a SRC);
(iv) 138 had previously been supplied electricity by AGL under a “Default Contract”
(v) 19,594 had not previously been supplied electricity by AGL.
Again, Mr Jaski’s report did not indicate the origins of the remainder.
As with the Category 3 Consumers, the evidence did not disclose how many in each of these categories of origin agreed on an energy plan with a CSR in the course of an inbound telephone conversation, but it is reasonable to suppose that a significant proportion of each (other than those “automatically recontracted”) did so.
Mr Jaski’s report indicated that, of the Category 5 Consumers, some 2,508 had exercised cooling off rights within 13 days of agreeing on the energy plan and so did not continue as Category 5 Consumers. The report also indicated that 57,247 remained as Category 5 Consumers at 15 July 2013. Using the same proportion of the whole of those who had commenced on an energy plan by agreement with a CSR in an inbound telephone conversation, it seems reasonable to suppose that at 15 July 2013 about 24,000 of the Category 5 Consumers would have commenced on an energy plan as a result of an agreement with a CSR. These are the consumers who received the Mid-2013 Rate Increase Letters.
AGL submitted that each of the five categories of origin identified by Mr Jaski should be regarded as a sub-class of both Category 3 and Category 5 Consumers. It based this submission on the knowledge of AGL’s rates or its SRC which it submitted could be imputed, or not imputed, as the case may be, to each of the sub-classes by reason of their category of origin. In addition, AGL submitted that adoption of these sub-classes would permit an objective determination of the numbers in each sub-class and, if necessary, an identification of each person in the sub-class.
However, the achievement of precision of this kind is not essential, just as it was not essential in Jewellery Group. Further, division of the Category 3 and Category 5 Consumers into the sub-classes proposed by AGL would not allow for the probability that the knowledge of those in each sub-class was not uniform and for the probability that the awareness of each consumer of the available arrangements with AGL did not closely correlate with the consumer’s category of origin. For example, contrary to the AGL submission, some of those Category 3 and Category 5 Consumers who had not previously been on a SRC with AGL are likely to have known from other sources of the availability of its standing contract.
I consider it reasonable to conclude in relation to both Category 3 and Category 5 Consumers that many (and probably most, if not all) of those who had previously been supplied electricity under a SRC were aware that electricity could be supplied other than pursuant to an energy plan. That is, they were consumers who were aware that they did not have to enter into an energy plan to secure a supply of electricity from AGL and that they had the choice of continuing their existing arrangement (whether or not they knew that that arrangement was described as a SRC). Consumers of this kind are likely to have considered that, by accepting the offered energy plan with the stipulated discount, they were obtaining an advantage for themselves relative to the position which would pertain if they remained on an SRC and that it was that advantage which made it worthwhile for them to move from a SRC and to commit to AGL for the two year period.
The same conclusion is appropriate with respect to those who had previously been supplied electricity under a no discount product. There was little evidence about the relatively small numbers who had been supplied under a default contract and it is not possible to make useful findings about them.
As indicated earlier, there are also likely to have been some in the other categories of origin who were aware that AGL could supply electricity other than pursuant to an energy plan, and that this could be done pursuant to a standing contract. That knowledge may, for example, have been derived from an earlier experience with AGL.
This means that I accept that there were consumers in sub-class (ii) to which the ACCC referred.
The extent of the knowledge of those who had previously been supplied electricity by AGL under an energy plan or who had been supplied by another retailer is less certain. It can at least be concluded that these consumers were aware that electricity could be supplied to them under an energy plan. The AGL customers may be taken to have known this because of their previous experience on such plans with AGL. I note in this respect that the caller in one of the audio taped conversations was an existing AGL customer seeking a greater discount from AGL in light of the discount offer he had received from another retailer. But even if there were AGL customers or customers of another retailer who had not known previously of energy plans, they were, in their conversations with the CSRs, told of “plans” by which they could obtain discounts. They thereby learnt of energy plans.
The heading to the second form of letter was to my mind of a more neutral character.
The reasoning above is sufficient for a conclusion that AGL contravened s 29(1)(g) of the ACL by making a false or misleading representation that its supply of electricity to the sub-class (i) and (ii) consumers would continue to have the benefit represented to those consumers by the Initial Representation. That is, that the supply by AGL would entitle the consumers to continue to receive the discount from the amount they would otherwise pay for their electricity if not subject to an energy plan. It also means that AGL contravened s 29(1)(i) of the ACL by making a false or misleading representation with respect to the price at which it would supply electricity.
It is convenient to deal with the claimed contravention of s 18 in respect of the sub-class (i) and (ii) consumers when considering the ACCC claim of misrepresentation by non-disclosure.
The sub-class (iii) consumers
An assumption by consumers in 2012 and 2013 that AGL had rates of general application cannot be described as extreme or fanciful: on the contrary it was an accurate understanding. Further, and in any event, many of the features mentioned earlier in these reasons would have suggested naturally to these consumers that AGL had rates of general application. These included the knowledge which may be attributed to the consumers that AGL is a large retailer of electricity supplying electricity to hundreds of thousands of homes in South Australia; that the way in which electricity is supplied to residential premises tends to be the same; that the very volume of AGL’s customers would make it probable that they would have arrangements with their customers of a generally uniform kind; and the fact that AGL’s CSRs had referred to discounts from charges, rather than from reduced rates, as the means by which AGL could make it attractive for consumers to commit to them for the fixed terms of their energy plans.
Accordingly, I am satisfied that the ordinary and reasonable Category 3 Consumers are likely to have made the assumption that AGL had rates of general application to consumers like themselves.
However, ordinary and reasonable consumers do not include those “who fail to take reasonable care of their own interests”: Campomar at [102]. In this respect AGL relied on the report of Mr Price. That report indicated that consumers had a number of means by which they could locate rates for the supply of electricity to residential premises, including the schedule of rates in the Offer Summary in the Welcome Pack, the schedule of rates on each account they receive, and the rates published on fact sheets on AGL’s website. Mr Price’s report also indicated that consumers could compare different offers and the effect of different rates in their own circumstances, by use of the facility on the ESCOSA website or by use of one of the ten other price comparison websites.
It is evident that many of the regulatory requirements imposed by ESCOSA were directed to requiring retailers to provide consumers with information about their rates at the commencement of their contracts and with information about their usage and rates during the currency of their contracts, with a view to facilitating their ability to make these forms of comparison.
The evidence did not disclose what consumers would have seen in the Relevant Period if they had accessed the AGL website, but it seemed to be common ground that they would have seen AGL’s various schedules of rates.
Based on general experience rather than direct evidence, I consider it probable that the majority of both Category 3 and Category 5 Consumers had access to the internet and therefore access to AGL’s website and the price comparison websites. There is a sense therefore in which it could be said that the majority of Category 3 and Category 5 Consumers had the means to identify for themselves, if they wished, the fact that AGL had various schedules of rates.
However, it is difficult to conclude that a failure by the consumers to make use of these websites, if that was the case, amounted to a failure to take reasonable care for their own interests. Such a failure is to be assessed objectively. The very numbers of the Category 3 Consumers involved suggests that the Court would not readily conclude that they had not met the objective standard involved. On the contrary, the circumstance (if it be the case) that large numbers apparently did not invoke means of identifying various rate schedules available militates against such a finding.
Further, those Category 3 Consumers who, on receiving their Welcome Packs, went to the AGL website would have seen that the rates notified to them were the same as those in a number of AGL’s categories and, in particular, the same as its then prevailing SRC rates.
Finally, AGL could hardly be heard to say that consumers who, like Customer Six in the taped telephone conversations, were motivated by loyalty to the AGL brand were failing to take reasonable care of their own interests by failing to check the position independently, and I did not understand it to make that submission.
For these reasons, I do not consider that the ordinary and reasonable Category 3 Consumer (and for that matter the ordinary and reasonable Category 5 Consumer) should be taken not to include those who failed to check the rates applicable in their case against the rates published on the AGL website.
On my findings, the Mid-2012 Discount Representation to the sub-class (iii) Category 3 Consumers was that they would continue to receive their percentage discount from the energy usage charges calculated by rates which AGL applied generally to consumers like themselves. This was a misrepresentation. These consumers would no longer receive the agreed discount from charges calculated in this way but from charges calculated by reference to a category of rates which AGL itself assigned to these consumers and then increased selectively. Those rates were higher than those which applied to otherwise similar consumers who entered into energy plans with AGL following the Mid-2012 Rate Increase. The effect of AGL’s conduct was summarised earlier: it reduced the benefits of the discounts represented to the consumers when they agreed on their energy plan.
It follows that the ACCC has also established that the Mid-2012 Discount Representation was false or misleading in relation to the sub-class (iii) consumers.
Omission to disclose the Mid-2012 Rate Increase Information
In relation to the alleged contravention of s 18 in relation to Category 3 Consumers in 2012, the ACCC relied on both the Mid-2012 Discount Representation and AGL’s omission to disclose certain information to those consumers at the time of the Mid-2012 Rate Increase. The AFTS pleaded that AGL had omitted to disclose the following information (described in the AFTS as “the Mid-2012 Rate Increase Information”) to consumers:
Following the Mid-2012 Rate Increase:
(a)energy usage charges for electricity supplied by AGL SA to Consumers would not be calculated by reference to the same rates;
(b)the rates for energy usage charges for Category 3 Consumers would be higher than the rates for energy usage charges that would apply to them if they were supplied electricity by AGL SA not under an Energy Plan; and
(c)the rates for energy usage charges for Consumers commencing an Energy Plan during the Relevant Period from 19 July 2012 would be the same as the rates for energy usage charges which would apply to them if they were supplied electricity by AGL SA not under an Energy Plan.
Put more shortly, the ACCC contended that AGL should have informed the Category 3 Consumers that it would use different rates to calculate energy usage charges; that the rate used to calculate their charges would be higher than the rates they would have used had the consumers not agreed on an energy plan; and that rates applicable to those commencing on energy plans from July 2012 onwards would be less than the rates applied in their case.
AGL acknowledged that it was aware at the time it sent the 2012 Rate Increase Letter of the elements of the pleaded Mid-2012 Rate Increase Information.
It is well established that, in some circumstances, silence may constitute conduct which is misleading or deceptive. There was little disagreement between the parties as to the principles relevant to this part of the ACCC claim. The High Court discussed many of the principles in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357, in particular at [16]-[21] (French CJ and Keifel J).
I take the principles relevant to this case as being:
(1)Conduct involving silence may, in some circumstances, constitute misleading or deceptive conduct;
(2)In considering whether there is a contravention of s 18, silence is to be assessed as a circumstance like any other;
(3)Mere silence without more is unlikely to constitute misleading or deceptive conduct. Remaining silent will, however, constitute misleading or deceptive conduct if the circumstances are such as to give rise to a reasonable expectation that if some relevant fact does exist, it will be disclosed;
(4)A reasonable expectation that a fact, if it exists, will be disclosed will arise when either the law or equity imposes a duty of disclosure but is not limited to those circumstances. It is not possible to categorise all the circumstances in which a reasonable expectation of disclosure may arise but they may include circumstances in which a statement conveying a half-truth only is made, circumstances in which the representor has undertaken a duty to advise, circumstances in which a representation with continuing effect, although correct at the time it was made, has subsequently become incorrect, and circumstances in which the representor has made an implied representation;
(5)In considering whether a party engaged in commercial dealing may have a reasonable expectation that a fact, if it exists, will be disclosed, one needs to keep in mind that it will often be the case in such dealings that one party has more knowledge about a relevant matter than the other and yet will not, in accordance with ordinary commercial expectations, be guilty of misleading or deceptive conduct in failing to make that knowledge known to the other.
Fundamentally, the determination of whether a failure to disclose a matter is misleading or deceptive requires examination of all the circumstances. If in the circumstances, assessed objectively, the representees would have been entitled to expect or infer (that is, have a reasonable expectation) that the particular matters would be disclosed and they were not, the representor may have engaged in misleading or deceptive conduct: Clifford v Vegas Enterprises Pty Ltd [2011] FCAFC 135 at [198]. French CJ and Keifel J in Miller said in relation to the concept of reasonable expectation, at [19]:
The language of reasonable expectation is not statutory. It indicates an approach which can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations. …
(Citation omitted)
Silence and sub-classes (i) and (ii)
Although the AFTS contained a plea in [40] that the Category 3 Consumers did reasonably expect that the Mid-2012 Rate Increase Information would be disclosed to them, it did not particularise the basis for the expectation alleged. Further, the ACCC submissions did not make clear why the Category 3 Consumers in any of the sub-classes would have had such an expectation.
The ACCC did not allege that AGL was under a duty to disclose the Mid-2012 Rate Increase Information, let alone indicate a basis for such a duty. I accept in this respect the submission of AGL that the regulatory regime, to which I referred earlier, did not require disclosure of any of the elements of the Mid-2012 Rate Increase Information and that AGL had complied with its obligations of disclosure under that regime. The ACCC did not contend otherwise.
Section 18 does not impose an independent duty of disclosure. However, when a person is subject to an obligation to disclose information, s 18 requires that the information given not be misleading or deceptive or likely to mislead or deceive: Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 466.
The ACCC submitted that electricity is an essential service such that there is a “common bond” between every person and every household in South Australia in relation to the supply of electricity. It then referred to the diversity of persons and, in particular of the Category 3 Consumers, who shared that “common bond”, noting that some would be “less astute, less intelligent or less well-informed than the average member of the community”. Although not stated in express terms, the submission seemed to be that these circumstances gave rise in some way to a duty in AGL to disclose the Mid-2012 Rate Increase Information, or at least informed the disclosure which could reasonably be expected of AGL. In this way the ACCC submissions sought to invoke the reasoning in Fraser at 467-468.
However, I accept AGL’s submission that Fraser is distinguishable. In that case the Court held that the directors of NRMA Holdings Limited were under a duty, independently of s 52 of the former Trade Practices Act 1974 (Cth), to make disclosure of relevant information concerning the de-mutualisation of the company. Having found such a duty, the Court referred to the “common bond” of the company’s members in the context of identifying the content of the information which the directors should have provided to them. The Court did not hold that a common bond of some kind between a diverse group of consumers gave rise by itself to a duty of disclosure. Accordingly, in my opinion, the decision in Fraser does not assist the ACCC presently. As already noted, the ACCC did not contend that AGL was subject to some independent obligation of disclosure with respect to which the content of the statements made in the Mid-2012 Rate Increase Letter could be compared.
I am unable to find any basis for a finding that, objectively speaking, the sub‑class (i) and (ii) consumers would have expected that AGL would inform them (in terms of the first and third elements of the Mid-2012 Rate Increase Information) that it would use different rates to calculate energy usage charges among its various customers or that it would charge those consumers commencing on an energy plan after July 2012 at the same rates as would apply if they were not on an energy plan. There is no reason to suppose that these matters would have been of any particular significance to the sub-class (i) and (ii) consumers.
It is the second item of the Mid-2012 Rate Increase Information which would have been of interest to the sub-class (i) and (ii) consumers. Had AGL informed them of that information, they would thereby have become aware that they were now being charged at rates which were higher than would have been the case if they had not agreed to an energy plan. They could then have concluded that the basis upon which they had agreed to commit to AGL for a two year term had been falsified or, at least, made less attractive. But more must be established for the reasonable expectation supporting misrepresentation by silence than the putative interest of the sub-class in the information or the use which could be made by the sub-class of the information had it been provided.
The ACCC submitted that it would have been “relatively easy” for AGL to have informed the Category 3 Consumers of the way in which the rates for their energy usage charges would differ from the SRC Rate. It submitted further that “it is not a demanding expectation that an energy supplier will make fair or complete disclosure of material information to existing consumers when it writes to those consumers about rate increases.”
However, this is not sufficient to give rise to the reasonable expectation for which the ACCC contended. I accept the submission of AGL that the test of reasonable expectation is not satisfied by an appeal to “vague and general notions of fairness or some concept of optimal disclosure”. Some principled basis for the reasonable exception must be identified. Any duty by AGL to disclose information, and any reasonable expectation by consumers that it would disclose information, must have its origin in matters which are independent of the ease of the means by which the duty can be discharged or the expectation satisfied, if it exists.
I think it reasonable to suppose that the ordinary and reasonable sub-class (i) and (ii) consumer reposed some trust in AGL and would have relied on it to charge no more than that to which it was entitled under the arrangements which the consumer had made with it. They would have expected a reputable retailer not to depart from the representation on which it had induced them to contract with it. However, that is different from an expectation that AGL would alert them to a circumstance from which they could infer that it was not doing so.
The ACCC did not contend that the 2012 Rate Increase Letters contained half-truths which enlivened an expectation that the full-truth of each fact would be disclosed. It did not contend, for example, that the impact of the increase in each consumer’s case would depend, by implication, only on the extent of that consumer’s electricity usage conveyed a half-truth, namely, by omitting to state that the impact in the consumer’s case was also affected by AGL’s proposed application of the discount to charges calculated by rates other than the SRC Rates.
In the circumstances, I am unable to conclude that the sub-class (i) and (ii) consumers had a reasonable expectation that AGL would disclose to them any element of the Mid-2012 Rate Increase Information.
Nevertheless, I hold that the Mid-2012 Discount Representation was misleading or deceptive in contravention of s 18 of the ACL in relation to the Category 3 sub-class (i) and (ii) Consumers for the same reasons which I gave in relation to the contraventions of s 29(1)(g) and (i).
Silence and sub-class (iii)
My observations about the lack of particularisation of the alleged expectation that consumers in sub-classes (i) and (ii) had that they would be informed of the Mid-2012 Rate Increase Information also apply in relation to this sub-class.
Given my findings of the Initial Representation made to the sub-class (iii) consumers, I consider that they could not reasonably be held to have had an understanding that they would be informed of any of the three matters said to comprise the Mid-2012 Rate Increase Information. That is because the representation to those consumers in the Initial Representation and by the Mid-2012 Discount Representation was not that their discount would be from a single set of rates which AGL applied to its residential customers. That being so, these consumers would not have thought it a matter of any moment that, following the Mid-2012 Rate Increase, the same rates would not be used in the calculation of the energy charges to all of AGL’s customers.
Likewise, I am unable to identify any basis for a conclusion that the sub-class (iii) consumers had a reasonable expectation of being informed of the matters (b) and (c) said to comprise the Mid-2012 Rate Increase Information. No doubt being informed of those matters would have been of interest, and perhaps useful, to them. However, that does not provide a basis by itself for a conclusion that they had a reasonable expectation of being informed about those matters.
The ACCC did not establish any other basis upon which it could be held that AGL had engaged in a form of misrepresentation by silence in relation to the sub-class (iii) consumers.
This means that the claim of misleading or deceptive conduct by silence fails. However, the claim of misleading or deceptive conduct in respect of the Mid-2012 Discount Representation succeeds in relation to the sub-class (iii) consumers for the same reasons as given in relation to s 29(1)(g) and (i) of the ACL.
The Mid-2013 Discount Representation
The ACCC claims that, by sending the Mid-2013 Rate Increase Letter after earlier making the Initial Representation and the Mid-2012 Discount Representation, AGL represented to the Category 3 and Category 5 Consumers that there had been “no change” to the discount they were receiving and would continue to receive for the duration of their energy plan off:
(a)AGL SA’s energy usage charges that would apply to them in they were supplied electricity by AGL SA not under an energy plan; or
(b)The energy usage charges for the supply of electricity by AGL SA to residential consumers in South Australia.
The ACCC called this representation “the Mid-2013 Discount Representation”.
In form, the Mid-2013 Discount Representation uses the same terminology as did the pleaded Initial Representation and the pleaded Mid-2012 Discount Representation, save only that the Mid-2013 Discount Representation is said to be a representation that there had been “no change” to the discount which the consumers were receiving.
Did AGL make the Mid-2013 Discount Representation?
In relation to the Category 3 Consumers, the AFTS alleges at [49] that the Mid-2013 Discount Representation was partly express and partly to be implied. It alleges that the representation was made expressly by the information and statements in each of the Mid‑2012 and Mid-2013 Rate Increase Letters, the WP Statements and the CSR Statements. It was said to be implied from the Mid-2012 and Mid-2013 Rate Increase Letters, the CSR call script and the Welcome Pack.
In relation to the Category 5 Consumers, the AFTS also alleges (at [50]) that the representation was partly express and partly to be implied. In relation to the allegation that the representation was express, the AFTS particularises the information and statements in the Mid-2013 Rate Increase Letter. In relation to the implication, the AFTS refers to “the entirety of the Mid-2013 Rate Increase Letter” together with the Initial Representation.
The ACCC did not rely for the alleged Mid-2013 Discount Representation on any other document, such as the periodic bills rendered by AGL to consumers. Those bills identified the discount applied to the bill in both percentage and dollar terms. Nor did it contend that the statement in the 2013 Rate Increase Letter that the estimated impact of the increase at around $1.50 per week was calculated by reference to the consumption of an average AGL customer “in your area” involved an implicit representation which was inaccurate.
The claim in each case that the representation was made expressly can be dismissed shortly. The Mid-2013 Rate Increase Letters contain no reference to a discount, or its continuance, at all.
Instead the ACCC claim is that the primary impression conveyed by the Mid-2013 Rate Increase Letter was similar to that conveyed by the Mid-2012 Rate Increase Letter and was to the effect that the discount previously agreed with a consumer at the time of commencement of their energy plan was unaffected by the rate increase.
As previously noted, the Mid-2013 Rate Increase Letters were materially different from the Mid-2012 Rate Increase Letters because they did not contain any statements to the effect that the consumers would “continue” to receive their discounts.
The ACCC submitted that the Mid-2013 Discount Representation arose in different ways, depending on whether consumers had also received the Mid-2012 Rate Increase Letter. First, it submitted that a consumer receiving the Mid-2013 Rate Increase Letter had, in the context of the CSR Statements and WP Statements, “no reason to understand” from the content of the letter that their “percentage discount” would change as a result of the Mid‑2013 Rate Increase.
There are two difficulties in accepting this submission. First, any consumer understanding from the Letter that the “percentage discount” had not changed was not falsified as the consumer continued to receive the same percentage discount so that a representation in these terms cannot give rise to an actionable misrepresentation. Secondly, an absence of reason to understand that there has been a change is not equivalent to a positive or implied representation that there has been no change.
Next, the ACCC submitted that the Mid-2013 Discount Representation arose in the case of Category 3 Consumers from the combination of the Initial Representation and the Mid-2012 and Mid-2013 Increase Letters. This was said to be so because a consumer who had received the CSR Statements and the WP Statements and then the Mid-2012 Rate Increase Letter had understood that their “percentage discount” would continue despite the Mid-2012 Rate Increase. Then, so the argument ran, there was “nothing in the content of the Mid-2013 Rate Increase Letter to suggest to the consumer that this position had changed”. In making this submission, the ACCC drew attention to the title to the Mid-2013 Rate Increase Letter which was in bold and larger font size “Important information about your energy rates”. It submitted that that conveyed to the consumers that the letter contained all relevant and important information as to the impact of the rate increase on their energy plan.
The principal difficulty with acceptance of this submission is the same as that just outlined. An absence of an indication of change is not equivalent to a positive or implied representation that there has been no change. Further, I do not accept that the prominent title to the Mid-2013 Rate Increase Letter conveyed the inference for which the ACCC contended. Instead its effect was to draw the consumers’ attention to the fact that the Letter contained information which AGL regarded as important for them to know.
It is possible that the Mid-2013 Rate Increase Letter contains an implicit representation along the lines that the notified increase and the new rates were in accordance with the position as represented by AGL in the Initial Representation. However, that is not the representation alleged by the ACCC and it is not necessary to consider it.
This means that the claimed contravention of s 29(1)(g) and (i) by the Mid-2013 Rate Increase Letters fails and it is not necessary to address the remaining issues which would otherwise arise. I will address the misleading or deceptive conduct claim separately.
Omission to disclose the Mid-2013 Rate Increase Information
In relation to the s 18 claim arising from the Mid-2013 Rate Increase Letter, the ACCC relies in addition on an alleged misrepresentation by silence by AGL. By [55(d)] the AFTS alleges that at the time of, or prior to, the Mid-2013 Rate Increase Letter AGL did not disclose information described as “the Mid-2013 Rate Increase Information” to the Category 3 and Category 5 Consumers. The information said not to have been disclosed was as follows:
Following the Mid-2013 Rate Increase:
(a)and since the Mid-2012 Rate Increase, the rates for energy usage charges for Category 3 Consumers had been and would be higher than the rates for energy usage charges that would apply to them if they were supplied electricity by AGL SA not under an Energy Plan;
(b)and since 1 January 2013, the rates for energy usage charges for Category 5 Consumers would be higher than the rates for energy usage charges that would apply to them if they were supplied electricity by AGL SA not under an Energy Plan; and
(c)and prior to the Mid-2013 Rate Increase, the energy usage charges for electricity supplied by AGL SA to Consumers were not and would not be calculated by reference to the same rates.
In substance, the ACCC alleges that AGL should have disclosed, apparently to both Category 3 and Category 5 Consumers, that the energy usage charges for Category 3 Consumers had been and would continue to be higher than the rates which would apply if they were not being supplied pursuant to an energy plan; that the rates for Category 5 Consumers had since 1 January 2013 been higher than the rates which would otherwise have been applicable to them if they had not agreed to an energy plan; and that both before and after the Mid-2013 Rate Increase, the energy usage charges for electricity supplied by AGL to residential consumers were not and would not be calculated by reference to the same rates.
AGL admits that, at the time of the Mid-2013 Rate Increase and when it sent the Mid‑2013 Rate Increase Letter to Category 3 and Category 5 Consumers, it knew the Mid‑2013 Rate Increase Information. It also admits that it did not explicitly disclose the Mid‑2013 Rate Increase Information to consumers.
Although the AFTS pleads that the Category 3 and Category 5 Consumers would reasonably have expected that the Mid-2013 Rate Increase Information would be disclosed to them, it did not particularise the basis for the reasonable expectation alleged. Nor, on my understanding, did the ACCC submissions identify such a basis.
The ACCC did not contend that AGL was under a duty to disclose the information which it omitted to disclose. It did not raise a case of misrepresentation by half-truths and did not show a basis upon which the Court could conclude that the Category 3 and Category 5 Consumers had a reasonable expectation of disclosure.
Some things are apparent. There is no basis for a conclusion that any Category 3 Consumer had an interest in being informed of (b) or that any Category 5 Consumer had an interest being informed of (a). Of the sub-class (i) and (ii) consumers, none in either Category 3 or Category 5 could have had a reasonable expectation of being informed of (c) and the information in (a) and (b) would have been of interest only to those in Categories 3 and 5 respectively. However, as indicated earlier, such an interest does not of itself give rise to a reasonable expectation that information will be disclosed.
It is pertinent to note again that the ACCC did not submit that AGL had not complied with the provisions in the regulatory regime requiring disclosure to consumers.
Given the nature of the representation made to the sub-class (iii) consumers, I am unable to identify any basis upon which they could have had a reasonable expectation that AGL would disclose any element of the Mid-2013 Rate Increase Information to them. My reasoning in relation to the alleged misrepresentation by reference to the Mid-2012 Rate Increase Letter applies with equal force in relation to the ACCC’s present claim.
As with the claimed contravention of s 29(1)(g) and (i), the claimed contravention of s 18 of the ACL by the Mid-2013 Rate Increase Letter fails.
This conclusion makes it unnecessary to consider AGL’s submissions concerning the effect of its advertising in January and February 2013 which accompanied the introduction of the 2013 SRC Rates and the deregulation of the electricity market which came into effect on 1 February 2013.
It is also unnecessary, at least in this stage of the trial, to determine the AGL submission that no consumer was “worse off” by being charged at the Category 3 and Category 5 Rates with the agreed discount instead of the SRC Rate without discount. It is sufficient to indicate that the evidence may not support that proposition in an absolute sense.
Conclusion
For the reasons stated above, I will make a declaration to the following effect. The respondent AGL (South Australia) Pty Ltd has, in trade or commerce:
(a)made a false or misleading representation that the supply of electricity to consumers by it would continue to have a benefit, in contravention of s 29(1)(g) of the Australian Consumer Law;
(b)made a false or misleading representation with respect to the price at which it would continue to supply electricity to consumers, in contravention of s 29(1)(i) of the Australian Consumer Law;
and
(c)engaged in conduct which was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18(1) of the Australian Consumer Law,
by representing to the consumers who entered into an energy plan with it in the period 1 January 2012 to 18 July 2012 in telephone conversations with Customer Service Representatives who were aware that AGL (South Australia) Pty Ltd could supply electricity to them other than pursuant to an energy plan that they would continue to receive a discount from their electricity usage charges calculated by reference to the rates which would otherwise have applied to them if they had not entered into the energy plan when that was not so, and by representing to the remaining consumers in this category that they would continue to receive a discount from their electricity charges calculated by reference to rates which it applied generally to consumers like themselves, when that was not so.
I will give the parties an opportunity to speak to the precise form of the declaration before it is made.
Otherwise the declarations of contraventions sought by the Australian Competition and Consumer Commission are refused.
I will hear from the parties as to the remaining relief sought by the ACCC.
I certify that the preceding three hundred and two (302) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White. Associate:
Dated: 15 December 2014
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