Australian Competition and Consumer Commission v Sensis Pty Ltd

Case •

[2002] FCA 1571

•

20 DECEMBER 2002

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Sensis Pty Ltd
[2002] FCA 1571

TRADE PRACTICES – misleading and deceptive conduct – whether Yellow Pages Connect represents it is providing accurate matches for the requests of consumers – whether Yellow Pages Connect is providing accurate matches for the requests of consumers

Trade Practices Act 1974 (Cth) ss 52(1), 53(c), 55A and 58

Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited (1982) 149 CLR 191 - cited
Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193 - cited
Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 - cited

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v SENSIS PTY LTD (formerly PACIFIC ACCESS PTY LTD (ACN 007 423 912))
V 1263 OF 2001

MERKEL J
20 DECEMBER 2002
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 1263 OF 2001

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

SENSIS PTY LTD
(formerly PACIFIC ACCESS PTY LTD (ACN 007 423 912))
RESPONDENT

JUDGE:

MERKEL J

DATE OF ORDER:

20 DECEMBER 2002

WHERE MADE:

MELBOURNE

THE COURT MAKES THE FOLLOWING DECLARATIONS AND ORDERS:

1.The Court declares that the respondent has engaged in misleading conduct, or conduct likely to mislead, in contravention of s 52(1) of the Trade Practices Act 1974 (Cth) (“the TPA”) in relation to “Out-of-Area” listings given in connection with its Yellow Pages Connect service.

2.Pursuant to s 80 of the TPA the Court orders that the respondent:

(a)amend its Yellow Pages Connect Complete Consumer Advisor Manual to incorporate an instruction to its operators, in respect of an unknown search request (as described in paragraph 96 of the Affidavit of Margaret Awrey sworn 8 November 2002), that when a caller requests goods or services in, or in relation to, a particular geographic area, the operator is to enquire whether the caller wants a business located in the area specified by the caller or whether the caller is content to be given a business that services or supplies goods (as the case may be) to that area; and

(b)take reasonable steps to ensure that its operators comply with the instruction set out in sub-paragraph (a).

3.The respondent pay 50 per cent of the applicant’s costs of and incidental to the proceeding.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 1263 OF 2001

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

SENSIS PTY LTD
(formerly PACIFIC ACCESS PTY LTD (ACN 007 423 912))
RESPONDENT

JUDGE:

MERKEL J

DATE:

20 DECEMBER 2002

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

  1. The applicant (“the ACCC”) has commenced a proceeding against the respondent (“Sensis”), which is a wholly owned subsidiary of Telstra Corporation Limited, claiming, inter alia, that Sensis has engaged in misleading and deceptive conduct in relation to its “Yellow Pages Connect” service.

  2. The purpose of Yellow Pages Connect is to assist consumers to locate products and services.  When a person calls the telephone number of the service, 12 451, an operator searches the Yellow Pages Connect database of business listings for businesses that respond to the caller’s search criteria.  As Sensis produces the Yellow Pages directories, its database contains the approximately 1.8 million listings in those directories and certain additional information about many of the listings that Sensis has inserted into the database for the purposes of the Yellow Pages Connect service and its predecessor, the Yellow Pages Direct service.

  3. The advertising of Yellow Pages Connect describes the service as a:

    “comprehensive, live, operator-assisted, business referral service that assists consumers in finding a supplier or service when they do not have a specific business in mind.  This dial-up directory and connection service allows the advertiser to be presented as a potential provider to customers who are on the move and looking for a more immediate answer to their purchase demands.”

  4. Consumers are informed that when they dial 12 451:

    “Consumer Advisers search on a combination of Business Type, Name, Heading, Location and Keywords to match a caller’s request”

  5. Consumers are also informed that the operator, who is called a consumer adviser:

    “will locate the product or service you need quickly and conveniently, and directly connect you upon request.”

  6. A fee of $1.21 applies to each call made to Yellow Pages Connect, in addition to the usual call charges that apply to any connection.  A typical advertisement for the Yellow Pages Connect service, which appeared in the 2001-2002 Sydney White Pages directory, is as follows:

    “The Yellow Pages® Connect service is a live, operator-assisted business referral service that helps you find the products and services you need quickly and easily.

    By calling 12 451* a Yellow Pages® Connect adviser can help you find the product or service you’re looking for and connect you directly to one of the three businesses provided.

    We’ll search using any combination of information.  Just give us a clue:

    Scenario…
    Is it a restaurant, plumber or florist?

    Location…
    Are they interstate, in the city or in Smith Street?

    Keyword…
    Do you want an Italian restaurant, 24 hour plumber or a florist who takes credit cards?

    Whatever you need, wherever you are, Yellow Pages® Connect consultants can help you find it immediately with just one phone call.”  [Emphasis added]

  7. Sensis’ internal documents disclose that:

    “Yellow Pages® Connect is targeted to:

    ·Mobile phone users

    ·Busy customers

    ·Consumers from non-English speaking backgrounds

    ·Tourists looking for information

    ·Sight impaired

    ·Those with a need to locate updated data on suppliers of goods and services nationally

    ·Where a print directory isn’t available”

  8. The Yellow Pages Connect database is organised into the following areas of information for each business listing:

    (a)       name of the business;

    (b)       state in which the business is located;

    (c)       the suburb in which the business is based;

    (d)       the street name and number in which the business is based;

    (e)       the “heading” for the business; and

    (f)        keywords.

  9. The businesses listed on the database are classified under “headings” based on the type of product supplied or services provided by the business.  Keywords are items of additional information relevant to a business which the business considers will be of significance to consumers.  Common keywords include “repairs”, “delivery”, the names of particular credit cards or brands and categories of cuisine.  For example, if a request is for a Chinese restaurant in South Yarra that accepts a Visa credit card, the request will contain two keywords “Chinese” and “Visa credit card”.  The database search in response to the request provides the businesses that match that request.

  10. Although the ACCC claims that Sensis engaged in misleading and deceptive conduct in relation to a number of different aspects of Yellow Pages Connect, ultimately it confined its case to two particular aspects.  The first related to “Out-of-Area” listings.  Such listings arise because Sensis offers priority advertising to advertisers for an extra fee, which enables them to advertise their goods or services outside of the areas in which they are located.  The priority given to priority advertisers can result in their business being the first business to be offered by the Sensis operator to a caller, even if it is outside the area requested by the caller and there is a business, which is not that of a priority advertiser, that provides the relevant goods or services from a location in the area requested by the caller.

  11. The problem concerning “Out-of-Area” listings was brought to the attention of the ACCC by Mr Paul Steinberg, who is the owner and operator of a hardware store called “Carlton Hardware and Handyman Centre”, which conducts its business at 142 Elgin Street, Carlton.  Mr Steinberg’s complaint to the ACCC was that if a priority advertiser conducted a retail hardware store business outside of Carlton, but was listed as servicing Carlton, the name of that advertiser would be the first name given in response to a caller’s request for a retail hardware store in Carlton, notwithstanding that the Yellow Pages Connect database listed the “Carlton Hardware and Handyman Centre” (which was not a priority advertiser) as a retail hardware store in Carlton.  In support of his claim that the Yellow Pages Connect service was misleading the public, Mr Steinberg gave the following account of a conversation he had with an operator after telephoning 12 451:

    “I said:  ‘I’d like a retail hardware store in Carlton, please.’

    The operator said:         ‘I have Equinox Hardware for you in Brunswick.’

    I said:‘Do you mean to tell me that there are no hardware stores in Carlton?’

    The operator said:         ‘Oh, yes we do have a listing for Carlton Hardware in Elgin Street.  Would you like that number?’

    I said:‘I’m sorry, but I asked for a hardware store in Carlton.  Why didn’t you give me the listing for that one in the first place?’

    The operator said:         ‘These people have a priority listing.’”

  12. The ACCC claims that, by giving the “Out-of-Area” listings of priority advertisers in response to requests for goods or services in a particular area, Yellow Pages Connect is misleading the public in contravention of ss 52(1), 53(c), 55A and 58 of the Trade Practices Act 1974 (Cth) (“the TPA”).

  13. Relevantly, those sections provide:

    “52(1)A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

    …

    53A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:

    …

    (c)represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have;

    …

    55AA corporation shall not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services.

    …

    58A corporation shall not, in trade or commerce, accept payment or other consideration for goods or services where, at the time of the acceptance:

    (a)the corporation intends:

    (i)        not to supply the goods or services; or

    (ii)       to supply goods or services materially different from the goods or services in respect of which the payment or other consideration is accepted; or

    (b)there are reasonable grounds, of which the corporation is aware or ought reasonably to be aware, for believing that the corporation will not be able to supply the goods or services within the period specified by the corporation or, if no period is specified, within a reasonable time.”

  14. The ACCC contends that the Court should order, pursuant to s 80 of the TPA, that Sensis amend its current instructions to its operators so that those instructions provide that where a geographic area has been specified by a caller, the operator should be required to ask the caller whether he or she is requesting a business that is located in the geographic area specified or is requesting a business that services that geographic area.  The ACCC contended that when that issue is drawn to the attention of callers they will be better able to ensure that their request is matched by Yellow Pages Connect.

  15. The second aspect of the Yellow Pages Connect service that the ACCC claims is misleading, relates to the manner in which Sensis has collated keywords for use in its database and then uses those keywords in responding to the requests of callers.  Keywords are a significant aspect of Yellow Pages Connect.  They enable a priority advertiser, which must provide at least three keywords, to be matched against a caller’s specific request.  The entitlement of priority advertisers to specify keywords provides them with a significant advantage over other businesses, whose names may not, in the usual course, appear on a search which includes keywords.

  16. There are approximately 7,700 priority advertisers which have provided a minimum of three keywords to Sensis to be included in the Yellow Pages Connect database.  When Sensis established its database in 1997 and later updated it in November 2000 when the current version of the Yellow Pages Connect service first commenced, it was necessary for it to ensure that the database contained sufficient information to meet the requests of callers, including keywords.  Thus, Sensis inserted some keywords used by advertisers in the Yellow Pages directories, provided those advertisers fell within one of the 65 most frequently searched headings at the time of the launch of the original service.  For example, if an advertiser had a heading name relating to ‘restaurants’, ‘pharmacies’, ‘newsagents’ or ‘handyman equipment hire, keywords were inserted for some of the businesses falling under those headings.  However, no keywords were inserted in respect of businesses falling outside of the top 65 categories, such as ‘towing services’ or ‘bakers’.  The keywords for advertisers falling within the 65 categories, who were not priority advertisers, were entered manually by Sensis into the database using part of the information that those businesses had chosen to publish in their paid advertisements in the Yellow Pages directories.  Further keywords of other advertisers have been added into the database since November 2000 but that appears to have been done on an ad hoc basis.  Consequently, the information in Sensis’ database in relation to keywords, reflects the information given by priority advertisers and the keywords inserted prior to and since November 2000 in the circumstances set out above.  Currently, in addition to the priority advertisers, there are about 121,000 non-priority advertisers with keywords attached to their listings on the database.  It was common ground that, as a result of the process described above, only about 7.15 per cent of the total business listings in Australia have had keywords inserted into the database and are therefore able to be the subject of a search using keywords.

  17. The ACCC claims that, in the Yellow Pages Connect advertising, Sensis represents to consumers that when they make a request using a keyword the response to that request will be that which will accurately or most accurately match the request. The ACCC claims that as only approximately 7.15 per cent of the businesses in Australia have keywords recorded in Sensis’ database, consumers are being misled in contravention of ss 52(1), 53(c), 55A and 58 of the TPA because 92.85 per cent of businesses, which may provide equal or better matches to a specific request using a keyword, have been excluded from being offered to consumers in response to a request, because those businesses do not have keywords entered in the database.

  18. The ACCC is seeking declaratory relief that the claimed misleading conduct contravenes ss 52(1), 53(c), 55A and 58 of the TPA and injunctions restraining Sensis, for a period of three years, from engaging in conduct of a similar kind. More specific injunctions are also sought under s 80 of the TPA in respect of “Out-of-Area” listings and keywords in the following terms:

    “7.      An order, pursuant to s.80 of the Act, requiring the respondent to amend its current Operator Script to include, and incorporate in any document or documents which it might introduce in the future to replace the current Operator Script, for so long as it remains true, to be stated where a geographic area has been specified by the consumer, in the case of an unknown search request, words to the following effect, namely:

    ‘Do you want a business located in [the geographic area specified by the consumer] or are you happy to include a business that services [that geographic area]?’

    8.        An order, pursuant to s.80 of the Act, that the respondent will include words to the following effect in all future long and short-form print and web advertisements of the service (including the Yellow and White Pages telephone directories), and all future radio and telephone advertisements, which are directed at consumers:

    ‘Our data base contains more information about some businesses than others.  Businesses can pay a fee to have additional information included in the data base and to be given out in preference to those who do not.’”

  19. The ACCC is also seeking orders that Sensis publish corrective advertising and implement and maintain a trade practices compliance program.

  20. In order to appreciate the issues arising in respect of “Out-of-Area” listings it is necessary to consider more carefully the circumstances in which an “Out-of Area” listing of a priority advertiser will be given in response to a request by a caller.  The benefits offered to a priority advertiser are set out in the “Yellow Pages® Connect Complete Consumer Advisor Manual” (“the Manual”), the stated purpose of which is to provide Yellow Pages Connect operators:

    “with the skills and knowledge to perform the role of Consumer Advisor within Yellow Pages® Connect”

  21. The Manual explains that advertisers can purchase a priority listing for more than one suburb provided that their business complies with advertising guidelines.  The Manual states:

    “A priority is only valid for the individual suburbs that an advertiser has purchased.  For example, a florist that is based in Box Hill and delivers to nearby suburbs might buy a priority listing in Box Hill, and might also purchase one in Balwyn, Burwood, Doncaster, Blackburn and Surrey Hills.  Consequently, when a caller requests a search in any of those suburbs the business will appear as a priority listing.

    The system works on a rotational basis.  When a listing is offered to a caller the computer registers a hit for that listing which is rotated to the bottom of the list, and the next listing moves to the top.  This ensures all listings are treated equally.

    It is important to note that paid listings only rotate within the paid listings category, thereby ensuring that paid listings will always appear above other listings.  Equally, advertisers with a non-paid [Yellow Pages Connect] listing will rotate within their category, thus always appearing at the bottom of the screen.  This ensures a fair service whereby paid advertisers are given due recognition.”

  22. The Manual provides an example of a basic search for a caller’s request for a “restaurant in Sydney”.  The request showed 308 listings, of which 30 were priority listings.  The 30 priority listings appeared ahead of the non-priority listings and were listed in order as priority listings on the basis of the rotational system described in the Manual.  The first priority listing appeared on the screen with its keyword information.  Thus, a caller who asks for a restaurant in Sydney would be given the first priority listing together with the relevant information concerning it and, if requested, a second and third priority listing.  After a listing is given the caller is asked whether he or she would like to be connected with the listing.  Non-priority listings are not given (unless the caller specifically requests otherwise) as long as there are any priority listings, and then only if the caller has not received the three numbers he or she is entitled to request.    Thus, a non-priority listing will not be given if three priority listing numbers have been provided to the caller, or if the conversation is terminated prior to reaching the non-priority listings, for example where there is a request to connect to a priority listing.

  1. The “Out-of-Area” listing issue is specifically addressed in the manual, which provides, as an example, a request for a medical practitioner in Box Hill.  The computer search response to that request listed an orthopaedic surgeon in Richmond who services the area of Box Hill as the first priority advertiser, Blackburn South Medical Centre in Blackburn South as the second priority advertiser and the Box Hill Clinic in Box Hill North as the third priority advertiser.  The fourth and subsequent listings, which were not priority advertisers, were medical practitioners in Box Hill.  In explaining the procedure to be followed by the operator the Manual stated:

    “‘P’ indicates the advertiser has paid for their listing on the [Yellow Pages Connect] database.

    If paid listings that are not based in the requested location appear at the top of the list they must be read out.  You may only remove these listings if the caller indicates clearly that they wish you to locate an advertiser physically based in the requested area.  Otherwise, listings must be read out from the top of the list to the bottom of the list.

    ‘   ’ indicates the advertiser has an advertisement in the directory (book) but is not a paid advertiser with [Yellow Pages Connect].
    …”

  2. In explaining the provision to a caller of up to three numbers per call, the Manual states:

    “It is important to always read business names out from the top of the list and in the order in which they appear.  It is also desirable to enquire each time as to whether the caller would like that number.”

    In the section headed “Verbiage” the Manual states:

    “1.      Greeting.
    ‘Yellow Pages Connect, how may I help you?’

    2.Closing.

    ‘Thankyou for calling.  Good bye.’ (Thanks, Bye also acceptable)

    3.Offer the Business.  Unknown Supplier

    Unless asked, you do not need to say how many businesses appear after a search.  Simply offer the first business on your screen and any subsequent businesses depending on the callers requirements:
    ‘I have…Can I connect you?’
    If the caller requires more than one listing, offer up to 3.  I have…Would you like that listing?
    At the end Which listing will I connect you to?

    …”

    In respect of the third listing the Manual states:

    “4.      3rd listing.
               Prior to reading out the details of the 3rd business inform the caller:
    ‘I can provide you with one more listing/address for this call.’”

  3. The problem that has arisen in respect of “Out-of-Area” listings is a consequence of the requirement that the operator may only remove an “Out-of-Area” listing “if the caller indicates clearly that they wish you to locate an advertiser physically based in the requested area”.  It is clear from the evidence that a request by a caller for a supplier of goods or services “in” a particular locality is not treated by Yellow Pages Connect as a clear indication that the caller wishes the operator to locate a business that is physically based in the requested area.  The source of the problem is in the Yellow Pages Connect Advertising Rules, which permit a priority advertiser to purchase advertising in areas outside of the area in which the advertiser is physically located.  The Advertising Rules provide:

    “The Advertiser may only purchase locations that they have a physical presence in, and/or where they are able to service.

    Fixed Businesses (where consumers travel to the business).
    An Advertiser may only purchase a priority listing in the suburb in which the business is located plus selected adjacent suburbs, as determined by Pacific Access.  Where a consumer may expect a delivery or mobile service, (eg. restaurants that have a home delivery service), then the fixed business may also purchase suburbs that they deliver to.

    Mobile Businesses
    Where the Advertiser travels to the consumer, (eg. plumbers), the Advertiser is only permitted to purchase those areas actually serviced.

    Location Independent Businesses
    Where the business location is not relevant because the business is carried out over the phone, electronically, or otherwise, the Advertiser may purchase any or all available locations, provided the advertisement does not imply that the business has a physical presence where it does not.”

  4. The requirement of a relevant connection for “Out-of-Area” listings is reasonable.  However, I do not accept Sensis’ contention that where a caller, for whatever reason, requests the provision of goods or services in a particular locality, it is an accurate response to such a request to provide that caller with a “match” by providing a supplier of the goods or services in another locality, in preference to a supplier of the goods or services situated in the locality requested by the caller.  Mr Steinberg’s request for a retail hardware store in Carlton affords a good example of the problem arising as a result of the operators engaged by Yellow Pages Connect being instructed not to accept a request for a supplier of goods or services in a location as, without more, constituting a clear indication that the caller is asking for a business physically located in the requested area.

  5. Another example of that problem was provided by Mr Pennell, a Project Officer with the ACCC.  His conversation with a Yellow Pages Connect operator concerning his request for florists in Moonee Ponds was as follows:

    “She said:      Yellow Pages Connect can I help you?

    I said:             I am after the number of florists in Moonee Ponds.

    She said:I have Interflora Melbourne which services Moonee Ponds.  Would you like the number?

    I said:Yes thanks.  What is the address of that business?

    She said:I don’t have the address, but the number is 1800 808 500.

    I said:Thanks, do you have another?

    She said:I have Momenta Magica in Clayton, I don’t have an address just the number, but it services the Moonee Ponds area, would you like that?

    I said:Yes thanks.

    She said:It is 9515 8735.

    I said:Do you have another?

    She said:This will be last one I can provide you with.  It is Roses Only in Melbourne, it also services the Moonee Ponds area.  The number is 1300 137 327.

    I said:As a matter of interest how is that when I asked for a florist in Moonee Ponds you provided me with details of three florists none of which are located in Moonee Ponds?

    She said:Those businesses have paid to be advertised in the area you asked for to get more patronage.

    I said:Are there any florists listed in Moonee Ponds?

    She said:Yes there are, but I can only give you three listings.  If you want more you will have to call back to get those details and ask for florists in Moonee Ponds.

    I said:But that is what I did ask for when I called.

    She said:I am sorry but when you asked for florists in Moonee Ponds we have to read out exactly what comes up on the screen first.

    I said:Okay.  Thanks.”

  6. Ms Awrey, a Customer Segment Manager employed by Sensis, gave evidence on behalf of Sensis.  She accepted that operators treat a business that services an area as synonymous with a business in the area.  When Ms Awrey was taken to the transcript of Mr Pennell’s conversation she stated that the response of the operator accorded with the instructions given to operators in the manual.

  7. In her affidavit Ms Awrey explained that where callers are offered an “Out-of-Area” priority advertiser they are informed of the geographical location of the priority advertiser and that either the priority advertiser services, delivers to or advertises in the locality specified by the caller.  She added that, in such circumstances, callers may decline to accept the “Out-of-Area” priority advertiser which is offered to them by an operator, in which event they will then be offered further businesses appearing from the search results.  In her affidavit Ms Awrey also pointed out that, if a caller “clearly indicates” that they want a business physically situated in a locality, the operator is instructed to remove any priority advertisers with an “Out-of-Area” listing from the search results and offer the caller a business that is physically situated in the particular locality they have specified.

  8. Notwithstanding Ms Awrey’s evidence, the problem is that a request for a provider of goods and services in a locality is not treated by Yellow Pages Connect as “clearly indicating” that the caller wants a business physically situated in that locality.  Consequently, the caller may be given an “Out-of-Area” listing of a priority advertiser, even if they ask for “a hardware store in Carlton”, thereby placing the burden on the caller not to accept that response and to persist in the request for a business physically located in the area.

  9. It can be accepted, as was pointed out by Ms Awrey, that the “Out-of-Area” listing problem only arises in respect of an “unknown” search request, and not in respect of “known” or “partial” search requests.  Ms Awrey explained the difference between such requests as follows:

    “96.     An unknown search request is where a consumer contacts Yellow Pages® Connect and does not know the particular business he or she is seeking.  An example of an unknown search request is where a consumer calls Yellow Pages® Connect and says to the operator:

    ‘I am after a restaurant in or around Hawthorn’.

    97.      A known search request is where a consumer calls Yellow Pages® Connect and knows the name of the business he or she is after and wants the telephone number for the business.  For example, such a search request occurs where a consumer says to the operator:

    ‘Are you able to tell me the telephone number for [name of business] in Burwood Road, Hawthorn?’

    98.      A partial search request occurs where a consumer who calls Yellow Pages® Connect is seeking a particular business but does not know, or cannot recall, its name, but the consumer provides the operator with information about the business which enables the business to be identified.  A partial search request is where a consumer says to an operator:

    ‘I want the number of the pub on the corner of Flinders Street and Swanston Street in the city.  I think it has ‘Young’ in the name.’

    99.      In relation to ‘unknown’ search requests, there may be a number of business which respond to the consumer’s Search Criteria.  In relation to both ‘known’ and ‘partial’ search requests, there is only one business which the consumer is seeking, and nothing turns on whether the business is a Priority Advertiser or a Non-Priority Advertiser.”

  10. Further, in the usual course a caller will only be given an “Out-of-Area” response that may not comply with the caller’s request if all of the following conditions are met:

    (a)       it is an unknown call;

    (b)the caller requests a business in the area but does not expressly require that the business be physically located in the area;

    (c)there is a priority advertiser;

    (d)if keywords are used, the priority advertiser has at least as many applicable keywords as a non-priority advertiser;

    (e)the priority advertiser is not physically located in, but is recorded as servicing, the area;

    (f)there is in fact a non-priority advertiser physically located in the area; and

    (g)the caller does not make  sufficient requests to be given a non-priority advertiser in the area.

  11. While “unknown” calls that satisfy the conditions set out above may not constitute a significant percentage of calls to Yellow Pages Connect and the ACCC has not adduced evidence of consumers being misled by the manner in which the service operates in respect of “Out-of-Area” listings, it does not follow that Sensis has not engaged in misleading conduct.

  12. A significant attraction of Yellow Pages Connect to priority advertisers is the priority given to them in response to calls in respect of all of the areas from which they have purchased advertising for their goods or services.  If priority advertising is to succeed, Yellow Pages Connect must ensure that the priority it gives will yield positive responses from callers in favour of the priority advertisers.  The manner in which that is achieved is to place the onus upon the caller not to accept the operator’s response where an “Out-of-Area” provider is supplied in respect of the goods or services the caller requests in a particular location.  If the caller does not persist in requesting a provider of goods and services in a particular location the caller’s request will have been “matched” by the provision of a provider of relevant goods or services in another location.  While it is accurate for Sensis to claim that operators inform the caller that the provider of the service is outside the requested location, the operator is instructed not to proffer any further information, such as that there are other providers in the requested area, unless specifically requested to provide that information.  It appears that Yellow Pages Connect has structured its service to encourage responses from operators in favour of priority advertisers as that is precisely the service for which those advertisers have paid.

  13. The ACCC claims that the manner in which Sensis has structured its Yellow Pages Connect service in respect of “Out-of-Area” listings is misleading because:

    ·Sensis has represented to the public that it will provide an accurate, or the most accurate, match to the search criteria specified by a caller; and

    ·Sensis does not provide an accurate, or the most accurate, match in respect of “Out-of-Area” listings where there is a priority advertiser.

  14. In my view the ACCC is correct in contending that Sensis represents to consumers that it will give an accurate, or the most accurate, match it is able to give to the search criteria specified by the caller.  While that is disputed by Sensis, the service it is offering to a consumer is that a caller who provides the key features of category and location and, where applicable, keywords, to Yellow Pages Connect, will be provided with a match for that search criteria.  It is implicit, if not explicit, that the match given will be an accurate match or, in the event that Sensis is not able to provide such a match, it will be the most accurate match which it can provide from its database.

  15. As explained above, in many instances the first match provided by the database in respect of an “Out-of-Area” priority advertiser is not an accurate match, nor is it the most accurate match, when there is a non-priority listing in the area.

  16. Senior counsel for Sensis contended that the ACCC’s case failed to take into account the conduct of Sensis’ operators and the likely course of a conversation that would occur between an operator and a reasonable caller when the caller is given an “Out-of-Area” listing.  It was contended that in the course of that conversation, if the physical location of the business was a matter of relevance, the caller could be expected to take reasonable care to act in his or her own interest, and request a business that is physically located in the requested area.  Reliance was place on the observations of Gibbs CJ in Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited (1982) 149 CLR 191 at 199, where his Honour observed that s 52 of the TPA requires that consideration be given to the class of consumers likely to be affected by the relevant conduct. His Honour observed that:

    “It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct.  Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion by regarded as contemplating the effect of the conduct on reasonable members of the class.  The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests.  What is reasonable will or [sic] course depend on all the circumstances.”

  17. Reliance was also placed on the observations of Gummow J in Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193 at 241 where his Honour observed:

    “It is, of course, fundamental that s 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests and also that it would be wrong to select particular words or acts which, although misleading in isolation, do not have that character when viewed in context: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; 42 ALR 1 (CLR at 199; ALR at 6-7).”

  18. In the joint judgment of the High Court in Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 at 87 their Honours stated that the initial question that must be determined is whether the misconceptions or deceptions, alleged to arise or to be likely to arise, are properly to be attributed to the ordinary or reasonable members of the relevant classes of prospective purchaser.

  19. In the present case the persons likely to be affected by the relevant conduct have been identified by Sensis in its internal documents as mobile phone users, busy customers, consumers from non-English speaking backgrounds, tourists looking for information, sight impaired callers, those with a need to locate updated data on suppliers of goods and services nationally and those who do not have a print directory available.  Although there may be some difficulty in determining the effect of the relevant conduct on the ordinary or reasonable members of each of those categories, I am satisfied that, when an ordinary or reasonable caller proffers a request giving category, location and keywords, the caller expects to receive an accurate, or the most accurate, response that Sensis is capable of giving from its database in response to that request.  I do not expect that a reasonable caller fails to take care to act in his or her own interest in assuming the response given is an accurate response, or the most accurate response, and would not be acting reasonably if he or she does not persist with the request until given a supplier physically located in the area.  Further callers, who pay $1.21 for the operator’s response, are entitled to assume it is accurate, rather than inaccurate.

  20. For the reasons set out above the Yellow Pages Connect Service has been structured to discourage persons from making further requests.  In that regard Ms Awrey’s evidence was to the effect that the efficiency and profitability of the service required that calls be short; that was said to be necessary both for costs reasons and for customer satisfaction.  Thus, it forms no part of Sensis’ objectives in respect of the service to encourage conversations for any period longer than the minimum it takes for the customer to accept the response given.  Customers are not encouraged or invited to persist in making a request until given an “In-the-Area” business.  Accordingly, contrary to its submissions to the Court, Sensis is not entitled to assume that the ordinary or reasonable caller will persist in his or her request for a business physically located in the area until that request is met.

  21. I have concluded that Sensis has in trade and commerce engaged in conduct that is misleading or is likely to be misleading in contravention of s 52(1) of the TPA in respect of “Out-of-Area” listings given in connection with its Yellow Pages Connect service. As that contravention is sufficient to found the relief I regard as appropriate, it is unnecessary to consider if Sensis has also contravened ss 53(c), 55A or 58 of the TPA. The ACCC accepted, correctly in my view, that the source of the problem lies in the operator’s script in the Manual and that that problem was easily corrected by an injunction requiring the script to be altered so that in the case of an unknown request words to the following effect appear in the script:

    “Do you want a business located in [the geographic area specified by the consumer] or are you happy to include a business that services [that geographic area]?”

  1. A number of factors militate against any relief, such as corrective advertising or a trade practices compliance program, being ordered in addition to a limited injunctive relief, namely:

    ·there is no evidence that the contravention occurs in a large number of cases nor is there evidence that consumers have suffered any loss as a consequence of it;

    ·the contravention has arisen because of a specific instruction in the Manual which has resulted in operators not treating a request for a supplier of goods and services in an area as a request for a supplier of goods and services in that area – an injunction can bring that practice to an end;

    ·save for the “Out-of-Area” listing problem, the evidence is that otherwise operators are encouraged by Sensis to give, and do give, honest and frank responses to the questions asked by callers; and

    ·the contravention of s 52(1) of the TPA has come about by reason of a misconception on the part of Sensis as to whether it is its obligation, or that of the caller, to ensure that a request for a business in an area is matched by the provision by Sensis of a business that is physically located in that area.

  2. In the circumstances set out above I do not regard the contravention as warranting any relief other than injunctive relief in respect of the Manual.  In particular, I do not regard orders for corrective advertising or for the implementation of a trade practices compliance program as necessary or appropriate.

  3. Finally, I turn to consider the ACCC’s case in respect of keywords.  The manner in which Sensis has developed its database has left it open to the complaint that when a caller makes a specific request Sensis may not be providing that caller with all of the matches, or all of the most accurate matches, that may be available to it from the data contained in the Yellow Pages directories.  However, I do not accept that Sensis has made a representation to callers that it will match their request with that information.  Rather, the representation is to the effect that it will match, or most accurately match, the request from the information it has compiled for the purposes of the Yellow Pages Connect service, that is, the information contained in its database.  I do not regard Sensis as representing to the public that it will provide all of the matches that might be available to it, from whatever source, in response to a request.

  4. It is also likely that Sensis is representing to the public that it has the capacity to match their requests.  However, save in respect of “Out-of-Area” listings, there is no evidence that callers are not receiving a match for their requests from the existing database.  Thus, there is no evidence that the database does not have the capacity to match the requests of callers or that the deficiencies which the ACCC alleges exist in the current database are resulting in the requests of callers not being matched in the manner represented by Sensis.

  5. Accordingly, I am not satisfied that the ACCC has discharged the onus on it to establish that Sensis has engaged in conduct that is misleading or deceptive or is likely to be misleading or deceptive in respect of the keywords. For the same reasons I am not satisfied that the ACCC has established that there is a breach of ss 53(c), 55A and 58 of the TPA in respect of the keywords.

  6. For the above reasons the ACCC is entitled to limited declaratory and injunctive relief in respect of “Out-of-Area” listings but is not otherwise entitled to the relief it seeks in the proceeding.  The relief that the ACCC has succeeded in obtaining falls a long way short of the relief it was initially seeking, and also falls short of the relief it was ultimately seeking at the hearing.  In my view the orders for costs ought to reflect the ACCC’s limited success.  Further, a great deal of evidence was directed to matters upon which the ACCC has not succeeded.  That matter also ought to be reflected in the order for costs.  In the circumstances it is my view that Sensis should pay 50 per cent of the ACCC’s costs of and incidental to the proceeding.

  7. Although the ACCC has not succeeded in respect of a number of aspects of its case there were two matters which are of concern, notwithstanding that the evidence in relation to those matters did not establish contraventions of the TPA. The first matter was that Sensis’ Advertising Rules do not require information to be provided as to whether an “Out-of-Area” listing for a priority advertiser might result in any additional costs to the consumer. The second matter relates to the aging of the database. Plainly, ad hoc updating of information in the database by Sensis will result in inaccurate information being provided to callers over time.  I expect that appropriate steps can be taken to ensure that both of these issues are addressed in a manner which will ensure that consumers are not misled as to the costs of an “Out-of-Area” business and that the information provided to callers will continue to be an accurate response to their requests.

I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel.

Associate:

Dated:             19 December 2002

Counsel for the Applicant: Mr D Shavin QC with
Ms EJ Hollingworth
Solicitor for the Applicant: Deacons
Counsel for the Respondent: Mr CM Maxwell QC with
Mr CC Macaulay
Solicitor for the Respondent: Mallesons Stephen Jaques
Date of Hearing: 2 and 3 December 2002
Date of Judgment: 20 December 2002
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