Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4)
[2011] FCA 761
•7 July 2011
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761
Citation: Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761 Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v SINGTEL OPTUS PTY LTD File number: NSD 1157 of 2010 Judge: PERRAM J Date of judgment: 7 July 2011 Catchwords: TRADE PRACTICES – Misleading and deceptive conduct – remedies – pecuniary penalty – principles relevant to imposition of a penalty – Trade Practices Act 1974 (Cth) s 76E
PRACTICE AND PROCEDURE – Suppression order – application under Federal Court of Australia Act 1976 (Cth) s 50 – principles relevant to making a suppression order – prejudice to the administration of justice – circumstances where s 50 order will be made
Legislation: Competition and Consumer Act 2010 (Cth)
Crimes Act 1914 (Cth) s4AA
Federal Court of Australia Act 1976 (Cth) s 50
Trade Practices Act 1974 (Cth) ss 52, 55A, 76, 76E, 87B
Trade Practices Amendment (Australian Consumer Law) Act (No.1) 2010 (Cth)Cases cited: Australian Broadcasting Commission v Parish (1980) 43 FLR 129 cited
Australian Competition and Consumer Commission v Boost Tel Pty Ltd [2010] FCA 701 cited
Australian Competition and Consumer Commission v Cement Australia (No.2) [2010] FCA 1082 cited
Australian Competition and Consumer Commission v Global One Mobile Entertainment Ltd [2011] FCA 393 cited
Australian Competition and Consumer Commission v Gourmet Goody’s Family Restaurant Pty Ltd [2010] FCA 1216 cited
Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] ATPR 42-070 cited
Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No.2) [2011] FCA 382 cited
Australian Competition and Consumer Commission v Roche Vitamins Australia Pty Ltd [2001] ATPR 41-809 cited
Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2011] FCA 87 cited
Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2010] FCA 1177 cited
Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No.2) [2010] FCA 1200 cited
AustralianCompetition and Consumer Commission v Singtel Optus Pty Ltd (No.3) (2010) 276 ALR 102 cited
Betfair v Racing New South Wales (No.5) [2009] FCA 1011 cited
Hogan v Australian Crime Commission (2009) 177 FCR 205 cited
Hogan v Australian Crime Commission (2010) 240 CLR 651 cited
Markarian v The Queen (2005) 228 CLR 357 cited
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 cited
Qantas Airways Limited v Rolls-Royce PLC [2010] FCA 1481 cited
Scott v Scott [1913] AC 417 cited
Telstra Corporation Limited v Cable and Wireless Optus Ltd [2001] FCA 1238 cited
Telstra Corporation Limited v Optus Communications Pty Ltd (1996) 36 IPR 515 cited
Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 cited
Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115 cited
Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326 cited
Wong v The Queen (2001) 207 CLR 584 cited
Yara Australia Pty Ltd v Burrup Holdings Limited (No.2) [2010] FCA 1304 citedDate of hearing: 8 December 2010 Date of last submissions: 16 June 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 97 Counsel for the Applicant: Mr N Williams SC with Mr D Tynan Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr S Finch SC with Ms D Bampton Solicitor for the Respondent: Minter Ellison
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1157 of 2010
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND: SINGTEL OPTUS PTY LTD
Respondent
JUDGE:
PERRAM J
DATE OF ORDER:
7 JULY 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The respondent pay to the Commonwealth a pecuniary penalty of $5.26 million.
2.Until further order Confidential Exhibits SCT-3, HJL-1, HJL-2, Exhibits 2 and 3, annexure A to the respondent’s submission on penalty and annexure B to the applicant’s submission on penalty not be published to any person apart from the parties to the litigation and their advisers.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1157 of 2010
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND: SINGTEL OPTUS PTY LTD
Respondent
JUDGE:
PERRAM J
DATE:
7 JULY 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
I. Introduction
This case concerns an advertising campaign launched by the respondent (‘Optus’) on Anzac Day 2010. The campaign was concerned with the sale of various broadband internet plans. It was a multimedia campaign containing elements in each of the print media, television and the internet. The plans were known as the ‘Think Bigger’ plans. They came in two varieties: two regular plans of 120GB and 150GB size; and, in the case of customers connected to Optus’ highspeed fibre optic cable network, three plans, two of the same size and also one of 170GB, sold under the name ‘Supersonic’. Despite those variations, the advertising for each of the plans had a common feature: each was advertised as consisting of a peak usage allowance and an off-peak usage allowance with those two allowances totalling, in sum, the size of the plan. Thus, to take an example, the 120GB Think Bigger plan was said to consist of a 50GB peak usage allowance together with a 70GB off-peak usage allowance. It was in that manner that the products were advertised. In fact, however, that was by no means an accurate description of any of the plans’ operations. Rather than providing two distinct usage allowances – one peak; one off-peak – available to customers to use in their respective entireties, the situation was altogether different: upon a customer exhausting all of his or her peak allowance the service would be throttled back to 64kbps and that languid speed would apply, not only, as one would expect, to the peak usage but, rather more surprisingly, to the off-peak usage and – more importantly – even if the off-peak allowance had not yet been exhausted. If it was the off-peak allowance which was exhausted further use would be deducted from the peak allowance and once it was reached the same would occur in that any further usage would be throttled back to 64kbps. Before this Court no certainty existed as to what a ‘broadband speed’ was but it was accepted that, regardless of where that line should be drawn, 64kbps was not such a speed. Each advertisement was accompanied by a small print explanation: ‘Speed limited once peak data exceeded’.
The Australian Competition and Consumer Commission (‘the Commission’) became interested in the campaign and, on 18 June 2010, wrote to Optus outlining its concerns which included the notion that the advertisements were misleading. A lively correspondence between the regulator and the company then ensued; modifications to some of the advertisements were made but the basic feature of the headline advertising of the existence of two distinct usage allowances with a fine print disclaimer persisted. On 6 September 2010, the Commission commenced proceedings in this Court to vindicate its contention that the advertisements were misleading and deceptive. Those proceedings were heard on 27 October 2010. Because one of the orders sought by the Commission included an order which, if made, would have required Optus to conduct, at its own expense, a corrective advertising campaign the hearing of the case was attended by some urgency. On 29 October 2010 I determined that the advertisements were misleading: Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2010] FCA 1177 (‘Optus No.1’). I rejected the proposition that the true position was adequately disclosed by the fine print disclaimer. On 2 November 2010, following further argument, I granted injunctive relief preventing Optus from persisting with that kind of advertisement for a period of 3 years: Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 2) [2010] FCA 1200 (‘Optus No.2’). Shortly thereafter, on 5 November 2010, I heard the Commission’s application for orders requiring Optus to run a series of corrective advertisements as a result of which, on 19 November 2010, I ordered Optus to write to all of the persons who had subscribed to the plans in particular terms, to place corrective signs in all Optus stores and to place a notice on its website. I declined an order that a corrective television commercial be run: AustralianCompetition and Consumer Commission v Singtel Optus Pty Ltd (No 3) (2010) 276 ALR 102 (‘Optus No.3’).
Prior to 2010, those orders would have marked the end of the litigation. However, following the passage of the Trade Practices Amendment (Australian Consumer Law) Act (No.1) 2010 (Cth) there was introduced into the former Trade Practices Act 1974 (Cth) (‘the Act’) a new s 76E which, for the first time, empowered this Court to order a person to pay to the Commonwealth such pecuniary penalty ‘in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate’ if the Court were satisfied that the person in question had contravened, relevantly, ‘a provision of Division 1… of Part V (other than section 52)’.
The form of the Act was heavily reworked on 1 January 2011 and renamed the Competition and Consumer Act 2010 (Cth). The transitional arrangements to that pointlessly renamed legislation ensure that the Act in its form prior to 1 January 2011 continues to apply to this litigation: see Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) [2011] FCA 382 at [5]-[6] (‘MSY Technology (No 2)’).
In Optus No.1 I concluded that the advertisements infringed not only s 52 of the Act but also s 55A which prohibits conduct ‘liable to mislead the public as to …. the quantity of any services’. Section 55A is contained in Division 1 of Part V so that the Court’s power to order a civil penalty under s 76E is enlivened in this case.
By s 76E(3), the maximum penalty for each act or omission is fixed, in the case of a contravention of Division 1 of Part V, at 10,000 penalty units for a corporation. Section 4AA of the Crimes Act 1914 (Cth) presently defines a penalty unit to be $110 so that in its operation s 76E(3) limits the maximum civil penalty payable for each act or omission to $1.1 million. That range of penalty is consistent with the Minister’s comments on the second reading of the Trade Practices Amendment (Australian Consumer Law) Bill (No.1) 2010 (Cth) that ‘[t]hese penalties will be serious’.
The Commission’s original application had claimed an order for the imposition of such a penalty. On 8 December 2010, I heard argument on that question and it is that issue which is addressed in these reasons. Additionally, a separate question arose as to the extent to which various financial information relating to the revenues generated by Optus through its promotion and sale of the plans should be the subject of a non-publication order.
The structure of these reasons is as follows: Section II surveys the factors relevant to the imposition of the penalty; Section III deals with the imposition of the penalty; Section IV addresses the issue of whether the evidence of Optus’ revenues should be suppressed; Section V specifies the appropriate relief.
II. Factors relevant to the imposition of a penalty under s 76E
The relevant facts appear in Optus No.1 and Optus No.3 which should be read as part of these reasons.
The full text of s 76E of the Act is set out in Appendix 1 to these reasons. Subject to one matter, the principles to be applied when imposing a penalty under it are clear. To begin with, the Court must take into account the three mandatory matters set out in s 76E(2), that is to say, it must consider:
(a)the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;
(b)the circumstances in which the act or omission took place; and
(c)whether the person has previously been found by the Court in proceedings under Part VC or this Part [VI] to have engaged in any similar conduct.
The requirements of s 76E(2) are, however, inclusive; other matters thought relevant may also be taken into account. Several decisions in this Court have confirmed that the principles relevant to the imposition of a civil penalty under the former s 76 (which dealt with the civil penalties to be imposed in the case of breaches of Part IV) are applicable in principle to s 76E: Australian Competition and Consumer Commission v Global One Mobile Entertainment Ltd [2011] FCA 393 at [110]-[112] per Bennett J; Australian Competition and Consumer Commission v Gourmet Goody’s Family Restaurant Pty Ltd [2010] FCA 1216 at [6] per Jagot J; and my own decision in MSY Technology (No.2) at [68]-[69]. Those principles, which derive from several decisions concerned with penalties in the context of Part IV, suggest that relevant non-mandatory factors under s 76E will include:
1.the size of the contravening company;
2.the deliberateness of the contravention and the period over which it extended;
3.whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;
4.whether the contravener has a corporate culture conducive to compliance with the Act (or the new Australian Competition and Consumer Law) as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention;
5.whether the contravener has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention;
6.whether the contravener has engaged in similar conduct in the past;
7.the financial position of the contravener;
8.whether the contravening conduct was systematic, deliberate or covert.
The case law about s 76 suggests that two further matters may be relevant to the imposition of a penalty: first, the effect of the contravening conduct on a functioning market together with any other economic effects of the contravening conduct; secondly, the degree of market power of the contravener as evidenced by its market share and the ease of entry into the market. There may be few circumstances where the latter concept has much bearing on questions arising under Part V but the possibility that might occur should not be excluded. It is also possible, for the reasons explained in Global One Mobile Entertainment and MSY Technology (No.2) that the effect on a functioning market could be of relevance although this may be limited in cases where the conduct is not likely to have had market-wide consequences.
I turn first, then, to the three mandatory factors under s 76E(2).
(i) The nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission: s 76E(2)(a)
In Optus No.3 I set out the details of the advertising campaign which, in Optus No.1, I had concluded was misleading and deceptive. It consisted of a co-ordinated foray into several media over a period, in total, of about five months. The television campaign consisted of three different commercials:
·the 120GB Broadband Think Bigger moose television commercial
·the 150GB Broadband Think Bigger moose television commercial
·the 120GB Broadband Think Bigger ostrich television commercial
The nature of the commercials is explained in detail in Optus No.1 at [32]. The two moose commercials were broadcast from 25 April 2010 to 14 June 2010; the ostrich commercial from 15 June 2010 to 8 September 2010. The advertisements were broadcast on free-to-air television between 6am and 6pm and on subscription television between 6am and 9.30pm. The evidence before me included the full advertising schedule for these commercials which was 196 pages in length and consisted of densely printed spreadsheet entries. Each page contained 79 entries, each of which was a timeslot for a particular programme, for example, one entry is for ‘9-9.30’, ‘Sons & Daughters’. There is a column which indicates how many ‘spots’ the particular commercial was to run in that time slot. For example, in the time slot just referred to the commercial was run just once. In some time slots the commercials were run more than once; for example, on Home Shopping between 2pm and 4pm it was run 4 times. Ignoring (in Optus’ favour) the fact that many entries include multiple spots for single time slots, it is apparent that the commercials were shown on more than 15,405 occasions (the product of 79 and 196). There was also placed in evidence before me, but subject to a confidentiality order, the total cost of the television broadcasting. I do not think that the publication of that figure in these reasons is necessary. The basic point has already been made: this was a high volume and substantial advertising campaign. It will suffice to say that it was also expensive.
The essential vice in these advertisements was the same: they suggested that a consumer would obtain a broadband usage allowance of 120GB or 150GB (depending on the particular plan) consisting of two usages allowances – one peak, one off-peak. In fact, however, this was only true if the consumer was careful to ensure that all of his or her off-peak allowance was exhausted before the peak allowance was fully utilised. Although the television commercials were not identical they did have in common a feature not shared by the commercials appearing in other media and this related to the disclaimer. In the case of these three commercials the disclaimer was, for reasons given in Optus No.1 at [32], essentially invisible. For that reason, I described those advertisements as ‘misleading…seriously so’: Optus No.1 at [33]. Given the breadth of the television campaign it is appropriate to note that it is likely that the advertisements were seen by a very large number of people. This was a significant television commercial directed towards a large target audience concerning a frequently purchased kind of product. In terms of the number of consumers reached the matter must be regarded as being towards the upper end of the spectrum. There are commercials with broader reaches but they are not common. In terms of the seriousness of the misleading conduct (as opposed to its deliberateness) I concluded in Optus No.1 that these commercials were seriously misleading. That is a view to which I continue to adhere.
I turn then to the print advertisement. These are described in Optus No.1, by reference at [34] to the flyers annexed therein. In their case the campaign was less reaching in its extent. An advertisement for the 150GB Think Bigger plan ran for 7 days over the period 27 April 2010 to 20 May 2010 in various Sydney papers; 6 days in Melbourne between 27 April 2010 and 19 May 2010; and one day in Brisbane and two days in Perth and Adelaide between 3 May 2010 and 7 June 2010. Unlike the television commercials where the disclaimer was in practical terms invisible, it can be said in favour of the newspaper advertisements that, for the attentive, the disclaimer was at least available to be read. It appeared in small print at the bottom of the page. It read: ‘Speed limited once peak data exceeded’. In Optus No.1 at [25] I said this (in relation to the flyer, which at [34] I found was not materially different to the print advertisement):
25.I accept that a careful reading of the small print disclaimer at the bottom of the page, “Speed limited once peak data exceeded”, and some meditation upon the full import of that statement would lead sophisticated persons to deduce that the 150GB was not the total of two distinct usage allowances but in fact a theoretical maximum which could be obtained only by using the 75GB off-peak allowance in full before exhausting the 75GB peak allowance. But that is not what an ordinary person reading it would have understood. To the contrary, the reference to reaching “peak data” is much more likely to have been understood, even by people reading with some care, as being about the consequences for the peak usage and as not being concerned with off-peak usage. Mr Finch SC, who appeared with Mr Darke and Ms Bampton for Optus, submitted that the consumer would not read the disclaimer that way because it would mean, on a moment’s reflection, that the off-peak allowance was not limited at all. The density of the previous sentence and the sheer number of intellectual balls which need to be kept in the air to understand it strongly tell against its correctness. Contrary to the submission, it would only be exceptionally gifted individuals who would grasp the full import of those words on first seeing them in the advertisement. Viewed in isolation at the moment of its delivery this advertisement plainly misleads consumers into thinking that they will receive 150GB of broadband when they are getting no such thing unless they assiduously ensure that they exhaust all of their off-peak usage allowance before exhausting their peak usage allowance.
In other words, the disclaimer was ineffective.
The difference between the television commercials and newspaper, then, was the difference between a commercial run for a long period and one for a short period; between a disclaimer which was invisible and a disclaimer which was ineffective but in respect of which gifted readers might still have stood a chance of understanding the true nature of the product.
In addition to the print commercials two flyers were also prepared. They were in colour and hence more noticeable than the monochrome newspaper advertisements. They are attached as annexure A and B to Optus No.1. The flyer for the Think Bigger 120GB ‘Super-fast broadband’ was inserted in Sydney metropolitan and regional newspapers on 8 days between 20 July 2010 and 18 August 2010; in Melbourne metropolitan and district newspapers for 7 days between 21 July 2010 and 19 August 2010; in Brisbane for 4 days between 21 July 2010 and 18 August 2010; in Perth on 27 July 2010 and 16 August 2010; and in Adelaide on 21 July 2010. The 150GB broadband flyer advertisement was also widely circulated. It was inserted in 33 district newspapers on individual days between 4 May 2010 and 29 June 2010. It was also inserted into major Sydney newspapers on 6 days between 12 May 2010 and 23 June 2010; in major Melbourne newspapers for 7 days between 11 May 2010 and 29 June 2010; in Adelaide on 9 June 2010 and 16 June 2010; in Brisbane on 12 June 2010; and in Perth on 11 May 2010.
In terms of width of distribution I propose to proceed on the basis that the flyer campaign was about equal in width of distribution to the print campaign. The advertisements in question are equally misleading: there was a technically correct disclaimer but it was too small and its meaning too subtle to be effective.
The Think Bigger campaign was also run on-line (in the form of the moose). It lasted from 25 April 2010 until 30 September 2010. In terms of its capacity to mislead it is to be placed on the same level as the print version of the advertisement; that is, it did not suffer from the more extensive vices of the television commercials. On the other hand, there are aspects of an internet advertisement of the present kind which may warrant heightened scrutiny. It is in the nature of on-line advertising that it is inherently available and, indeed, provided at the very moment a consumer is generally able to receive it for most internet users are giving the monitor their largely undivided attention. That aspect of internet advertising marks it out as being quite different in nature to a television commercial: such a commercial may be ignored under the weight of conversation between viewers; muted, until the advertisements have passed; disposed of altogether by changing channel; or, with the rise of simultaneous recording technology such as PVRS, at best, fast forwarded through (as with Foxtel’s IQ product) or, at worst, simply skipped altogether. Nor, like a newsprint commercial, does an internet advertisement suffer the indignity of having to compete to get the consumer’s attention. It appears, often enough, unsought and fills the screen. It is true, no doubt, that the consumer can usually dispose of the commercial at will by closing it but even that act is an act of guaranteed engagement. It is inherent in internet advertising that it is more targeted and more likely to be viewed. Further, because the relationship between a computer user and the internet is one of greater engagement such a commercial is not only more likely to be noticed but also much more likely to be watched. This effect will be particularly prominent where the advertisement is interactive, that is, requiring some input from the user.
There is a further effect. Here what was being advertised was the provision of broadband internet plans the principal place of purchase for which was likely to be Optus’ own website. The on-line commercial has to be seen therefore as not just an element in an overall multimedia campaign but as the ultimate conduit for that campaign. The internet commercial is to be seen in such cases, not only in its own right as perhaps an ordinary commercial might be seen, but as a form of communication very likely to be seen by a class of person whose appetites have already been whetted by another commercial. These matters tend, in my mind, to aggravate the seriousness of the Think Bigger internet commercial.
Different considerations apply to the Supersonic broadband internet commercial. The nature of these commercials was explained in Optus No.1 this way at [37]-[39]:
37The internet advertisements for the 120GB, 150GB and 170GB supersonic broadband packages raise slightly different issues. All three are relevantly the same. A user visiting the Optus website can select a tab headed “Broadband” which takes her through to a page on which, inter alia, a picture of a deer apparently breaking the speed barrier appears and with it the words “Supersonic Broadband” and “Up to 4 times faster”. Interested persons are invited to click on a button marked “Find out more”. When that button is clicked the user is taken to a new page on which appears a sophisticated animation. The scene is a forest and darting through the forest so fast that it can barely be seen is the elusive figure of a supersonic deer. After a few seconds the movie stops and a competition is suggested between standard broadband and supersonic broadband by the use of two sets of words which move quickly together to say “SUPERSONIC BROADBAND vs STANDARD BROADBAND”. The scene clears and then a split screen appears with two deers racing against each other. The deer representing the supersonic broadband gets faster and faster before finally taking flight passing through the sound barrier (with a concomitant shock wave) and disappearing from view. The standard broadband deer keeps running for a while before stopping with a spent expression on its face.
38Persons interested in acquiring the supersonic variety of broadband are then taken through to some further menu options. There they will see the screen shot which is annexure C to these reasons. The same point is repeated in relation to each of the plan signs. Later in the website precise details of the plans’ operation are given in small print.
39Again, the basic point is that the plans suggest that the consumer will receive 120GB (or whatever they have selected) in return for proffered payment. This is qualified by the words “Premium speed for Australian hosted content speed limited to 64kbps if peak data exceeded”. But the font of that disclaimer is about one quarter of the font in which “120GB” appears. The reference to “50GB peak + 70GB off peak” gives rise to the impression that the purchaser will obtain those two quotas. The disclaimer is inadequate to dispel that impression. I have given consideration to the fact that the experience of an internet user is such that he is more likely to be paying attention to the screen than would the casual observer of a television commercial or newspaper advertisement. However, I do not think this assists. The disclaimer’s misleading nature emerges principally from its capacity to suggest that the limitation applies to peak usage only and not so much from its size. Its inherently deceptive nature is unlikely to be expunged by repeated exposure to it. Indeed, in some senses its vice is likely to be augmented by repeated viewings. Nor do I accept that later repetition of the same point within the website could reverse the effect.
These advertisements were run for a shorter period of time from 2 August 2010 until 30 September 2010. The evidence before me did not suggest that they formed part of a larger multimedia campaign. For that reason their seriousness is to be seen as less than the Think Bigger internet commercial.
There was also a billboard campaign which consisted of 37 billboard commercials in NSW, Victoria, Queensland, South Australia and Western Australia between May and July 2010. These were in essentially the same form as the flyer with the moose except, obviously enough, much larger. In terms of its deceptive capacity they are to be approached in much the same way. The questions of reach and distribution give rise to difficulties. It is hard to be clear about their effect without knowing where the billboards were. A billboard on the side of the M2 is not the same as a billboard on the Nullarbor Plain. Relevant too is the fact that the relationship between a consumer and a billboard is not the same as the relationship between a consumer and a newspaper or computer. Billboards are not read in the same way as other media because generally the consumer will be moving whereas the billboard will be still. Passengers stranded on railway platforms are an exception to this. In any event, the deceptive capacity of the billboards needs to be seen in light of those effects.
The evidence before me did not permit such effects, however, readily to be gauged. Where the imposition of a civil penalty is sought, the Commission bears the onus of proving the circumstances of the advertisement and in the case of the billboards I do not think that has been done. I proceed on the basis that only minor harm is likely to have been caused.
On the question of loss or damage, the following should be said. There was no direct evidence before me of loss or damage suffered by consumers. The Commission submitted that the inability to quantify accurately the extent of loss or damage is not a mitigating factor in the imposition of a penalty citing Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115 and Australian Competition and Consumer Commission v Roche Vitamins Australia Pty Ltd [2001] ATPR 41-809. For reasons I gave in MSY Technology (No.2) at [77]-[80] I do not accept these cases stand for that proposition. To the contrary, where the conduct in question is conduct which, in the ordinary course of human affairs, might be expected to cause loss or damage to consumers then the absence of any evidence of loss or damage allows more readily to be drawn the conclusion that no loss or damage was, in fact, caused. The drawing of that conclusion is a factor which operates in mitigation. There will be cases – Roche was one – where the conduct would not be expected to cause loss or damage. In such cases the absence of any evidence of loss is neither surprising nor, in that circumstance, of any relevance. In the present context, it is important to distinguish the inability to prove loss or damage from the inability to quantify loss or damage: cf Global One Mobile Entertainment at [135] per Bennett J.
In this case, there is no doubt that a misleading advertisement would be expected to cause consumers loss and damage consisting, at least, of their purchase of a plan of 24 months duration which, but for the commercials, they might never have acquired. This is not, therefore, a case like Roche. There are difficulties in assessing the loss or damage ensuing from such a state of affairs but that, of course, is a different question.
The evidence before me disclosed that there had been only 3 complaints from members of the public either to Optus or the Telecommunications Industry Ombudsman. I do not think that this number should be accepted as the number of people who have been deceived for there will be a number of people who will be inclined stoically to accept the reduction in speed to 64kbps which occurs after the peak usage has been fully depleted as one of life’s misfortunes to be endured rather than about which to be complained; there may be others yet who have not encountered the difficulty because their usage has not been sufficiently substantial; others still may have encountered the problem only sporadically and may not have made the connexion between their usage and the problem and who see the matter as a network fault. There is evidence, however, which suggests that these various classes of customer are likely to be relatively modest. That evidence arises from the Commission’s partially successful application for corrective advertising. In Optus No.3 I made orders which required Optus to write to every person who had acquired one of the plans in question between 25 April 2010 and 31 December 2010. The letter which was sent explained the problem and offered every customer the opportunity to terminate his or her plan without penalty. In addition, Optus was ordered to place a pop-up on those parts of its website selling broadband plans which informed consumers of the existence of these proceedings, the difficulty with the advertisements and of the customers’ right to be released from the plans. A similar régime of signs was required to be placed in all Optus stores.
The use of the impugned advertisement ended on 30 September 2010 when it was finally removed from the website. There was, therefore, an extended period during which all existing customers, and customers who signed up within three months of 30 September 2010, have had an opportunity to be released from the plans. No evidence was led of the number of customers who took up the offer to be released from their contract; in any event the corrective advertising period did not conclude until after the penalty hearing was conducted.
The available inference from that material is that most people who might have suffered loss and damage are likely to have been released from the plans and that loss capped. There remains the possibility of some residual outliers: those who have suffered loss and damage who have not come into contact with any of the corrective measures for one reason or another; those who have been released from the plans but who have not had refunded to them the amount of their loss up to their release; those who do not care. However, I proceed on the basis that these classes are very modest or the amounts involved, from the customer’s perspective, small. Even in relation to the 3 complaints that were received it is appropriate to note that is not clear to me that two of them, in fact, relate to the present issue.
I conclude therefore that little loss or damage has been suffered by consumers on this occasion.
On the question of loss and damage the Commission also sought to rely upon the revenue which Optus had earned and would, in the future, earn from the Think Bigger and Supersonic campaigns (particularly given the two year length of the plans). In this case, however, I do not see that Optus’ revenues are a useful proxy for the loss and damage suffered. By reason of the matters to which I have just made reference, the most likely inference is that very few of those who remain contracted to Optus under these plans are suffering, or have suffered, loss or damage. Although there might be some kind of relationship between the revenues made by Optus in the period between 25 April 2010 and 30 September 2010 and the losses suffered in that period (because the class of consumers would still at that point include those who had suffered loss and damage) the nature of that relationship is too obscure to make useful the kind of approach the Commission suggests.
(ii) The circumstances in which the act or omission took place: s 76E(2)(b)
The Commission submitted that two matters were relevant under this provision. First, on 14 September 2009 Optus had given the Commission an enforceable undertaking pursuant to s 87B of the Act under which it had agreed to desist from the practice of headline advertising, that is, from using advertisements in which the effect of a prominent headline was displaced by smaller disclaimer; its present conduct was, therefore, to be seen in a more serious light. Secondly, so it was said, it was relevant to take into account the fact that Optus had not desisted from the advertisements until after the commencement of the present proceedings.
As to the enforceable undertaking, the following might usefully be observed. The undertaking was proffered jointly by Optus, Telstra Corporation Ltd and Vodafone Hutchinson Australia Pty Ltd and was dated 14 September 2009. By paragraph [31(a)] of that undertaking Optus had undertaken immediately to desist from creating new advertising that used headline representations as to price or offer in circumstances where the overall impression of the price or offer was subsequently qualified by fine print terms and conditions that made it unlikely or impossible that a consumer, by ordinary use of the service, could reasonably achieve the benefits offered by the headline representation.
The effect of such an undertaking under s 87B is to create an administrative regime parallel to, but not identical with, the orders resulting from court proceedings. It is a voluntary procedure (s 87B(1)) although once put in place it may only be withdrawn with the Commission’s consent (s 87B(2)). Its principal feature is that once in place it may be enforced by the Court (s 87B(4)).
The undertaking did not occur in a vacuum but resulted instead from discussions between Optus and the Commission. Those discussions included a meeting which took place between officers of the Commission (including a Ms Court, one of its members) and senior Optus representatives consisting of members of Optus’ internal legal counsel. The meeting occurred on 26 August 2009 at the Commission’s Sydney offices. At the meeting Ms Court gave a Powerpoint presentation entitled ‘Truth in Advertising’. It consisted of a number of slides including many dealing with the use of fine print disclaimers. Like the terms of the undertaking, its message was quite clear. Further, the target audience at the Powerpoint presentation was Optus’ own in-house lawyers (I return to their role below). The present point to be emphasised is the centrality of the legal department.
Optus sought to deflect the significance of the undertaking: it was evidence of Optus’ commitment to its compliance programmes; it was a positive factor not a negative; it had been given voluntarily and should not be used against it. Optus furnished evidence of its attempts to co-operate with the Commission and of its commitment to compliance with the requirements of the law. Further, it was not alleged by the Commission that Optus had breached the undertaking, a serious matter were it to be alleged. If a case based on a breach of the undertaking were to be advanced it would, of course, need to be properly particularised.
These submissions are unpersuasive. The advertisements in question are plainly examples of the very thing the undertaking was directed at and, it might be added, the very thing explained to Optus’ in-house lawyers in person beforehand. These are facts which signal failure to take seriously the problem at hand. I return below to the question of whether that failure is to lie at the feet of the lawyers themselves or at the feet of those responsible for ensuring that the lawyers were properly resourced. For present purposes it suffices to say that, whatever the exact cause, the failure was significant. Nor do I accept that it is impermissible to have regard to the undertaking. Normative constraints on Optus’ conduct may come from a variety of sources both judicial and administrative. The fact that an undertaking is in form voluntary is not to the point. Paragraph [27] of the undertaking recorded the Commission’s view that Optus had previously engaged in the practice of using headline advertising. Optus recognised at paragraph [29] that the Commission considered that Optus had engaged in the practice from time to time and that ‘advertising standards in the telecommunications industry should be improved’. That formed the background to paragraph [30]:
In recognition of their position as market leaders in the telecommunications industry in Australia, and in order to set a new industry benchmark for ‘truth in advertising’ going forward, each of Telstra, Optus and VHA provide this undertaking to the [Commission].
The Commission could have chosen to commence proceedings in relation to the conduct referred to in the undertaking. I draw the conclusion, however, that it opted to seek to educate the leading players in the telecommunications industry about the risks associated with headline advertising and took the route of accepting an enforceable undertaking from them. It seems to me that those matters – including Optus’ publicly professed desire to improve standards in the industry – are relevant matters in the process of assessing an appropriate penalty for departure from those self same standards. What is involved is hypocrisy: the saying of one thing; the doing of another.
The Commission also submitted that Optus did not desist from the advertisements until well after its proceedings had been commenced. The facts are, however, a little more complicated. The Commission wrote to one of Optus’ in-house counsel, Mr Derber, on 18 June 2010 setting out its concerns regarding the Think Bigger advertisements. The proceedings were then commenced on 6 September 2010. In summary, as outlined above, by the time the letter was written to Mr Derber, the Moose television commercials had ceased running; having done so on 14 June 2010 (4 days before the letter). However, these were just as quickly replaced by the ostrich television commercial which ran from 15 June 2010 to 8 September 2010. The advertisements in newspapers had finished by the time of the letter. There were, however, flyer inserts which occurred after 18 June 2010.
Evidence was given by Optus’ Channel Marketing Manager that the 120GB Think Bigger flyer was inserted into a large number of metropolitan and regional newspapers after 18 June 2010 including the Daily Telegraph, the Melbourne Herald Sun, the Melbourne Age, the Adelaide Advertiser, the Brisbane Courier Mail, the Perth West Australian, the Sydney Morning Herald, the Australian and a number of regional or metropolitan newspapers. This appears finally to have ceased on about 19 August 2010. The 150GB flyers appeared on a few occasions after 18 June 2010 but not in as extensive a fashion.
It is fair to say, in those circumstances, that the Commission’s letter did not cause Optus to stop the campaign. The Commission commenced proceedings on 6 September 2010. This appears to have brought most, but not all, of the campaign to a halt. A letter box drop for the Think Bigger flyers proceeded on 12 September 2010 in Melbourne, Brisbane, Adelaide and Perth and a final letter box drop occurred in Melbourne on 19 September 2010. A letter box drop planned for 14 September 2010 for the Supersonic packages was cancelled. The internet pages remained in place until 30 September 2010. The billboards (with one exception which was not Optus’ responsibility) were all down by the end of July.
Those steps took place against a backdrop which included reasonably extensive correspondence between the Commission and Optus. In a letter of 25 June 2010 Optus indicated it was going to move the disclaimer closer to the words ‘75GB peak 75GB off-peak’ but did not indicate what this would ultimately look like. On 29 June 2010 it provided the Commission with its proposal. On 19 July 2010 the Commission raised concerns about the television commercials as a result of which Optus, on 23 July 2010, provided copies of those advertisements. Several weeks later on 16 August 2010 the Commission requested the broadcast schedule which was provided on 23 August 2010 along with further schedule information, which had also been requested by the Commission, for other media. Additional documents and material was provided by Optus on 27 August 2010. What occurred between then and 6 September 2010 is unclear. There is reference in the email correspondence to a meeting taking place on Thursday 2 September 2010 between senior staff at the Commission and Optus but more than that one cannot say. I do not discern in the correspondence a request by the Commission that Optus should cease from the campaign but rather only requests for information and the indication of concerns. Largely, Optus appears to have done what was asked of it. On the other hand, the internet pages were ultimately only taken down by 1 October 2010. My first judgement in Optus No 1 was given on 29 October 2010. In that decision I concluded that two of the Commission’s concerns were not substantiated. Optus’ resistance of the Commission’s proceedings was, in that circumstance, by no means unsuccessful or unwarranted. In those circumstances, the proper characterisation of Optus’ relationship with the Commission after 18 June 2010 is that it was appropriately co-operative. It is also to be noted that Optus was largely co-operative on the issue of corrective advertising.
(iii) Whether the person has been found by the Court in proceedings under Part VC or Part VI to have engaged in any similar conduct: s 76E(2)(c)
The Commission points to prior decisions of this Court to prove that Optus has been found previously to have engaged in misleading or deceptive conduct in proceedings under Part VI. These are:
Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326
Australian Competition and Consumer Commission v Boost Tel Pty Ltd [2010] FCA 701
Telstra Corporation Limited v Optus Communications Pty Ltd (1996) 36 IPR 515
Telstra Corporation Limited v Cable and Wireless Optus Ltd [2001] FCA 1238
Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2011] FCA 87That which is required to be taken into account under s 76E(2)(c) is: (i) the existence of a proceeding; (ii) being a proceeding under Part VC or Part VI; (iii) in which ‘the Court’ has found the person to have engaged ‘in any similar conduct’; (iv) which is a previous proceeding.
In Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326, Optus had advertised mobile telephone plans in which weekend local calls were represented as being free up to a limit of $52 per month. The representation was contained in a television commercial and newspaper and radio advertising. In fact, calls made from a mobile to other mobiles were not free. Tamberlin J rejected the argument that the word ‘free’ would be understood as not applying to mobile calls and held the fine print disclaimers inadequate (at 338). His Honour concluded that s 52 and s 53(c) had been breached and granted relief under Part VI. In my view, the conduct in question in that case was similar conduct within the meaning of s 76E(2)(c) and I am therefore required to take it into account.
Australian Competition and Consumer Commission v Boost Tel Pty Ltd [2010] FCA 701 concerned the Commission’s claims against an unrelated entity, Boost Tel, arising from an advertisement concerned with a pre-paid phone card. The second respondent, Prepaid Services Pty Ltd, was a wholly owned subsidiary of Optus. The reasons for judgment of Siopis J do not deal with the position of Prepaid Services Pty Ltd instead only resolving the questions relating to Boost Tel. This appears to be because the Commission and Prepaid Services Pty Ltd had reached substantial agreement on the orders to be made. I cannot discern from the decision the nature of Prepaid Services Pty Ltd’s conduct nor do I know the orders which were eventually made in respect of it. Section 76E(2)(c) makes mandatory prior findings about ‘the person’ which, in this case, is Optus. Prepaid Services Pty Ltd is not Optus even if it is a wholly owned subsidiary. I do not accept, therefore, that this decision is a mandatory consideration. Despite that, it would nevertheless be appropriate to take into account the conduct of wholly owned subsidiaries where there is nothing to suggest that the subsidiary is carrying on business as a stand alone entity. This is not to take into account the mandatory consideration in s 76E(2)(c) but merely a factor neither required nor forbidden by the provision. Taking that course, however, it is difficult to identify anything useful about this decision. Too little is known to draw any adverse conclusions.
Telstra Corporation Limited v Optus Communications Pty Ltd (1996) 36 IPR 515 was concerned with a successful application by Telstra for an interlocutory injunction in respect of two of Optus’ television commercials. Although Merkel J indicated the advertisement might be misleading, the decision contains no finding of a breach of Part V. As a case for interlocutory relief, no prior finding was made in relation to Optus. As such this case is not a mandatory consideration under s 76E(2). Nor is it a matter, given its interlocutory nature, that is otherwise relevant.
In Telstra Corporation Limited v Cable and Wireless Optus Ltd [2001] FCA 1238 Telstra sought to restrain Cable and Wireless Optus Ltd, Optus Networks Pty Ltd and Optus Mobile Pty Ltd from persisting with advertisements about the size of Optus’ networks on an interlocutory basis. The decision contains no finding of a contravention of Part V or other ‘similar conduct’ and has no relevance.
Lastly, the Commission relied upon the orders made by North J on 26 October 2010 in other proceedings brought by it against Optus. In question were commercials using the expressions ‘unlimited calls’ and ‘unlimited SMS’ in a number of distinct advertisements. By consent their use was declared misleading and their further use restrained by injunction. On 11 February 2011, in the same proceeding, North J determined that the use of the expression ‘unlimited broadband’ in one of those same commercials was misleading: Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2011] FCA 87. Both of these involve similar matters to the present proceedings. Given their contemporaneity they are to be seen as substantial exacerbations.
It follows that s 76E(2)(c) requires me to take into account Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326, the conduct identified in the orders of 26 October 2010 and the conduct identified in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2011] FCA 87. Of the first, Optus submitted that it was so old as to be of little relevance. I do not accept, in the context of a corporation which is likely to have a long corporate memory, that it is entirely irrelevant; but its relevance is certainly very much to the lower end. Insofar as the more recent case is concerned its facts point to very similar conduct to that with which we are presently concerned. It is relevant largely to assist in gauging whether what occurred in this case was an isolated aberration or a systemic failure.
I turn then to the non-mandatory considerations.
(iv) The size of the contravener
The Commission submitted, and I accept, that Optus is one of the country’s largest telecommunications companies. Many of the consequences of the size of Optus impact on discretionary matters already considered, for example, the extent of the campaign. Large companies tend to run large campaigns. But Optus’ size is also an indicator of its status as a market leader and this is a matter bearing upon general deterrence.
(v) The deliberateness of the conduct and the period over which it extended
There is no direct evidence of the manner in which the commercials were created. I neither know, therefore, who came up with the idea of advertising a peak and off-peak component nor who decided to use the disclaimers in the manner in which they were ultimately deployed. Thus, in one sense, it will never be known whether the person who conceived the campaign designed it with the deliberate intention of deceiving the public. In the absence of evidence on the issue, I conclude that it is not shown that the advertisements were deliberately false; that is, I do not find that a fraud was being attempted. Indeed, I did not apprehend the contrary to be submitted. The real question, however, turns on the circumstances which permitted the advertisements to find their way into the public domain at all. In that context, what is known is that Optus intended all of its advertisements to be screened by its legal department and that this was, in fact, done.
Optus placed before me evidence of its compliance programme which applied in 2009/2010. Under that programme, all of Optus’ permanent employees and contractors were required between 1 July and 30 June to undertake an on-line training programme dealing with each employee’s obligations under the Act. This programme was administered by the Human Resources Department. It consisted of two modules: one relating to anti-competitive conduct; the other to consumer protection. The modules concluded with a computer administered test. Each employee sitting the module was required to pass the test and, in the event of failure, was required to continue sitting the test until it was passed.
The consumer protection module consisted of basic principles of consumer protection law under the Act. I will not set it out given its extensive nature. It suffices to note that employees were warned about misleading and deceptive conduct and the perils posed by the use of words such as ‘unlimited’ and ‘free’. Real examples were given. Despite its extensive nature the module did not, however, refer to the difficulties inherent in headline advertising and employees were not required through the means of this programme to be familiar with it or its pitfalls.
This last aspect is important because part of Optus’ undertaking to the Commission was to review its compliance programme ‘to ensure that appropriate procedures and systems are in place to address the specified advertising practices’. This does not appear to have been done. No system was in place to ensure that employees and contractors were trained about headline advertising. The systems which were in place were not updated to include components dealing with headline advertising notwithstanding Optus’ undertaking to the Commission that they would be. Optus submitted, however, that this was wrong, and that information about headline advertising was available to employees. It is true that there was available on the legal section of Optus’ staff intranet a document entitled ‘Tips and Pitfalls for ad copy – November 2009’ and that this set out, in some detail, the problems of headline advertising; indeed, it even referred to the undertaking given only two months before.
The difficulty with this document – possibly adequate in its own terms – is that staff and contractors were not required to be aware of it and it did not form part of its compliance programme. Staff were not educated about it and they were not tested on it. It was available but knowledge of its contents was not mandatory. Had it formed part of the balance of the consumer protection module of the compliance programme this would not have been an issue. But the short fact is that it did not. I was not taken to anything which indicated that employees of Optus were required to visit the legal section of the intranet nor was there any evidence to suggest that it was their practice to do so. The absence of such a practice would not be difficult to understand.
The appropriate conclusion, therefore, is that an adequate compliance programme in relation to headline advertising was not in place. The ‘Tips and Pitfalls’ document available on the intranet was not a compliance programme. These matters are, of course, ones of substance and are not to be resolved by mere labels. But the highest Optus’ evidence about this rose was that the document was ‘available’ and this, I think, will not do.
There being no fixed programme designed to catch headline advertising it is unsurprising that the present campaign occurred. No education had been required of staff to prevent it occurring. I infer this occurred in contravention of the undertaking to update the compliance programme to deal with headline advertising.
That, however, is only half the picture. The compliance programme which did exist very clearly required all advertising copy to be cleared by Optus’ legal department. The evidence suggests, and I accept, that this aspect of the compliance programme was effective in the sense that the advertising in question was sent to the legal department for vetting. Ms Perez, one of Optus’ corporate counsel, explained in evidence what happened once advertising copy arrived in the department. There were two steps:
(a)a lawyer would review the material within 48 hours, subject to length and volume;
(b)the material would be signed off or remitted back to the relevant business unit.
In the case of this campaign, it was Mr Derber who reviewed the television, print, billboard and flyer advertisements for the Think Bigger plans. The on-line material for both the Think Bigger and Supersonic plans was vetted by a lawyer seconded to Optus, Ms Booth. Mr Derber swore an affidavit but was not cross-examined. I do not know, therefore, how his knowledge of the undertaking or the ‘Tips and Pitfalls’ documents intersected with these commercials. I do not know anything about his reasoning process in vetting the advertisement. Ms Booth was not called at all and similar difficulties arise. The Commission, however, did not submit that I should draw any inferences from the failure of Optus to lead evidence about these matters and I do not.
Rather, the Commission pointed to the evidence of Ms Perez as throwing light on the real problem. Her evidence was that Optus had five lawyers whose principal duties were to vet such material. She also gave evidence that this team reviewed 450 to 700 different advertisements each month. To that I would add that vetting was expected to be done within 48 hours. In the year running between October 2009 to September 2010 this team of five reviewed 7,421 advertisements or, on average, 1,484 advertisements per lawyer which is 28 per week (provided that they worked 52 weeks) or just under six per day.
The Commission submitted that it was here that the problem lay; that the evidence showed that Optus did not allocate sufficient resources to the vetting process and that systemic failures were therefore inevitable. Optus submitted, on the other hand, that the rarity of breaches found by the Courts showed the absence of a problem. I do not agree with this last submission. In a short space of time there have been two headline advertising breaches by Optus: those in this case and those in the proceedings before North J; the undertaking prepared in consultation with Optus’ own in-house lawyers appears to have been overlooked by those self same lawyers. Further, it was not just one lawyer who vetted the advertisements in this instance; it was both Mr Derber and Ms Booth. That fact reduces the plausibility of the notion that what occurred was a mere aberration.
I draw the inference that the Commission suggests should be drawn: that Optus does not, despite its protestations to the contrary, take this issue sufficiently seriously to put proper resources into its resolution. I do not, therefore, regard this as a case of a ‘wrong call’ as Optus submitted but rather as the inevitable consequence of failing to implement the undertaking.
In that regard, nothing was placed before this Court to throw light on the vetting procedure. One obvious question about this arises: how did both of the lawyers responsible for the materials’ vetting overlook the enforceable undertaking given to the Commission? Optus made oral submissions to the effect that there was in this case an error of judgment in vetting the advertisements, about which reasonable minds can and do differ. I do not accept this submission. Because these advertisements are obvious examples of the practice, the only explanation which makes any sense is that Mr Derber and Ms Booth were unaware of the undertaking. This is consistent with what appears to have happened in the proceedings before North J where again one can only ask how lawyers aware of the undertaking could have authorised the ‘unlimited’ advertisements there in suit. This suggests, and I find, that those responsible for the implementation of the enforceable undertaking not only failed to ensure that the compliance programmes were updated but, more significantly, that there was a lack of basic understanding of the undertaking within the legal department. It bespeaks on Optus’ part a failure to take compliance seriously. While this does not necessarily show the conduct was deliberate, it discloses an approach to the Act on Optus’ part which requires condign sanction.
(vi) Whether the contravention occurred at a senior level
Whilst senior management have their part to play in this matter it is clear that the contraventions themselves did not arise at that level but at the point where the advertisements were composed and vetted. That senior management bears the ultimate responsibility for the structural deficiencies to which I have referred does not alter that analysis.
(vii) Whether the company has a corporate culture conducive to compliance with the Act as evidenced by educational programmes and disciplinary and other corrective measures in response to an acknowledged contravention.
I have dealt with this above.
(viii) Whether Optus has co-operated with the Commission
I have already reached the conclusion that Optus did do all the things which were asked of it by the Commission prior the commencement of the proceedings. Further, it is to be kept in mind, as I have already said, that Optus was successful in its defence of some of the Commission’s allegations. In Optus No.1, I rejected the Commission’s case that there was insufficient explanation that 64kbps was not a broadband speed or of the nature of a throttling speed. Optus’ defence of the initial proceedings was therefore understandable and, to an extent, successful. Further, Optus was successful in Optus No.3 in arguing against the imposition of a régime of corrective television advertisements. Viewed as a whole, I regard this factor as neutral.
(ix) The financial position of the Respondent
Optus’ annual report for the financial year ended 31 March 2010 indicated revenues of approximately $8949 million which included revenue of $3388 million for its fixed division. For the half year ended 20 September 2010 Optus’ operating revenues were $4578 million. Optus submitted that this was of little assistance and, at least in this case, I agree. What is important to know is the benefit that Optus has derived from the campaign. This is not because those profits are somehow to be seen as being linked necessarily to the impugned conduct; to the contrary, there may often be little to allow such a simplistic connexion to be drawn. But knowing the full profit would provide a background to an assessment of the issues which arise when the question of deterrence comes to be addressed; when the necessity of ensuring that the civil penalty imposed is not merely to be seen as a cost of doing business arises.
The evidence before me was the subject of confidentiality orders. I deal below with whether those orders should be maintained and conclude that they should be. It will suffice in these reasons to say that a very large number of customers signed up to these plans; that the revenues which have been made and those that will be made by reason of them are very substantial; and that the profits in question are connected in a non-trivial way with the advertising campaign.
(x) The degree of market power the contravening company has
There was no evidence as to this matter. In any event, whilst I would not foreclose the relevance of this factor in a claim based upon a breach of Part V, I do not think that it would be apposite in this case.
III. The appropriate penalty
How should the above factors be approached in the formulation of a penalty or penalties? One begins of course, with the obvious: the purpose of a penalty is deterrence; deterrence of the contravener, no doubt, but deterrence also of those on-lookers who might, but for the penalty inflicted on the contravener, be tempted to engage in the same behaviour themselves. In the realm of financial penalties for economic wrongs this latter aspect of the punishment is especially important. The principal purpose of a financial penalty in this context is, as French J has observed, ‘to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act’: Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 at 52,152. I regard this as an important matter and take comfort from the Full Court’s explanation in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 that the ‘Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay, and detection lead merely to a compliance program for the future’ at 294-295 per Burchett and Kiefel JJ.
The maximum penalty for any single contravention, as discussed above, is $1.1 million which will mark the appropriate penalty for the most serious of contraventions. This immediately then raises the question of just how many separate contravening acts the present case presents. The Commission submitted that there were 11, one for each advertisement. Although Optus agreed 11 contraventions were found, it submitted that the vice in each advertisement was the same and that, in substance, there was but a single contravention.
I do not think the vice in each advertisement was the same. The deceptions were not identical and the breadth of exposure for each advertisement differed. The television commercials were, in terms of deception, much worse than the other elements in the campaign. The flyers and newspaper advertisements were less, although still, serious. The billboard even less so. On the other hand, the Think Bigger internet commercial was by far the most persistent format. Less serious was the Supersonic internet commercial, by reason, in part, of its duration. I conclude therefore that each advertisement represented a distinct item of conduct separate from, and different to, the others. It would not be consistent with the overall seriousness of the matter to treat this as but a single contravention just as it would be manifestly excessive to proceed on the basis that each individual instantiation of the commercials was itself a contravention. Consistently with what I regard as the objective seriousness of the matter I approach the question of penalty on the basis that there were 11 contraventions, one for each advertisement in each media.
The maximum penalty is therefore $12.1 million which it would be appropriate to apply only in the worst case. I do not, however, propose to work backwards from that figure mindful of the injunctions against such practices in relation to criminal sentencing explained in Markarian v The Queen (2005) 228 CLR 357 at 371-375 [27], [31], [37] and [39]. Those principles are applicable in the formulation of a civil penalty under the former s 76: Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] ATPR 42-070; and also to the imposition of a civil penalty under s 76E: MSY Technology (No.2) at [73]. What is called for is an ‘instinctive synthesis’ of the often contradictory factors which arise in sentencing: cf Wong v The Queen (2001) 207 CLR 584 at 611 [75] per Gaudron, Gummow and Hayne JJ; Markarian at 373-374 [37] per Gleeson CJ, Gummow, Hayne and Callinan JJ.
Adopting that approach and having regard to my conclusions above, the penalties I impose are as follows:
TV 120GB
Moose Think Bigger$750,000
TV 150GB
Moose Think Bigger$750,000
TV 120GB
Ostrich Think Bigger$750,000
Print 150GB Think Bigger
$450,000
Flyer 120GB Think Bigger
$450,000
Flyer 150GB Think Bigger
$450,000
Bill Board 150GB Think Bigger
$10,000
Online 120GB Think Bigger
$600,000
Online 120GB Supersonic
$350,000
Online 150GB Supersonic
$350,000
Online 170GB Supersonic
$350,000
$5.26 million
The totality principle requires one to reflect upon whether the sum of $5.26 million adequately captures the total wrong-doing implicit in the contraventions. In my opinion, it does. It is not, therefore, necessary to decide in this case whether the totality principle should be applied both at the level of determining the number of contraventions which occurred and again as a check at the end of the process. Importantly also I observe that the penalty represents a substantial proportion of the overall profits that Optus can expect to make from the plans. I will not publish those profits but no-one need be in doubt that this penalty has a significant and adverse effect on the economics of the campaign and on the profits expected to be made by Optus over the life of the plans. Such a penalty will operate as an appropriate deterrent not only to Optus but also to other traders who might be tempted by the thought that misleading advertising is a profitable strategy. These penalties will demonstrate that it is not.
IV. Confidentiality orders
In this case, as in many cases in this Court, claims for orders under s 50 of the Federal Court of Australia Act 1976 (Cth) have been made to restrain the publication of particular evidence said to be commercially sensitive. Section 50(1) provides:
The Court may, at any time during or after the hearing of a proceeding in the Court, make such order forbidding or restricting the publication of particular evidence, or the name of a party or witness, as appears to the Court to be necessary in order to prevent prejudice to the administration of justice or the security of the Commonwealth.
The power in s 50 is only enlivened when the Court is of the opinion that its exercise is ‘necessary’ for either of the two specified reasons. Questions of national security are not involved in this case and may be put to one side save that the provision’s reference to it shows that it is not concerned with trivialities, a point made by Bowen CJ in Australian Broadcasting Commission v Parish (1980) 43 FLR 129 at 133 and approved by the High Court in Hogan v Australian Crime Commission (2010) 240 CLR 651 at 664 [30] (‘Hogan’). Further, as that last case indicates the word ‘necessary’ is ‘a strong word’.
The apparent astringency in the requirements of s 50 have often been explained on the basis that the provision authorises a mode of a trial contrary to the established common law orthodoxy of open justice. That concept is a deep seated one. Section 50 makes plain that it is only when the administration of justice makes such a mode of trial necessary – not desirable or convenient – that it is authorised: Hogan at 664 [31].
The administration of justice is concerned with the exercise by the Federal Court of the judicial power of the Commonwealth and it is the exercise or administration of that power which is to be considered when assessing the issues thrown up by s 50. The administration of justice is not, therefore, to be equated with broader notions of the public interest in respect of which it is to be seen as ‘a more specific discipline’: Hogan at 664 [30].
All that having been said, however, there will be cases when the administration of justice does require that evidence be kept from public view. The maintenance of trade secrets is one well known example where a Court will protect the information from disclosure: see Scott v Scott [1913] AC 417 at 437 per Viscount Haldane LC. In a case where a suit is brought by a firm specifically to maintain the confidential nature of a secret – perhaps a claim to prevent a former employee handing to a competitor a secret method of manufacture or a secret ingredient in a famous dish – the Court’s jurisdiction to maintain the integrity of the secret will be clear for a suit to keep a secret would be pointless if the secret had to be given away as part of the process of securing its secrecy. In such a case, the standard of necessity demanded by s 50 is comfortably achieved.
But the dictates of the administration of justice are not confined to that simple situation. Even where the secret is not the direct subject of the suit it has been accepted that the administration of justice will require the suppression of commercial information if its value as an asset would be seriously compromised by disclosure. So much was explained by Jessup J in the Full Federal Court in Hogan v Australian Crime Commission (2009) 177 FCR 205 at 220-221 [42] and his Honour’s reasoning was explicitly approved by the High Court on appeal in Hogan at 666 [38]-[39]. No different in effect is the conclusion of another Full Court in Parish that the terms of an agreement between the Australian Cricket Board and certain companies associated with the late Mr Kerry Bullmore Packer relating to the broadcast rights for cricket were properly to be kept confidential. In that case the Australian Broadcasting Commission, obviously fearful of being cut off from the right to broadcast cricket, commenced proceedings against the Board and Mr Packer’s companies seeking to argue that the agreement between them was invalid under the anti-trust provisions in Part IV of the Trade Practices Act. The agreement contained the prices being paid to the Board by Mr Packer for the broadcast rights. The Board argued that disclosure of that financial information would ‘seriously weaken the negotiating strength of the Board’ and evidence to that effect was led. At first instance, Brennan J (then of the Federal Court) had held that this was not a sufficient reason to make an order under s 50. In the Full Court, the opposite conclusion was reached.
In Parish, therefore, one has the example of financial information being kept secret where disclosure would effect negotiations not the direct subject of the proceedings. It is true that the Board had also suggested that if the financial information were disclosed it might consider whether it would continue to honour the agreement so that in a sense the subject matter of the litigation could have been at stake. I do not, however, read that as an essential part of the reasoning process adopted either by Bowen CJ or Franki J. Moreover, both judges accepted that the administration of justice included the need to do justice between the parties. Consistently with Parish, this Court has frequently made s 50 orders in circumstances involving what might loosely be called situations of commercial confidence. No doubt, these decisions are to be seen as manifestations of the proposition that the categories of what may be protected from public disclosure under the demands of the administration of justice are not closed.
The cases support the making of a s 50 order in at least the following categories of case:
(a)documents indicating the profitability of a business whose information is not publicly available where disclosure would permit trade rivals to act to the prejudice of the company: Yara Australia Pty Ltd v Burrup Holdings Limited (No.2) [2010] FCA 1304 at [25] per Barker J. It should be emphasised that this class rests on the capacity of the trade rivals to act in the nominated prejudicial fashion.
(b)information relating to the costs of producing and transporting goods and of calculating rebates where disclosure would be damaging to the business concerned: Australian Competition and Consumer Commission v Cement Australia (No.2) [2010] FCA 1082 at [13] per Greenwood J. In that case the harm was made out because the position of trade rivals was likely to be enhanced if the rebating arrangements became known.
(c)information relating to the implementation of corporate strategies: Betfair v Racing New South Wales (No.5) [2009] FCA 1011 at [29]-[34]. In that case, strategy information was kept from release by reason of a relationship akin to trade rivalry.
(d)Clauses of agreements disclosing market sensitive pricing information: Qantas Airways Limited v Rolls-Royce PLC [2010] FCA 1481.
(e)information which might be expected to prejudice negotiations. Parish was such a case. In this Court, evidence of television programming schedules for advertisements are not uncommon and often enough these contain differing advertising rates. Generally the view has been taken that disclosure of that kind of information, that is, the rates, would disrupt the market in the provision of advertising services.
In light of those matters I turn to the claims which are made.
Confidential Exhibit SCT-3 to the affidavit of Sarah Catherine Tormey of 19 November 2010
Ms Tormey is a solicitor with the Australian Government Solicitor and has the day to day carriage of this matter for the Commission. Prior to the penalty hearing she served upon Optus’ solicitors a notice to produce which sought, inter alia, all documents recording monthly sales revenue for the plans the subject of these proceedings and also for all fixed line retail broadband plans. The periods varied but all ranged between 1 January 2010 and 29 October 2010. The letter accompanying the notice to produce expressly noted that if Optus claimed that any of the information was confidential and the Commission wished to use the material, it would tender it as a confidential exhibit to permit that claim to be made. Optus’ solicitors subsequently provided material in answer to the notice in respect of which it claimed confidentiality. Ms Tormey exhibited to her affidavit that material as ‘Confidential Exhibit SCT-3’.
Confidential Exhibit SCT-3 sets out the revenues from the various plans between January 2010 and October 2010. Mr Hugh John Longshaw, a Commercial Manger in marketing at Optus swore an affidavit dealing, inter alia, with Confidential Exhibit SCT-3. It was he who had prepared the exhibit. He swore that its contents were extremely confidential and ‘it would be of considerable benefit to competitors if they became aware of our profits and costs and the numbers of our customers in relation to those plans. If a competitor saw this information, they could be at a significant commercial advantage by understanding the profits that Optus had made from Think Bigger and Supersonic Broadband plans and the expenses that had been incurred in deriving those profits’. I accept this evidence and it follows that an order limiting disclosure of the exhibit should be made.
Confidential Exhibit HJL-1 of the affidavit of Hugh John Longshaw of 26 November 2010
This exhibit contains three elements. The first consists of a table setting out the earnings before interest, taxes, depreciation and amortisation for each of the plans for the period January 2010 to October 2010. The second consists of a table listing precisely how many customers on old plans were migrated to new plans including those the subject of these proceedings. The third was a short document correcting some minor errors in Confidential Exhibit SCT-3. Mr Longshaw, who prepared all these tables, gave the same evidence about Confidential Exhibit HJL-1 as he gave about Confidential Exhibit SCT-3 (above). I accept that these matters would prejudice Optus substantially if released and that an order to prevent that occurring is necessary.
Confidential Exhibit HJL-2 to the second affidavit of Mr Longshaw of 6 December 2010
This exhibit contained Mr Longshaw’s estimates of future revenues from the plans. There is no reason to distinguish the position of the future income streams from those relating to the past and accordingly an order under s 50 is appropriate.
Annexure A to Optus’ written submission of 3 December 2010, annexure B to the Commission’s submission of 29 November 2010 (as amended on 30 November 2010) and Exhibits 2 and 3
Annexure B is the same as Exhibit 2 and annexure A is the same as Exhibit 3. All three of these documents are summaries of Confidential Exhibits SCT-3, HJL-1 and HJL-2. Since those exhibits are entitled to protection, the summaries must be protected too.
Confidential Exhibit HKY-1 to the affidavit of Ms Hey-Yong Kristy Yoon of 3 November 2010 and Confidential Exhibit KAH-1 to the affidavit of Ms Kim Adele Hamilton of 4 November 2010
These two affidavits were previously read before me at the hearing on corrective advertising: see Optus No.3. Optus relied on Ms Hamilton’s affidavit in this hearing, but Ms Yoon’s affidavit was not again before me. However, Optus submitted that a s 50 order had been made by me on 5 November 2010. The transcript for that day records me as having said in relation to those two exhibits that I was content to make such orders in respect of them. No formal order recording that was entered. Plainly an order was made and the Court’s records will be amended to reflect that such an order was made on that day.
V. Orders
I order Optus to pay the Commonwealth a pecuniary penalty of $5.26 million. I order that until further order Confidential Exhibits SCT-3, HJL-1, HJL-2, Exhibits 2 and 3, annexure A to Optus’ submission on penalty and annexure B to the Commission’s submission on penalty not be published to any person apart from the parties to the litigation and their advisers.
I will hear the parties on costs if they wish at a time to be arranged with my associate.
I certify that the preceding ninety-seven (97) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate:
Dated: 7 July 2011
APPENDIX 1
76E Pecuniary penalties—consumer protection etc.
(1) If the Court is satisfied that a person:
(a) has contravened any of the following provisions:
(i)a provision of Part IVA;
(ii)a provision of Division 1 or 1AAA of Part V (other than section 52);
(iii)subsection 65C(1) or (3), 65D(1) or 65F(8), section 65G or subsection 65Q(9), (9C) or (10) or 65R(1);
(iv) section 87ZN or 87ZO; or
(b)has attempted to contravene such a provision; or
(c)has aided, abetted, counselled or procured a person to contravene such a provision; or
(d)has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision; or
(e)has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or
(f)has conspired with others to contravene such a provision;
the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate.
(2)In determining the appropriate pecuniary penalty, the Court must have regard to all relevant matters including:
(a)the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and
(b)the circumstances in which the act or omission took place; and
(c)whether the person has previously been found by the Court in proceedings under Part VC or this Part to have engaged in any similar conduct.
(3)The pecuniary penalty payable under subsection (1) is not to exceed the number of penalty units worked out using the following table:
Number of penalty units
Item
For each act or omission to which this section applies that relates to ...
the number of penalty units is not to exceed ...
1
a provision of Part IVA
(a) if the person is a body corporate—10,000; or
(b) if the person is not a body corporate—2,000.
2
a provision of Division 1 or 1AAA of Part V (other than section 52)
(a) if the person is a body corporate—10,000; or
(b) if the person is not a body corporate—2,000.
3
subsection 65C(1) or (3) or 65D(1)
(a) if the person is a body corporate—10,000; or
(b) if the person is not a body corporate—2,000.
4
subsection 65F(8)
(a) if the person is a body corporate—150; or
(b) if the person is not a body corporate—30.
5
section 65G
(a) if the person is a body corporate—10,000; or
(b) if the person is not a body corporate—2,000.
6
subsection 65Q(9)
(a) if the person is a body corporate—200; or
(b) if the person is not a body corporate—40.
7
subsection 65Q(9C)
(a) if the person is a body corporate—300; or
(b) if the person is not a body corporate—60.
8
subsection 65Q(10)
(a) if the person is a body corporate—600; or
(b) if the person is not a body corporate—120.
9
subsection 65R(1)
(a) if the person is a body corporate—150; or
(b) if the person is not a body corporate—30.
10
section 87ZN
(a) if the person is a body corporate—150; or
(b) if the person is not a body corporate—30.
11
section 87ZO
(a) if the person is a body corporate—250; or
(b) if the person is not a body corporate—50.
(4)If conduct constitutes a contravention of 2 or more provisions referred to in paragraph (1)(a):
(a)a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions; but
(b)a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.
120
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