Australian Competition and Consumer Commission v StoresOnline International Inc (No. 2)
[2010] FCA 418
FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v StoresOnline International Inc (No. 2) [2010] FCA 418
Citation: Australian Competition & Consumer Commission v StoresOnline International Inc (No. 2) [2010] FCA 418 Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v STORESONLINE INTERNATIONAL INC and STORESONLINE INC File number: NSD 1991 of 2007 Judge: EDMONDS J Date of judgment: 5 May 2010 Catchwords: TRADE PRACTICES – consumer protection – s 52 Trade Practices Act 1974 (Cth) – whether representations by the respondents were misleading or deceptive or likely to mislead or deceive – s 53(e) Trade Practices Act 1974 (Cth) – whether representations by the respondents were false or misleading with respect to the price of goods or services – whether the respondents falsely represented that the goods and services supplied were offered at varied prices depending upon the time and circumstance in which the goods and services were acquired.
HELD: that the representations were misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act 1974 (Cth); that the respondents’ conduct in making them also contravened s 53(e) of that Act.
Legislation: Trade Practices Act 1974 (Cth) ss 52, 53(e)
Federal Court of Australia Act 1976 (Cth) s 21Cases cited: Ascot Four Pty Ltd v Australian Competition & Consumer Commission (2009) 176 FCR 106
Australian Competition & Consumer Commission v Chen (2003) 132 FCR 309
Australian Competition & Consumer Commission v Goldy Motors Pty Ltd [2001] ATPR 41-801
Australian Competition & Consumer Commission v Pacific Dunlop Ltd [2001] ATPR 41-823
Australian Competition & Consumer Commission v Prouds Jewellers Pty Ltd [2008] ATPR 42-217 Australian Competition & Consumer Commission v Prouds Jewellers Pty Ltd [2008] ATPR 42-268
Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114
Australian Competition & Consumer Commission v Target Australia Pty Ltd [2001]ATPR 41-840
Australian Machinery & Investment Co Ltd v Deputy Commissioner of Taxation (1946) 180 CLR 9
Lovell & Christmas Ltd v Commissioner of Taxes [1908] AC 46
Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89Date of hearing: 14 and 15 December 2009 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 32 Counsel for the Applicant: Mr ST White SC with Mr T Brennan Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Respondents: Mr DJ Fagan SC with Mr EAJ Hyde Solicitor for the Respondents: Deacons
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1991 of 2007
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND: STORESONLINE INTERNATIONAL INC
First RespondentSTORESONLINE INC
Second Respondent
JUDGE:
EDMONDS J
DATE OF ORDER:
5 MAY 2010
WHERE MADE:
SYDNEY
THE COURT DECLARES THAT:
1.Each respondent has in trade or commerce engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act 1974 (Cth) (‘the TPA’) by representing at each StoresOnline seminar and StoresOnline workshop held in Australia since October 2006 that it offered for sale or sold StoresOnline packages in Australia at the price (‘Full Price’) determined by adding a fee of $2,700 per web site per year and a programming fee of $2,800 (‘Full Price Representation’) when StoresOnline packages had not been offered for sale or sold in Australia at that price.
2.Each respondent has in trade or commerce in connection with the supply or possible supply of goods and services, namely, StoresOnline packages being computer software licences and related goods and services, or in connection with the promotion of the supply of such goods and services, made false or misleading representations with respect to the price of services, in contravention of s 53(e) of the TPA in that at each StoresOnline seminar and StoresOnline workshop held in Australia since October 2006 it made the Full Price Representation when StoresOnline packages had not been offered for sale or sold in Australia at the Full Price.
3.Each respondent has in trade or commerce engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 52 of the TPA by representing at each StoresOnline seminar held in Australia since October 2006 that it intended to offer StoresOnline packages for sale to workshop attendees at the price (‘90 Day Offer Price’) of $2,700 per web site per year for 90 days from the date of the workshop (‘90 Day Offer Current Intention Representation’) when it had no such intention.
4.Each respondent has in trade or commerce in connection with the supply or possible supply of goods and services, namely, StoresOnline packages being computer software licences and related goods and services, or in connection with the promotion of the supply of such goods and services, made false or misleading representations with respect to the price of services, in contravention of s 53(e) of the TPA in that at each StoresOnline seminar held in Australia since October 2006 it made the 90 Day Offer Current Intention Representation when it did not intend to offer the StoresOnline packages for sale at the 90 Day Offer Price for 90 days from the date of the workshop.
5.Each respondent has in trade or commerce engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 52 of the TPA by representing at each StoresOnline seminar and StoresOnline workshop held in Australia since October 2006 that the StoresOnline packages will be available for purchase by those who attend a workshop in Australia at the 90 Day Offer price for 90 days from the day of the workshop (‘90 Day Offer Future Availability Representation’) when the StoresOnline packages were not available for purchase in the period following the workshop.
6.Each respondent has in trade or commerce in connection with the supply or possible supply of goods and services, namely, StoresOnline packages being computer software licences and related goods and services, or in connection with the promotion of the supply of such goods and services, made false or misleading representations with respect to the price of services, in contravention of s 53(e) of the TPA in that at each StoresOnline seminar and StoresOnline workshop held in Australia since October 2006 it made the 90 Day Offer Future Availability Representation when the StoresOnline packages were not available for purchase in the period following the workshop at that price.
7.Each respondent has in trade or commerce engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 52 of the TPA by representing at each StoresOnline seminar held in Australia since October 2006 that the difference between the Full Price and 90 Day Offer Price was the amount a purchaser of the StoresOnline package could save by becoming eligible for the 90 Day Offer through attending a StoresOnline workshop (‘Seminar Level of Savings Representation’) when that level of saving did not exist.
8.Each respondent has in trade or commerce in connection with the supply or possible supply of goods and services, namely, StoresOnline packages being computer software licences and related goods and services, or in connection with the promotion of the supply of such goods and services, made false or misleading representations with respect to the price of services, in contravention of s 53(e) of the TPA in that at each StoresOnline seminar held in Australia since October 2006 it made the Seminar Level of Savings Representation when the level of saving so represented did not exist.
9.Each respondent has in trade or commerce engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 52 of the TPA by representing at each StoresOnline workshop held in Australia since October 2006 that the difference between the 90 Day Offer and the price at which StoresOnline offered to sell the StoresOnline package provided the purchase occurred before the conclusion of the StoresOnline workshop (‘Workshop Offer’) was the amount a purchaser of the StoresOnline package would save by purchasing the package prior to the conclusion of the workshop compared to what that purchaser would be required to pay for the StoresOnline package at any time in the 90 day period following the workshop (‘Workshop Level of Savings Representation’) when that level of saving did not exist.
10.Each respondent has in trade or commerce in connection with the supply or possible supply of goods and services, namely, StoresOnline packages being computer software licences and related goods and services, or in connection with the promotion of the supply of such goods and services, made false or misleading representations with respect to the price of services, in contravention of s 53(e) of the TPA in that at each StoresOnline workshop held in Australia since October 2006 it made the Workshop Level of Savings Representation when a purchaser of a StoresOnline package would not be required to pay more than the Workshop Offer to purchase the StoresOnline package.
THE COURT ORDERS THAT:
11.The respondents pay the applicant’s costs as taxed or agreed.
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 1991 of 2007
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND: STORESONLINE INTERNATIONAL INC
First RespondentSTORESONLINE INC
Second Respondent
JUDGE:
EDMONDS J
DATE:
5 MAY 2010
PLACE:
SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
As part of wider relief in the form of declarations and orders made by consent on 15 December 2009, the applicant (‘the ACCC’) seeks the declarations set out in [8] to [17] inclusive of its Third Further Amended Application (‘the Application’) filed on 24 June 2009, namely, that each of the respondents has, in trade or commerce, engaged in conduct that was misleading or deceptive or, in connection with the supply or possible supply of goods and services, made false or misleading representations with respect to the price of services, in contravention of ss 52 and/or 53(e) of the Trade Practices Act 1974 (Cth) (‘the TPA’). The respondents put in issue that their conduct or representations, if made, would give rise to such contraventions.
BACKGROUND
Group Structure
The first respondent (‘StoresOnline International’) and the second respondent (‘StoresOnline’) are United States corporations incorporated in Delaware. They are subsidiaries of another Untied States corporation, iMergent Inc, a publicly listed marketing company.
Since its incorporation on 11 January 2002, StoresOnline has carried on business of conducting introductory preview presentations (‘seminars’) and day-long workshop presentations (‘workshops’) around the world, including Australia, at which it offers for sale to the public a package of computer software licences (being licences to use the StoresOnline software) and related goods and services for setting up online stores (‘the Package’).
There is some untested evidence that StoresOnline International is a company incorporated solely for the purpose of allowing StoresOnline to distinguish revenue earned in the United States of America from revenue earned elsewhere in the world. Revenue earned at workshops held in countries other than the United States of America is recorded in the accounts of StoresOnline International, rather than StoresOnline. The basis on which it does this is not explained. It is said that StoresOnline International does not employ any staff and is not involved in conducting seminar or workshop presentations in Australia or elsewhere. One explanation might be that outside the United States, and therefore in Australia, StoresOnline is acting as agent for StoresOnline International, but in the absence of any evidence, this is mere speculation.
As I say, this evidence is untested, but on the back of it, StoresOnline submitted that StoresOnline International, by itself, its servants and/or agents, has not conducted any seminars or workshops in Australia or elsewhere. Accordingly, it was submitted that the proceeding against StoresOnline International ought to be dismissed. Contrary to StoresOnline’s submissions, this was not accepted by the ACCC. Nor is it supported by such evidence as exists going to StoresOnline International’s activity in Australia. There is evidence which makes it clear that StoresOnline International sold the Packages to persons attending workshops in Australia and that it entered into those contracts of sale in Australia. Where the essence of a business ordinarily consists of making certain classes of contracts and in carrying those contracts into operation with a view to profit, the business is carried on within the locality where such contracts are habitually made: Lovell & Christmas Ltd v Commissioner of Taxes [1908] AC 46 at 51 – 52; Australian Machinery & Investment Co Ltd v Deputy Commissioner of Taxation (1946) 180 CLR 9 at 27 per Starke J.
For these reasons, I would not be prepared to dismiss the proceeding against StoresOnline International on the ground that it did not do anything in Australia or elsewhere outside the United States. As senior counsel for the ACCC said on more than one occasion ‘the fingerprint of StoresOnline International is all over this case’.
The StoresOnline Package
The Package was intended to enable customers to develop, construct and publish websites that could be used as online retail stores (that is, a website that can accept orders and payments for products offered on the website) and to provide them with marketing tools and information to assist customers to develop strategies to sell products from their website.
Seminars and Workshops
In the period January 2006 to November 2008 StoresOnline conducted around the world 19,168 seminars and 3,039 workshops. In the period 9 October 2006 to 27 October 2007 StoresOnline conducted 318 seminars and 76 workshops in Australia. The Australian seminars were attended by 41,365 and 8,540 people attended the Australian workshops. The seminars were generally 90 minutes in duration and provided attendees with an overview of the Package, the opportunities presented by the internet and techniques for marketing and promoting websites on the internet. Attendees were informed that the workshops would provide a detailed analysis of the opportunities available to create wealth from the internet, which analysis was not available during the time permitted at the seminar.
The clear objective of the seminars was to sell attendance at workshops. No Packages were sold or offered for sale at the seminars.
Consumers who attended workshops did so generally about two weeks after their attendance at a seminar. Workshops ran for a full day (usually 8.30 am – 6.00 pm) and were focused on promoting the internet as an opportunity to create wealth and selling the Package to enable attendees to take advantage of that opportunity.
The plenary sessions of workshops were organised into five components:
(1)A morning introduction from a person presented as a senior representative of StoresOnline;
(2)a morning ‘training’ session from a person presented as a trainer;
(3)a lunch session;
(4)an afternoon session from the trainer; and
(5)a workshop closing from the senior StoresOnline representative.
Following the lunch session attendees at workshops were invited to attend ‘one-on-one’ sessions with a sales representative from StoresOnline.
Attendees who elected to make a purchase of the Package did so either during the one-on-one session or at the ‘sales close’ usually conducted at a table at the end of the plenary workshop session.
The price paid by each customer for a Package was, in almost every case, either $2,700 (for 3 websites) or $4,900 (for 6 websites). Many customers also paid $990 for a credit card processing facility and some paid additional amounts for other services.
It is common ground that during the seminars StoresOnline representatives made statements to the following effect:
(1)That the full price of the Package comprised a programming and software fee of $2,800 and an annual hosting and support fee of $2,700 (‘the full price’);
(2)that persons who attended the workshop would receive a 90 day offer available from the day following attendance at the workshop which involved a waiver of the $2,800 programming and software fee such that the price of the Package was $2,700 per website per year (‘the 90 day price’);
(3)there would be a special workshop price that would only be offered on the day of the workshop.
It is also common ground that at each workshop there was a repetition of statements to these effects.
Moreover, it is also common ground that it was the practice of StoresOnline to make known to attendees of the workshops at the luncheon interval the details of the special workshop price. The workshop offer was to the effect that if attendees purchased the Package on the day of the workshop they could purchase a Package of three website licences for $2,700 plus ongoing fees or six website licences for $4,900 plus ongoing fees.
THE ACCC’S PLEADED CASE
The Fourth Further Amended Statement of Claim (‘the FFASC’) sets out the ACCC’s pleaded case in relation to the misleading and deceptive conduct allegations. That pleaded case contends that the following statements were made or the following representations were conveyed at seminars and workshops:
(1)At seminars and workshops the respondents or one of them represented that it offered for sale or sold the Package in Australia for the full price (‘the full price representation’): ([46], [47], [56] and [57] of the FFASC);
(2)At seminars the respondents or one of them made a statement to the effect that the Package would be available for purchase by persons who attended the workshop for a period of 90 days from the day of attendance at the workshop at the 90 day price, a saving of $2,800 compared to the full price: ([48] and [49] of the FFASC);
(3)By reason of the matters in (2) above, the respondents or one of them represented that it intended to offer the Package for sale to workshop attendees at the 90 day price for 90 days from the day of attendance at the workshop (‘the 90 day current intention representation’): ([50] of the FFASC);
(4)Further or in the alternative to (3) above, by reason of the matters in (2) above, the respondents or one of them represented that the Package would be available for purchase by those who attend a workshop in Australia at the 90 day price for 90 days from the date of attendance at the workshop (‘the 90 day future availability representation’): ([51] of the FFASC);
(5)At workshops the respondents or one of them made the 90 day future availability representation: ([58] and [59] of the FFASC);
(6)By conveying the full price representation; by making the statement as to the 90 day price in (2) above, and by expressly comparing the full price and the 90 day price at each seminar, the respondents or one of them represented the difference between them was the amount a purchaser of the Package could save by becoming eligible for the 90 day price by attending a workshop (‘the seminar level of savings representation’): ([52] and [53] of the FFASC);
(7)At workshops the respondents or one of them offered to supply the Package to attendees at the special workshop price, a price substantially lower than the full price or the 90 day price (‘the special workshop price’): ([60] and [61] of the FFASC);
(8)By comparing the 90 day price with the special workshop price the respondents or one of them represented at workshops that the difference was the amount a consumer would save if he or she purchased the Package at the workshop compared to what he or she was required to pay at any time in the 90 days after the workshop (‘the workshop level of savings representation’): ([62] of the FFASC);
THE ACCC’S SUBMISSIONS ON THE EVIDENCE
According to the ACCC, the evidence discloses the respondents or one of them breached ss 52 and/or 53(e) of the TPA in that each of the representations referred to above were misleading and deceptive because:
(1)The respondents or one of them did not offer for sale or sell the Packages in Australia at the full price;
(2)The respondents or one of them did not make available the Packages for purchase by those who attended the workshop at the 90 day price;
(3)The respondents or one of them at no time had any intention to offer the Packages for sale to workshop attendees at the 90 day price;
(4)The respondents or one of them did not have reasonable grounds for offering the 90 day price and by reason of s 51A of the TPA the representation is deemed to be misleading;
(5)By reason of the fact that the respondents or one of them did not offer for sale or sell the Packages at the full price and/or because the Packages were not available for sale at the 90 day price there was no saving if a consumer purchased the Package at the special workshop price.
According to the ACCC, the evidence establishes the Packages were only available for purchase on the day of the workshop and at the special workshop price. The Packages were not available for purchase at the full price nor at the 90 day price. The business model of the respondents or one of them was based upon sales of the Packages at workshops at the special workshop price. According to the ACCC, the following evidence confirms this to be the case:
(1)The affidavit of Clinton Rex Sanderson, Senior Vice-President of Sales for StoresOnline, sworn 12 March 2009, states that the Package comprised various documents one of which was an Active Merchant Receipt, a copy of which appears at various pages of the tender bundle. The Active Merchant Receipt is a critical component of the Package as it records the licence number and password necessary to enable the customer to access the software that they have purchased. The Active Merchant Receipt is drafted in terms that the licensee has attended a workshop and accepted the special workshop price. It is inconsistent with a licensee acquiring the licence by accepting the 90 day price or the full price. The Active Merchant Receipt was provided to all StoresOnline customers before they purchased a Package.
(2)The evidence of Mr Sanderson also confirms the Packages were only available for sale at workshops at the special workshop price. The affidavit of Jeffrey Garth Korn, General Counsel and Company Secretary of each respondent, sworn 13 April 2009, confirms that the only revenue earned by StoresOnline was from the sale of the Packages in Australia at workshops. It is notable that nowhere in the evidence filed by StoresOnline do the deponents suggest the Package was available for purchase outside workshops, at the full price or even at the 90 day price. For example, there is no evidence that a consumer could purchase the Package at the full price by visiting the website, StoresOnline or that a brochure, price list or other document existed which was made available to customers or that sales representatives outside of seminars and workshops sold the Package to the public. There is nothing in the evidence that supports the proposition that a person who purchased the product was receiving a discount or making a saving. Indeed the evidence is to the contrary, namely, that StoresOnline deceived customers into believing that the special workshop price represented a saving when in fact no saving existed.
(3)The evidence also discloses that all sales of the Package were at workshops at the special workshop price. So much appears to be conceded by the respondents.
STORESONLINE’S SUBMISSIONS ON THE EVIDENCE
StoresOnline submitted that there is no proper basis for the Court to find that there has been any contravention of ss 52 and/or 53(e) of the TPA for the following reasons:
(1)The evidence that StoresOnline nominates two fees for the Package, that is, the fees for establishing and maintaining a website of $2,800 programming and software fee and a $2,700 per year hosting and support fee, is unchallenged by the ACCC.
(2)Following a workshop, customers were able to avail themselves of the 90 day price, for the period in which it remained valid, and thereafter, customers could purchase the Package for the above mentioned two fees.
(3)There is no evidence led by the ACCC to establish that:
(a)StoresOnline had refused to sell a Package on the basis of these two fees or at the 90 day price; and
(b)StoresOnline had refused to sell a Package other than at a workshop;
Indeed, the stated policy of StoresOnline is that the 90 day price is only available for the first 90 days after the date of a workshop, thereafter any consumer that wishes to acquire the Package outside that period must do so on the basis of the above mentioned two fees.
(4)The fact that the vast majority of consumers purchase the Package on the same day as they attend a workshop does not make the full fee basis or the 90 day price each a sham but merely indicates the value which is represented by the special workshop price. The fact that the vast majority of the sales occur at workshops is merely indicative of the fact that StoresOnline is an American entity that otherwise has no business presence in Australia and undertakes no marketing activities in the country other than promoting and undertaking the seminars and workshops.
Furthermore, StoresOnline submitted, there is no evidence led by the ACCC that any consumers were, or a submission that a reasonable consumer would be, in any way mislead as to:
(1)The fact that the 90 day price was only available for the first 90 days after the date of a workshop, thereafter any consumer that wished to acquire the Package outside that period must pay both fees for the Package; and
(2)the special workshop price was only available on the day of the workshop.
FINDINGS
In my view, the evidence establishes and I find that:
(1)The Packages were never sold by the respondents or one of them in Australia at the full price;
(2)the Packages were never intended to be sold by the respondents or one of them in Australia at the full price and, in consequence, any statement or writing to the effect that the full price of the Package was $5,600, while representing that the Package was offered for sale in Australia at the full price, was not an offer to sell at that price which was capable of being accepted because it was not made with the intention that it was to become binding when a person to whom it was addressed, communicated his assent to its terms. Rather, such a statement or writing, as well as falsely representing that the Package was offered for sale in Australia at the full price, represented to a prospective purchaser of the Package that if the purchaser was able to purchase it at a price less than the full price, the purchaser was making a saving by reference to the full price. It follows that that representation was also false;
(3)the Packages were never sold by the respondents or one of them in Australia at the 90 day price; and
(4)the Packages were never intended to be sold by the respondents or one of them in Australia at the 90 day price and, in consequence, any statement or writing to the effect that the 90 day price was $2,700, while representing that the Package was offered for sale in Australia at the 90 day price within the period of 90 days from the date of attendance at the workshop, was not an offer to sell at that price which was capable of being accepted because it was not made with the intention that it was to become binding when a person to whom it was addressed, communicated, within that period of 90 days, his assent to its terms. Rather, such a statement or writing, as well as falsely representing that the Package was offered for sale in Australia at the 90 day price within the period of 90 days from the date of attendance at the workshop, represented to a prospective purchaser of the Package that if the purchaser was able to purchase it at a price less than the 90 day price, they were making a saving by reference to the 90 day price. It follows that that representation was also false.
ANALYSIS
In the face of these findings, I am impelled to conclude that the respondents or one of them have contravened ss 52 and/or 53(e) of the TPA in terms of the declaratory relief sought by the ACCC and that the only remaining issue is whether I should exercise my discretion to grant that relief.
Before considering that question, I should say something of the authorities to which I was referred by senior counsel for the ACCC in support of the conclusion I have reached as to such contraventions. In particular, I was referred to the ‘dual pricing’ arrangements involving ‘was’ and ‘now’ prices and ‘strike through’ and ‘sale’ prices in catalogues issued by retail jewellers in Ascot Four Pty Ltd v Australian Competition & Consumer Commission (2009) 176 FCR 106 and Australian Competition & Consumer Commission v Prouds Jewellers Pty Ltd [2008] ATPR 42-217 (first instance); 42-268 (on appeal). Senior counsel for StoresOnline submitted that the facts of this case were clearly distinguishable from the facts of those cases. He submitted that each of the catalogues at issue in those cases contained offers explicitly limited in time and the retailer’s purpose in each case, clearly enough, was to increase sales by creating the impression that the discount offered would be available for a limited time only, after which the ‘now’ price would cease to be on offer, and the price payable by the customer for the relevant item would revert to the ‘was’ price. There were findings in each of those cases that none of the relevant items of jewellery had genuinely been on offer for any period of time at the ‘was’ price. For that reason, he submitted, the representation embodied by the ‘strike through’ price was held to be misleading: see Prouds Jewellers at [42] and Ascot Four at [32]. He submitted that there was no proper basis for making such findings in this case.
But the findings in [23] above do not support such a distinction. Indeed, the finding that the Packages had never been offered for sale at the full price and the finding that the Packages had never been offered for sale at the 90 day price in the 90 day period following attendance at the workshop are consistent with the findings in each of those cases that none of the relevant items of jewellery had genuinely been on offer for any period of time at the ‘was’ price. And the special workshop price offer was expressly limited in time (to the period of the workshop) leading to the conclusion that like the retailer’s purpose in each of the jewellery cases, StoresOnline’s purpose in this case was to increase sales (at the workshop) by creating the impression that the discount offered would be available for a limited time only, after which the special workshop price would cease to be on offer, and the price payable by the purchaser of the Package would revert to the 90 day price, and after 90 days, to the full price.
One has to be careful in applying conclusions coming out of cases involving different factual contexts, but having regard to the findings in [23] above, I do not think the basis upon which StoresOnline sought to distinguish this case from the facts in Ascot Four and Prouds Jewellers withstands close scrutiny.
WHETHER DECLARATORY RELIEF SHOULD AS A MATTER OF DISCRETION BE GRANTED
Section 21(1) of the Federal Court of Australia Act 1976 (Cth) confers power on the Court in any matter in which it has original jurisdiction to make binding declarations of right, whether or not consequential relief is claimed. In Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89, the Full Court held that the Court had power under s 21 of the Federal Court Act to make a declaration of right that s 52 of the TPA had been contravened in proceedings for injunctive relief brought under s 80 of the TPA, irrespective of whether the injunctive relief was granted. As Sheppard J said in the Tobacco Institute case at 98:
‘The declaration, if made, will be a declaration of right because the right which will be declared will be a public right, namely, the right of the public not to be misled or deceived by factual statements in an advertisement concerning the effects of passive smoking.’
StoresOnline submitted that the Court ought to exercise its discretion and not make the declarations sought for the following reasons:
(1)There is no real utility in the declarations sought particularly in the circumstances where no other relief is sought by the ACCC (by way of injunction, damages or otherwise);
(2)the conduct complained of occurred some time ago; and
(3)the evidence is that since May 2008 StoresOnline has offered the product for sale via its website as well as at seminars and workshops.
The ACCC submitted that the power to make declarations of right is readily exercised in proceedings brought by regulators such as the applicant because in such proceedings the Court looks to the public interest nature of the proceedings and the public interest in the enforcement of the TPA: Australian Competition & Consumer Commission v Target Australia Pty Ltd [2001] ATPR 41-840 at [18]; Australian Competition & Consumer Commission v Goldy Motors Pty Ltd [2001] ATPR 41-801 at [30] and [34]; Australian Competition & Consumer Commission v Pacific Dunlop Ltd [2001] ATPR 41-823 at [40]; Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 at 131 (specifically [37] – [40]). More specifically, the Court has observed that declarations:
(1)Are an appropriate vehicle to record the Court’s disapproval of the contravening conduct: Tobacco Institute at 100; Australian Competition & Consumer Commission v Chen (2003) 132 FCR 309 at [36] per Sackville J;
(2)serve to vindicate the ACCC’s claim that the respondent has contravened the Act: Goldy Motors at [30];
(3)are of some assistance to the ACCC in future in carrying out the duties which are conferred upon it by the Act: Goldy Motors at [34]; and
(4)may inform consumers of the dangers arising from a respondent's contravening conduct: Pacific Dunlop at [59] – [69].
I agree with these submissions. In the context of a highly systemetised, high volume business method implemented throughout Australia and in other parts of the world the public interest in the making of declarations as sought by the ACCC is particularly strong. This is exemplified by the business model of the respondents which was dependant on encouraging consumers to believe they were acquiring the Packages at a significant discount in circumstances where no discount existed.
I therefore propose to make the declaratory relief sought. The respondents must pay the ACCC’s costs as taxed or agreed.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate:
Dated: 5 May 2010
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