Colgate-Palmolive Pty Ltd v Smithkline Beecham Holdings (Australia) Pty Ltd
[1997] FCA 881
•3 SEPTEMBER 1997
FEDERAL COURT OF AUSTRALIA
TRADE PRACTICES - consumer protection - misleading and deceptive conduct - interlocutory injunction - whether serious question to be tried - where balance of convenience lies
Trade Practices Act 1974 (Cth): ss 52, 53, 55, 80
Sterling Winthrop Pty Ltd v Boots Co (Australia) Pty Ltd (1995) 32 IPR 361
Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) 14 ALR 293
COLGATE-PALMOLIVE PTY LIMITED v SMITHKLINE BEECHAM HOLDINGS (AUSTRALIA) PTY LIMITED, SMITHKLINE BEECHAM (AUSTRALIA) PTY LIMITED
NG 591 of 1997
LOCKHART J
3 SEPTEMBER 1997
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 591 of 1997
BETWEEN:
COLGATE-PALMOLIVE PTY LIMITED
APPLICANTAND:
SMITHKLINE BEECHAM HOLDINGS (AUSTRALIA) PTY LIMITED
FIRST RESPONDENTSMITHKLINE BEECHAM (AUSTRALIA) PTY LIMITED
SECOND RESPONDENTJUDGE:
LOCKHART J
DATE OF ORDER:
3 SEPTEMBER 1997
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The motion for interlocutory injunctions is dismissed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 591 of 1997
BETWEEN:
COLGATE-PALMOLIVE PTY LIMITED
APPLICANTAND:
SMITHKLINE BEECHAM HOLDINGS (AUSTRALIA) PTY LIMITED
FIRST RESPONDENTSMITHKLINE BEECHAM (AUSTRALIA) PTY LIMITED
SECOND RESPONDENT
JUDGE:
LOCKHART J
DATE:
3 SEPTEMBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This is a dispute between the two major distributors of toothpaste in Australia about the form of advertising and packaging of a new toothpaste known as “Macleans Whitening Toothpaste” (“MWT”) which was launched onto the Australian market in 1996. The applicant, Colgate-Palmolive Pty Limited, is the market leader in the toothpaste industry in Australia. The respondents are the next largest distributors. Nothing turns at this interlocutory stage of the proceeding upon which of the two respondents is the correct respondent or whether they are both correctly joined as respondents. I shall simply refer to them as “the respondents”. If interlocutory relief is to be granted, something may turn on the identity of the correct respondent. That is a matter to be addressed by the parties in due course, if the need arises.
The applicant seeks interlocutory injunctions restraining the respondents from advertising and packaging MWT in the form which it presently takes, on the basis that their conduct is misleading or deceptive or likely to mislead or deceive and contravenes ss 52, 53(a), 53(c) and 55 of the Trade Practices Act 1974 (“the Act”). The injunctions are sought pursuant to s 80 of the Act. Injunctive relief is also sought on the ground that the conduct of the respondents breaches undertakings given by them in a deed between the parties.
A considerable amount of evidence was tendered at the interlocutory hearing last Friday, but in the end the area of disputed fact is small. No oral evidence was given; the evidence was by affidavit.
It is useful to know something about the toothpaste industry in Australia, especially the segment that is relevant for present purposes.
In April 1996 the applicant launched onto the Australian market a new brand of toothpaste known as Colgate Baking Soda and Peroxide toothpaste (“CBSP”). In the period to 30 June 1997 CBSP generated net manufacturing sales of approximately $10,950,000.
CBSP is promoted in the market as a cosmetic toothpaste with cleaning, whitening and freshening benefits, combined with the therapeutic benefit of “maximum cavity protection”.
Although toothpastes that have a whitening effect on human teeth have been on the Australian market for some time, they have been available primarily through pharmacies and not to any substantial degree in the supermarkets and other retail outlets. The launch in April 1996 by the applicant of CBSP was the first major penetration of the Australian toothpaste market with a toothpaste containing a whitening benefit.
The respondents’ product, MWT, was launched onto the Australian market in 1996. It was launched to the trade in about July 1996, then distributed to supermarkets and other outlets in about August/September 1996. Advertising and promotion of MWT commenced in October 1996. MWT has been marketed in the mass media, in particular television advertising, by reference to its alleged superior whitening benefits.
The whitening segment is the most dynamic segment of the toothpaste market in Australia. It has grown from about 3% market value at the beginning of 1996 to an average of 22% in the three months to 15 June 1997. It is also the most profitable segment of the toothpaste market.
The particular forms of advertising MWT to which the applicant takes exception concern certain words on the packs in which the tubes of MWT are contained and on the tubes themselves; also a television commercial which has appeared on television and which the respondents intend to continue to use unless restrained by this Court.
After the launch of MWT, the applicant complained to the respondents about the claims made on the pack and tube and in a trade presenter prepared for use by sales representatives of the respondents in the promotion of the product. This led to discussions between the parties and culminated in the execution by them of a deed dated 20 September 1996 in which the respondents undertook to the applicant, without admissions, that they would not represent in trade or commerce that:
(a) toothpastes containing peroxide are damaging to human tissue;
(b) toothpastes containing peroxide are not safe;
(c)toothpastes containing peroxide are not gentle enough to be suitable for use on a daily basis;
(d) toothpastes containing peroxide are harsh;
(e) toothpastes containing peroxide cause abrasion of tooth enamel;
(f) toothpastes containing peroxide act solely by bleaching stains on the teeth;
(g)peroxide at the levels contained in Colgate-Palmolive’s CBSP toothpaste acts as a strong bleach;
(h)toothpastes other than MWT are not suitable for use every day;
toothpastes other than MWT cause abrasion of tooth enamel;
(j) toothpastes other than MWT are not safe.
The respondents also undertook in the deed, without admissions, that they would not use the words “harsh abrasives”, “peroxide” or “bleach” in advertising or other promotional materials for MWT in a disparaging and misleading or deceptive way.
After the execution of the deed, the respondents produced new wording on their pack and tube of MWT and arranged for the screening of the television commercial to which reference was made earlier. It is this revised wording and commercial to which the applicant objects and in respect of which interlocutory relief is claimed.
A description of the various forms of pack of the rival products and of the respondents’ television commercial is required. The pack which contains the applicant’s product CBSP states in large print that the product is new and that its name is “Colgate Baking Soda & Peroxide”, being a fluoride toothpaste.
In February 1997 the applicant launched another product known as the Colgate Sensation Whitening brand of toothpaste (“CSW”). CSW has been a successful product for the applicant. In the period to 30 June 1997 it had achieved net manufacturing sales of about $4,197,000. CSW is promoted as a toothpaste with an advanced whitening formula, which leads to whiter, shinier teeth, maximum cavity protection and fresh breath. The pack which contains CSW describes it by name as “New” “Colgate” “Sensation Whitening”, being a “fluoride toothpaste”.
The pack issued by the respondents, containing a tube of MWT, describes it as “Macleans Whitening” and as being a new product with Triclene and having various advantages. The particular matter of which the applicant previously complained before the execution of the deed was the statement on the back of the pack that MWT “Is gentle enough to use every day as it contains no harsh abrasives, bleaches or peroxide.” The essence of the complaint made by the applicant was that this statement would lead the reader to think that the applicant’s product, CBSP, being the market leader and therefore known to the buying public, did contain harsh abrasives, bleaches or peroxide and that these were harmful to health.
Following the execution of the deed the new pack adopted by the respondents for their new product contains on the back of it the following statement: “Macleans Whitening is gentle enough to use every day”; beside it are six small red squares with a white tick appearing in each square and opposite each square, are the following words as one reads down the back of the pack:
“No bleaches”
“No peroxide”
“Fights decay & plaque”
“Reduces tartar build-up”
“Long-lasting freshness”
“No harsh abrasives”
A statement of ingredients appears to the right of this section of the wording on the pack. Similar statements appear on the form of tube which is inside the pack. The parties agreed that peroxide is a bleach.
The applicant says that the effect of this advertising is to lead the reader to think that CBSP and CSW are products that are not gentle enough to use every day, are harmful to oral hygiene, contain bleaches, contain peroxide and contain harsh abrasives.
The television advertisement, of which the applicant complains, is used in a new television advertising campaign for MWT that was launched during the week commencing 14 July 1997 by the respondents, and is known as “the Angel campaign” or “Wings 4”. This description of the campaign arises from the picture which appears on the screen of a woman who, after using MWT, examines her teeth in a mirror which commence to reflect a brilliant white radiance, and there emerges a pair of wings folded on the back of the woman that commence to unfold.
The commercial comprises a 30 second commercial and a 15 second commercial, both used within the same commercial break. The 15 seconds commercial contains the impugned material. The 30 seconds commercial contains audio statements which do not refer to peroxide or harsh abrasives. The applicant has no objection to this commercial; but objects to the 15 second commercial on the basis that the viewer would be likely to think that peroxide and harsh abrasives are harmful to teeth and oral hygiene; and that CBSP and CSW contain peroxide and harsh abrasives and thus are harmful to oral hygiene.
The pictures and words of the 15 second commercial (as stated in the evidence) are as follows:
Video Audio The Commercial is set in a stylish, white, warehouse apartment with loft bedroom etc
We see a woman pulling off a white top as she changes to go out. We only see her from the front, or in close up.
Cut to bathroom where she reaches for a pack of Macleans Whitening.
We cut to a close up framing the words “Macleans Whitening”. The word “Whitening” then changes so we now see “Macleans Triclene”.
We cut to a close up of the woman as she begins to brush her teeth.
Then we zoom in on her teeth and match dissolve to an animated demo of the Triclene lifting stains
With the demo teeth now clean, we match dissolve to a close up of the woman with gleaming, white teeth
We’re looking over her shoulder as she checks her teeth in the mirror, and they start [to] radiate a brilliant white radiance.
As they do, we pull back to see a pair of beautiful wings, which have been folded on her back all along, gracefully unfold as if stretching.
Cut to exterior of the warehouse to see shafts of brilliant white shining from the windows.
Dissolve on pack and super: Are your Macleans showing?
Music: Varies to support action
FVO: Macleans Whitening ...
contains fluoride ...... plus Triclene ...
... but no peroxide.With daily brushing ...
... it gently breaks down stains ...
... to give you your whitest Macleans ever.No harsh abrasives either.
Macleans Whitening.
Pure white.Music: Macleans musical sting.
That is what the case is about.
The evidence before the Court, including technical and scientific evidence, shows the following:
hydrogen peroxide has been used in dentistry for more than 70 years to bleach teeth and, more recently, for more general oral hygiene functions;
all effective toothpastes contain an abrasive of some kind. Interestingly, in ancient times ground marble was added to dentifrices for its abrasive properties. Abrasion is a necessary and desirable property of toothpastes generally;
abrasives are used by all the rival products with which this case is concerned; but none of them are harsh abrasives in the sense of being harmful to teeth or oral hygiene;
CBSP, although containing peroxide, uses it at levels that are well below levels that could cause harm to teeth or oral hygiene; in other words the level of use of peroxide is accepted by its dental and scientific experts as not being harmful. CSW does not contain peroxide.
Taking first the reference to “no peroxide” on the pack and tube of MWT. The statement is true; so what is it that can be said to constitute misleading or deceptive conduct? The applicant’s case is put on two bases. First, it is said that although true, the statement by implication suggests to the reader that peroxide is harmful to teeth, so that toothpaste containing peroxide should not be used. Secondly, it is said that it carries the further implication that, not only is peroxide harmful to teeth but peroxide is used by the market leader, Colgate, that is the target of the advertising; so its toothpaste must be harmful to teeth.
With respect to the first basis, I accept that people have various attitudes to peroxide. Some people would regard it as harmful, others as probably or possibly harmful, still others that it is harmful if used to excess. There may be other attitudes, but these are some of them. People may hold these views generally or, with particular reference to teeth. The presence of the red square with the white tick against the statement of “No peroxide”, and the placement of that statement in a list of beneficial qualities of the product (such as “Fights decay and plaque”), suggests to my mind that the reader would think the respondents are saying it is desirable not to have peroxide in toothpaste; but beyond this the statement would mean different things to different readers. On balance, I think that there is a serious question to be tried about whether the statement does convey the implication that peroxide is not safe.
With respect to the second basis, it is obvious that CBSP does prominently market itself as containing peroxide. Since there is a serious question to be tried about whether the statement “No peroxide” conveys the implication that peroxide is not safe, there must also be a serious question to be tried about whether the statement implies that CBSP is harmful to teeth.
However, I fail to see how the “No peroxide” statement could carry any imputation in relation to CSW since that product does not contain any peroxide.
The statement on the pack and tube “No bleaches”, also containing the red square with the white tick, conveys, I think, essentially the same impression as the statement “No peroxide”; and I make the same comment with respect to it. I note, though, that the public’s link between ‘bleaches’ and CBSP would be weaker than between peroxide and CBSP and therefore the case on the second basis would be weaker.
The statement “No harsh abrasives”, also against the red square with the white tick, has been criticized by the applicant. The fact is of course that most, if not all, toothpastes contain abrasives of some kind in order to perform the function of cleaning teeth. Harsh abrasives, however, are more likely than not to be harmful to teeth. Hence, even if the statement suggests that harsh abrasives are harmful, that statement is correct.
The applicant argued that this statement carried the imputation that CBSP and CSW contain harsh abrasives. I find it difficult to accept that, in the absence of anything else, a mere representation that one product does not contain a harmful substance, is a representation that another product does contain that harmful substance. Of course the applicant argues that this inference can be drawn since it is the market leader and it relies on the other statements on the toothpaste tube and its pack. Nonetheless I find it hard to accept that that is sufficient to cause the statement to be misleading or deceptive. I do not find that there is a serious question to be tried on this issue.
The statement “MACLEANS WHITENING is gentle enough to use every day” seems to me by itself to be innocuous. When the whole of the pack and tube is examined and all the statements read together, it seems to me that it could not be misleading or deceptive, whether in isolation from the other statements on the pack and tube or together with them.
With respect to the statements in the television commercial of which complaint is made, I make substantially the same observations as I made above. That is, there is a serious question to be tried in relation to the representation that there is no peroxide in MWT but there is not a serious question in relation to the representation that MWT does not contain harsh abrasives.
I recognize that advertising, including comparative advertising, can be subtle and yet very effective to promote the interests of the advertiser and interfere with proper competition. When a company engages in comparative advertising, particular care is required to ensure the correctness of the advertising: Sterling Winthrop Pty Ltd v Boots Co (Australia) Pty Ltd (1995) 32 IPR 361 at 365; Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) 14 ALR 293.
The purpose of Part V of the Trade Practices Act is to prevent unfair trading practices and to promote fair competition in trade and commerce. The Court must be careful that it does not restrict competition unduly unless satisfied that the activities in question really do constitute unfair trade practices.
Taking all these matters into account, in my opinion, although there is a serious question to be tried on certain issues, the applicant’s case is not a strong one. I take this into account when considering the balance of convenience.
I make the same observations about a serious question to be tried with respect to the applicant’s case based on the deed.
I turn to the balance of convenience.
Whether there is a serious question to be tried and where the balance of convenience lies are generally not two distinct matters but interact in varying degrees depending upon a number of circumstances, including the strength of the applicant’s case in the sense of the likelihood that final relief will be granted.
The applicant has carried on business in Australia since 1921 and sold toothpaste here under the Colgate trademark since 1928. For more than 40 years the applicant has taken various steps to promote its toothpastes and to promote advances in dental clinical research, community awareness and education in oral hygiene. The applicant has established a fine reputation and goodwill in Australia for providing safe, effective and high quality products including its toothpaste and other oral hygiene products.
The applicant’s products, CBSP and CSW, are both fairly new products, having been on the market for just over one year and about six months respectively. I am satisfied that because both products have been on the market for only a short time they are vulnerable to disparaging advertising, particularly on the grounds that they may be harmful. People these days, including Australians, are very concerned about issues of health and safety of products. There is some risk that the alleged offending words on the MWT pack and tube and in the commercial may lead some consumers to think that the applicant’s products are unsafe or may be unsafe.
The current Angel commercial television advertising schedule of the respondent has been planned since May 1997 (that is the 15 second commercial). It is necessary to book television advertising campaigns weeks, sometimes months, ahead of time, and this is a factor that must be taken into account in favour of not granting interlocutory relief.
The respondents’ product has enjoyed significant success since its launch. It is the flagship of the Macleans brand of toothpaste; and sales of MWT are expected to drive the Macleans brand as a whole. More than $300,000 has been spent by the respondents in 1997 in advertising MWT, and increased sales have been experienced across the Macleans brand. The grant of interlocutory injunctive relief would have a significant effect on sales of both MWT and Macleans brand as a whole. But, if the operation of the injunction concerning printing on the packs and tubes is deferred until current stocks under the control of the respondents have been exhausted, this adverse effect would be reduced.
During the period that may be required to replace and restock MWT in new tubes and packs there will doubtless be a loss of momentum in the marketing of MWT and there would be a risk that the Macleans brand name would be damaged.
Overall, I am not persuaded that the balance of convenience favours the applicant. In my view it favours the respondents; hence no injunctions should be granted.
The motion for interlocutory injunctive relief is dismissed. I will hear brief submissions on costs.
I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lockhart
Associate:
Dated: 3 September 1997
Counsel for the Applicant: Mr R V Gyles QC
Mr T D BlackburnSolicitor for the Applicant: Mallesons Stephen Jaques Counsel for the Respondents: Mr S Robb QC
Mr K HowardSolicitor for the Respondents: Freehill Hollingdale & Page Date of Hearing: 15 August 1997 Date of Judgment: 3 September 1997
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