W.T.H. Pty Ltd (trading as Avis Australia) v Budget Rent a Car System Pty Ltd

Re: W.T.H. PROPRIETARY LIMITED (trading as AVIS AUSTRALIA)
And: BUDGET RENT-A-CAR SYSTEM PTY. LIMITED
No. G211 of 1984
(1984) ATPR para 40-479
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.

CATCHWORDS

Trade Practices - application for interlocutory injunction by competitor - large scale advertising campaign for television and newspapers - consumer protection - misleading and deceptive conduct - inducing a breach of contract between competitor and competitor's credit card holders.

Trade Practices Act 1974; s. 52

HEARING

SYDNEY

#DATE 4:7:1984

ORDER

ORDER that until the hearing and determination of these proceedings or until further order the Respondent by itself its servants and agents be restrained from:

(a) publishing, causing to be published, putting to air or causing to be put to air or otherwise advertising or causing to be advertised by any medium that portion of the advertisement described in Exhibits 4 and 11 ("the offending portion") described in the Schedule hereto or any colourable imitation of the offending portion which expressly or impliedly incorporates an offer of the kind described in sub-paragraph (b) hereof;

(b) publishing, causing to be published, putting to air or causing to be put to air or otherwise advertising or causing to be advertised by any medium any offer to exchange a Budget Card for a credit card issued by any other car rental company in Australia on substantially similar terms to those upon which an Avis Credit Card is issued or any offer to such effect;

(c) representing that the Budget Corp-Rate ID Card is a credit card;

(d) inducing holders of credit cards issued by the Applicant or by any other car rental company in Australia to deliver possession custody or control of such cards to the Respondent or its representatives.

ORDER that the Respondent be released from the undertakings given to the Court by its Counsel on 2 July 1984 and continued on 3 and 4 July 1984.
GRANT LIBERTY to apply generally on two (2) days' notice.
RESERVE the costs of the Application for interlocutory relief.

THE SCHEDULE

The portion of the advertisement which contained the statement "and by the way, if you happen to have one of their credit cards, we will give you $10 cash and a new Budget card for it" and the filmed portion of such advertisement showing a traveller arriving at the Budget desk, Mr. Ansett serving at such desk, and Mr. Ansett serving the traveller with the Budget card in exchange for $10 and a credit card on one of Budget's competitors.

JUDGE1

This is a dispute between two major motor vehicle rental companies. The applicant is W.T.H. Pty. Limited trading as Avis Australia (to which I shall refer for convenience as "Avis"). The respondent is Budget Rent-A-Car System Pty. Limited (to which I shall refer for convenience as "Budget").

Over about the last five years Budget has substantially incresed its share of the Australian motor vehicle rental market. The dispute arises out of an advertising campaign recently embarked upon by Budget to increase further its share of that market.
Avis seeks interlocutory injunctions to restrain Budget from advertising, on television and in the press, matter which is said to constitute misleading or deceptive conduct by Budget and therefore to contravene s. 52 of the Trade Practices Act 1974. Avis also seeks to restrain Budget from inducing credit card holders to breach their contracts with Avis.
Many affidavits have been read by the parties. No oral evidence was given. There is no dispute on the facts at this stage of the case, although the correct inferences to be drawn from some of the evidence is not the subject of agreement.
The major car rental businesses that operate throughout Australia include Avis, Budget, Hertz Rent-A-Car ("Hertz"), and Thrifty Rent-A-Car System Pty. Limited ("Thrifty"). Competition between car rental operators who conduct their businesses nationally is intense and all operators expend substanial sums of money on the advertising of their services.
Between 1959 and 30 June 1979, Avis was granted exclusive car rental authorities at all major and many minor airports, pursuant to the Airports Business Concessions Act 1959. Following the lodging of tenders called by the Minister of Transport, Budget was granted one of two national authorities pursuant to the Airports Business Concessions Act 1959 to conduct the business of hiring self-drive motor vehicles for a period of five years from 1 July 1979 at all major and many minor Commonwealth airports. Hertz was granted the other authority.
On 1 July 1979, Budget by itself and its licensees
established rental desks at 52 airport terminals, including all the major airports in Australia, pursuant to the authority granted by the Commonwealth and to contracts entered into with local authorities that also operate airports. The number of rental desks at airport terminals has now grown to 120. There is evidence that at the present time Budget holds about 55 per cent of the national motor vehicle rental market.
Following a further change in Commonwealth Government policy, as from 1 July this year there are to be four major car rental operators authorised to operate from Commonwealth airports. The four operators are Budget, Avis, Hertz and Thrifty. The change on 1 July 1984 has been much publicised and advertised.
There is evidence that Budget assumed that in the period leading up to 1 July 1984 the other car rental companies would advertise extensively and endeavour to take from Budget part of its share of the car rental market, so Budget asserts that it decided that it needed to ensure not only that it retained its market share but also that it increased that share. As part of that endeavour, Budget says that it was imperative for it to produce innovative and attractive marketing and advertising programmes.
Budget instructed its advertising agency to prepare an advertising campaign which would give effect to its wishes. Budget concluded that a flat daily rental rate for a large part of the Budget fleet of motor cars would be the best means of achieving its aims. Budget says that it was important that the advertising campaign upon which it proposed to embark would be linked to Budget's celebration of having operated from Commonwealth airports for five years, commencing with the breaking of Avis's exclusive airport coverage in 1979.
Budget says that the focal point of its campaign was an advertisement made for television which emphasised the flat daily rental rate of $35 offered by Budget to renters of models up to and including the Holden Commodore during the month of July. Budget says that the daily rate of $35 is particularly competitive, as the equivalent rates are $49 for Avis, $48 for Hertz and $43 for Thrifty in respect of a Holden Commodore or equivalent vehicle.
There is evidence from Budget that the advertising campaign is one planned for the month of July 1984 only. Budget says that because of the critical importance of 1 July to the car rental industry, the campaign was prepared on the basis that it would only be effective in the period immediately preceding and subsequent to that date. Budget says that if it is required by this Court not to publish the advertisements, which it says are an integral part of its campaign, it would be unable to devise in the time available to it a campaign which could take advantage of the 1 July 1984 changeover in airport operations of car rental operators.
There is evidence from Budget that its success has been due in large part to its ability to adapt its advertising techniques and marketing campaigns to changing circumstances in the market place. Evidence has been given by the General Manager of Budget by affidavit that he believes that Budget will suffer irreparable damage if its competitors are able to influence the market by their advertising campaigns without competing advertising from Budget, which would then have to fall back on television advertisements which it had run for some time and which it now regards as stale and inapplicable to the circumstances of 1 July 1984. He says that the harm caused by such an event at this time could never be measured, and that this is particularly so with the introduction of both Avis and Thrifty as national operators from all Commonwealth airports. The same gentleman has sworn that the ability of Budget's competitors to advertise the importance of 1 July 1984 to car rental operators with no competitive advertising campaign from Budget will result in Budget's market share being in fact eroded, which would subsequently be very hard to regain. He says that a loss in Budget's growth and momentum would have direct consequences not only with Budget's customers but also with its licensees and franchisees who are reliant upon Budget to meet the new competition at Commonwealth airports. Over 80 per cent of Budget's advertising expenditure is on television. Television is the major medium for Budget marketing.
On Wednesday, 27 June last an advertisement appeared on a Melbourne television channel advertising Budget and its new proposals. The same advertisement was screened on Channel 10 in Sydney on Thursday, 28 June. It runs for 30 seconds. I have seen it in court on more than one occasion.
Avis asserts that the conduct of Budget in putting the advertisement to air constitutes misleading or deceptive conduct in that:-

(a) It represents that the Budget card described in the

advertisement is a credit card, which it is not;

(b) It represents to Avis cardholders that by surrendering their

Avis cards to Budget representatives upon receipt of $10 in cash and a Budget card they are not in breach of their contracts with Avis and are immune from suit from Avis;

(c) It represents that Avis service desks are not manned at all,

or if manned, are manned infrequently; and

(d) it portrays the Avis service desk as manifestly inferior in

quality and size to the Budget desk, thus creating a false impression about Avis and its services.

A further ground of complaint, based on the associated jurisdiction of this Court, is that the conduct to which I have briefly referred is said to constitute the tort of inducing Avis credit card holders to break their contracts with Avis. This complaint is based on the contract between Avis and its credit card holders which provides that each Avis credit card remains the property of Avis and is not transferrable, it must be returned to Avis upon request and must be kept safe by the cardholder.
Budget replies to Avis's complaints by asserting amongst other things that:-

(a) the advertisment does not represent that the Budget card portrayed in the advertisements is a Budget credit card. An Avis carholder upon seeing the advertisment would, so it is said, realise that it takes days or perhaps weeks fora company to process an application for a credit card, so that it would be unlikely for that person to think that what he receives across the counter from Budget upon presentation of his Avis card would be a Budget credit card;

(b) the advertisement does not encourage the Avis cardholder to break his contract with Avis;

(c) by surrendering the Avis cards to Budget representatives, Avis cardholders are appointing Budget as their agent for the purpose of returning the cards to Avis and safeguarding them in the meantime;

(d) the advertisement does not represent that Avis desks at airports are not manned or are infrequently manned, and, even if it does, it is the fact that they are infrequently manned. Further it is said by Budget that this aspect of the advertisement is mere puffing;

(e) any portrayal of the Avis desks in the advertisement as being inferior in quality or size to that of Budget is mere puffing.

Avis sought and obtained from another Judge of this Court on last Friday, 29 June, injunctions restraining Budget from engaging in the impugned conduct. Those injunctions containued until Monday, 2 July. I commenced the hearing of this application for interlocutory relief on Monday afternoon, and the case was part-heard at the conclusion of the court's business that day. I accepted undertakings to the Court proffered by counsel for Budget and granted an injunction in respect of a matter not covered by those undertakings, which in essence continued the injunctions granted last Friday until yesterday. I resumed the hearing of the matter yesterday afternoon and, at the conclusion of the hearing yesterday, substantially the same procedure was followed, thus holding the position until today.
As this is an application for interlocutory injunctive relief, I am not, of course, deciding any of the issues on a final basis. My first inquiry is to determine whether Avis has established a prima facie case in the sense outlined in Beecham Group Limited v. Bristol Laboratories Pty. Limited (1968) 118 CLR 618, or, to put what is in my view substantially the same test, as expounded by the House of Lords in American Cynamid v. Ethicon Limited (1975) AC 396, whether there is a serious question to be tried. Sometimes these tests are seen to be different in their character or operation. If there are any substantial differences between them, which I doubt, they do not matter in this case as my conclusions would be the same whichever test be applied. The balance of convenience must be examined if I reach a conclusion favourable to Avis on the first question, although it must not be forgotten that the balance of convenience is often interwoven with the earlier question whether there is a prima facie case or whether there is a serious question to be tried.
The television advertisement in question requires some brief description. It lasts for 30 seconds and there are in the advertisement three simulated airport desks, one for Budget, one for Avis and so far as one can tell one for Hertz - possibly a fourth desk is in the background. Budget is the prominent desk which faces the viewer. A voice-over announces that "It is the biggest arrival at airports around Australia in five years". Mr. Robert Ansett walks in and stands behind the Budget desk. To the accompaniment of much clapping and cheering he produces a display card featuring the $35 flat rate promotion and places it upon the Budget counter.
Mr. Ansett then says, "Budget is celebrating five years at airports and for the month of July we are offering you a choice of a Holden Commodore, Camira or Gemini for just $35 a day. We are only too happy for you to compare our prices with our competitors whenever they arrive. And by the way if you happen to have one of their credit cards we will give you $10 and a new Budget card for it". At or about this point a traveller arrives at the Budget desk and Mr. Ansett begins to serve him with what is described in the text of the advertisement as a "trade-in"; that is, the customer trades in the rival rental company's credit card and receives $10 cash and a Budget card.
Mr. Ansett is seen holding the $10 and the credit card and the voice-over announces, "More than ever Budget drives your dollar further".
Impressions gained by the viewer of a television advertisement such as this are not only from the spoken word spoken but from the visual images in conjunction with the spoken word; it is the overall impression that matters.
In my opinion, Avis has established a prima facie case that the advertisement suggests to a viewer (I am content to assume for present purposes that he is an Avis card holder) that he may exchange his Avis card for a Budget card entitling him to use the Budget credit facilities when seeking to rent a motor vehicle from Budget.
It is common ground that the card which the Avis card holder will receive from Budget, on presentation of his Avis card, is not a Budget credit card but a card styled "Budget Corp. I.D. card" which is an identification card that entitles its holder to rent a vehicle from Budget at what is called the "CorpRate" i.e. a discount of 15 per cent on normal rates. It does not entitle the holder to use Budget credit facilities. Indeed, the Avis card holder must complete a Budget application form for a credit card and within a short time, after it has been processed, he will receive a Budget credit card.
Although the evidence was not, in its earlier stages, at all free from ambiguity, it seemed to me that by the time it had concluded it was plain that Budget's policy is, at least now, to automatically issue, within about five days of the form of application being signed, a Budget credit card to a person who surrenders a rival company's credit card and who receives his $10.
However, there is no suggestion that the Budget Corp card which the Avis card holder receives in return for his surrender of the Avis card and receipt of $10 in cash is itself a credit card. A prima facie case has been established that the advertisement offers the Avis card holder something which he does not in fact receive upon surrender of his Avis card at the Budget counter.
A person seeing the television commercial would think that, if he held an Avis credit card, he would be able to surrender it to a Budget representative and receive in return $10 cash and a Budget credit card entitling him to the benefit of Budget's credit facilities.
In my opinion, a prima facie case has been established that this conduct of Budget is misleading or deceptive conduct or conduct likely to mislead or deceive and is therefore in contravention of s. 52 of the Trade Practices Act.
I should add that the advertisement applies not only to Avis cards but to the cards of any other motor vehicle rental companies in competition with Budget.
Also, in my view a prima facie case has been made out that, by offering a Budget card and $10 cash in return for an Avis card, Budget is inducing the viewers of the television commercial who hold Avis cards to breach their contract with Avis. The terms of that contract are set out in the form of application which the Avis card holder signs. Some of those terms are referred to or summarized on the back of the Avis credit card itself. These include terms that the Avis card is not transferable, remains the property of Avis, must be returned to Avis upon request, and must be kept safe by the card holder. A prima facie case has been established that these conditions are inconsistent with the act of the card holder surrendering his card to Budget representatives in the circumstances encouraged by the television advertisement.
Counsel for Budget submitted that the proper conclusion from the relevant circumstances was that each Avis card holder who surrendered his Avis card to a Budget representative was appointing Budget his agent for the purpose of returning the card to Avis. Whilst the point is not free from argument, I think that this is an unreal analysis of the facts and not one which is likely to succeed at the final hearing. However, I have formed no concluded view on the matter.
After the hearing had progressed to a point where the evidence was well advanced, counsel for Budget informed the court that Budget was prepared to proffer the following undertakings to the court:

"1. It will not advertise:

(a) on television its offer to "trade-in" credit cards of its competitors without stating clearly and prominently as part of the advertisement at the time the "trade-in" is shown to occur the words "this will be a corporate ID card. Within seven days you will receive your Budget credit card";

(b) in the press its offer to "trade in" credit cards of its competitors without stating as part of the advertisement:

(i) that the replacement Budget credit card will be issued within seven days; and

(ii) that it will return those cards to the company that issued them.

2. It will instruct its staff to advise all persons handing in the cards of one of its competitors in return for a Budget card that it will take up to seven days before their replacement Budget CorpRate credit cards are delivered to them.

3. It will deliver up to its respective competitors all credit cards which were issued by those competitors and handed in to Budget after receipt of those cards at Budget's head office in Melbourne.

4. It will issue to each competitor's card holder a Budget CorpRate credit card within seven days of receipt by Budget at its head office of an application signed by the card holder and setting out his billing name and address and no more."

There are in my view various difficulties with the undertakings which were referred to in argument, one being that undertaking 1(a) could be complied with by words appearing upon the screen and not resulting from any alteration or amendment to the film or the sound-track. I have serious reservations about this method of informing the viewer of the relevant words especially as the advertisement lasts only for 30 second and a lot happens in that time. Also, the initial written form of the undertakings handed to the Court by counsel for the respondent was changed on two later occasions during the course of argument. I do not say this critically, but it leads me to pause carefully in all the circumstances of the case before accepting the undertakings. I am strengthened in taking this view when it is remembered that the fact that undertaking 1(a) would be complied with only by words appearing on the screen and not by amendment to the film or sound-track, did not become apparent until towards the end of the proceedings before me.
Having carefully considered the terms of the undertakings that are proffered I am not satisfied that the course suggested by Budget would overcome the difficulties with the advertisement to which I have referred; particularly the inducement to Avis card holders to breach their contracts with Avis.
It is true that the contracts between Avis and its card holders are terminable at will and that Budget cannot be restrained from trying to induce Avis card holders to leave Avis and become Budget card holders; but these matters are not germane to the complaints of the applicant. Even if they could provide an answer to the complaints of the applicant, they do not in my view infringe the prima facie case that has been established and are more appropriate to be dealt with at the final hearing.
In my opinion Avis has also established a prima facie case that the television advertisement represents to Avis card holders that, by surrendering their Avis cards to Budget representatives, upon receipt of the $10 cash and a Budget card they are entitled in law to do so and will not be in breach of their contractual commitments to Avis.
I should emphasise that the television advertisment is not confined to Avis, or Avis cardholders. It encourages the card holders of any motor vehicle rental company in competition with Budget to adopt the course suggested in the advertisement.
I need not deal separately with the proposed newspaper advertisement of Budget that is attacked by Avis. It suffers from certain of the same basic problems as does the television advertisement - though not all of them.
I turn to the balance of convenience. Budget says that it will lose the benefit of its proposed advertising campaign if injunctions are granted. It has spent a great deal of money on its campaign and, if enjoined, it says it will have to resort to, in effect, old advertisements which are inappropriate to its proposed campaign.
Budget says that it will not increase its market share and possibly lose some of the share already gained. I have no doubt that Budget will suffer inconvenience if restrained by injunction. Perhaps Budget will have to resort to second-best in its advertising campaign. I am not satisfied, however, that the dire consequences foreshadowed by Budget will necessarily result. It will, of course, have the benefit of Avis' undertaking as to damages. There is evidence that Avis will suffer harm if interlocutory injunctive relief is refused. I accept that Avis may lose some of its credit cardholders to Budget if Budget's conduct continues unrestrained and that Avis may suffer some loss of market share.
In my opinion, the public interest, not merely the private interests of Avis and other motor vehicle rental companies, overrides any inconveniences or damage to Budget that it may suffer consequent upon the granting of injunctive relief. Also it must be remembered that it is Budget which is seeking to disturb the status quo. I do not think it right that Budget should reap advantage at the expense of its competitors by engaging in what is prima facie misleading and deceptive conduct and unfair competitive behaviour.
There was discussion between counsel and the Bench whether any injunctions granted, although interlocutory, would have a final effect in practice. This is a not uncommon occurrence in matters of this kind. It was common ground throughout the hearing that all the Court was hearing was an application for interlocutory, not final, relief. However, I should say that I have formed the view that Avis' case is on the stronger, not the weaker, side.
I formed the impression that Budget has come a long way since 1979 when it was granted one of two national authorities to conduct the business of hiring self-drive motor vehicles at Commonwealth airports. Its market share apparently now stands, as I have said, at 55 per cent. It has achieved this spectacular result in the fact of competition and due to energy, force and imagination of those who control its affairs. Advertising has played a key role in its success.
With the advent of a new era operative from last Sunday, Budget will be one of four major car rental operators authorised to operate from Commonwealth airports. It is natural that Budget wishes to continue its forward march and further enhance its business and increase its market share. But, as the market leader which it has become, in my view it should observe, not ignore, proper standards of conduct in its advertising and other commercial activities. Indeed, it could be playing a role in setting the proper standards of behaviour in the relevant part of the industry.
The highly competitive nature of the motor vehicle rental business may bring those engaged in it close to the edge of misleading or deceptive conduct, but they should not cross the fine line that divides such conduct from fair competitive behaviour.
My remarks are in the context of the Trade Practices Act - in particular s. 52 - and are not intended to make judgments on matters of commercial morality unrelated to the issues in this case. It is not for the courts to do that. Whether inducements to holders of one company's credit cards to "trade them in" for a rival company's cards upon payment of a small sum of money for the purpose of gaining further business, is conduct acceptable to the Australian community today is for others to judge.
A circular dated 22 June 1984 from Budget to its staff describes the television advertisement, the subject of this case, as something which "will deliver the final KO blow to Avis, Hertz and Thrifty". Budget staff are encouraged to "beat the hell out of the competitors". Notwithstanding the racy style of this document it is an interesting barometer of Budget's attitude towards its new advertising campaign in which the television advertisement plays a critical role. Budget has, in my view, gone too far. I propose to restrain it from doing so.
However, I do not wish to see Budget losing any benefit from its proposed advertising campaign except what is necessary to excise the offending elements. If Budget decides to amend its campaign, in particular its television and proposed newspaper advertisements, but wishes to have the court's approval to those amendments rather than run the risk of contempt, I am prepared to consider the material as amended and determine whether it would infringe the Trade Practices Act or violate any of the rights of Avis or its card holders. Accordingly, I will give leave to Budget to restore the matter to the list on two days notice generally and in particular for this purpose.
I do not propose at the moment to make formal orders - I will stand the matter down until later to-day so that the parties may bring in short minutes of order.

[1984] FCA 239

04 JULY 1984