In Australian Competition and Consumer Commission v TPG Internet Pty Ltd[2 013] HCA 54 the High Court of Australia upheld a $2million penalty imposed on TPG for misleading advertisements relating to its multi-media advertising campaign on television, radio, internet and print for its ADSL2+ service in 2010-2011.
The TPG advertisements prominently displayed the offer to supply broadband internet ADSL2+ service for $29.99 per month. Much less prominently, the advertisements qualified this offer, stating that it was made on the basis that the ADSL2+ service was available only when bundled with a home landline telephone service for an additional $30.00 per month (with a minimum commitment of six months). In addition, TPG required the consumer to pay a setup fee of $129.95 plus a deposit of $20.00 for telephone charges.
According to the High Court the "dominant message" of the advertisements is of crucial importance.
It agreed with the trial judge who decided that "each advertisement had the same dominant message, namely: "Unlimited ADSL2+ for $29.99 per month". His Honour found that the "ordinary or reasonable consumer taking in only the dominant message would have the impression that the entire cost of the service is $29.99 per month, with no other charges and no obligation to acquire another service"; and the balance of the advertisement which contained that information was not given sufficient prominence to counter the effect of the headline claim".
The High Court majority said:
" in this case, the advertisements were presented to accentuate the attractive aspect of TPG's invitation relative to the conditions which were less attractive to potential customers. That consumers might absorb only the general thrust or dominant message was not a consequence of selective attention or an unexpected want of sceptical vigilance on their part; rather, it was an unremarkable consequence of TPG's advertising strategy. In these circumstances, the primary judge was correct to attribute significance to the "dominant message" presented by TPG's advertisements. ...
It may be accepted that if the hypothetical reasonable consumer is taken to know that ADSL2+ services may be sold as part of a bundle with telephony services, then, if he or she brings that knowledge to bear in a conscious scrutiny of the terms of TPG's offer, he or she might be less likely to form the impression that the offer was of an ADSL2+ service available without a requirement to take and pay for an additional service from TPG. But the circumstance that many consumers might know that ADSL2+ services are commonly offered as a "bundle" was not apt to defuse the tendency of the advertisements to mislead, especially where the target audience is left only with the general thrust or dominant message after the evanescence of the advertisement."
In respect of the penalty the High Court majority said:
"General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct. TPG's campaign was conducted over approximately 13 months at a cost to TPG of $8.9 million. It generated revenue of approximately $59 million, and an estimated profit of $8 million. TPG's customer base grew from 9,000 to 107,000 during this period, although it cannot be said that this was at the expense of TPG's competitors....
The pecuniary penalty fixed by the primary judge did not exceed that which might reasonably be thought appropriate to serve as a real deterrent both to TPG and to its competitors."
Although the High Court reached its decision by a 4-1 majority, 3 judges of the Full Court of the Federal Court had reached the opposite result in allowing an appeal from the trial judge who imposed the original $2million penalty.
It is likely that the ACCC will use the principles when examining ads for insurance, banking and energy products.
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Posted 10th January 2014 by David Jacobson in Marketing, Web/Tech