September 19, 2014

Advertising on the Internet — Recent Issues

This article was first published in the Internet Law Bulletin 2013 17(7) at 174.

Take-away tips

  • When reviewing advertising for legal compliance consider:
    • Does the advertising have a dominant message?
    • Are there any conditions that impact the dominant message and if so are they sufficiently clear and prominent?
  • For internet advertising, it is not sufficient that a consumer can “click” on the advertisement to learn about any conditions that vary the dominant message.

Introduction

By now many of you have will have heard about the High Court’s decision in the long running misleading advertising dispute between the Australian Competition and Consumer Commission (ACCC) and TPG Internet Pty Ltd (TPG).  In its decision handed down on 12 December 2013,1 the High Court reinstated a $2 million pecuniary penalty imposed on TPG for a misleading advertising campaign about TPG’s unlimited broadband bundle.

The 4—1 majority judgment sent a clear message to advertisers to be careful in ensuring that the dominant message of their advertising and marketing is not misleading and deceptive.  Advertisers cannot always rely on the fine print of an advertisement to avoid liability under the Australian Consumer Law (ACL), where the dominant message of an advertisement may be considered misleading or deceptive.

TPG’s multimillion dollar advertising campaign consisted of advertising in various forms of media, including online.  So, what does this decision mean for businesses advertising on the internet?

Background

In late September 2010, TPG launched a substantial and extensive advertising campaign in relation to its broadband Internet product with unlimited downloads know as “Unlimited ADSL2+”.  The campaign was run in various different mediums including television, radio, print, billboard and internet advertising, at a total cost of $8.9 million.  The internet campaign appeared on TPG’s website and a number of third party websites.

TPG’s advertising campaign ran in its initial form from late September 2010 until about 7 October 2010, when TPG implemented some changes to the advertising as a result of correspondence received from the ACCC.  The changes were to include details about the set-up charges for TPG’s broadband Internet product and to make the minimum price more prominent in TPG’s advertisements.  TPG’s revised advertising ran from around October 2010 until November 2011.

The main feature of the advertisements was the statement “Unlimited ADSL2+ for $29.99 per month”.

The more detailed terms and conditions of TPG’s broadband Internet product and service were less prominently displayed in the advertising.  The manner in which the terms and conditions were displayed varied depending on the advertising medium.

The ACCC commenced proceedings against TPG claiming “that TPG represents in each of the advertisements that the Unlimited ADLS2+ broadband internet service could be acquired at a costs of $29.99 per month:”

  • without obligation to acquire any additional service;
  • without obligation to pay any additional monthly charge; and>
  • without obligation to pay any up front charges.2

The ACCC alleged that these representations are misleading and deceptive as the $29.99 per month was only available to consumers who bundled the broadband service with a home phone service for a total of $59.99 per month.  In addition, there was a setup fee of $129.95 on a 6 month contract and a $20 deposit required.

Due to the date span of the advertising campaign, the advertisements published before 1 January 2011 were subject to the provisions of the Trade Practices Act 1974 (Cth) (TPA) while the advertisements published from 1 January 2011 on were subject to the ACL.  The Courts treated the relevant provisions from each piece of legislation as essentially the same.  For ease of reference we refer only to the relevant provisions from the ACL unless otherwise specified.

The ACCC alleged that the advertising contravened ss 18, 29(1)(i) and (m) and 48 of the ACL.

Federal Court Decision3

At first instance the trial judge, Murphy J, found that the majority of the advertisements were misleading and deceptive in contravention of ss 18 and 29 of the ACL.  His Honour also found that that some of the initial advertisements failed to prominently display the total price of the service in contravention of s 53C of the TPA.

In making these findings, Murphy J considered whether the representations pleaded by the ACCC were conveyed and, if so, were they misleading or deceptive or likely to mislead or deceive.  Murphy J stated that “both of these issues must be considered by reference to the class of consumers likely to be members of the target audience.  It is necessary to isolate the ordinary or reasonable member of the target audience and consider the characteristics of this person.”4

Detailed consideration was given by Murphy J to the level of knowledge regarding the broadband services to be imputed to the relevant target audience.  In considering whether the reasonable consumer would anticipate that the advertised offer was bundled with another service, he found that in his view “whilst bundling is an available option, the array of available internet options is such that the ordinary or reasonable consumer would not have a starting assumption about the service.  He or she can be expected to simply rely on the advertisement for relevant information as to the type of service offered.”5  However, he accepted that the ordinary or reasonable consumer would be aware that set-up fees are usually charged.

Murphy J took the view that given the extensive reach of the advertising campaign the advertisements needed to be looked at collectively as well as individually.  Also, that advertisements in different media need to be considered in the context of that medium. He went on to state that consideration of whether the representations alleged by the ACCC have been conveyed “involves consideration as to whether the advertisements have a dominant message”,6 and that, “Identifying the dominant message is an important first step in determining what representations are made by an advertisement, as a consumer may take in only this general thrust.”7

His Honour found that in all the advertising, including the internet advertisements, there was a dominant message and that dominant message was that TPG’s broadband Internet product cost only $29.99 per month.  Murphy J held that the conditions on obtaining this price, including payment of an additional $30 per month to rent a home telephone line, were not part of this dominant message.

The question then became whether the false impression created by this dominant message is “corrected or qualified by other information in the advertisements”.8  For the majority of the various advertising mediums and forms of the advertisements, Murphy J found that the false impression created by the dominant message was not corrected.

In considering the internet advertising, TPG submitted that a consumer could “click” through from the advertisement and get all the relevant information necessary to clarify the product offering and the specific terms and conditions of the offer.  Murphy J did not agree with TPG’s submission, and considered that TPG’s submission was relevant to whether the advertisements were deceptive and/or misleading, stating that “It is well established that if an advertisement is misleading, the fact that the consumer will learn the true position prior to entering a contract does not mean that there has been no contravention of the Act.  It is not to the point that any misleading impression created by an advertisement may or will be corrected before any contract is made. The misleading conduct occurs at the time of publication”.9

The internet advertisements included the following qualifying statements in smaller font “when bundled with TPG home phone line rental ($30 per month)” or similar.  As regards to this disclaimer in relation to television advertisements, Murphy J found that this statement was unclear.  In order to be clear Murphy J held that the disclaimer should have more precisely stated that there was an “extra $30 per month”, or an “additional $30 per month” or to state the full price of $59.99 a month.  He found that the failure to do so was important in determining the impression conveyed in the advertisements.

Full Federal Court Decision10

TPG appealed the first instance judgment.  On appeal to the Full Federal Court, the Full Court overturned the majority of the trial judge’s findings and held that in all but some limited cases the advertising was not misleading or deceptive.11
In making these findings the Full Court emphasized that “it is necessary to look at the whole of the advertisement in its full context”.12  The Full Court also took the view that relevant consumers would understand that these types of products could be “bundled” or “stand-alone”.  They stated that they did not believe the “dominant message” approach taken by Murphy J was correct and they believed it to have “led him into error”.13

The Full Court found that the approach taken by the trial judge, failed to take into account the “attributes of the hypothetical reader or viewer”14 and that “the consumer must be taken to have read or viewed the advertisements with the knowledge of the commercial practices of bundling and setup charges”.15

High Court Decision16

The ACCC appealed the Full Court’s judgment to the High Court.
On appeal to the High Court, the High Court held that the Full Court erred in its finding and reinstated the trial judge’s finding that the advertising was misleading and deceptive in contravention of the ACL.

The High Court found that “the primary judge was correct to attribute significance to the ‘dominant message’ presented by TPG’s advertisements” 17 and the Full Court erred in finding otherwise.  A consumer might only absorb the general thrust or “dominant message” of the advertisement and would not pay particular attention or have regard to the smaller fine print and details.  The High Court held that the relevant question was not whether consumers were induced to enter into a contract with TPG, but rather whether it would cause consumers to contact TPG rather than one of its competitors on the basis of an “erroneous belief engendered by the general thrust of TPG’s message”.18  Accordingly the High Court reinstated the $2 million pecuniary penalty imposed by the trial judge.

Conclusion

While the trial judge and the Full Court have described their analysis of the advertising in different terms, there seems to be limited difference between their respective analysis.  Both Courts accept that a consumer may only absorb the “general thrust” of the advertisements and the High Court agrees.  The real difference between the application of the analysis of the trial Judge and the Full Court seems to be, the level of knowledge attributed to the ordinary or reasonable member of the target audience.19

The trial judge adopted the view that relevant consumers are unlikely to make any assumptions as to whether the product might be bundled; while the Full Court adopted the view that the relevant consumer is likely to view the advertisement with knowledge of the commercial practice of bundling.

The difference adopted by the Courts in attributing different degrees of knowledge to consumers, clearly demonstrates the impressionistic and subjective nature of considering whether an advertisement is misleading and deceptive and the difficulties that can arise in making such an assessment.

What is clear from the High Court’s decision is that companies and advertisers must be mindful of the “dominant message” of their advertising in assessing whether their advertisements could be considered misleading or deceptive.  Where substantive conditions apply to the overall or dominant message, companies and advertisers should carefully consider whether those conditions are clearly and prominently advertised; and whether consumers are averted to those conditions in the advertisement.

Footnotes
1.Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 304 ALR 186; 88 ALJR 176; [2013] HCA 54; BC201315601.
2.Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2011] FCA 1254; BC201108516 at 6.
3.Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2011] FCA 1254; BC201108516.
4.Above, n 2, at 16.
5.Above, n 2, at 31.
6.Above, n 2, at 41.
7.Above, n 2, at 43.
8.Above, n 2, at 57.
9.Above, n 2, at 114.
10.TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277; [2012] FCAFC 190;BC201210930.
11.TPG did not appeal the trial judge’s findings in relation to contravention of s 53C of the TPA. The Full Court also reduced the penalty to $500,000.
12.Above, n 10, at 84.
13.Above, n 10, at 104.
14.Above, n 10, at 105.
15.Above, n 10, at 106.
16.Above, n 1.
17.Above, n 1, at 52.
18.Above, n 1, at 48.
19.Gageler J also makes this point in his dissenting judgment: Above, n 1, at 75.