High Court bundles up TPG with a $2 million penalty for misleading advertising

The High Court’s reasons for judgment in ACCC v TPG Pty Ltd [2013] HCA 54 serves as a warning to advertisers that campaigns designed to emphasise the most attractive component of an offer must be carefully designed so not to have the tendency to mislead and deceive consumers.  The lesson for advertisers is to ensure that the dominant or headline message of any commercial incorporates the key terms of the offer.

The subject-matter of the proceedings involved a multi-media advertising campaign by TPG for its ADSL2+ internet services.  The service was offered at the eye-catching price of $29.99 per month, yet much less prominently throughout the impugned advertisements were references to extra costs, including that the service was only available when bundled with a home telephone service for an additional $30.00 per month and that there was an initial set-up fee of $129.95.

The ACCC brought proceedings alleging the advertisements breached ss 52 and 53(c) of the Trade Practices Act 1974 (Cth) as it then was (now ss 18 and 29 of the Australian Consumer Law).

The primary judge upheld the ACCC’s claim and imposed a penalty of $2 million.  The primary judge’s approach focused on the “dominant message” of the advertisements to members of the class of consumers to whom they were directed.  That dominant message was the most attractive component; by contrast, the information about TPG’s bundling condition was not so clear and prominent as to correct the misleading impression of the dominant message.

The Full Federal Court criticised this “dominant message” approach.  It held that this approach did not take into account the need to have regard to the attributes of the hypothetical reader or viewer of the advertisements.  One such attribute was that many members of the relevant class of consumers would be familiar with internet services being bundled with home telephone services and would also know that set-up charges are often applied.   In analysing the advertisements through this prism, the Full Court reversed almost all of the primary judge’s findings and reduced the penalty to $50,000.

The primary judge’s assessment was restored by the High Court.  The majority (French CJ, Crennan, Bell and Keane JJ) said that the Full Court erred in holding that the primary judge was wrong to regard the “dominant message” of the advertisements as of crucial importance.  The very nature of this type of advertising was to “intrude on the consciousness of the target audience” such that that audience would not necessarily pay close attention to it, but would “absorb the general thrust”.   It was this process of viewing the advertisements which gave them a tendency to mislead; the advertisements selected some words for emphasis and “relegated the balance to relative obscurity”.

In those circumstances, the majority of the High Court held it was not open to the Full Court, in the proper exercise of its appellate function, to hold that TPG’s advertisements were not misleading.  The primary judge’s orders and penalty of $2 million was restored.

King & Wood Mallesons’ In Competition Blog has also prepared a useful summary of the decision which can be accessed here.