ACCC v Tel.Pacific Limited

[2009] FCA 279

Federal Court of Australia|2009-03-30|Before: Gordon J

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Source facts

Court

Federal Court of Australia

Decision date

2009-03-30

Before

Gordon J

Source

Original judgment source is linked above.

Judgment (85 paragraphs)

Tel.Pacific Limited ("Tel.Pacific") from at least May 2007 until the date of this order, in trade or commerce: (a) engaged in conduct that was misleading and deceptive or likely to mislead and deceive, in contravention of s 52(1) of the Trade Practices Act 1974 (Cth) ("the Act"); (b) in connexion with the supply or possible supply of services or in connexion with the promotion of the supply or use of services, falsely represented that the services were of a particular value, in contravention of s 53(aa) of the Act; (c) in connexion with the supply or possible supply of services or in connexion with the promotion of the supply or use of services, represented that the services had performance characteristics or benefits that they did not have, in contravention of s 53(c) of the Act; and (d) engaged in conduct that was liable to mislead the public as to the nature, characteristics and suitability for their purpose of services in contravention of s 55A of the Act, by publishing advertising material in relation to each of: (i) the "hello India" pre-paid phone card; (ii) the "hello China" pre-paid phone card; (iii) the "hello Middle East" pre-paid phone card; (iv) the "UTSAV" pre-paid phone card; and (v) the "Voice Thailand" pre-paid phone card, (copies of which are attached as Annexures A to E) ("the Advertising Material"), which contained statements including "No Connection Fee[s]" and/or "Flat Rate" and thereby represented that no fees other than timed call charges applied to use of the cards (the "No Fee Representation"), without disclosing or adequately disclosing that, in fact, service fees, disconnection fees and surcharges applied to those cards.

Tel.Pacific, from at least May 2007 until the date of this order, in trade or commerce: (a) engaged in conduct that was misleading and deceptive or likely to mislead and deceive, in contravention of s 52(1) of the Act; (b) in connexion with the supply or possible supply of services or in connexion with the promotion of the supply or use of services, falsely represented that the services were of a particular value, in contravention of s 53(aa) of the Act; (c) in connexion with the supply or possible supply of services or in connexion with the promotion of the supply or use of services, represented that the services had performance characteristics or benefits that they did not have, in contravention of s 53(c) of the Act; and (d) engaged in conduct that was liable to mislead the public as to the nature, characteristics and suitability for their purpose of services in contravention of s 55A of the Act, by publishing advertising material in relation to each of: (i) the "hello India" pre-paid phone card; (ii) the "hello China" pre-paid phone card; (iii) the "hello Middle East" pre-paid phone card; (iv) the "UTSAV" pre-paid phone card; and (v) the "Voice Thailand" pre-paid phone card, (copies of which are annexed at Annexures A to E), which contained statements to the effect that a stipulated number of minutes of calls was available on that card and thereby represented that users can use the card for more than one connection and, in doing so, will be able to achieve the total stipulated call duration for the location and type of connection (landline or mobile) specified (the "Call Duration Representation"), without disclosing or adequately disclosing that, in fact, the stipulated call duration could only at best be achieved if one continuous phone call were made, that calls were charged in incremental periods and that surcharges, other additional charges or higher rates may be payable in respect of certain calls, thereby diminishing the value of the card and, therefore, the number of available minutes.

SCHEDULE 4 Federal Court declares Tel.Pacific engaged in false, misleading and deceptive conduct in advertising its pre-paid phone cards Following legal action by the Australian Competition and Consumer Commission (ACCC), the Federal Court of Australia declared Tel.Pacific Limited (Tel.Pacific) made false, misleading and deceptive representations in contravention of sections 52, 53(aa), 53(c) and 55A of the Trade Practices Act 1974 * (TPA). Tel.Pacific engaged in the offending conduct over a sustained period of time in connexion with statements it made in advertising for the sale of various pre-paid phone cards including its hello India, hello China, hello Middle East, UTSAV and Voice Thailand cards. The Court declared that Tel.Pacific's conduct contravened the TPA because it represented in relation to certain phone cards that no fees other than timed call charges would apply when this was not the case. With some cards, service fees were charged at regular intervals from the date of activation, regardless of usage. Also, disconnection fees were charged for calls beyond certain durations and surcharges applied for calls to certain countries. The Court also declared Tel.Pacific contravened the TPA because it represented that certain phone cards would have a specific number of minutes call time when this was not the case. In some instances, the total stipulated call durations could at best only be achieved if one continuous call was made. The ACCC alleged it was neither practical nor realistic for users to be able to achieve the advertised call duration as in one case it would require the consumer to make a continuous call of over 33 hours. Further, calls on certain cards were charged in incremental periods, diminishing the total number of minutes available for use of the card for multiple calls. Also surcharges, other additional charges or higher rates were payable in respect of certain calls diminishing the value of the card and number of minutes available. Another factor was that service fees and disconnection fees applied to multiple uses of the card diminishing the value of the card and number of minutes available. The Court made orders that restrained Tel.Pacific from engaging in similar conduct for a period of 2 years, required it to publish this notice and to implement a trade practices compliance program and to pay the ACCC's costs of the proceeding. A copy of the decision can be found at www.fedcourt.gov.au. *Section 52 of the TPA prohibits conduct that is misleading or deceptive or is likely to mislead or deceive, section 53 of the TPA prohibits the making of certain false or misleading representations about goods or services, and section 55 of the TPA prohibits conduct that is liable to mislead the public about the nature, characteristics, suitability or quantity of services.

REASONS FOR JUDGMENT INTRODUCTION 1 Tel.Pacific Limited (ACN 073 079 268) ("Tel.Pacific"), a publicly listed company, provides telecommunication services to the public including by way of sale of pre-paid phone cards to consumers throughout Australia. It sells approximately 54 different pre-paid phone cards which provide consumers with credit to access telephone services to various overseas countries. 2 This proceeding concerns advertising material, usually in the form of A4 sized posters, for 5 of Tel.Pacific's pre-paid phone cards. A copy of the advertising material in issue in these proceedings is attached as Annexures A to E to the Orders ("the Advertising Material"). The advertising material was usually placed in the windows or behind the counters of newsagents and other retailers located throughout most of Australia ("Retailers") who purchase pre-paid phone cards from Tel.Pacific through Tel.Pacific sales representatives and on sell them to the public. 3 By application dated 3 February 2009, the Australian Competition and Consumer Commission ("the ACCC"), alleged that the Advertising Material contravened ss 52, 53(aa), 53(c) and / or 55A of the Trade Practices Act 1974 (Cth) (the "Act"). It will be necessary to return to consider the representations which were conveyed and the manner in which the representations were false, misleading and deceptive later in these reasons for decision. 4 It is sufficient for present purposes to note that on 12 March 2009, Tel.Pacific filed its points of defence in which it accepted the ACCC's allegations in relation to the contraventions of the Act and stated that it had ceased to distribute the Advertising Material. However, at that time, Tel.Pacific took issue with aspects of the relief sought by the ACCC in its Application. 5 On 24 March 2009, an initial scheduling conference was to be held at 2.00pm. That conference was deferred, at the request of the parties, until 4.15pm on 24 March 2009. When the matter was called, the Court was informed that the ACCC and Tel.Pacific had resolved the entirety of the proceeding. The parties submitted to the Court declarations, injunctions and others orders which they sought by consent. The terms of the proposed consent orders were the subject of discussion and amendment. At the conclusion of the hearing, I made orders in the terms proposed by the parties subject to certain amendments. These reasons for decision record why, in my view, it was appropriate for the Court to grant the declarations and make orders in the terms that it did on 24 March 2009 and why the declarations and orders were amended from that proposed by the parties. 6 The proposed consent orders provided for declarations, an injunction and other orders in relation to Tel.Pacific's contraventions of ss 52, 53(aa), 53(c) and / or 55A of the Act. I will deal in turn with the declarations (paras 1, 2 and 3 of the proposed consent orders), the injunction (par 4 of the proposed consent orders) and the other orders (pars 5-12 of the proposed consent orders).

Declarations 7 In my view, it is appropriate for there to be declarations in accordance with paragraphs 1, 2 and 3 of the minute of proposed orders. As a general principle, a court does not make declarations on matters relating to public rights by consent or on admissions, unless it is satisfied by evidence: Australian Securities & Investment Commission v Rich (No 2) (2004) 50 ACSR 500 at [10]; Williams v Powell [1894] WN (Eng) 141; Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221 at 225-227; Termijtelen v Van Arkel [1974] 1 NSWLR 525; Wallersteiner v Moir [1974] 3 All ER 217; Metzger v Department of Health and Social Security [1977] 3 All ER 444 at 451; BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 51 ALR 401; Young P W, Declaratory Orders (2nd ed, 1984) [601]. 8 In the present case, that is not an issue. The Advertising Material was annexed to the ACCC's case summary. Tel.Pacific admitted that it distributed the Advertising Material. Further, it admitted that the following three representations were conveyed by the Advertising Material which contained statements: 1. including "No Connection Fee[s]" and "Flat Rate", thereby representing that no fees other than timed call charges applied to use of the cards ("the No Fee Representation"); 2. to the effect that a stipulated number of minutes of calls was available on the card, thereby representing that users can use the card for more than one connection and, in doing so, will be able to achieve the total stipulated call duration for the location and type of connection (landline or mobile) specified ("the Call Duration Representation"); 3. to the effect that each phone card could be sued for "up to" a specified number of minutes, thereby representing that users can use the card for more than one connection and, in doing so, achieve close to the stipulated call duration for the for the location and type of connection (landline or mobile) specified ("the Up To Call Duration Representation"), (collectively, the "Representations"). 9 Having read the Advertising Material, I accept that each representation was conveyed by the Advertising Material. Finally, Tel.Pacific admitted that each of the Representations was false, misleading and deceptive in contravention of ss 52, 53(aa), 53(c) and / or 55A of the Act because Tel.Pacific's Advertising Material failed to disclose or adequately disclose: 1. in relation to the No Fee Representation, that service fees, disconnection fees and surcharges applied to the cards; 2. in relation to both the Call Duration Representation and the Up to Call Duration Representation, that the stipulated call duration could only at best be achieved if one continuous call was made, that calls were charged in incremental periods and that surcharges, other additional charges or higher charges may be payable in respect of certain calls, thereby diminishing the value of the card and the number of available minutes. 10 In those circumstances, it is appropriate for the Court to grant the declarations that were sought by consent. There is, however, in the circumstances of this case, a further reason for granting the declarations. In the absence of them, the contravening conduct would not otherwise be clearly identified and, as will become apparent, there is at least some public benefit in that contravening conduct being clearly identified.

Other orders: pars 6 to 12 12 The other orders are within power and otherwise appropriate: Australian Consumer & Competition Commission v Target Australia Pty Ltd [2001] ATPR 41-840 at [24] and Australian Consumer & Competition Commission v Econovite Pty Ltd [2003] ATPR 41-959 at [12]. 13 Paragraph 8 of the orders requires some explanation. Initially, the proposed consent order was in more expansive terms that the order ultimately made by the Court. The consent order proposed that the list of materials to be sent to the top 20 of Tel.Pacific's competitors extend to include not only the documents set out in Schedules 3 and 4 but also a copy of the orders and any reasons for decision. Two questions arose - should such an order be made and, if so, what was the appropriate form of any such order. The ACCC submitted that such an order should be made and that it was in the nature of a "Community Service Order" within the meaning of ss 86C(2) (a) and (4) of the Act. Whatever it is, it is not such an order. It is more akin to an order of the kind described in s 86C(2)(c) of the Act, namely "an order requiring the person (ie Tel.Pacfic) to disclose, in the way and to the persons specified in the order, being information that the person has possession of or access to". 14 Counsel for the ACCC could not refer me to any previous authority where such an order had been made. On reflection, the proposed consent order was in substance akin to a limited form of corrective advertising. The difference in this case is that the audience to whom the correcting publication is to be sent is not the consumers of Tel.Pacific's pre-paid cards (see s 86C(2)(d)) but to its competitors. 15 Section 86C of the Act is directed at protecting the public interest. The sole consideration of the Court is the protection of the consumers. It achieves those objectives by raising public awareness of the type of conduct that may contravene the Act and as to the outcome of particular litigation: see eg ACCC v On Clinic Australia Pty Ltd (1996) ATPR 41-517. As is well established, these orders are not intended to be punitive: ACCC v On Clinic Australia Pty Ltd. Tel.Pacific did not submit that the order was punitive. In fact, it consented to the order. In the present case, I consider that the proposed order does not merely announce a "win" for the ACCC and the contrition of Tel.Pacific (cf ACCC v Real Estate Institute of WA Inc (1999) 95 FCR 114). It is "directed to informing the relevant market … of the outcome of the litigation so that those in the market have at least a broad understanding of the ways in which [Tel.Pacific has] had to change [its] conduct": ACCC v Real Estate Institute of WA Inc (1999) 95 FCR 114. 16 Finally, in the circumstances, it is clearly in the public interest that these proceedings between the ACCC and Tel.Pacific are settled: see Kiefel J in NW Frozen Foods Pty Ltd v Australian Consumer & Competition Commission (1996) 71 FCR 285 at 291. 17 For those reasons, I made orders substantially in accordance with the minute of proposed orders subject to the amendments identified.

ACCC v Tel.Pacific Limited

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