Australian Competition and Consumer Commission v Dell Computers Pty Limited

Federal Court of Australia|2002-07-02|Before: Jacobson J

Introduction 1 The applicant ("ACCC") seeks declaratory, injunctive and consequential relief against the respondent ("Dell") in respect of a substantial number of advertisements published during the period from June 1994 to March 2002. 2 The ACCC contends that the advertisements with the exception of an advertisement in March 2002 were misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act 1974 ("TPA"). The ACCC also contends, that except for, the March 2002 advertisement, Dell made false or misleading representations with respect to the price of goods, in contravention of s 53(e) of the TPA. 3 The ACCC concedes that the advertisement published by Dell in March 2002 did not breach s 52 or s 53(e) TPA. However, the ACCC claims that Dell made a representation in the advertisement with respect to a part of the consideration for the supply of the goods without specifying the cash price. The ACCC claims that this advertisement was published in contravention of s 53C of the TPA. 4 Photocopies of the advertisement were annexed to the Amended Statement of Claim. I will refer below to each of the annexures. 5 Dell is a subsidiary of Dell Computer Corporation of Austin, Texas. Dell Computer Corporation is a very large company that carries on business on a global basis. It employs more than 34,000 people throughout the world. Dell has carried on business as a supplier of computers in Australia since 1992. 6 The advertisements in question in these proceedings were directed at potential purchasers of Dell's home and small business computers. 7 Unlike its competitors, including well-known companies such as IBM, Dell's computers are not available for purchase in retail outlets. Dell maintains no retail outlets of its own in Australia. Nor does it have warehouses or other premises at which customers can take delivery of computers. Thus a feature of Dell's business which distinguishes it from other computer manufacturers and suppliers is that, Dell's computers are available to its home and small business customers only by way of delivery from Dell. 8 The vice which the ACCC claims it has identified in Dell's advertising is as follows: the advertisements do not make it sufficiently clear to potential customers that the delivery fee which is charged by Dell (except during certain periods where the fee is waived) is compulsory rather than optional. 9 Most of the advertisements were published in the print media. Some were published on Dell's Internet website and others were published on the radio. In view of the fact that Dell has no retail or other outlets, all of its completed transactions were made by way of direct sales. Customers saw or heard the advertisements and then made direct contact with Dell either by telephone or over the Internet. 10 All the advertisements had in common a prominent display or statement of the price, and, elsewhere in the advertisement, a reference to an additional charge for delivery. The gravamen of the ACCC's case is that the reference to the delivery charge did not specify that the fee was compulsory. 11 There were three different categories of advertisements. The first category consisted of the advertisements, copies of which were annexures A, B, C, D, E, F and L to the amended statement of claim filed on the 28March 2002. These advertisements all displayed the cost of the computer (excluding delivery) in prominent typeface. Much was made by the ACCC of the use of "price points" such as $1,999 but I do not think the outcome of the proceedings turns on this. The reader of the print media was then directed by way of an asterisk to small print, which is apparently known in the advertising world by the somewhat colourful description of "birdseed". The "birdseed" conveyed to any reader, who chose to study it, that delivery was additional. So too, the website advertisement contained the words "delivery additional." 12 The distinguishing feature between the first and the second category of advertisements was that in the first category the amount of the delivery charge was not specified. The ACCC contends that the wording that was used in this category, which was to the effect that delivery was not included in the price, did not convey to the reader either the charge or the obligation to pay it. 13 The second category consisted of advertisements published in print media or on the Internet or on the radio in which there was a reference to the existence of an additional delivery charge, which was specified. Typical wording was "additional delivery charge of up to $99 (including GST) applies" or "an additional standard delivery charge of $99 (including GST) applies." The ACCC's case in relation to this category is again, that the advertisements did not specify the compulsory nature of the charge. Copies of these advertisements were found in annexures G, H, I, J, K and M to the amended statement of claim. 14 The third category of advertisement appeared in the print media. After quoting the price in bold print, the advertisement went on to say in smaller but reasonably clear type that the goods were available by delivery only, with a standard delivery fee of $99. A copy of this advertisement was found at annexure N to the amended statement of claim. 15 The ACCC concedes that the third category of advertisements made it sufficiently clear that the specified delivery fee was compulsory. However, the ACCC's case in relation to this advertisement is that it made a representation as to part of the consideration for the supply of goods, i.e. in the example used above $1,999 (or such other price as was specified in the advertisement) without specifying the cash price for the goods in contravention of s53C of the TPA. According to the ACCC, compliance with s 53C of the TPA could only be achieved by adding the delivery charge of $99 to the sum of $1,999 used in the example above, so as to state the total cash price of the goods in the advertisement as $2,098.

Whether the First and Second Categories of Advertisements contravened s 52 of the TPA 16 Clearly enough, the advertisements constituted conduct engaged in by Dell in trade or commerce. The parties did not dispute this proposition. 17 It has been well-established by authority of twenty years' standing that the relevant section of the public by reference to which the conduct is to be tested must first be identified and that having done so, the matter is to be considered by reference to all who fall within it "including the astute and the gullible, the intelligent and the not so intelligent": Taco Company of Australia Inc v Taco Bell Pty Ltd ("Taco Bell") (1982) 42 ALR 177 at 202, per Deane and Fitzgerald JJ, citing Lockhart J in Puxu Pty Ltd v Parkdale Custom Built Furniture Pty Ltd (1980) 31 ALR 73, at 93. 18 Their honours also noted that, although evidence is admissible that persons have been mislead, such evidence is not conclusive in deciding the question of whether the conduct is misleading or deceptive or likely to mislead or deceive; see Taco Bell at 202-203. The test, which must be applied, is an objective one. 19 Mr Walker SC, who appeared for Dell, submitted that the relevant section of the public who read the advertisements would be capable of discerning from them that there was an additional delivery charge and that it was compulsory. He put his submission more strongly in relation to the second category than the first category because of course the first category did not specify the amount of the charge. 20 Mr Walker also relied upon the knowledge which a reader would be able to glean from the wording of the advertisement, that Dell sold its products by direct sale to customers who would therefore appreciate that the goods would have to be delivered to them. 21 Mr Walker submitted that even if readers, viewers or listeners did not know that there was a compulsory delivery charge for the goods they would be disabused of "the unexcluded possibility" of free collection before they entered into their contracts of purchase. I should add that the evidence seemed to me to establish that callers or Internet users were informed of the compulsory delivery charge either before or at the time they entered into contracts of purchase. 22 The relevant section of the public to whom the advertisements were directed comprised potential customers for Dell's home and small business computers. This was a fairly wide range of persons. The proper approach to examination of the advertisement in order to determine whether there has been a breach of s 52 of the TPA was stated (albeit in slightly different terms by each of the Justices) in Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations (1992) 38 FCR 1 at 4-5 per Sheppard J, at 27-28 per Foster J and at 49-50 per Hill J. 23 I have therefore taken into account the fact that readers would not be expected to parse and analyse the advertisements and that they would have absorbed the general thrust of them. 24 Some evidence was tendered by the ACCC to support a finding that potential customers had actually been mislead; this was contained in the affidavits of Ms Tang, Mr Young and Mr Downing. Ms Tang is an employee of the ACCC and her evidence was of a number of "trap" enquiries. I do not think that her evidence is of much assistance to me because she telephoned Dell after the ACCC received a letter from Mr Young. She was therefore aware of the apparent vice in Dell's advertisements when she carried out her "trap" enquiries. 25 Mr Young is a loss adjuster. He saw the words "delivery additional" but read the words as indicating that the delivery was optional. He telephoned Dell to see whether his reading of the advertisement was correct. When he phoned Dell, he was informed that the delivery fee was $99 and that it could not be avoided unless he travelled to Malaysia to collect the computer. 26 Mr Downing is an information technology manager. He knew that Dell had no storefront from which computers could be collected. However, he assumed that the price displayed included delivery charges. He viewed the configuration of various computers and prices on Dell's website. No delivery price was displayed during this process. He first saw the delivery price when he had "customised" the computer and added it to his "shopping cart." He proceeded with the purchase because he was spending more than $4,000 on the computers and did not wish to discontinue the order over a delivery charge of about $100. 27 Mr Walker made much of the fact that there was little evidence called on this issue. He submitted that the evidence did not establish that the purchasers had suffered any loss apart from a 25c telephone call or that they had not obtained full value for the computers. He pointed out that Mr Downing made a further purchase from Dell some time after the purchase referred to above. Mr Walker also pointed to evidence in answers to interrogatories, which established that there were only about seven complaints to the ACCC notwithstanding the fact that Dell had sold hundreds of thousands of computers during the relevant period. 28 Despite the paucity of the evidence, it does seem to me that it provides some support for the proposition that members of the relevant class were misled or that they were likely to have been misled. The fact that there was little affidavit evidence and only a handful of complaints does suggest that not many persons were prepared to come forward and complain about the advertisements. However, as stated in Taco Bell, the evidence is not conclusive on the question and it is for me to decide, applying an objective test, whether the advertisements were misleading or likely to mislead. 29 It seems to me that the words which were used were sufficiently imprecise to leave open, on any reasonable interpretation of the advertisement, the possibility that a purchaser could collect the goods without paying a delivery charge. In my view, there was nothing in the advertisement which would have enabled any member of the relevant class to work out for himself or herself that the unexcluded possibility, i.e. free personal collection, was not available: CRW Pty Ltd v Sneddon (1972) AR (NSW) 17 at 28; see also Siddons Pty Ltd v The Stanley Works Pty Ltd (1991) 29 FCR 14 at 18-20. 30 It follows that in my view the advertisements in categories 1 and 2 constituted conduct in trade or commerce, which was misleading or deceptive or likely to mislead or deceive the relevant section of the public. 31 Nothing in the view that I have come to turns upon an examination of the size of the "birdseed" or the absence of any reference to the figure of $99 in category 1. Rather it is based upon what I consider to be a reasonable interpretation of the wording by a reader who took the trouble to read it: Talmax Pty Ltd v Telstra Corporation Ltd [1997] 2 Qd R444 at 446. I do not consider that this view is "extreme or fanciful": Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 at 86. 32 In my view, the fact that potential customers did not suffer loss apart from a 25c phone charge is irrelevant; see Heydon, Trade Practices Law, Vol.1 at [11.770] and the authorities cited therein by the learned author. Moreover, for the same reason, it is not relevant to the question of contravention of s 52 of the TPA that there was no suggestion in the evidence that purchasers had not obtained full value from the products. 33 I also reject Mr Walker's submission that s 52 was not breached because potential customers were disabused of the unexcluded possibility when they telephoned Dell or when they placed orders on the Internet. There is ample authority to the contrary. As Northrop J said in St Lukes Health Insurance v Medical Benefits Fund of Australia Ltd (1995) ATPR 41-428, at 40,823: "… even if I accept - as I do accept - the fact that MBF would explain to persons applying for the cover what were the effect of the terms of the package that was entered into, that does not overcome any misleading or deceptive conduct which had occurred at an earlier stage when the member of the public seeing the advertisement, or hearing it, goes along to MBF to consider entering into it. The misleading or deceptive conduct occurs at the time of the publication of the television advertisement or of the publication of the newspaper advertisements." 34 Other authorities to the same effect include Minister for Health and Aged Care v Harrington Associates Limited (2000) 107 FCR 212, at 233-234.

Whether the First and Second Categories of Advertisements breached s 53(e) 35 The question, which arises under this section, is whether the delivery charge was part of the price for the goods. There is an inclusive definition of "price" in s 4 of the TPA. "Price" includes a charge of any description. 36 In Australian Competition and Consumer Commission v Nationwide News Pty Ltd (1996) ATPR 41-519 at 42,493-4, Heerey J construed the word "price" in s 53(e) narrowly. His Honour said that "price" means the money consideration for the goods. His honour observed that the word "price" is well understood in sale of goods of legislation and he gave it the same meaning in s 53(e) of the TPA. 37 Although his Honour did not refer in the judgment to the definition in s 4 of the TPA, it seems to me that his Honour was applying that definition of "price" to the word appearing in s 53(e). It follows that even though the definition of "price" in s 4 of the TPA includes a charge of any description, on the approach taken by his Honour, the charge must be part of the money consideration for the purchase of the goods. I respectfully adopt this approach to the construction of the word "price" in s 53(e) of the TPA. 38 It was submitted by Mr McClintock SC and Mr Renehan for the ACCC that the delivery charge was part of the money consideration for the goods. However, it seems to me that the delivery charge was not part of the purchase price in the sense referred to above. It was not contended by the ACCC that the delivery charge was anything but a bona fide fee for delivery of the goods. Accordingly, in my view, it follows that the delivery charge was a fee for services rather than a part of the consideration for the purchase of the goods.

Whether the First, Second and Third Categories of Advertisements contravened s 53C. 39 The question which arises under this section is whether the representations made with respect to the price of the goods e.g. $1,999, constituted part only of the consideration for the supply of the goods having regard to the fact that a compulsory delivery charge was payable. 40 If a literal approach to the words "consideration for the supply of goods" were taken, it would follow that Dell stated part only of the consideration in the advertisements because the delivery charge constituted the balance of the consideration payable. 41 As Mr Walker pointed out, this would give rise to serious difficulties for companies who offer a range of options to potential customers of their goods. Thus pizza vendors would have to specify in their advertisements the price for each and every option and they would have to provide a complicated schedule showing the total cash price for all combinations of possible options. Similar difficulties would occur where it was proposed to offer a range of discounts applicable either in relation to the number of goods purchased or a range of dates on which the discounts would be applicable. 42 It is of course true that in these proceedings the delivery charge is not optional. However, the question of whether s 53C has been contravened turns upon whether the delivery charge is a part of the consideration for the supply of the goods. 43 There is an inclusive definition of "supply" in s 4(1) of the TPA. When used either as a verb or a noun, "supply" means in relation to goods, supply by way of sale, exchange, lease, hire or hire purchase. Thus, there will be no contravention of s 53C unless the delivery charge is part of the consideration for the purchase of the goods. In my opinion the delivery charge was not part of the consideration payable for the purchase of the goods. It was a fee for delivery of the computers notwithstanding that the payment of the fee was obligatory. Accordingly, in my view, the advertisements did not contravene s 53C. 44 This approach to the proper construction of s 53C is supported by paragraph 93 of the explanatory memorandum to the Trade Practices Revision Bill 1986, by which s 53C was introduced into the TPA. That paragraph states as follows: - "The new s 53C prohibits a corporation advertising part only of the consideration payable for goods or services without disclosing the total consideration for which the goods or services may be purchased outright. This provision is directed at a trader advertising that a consumer may buy a product for a low deposit without disclosing the total price payable." This approach is further supported by the remarks of Pincus J in Trade Practices Commission v Autoways Pty Limited (1990) ATPR 41-051 at 51,676.

Declaratory and Injunctive Relief 45 Since I am of the view that the first and second categories of advertisements contravened s 52 of the TPA, it is appropriate to make a declaration in the terms set out in the orders attached to this judgment. I would also propose to order injunctive relief in the terms set out in those orders.

Corrective Advertising 46 Although there have been very few complaints made to the ACCC, I have found that over a substantial period of time, Dell's advertisements were published in contravention of s 52 of the TPA. In my opinion, consumers ought to be made aware that Dell does not have any premises in Australia from which computers can be collected and that delivery charges are payable unless waived. It therefore seems to me to be appropriate to make an order for corrective advertising. I have come to this view even though a lengthy period of time has elapsed since the last offending advertisement was published. 47 The advertisement proposed by the ACCC in the form of annexure "A" to the amended application is not appropriate because I have found that the advertisements did not contravene s 53(e) or s 53C of the TPA. Also, for the reasons set out below, I do not propose to order Dell to refund the delivery charges paid to it. 48 The advertisement should state that it is corrective advertising. It should not contain the bold words "an apology from" as set forth in annexure "A" to the application. It should include Dell's name in the distinctive form in which it appears in the ACCC's proposed advertisement. It should also contain the words "ordered by the Federal Court." 49 The balance of the advertisement should be in the following terms: - "The Federal Court has declared that a number of our advertisements published during 2001 and earlier periods were misleading or deceptive or likely to mislead and deceive. The reason the Federal Court has made this declaration is that the advertisements did not make it clear that computers can only be purchased from Dell by way of delivery and (except in circumstances where we offer free delivery) by payment of Dell's standard delivery charges. We sell computers over the telephone and the Internet. We do not have a shopfront so our customers cannot collect computers from us. We deliver all our computers to our customers. In the future, where compulsory fixed delivery charges are payable, we will ensure that our advertisements clearly stipulate that the products are available only by way of delivery at a specified delivery charge." 50 The advertisement should include the logo of the ACCC and its name as appearing in the draft advertisement annexed to the application. The advertisement should conclude with the words "This Corrective Advertisement has been paid for by Dell…", as appearing at the foot of the draft advertisement.

Refund of Delivery Charges 51 There was substantial debate as to whether I have power to order a refund of delivery charges under s 80 of the TPA. I do not need to decide this question because it seems to me that it would not be a proper exercise of my discretion to make such an order. 52 There is evidence that the total delivery charges paid to Dell during the relevant period were approximately $11.1 million. However, the evidence also establishes that the delivery costs incurred by Dell in delivering the computers was in the order of $11.5 million. In my view, it would be wrong to order Dell to bear a loss of $11.5 million on the delivery costs incurred by it. 53 I have also taken into account the fact that there were only a handful of complaints to the ACCC. It seems to me that if I were to order Dell to refund to any customers who may now come forward and claim to have been misled by the advertisements, it would be an open invitation to customers who have hitherto made no such complaint, to obtain a windfall of $99 from Dell.

Costs 54 In view of the fact that the ACCC has been substantially successful in these proceedings, I propose to order Dell to pay the costs of the proceedings. The fact that I have not ordered Dell to make a refund of the delivery charges is not a matter, which in my view should affect the exercise of my discretion to order Dell to pay the costs of the proceedings. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Counsel for the Respondent: Mr B Walker SC and Mr P Renehan

Trade Practices Act 1974(Cth)ss 52, 53(e), 53C

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