It should be noted that Voltaren Emugel 120 g was not sold in 2018, so that the figures above were those from 2016 and 2017.
55 The point made by GSK was that the price premium difference between Emulgel and Osteo Gel when it is in the same or similar size packaging is not as great as the greater price charged for Emulgel for smaller packaging. As GSK puts it, by far the most expensive of these products in price per 100 g or price per gram is the Emulgel 20 g, which is sold in quite substantial numbers, and the next most expensive is Emulgel 50 g. Thus economies of scale accounted for a much bigger difference in the purchase price per 100 g or price per gram than the differential pricing between Emulgel and Osteo Gel. GSK submit that there was nothing misleading about charging a higher price for a product that has the innovative feature of a cap that no one else apparently had. That submission should be accepted. While there is no doubt that the targeted marketing of Osteo Gel enabled GSK to charge a premium, that has not, as the ACCC submits, been shown of itself to have had any significant effect in reinforcing any message of substantial difference going beyond the packaging claims, let alone to do so in a way that contributed in any real way to any misleading or deceptive effect. If there was already any misleading or deceptive effect, the price difference might, to a limited extent, reinforce that effect.
56 In relation to the revised packaging, GSK not only admits, but relies upon the fact:
(1) that Emulgel was promoted for use in treating local pain and inflammation in acute soft tissue injuries and localised soft tissue rheumatism; and
(2) that Osteo Gel was promoted for use in treating local pain and inflammation associated with mild forms of osteoarthritis of the knees and fingers, reflecting the indications for use of the products approved by the TGA.
57 GSK contends that the above approach to marketing was to ensure "clear communication of the approved duration of use for each condition and to target osteoarthritis sufferers who were not purchasing Emulgel without alienating Emulgel customers". The substance of the GSK's case is that the different ailments targeted by the two products, including different maximum duration of use, justified the differential claims made, supported by the different cap for the Osteo Gel tube. GSK defends the use of the word "effective" in the cross-reference to Emulgel as emphasising that the gel in each had the same effect, or at worst as being of no moment; and maintain that this, along with other lesser packaging changes, rendered the overall effect as not contravening.
58 Plainly enough, from late 2014 Emulgel was being marketed in a way that no longer encouraged its use for those with osteoarthritis, confining its use advice to a shorter duration of a maximum of two weeks. Osteo Gel was being marketed in a way that was clearly directed for use with osteoarthritis, with a longer duration of use advice of a maximum three weeks, and with the additional feature of a cap that was easier to open and therefore particularly better for those individuals who had that condition in their hands. Osteo Gel was, from a consumer's perspective, a product for the treatment of osteoarthritis, while Emulgel was not on its face or in the claims made about it, directed to such a specific condition involving local pain and inflammation, although that particular use was not excluded. Was there anything wrong with the way in which this was done once the Osteo Gel packaging was changed in March 2017 to state "Same effective formula as Volatren Emulgel", along with other changes?
59 As already noted, the ACCC emphasises the fact that the changed packaging for Osteo Gel was introduced in March 2017 in the context of its prior, and now admitted, misleading character, relying also on correspondence between the parties leading up to that change, and beyond. The ACCC's core case is that the dominant, misleading, message was still present and that it was not sufficiently abated by those changes. Understanding why the original packaging was misleading is an important consideration in helping to decide whether the changed packaging contravened.
60 The ACCC asserts that it is likely that there are consumers who have purchased Osteo Gel in both the original and revised packaging, with the later purchases informed by the prior understanding of its suitability, and thereby that of Emulgen, based on the understanding gleaned from the original packaging. That may well be correct for some consumers, but that will only be the response of a reasonable, ordinary consumer of Osteo Gel (including those who buy it on behalf of those afflicted by osteoarthritis) if the new packaging is not clear enough in its own terms. If it is clear enough, then it becomes an assumption that a consumer will not pay heed to adequate packaging information. I therefore consider that this argument does not assist the ACCC in the absence of any evidence to demonstrate, beyond speculation and perhaps weak inference, how and why a consumer who was misled by the prior packaging was more likely to be misled by the new packaging if it was satisfactory in its own terms, than someone who had never bought Osteo Gel before.
61 The detail of the balance of the ACCC's argument may be summarised as follows:
(1) The original Osteo Gel name and packaging, in the context of the Emulgel packaging, combined to convey the Osteo Gel Representations (that is, to use the summary in the ACCC's submissions, "Osteo Gel was specifically formulated to treat, and solely or specifically treats, local pain and inflammation associated with mild forms of osteoarthritis of the knees and fingers, and is more effective than Emulgel at treating those conditions"), when none of those matters were true, by reason of the following features:
(a) the product names for both were in large, bold and prominent lettering, on the front and back panels, and gave a clear indication to the prospective purchaser that the products were different, with Osteo Gel clearly intended to be associated with a serious medical condition, osteoarthritis;
(b) the benefit statements were prominently set out on the front and back panels, reinforcing that purported difference:
(i) Emulgel packaging bearing the benefit statement "For temporary relief of local pain and inflammation" underneath the description of the active ingredient, making no reference to mild forms of osteoarthritis despite the ARTG approved specific indications extending to that pain condition; and
(ii) Osteo Gel packaging bearing the benefit statement, in white letters superimposed on a blue stripe, "For the temporary relief of local pain and inflammation associated with mild forms of osteoarthritis of the knees and fingers" immediately beneath the name Osteo Gel and above the description of the active ingredient on the front and back panels; and
(iii) Osteo Gel's benefit statement also appeared at the very top of the side panel above the "Do Not Use" and "Dosage" instructions, in contrast to the side panel of the Emulgel packaging which contained the statement "For temporary relief of local pain and inflammation in acute and soft tissue injuries, including sprains, strains and sports injury, and localised soft tissue rheumatism, including tendinitis and bursitis", noting that prior to 2014, the Emulgel benefit statement on its packaging had the additional words "and mild forms of osteoarthritis of the knees and fingers" (see the image at [22] above);
(c) Osteo Gel packaging had an x-ray style image of a knee joint next to the benefit statement, with redness signalling inflammation shown between the femur and tibia reinforcing the impact of the benefit statement as to osteoarthritis of the knee;
(d) Osteo Gel packaging had a triangular blue cap instead of the white round cap of the Emulgel product, with an image of the cap displayed on the front and back panels underneath the words "easy-to-open cap", with reliance on internal media briefings for Novartis on this topic as to how this was relied upon to differentiate between Osteo Gel and Emulgel;
(e) the "Dosage" instruction for Osteo Gel instructed "Do not use for more than 3 weeks for osteoarthritis except on medical advice", and for Emulgel instructed "Do not use for more than 2 weeks except on medical advice", in the context of both instructions appearing on the Emulgel packaging prior to late 2014, but deliberately excluded in the revised Emulgel packaging.
(2) The effect of the above representations was reinforced by the proximate display of Osteo Gel and Emulgel, encouraging comparison and the enhancement of perceived, but not real, difference, with Osteo Gel being typically more expensive than Emulgel, supporting the perception of Osteo Gel being a "specialised product" that was superior to Emulgel in treating osteoarthritis pain because it was specifically formulated to do so, with the differential pricing being deliberate.
(3) As a result of the five aspects of the original packaging described at (1)(a)-(e) above, and still forming the main part of the revised packaging, in the context of (2) above, the dominant message was that Emulgel and Osteo Gel were different, and that Osteo Gel was specifically formulated to treat, specifically treated, and was more effective than Emulgel in treating, mild forms of osteoarthritis of the knees and fingers. Thus the Osteo Gel Representations continued to be made.
(4) Further, each product's original packaging, prior to the change for Osteo Gel in March 2017, included the active ingredient statement "Diclofenac diethylammonium gel 11.6 mg/g" in smaller italicised font on the front and back panels (some versions of the Emulgel and Osteo Gel packaging included the additional words "equivalent to diclofenac sodium 10 mg/g (1% w/w)"):
(a) for Emulgel, set out underneath the product name and above the benefit statement;
(b) for the Osteo Gel packaging, set out underneath both the product name and the purported benefit statement;
enabling a careful and astute customer to read and compare the two and conclude the gels were the same, causing the dominant messages to be questioned, but this was insufficient to negate or neutralise the dominant impression and in particular failed to draw consumers' attention to "the true position in the clearest possible way", citing National Exchange at [55].
62 The ACCC also relied upon evidence in the form of media briefings and internal communications proposals to demonstrate that Novartis had launched Osteo Gel as an additional product that was distinct from Emulgel to increase market share without cannibalising sales of Emulgel. To that end, Novartis had deliberately targeted osteoarthritis pain sufferers as potential purchasers, intending them:
(1) to think that Osteo Gel was a new treatment for osteoarthritis pain and had unique benefits; and
(2) to think that Osteo Gel was not a "homogenous topical rub" because it specifically treated osteoarthritis pain.
The ACCC submits that all of this was consistent with making the admitted Osteo Gel Representations, and that, given Novartis' expertise in this field of marketing, an inference may readily be drawn that the objective so derived was achieved, including by the use of differential packaging of Emulgel and Osteo Gel.
63 Each of the propositions in the preceding paragraph may be accepted for present purposes as forming part of the contravening conduct to which the respondents have admitted, even if not in letter and verse and in respect of every nuance. The respondents may revisit the issue of how far their admissions as to the contraventions of the original packaging go on the question of penalty for that conduct. However, assuming for present purposes that each proposition is established without qualification, that does not, of itself, answer the question of whether or not that impression remains. The changes in the packaging at the very least would have tended to operate against the marketing objectives of encouraging those with osteoarthritis to buy Osteo Gel instead of Emulgel. That is because the additional words "Same effective formula as Volatren Emulgel" at least pointed to the active ingredients in the two products being the same, reinforced by the statement of those same active ingredients on the Emulgel packaging.
64 The ACCC contends that despite the changes to the Osteo Gel packaging in March 2017, in particular the introduction of the additional words, the representations and thereby conduct was still misleading, deceptive, false and liable to mislead, such that the Osteo Gel Representations also took place from March 2017 to May 2018. The ACCC's argument as to why that is so may be summarised as follows. It is convenient at this point to comment on each argument.
(1) The five aspects of the packaging referred to at [61(1)] above, were likely to have left the ordinary and reasonable consumer with the "overwhelming initial impression" that Osteo Gel was a distinct product that specifically treated osteoarthritis.
Comment: While the prior packaging did give the proscribed impression, and this was the dominant impression, it is overstating it to say that this impression was overwhelming, in the sense of eliminating any other reasonable impression. It was nothing as extreme as the Nurofen case. The statement of the active ingredients was on the front of both the original Osteo Gel and Emulgel packaging, rather than hidden away. While the dominant message was still initially misleading - and that was enough to amount to contravening conduct - it was not overwhelmingly misleading. A consumer who was more careful, thorough or astute than they should have to be would not easily have been misled, especially once the presence of identical active ingredients was appreciated.
(2) Correction of that false impression required direct and prominently displayed statements to the contrary, because consumers who have been misled so overwhelmingly are less likely to be receptive to disclaimers pointing to the opposite being true.
Comment: This proposition relies upon acceptance of the first proposition, and therefore overstates the position for the same reason.
(3) The additional information failed to draw attention to the true position in the clearest possible way by stating that the formulation of each product was identical, again citing National Exchange at [55].
Comment: This is a very different case to National Exchange, with the degree of disparity between what was represented and the correct position being real, but not anywhere near as extreme. At trial, the original packaging would have been found to be misleading, but not in the most egregious category. Some ordinary consumers, perhaps many, would have been misled, but others would not.
(4) The use of the word "effective" was superfluous to the formulation and therefore confusing - it could mean a number of different things:
(a) that the formula is effective in the way it works, although for what is not stated; or
(b) that the formulas of Osteo Gel and Emulgel are effectively (but not entirely) the same.
Comment: While the GSK contrary argument outlined below goes too far, in that the word "effective" did not have the positive effect contended for, the ACCC makes too much of the use of an apparently superfluous word. In the context of this case, the dominant message, when read with the actual formula on both packages, is that consumers were being told that the gel in each tube is the same. That said, clearer language would have been preferable. GSK were taking a risk in choosing indirect language to convey the fact that the gel in Osteo Gel was the same as the gel in Emulgel.
(5) While the active ingredient was listed, neither packaging sets out the other ingredients so as to permit comparison.
Comment: This is not entirely correct. While there is no exhaustive list of everything that is in the gel, both sets of packaging advise that the contents include isopropyl alcohol as a preservative and also benzoates. In any event, it is unclear why this makes any difference given that there was expressly no difference in the active ingredient by reason of the same formula being set out. Any message of similarity will be diluted rather than enhanced by two longer lists of identical inactive ingredients requiring comparison.
(6) Even if consumers did end up appreciating that Osteo Gel and Emulgel were identically formulated, the clear impression that Osteo Gel was a specific treatment product may still have persisted because the overwhelming tendency of the packaging was to lead consumers to think exactly that, as intended. The vice of the packaging was that it required "consumers to find their way through to the truth past advertising stratagems which have the effect of misleading or being likely to mislead them": TPG Internet at [54].
Comment: This submission is too speculative in nature as the overall effect either was, or was not, of a proscribed character. The submission again relies upon an exaggerated characterisation of the prior misleading impression being overwhelming, as opposed to dominant.
(7) It could not be safely assumed that reasonable consumers would recognise and navigate the logical disconnect between Osteo Gel being a specialised product and containing the same formula as Emulgel.
Comment: Again, either the overall effect carried a proscribed dominant effect, or it did not, with there being no useful role for any assumption of this kind being made or not being made. The asserted "logical disconnect" does not add anything useful to the analytical task required to be carried out, nor to the pleaded Osteo Gel Representations.
(8) In any event there was no corresponding disclaimer on the Emulgel packaging, which failed to make it clear the product was suitable or equally effective for the treatment of osteoarthritis.
Comment: There is no case brought that the Emulgel packaging was itself contravening. It is going too far to require that Emulgel packaging detail more specifically the uses to which it could be put, including osteoarthritis.
(9) It is not clear that the additional statement was sufficiently prominent to capture consumers' attention and divert them from the dominant message of the packaging.
Comment: The additional statement, if sufficient in content, was also sufficient in prominence. It was both larger and clearer than any other claim other than the claim that the cap was "easy-to-open" (which was not suggested to be misleading), and immediately above the substantially larger statement of the formula than had appeared on the packaging admitted to be contravening.
(10) The mistaken belief that Osteo Gel is a specific treatment product still created by the post-March 2017 packaging for Osteo Gel was not limited to influencing purchasing decisions, but also deprived consumers of the opportunity of engaging with alternative products on a rational basis. This is because, on the ACCC's argument, the consumer has been enticed into Voltaren's "marketing web" by the initial impression that Osteo Gel was a specifically formulated product, citing TPG Internet at [50].
Comment: GSK was not entitled to divert customers of competitors to its products by misleading or deceptive conduct. But either that proscription was breached, or it was not. If the ACCC cannot first establish that GSK has misrepresented Osteo Gel as a specific treatment product, then this argument as to a further consequence of doing that does not assist.
(11) It is likely that existing users of Osteo Gel did not notice the packaging change, because, having previously purchased it, they may not have reviewed the packaging with the scrutiny that they otherwise might have when making a subsequent purchase, citing TPG Internet at [50].
Comment: This is an inapt application of the principle stated in TPG Internet, which was directed to assessing conduct at the time it took place, not at the later time that a contract is entered into when the incorrect impression may have been corrected.
65 GSK's counter arguments turn on a number of key propositions, supported by references to the evidence which I accept establishes the essentially uncontroversial factual foundation for what is asserted to explain and justify what took place. GSK submits that the packaging changes gave a final impression that was not proscribed for the following key reasons, again with comments:
(1) GSK characterises the ACCC's case on context as incomplete, because it fails to give sufficient acknowledgement to the difference in the conditions for which the same gel is used, including in particular the different maximum duration of use, being specifically acknowledged and approved by the TGA.
Comment: The different duration of use is important. Users treating different conditions with the same medication require different information. There is nothing inherently wrong with having this packaged and sold differently, so that the user only obtains the information they need, and does not obtain information they do not need. Combining such information may itself lead to confusion and error. In the case of persons with more general conditions, there is a risk of using the product for too long, presumably outweighing the benefits for such a condition. Separate packaging, with separate maximum duration of use instructions, is inherently less likely to lead to user error in that regard.
(2) GSK contends that the difference in the two classes of conditions is not artificial, but is reflected in the existing market, with two quite different "pain states" being involved. Each pain state may be treated by the same gel up to the common maximum period of two weeks. But the consumer responses to each pain state will necessarily be different. GSK evocatively and diplomatically refers to the two markets, involving two separate classes of consumers required to be identified, citing Campomar Sociedad, Limitada v Nike International Limited [2000] HCA 12; 202 CLR 45 at [103], as:
(a) the young (or young-at-heart) "weekend warriors" with sports injuries or strains want[ing] pain relief; and
(a) those with more years behind them but still "forever young" who suffer from pain associated with osteoarthritis,
with those in either not necessarily appreciating being grouped with the other.
Comment: This reinforces the notion in the preceding comment that users treating different conditions have different needs. Weekend warriors should ordinarily not use Emulgel for more than two weeks; while osteoarthritis suffers may get less relief than is ideal if they cease use at the two week mark.
(3) GSK suggests that the ACCC does not advance any different position on the proposition that the different "triangular winged cap" on Osteo Gel provided a practical benefit to people with osteoarthritic conditions of the hand who may encounter difficulties in gripping, opening and closing things and for who such a modification will materially assist, including by minimising pain. GSK points out that osteoarthritis is a commonly occurring disease with prevalence increasing with age, skewed towards women.
Comment: The different cap is a genuine point of difference, although doubtless also a useful marketing angle. There is no doubt that the Osteo Gel cap is easier to open, and not just for those suffering from osteoarthritis.
(4) GSK therefore characterises its conduct as entailing, via the new packaging, the legitimate marketing of an existing anti-inflammatory gel as a separate retail product with the different cap, specific use instructions, and advertising for consumers with osteoarthritis, and to do so without alienating users of Emulgel.
(5) GSK accepts that it (and Novartis earlier) went about this in the wrong way to start with by reason of not sufficiently qualifying the claims made about Osteo Gel to make it clear enough that the gel component of the two products was the same, and so falling short of what was required. GSK submits that this failing was no longer present following the change in packaging in March 2017, adding the additional information, and reducing the size of the Osteo Gel font, adding the additional information and relocating the active ingredient information, in a larger font, immediately below that additional information.
(6) As noted previously, GSK characterises the ACCC's approach of asking whether the changes went far enough to counter the prior contravening conduct as "an inversion of the analytical task", with the proper approach being to assess whether or not the new packaging does or does not, by implication in the absence of express representations, convey the pleaded Osteo Gel Representations. Rather, GSK contends, what is required is an overall assessment of the impression conveyed by the packaging with appropriate weight being given to the various features, including in particular the prominence given to the additional words, which does not involve any maze to uncover the true meaning. GSK contends that the additional words, as a matter of plain English, tell a consumer that the gel in Osteo Gel is the same as that in Emulgel, and is just as effective, with there being no logical disconnect as alleged by the ACCC.
(7) GSK places some collateral reliance on the ACCC declining at one point to meet with it and suggests that this might have been productive of an earlier interim arrangement as happened in the Nurofen case.
Comment: The ACCC is correct to point out that this Court was not called upon to adjudicate upon the interim packaging in the Nurofen case. This is not a path for redemption if the representations are found to continue to contravene from March 2017.
66 The ACCC in closing oral submissions relies on numerous arguments to meet GSK's case. Three in particular have not been mentioned above and warrant specific reference.
67 First, the ACCC takes issue with the proposition that it is permissible to market the same gel to distinct markets, describing it as an acceptance by GSK that it is marketing an illusion, being that Osteo Gel is specifically formulated. The ACCC characterises this "commercial advantage" as being no more than taking advantage of osteoarthritis suffers who are overwhelmed, reliant purchasers. Such purchasers want a product to address their specific needs, but GSK want to avoid losing customers who are young and do not want to be associated with osteoarthritis sufferers. The ACCC submits that this entails going beyond the permissible step of marketing the same gel for use in one part of the market and the same gel for a different use in a different segment of the market. The objection comes down to the specific formulation in the use of the words "Osteo Gel". The ACCC's greatest concern is with the use of those words, in effect proposing to deny the right in most circumstances to use a product name that suggests that it can be used for a specific condition when it has not been formulated for such a condition. The ACCC's case, in substance, is that the use of the name "Osteo Gel" had the same effect as the use of the word "targeted" in the Nurofen case. That is, the use of that name conveyed the meaning "targeted for osteoarthritis".
68 It may be accepted that GSK took a real risk with such a name and therefore such an impression being conveyed. GSK accepts that this was so with the earlier packaging, but maintains that it is adequately corrected with the March 2017 packaging.
69 Secondly, the ACCC's case is that the easy-to-open cap was part of what made the March 2017 packaging misleading, adding to the deceptive nature, and not being any genuine point of difference. Had it been a real point of difference, it would have featured in the advertising, yet it did not in the sample advertisement played at the hearing. Thus, on the ACCC's case, the product bundle was an aspect of the misleading or deceptive illusion created by GSK.
70 Thirdly, the ACCC's case is that repurchasing frequency is not as clear and supportive of GSK's case and that it may be more frequent than annually. In the result, I can only safely conclude that Osteo Gel is not a frequent purchase, with that being logically determined by how advanced a sufferer's osteoarthritis condition is, and how much the gel is applied. It may be an annual purchase, or it could be a number of times in a year.
71 Finally, the ACCC relies upon TPG Internet at [55] to draw from the marketing evidence an intent to create a favourable impression, which was realised in the sense of an intent to achieve a result, rather than any necessary intent to mislead. It may be accepted that GSK fully intended to encourage the purchase of Osteo Gel for use by osteoarthritis sufferers. The live question is whether it has been proven that this objective was sought to be achieved by proscribed means.