Australian Competition and Consumer Commission v Nonchalant Pty Ltd

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: NONCHALANT PTY LTD (ACN 154 042 903) (IN LIQUIDATION)

JUDGE: GORDON J DATE OF ORDER: 18 JUNE 2013 WHERE MADE: MELBOURNE

1. The Respondent, Nonchalant Pty Ltd (Abel), between at least 2 May 2012 and 15 May 2012, by representing, in trade or commerce, on the website www.abel.com.au (the Abel website), that it supplied motor vehicles for hire at the prices specified on the Abel website when in fact some of the motor vehicles were not available for hire at the specified prices has, in connection with the possible supply, or the promotion of the supply, of motor vehicle hire services: (a) made false or misleading representations with respect to the price of services in contravention of s 29(1)(i) of the Australian Consumer Law (the ACL), which is Sch 2 to the Competition and Consumer Act 2010 (Cth) (the CCA); and (b) engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL.
2. Abel, on 21 May 2012, by representing, in trade or commerce, in print advertisements displayed in its depot in Coopers Plains, Queensland, that it supplied motor vehicles for hire through the Abel website at the prices specified in the print advertisement when in fact some of the motor vehicles were not available for hire at the specified prices has, in connection with the possible supply, or the promotion of the supply, of motor vehicle hire services: (a) made false or misleading representations with respect to the price of services in contravention of s 29(1)(i) of the ACL; and (b) engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL.

3. On or before 18 July 2013, or by such further time and by such instalments as the District Registrar may allow, Abel pay to the Commonwealth of Australia, pursuant to s 224 of the ACL, a pecuniary penalty of $30,000 in respect of its conduct in contravention of the ACL referred to in paragraphs 1 and 2 above.
4. The proceeding otherwise be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 12 of 2013

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: NONCHALANT PTY LTD (ACN 154 042 903) (IN LIQUIDATION)

JUDGE: GORDON J DATE: 18 JUNE 2013 PLACE: MELBOURNE

INTRODUCTION 1 At the very least, the Respondent, Nonchalant Pty Ltd (ACN 154 042 903), has behaved as its name suggests - nonchalantly. It operated a business offering motor vehicle hire services in Queensland trading as "Abel Rent A Car" (Abel). In May 2012, it published on its website, www.abel.com.au (the Abel website) and through a print advertisement available at its Coopers Plains depot in Queensland, that a variety of motor vehicles were available for hire from Abel at specified daily prices. In fact, some of the motor vehicles were not available for hire at the specified prices. 2 On 11 January 2013, the Applicant, the Australian Competition and Consumer Commission (ACCC), filed this proceeding seeking declarations pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) that Abel by representing, in trade or commerce, online and in print advertisements displayed at Abel's Coopers Plains depot, that it supplied motor vehicles for hire through the Abel website at the prices specified when in fact some of the motor vehicles were not available for hire at the specified prices has, in connection with the possible supply, or the promotion of the supply, of motor vehicle hire services: 1. made false or misleading representations with respect to the price of services in contravention of s 29(1)(i) of the Australian Consumer Law (the ACL), which is Sch 2 to the Competition and Consumer Act 2010 (Cth) (the CCA); and 2. engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL. The ACCC also sought the imposition of pecuniary penalties pursuant to s 224 of the ACL. 3 When the proceeding was commenced, Abel was already in liquidation. The effective date of its liquidation was 8 December 2012. On 19 March 2013, the Court granted the ACCC leave nunc pro tunc pursuant to s 500(2) of the Corporations Act 2001 (Cth) to commence and to continue the proceeding. 4 On 11 April 2013, the matter was set down for trial. The liquidator was served with notice of the trial date. The liquidator of Abel has repeatedly stated that he does not intend to defend, or participate in, the proceeding. The ACCC was directed to file its evidence by 30 April 2013. It filed two affidavits; both sworn by Tom Bridges, an employee of the solicitors' firm acting for the ACCC. At the trial, the ACCC also relied upon two earlier affidavits filed in the proceeding sworn 11 March 2013 - an affidavit sworn by Guy Launder, an ACCC employee and an affidavit sworn by Marie Monforte, an ACCC investigator. The ACCC applied under r 30.21 of the Federal Court Rules 2011 (Cth) (the Rules) for an order that the hearing proceed in the absence of Abel. The trial proceeded on that basis. 5 For the reasons that follow, I would grant the declarations sought by the ACCC. The imposition of a pecuniary penalty is also appropriate. These reasons will consider first, the relevant statutory framework, and second the relevant conduct of Abel, before turning to an analysis of the representations made by Abel and the appropriate relief to be granted.

RELEVANT STATUTORY FRAMEWORK 6 The fact that Abel does not intend to defend, or participate in, the proceeding does not preclude the ACCC applying to the Court for an order that the hearing proceed: r 30.21 of the Rules. 7 The legislative basis of the Court's jurisdiction to hear the present case and to grant the relief sought is found in s 86 of the CCA. 8 Part 2-1 of Sch 2 of the ACL addresses misleading or deceptive conduct. Section 18(1) of the ACL relevantly provides that: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. Section 18 reproduces s 52 of the old Trade Practices Act 1974 (Cth) (the TPA), save that the word "corporation" has been replaced with "person". 9 Section 29(1)(i) of the ACL provides that a person must not, in trade or commerce, make a false or misleading representation with respect to the price of goods or services in connection with the supply, possible supply or promotion by any means of the supply or use of such goods or services. 10 Whether a representation is misleading, deceptive or false in breach of ss 18 and/or 29(1)(i) of the ACL is an objective question of fact to be determined by the court having regard to the evidence of the alleged conduct and to the relevant surrounding facts and circumstances. 11 A representation is misleading or deceptive if it is capable of inducing error: Johnson Tiles Pty Ltd v Esso Aust Ltd (2000) 104 FCR 564 at [63]. A representation will not be misleading or deceptive merely because it is likely to produce confusion: Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 201. 12 Two further matters of principle should be stated: (1) the alleged representations should be considered having regard to the ordinary class of consumers to whom they were directed: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [24]-[26] and (2) intention is not an element of a contravention of s 18 of the ACL. 13 A representation about price that does not include all relevant charges applicable to the product may be misleading or deceptive in breach of the ACL: see Australian Competition and Consumer Commission v Audi Australia Pty Ltd [2007] FCA 1990. In that context, a failure to include a compulsory delivery charge in the advertised price of a product has been held to be misleading: Australian Competition and Consumer Commission v Dell Computer Pty Limited (2002) 126 FCR 170. 14 Advertising vehicles for hire at a daily rate without any qualification, when in truth, the cars were only made available at the advertised base rate plus mileage charges and other charges founded the making of an mandatory injunction in Australian Competition and Consumer Commission v Abel Rent-A-Car Pty Ltd [1999] FCA 314 requiring Abel Rent-A-Car Pty Ltd to recall all of its advertising brochures which contained the offending words and to change its signage, depot billboard and vehicle signage to add the words, in prominent text, "plus mileage" or, alternatively, text prominently stating the number of kilometers included, without further charge, in that rental price. Abel Rent-A-Car Pty Ltd is not the same entity as the respondent in this proceeding. 15 The relevant principles governing the attempted use of disclaimers or qualifications to erase or override what would otherwise constitute misleading or deceptive conduct was considered in Downey v Carlson Hotels Asia Pacific Pty Limited [2005] QCA 199 where Williams, Keane JJA (as he then was) and Atkinson J stated: [82] It is well established that: … exclusionary and disclaimer clauses cannot override the statutory prohibition against misleading and deceptive conduct or prevent the grant of appropriate statutory relief where loss or damage is, as a matter of fact, caused by a contravention of the statute. [83] It has been recognised, however, that disclaimers can be effective "if the clause actually has the effect of erasing whatever is misleading in the conduct"; in other words, if the effect of the disclaimer is to make clear something that, if allowed to remain vague or ambiguous, could have led a person into error. ... It is apparent that if a disclaimer is to function in this way it must be worded unambiguously, feature prominently and it must be communicated to the reader that the disclaimer is relevant to the information it is seeking to qualify. As Jacobson and Bennett JJ noted in National Exchange: Where the disparity between the primary statement and the true position is great it is necessary for the maker of the statement to draw the attention of the reader to the true position in the clearest possible way. (Citations omitted.) 16 In Australian Competition and Consumer Commission v Signature Security Group Pty Ltd (2003) 52 ATR 1, the Court succinctly outlined the issue of disclaimers or qualifications by use of an asterisk when it stated at [27]: … a representation that the price of goods is $295 is seriously misleading if the truth is that they are never available at that price. Even an astute observer noticing the asterisk and realising that it directs the reader to additional information might be led to believe that the goods were available for $295 at least in some circumstances. It is unlikely that such an observer would immediately conclude that they were never available at that price. In those circumstances it would take an extremely prominent reference to the additional information to prevent such a representation from being misleading.

RELEVANT CONDUCT 17 In April and May 2012, Abel was in the business of providing car and truck rental services to consumers. 18 On 5 April 2012, the ACCC received a complaint from a consumer who had hired a car from Abel. The complaint was to the effect that the complainant booked the car over the phone and was quoted a price by Abel for the hire. But when the complainant went to pick up the car from Abel's collection point, he was charged a higher price than the quote Abel had provided over the phone. This complaint triggered an investigation by the ACCC of Abel's car hiring practices. 19 The ACCC's investigations revealed that two categories of Abel's advertising were of concern - online advertising and print advertising. Each category will be dealt with in turn.

Online Advertising 20 Between 2 May 2012 and 15 May 2012, Abel caused to be published on the Abel website an electronic advertisement which listed a variety of motor vehicles as being available for hire from Abel, through the Abel website, at the specified daily prices set out in the advertisement (the Online Advertisement). The Online Advertisement specified the following motor vehicles by reference to make, category and price per day. Make Advertised Category Price (per day) 1 Hyundai Getz Small Car $29 2 Nissan Micra Compact Car $35 3 Nissan Tiida Family Car $45 4 Mitsubishi Triton Work Ute $49 5 Mitsubishi Isuzu Truck Moving Truck $79

21 Through the Online Advertisement, Abel represented that each of the motor vehicles referred to above was available for hire from Abel, through the Abel website, at the specified prices set out respectively in the "Price (per day)" column of the table. It is important to note that the specified prices were not expressed: 1. to be qualified by any disclaimer or exclusion; or 2. to include any additional fees or charges. 22 In fact, the actual minimum daily hire price for the motor vehicles numbered 2-5 (inclusive) were as follows: Make Advertised Category Price (per day) Actual minimum available price for 1 day hire 2 Nissan Micra Compact Car $35 $43.54 3 Nissan Tiida Family Car $45 $47.83 4 Mitsubishi Triton Work Ute $49 $58.59 5 Mitsubishi Isuzu Truck Moving Truck $79 $93.20

Print Advertisement 23 On or around 21 May 2012, Abel had available in its depot at Coopers Plains in Queensland, a pile of a print advertisement which listed a variety of motor vehicles as available for hire from Abel, through the Abel website, at specified prices set out in the advertisement (the Printed Advertisement). 24 The Print Advertisement contained the following statements and information: 1. "Great Cars Great Online Deals" and "Rent Cars From $29 A Day When You Book Online!" in large, prominent text; 2. "Sept 2011-Dec 2011" in small font in the bottom right hand comer of the first page; 3. "www.abel.com.au For Great Online Deals"; 4. that a variety of motor vehicles were available for hire from Abel, to be "Book[ed] Online"; Make Advertised Category Price (per day) 1 Nissan Micra Compact Car $35 2 Nissan Tiida Medium Car $39 3 Nissan Dualis Large Car $45 4 Hyundai IMax People Mover $65

5. "ABEL Rental Terms and Conditions Apply. www.abel.com.au/hire-terms-and-conditions.asp" and "Offers subject to availability, expires 16/12/2011" in small font towards the bottom of the second page. 25 By the Print Advertisement, Abel represented that each of the motor vehicles referred to at [24] above was available for hire from Abel, through the Abel website, at the specified prices set out respectively in the 'Price (per day)' column of the table. It is important to note that the specified prices were not expressed:
6. to be qualified by any disclaimer or exclusion; or
7. to include any additional fees or charges.

Reason why daily fee exceeded advertised daily rental charge 26 The reason for Abel's actual daily rental charge exceeding its advertised daily rental charges was that Abel added various other costs to the advertised daily charge when a vehicle was booked. The additional charges were comprised of: 1. a mandatory $5.00 per day "vehicle registration recovery fee" (VRRF) payable on top of the advertised hire price; and 2. a compulsory 7.5% "administration charge" payable on top of, and by reference to, the combined advertised hire price and VRRF. 27 These additional charges did not appear on the Printed Advertisement and only appeared on Abel's website after the potential customer had commenced the booking process. A customer viewing the Online Advertisement on the home page of Abel's website would click on the "Book Now" icon, which then redirected the consumer to a different booking page. Once the potential customer selected their desired type of vehicle, the booking page would be updated to display an "Estimate of Charges". This information would also be displayed on the booking confirmation page after the customer had submitted their personal and credit card details. By way of example, if a potential customer selected a Nissan Micra, the Estimate of Charges would be itemised in the following way: Estimate of Charges

Rental for period (Incl GST) - Days $35.00 1 @ $35.00

• TIME CALCULATIONS - -Detailed Quotation- Rental Charges $31.82 Vehicle Registration Recovery Fee $5.00 Admin Charges $2.76 GST $3.96 Total $43.54

(Emphasis added.) 28 Notably, the additional charges (the items in italics) only appeared in the Estimate of Charges as dollar amounts, without any explanation as to the reason for their imposition or the method by which those amounts were calculated. 29 However, the booking confirmation page did state that the "Online Booking Deal Offer is subject to Abel Rental Terms & Conditions at the time of vehicle pickup". Presumably this was also intended as a reference to the "Rental Terms & Conditions" to which a hyperlink appeared at the foot of Abel's website. 30 Nevertheless, the terms and conditions presented to persons who had made an online booking did not clearly explain the additional charges. The document makes no reference to a VRRF. So far as the administration charge is concerned, paragraph 19 of the terms and conditions provided: 19. CREDIT CARD FEES: The Renter agrees to pay an additional administration charge of 5.5% and a credit card surcharge 2.75% when paying by credit cards. (Emphasis added.) It is unclear as to how or why an administration charge of 7.5% was levied upon customers: see [27] above where the charge was $2.76 on a daily hire of $35.00. The terms and conditions supplied to customers indicate that the administration charge was to be 5.5%. Even when that fee is combined with the credit card surcharge, a figure of 7.5% does not result.

Correspondence with Abel and subsequent steps 31 On 5 June 2012, the ACCC wrote to Abel seeking an explanation for its advertising practices. No response was received and so, on 19 June 2012, the ACCC emailed a copy of its letter of 5 June to Ms King of Abel. Ms King responded on behalf of Abel on 26 June 2012. Ms King's reply stated, in part: … @ 1 June 2012 Nonchalant initiated the process of updating its website and print materials. There was confusion between Nonchalant and its consultants as to what was to be done and unfortunately that confusion appears to have lead to the issues that you have raised. On the 19th June when your letter drawing Nonchalant's attention to this issue was received. Nonchalant acted immediatly [sic]. The website and the print materials were within 48 hours all brought into line with the $29 a day promotion materials. Nonchalant regrets that it didn't see and deal with the problem sooner. Nonchalant is mindful of its legal obligation not to mislead the public and uses its best endeavours to comply with it. Given the immediate response and the explanation given we trust that no enforcement proceedings will be taken in this instance. 32 On 4 September 2012, the ACCC issued two infringement notices pursuant to s 134 of the CCA to Abel for alleged breaches of s 29(1)(i) of the ACL in relation to its "$35 A Day" representations in: 1. the Online Advertisement; and 2. the Printed Advertisement. The infringement notices have not been paid. Abel went into voluntary liquidation on 14 December 2012.

ANALYSIS 33 The representations contained in the Online Advertisement and the Print Advertisement contravene ss 18 and 29(1)(i) of the ACL - they were clearly false, misleading and deceptive.

Online Advertisement 34 The prices in the Online Advertisement were likely to lead a reasonable consumer in the market for renting a motor vehicle who had viewed the home page of the Abel website to conclude that the advertised vehicles could be rented at the advertised prices on the home page with no additional fees payable. 35 The disclosure of the additional fees and charges on a separate web page which was only reached once the reader had been drawn into the website and commenced the booking process was not sufficient to negate the effect of the price representations on the home page and was not sufficient to correct the otherwise misleading and false representations on the home page. 36 The representations as to price on the home page were likely to lead readers of the advertisement into error about the actual price payable for the hire cars. Having induced a visitor to the home page to commence the booking process, it was then less likely that the potential customer would abort the booking process. It is likely that a number of consumers would not have seen the succeeding pages on Abel's website in any event and simply made plans to book a relevant Abel vehicle based on their understanding of the rental charges that appeared on the home page. As Counsel for the ACCC submitted, the facts speak for themselves. Vehicles were not available for hire at the advertised prices.

Printed Advertisement 37 The Printed Advertisement also failed to disclose the additional mandatory fees and charges. A reasonable consumer in the market for renting a motor vehicle who attended the Coopers Plains Abel depot on 21 May 2012 would consider that the prices listed on the Printed Advertisement, a pile of which were displayed on the front counter of the depot, were then currently available. The advertising brochures were not rectified until after 19 June 2012. 38 The fine print on the Printed Advertisement stating that "[o]ffers… [expire] 16/12/2011" and "Sept 2011 - Dec 2011" was neither sufficiently prominent nor proximate to the relevant price representation to negate the representation that the prices were still on offer on the day the Printed Advertisement was displayed. Although printed legibly, the disclaimer appears only in small print at the bottom of the Printed Advertisement and is not identified by any asterisk or other symbol in proximity to the stated prices. The disclaimer was also not consistent with Abel's conduct in having large quantities of the Printed Advertisement available from their premises in May 2012, some five months after the supposed expiry date. 39 Given the temporal and spatial separation of the prices advertised in the Online Advertisement and the Printed Advertisement from the disclosure of the additional fees and charges on other pages of the Abel website or at the Abel depot on collection, the overall impression created by both the Online Advertisement and the Printed Advertisement is that each of the advertised vehicles was available for rent at the stated daily price with no additional fees payable. This representation was false and misleading in breach of ss 18 and 29(1)(i) of the ACL. 40 The further fine print towards the bottom of the Printed Advertisement "ABEL Rental Terms and Conditions Apply www.abel.com.au/hire.terms.and.conditions.asp" does not override the fact that the price representations were false, misleading and deceptive. The fine print does not expressly qualify the price advertised and even if a consumer took these words to qualify the price, the consumer was directed to the Abel website, the home page of which repeated the offending representations. 41 While Abel has not filed a Defence, Ms King's email of 26 June 2012 (see [31] above) in response to the ACCC's letter of 5 June 2012 is significant. Ms King appears to accept the ACCC's complaint that the advertisements were misleading but seeks to deflect responsibility for the "problem" by blaming Abel's advertising consultants. That is not a defence.

RELIEF SOUGHT 42 The ACCC seeks the declarations set out at [2] above and the imposition of pecuniary penalties.

Declarations 43 I would grant the declarations sought by the ACCC for the following reasons: 1. the public interest nature of the proceeding and the public interest role of the ACCC in enforcing the CCA (and formerly the TPA): Trade Practices Commission v Manfal Pty Ltd (No 3) (1991) 33 FCR 382 at 384 and 388; Australian Competition and Consumer Commission v Pacific Dunlop [2001] FCA 740 at [40]. 2. the declarations are of assistance in clarifying the law: Australian Competition and Consumer Commission v Goldy Motors [2000] FCA 1885 at [34]; Tax Practitioners Board v Munro [2012] FCA 1338; and 3. the declarations may inform consumers of the dangers arising from a respondent's contravening conduct: Australian Competition and Consumer Commission v Pacific Dunlop.

Pecuniary Penalty 44 The other relief sought by the ACCC is the imposition of a pecuniary penalty. 45 The main object of the pecuniary penalty provisions of the CCA is deterrence: Australian Competition and Consumer Commission v Gourmet Goody's Family Restaurant Pty Ltd [2010] FCA 1216 at [6]; Australian Competition and Consumer Commission v Global One Mobile Entertainment Limited [2011] FCA 393 at [112]. 46 The voluntary liquidation of Abel is no bar to imposing a civil penalty suitable for general deterrence and does not defeat the significant public interest behind the deterrence function, even if Abel will not be able to pay the fine: Secretary, Department of Health and Ageing v Prime Nature Prize Pty Limited (in liq) [2010] FCA 597 at [22]. 47 As Goldberg J said in Australian Competition and Consumer Commission v SIP Australia Pty Ltd [2003] FCA 336 at [59]: If general deterrence is to have any meaning, a company in liquidation which has contravened the Act must be ordered to pay an appropriate pecuniary penalty as a deterrent to others who might be tempted to engage in similar conduct. See also Australian Competition and Consumer Commission v EDirect Pty Ltd (in liq) (2012) 206 FCR 160 at [69]. 48 Any pecuniary penalties imposed by a court in respect of contraventions of the ACL are not admissible to proof against an insolvent company: s 553B of the Corporations Act; Mathers v Commonwealth of Australia (2004) 134 FCR 135. The imposition of the fine will therefore not interfere with the liquidation of Abel or prejudice its creditors. 49 In assessing the appropriateness of the particular penalty, the applicable principles are not in dispute: s 224(2) of the ACL and Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) (2011) 195 FCR 1 at [96]-[97]. 50 What then is the position here? The conduct engaged in by Abel is serious. There are two separate courses of conduct attracting a penalty - the Online Advertisement and the Printed Advertisement - but those courses of conduct are closely related and interconnected: Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) at [107]-[109]. Abel's practice of charging customers a higher rental charge than they were led to believe was payable has drawn a public complaint. The difference between the advertised daily price and actual price charged was significant ($8.34 per day for the Nissan Micra and $14.20 for the Isuzu truck). Ms King's explanations for the "problem" are disingenuous. Ms King sought to attribute responsibility to Abel's consultants but the false, misleading and deceptive nature of the advertisements was obvious and should have been corrected by Abel regardless of who was originally at fault for the content of the advertisements. 51 As it was, the corrections were only made after the ACCC raised its concerns on 5 June 2012, which concerns Abel did not respond to until after being contacted again by the ACCC. Moreover, it is untrue that the problems Ms King conceded existed in the advertisements only existed between 1 June 2012 and 19 June 2012. The qualification on the Printed Advertisement shows that the brochure must have been in existence since "Sept 2011", the opening date of the "great deal". Abel is in liquidation. Abel was placed in liquidation after the ACCC issued two infringement notices pursuant to s 134 of the CCA to Abel for alleged breaches of s 29(1)(i) of the ACL in relation to its "$35 A Day" representations: see [32] above. There is some evidence to suggest that the former director of Abel now operates a motor vehicle company through another entity. 52 In all the circumstances, it is appropriate that a pecuniary penalty of $15,000 be imposed on Abel for the contraventions of the ACL in respect of the Online Advertisement and a further pecuniary penalty of $15,000 be imposed on Abel for the contraventions of the ACL in respect of the Printed Advertisement.

Conclusion 53 The declarations and the fine will serve the public interest by deterring the relevant conduct and assisting the ACCC to educate consumers and the industry as to the dangers of this conduct. I will make no order as to costs. Such an order is, in the circumstances of this case, futile. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.