CTHFCAFC

Australian Competition & Consumer Commission v Dell Computer Pty Limited

[2002] FCAFC 434

Federal Court of Australia (Full Court)|2002-12-20|Before: Branson J, Emmett J, Stone JJ

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At a glance

Source facts

Court

Federal Court of Australia (Full Court)

Decision date

2002-12-20

Before

Branson J, Emmett J, Stone JJ

Source

Original judgment source is linked above.

Judgment (40 paragraphs)

[1]

Introduction 1 I have had the advantage of reading the reasons for judgment of Emmett J in draft form. I gratefully adopt his Honour's outline of the background to this appeal including his Honour's summary of the reasons for decision of the primary judge. 2 In these reasons for judgment I utilise expressions as defined or explained by Emmett J.

[2]

Statutory Provisions 3 This appeal raises for consideration the proper construction of ss 53(e) and 53C of the Trade Practices Act 1974 (Cth) ('the Act'). These provisions respectively provide: '53. False or misleading representations A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services: … (e) make a false or misleading representation with respect to the price of goods or services; … 53C Cash price to be stated in certain circumstances A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the corporation also specifies the cash price for the goods or services.' 4 The Act contains a number of definitions which, in my view, relevantly impact on the construction of the above provisions. Section 4 contains the following relevant definitions: 'price includes a charge of any description; … services includes any rights …, benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, … but does not include rights or benefits being the supply of goods or the performance of work under a contract of service. supply, when used as a verb, includes: (a) in relation to goods - supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and (b) … and, when used as a noun, has a corresponding meaning, …' 5 Section 4C relevantly provides: 'In this Act, unless the contrary intention appears: … (c) a reference to the supply or acquisition of goods includes a reference to the supply or acquisition of goods together with other property or services, or both; …'

Australian Competition & Consumer Commission v Dell Computer Pty Limited - [2002] FCAFC 434 - FCAFC 2002 case summary — Zoe

[4]

'Once it is appreciated that the beer transported by QRX is supplied by the brewer to a licensee only at the licensee's premises, it is impossible to suppose that the transport services rendered by QRX are acquired by the licensee. The beer supplied at the licensed premises may be described as "delivered beer" to distinguish it from beer at the brewery door, but the delivery services supplied by QRX are acquired by the brewery, not by the licensee. The licensee acquires only delivered beer. …' 8 In my view, although it appears that the case of the appellant before the learned primary judge was not clearly so put, the obligation undertaken by Dell when a customer orders a computer is an obligation to supply to the customer, at the customer's nominated place of delivery, a computer having the specifications nominated by the customer. That is, a purchaser of a Dell computer acquires a delivered computer. The obligation assumed by Dell is, in my view, a single obligation to supply to its customer at the nominated place of delivery the computer specified by the customer. 9 It is by reference to that obligation, in my view, that s 53 requires consideration to be given to whether Dell, by the advertisements in the first and second categories identified by the primary judge, made a false or misleading representation with respect to the price of goods. 10 As Emmett J has pointed out, the word 'price' ordinarily means the consideration in money payable in respect of a sale. I see no reason to conclude that the word 'price' is not used in this sense in ss 53 and 53C of the Act. However, where, as in this case, what is sold is a 'delivered' product, the money payable in respect of the sale will, in my view, comprehend the cost of delivery. For this reason I do not regard as significant the fact that a fee for delivery is commonly characterised as a 'charge' for the service of delivery. 11 The Dell advertisements in the first and second categories identified by the primary judge gave prominence to a figure (often being a figure like $1,999, $2,999 or $3,699) apparently being the price for a particular computer, but did not disclose that an additional amount, described in small print as 'delivery', was required to be paid for the supply of that computer. 12 Having regard to the obligation which Dell would assume in respect of the sale of a computer so advertised, I conclude that the figure given prominence in the advertisements was not the price payable by the customer in respect of the supply of the computer so advertised. It was not the consideration in money payable in respect of the obligation to be undertaken by Dell; the promised supply of the computer could not be obtained for that sum. Dell did not propose to, and did not undertake an obligation to, sell a non‑delivered computer. The price for the goods which it did propose to sell (i.e. delivered computers) included the amount characterised in its advertisements as 'delivery'. 13 It is immaterial, on the approach which I consider appropriate, that the total amount apparently received by Dell in respect of the amounts described as 'delivery' bears a relatively close relationship to its costs of importing computers from Malaysia and delivering them to its Australian customers. I also consider that it is immaterial that the appellant did not contend that the delivery 'charge' was anything but a bona fide fee for the delivery of the goods in question. Dell did not, in my view, provide to its customers a delivery service which was additional to its obligation to supply to the customer the relevant computer; its obligation was to supply a delivered computer. The issue of whether, if it did provide to its customers a delivery service, any charge for the delivery service would form part of the 'price' of the goods within the meaning of the Act, should, in my view, be determined in a case which calls for the issue to be determined. 14 I conclude that the publication by Dell of the advertisements in the first and second categories of advertisements identified by the primary judge resulted in contravention of s 53(e) of the Act. The advertisements in these categories, unlike the advertisements in the third category, did not disclose the compulsory nature of the charge categorised by the advertisements as 'delivery'. Their publication resulted in the making of a false or misleading representation that the figure given prominence was the price of the advertised computer when in fact the price of the advertised goods included an additional amount ordinarily being $99.00.

[7]

19 It is plain that s 53C was not necessary to address the mischief of part‑payments represented to be full consideration. Section 53(e) was quite adequate to proscribe any such practices. It seems likely that s 53C was intended to address a more specific problem. I conclude that the better view is that s 53C is concerned with representations explicitly concerning part‑payments. That is, that it is concerned with representations with respect to an amount that it is represented would constitute a part of the consideration for the supply of goods or services. A representation that an amount is the whole consideration for the supply of goods or services when in fact it will constitute only part of the consideration falls squarely with the terms of s 53(e); I do not consider that it also falls within the terms of s 53C. 20 The vice which the appellant identified in the advertisements in the first and second categories identified by the primary judge was that they represented that a specified sum of money was the whole consideration for the sale and purchase of a computer when, in fact, the sum so specified constituted only part of the consideration. In my view, once the advertisements in the first and second categories are so characterised, it is plain that their publication does not result in a contravention of s 53C of the Act. 21 The advertisements in the primary judge's third category make it clear, as his Honour found, that the payment of a specified delivery fee was compulsory. Consequently, the advertisements in this category contained a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods within the meaning of s 53C. The issue in respect of this category of advertisement is therefore whether the advertisements specified the cash price for the computer. 22 The Macquarie Dictionary contains the following definition of 'specify': '1. to mention or name specifically or definitely; state in detail. 2. to give a specific character to. 3. to name or state as a condition. 4. to make a specific mention or statement.' 23 It was implicit in the submissions of the appellant, as it seems to me, that a cash price for goods or services will only be 'specified' if it is given as a single figure. I am not persuaded that the word 'specified' should be so understood in the context of s 53C. The above definition provides support for this approach. In my view, a cash price for goods and services is mentioned specifically if it is definitely identified as the aggregate of two nominated figures. Thus, a cash price identified as, for example, $1,999 plus $99, is, I consider, a cash price 'specified' in the amount of $2,098 within the meaning of s 53C of the Act. There is no reason to think that a consumer interested in purchasing a computer would be in any doubt as to the price of the delivered computer. Similarly, to adopt an analogy referred to in argument, a representation by a corporation in the fast food business that a pizza will cost, for example, $10 (being the price of a basic pizza) plus $1 for each of a number of 'extras' (eg anchovies, olives etc) will not, in my view, involve a contravention of s 53C simply because the full cash price of every potential combination is not given. 24 It is not easy to state an exhaustive test of the circumstances in which a cash price will be specified within the meaning of s 53C and I do not consider it necessary to attempt to do so. A measure of judgment is, in my view, involved. Where a cash price could only be identified by the performance of a complicated calculation, or where the cash price was stated in a manner pregnant with ambiguity, a conclusion that the cash price was not specified might readily be reached. 25 In my view, the publication of the advertisements in the third category identified by the primary judge did not result in a contravention of s 53C of the Act.

[21]

BACKGROUND FACTS 33 Dell has had a presence in Australia since September 1992. Dell is a subsidiary of Dell Computer Corporation, which has its corporate headquarters in Austin, Texas, USA and has regional headquarters in England, Singapore and Japan. Through Dell and associated entities, Dell Computer Corporation has been servicing individuals, businesses, governments and large organisations in the Asia-Pacific region since the early 1990s. 34 Historically, Dell has been distinguishable from its competitors because it sells its computer products directly to its customers. That is to say, it does not sell through a reseller such as a retail store. A further distinguishing feature of the Dell business model is that Dell does not maintain stock or inventory of completed computer products. Rather, the manufacturing process for Dell's computer products does not commence until a customer has placed an order for such computer products. The computer products are then manufactured to a customised configuration, being a combination of hardware and software as requested by the customer. 35 Because Dell does not sell through re-sellers, Dell arranges for computer products ordered by the customer to be delivered direct to the customer. In most instances, Dell charges a delivery fee for that delivery. However, not infrequently, Dell sells to its customers at a price that is less than the advertised price. For example, during the period 12 December 1998 to 6 May 2002, 13.4 per cent of orders of computer products involved a discount to the customer. The average percentage discount given on total sales during that period was two per cent. 36 It has been the practice of Dell, from time to time, to instruct telephone sales staff to close deals by offering free delivery. Thus, a proportion of the discounts given to customers represent the waiver or reduction by Dell of the delivery charge. In addition to such discounts, Dell frequently conducts 'Free Delivery' promotions. During those promotions the computer products purchased by the customer are delivered at no additional cost. 'Free delivery' promotions, have been conducted at various times during the period from 20 November 2000 to 14 April 2002. 37 During the period from September 1992 to 5 May 1999, the delivery fee, if any, charged by Dell was not a standard fee. In the period from September 1992 to 12 December 1998, various freight delivery charges were made. The variation in charges represented variable fees that were levied according to the place of delivery. Higher charges were made for either expedited delivery or delivery to remote areas. During the period 12 December 1998 to 4 May 1999, if a delivery fee was charged, it was one of several fixed fees according to the place of delivery. 38 Delivery charges applied irrespective of the computer products that were being delivered and it was not mandatory for the telephone sales staff to charge the delivery fee to the customer. However, that was usually done through the levying of one of the variable charges just referred to. 39 From 5 May 1999, the delivery fee was standardised in respect of all of Dell's computer products. For example, most home and small business sales were in respect of the 'DIMENSION' and 'INSPIRON' computer products. A standard delivery charge for those computer products applied as follows:

[23]

40 The advertisements that are the subject of the proceeding were directed towards home and small business users. In view of the fact that Dell has no retail or other outlets, all of its completed transactions are made by way of direct sales. Accordingly, Dell's advertisements did not refer prospective customers to a reseller. Rather, prospective customers were directed either to log on to Dell's Internet site or to call a designated telephone number. 41 If the prospective customer logged on to the Internet site, he or she was able to order computer products online without speaking to a representative of Dell. Since approximately February 1997, a prospective customer who clicked on an appropriate spot would be linked automatically to 'the home store configurator', which quoted the price of the relevant computer products and the applicable delivery charge. Accordingly, any order placed by a consumer online since the inception of the Internet site could only have been so placed once the consumer had already been informed of a price for the computer products, which included delivery. 42 If a prospective customer rang the designated telephone number, it would be answered by an automated voice response system. The caller was asked to press a certain number if he or she was interested in home or home office computer products or to press another number if the call related to a potential purchase of computer products for a small business. If the first option was chosen, the caller was linked to a telephone sales representative in Malaysia. If the second option was chosen, the caller was linked to Dell's centre in Frenchs Forest near Sydney. 43 Telephone operators received training that encouraged consistency and uniformity in all communications with customers or potential customers. Computer products are adaptable and, by paying more, a consumer could purchase a bundle that need not necessarily accord with that shown in an advertisement that prompted the enquiry from the prospective customer. The primary function that a telephone sales operator performed was to discuss with the prospective customer what configuration or 'bundle' of computer products was wanted. The total price charged for computer products depended upon the configuration chosen by the customer. 44 Once the configuration and the total price were established with the customer over the telephone, the sales representative recorded the relevant address and contact details of the customer and, in most cases, subsequently forwarded a quotation to the customer. The quotation specified the features chosen by the customer and the total cost, including delivery. The delivery fee was described in the quotation as 'standard delivery'. If the customer requested that the computer products be made available more expeditiously, the additional fee was shown. 45 Within the sales quotation system used by Dell, delivery was not recorded as a separate charge. Instead, the delivery charge was included in the full quoted list price of the computer products. The amount allowed for delivery in the sales quotation was the then current specified charge by type of computer product. The actual charge for delivery that would be allocated to a particular customer depended upon the discount, if any, negotiated with the customer. The amount of such discounts, if any, varied, as did the reason for the discount. 46 All computer products are shipped to Australia from Malaysia, where they are manufactured, to premises in

[27]

the decision of the primary judge 51 The primary judge found that the relevant section of the public, by reference to which Dell's conduct was to be tested, included 'the astute and the gullible, the intelligent and the not so intelligent'. The relevant section of the public comprised potential customers for computer products for home and small business use. His Honour found that that was a fairly wide range of persons. In considering whether or not the conduct of Dell contravened s 52 of the Act, his Honour took into account the fact that readers of the advertisements would not be expected to pause and analyse the advertisements but that they would have absorbed the general thrust of them. 52 His Honour concluded that the words that were used in the first and second categories of advertisement were sufficiently imprecise to leave open, on any reasonable interpretation of the advertisements, the possibility that a purchaser could collect the goods without paying a delivery charge. His Honour considered that there was nothing in the advertisements that would have enabled any member of the relevant section of the public to work out, for herself or himself, that the unexcluded possibility, that is to say, free personal collection, was not available. His Honour concluded that the publication of the advertisements in the first and second categories constituted conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive the relevant section of the public, contrary to the prohibition contained in s 52 of the Act. There is no appeal from that decision. 53 However, the Commission also contended that the publication of the first and second categories of advertisement contravened ss 53(e) and 53C of the Act. The Commission also contended that the publication of the third category of advertisement contravened s 53C of the Act. 54 Sections 53(e) and 53C relevantly provide as follows: '53 A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods … or in connexion with the promotion by any means of the supply or use of goods…: … (e) make a false or misleading representation with respect to the price of goods …; … 53C A corporation shall not, in trade or commerce, in connection with the supply or possible supply or goods…or in connection with the promotion by any means of the supply or use of goods…make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods…unless the corporation also specifies the cash price for the goods…' 55 Under s 4 of the Act, the following terms are defined as follows: '"price" includes a charge of any description; … "supply", when used as a verb, includes, in relation to goods, supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and, when used as a noun, has a corresponding meaning.' 56 His Honour approached the question on the basis that 'price' means the money consideration for goods, that term being well understood in sale of goods legislation. Even though the definition of price in s 4 of the Act includes a charge of any description, the charge must be part of the money consideration for the purchase of the goods. His Honour concluded that the delivery charge was not part of the purchase price in that sense. Further, the Commission did not contend that the delivery charge was anything but a bona fide fee for the delivery of the goods in question. His Honour concluded, therefore, that the delivery charge was a fee for the service of delivering the computer products and not part of the consideration for their purchase. 57 The question that arises in relation to s 53C of the Act is whether the sums of money, which were represented in the advertisements as the price of the computer products, constituted part only of the consideration for their supply, having regard to the fact that a compulsory delivery charge was payable. The primary judge observed that, if a literal approach to the expression '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. His Honour considered that, while it is clear that the delivery charge is not optional, the question of whether s 53C of the Act has been contravened turns on whether the delivery charge is part of the consideration for the supply of the computer products. 58 His Honour referred to the definition of 'supply' in s 4 of the Act and observed that there would be no contravention of s 53C of the Act unless the delivery charge were part of the consideration for the purchase of the computer products. His Honour considered that the delivery charge was not a part of the consideration payable for the purchase of the computer products but was a fee for delivery of the computer products notwithstanding that the payment of the fee was obligatory. Accordingly, his Honour was of the view that the publication of the advertisements did not contravene s 53C of the Act. 59 In view of the fact that the Commission had been substantially successful in the proceeding, his Honour ordered Dell to pay the Commission's costs of the proceeding.

[30]

The first and second of those obligations are performed in consideration of a sum of money that it is easy to characterise as a 'price'. The fee for delivery is easily enough characterised as a 'charge' for the service of delivery. 63 The first and second obligations, coupled with the obligation to pay the price, are properly characterised as a contract for the sale of future goods. That concept is recognised by the uniform legislation dealing with sale of goods, such as s 10(3) of the Sale of Goods Act 1923 (NSW) (the "Sale of Goods Act"). That is to say, Dell's obligation is to supply both services and materials: the 'price' is appropriated to those obligations. The delivery fee is separate and is appropriated to the obligation to deliver the result of the performance of the first and second of the obligations. 64 The definition of 'price' in s 4 of the Act does not relevantly extend the concept of price in relation to a sale of goods. The word 'price' is ordinarily applicable to the consideration in money payable in respect of a sale. However, the term 'price' is not ordinarily used in relation to the consideration in money paid for the provision of services. On the other hand, the word 'charge' is ordinarily so applied. Thus, the obvious purpose of the extended definition of 'price' in s 4 of the Act is to make it clear that the word is to apply not only to a money consideration payable for a sale, or other supply, of goods, but also to a money consideration payable for the provision, or other supply, of services. 65 It would have been possible for Dell to contract with its customers on the basis that, in consideration of the payment of a fixed amount of money, it would deliver to a given address computer products that satisfy a particular description and would vest title to those computer products in the customer. In those circumstances, it would have been possible to characterise that fixed amount of money as a 'price' for the goods. 66 There was no suggestion by the Commission that the delivery fee was other than a bona fide fee for the delivery of the computer products. Accordingly, it is not necessary to consider what the position might have been if there had been an appropriation of the total consideration to manufacture, vesting of ownership and delivery that did not represent a bona fide attempt at appropriate apportionment. It may be that, where there was such an appropriation, any representation as to price might be false or misleading. However, that is not this case and it is not appropriate to decide that question in this case. 67 Although it was not possible to acquire computer products without paying the charge for delivery, the arrangements between Dell and its customers clearly drew a distinction between the consideration for the sale of the computer products on the one hand and the consideration for their delivery on the other hand. The arrangements might be characterised as involving the combination of two contracts, being a contract for the sale of goods and a contract for the supply of delivery services. 68 Normally, the obligation of the seller under a contract for the sale of goods is to deliver at the seller's premises. The buyer's obligation is to attend at the seller's premises and take delivery. That, of course, is not the way in which Dell contracts with its customers. Rather it undertakes to deliver the computer products to its customer. However, it appropriates a money consideration to the performance of that obligation. The mere fact that a customer cannot have one obligation without the other does not detract from the fact that the parties have apportioned the total amount of money payable by the customer to the two different aspects of Dell's obligations, namely, sale (which includes manufacture and vesting of title), on the one hand, and delivery, on the other. 69 There is no reason to think that the use of conventional language in the Act was intended to depart from conventional usage of that language, as derived from the law merchant over several centuries and codified in the Sale of Goods Act. Price is the money consideration payable by a buyer under a contract of sale. The fact that additional money consideration is payable for the performance of an additional, albeit obligatory, obligation by the seller does not make the price apportioned to that additional obligation part of the price for the goods. 70 The vice that the Commission seeks to prevent in a situation such as that presently under consideration is prevented by s 52 of the Act, as the primary judge held. Thus, it was misleading or deceptive for Dell to offer the computer products, at a particular price, without making clear that it was a prerequisite for obtaining the computer products at that price that the customer must also pay an additional charge for delivery. However, there has been no false or misleading representation with respect to the price of the computer products. Further, there has been no complaint concerning any representation as to the 'price' of or 'charge' for, the service of delivering the computer products.