Australian Competition & Consumer Commission v Thorn Australia Pty Ltd [2004] FCA 157 | Case summary

For a period of 3 years from the date of this Order, the Respondent be restrained, whether by itself, its servants, agents or otherwise howsoever, in trade or commerce in Australia, in its television commercials, in connection with the supply or possible supply of, or the promotion of any supply to any person, of home goods, from: (a) failing to display for a sufficient period of time to be read by the average viewer; (b) failing to display in a clearly legible and easily comprehensible form; (c) failing to give due prominence to; or (d) using voice-over statements that fail to bring to the consumers' attention the existence or contents of; particular terms and conditions to which the advertised supply or possible supply of home goods is subject, such particular terms and conditions being: A. the term upon which the advertised price on offer is based; B. the identification of the particular items (if any) that are the subject of a free of discounted rental; C. the basis on which the price quoted or displayed is calculated including number of items and frequency of payment; D. the circumstances in which any free or discounted rental ceases upon the cessation of another rental; and E. if relevant, the fact that any offer applies to selected stock only; and F. the fact that full particulars of all terms and conditions are available on application. 4. The Respondent to: (a) formulate a trade practices compliance program to be implemented for its staff, which: (i) is tailored to the circumstances of the Respondent; (ii) provides for the appointment of a compliance officer, who is a senior officer of the Respondent; and (iii) emphasises compliance with Part V of the Trade Practices Act; (b) use all reasonable endeavours to have the proposed compliance program accord with the provisions of the Australian Standard for Compliance Programs AS 3806; (c) within 1 month of the date of this order, provide to the Australian Competition and Consumer Commission (the 'ACCC') a summary of the proposed compliance program to be approved by the Commission; (d) within 1 month of receiving written notification from the ACCC of its approval of the proposed compliance program, implement that compliance program in the manner and to the standard described in the summary; (e) cause an evaluation of the compliance program to be undertaken a year from the date of its implementation by an independent external professional or organisation with trade practices experience acceptable to the ACCC or otherwise approved by the Court; and (f) provide a report of the results of that evaluation to the ACCC within 30 days of the completion of the evaluation. 5. The parties have leave to apply to the Court should the ACCC not approve the proposed compliance program. 6. The Respondent to cause a prominent one click link to a website containing a corrective notice, to be published and displayed for a period of 6 months from the date of the order, on the home page of their internet website, radio-rentals.com.au, at its expense, disclosing the following information: (a) that the television advertisements failed to sufficiently disclose the terms and conditions because: (i) the conditions were not displayed for a sufficient period of time to be read by the average viewer; (ii) the conditions were not clearly legible and easily comprehensible; (iii) the conditions were not given due prominence; and (iv) the voice-over statements failed to bring the existence or contents of the small print conditions to the attention of customers; (b) the history of the television commercial; and (c) the matters referred to in the material annexed hereto and referred to as 'A', namely, the promotion, the conditions, the concerns of the ACCC, consent orders which were made in the Court and the nature of those orders. 7. The Respondent to cause to be prominently published, at its own expense, in the next Radio Rental advertising catalogue to be printed after final orders of the Court following the determination of the matters brought in relation to s 53C of the Trade Practices Act, a corrective notice: (a) disclosing the following information: (i) that the television advertisements failed to sufficiently disclose the terms and conditions because: A. the conditions were not displayed for a sufficient period of time to be read by the average viewer; B. the conditions were not clearly legible and easily comprehensible; C. the conditions were not given due prominence; and D. the voice-over statements failed to bring the existence or contents of the small print conditions to the attention of customers; (ii) the history of the television commercial; (iii) the matters referred to in the material annexed here to and marked 'A', namely, the promotion, the conditions, the concerns of the ACCC, consent orders which were made in the Court and the nature of those orders; and (b) to be distributed in the same localities as those in which the catalogues promoting the "Rent 2, Get 1 Rent Free" promotion were distributed. 8. The Respondent to cause to be broadcast at its own expense an advertisement (the 'Television Advertisement'), in terms agreed by the parties or directed by the Court on the television stations contained in the Television List annexed hereto and marked 'B' and further that such advertisement shall be: (a) if agreed between the parties, broadcast for the first time within 30 days of the parties reaching such agreement or, failing agreement, within 30 days of a direction by the Court to that effect; (b) of at least 30 seconds in duration; and (c) broadcast according to the Advertising Schedule annexed hereto and marked 'C'. 9. If the parties are unable to agree, within 7 days, on the terms of the Television Advertisement referred to in Order 8 the matter will be listed for further directions on 11 March 2004 at 9.30am at which time the parties will be required to submit their respective proposals for the content of the Television Advertisement. 10. The Respondent to pay the Applicant's costs of the action so far as they relate to proceedings brought in relation to s 52 and s 53(g) of the Trade Practices Act to be taxed on a party/party basis if not agreed. 11. The Applicant is to pay the Respondent's costs of the action so far as they relate to the proceedings brought in connection with s 53C of the Trade Practices Act to be taxed on a party/party basis if not agreed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT Introduction 1 Thorn Australia Pty Ltd ('Thorn Australia') carries on the business of renting out to members of the public electrical appliances including refrigerators, freezers, dishwashers, washing machines, television sets, DVD and video recorders and other items. It carries on that business under the name, Radio Rentals. The Australian Competition and Consumer Commission ('ACCC') has instituted proceedings against Thorn Australia in respect of misleading print and television advertising relating to its rental contracts. Thorn Australia concedes that it has engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and consents to orders being made arising out of those contraventions. It is also said to have contravened s 53C of the Trade Practices Act but it contests that allegation upon what it regards as the proper construction of that section. Section 53C requires that advertisements showing part of the consideration for the supply of goods or services should specify the 'cash price'. The facts behind the allegation relating to s 53C are not in dispute. 2 On the basis of agreed statements of fact, the Court is asked to make orders in terms of a minute of consent orders agreed between the parties. Such orders will be made if within power and appropriate. The Court is also asked to find, on the basis of substantially agreed facts, whether there has been a contravention of s 53C of the Act and, if so, to make further agreed orders in respect of it. The question arising in respect of s 53C is whether an advertisement setting out the periodic rent payable for the lease of goods must also show the total rent payable over the term. Facts Relating to Contravention of Section 52 of the Trade Practices Act 1974 3 The parties have agreed a Statement of Facts relating to the conceded contravention of s 52. It is convenient to set out relevant parts of it. 4 Between about 13 October 2002 and 30 November 2002, in connection with the supply or possible supply of or the promotion of the supply of home goods by Thorn Australia to consumers, it engaged in an advertising campaign which it called the 'Q3 Campaign' ('the Q3 Advertising Campaign'). 5 An offer designated 'Rent Two Get One Rent Free' offer was promoted in television advertisements, radio advertisements, a catalogue titled 'Rent Two, Get One Rent Free' ('the Q3 Catalogue') and point of sale material. Another offer called 'Rent, Try, Buy' offer was promoted in television advertisements, the Q3 Catalogue, a catalogue titled 'Rent, Try, Buy' and internet promotions. 6 The Q3 Advertising Campaign consisted of the following: (a) a 30 second television commercial; (b) a 15 second television commercial; (c) the Q3 catalogue; (d) radio advertisement; and (e) point of sale material. 7 Thorn Australia also utilised the internet at its website radio‑rentals.com.au for the purposes of causing advertisements for leasing of home goods to be published. As part of the Q3 Advertising Campaign, a thirty second television advertisement ('the First Television Advertisement') was screened between 13 October 2002 and 27 October 2002 in regional New South Wales, regional Victoria, regional Queensland, the Northern Territory, the Australian Capital Territory and regional and metropolitan Western Australia. The First Television Advertisement appeared on thirteen television stations across Australia and on numerous occasions. Another fifteen second television advertisement ('the Second Television Advertisement') was screened between 13 October 2002 and 4 November 2002. It also appeared on thirteen television channels in the various States and Territories on numerous occasions. Both Advertisements were screened on television at peak and off-peak times. 8 During the course of the First Television Advertisement, the following small print terms and conditions appeared on the screen: '*Free rental for third item with the lowest monthly rental'. 'Prices and offer based on 18 month consumer rental agreement on selected stock. Figures quoted are the weekly equivalent of the monthly payment.' 'Free rental for third item with the lowest monthly rental. Offer available whilst you continue to rent two other items. Full terms and conditions available on application.' Almost identical test appeared in the Second Television Advertisement. 9 In order to complement the media advertising component of the Q3 Advertising Campaign, Thorn Australia distributed 1, 954, 151 of the Q3 Catalogues by way of letter drop to households in Sydney, Melbourne, Brisbane, Perth, regional New South Wales, regional Victoria, regional Queensland, the Northern Territory, the Australian Capital Territory and regional Western Australia. 10 The Q3 Catalogue consisted of four pages: (a) The front page contained, amongst other things, the following representations: (i) the caption 'Rent Two, Get One Rent Free'; (ii) price and offer based on 18 month consumer rental agreement on selected stock; and (iii) small print terms and conditions, namely: 'Offer applies only to easiRENT items. Offer available only whilst you continue to rent other two items. Price and offer based on 18 month consumer rental agreement. Figure quoted is the weekly equivalent of the single item monthly payment. Figure quoted is for two items and is the weekly equivalent of the monthly payment'. (b) The second and third pages contained, amongst other things, the following representations: (i) the caption 'Rent Two, Get One Rent Free'; (ii) visual images of various consumer goods available under the easiRENT offer, and the representative weekly price payable for leasing the respective consumer good; and (iii) the same small print terms and conditions as in (a)(iii) and the statement: 'Price and offer based on 36 month consumer rental agreement. While stocks last.' (c) The back page contained, amongst other things, the following representations: (i) the caption 'Red Hot Favourites'; (ii) visual images of two packages consisting of up to three consumer goods; (iii) a banner pertaining to each package stating 'Rent, Try, Buy!'; (iv) a representative weekly price payable for leasing the respective consumer good or a combination of the goods represented in each package; (v) a further banner stating 'Rent, Try, Buy!' and the following description: 'Brand new and straight out of the box! Rent, Try, Buy is the easy and affordable way to own the latest in home entertainment and household appliances. …. The best thing about Rent, Try, Buy is that you can decide to buy a similar good after 12, 24 or 36 months or, continue to rent. The choice is yours! ALL WITH A BUYOUT PRICE FROM $50#' (vi) small print terms and conditions, namely: 'Offer applies to Rent, Try, Buy! items displayed. Price and offer based on minimum 12 month consumer rental agreement. Figure quoted is the weekly equivalent of the monthly payment. Rent, Try, Buy! is available on selected stock only and subject to availability. Goods available to buy using Rent, Try, Buy! are similar to rental goods in age, dimension and feature. #Buyout price for a similar good after payment of 36 months rental. ^While stocks last. Rental payments are calculated and payable monthly in advance. Prices may vary in some regional areas due to freight. Account set up fee applies for single item rented. Conditions apply and all rental applications are subject to approval. Full terms and conditions available on application. We reserve the right to substitute product in the event of unavailability. Offer expires 31/12/02 unless withdrawn earlier. We reserve the right to correct any errors or misprints. Thorn Australia Pty Ltd ABN 63 008 454 439 trading as Radio Rentals.' 11 The Q3 Advertising Campaign radio advertisement was broadcast between 20 October 2002 and 26 October 2002, 3 November 2002 and 9 November 2002 and 17 November 2002 and 23 November 2002 in Brisbane, Perth, regional New South Wales, regional Victoria, regional Queensland, the Northern Territory, the Australian Capital Territory and regional Western Australia. It stated: 'They're off and its Radio Rentals bounding out in front with Rent 2 and get a 3rd rent free, here's brand new TVs and DVD players from $5.95 each a week, and getting up on the inside is a chance to win one of 6 NEC home theatre packages valued at $4,500 each. Oh they hit the line and its Radio Rentals with Rent 2 and get a 3rd rent free call now on 131 181. Prices and offer based on an 18 month agreement on selected stock, figures quoted are the weekly equivalent of the monthly payment. Conditions apply.' The radio advertisement was broadcast on some sixty-nine radio stations around regional Australia on numerous occasions. 12 During the Q3 Advertising Campaign, Thorn Australia displayed Point of Sale Material in all of the respondent's stores between 14 October 2002 and 30 November 2002. 13 It is agreed that the First and Second Television Advertisements contravened s 52 of the Act for the following reasons: (a) they failed to adequately disclose the small print terms and conditions; (b) the conditions were not displayed for a sufficient period of time to be read by the average viewer; (c) the conditions were not clearly legible and easily comprehensible; (d) the conditions were not given due prominence; (e) the voice over statements failed to bring the existence or contents of the small print conditions to the attention of consumers. 14 Among the matters which the advertisements failed to sufficiently disclose were the following: (i) The free rental for the third item was for the item with the lowest monthly rental. (ii) The price and offer was based on an 18 month consumer rental agreement on selected stock. (iii) The figure quoted was for two items and was the weekly equivalent of the monthly payment. (iv) The offer was available only while the consumer continued to rent the other two items; and (v) Full terms and conditions were available on application. The Proposed Consent Orders for the Contravention of Section 52 15 The consent orders sought in respect of the contraventions of s 52 of the Trade Practices Act begin with two declarations that, by broadcasting the First and Second Television Advertisements Thorn Australia engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive. The declarations identify the ways in which the advertisements were misleading or deceiving by identifying the matters which they failed sufficiently to disclose relating to the terms and conditions of their offer to 'rent two get one rent free'. There follows an injunction for a period of three years restraining Thorn Australia from failing to display, for a sufficient period of time to be read by the average viewer and in a clearly legible and easily comprehensible form, particular terms and conditions which apply to the advertised supply or possible supply of home goods. The injunction would also restrain Thorn Australia from failing to give due prominence to the particular terms and conditions and from using voice over statements that fail to bring to the consumers attention the existence or contents of such conditions. The terms and conditions are:

The terms upon which the advertised price on offer is based. 2. The particular items (if any) that are the subject of a free or discounted rental. 3. The basis on which the price quoted or displayed is calculated including the number of items and frequency of payment. 4. The circumstances in which any free or discounted rental ceases upon the cessation of another rental. 5. If relevant, the fact that any offer applies to selected stock only. 6. The fact that full particulars of all terms and conditions are available on application. 16 The proposed orders also require Thorn Australia to formulate a trade practices compliance program tailored to its circumstances, providing for the appointment of a compliance officer and emphasising compliance with Pt V of the Trade Practices Act. It would be required to use all reasonable endeavours to have the proposed compliance program accord with the provisions of Australian Standard for Compliance Programs AS3806. A summary of the proposed compliance program is to be approved by the ACCC. The program is to be implemented within one month of written notification from the ACCC of its approval. Its evaluation is to be undertaken by an independent external professional or organisation with trade practices experience acceptable to the ACCC 'or otherwise approved by the Court'. A report of the results of the evaluation to the ACCC is to be made within thirty days of the completion of the evaluation. The order provides for leave to apply to the Court should the ACCC not approve the proposed compliance program. 17 There is a requirement for a corrective notice to be published and displayed for a period of six months on the home page of Thorn Australia's Internet web site at its expense disclosing that its television advertisements had failed to sufficiently disclose the terms and conditions upon which its offers were being made in the various respects already mentioned. 18 An order for a corrective notice to be published in the next Radio Rental advertising catalogue, disclosing similar information, is also sought. A corrective television advertisement is to be broadcast. There is then an order expressed to be conditional upon Thorn Australia being held to have contravened s 53C of the Trade Practices Act. Should it be found to have contravened that section, the ACCC seeks leave to amend the content of the corrective notices and advertisements referred to in these consent orders. It is agreed that Thorn Australia will pay the ACCC's costs of the action so far as they relate to the proceedings brought in connection with s 52 and 53(g) of the Trade Practices Act. Whether the Consent Orders Should Be Made 19 The Court must be concerned to ensure that before it makes a consent order the order is within power and appropriate. The considerations relevant to that assessment in respect of orders of the type now sought have previously been canvassed in Australian Competition and Consumer Commission v Real Estate Institute of Western Australia (1999) 161 ALR 79; Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548; Australian Competition and Consumer Commission v Target Ltd [2001] FCA 1326; Cassidy & Anor v Medical Benefits Fund of Australia (No 2) [2002] FCA 1097 (Hill J). It is not necessary for present purposes to revisit the discussions in those authorities. Suffice it to say that I am satisfied that the proposed consent orders, so far as they relate to contraventions of s 52, fall within the scope of the principles generally enunciated and are both appropriate and within power. To that extent I will make the orders sought. Contravention of Section 53C - The Statutory Framework 20 Section 53C of the Trade Practices Act was introduced into Pt V of the Act by the 1996 amendments. It provides: '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.' 21 In s 4 of the Act, the word 'supply' is defined thus: ''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) in relation to services - provide, grant or confer; and, when used as a noun, has a corresponding meaning and "supplied" and "supplier" have corresponding meanings.' The word 'price' is defined to include 'a charge of any description'. Facts Relevant to the Alleged Contraventions of Section 53C 22 An agreed statement of facts was tendered in connection with the alleged contravention of s 53C. It overlaps significantly with the agreed facts already referred to in connection with the contravention of s 52. The Q3 Advertising Campaign was described by reference to the broadcasting of the First and Second Television Advertisements and the distribution of those broadcasts, the publication of the Q3 Catalogue and the distribution of 1,954,151 copies of it around Australia. Also identified in the agreed statement of facts was a radio advertisement broadcast in various parts of Australia on numerous occasions on a large number of radio stations, all of which were identified. A transcript of the radio advertisement was set out in an annexure to the agreed statement of facts. Point of sale material which was advertised in various parts of regional Australia and in Sydney, Melbourne, Brisbane, Perth and the Northern Territory between 14 October 2002 and 30 November 2002 was also referred to and a copy annexed to the statement. Internet advertising was identified. 23 Relevant parts of the texts of the television advertisements, the Q3 Catalogue, the radio advertisements, the point of sale material and the Internet advertising were also set out. The common feature of relevance is that the advertisements all referred to a weekly rental rate for the hired goods. By way of example the First Television Advertisement contained both visual and aural presentations of the statement: 'Brand new TVs from only $5.95 a week'. The advertisements did not state the total rent payable for the period of the hire. The absence of that figure from the advertisements is said to give rise to the contraventions of s 53C. Contraventions of Section 53C - The Contentions 24 The ACCC alleged that the advertisements contravened s 53C because: (a) they contained a representation as to part of the consideration for the supply of the goods - the Advertised Payment; (b) they did not specify the cash price for the goods - that is the total amount of rent payable for the contract term on which the advertised payment was based. The ACCC argued that the policy in s 53C is to require advertisers to 'tell the whole story'. 25 The definition of supply in s 4 expressly includes supply by way of 'lease' and 'hire'. Section 53C is said therefore not to be confined to purchase or hire purchase agreements. Nothing in the section suggests that a narrower interpretation of sale or supply is intended. The term 'cash price' used in s 53C relates to the money for a supply of goods or services. The meaning of 'cash price', it was submitted, is intended to accommodate and be flexible enough to encompass the various circumstances which may arise from the various permutations of supply. In connection with a supply by way of lease, the cash price must necessarily relate to the rent payable under the lease, the rent being 'the charge' payable for being 'supplied' with the leased goods. 26 The respondent's advertising material did not specify the total amount of rent to be paid by a consumer. It neither stated the amount nor contained sufficient information to enable a consumer readily to determine the amount. The same was said to be true of the television advertisements and the other promotional material identified in the agreed statement of facts. 27 It was submitted on behalf of Thorn Australia that the rental agreement for the advertised goods provided for a lease period but also provided for termination prior to expiry of the lease period and for continuation beyond the end of the lease period. Its customers often exercised the right to terminate prior to expiry the minimum term or to rent the goods after its expiry. A continuation of the rental agreement beyond the lease period would be at the advertised rental. In some cases goods similar to those rented could be purchased at a nominated date for a specified sum. The total rent that would be payable by a consumer who leased goods for the term of the lease on which the advertised payment was based was simply a total. The total price paid would depend upon the rights ultimately exercised by the customer under the lease agreement. It was submitted that the ACCC's submission wrongly assumes that there is a singular term, and therefore a singular total rental, for which the advertised rental will apply. 28 It was said s 53C applies to representations concerning part payments. A rental payment is not a part payment, it is the full payment for the service of the use of a good for the period of the payment. In a rental payment there is no aspect of deferment of liability of the kind inherent in the notion of a part payment. As a matter of ordinary grammar representations as to 'an amount [being] part of the consideration' referred to in s 53C is a part of something that could have a singular cash price instead of payment by parts. The use of the definite article 'the' points grammatically to the cash price being a singular price. The fact that s 53C requires the cash price to be specified in the advertisement means that it must contemplate that the cash price is known at the time of advertising. However, the total rental is not such a price. Section 53C, does not apply to supply by rental. Thorn Australia also referred to practical difficulties associated with the construction advanced by the ACCC. The Construction of Section 53C 29 The construction of s 53C begins with the ordinary meaning of its words read in context and by reference to the purpose of the section. 30 The key elements of the prohibition for present purposes are the making of 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' and the requirement to 'specify the cash price for the goods or services'. It is significant that the term 'cash price' is used rather than a term such as 'total amount payable'. 31 The New Shorter Oxford English Dictionary defines 'cash' relevantly as: '1b. A sum of money

Australian Competition & Consumer Commission v Thorn Australia Pty Ltd

At a glance

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Judgment (14 paragraphs)

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Legislation Cited (1)

Cases Cited (7)

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