4.2 Who are the market participants?
103 This issue arises in relation to the trade mark infringement actions, the claims under the ACL for misleading and deceptive conduct and also those for passing off. It is generated by the fact that the respondents contend that certain categories of persons in the market, such as electricians, would not have been misled by the brand CLIPSO into thinking they were buying Clipsal products on account of their familiarity about, and expertise with, electrical accessories.
104 There is a preliminary, and perhaps obscure, issue as to the reasonableness of the consumers in the market regardless of their expertise. There are statements in cases about trade mark infringement that the issue of deception is to be assessed by asking about the impact of the impugned conduct on ordinary purchasers of the products: see Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 595 per Kitto J.
105 On the other hand, there are statements in relation to consumer claims under the ACL for misleading and deceptive conduct that suggest that the focus is on the impact of the impugned conduct on the ordinary and reasonable consumer or potential consumer: see Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 656 [53] per French CJ, Crennan, Bell and Keane JJ, 661 [78] per Gageler J; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 ('Parkdale') at 199 per Gibbs CJ.
106 So far as passing off is concerned, the focus is upon the impact of the conduct upon purchasers but excluding from that class 'careless or indifferent persons': Norman Kark Publications Ltd v Odhams Press Ltd [1962] RPC 163 at 168 per Wilberforce J (as he then was), cited with approval in the dissenting reasons of Gummow J in 10th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299 at 315.
107 I am inclined to the view that the class of purchasers deprived of its careless or indifferent members is the same class as the class of ordinary and reasonable purchasers contemplated for ACL purposes. Although the policy underpinning the ACL provisions is consumer protection whilst that underpinning passing off is the protection of traders, that difference does not provide any principled basis for identifying the classes of person affected by a representation in any different way. On the other hand, the difference between the two actions may well be material when it comes time to consider what kind of representation might be necessary. In particular, there may be subtle distinctions to be drawn between misrepresentations for passing off purposes and misleading and deceptive conduct or conduct likely to have that effect for the purposes of the ACL.
108 For present purposes, it is sufficient to know that the three different actions I have to consider require the market composition issues to be considered not only by reference to ordinary purchasers but also by reference to ordinary reasonable purchasers. In this case, however, I am not satisfied that the position of these two classes is any different. There may be cases where the difference I have just mentioned matters but this is not one of them. The two classes are, in this case, the same.
109 The more substantial issue was generated by the respondents' argument about who was in the market. All of the various strains of the argument ran into the same conceptual location, which was a contention that the fame of the CLIPSAL name was such that no reasonable electrical contractor or wholesaler would or could be misled by the CLIPSO mark (or packaging or logo) into thinking that what was being purchased was related to Clipsal. All of the applicants' claims in relation to Bakelite were therefore to be seen as failing because the notional class of ordinary consumers or ordinary reasonable consumers of Bakelite products did not include persons, such as retail consumers, who lacked this specialised knowledge.
110 As the applicants' case was developed, the class of consumers of Bakelite products was to be seen as including both a sub-group of retail consumers who purchased Bakelite products for themselves and another sub-group of retail consumers, typically engaged in home renovation projects, who were heavily involved in the decision as to which kind, or what brand, of power switch or socket the relevant engaged electrical contractor was to install.
111 An attempt was made in some of the applicants' evidence to assess just what percentage of the overall market was constituted by end-consumers themselves buying the products. For example, Mr Quinn, of whom mention has already been made, thought that end-consumers were responsible for around 6% of all Bakelite purchases in Australia. The cross-examination of Mr Quinn uncovered several methodological deficiencies in the process by which he had arrived at the 6% figure. I do not propose to set these deficiencies out. The reason for this is that whilst I accept that the respondents' criticisms of this evidence are well-founded at the level of a numerical analysis, I do not accept that the applicants have failed to show that end-consumers are market participants in the two senses discussed.
112 The reasons for this relate largely to the marketing activities of the applicants, which are very extensive. About those it is now necessary to say a few words.
113 For at least ten years or so the applicants have pursued a marketing strategy of causing end-consumers to make decisions about the brand of switch and socket products they wish to see purchased by their electricians. This strategy has been pursued by seeking to market the applicants' switch and socket products directly to the public. This has included the use of extensive display boards and other point-of-sale paraphernalia (one of which became Exhibit 26). Exhibit 26 is around 1.5m x 0.8m and is festooned with light switches (a photograph of it appears below at [159]). It is plainly directed at persons making design decisions and includes an attractive range of switches, colours and options. These display boards are placed in various outlets such as display centres. Another form of marketing has been a magazine entitled 'The Essential Checklist', which has been in production since 2003. One of these (or an extract from it) became Exhibit 33. A quick perusal of this work shows immediately that it is directed to consumers and not the trade. For example, on the front page there are headlines such as 'Styles and colours to suit your décor' and 'How to keep your family safe and secure'. Plainly, these are not directed at the trade. A perusal of the inside of the magazine shows the same thing. For example, at page l4 this story appears:
If you're building, renovating or improving your home, a licensed electrician will need to be called in at some stage.
However, in most cases, when you are dealing directly with a builder or design professional (i.e. architect), you may never get to speak to the electrician about what you need.
Don't let others decide
Often electricians are forced to make assumptions about your lifestyle, and guess how you might live in your new home.
If you're prepared to take your chances that the electrician will guess right, then there's no need to get involved in planning your electrical requirements. Of course the licensed electrician will do a good job of providing you with a basic wiring installation. However, don't you deserve your home to be just how you want it? What's more, it's likely they'll use Australia's own high quality Clipsal electrical accessories - but isn't it best to be sure?
114 Since 2005, the applicants have also provided a service known as 'Clipspec'. Clipspec is software that the applicants provide to persons operating various outlets through which its products are sold. It permits the delivery to consumers of what was referred to by Mr Quinn as 'Clipspec consultations'. Such consultations allow for an interactive planning experience for the consumer. The various outlets include Clipsal's 'Powerhouse' displays, builders' showrooms, the showrooms of Beacon Lighting (although this has now been discontinued), some electrical contractors and third party businesses who provide advice on designing electrical systems to customers. The process involves the consultant using the Clipspec software with customers to provide information about Clipsal goods. These sessions can last up to two hours. There is no need to expand upon this further. The basic point, which I accept, is that Clipspec is a marketing innovation directed at end-consumers and not the trade.
115 The reference above to Clipsal Powerhouses is a reference to a further marketing innovation. These are display centres operated by the applicants around Australia. There are six. These allow the general public to see the products in situ, and to speak with a consultant if need be. Clipsal has offered Clipspec consultations from these centres since 2006. There are analogous displays by the applicants at trade shows. Similar public-directed marketing activities were also to be seen on the applicants' YouTube Channel, and through the arrangement it had had with Beacon Lighting.
116 Most important perhaps is the applicants' website at www.clipsal.com, screenshots of which were in evidence. It was divided on its home page into a section for consumers and another for trade.
117 All of this material shows that the applicants go to considerable lengths to persuade end-consumers to get involved in the decisions about which switches and sockets are to be installed. Mr Quinn gave evidence of his work as the Director of Marketing at Schneider Australia. Around 70% of his time was devoted to the CLIPSAL mark. He had 33 staff, 17 of whom worked exclusively on the Clipsal brand and nine of whom had roles encompassing both the Clipsal brand and that of Schneider. It is obvious that these marketing activities are extensive. In 2013, the applicants spent approximately $13 million on them. Mr Quinn described part of these activities in these terms:
58. Clipsal views the increased involvement of end consumers in the decision-making process as an opportunity to create demand for its premium products. For many years, part of Clipsal's marketing strategy has been to encourage electrical contractors to "upsell" premium Clipsal Goods to their customers. In the last ten or so years, Clipsal has also started to focus a large part of its marketing on end consumers, the intention being that they will make the decision to purchase, or cause to be purchased, Clipsal Goods (and, in particular, premium Clipsal Goods). In this sense, Clipsal is aiming to create demand for premium products at the traditional end of the supply chain, and either for end consumers to make the purchase themselves or to drive their demand backwards through the supply chain to electrical contractors.
118 He explained the significance of that increased demand as arising for the following reasons:
60. Based on my knowledge and experience, including as outlined at paragraphs 11 and 12 above, end consumers take a different approach to decision-making than electrical contractors when it comes to electrical products. Whilst electrical contractors, who are almost exclusively male, have traditionally focused on factors such as reliability, quality and confidence that a job will be long-lasting, end consumers are more focused on aesthetics and, depending on the product, technological features. Both classes are likely to be focused on pricing issues. For both classes, brand is also important: for contractors it has always been important, whilst it is becoming increasingly important for end consumers.
61. The growing relevance in the last ten or so years of end consumers in the market for electrical products is part of a broader increase in interest in renovation, including "do-it-yourself" (DIY) work. This can be seen in the increased popularity of home shows, generally conducted at trade and exhibition centres. I discuss Clipsal's participation in home shows further at paragraphs 141 to 142 below. Home renovation television shows have also become an increasingly popular genre in television, and reflect the increasing interest of homeowners in renovating and building their own homes.
(Emphasis in original.)
119 The evidence disclosed that in the 2011 year net sales for Clipsal products (not just Bakelite) totalled $522,910,727. From this one may infer that this is a substantial business, in which a marketing staff of 33 is hardly to be seen as surprising.
120 The point of this digression is that it is reasonable to infer that the strategy of seeking to increase demand at the consumer end and then driving that demand back up the supply chain is likely to have influenced end-consumer decisions to some extent.
121 The critical question, however, is by how much. It does not seem to me that the effect of the strategy pursued by Clipsal can be readily measured. In the case of those consumers who simply give instructions on the kind of switches and sockets they wish to have adorn their new homes, the actual purchase order may be concealed beneath multiple layers of contractors or professionals. The instruction may be given to an architect who may produce plans which instruct a builder who may then instruct an electrical subcontractor. I can imagine no mechanism by which it might be readily ascertained from the simple fact that the electrical contractor purchased a Clipsal accessory that this was the result of the exercise of decision-making further along the supply chain. So too, whilst I accept the bona fides of those of the applicants' witnesses who tried to estimate how many purchasers in wholesale shops were tradespeople and how many were end-consumers, there are elements of this which must be purely speculative. The critical point at which it breaks down, in particular, is that whilst people who appear by reason of apparel to be tradespeople most likely are, it does not necessarily follow that someone who does not appear to be a tradesperson is not.
122 However, the evidence of these witnesses (the marketing director, Mr Quinn, a store manager of an electrical wholesaler, Mr Kalimnios and the electrical wholesaler, Mr Micholos) nevertheless persuades me that the applicants' efforts in bringing end-consumers into the process as part of its supply chain strategy are likely to have had some success. The evidence of Mr Kalimnios and Mr Micholos (referred to later in these reasons) was attacked on the basis that the firm for which they worked, P&R Electrical, was not independent of the applicants. It is not surprising that an electrical wholesaler might have a substantive commercial relationship with the market leader in electrical accessories, but I would not describe such a relationship as lacking independence. In any event, I do not think that the evidence of either man was adversely affected by this matter.
123 One is left in the situation then that the only evidence of the success of the strategy of seeking to increase demand at the consumer end of the market is the existence of the strategy itself. Although I am prepared to accept that some end-consumers do indeed purchase switches and sockets themselves, I do not accept that generally these are the same people who are involved in, or the targets of, Mr Quinn's supply chain strategy. As best I can surmise, they are instead a small group of people who decide to buy Bakelite products to have an electrician install them, or possibly even a smaller group of unlawful renegades who buy Bakelite products to install themselves.
124 I do not think that this class is large but neither do I think it de minimis. I reject the respondents' submission that I should dismiss Mr Quinn's evidence about this. That challenge arose this way. In earlier non-use proceedings relating to the Dolly Switch mark, Mr Quinn gave an account of the market which was submitted to be at variance with the version he now gave in these proceedings. In a statutory declaration dated 11 April 2013, Mr Quinn swore at paragraph 19 that:
19. In my experience, wholesalers and contractors, being the customers and consumers of Clipsal Goods comprising the Clipsal Dolly Switch, recognise the shape as being a distinguishing feature indicating the trade source of the goods. Competing brands of electrical switches and switched sockets have to date (except as discussed below) always been distinguished from Clipsal Goods in the trade by the different shape of their switch dolly as compared with the Clipsal Dolly Switch.
125 The respondents submitted that this showed that Mr Quinn did not think as at that date that end-users of either variety were part of the market. That reading of paragraph 19 is certainly available, but it needs to be seen in the context of paragraph 44:
44. The product brochures, catalogues, leaflets and bulletins are mailed out to Clipsal's wholesaler distribution network on a regular basis as well as to a large number of electrical contactors (sic) throughout Australia. This currently involves direct mailing to at least [redacted] businesses in the electrical trade throughout the whole of Australia. The above items are distributed via our Sales Representatives to wholesale branches and contractors, builders and specifiers. They are also distributed via Clipspec Consultants (within Clipsal Powerhouses and Displays (sic) Centres) to end users, via Builders to end users and via the Marketing Department to all customer types. They are distributed in person, via email and mail. They are distributed at the launch of each respective product and further distributed and used on an ongoing basis. All brochures bearing the Clipsal Dolly Switch shape are still in use and can be downloaded from the Clipsal Website or from our eCatalogue program. Orders can also be placed for printed copies via each state office.
(Emphasis added.)
126 I thus accept literally the respondents' written submission that end-users were not mentioned in paragraph 19 or 45 but observe that they were mentioned in paragraph 44. The respondents also put emphasis on paragraph 25, where Mr Quinn said:
25. Since 1970, Clipsal has sold Clipsal Goods incorporating the Clipsal Dolly Switch to a very wide network of wholesalers throughout Australia, who then in turn have sold the Clipsal Goods to the electrical trade which includes electrical contractors, builders and architects with a very limited amount (less than 1%) being sold to retail customers.
127 I do not read this as saying anything about the size of the end-user market who provide demand through others in the supply chain. What Mr Quinn is referring to here is the class of persons who go into a shop to buy Bakelite, a class I have already concluded is small.
128 There is, in my opinion, no inconsistency of any substance between the position adopted by Mr Quinn in his evidence in this case and his prior statutory declaration. I reject, therefore, the attack made on his credit in the respondents' written submissions. That said, I am left with the impression that what is involved here is really nothing more than an informed guess.
129 Consequently, one is still left with little compelling evidence that any of the end-consumers targeted by the strategy exist beyond the strategy itself and the amount spent on it. I have no particular difficulty describing the strategy as plausible. One can well see that there are likely to be some people who care very much about what the light switches and sockets installed in their homes are to be, whilst there will be others who are benignly indifferent. Amongst the first class, it requires no great mental athleticism to see that their fascinations are likely to be with the Bakelite products at the premium end of the market. Can I infer from these observations that such a class exists and in numbers which are significant? I believe that I can and I do. The widespread fascination with home renovations in some quarters is reflected in the programming that appears on popular television every week. I do not believe that Mr Quinn's strategy of creating demand and driving it back up the supply chain is some quixotic venture which is pointless. To the contrary, I am prepared to infer that a significant portion of persons building a new house or renovating an existing dwelling do care about which Bakelite products are used.
130 The respondents make two further submissions. First, it is said that the persons in the market must be actual buyers of the products in question. It is implicit in that submission that the respondents deny that persons who merely acquire goods through others without literally purchasing the goods themselves can be market participants.
131 This would be a surprising and highly formal outcome. It would exclude from the relevant market all those who act through agents. For example, it would mean that for trade mark and passing off purposes the relevant market for air cargo carriage services does not include end-users sending cargo by air because airlines only deal directly with freight forwarders and not the public. In Australian Competition and Consumer Commission v Air New Zealand (2014) 319 ALR 388 at 447 [263] and 454 [309] I accepted that, for the purposes of competition law, certain categories of such end-user could be market participants even if they utilised the services of freight forwarders to engage directly with the airlines. The correctness of this conclusion was upheld by the Full Court: Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 330 ALR 230 at 248-250 [52]-[65] per Dowsett and Edelman JJ. Of course, the question in that case is not the question in this case. I accept that it is a different question and to be quite clear I am not suggesting that that approach should literally be applied.
132 Nevertheless, it suggests that market analysis questions might not be blind to whether the transacting parties are principals or merely agents.
133 Further, it is difficult to identify the redeeming features of an approach to this issue which cuts out of an appraisal for trade mark infringement and passing off purposes the effect of the infringing conduct on the ultimate acquirer of the goods or services. In particular, it has the unwholesome consequence of leaving a trader in a market consisting of agents free to engage in trade mark infringement or passing off. In every such case, a competitor who sues will be met with the defence that the deceived party was not the actual purchaser. So if a trader set up a rival cargo airline called Qatas, Qantas would be without a remedy because only freight forwarders purchase their cargo carriage services and they (like the electricians in this case) could not be misled. It would be irrelevant that the ultimate consumer might have been misled because such a consumer did not purchase the airlines' services. This would, I think, be an outlandish result.
134 Further, such an eccentric conclusion would then bring the law of trade mark infringement and passing off into conflict with the corresponding statutory prohibitions on misleading and deceptive conduct where, so it seems to me, an analysis of the position of the principals would be inevitable.
135 There are, therefore, good reasons of principle to reject the respondents' submission about this. The respondents contend, however, that their position is supported by the High Court's decision in Cooper Engineering Co Pty Ltd v Sigmund Pumps Ltd (1952) 86 CLR 536 at 539. It is true that in that case, which was a trade mark case, three justices did fleetingly refer to the relevant inquiry thus: 'you must consider the nature of the customer who would be likely to buy the goods'. But there was no issue in that case about the distinction between a buyer and an ultimate acquirer. I do not think therefore that it represents an obiter dictum, let alone is it part of the ratio decidendi. The same remark can be made about the respondents' reliance upon Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641.
136 I conclude that it is not necessary in order for a person to be part of the relevant market that they be a purchaser; it will suffice if they are the person who makes the decision that the goods or services are acquired.
137 A second argument is then mounted by the respondents that a 'substantial number' of persons must be likely to be misled or deceived. This was said to follow from The Kendall Co v Mulsyn Paint & Chemicals (1963) 109 CLR 300 at 305 and the Full Court's more recent decision in Australian Postal Corporation v Digital Post Australia (2013) 308 ALR 1 at 15 [81]. This requirement was disputed by the applicants but I do not think it matters. In my opinion, the groups I have identified have a substantial number of members, except the category who purchase Bakelite for themselves which can be put aside in the present context.