Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd

NEW SOUTH WALES DISTRICT REGISTRY NSD 2354 OF 2007

REASONS FOR JUDGMENT 1 These are the reasons for judgment for final orders I made on 14 December 2007. In these reasons I have drawn heavily on written submissions made by the parties before the hearing on 14 December 2007. I will do so without further detailed attribution. The matter involves a dispute between two battery manufacturers (it is a gloss on the evidence to describe them as manufacturers but the details are immaterial). One alleges the other was advertising and otherwise promoting for sale its batteries in a way that involved misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1976 (Cth) ("the Act"). The impugned advertising and promotional material involved a comparison between the performance of the respondent's batteries and the performance of the applicant's batteries. 2 The history of the litigation is as follows. On 28 November 2007, the applicant approached the duty judge who granted leave to the applicant to file the application, statement of claim and affidavits in support and made the matter returnable before the duty judge at 2.15pm on 30 November 2007 for the hearing of the claim for interlocutory relief. An order was also made that certain of the applicant's exhibits (including the results of tests conducted by the applicant on the respondent's batteries) remain confidential to the external legal representatives of the respondent until further order. 3 On 30 November 2007, the respondent informed the Court that it was not ready to proceed with an interlocutory hearing on that day and was not in a position to do so the following Wednesday or Friday or "for some little time to come". The respondent indicated that it wanted an urgent final hearing of the matter. The matter was adjourned to 6 December 2007 on the basis that the applicant would apply to have the matter heard on that day. The matter was then allocated to my docket. 4 On Thursday, 6 December 2007, the matter came before me. The applicant sought to commence the hearing of its interlocutory application. The respondent opposed this course of action on the basis that it was not ready to proceed and could not be ready to proceed until Monday, 10 December 2007, at the earliest. The respondent again indicated its willingness to agree to an early final hearing. I then fixed the hearing of the interlocutory application for the following day. 5 The interlocutory hearing commenced on 7 December 2007. During the course of the hearing, the respondent offered to undertake to remove one of the contentious forms of advertising, namely the billboards, within a period of 5 days but only if the applicant desisted from seeking any further interlocutory relief. The applicant did not accept that offer. The proceedings did not finish on that day and were adjourned for further hearing to the next available Court date, namely 14 December 2007. 6 Shortly after the hearing for interlocutory injunctive relief resumed on 14 December 2007, I invited the parties to consider whether the interlocutory hearing might transform into a final hearing on the basis that I would make final orders that day disposing of all issues between the parties. I suggested this course for several reasons. First, I doubted, as I indicated to the parties, that further additional evidence would be necessary to enable the resolution of the issues on a final basis. Secondly, I had formed the preliminary view that on the evidence presented to that point, the respondent was able to make claims about the comparative performance of its batteries of the type alluded to in the advertising and other promotional material. However, I had also formed the preliminary view that the form of advertising and promotion actually used by the respondent to convey the comparative performance of its batteries was misleading and deceptive. I communicated at least aspects of these views to the parties. In the result, both the applicant and the respondent agreed to the transformation of the proceedings, with the applicant doing so on the basis that it accepted that the respondent could make a comparison between its batteries and one of the types of batteries made and sold by the applicant. 7 The batteries manufactured by the applicant are, relevantly, of three types. They are Energizer e2 Lithium, Energizer e2 Advanced and Energizer Max. Each is sold, relevantly, in two sizes, namely AA and AAA. Of these batteries only the Energizer Max is an alkaline battery. The respondent's battery is called Varta High Energy and is sold, relevantly, in the same two sizes, namely AA and AAA. It is an alkaline battery. The applicant ultimately accepted that the respondent could claim that both sizes of the Varta High Energy battery would last as long as the equivalently sized Energizer Max battery but alleged, correctly, that the same comparison could not be made in relation to the Energizer Lithium battery and the Energizer Advanced battery. 8 The evidence concerning the applicant's testing was to the following effect. The test results were detailed in a table entitled "Comparative Performance Summary" that was reproduced at pages 1-2 of Confidential Exhibit TM-2, exhibited to the affidavit of Anthony Mazzola and at pages 1-2 of Confidential Exhibit GRC-2, exhibited to the affidavit of Graeme Randall Clench. The testing was undertaken by reference to the applicable international standards (drawn from the International Electrotechnical Commission ("IEC") and the American National Standards Institute ("ANSI")) against which battery performance is traditionally assessed. Different tests measure the length of time a battery lasts when used in connection with different electronic devices such as high drain devices (for example, portable mp3 or tape players and cameras) and low drain devices (such as radios). The testing can take between 4 and 6 weeks. 9 The test results that were compiled in the "Comparative Performance Summary" compared the performance of different batteries in relation to the Varta High Energy battery. In the "Comparative Performance Summary", Varta High Energy, the battery against which others were tested, was given a base figure of 100%. The performance of other batteries that were tested in comparison to the Varta High Energy battery was expressed as a percentage of this base figure. 10 If a tested battery's performance was superior to that of the Varta High Energy battery (i.e. it lasted longer than the Varta High Energy battery), that particular test battery was given a figure greater than 100%. Conversely, if a tested battery's performance was inferior to that of the Varta High Energy battery (i.e. it did not last as long the Varta High Energy battery) that particular test battery was given a figure less than 100%. 11 The "Comparative Performance Summary" indicated the following:

· Energizer Lithium AAA and AA batteries outlasted Varta High Energy AAA and AA batteries in most of the IEC and ANSI tests and in particular in mp3, personal cassette player tests and digital camera tests;

· Energizer Advanced AAA batteries outlasted Varta High Energy AAA batteries in all the IEC and ANSI tests;

· Energizer Max AAA batteries outlasted Varta High Energy AAA batteries in some of the IEC and ANSI tests but not others.

12 The respondent tendered evidence of testing of Varta High Energy AA and AAA batteries in comparison with Energizer Max AA and AAA batteries and submitted that such tests demonstrated that the claim that the respondent's batteries lasted as long as applicant's batteries was true for that comparison. Given the applicant's concession on this issue, this submission can be accepted. 13 I turn now to consider the advertising and promotional material. Central to the applicant's case was the packaging in which the Varta High Energy batteries were offered for sale. The Varta High Energy packaging can be described as follows:

· a prominent yellow sticker was affixed to the front of the clear and hard plastic cover of the pack containing the batteries. The yellow sticker contained the words "Lasts As Long As Energizer ® and Duracell ®" and the word "Power" as well as an image of the Varta High Energy battery;

· an image of a computer mouse and a portable mp3 player was situated in the top left corner of the pack;

· the words "Varta" and "High Energy" appeared prominently on the pack;

· the pack was in three shades of blue, the borders between which were curved;

· under the word "Varta" appeared the words "Performance Guaranteed or Your Money Back", next to which appeared a star shape;

· at the foot of the pack the words "Alkaline Batteries" appeared and the word "Alkaline" was also visible on the batteries inside the plastic packaging and (less obviously) on the battery depicted on the yellow sticker;

· on the back of the pack appeared the words next to an asterisk "*Based on testing of the following non-rechargeable AAA Alkaline batteries: Varta High Energy (Made in Germany), Energizer® Max® and Duracell® CopperTop® (standard alkaline)†". There was no asterisk on the front of the pack;

· a star shape, which matched that appearing on the front of the pack, was also situated on the back of the pack. Next to the star was a detailed description of the terms of the money back performance guarantee;

· underneath those words appeared: "† 'Energizer' and 'Energizer Max' are registered trade marks of Energizer Australia Pty Ltd" and "† 'Duracell' and 'CopperTop' are registered trade marks of the Gillette Company a Delaware Corporation"; and

· the words "Made in Germany" also appeared on the back of the pack.

14 There was evidence indicating that often, although not always, multiple packs of the three types of Energizer battery were hung on a display rack on which packs of Varta High Energy batteries were also hung. In my opinion, by making the comparison on the yellow sticker that the Varta High Energy batteries lasted as long as Energizer and Duracell without identifying, as to Energizer, that the comparison did not include Energizer Lithium and Energizer Advanced and was restricted to Energizer Max, the packaging was plainly misleading and the conduct of the respondent in offering its batteries for sale in this packaging was misleading and deceptive. The fact that the comparison on the yellow sticker was only truthful if made in relation to Energizer Max was not made apparent by the reference to the comparison with the Energizer Max on the back of the pack. The comparison on the yellow sticker was on the front of the pack, which would ordinarily be the face of the pack seen by the consumer before selecting for purchase the batteries in the pack. The observations on the back of the pack were not averted to on the front of the pack and were in no way prominent. It is improbable that a consumer would have noticed those observations and understood the relevant qualification to the unqualified comparison appearing on the yellow sticker on the front of the pack. 15 In relation to the above evidence, the respondent sought to argue that a reasonable consumer would understand that the comparison was limited to alkaline batteries, and on that basis, would be with Energizer Max only. It also sought to argue that the price of the Varta High Energy battery would point to the comparison being with Energizer Max only, a comparably priced product. 16 Where a representation is made to the public, the relevant test in determining whether the representation is misleading or deceptive is whether 'ordinary' or 'reasonable' persons of the section of the community to whom the conduct has been directed (in this case consumers) are likely to be misled or deceived: Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 at 85-86; Astrazeneca Pty Limited v GlaxoSmithKline Australia Pty Limited [2006] FCAFC 22 at [37]. I do not accept the respondent's argument that a reasonable consumer would understand that the comparison on the yellow sticker was limited to alkaline batteries and, on that basis, would be with Energizer Max only. Nor do I accept the respondent's argument that a reasonable consumer would understand that the price of the Varta High Energy battery would point to the comparison being with Energizer Max only, a comparably priced product. Indeed, the foregoing submissions attribute to consumers a level of knowledge about the composition of batteries and their pricing which, in my opinion, is not realistic. 17 The advertising and promotion undertaken by the respondent also included instore display bins, counter units containing Varta High Energy batteries and streetside billboards at various locations. The display bins and counter units had the following features.

· an image of the swimmer Grant Hackett wearing a singlet bearing the word "Varta";

· the words "VARTA LASTS AS LONG AS ENERGIZER AND DURACELL in AA + AAA sizes only - see pack for details"; and

· the same image of Grant Hackett as appeared on the instore bin headers;

· the words "VARTA LASTS AS LONG AS ENERGIZER AND DURACELL in AA + AAA sizes only - see pack for details"; and

· There was no reference in the billboards to the word "Alkaline" and there was no reference to equivalent wording to that which appeared on the back of the Varta High Energy battery pack next to the asterisk (i.e. that the claim was based on comparative testing of Energizer Max and Duracell CopperTop batteries).

19 Internal documents of the respondent indicated that consideration was given to including in the billboards the statement on the back of the battery pack to the effect that the claim was "[b]ased on testing of …. Varta High Energy (made in Germany), Energizer Max and Duracell CopperTop ..." but a decision was made to proceed without those words. 20 In my opinion the billboards and the instore material would have likely deceived or misled 'ordinary' or 'reasonable' consumers (see Campomarat 85-86; Astrazeneca at [37]) given that the billboards and instore material did not in any way indicate that the comparison on which the performance claim was based was with Energizer Max batteries only. 21 Having regard to these conclusions, I was prepared, on 14 December 2007, to make the following orders:

1. In these orders: (a) Current High Energy Varta AA and AAA Batteries shall mean Varta High Energy AA and AAA batteries having the performance characteristics of those batteries made in Germany and supplied by the Respondent in Australia as at the date of these orders; (b) Current Varta High Energy Packaging shall mean packaging in the form of the packaging in which Current High Energy Varta AA and AAA Batteries are supplied in Australia as at the date of these orders with the sticker containing the words "Lasts As Long As Energizer & Duracell"; (c) Current Varta High Energy Billboard shall mean a billboard in the form of the billboard advertising the Current Varta High Energy AA and AAA Batteries as at the date of these orders and containing the words "Lasts As Long As Energizer & Duracell"; (d) Current Varta High Energy Promotional Material shall mean any promotional material other than packaging or billboards but including without limitation trade banners and instore bin and shelf materials advertising the Current Varta High Energy AA and AAA Batteries and containing the words "Lasts As Long As Energizer & Duracell"; (e) Energizer Max shall mean Energizer Max AA and AAA batteries having the performance characteristics of those batteries supplied by the Applicant in Australia as at the date of these orders; and (f) Duracell CTshall mean Duracell CT or Duracell CopperTop AA and AAA batteries having the performance characteristics of those batteries supplied in Australia as at the date of these orders.
2. Order that on and from 23 January 2008 the Respondent whether by its servants or agents or otherwise be permanently restrained from supplying or distributing Current Varta High Energy AA or AAA Batteries in Current Varta High Energy Packaging.
3. Order that on and from 21 December 2007 the Respondent whether by its servants or agents or otherwise be permanently restrained from exhibiting or causing to be exhibited or permitting to be exhibited any Current Varta High Energy Billboard.
4. Order that on and from 4.00pm on 17 December 2007 the Respondent whether by its servants or agents or otherwise be permanently restrained from supplying or distributing any Current Varta High Energy Promotional Material.
5. Order that on and from 23 January 2008 the Respondent whether by its servants or agents or otherwise be permanently restrained from making any representation in trade or commerce that or to the effect that Current Varta High Energy AA or AAA Batteries last as long as Energizer or Duracell.
6. Note that it shall not be a breach of the previous order to make a representation in trade or commerce that or to the effect that Current Varta High Energy AA or AAA Batteries last as long as Energizer Max or Duracell CT.
7. Order that the Respondent by 21 December 2007 issue instructions to the head offices of all retail stores in which the Current Varta High Energy Promotional Material is displayed to remove from that material the words "Lasts As Long As Energizer & Duracell".
8. Costs be reserved.
9. Reserve for later determination, if necessary, any question of damages. 22 I declined to make a number of orders sought by the applicant and, in particular, declarations that the respondent had engaged in misleading and deceptive conduct and an injunction effectively requiring the respondent to cover or over-stick the stickers on packs of Varta Higher Energy batteries in retail outlets. I declined to make the declarations as I did not view them to be necessary given that injunctions would issue restraining the respondent from engaging in the misleading and deceptive conduct (orders 2 to 5 above) and additionally, because the orders sought by the applicant were cast in too general terms. 23 I declined to make the orders concerning the over-sticking for essentially two reasons. The first was that it appeared to me potentially impracticable to require that to be done in what would have effectively been a period commencing the week before Christmas. The second was that I had formed the view that the proceedings could have been brought by the applicant earlier and it would, in all the circumstances, have been unjust to impose on the respondent the burden of complying with the order. In other circumstances it would have been an appropriate order, particularly given that I had gained the impression from the evidence (which is mainly unnecessary to detail) that the respondent had made a conscious decision (aided by legal advice) to steer a line of saying as little as possible about the basis of the comparison on which its promotion and advertising was based, even if in doing so, there was a real and obvious risk of contravening the Act. The fact that the respondent had embarked upon this course was starkly illustrated by the fact that it did not follow the form of advertising and promotion used in the United States of America. Indeed, in advertising and promoting Varta High Energy batteries in the United States, the respondent fairly clearly revealed to consumers the nature of the comparison (namely that Varta High Energy batteries last as long as Energizer Max batteries), while in Australia, the respondent had prepared art work (which it later decided not to adopt) for stickers which in substance replicated the United States' model for advertising and promoting Varta High Energy batteries. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Counsel for the Applicant: AJL Bannon SC with DT Kell

Solicitor for the Applicant: Gilbert + Tobin

Counsel for the Respondent: NC Hutley SC with J Baird (7 December 2007) and AL Connolly (14 December 2007)

Solicitor for the Respondent: Deacons

Date of Hearing: 7 and 14 December 2007

Date of Judgment: 14 December 2007

Date of Publication of Reasons for Judgment: 8 February 2008