Gillette Australia Pty Ltd v Energizer Australia Pty Ltd [2002] FCAFC 223 | Case summary

Gillette Australia Pty Ltd v Energizer Australia Pty Ltd [2002] FCAFC 223 | Case summary | Zoe

[7]

The Australian retail battery market 1 The parties to this appeal are manufacturers of batteries for retail consumer use in electrical and electronic appliances. The appellant, Gillette Australia Pty Limited, uses the brand "Duracel". It will be convenient to use that name to refer to the respondent itself as well as to its batteries. The respondent Energizer Australia Pty Limited (Energizer) manufactures batteries under the "Energizer" and "Eveready" brands. 2 The two main types of battery manufactured for retail sale in Australia are carbon zinc and alkaline. They can be used interchangeably in the same devices. Alkaline batteries are more technologically advanced, have a different chemical and material structure, and store more energy than carbon zinc batteries of equivalent size. An alkaline battery is more powerful than the equivalent carbon zinc battery. (In this context, power refers simply to the period of time for which a battery will provide energy.) Alkaline batteries are more expensive than carbon zinc batteries of equivalent size. 3 Duracell produces alkaline batteries and some other types, but not carbon zinc. Energizer however provides a range of batteries, including both alkaline and carbon zinc, as well as other types. In descending order of power, the Energizer batteries relevant for present purposes are as follows: (i) Energizer e2 Lithium (ii) Energizer e2 Titanium (iii) Energizer Advanced Formula Alkaline (iv) Eveready Gold Alkaline (v) Eveready Super Heavy Duty (coloured black) (vi) Eveready Heavy Duty (coloured red) (vii) Eveready General Purpose (coloured blue) 4 Batteries (v), (vi) and (vii) are carbon zinc. The Eveready Super Heavy Duty battery is the highest selling carbon zinc battery in the Australian market. 5 Batteries are provided in different sizes, AAA, AA, C, D, 9V and 6V. The most popular and important size is AA which is used in portable CD players, cameras, hand held electronic games and remote controlled motorised toys. 6 Duracell alkaline batteries retail for approximately the same price as Energizer alkaline batteries and for 1.5 times the price of Eveready Super Heavy Duty batteries. There was no detailed evidence as to retail prices in dollar terms but it was accepted for the purposes of this case that generally speaking prices would be under $10. 7 Duracell's marketing strategy is to increase consumer awareness about the benefits of alkaline batteries, as opposed to carbon zinc batteries, and to encourage consumers to trade up to alkaline batteries. At the moment alkaline batteries account for only slightly more than fifty per cent of the total market. 8 Batteries are sold at supermarkets, convenience stores, pharmacies and other retail outlets. Typically competing batteries are displayed side by side.

[8]

The present proceeding 9 From 11 November 2001 Duracell caused to be broadcast a television commercial referred to in the present case as the "Race Bunny" advertisement. The audio and visual aspects of the advertisement will be discussed in more detail below. At the moment it is sufficient to say that the advertisement took the form of a cartoon story of bunnies in a race which is won by a bunny powered by a Duracell battery. A claim is made in voice-over that the Eveready Super Heavy Duty battery "just can't keep up" and that "with up to three times more power Duracell always wins". During the course of the litigation Duracell proffered modified versions and on the hearing of the appeal it was accepted that only the final modified version was in issue. 10 On 23 November 2001, on the application of Energizer, a judge of this Court granted an interlocutory injunction restraining further broadcast of the advertisement up until 28 November. On that day the primary judge commenced an interlocutory hearing. At the outset of this hearing Duracell conceded that if the advertisement would be taken as comparing Duracell batteries against all Energizer's batteries, including its alkaline batteries, then the assertion that Duracell batteries lasted up to three times longer was not true and would be misleading. What was in contest was whether the advertisement would, as Duracell claimed, only be taken as referring to the Eveready Super Heavy Duty battery, which was of course a carbon zinc battery. 11 On the material filed there was a further issue. Energizer contended that even if the advertisement only referred to the Energizer Super Heavy Duty battery it was still misleading because the Duracell battery did not in truth last up to three times longer. This issue, which I shall refer to as "the technical issue", raised complex factual disputes as to testing and assessment. It was agreed that his Honour would not be asked to deal with the technical issue and that if necessary it would be the subject of a separate hearing at some future date. On 6 December an order was made by consent pursuant to O 29 r 2 that, in substance, the issues on liability other than the technical issue be tried separately from and prior to all other issues. 12 The hearing proceeded on 6 and 7 December. A number of affidavits were read on both sides. There was no cross-examination. Some affidavits filed by Energizer were not read, but were referred to in his Honour's judgment. On the appeal Duracell contended that this amounted to a breach of natural justice. This issue is considered in the judgment of Merkel J. 13 On 24 December 2001 his Honour delivered judgment upholding Energizer's case and granting a permanent injunction to restrain further publication of the advertisement. Although there was some ambiguity in the reasons, on the appeal it was accepted that the order is to be read as extending to the advertisement in its finally modified form. Hereafter references to the advertisement are to that form. 14 Leave to appeal against the primary judge's order was granted on 15 February 2002.

[10]

Judgment of the primary judge 17 His Honour found that Duracell had contravened ss 52(1) and 53(a) of the Trade Practices Act 1974 (Cth) (the TPA) which, relevantly for present purposes, provide: "52(1)A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 53 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: (a) falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model…" 18 In essence his Honour upheld Energizer's complaints that the advertisement, even as modified, was misleading because: · The Eveready Super Heavy Duty battery was only the fifth most powerful battery in Energizer's product range; · The advertisement did not reveal that there was a substantial price differential between Duracell and Eveready Super Heavy Duty batteries and thus consumers would be misled in comparing the value of the two; · The advertisement did not adequately identify the brand of battery to which Duracell batteries were being compared. 19 His Honour (at [47]) expressed the view that comparative advertising "has been traditionally recognised by this Court as an undertaking potentially fraught with risk." In support of this observation his Honour referred (at [47]-[49] and [51]) to statements in Hoover (Australia) Pty Ltd v Email Ltd (1991) 104 ALR 369 at 375, Telstra Corporation v Optus Communications Pty Ltd (1997) ATPR 41-541 at 43,515, Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 37 ALR 161 at 163 and State Government Insurance Commission v JM Insurance Pty Ltd (1984) 16 ATPR 40-465 at 45,362. His Honour did accept that those statements "need(ed) to be balanced" against a further statement in Stuart Alexander at 164-5 and against what was said in Colgate-Palmolive Pty Ltd v Smithkline Beecham Holdings (Australia) Pty Ltd (1997) 39 IPR 147 at 153 and Makita (Australia) Pty Ltd v Black & Decker (Australasia) Pty Ltd (1990) 18 IPR 270 at 276. However at a later stage (at [69]) his Honour said, in reference to Duracell's argument, that it was under no obligation to advertise the existence of Energizer comparable alkaline batteries: "The difficulty with (Duracell's) position in that regard is that its first advertisement is a comparative advertisement, thereby attracting authoritative observations of the kind referred to in [47]-[59] and [51] above."

[12]

"Fair" comparison 21 On the appeal senior counsel for Energizer submitted that the comparison must be a "meaningful" one. Comparison will be meaningful and fair only where it compares products which are approximate peers, except in the respect or respects identified in the advertisement. Comparative advertising, he argued, predicates that the comparison is between like products. If the products are not alike, then, unless the differentiating elements are sufficiently identified, the comparison will be unfair because it will mislead. In the context of the present case, to compare products without mentioning the price was not to make a full comparison and was thus unfair. 22 I do not accept this argument. Its textual base is the heading of Div 1 of Pt V, "Unfair practices". But to use general notions of unfairness, which bring to mind the concept of unconscionable conduct appearing elsewhere in the TPA, is to put an unwarranted gloss on the plain words of provisions of Pt V such as ss 52(1) and 53(a). Provided the factual assertions are not untrue, or misleading half-truths, an advertiser can lawfully compare a particular aspect of its product or service favourably with the same aspect of a competitor's product or service. 23 To take an example that was discussed in argument, airline X might advertise that its economy class seats provide 20 cm more leg room than those of airline Y. If that is in fact true, I do not see that the TPA obliges airline X to provide in its advertisement detailed information as to the myriad other factors which might influence consumers choosing between airlines. And if airline Y wants to advertise that its fares are cheaper, its aircraft more modern, and its flights more frequent than those of X then again, providing no untruths or misleading half-truths are stated, that is legitimate. 24 The word "cheaper" was added at the final stage of the modifications proffered by Duracell. But I do not see its presence or absence as being critical. The thrust of the advertisement was to compare the power of the two batteries, not their value for money, like the advertisement considered in Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 13 ATPR 41-106. The purchase decision for batteries of this kind is, from the consumer's point of view, a simple one. The only variables are power and price. A consumer, informed by the advertisement (correctly, it must be assumed for present purposes) that the Duracell battery lasts three times longer than the Eveready Super Heavy Duty battery, can make his or her decision at the point of sale whether the extra power of the Duracell is worth the higher price. I do not see how it could be said that such a consumer has been misled or deceived. Indeed, it would be inconsistent with the policy and objectives of the TPA to restrict a trader from publicising, truthfully, a feature of its product which is superior to the same feature of a competitor's product. If consumers buy more of a better product then the cost of producing that product can be spread over more items, thus resulting in lower consumer prices (at least this will be so in a competitive market, of the kind that exists in the present case). The competitor will have the incentive to provide products of equal quality, or further reduce prices, or both.

[17]

Introduction 31 I have read a draft of the reasons of Heerey J and adopt his Honour's account of the background facts and his abbreviated forms of reference to the parties. 32 I have also read a draft of the reasons of Merkel J and agree with his Honour's reasons and conclusions (at [57]-[84]) in relation to the natural justice issue and the consequence of that conclusion. Since the primary Judge's order, in so far as it relates to the third (and last) modified version of the Race Bunny advertisement ("the Modified Advertisement"), is to be set aside for those reasons, the question is not whether we are persuaded that his Honour erred, but it falls to us to decide afresh whether that version was misleading or deceptive for the purposes of s 52 of the Trade Practices Act 1974 (Cth) ("the TP Act"). Nonetheless, as will appear below, I have found it convenient, in reaching my own conclusion on this question, to address his Honour's treatment of it. 33 In Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (2000) ATPR 41-751 ("the earlier Eveready case") I held that the Duracell television advertising involved in that case was misleading or deceptive. That case, like the present one, involved "comparative advertising", that is to say, advertising which promotes goods or services by comparing them, to their advantage, with the goods or services of a competitor. The words at the centre of the earlier Eveready case were "lasts up to four times longer" and "lasts four times longer". I held that the comparator was batteries of the same size produced by either all other manufacturers in general, or any other particular manufacturer one might care to nominate. 34 In the present case the critical words were "up to three times longer". Duracell conceded before his Honour that if the comparator to which viewers would understand the advertisement was referring was all Energizer batteries, including the Energizer Advanced Formula Alkaline and the Eveready Gold Alkaline, the advertisement was misleading or deceptive. Duracell contended that the comparator was the Eveready Super Heavy Duty ("Eveready SHD") battery alone. Even so, there would remain for determination: (a) (following a further hearing) the issue whether a Duracell battery did indeed last up to three times longer than an Eveready SHD battery of the same size; and (b) even if it did, whether the advertisement was still misleading or deceptive because it failed to inform viewers that the Eveready SHD battery: (i) was considerably cheaper than the Duracell battery; and (ii) was only the fifth most powerful in Energizer's product range and was not the only Energizer competitor of the Duracell battery. 35 According to Energizer, even if the comparison was between a Duracell battery and an Eveready SHD battery of the same size and the former did last "up to three times longer" than the latter, nonetheless the advertising remained misleading or deceptive because it failed to inform viewers of the matters referred to in (b)(i) and (ii) above. 36 His Honour's order for separate determination was made on 6 December 2001, the first day of the hearing, and was directed to the identity of the comparator and issues (b)(i) and (ii), although the order was not expressed by reference to issues, but by reference to numbered paragraphs in Energizer's statement of claim. If Duracell failed on any one of these three issues, Energizer could obtain only injunctive relief, because all questions of pecuniary relief were reserved by the order for a future occasion. On the second and final day of the hearing, an amended statement of claim was filed. Paragraph numbers used in the preceding day's order were no longer appropriate but it is clear to which paragraphs in the amended pleading the order was intended to refer. 37 Both the original and the amended statements of claim complained about a "Race Bunny" advertisement and a "Brand Power" advertisement. The amended statement of claim referred to the original of the Race Bunny advertisement and to three modifications of it. It used the expression "the Advertisement" to refer to all four. His Honour concluded that they were all misleading or deceptive and granted injunctive relief. But he said he declined, in the exercise of his discretion, to grant an injunction in respect of the Brand Power advertisement, reserving for decision later whether that advertisement was misleading or deceptive. 38 His Honour's orders of 24 December 2001 were as follows: "1. The respondent Gillette Australia Pty Limited be permanently restrained from causing to be televised the commercial described in the Reasons for Judgment as the first or "Bunny" advertisement. 2. Liberty to either party to apply on two days notice to the other as to costs of the proceedings to date and as to final hearing on liability of second or Brand Power advertising and as to damages." Neither party has sought leave to appeal from his Honour's failure to decide whether the Brand Power advertisement was misleading or deceptive and nothing more need be said of it. 39 Against the possibility that his Honour's first order might be construed as not extending to the modified versions of the Race Bunny advertisement, Gillette sought from us, and was granted, leave to file an amended notice of appeal. The purpose of the amendment was to make it clear that if Duracell succeeded on the appeal, the broadcasting of the Modified Advertisement was not enjoined. Later, during the hearing of the appeal, senior counsel for the parties informed the Court that:

[21]

Reasoning of the primary Judge 41 His Honour referred to judicial observations that had been made in relation to comparative advertising, consumer surveys, television advertising and the modification of advertisements which had already been seen by the public. He next noted the parties' submissions and concluded in relation to the original Race Bunny advertisement that Energizer's submissions "should be generally sustained" (at [73]). Then his Honour turned to the three modified forms of that advertisement and stated as follows: "[75] Turning then to the proposals for modification which Gillette has proposed to be made, without admission of liability, in relation to the first or Bunny advertisement, Energizer submitted as follows: (i) the same do not alter the fundamental visual hook or grab of the ascendant Duracell bunny, and are in any event relatively slight changes to the voiceovers and superscript; (ii) there will be many consumers who will have been imbued with the misleading and deceptive message of the original advertisement, and there will have been many battery sales made by Gillette in the light of that advertisement; (iii) the racing bunny has appeared on the Duracell packs for its alkaline batteries, and presumably will continue to do so, the racing bunny representing the image of the perpetuator of the misleading message of the first or Bunny advertisement; (iv) the average viewer, already familiar with the first or Bunny advertisement, would be unlikely to notice or draw any significance from the changes appearing in the revised advertisements, and is just as likely to treat that advertisement as 'back on air' again; in any event, the visual message would continue to be dominating, and there would have been no retraction; and (v) the changes proposed are in all events relatively minor, and would tend to 'escape the attention of a viewer already imbued with the existing message', to adopt the dictum of Burchett J cited in [56] above [a reference to Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) 14 IPR 293 at 299]. [76] The most recently proposed review or modification, extracted in [27] above [a reference to the Modified Advertisement], does purport to address the subject topics of Energizer's complaints, namely the making of comparisons between Duracell Alkaline and Energizer's cheaper non-alkaline Eveready Super Heavy Duty battery. However Energizer submitted that the same does not address, adequately or at all, the fundamental problem of the inherently misleading comparison which it still makes, and in particular, the fact that the Super Heavy Duty battery is not the most powerful battery within Energizer's range; moreover, particularly in the light of the original text of first advertisement, merely to state that the Super Heavy Duty battery is 'cheaper' is inadequate for the purposes of comparative advertising, at least for the purposes of the necessary corrections thereto, and there still remains the sophisticated rapier of suggestion, to adopt the description of Burchett J in [53] above [a reference to Pacific Dunlop Ltd v Hogan (1989) 23 FCR 553 at 586]. [77] Additional criticisms are advanced in relation to the most recent proposed revision of the first advertisement as follows: (i) the additional references to Eveready Super Heavy Duty are likely to reinforce the message that the comparison is a brand versus brand comparison; the likelihood of the words 'Super Heavy Duty' being recalled by viewers at all from the original first advertisement, as distinguishing merely one of the batteries in the Eveready range, is low; (ii) in any event, the proposed superscript 'Eveready Super Heavy Duty is a cheaper non-alkaline battery', in its setting, would be comparatively very small, and would be screened at a time when viewers are likely to be distracted by the entertaining visual action of the bunny race ( ... ). Moreover such proposed superscript assumes that viewers will understand the significance of the reference to 'non-alkaline', and in any event, the same would not inform the viewers that Energizer has a comparable alkaline battery to that of Gillette, and it may be understood as explaining why it is that Energizer's best battery is three times worse than the Duracell battery; also it is to be remembered that Energizer's two best batteries are promoted by Energizer as lithium and titanium batteries ( ... ), which are both more powerful than conventional alkaline batteries; (iii) the language of the last corrected advertisement which consumers would be likely to understand would still be one of power, yet the televised message would still be focusing on Energizer's fifth most powerful battery; (iv) the blackening of the competitor battery does not advance the status quo; it remains a nondescript battery with all the implications thereby involved, and does not in any event look like the Super Heavy Duty battery; and (v) it remains untrue on any view that 'Duracell always beats Eveready Super Heavy Duty'; it does not do so in the 9 volt and 6 volt size. [78] There is force in at least the greater part of these further submissions. My conclusion is that Energizer's submissions in [75-77] above are substantially correct and must be sustained in principle in relation to all changes proposed to the original Bunny advertisement, including those to the superscript thereof. To adopt the words of Wilcox J in Makita extracted in [55] above [a reference to Makita (Australia) Pty Ltd v Black & Decker (Australasia) Pty Ltd (1990) 18 IPR 270 at 282, where Wilcox J referred to the difficulty in overcoming a misleading element in a television advertisement by means of a superscription], '… superscriptions cannot overcome all the problems', and of Tamberlin J in Optus extracted in [57] above [a reference to Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326 at 338-339, where Tamberlin J also referred to the limited effectiveness of a superscription], 'It is a very momentary and fleeting message in small print and plays a very subservient role in the advertisement'."

[22]

Facts 42 For the purpose of determination of the separate question, one needs to know very little by way of background facts in relation to the market for non-rechargeable batteries in Australia. Those facts are uncontroversial. They are that: · Duracell supplies, inter alia, alkaline, but not carbon zinc, batteries; · Eveready supplies, inter alia, both alkaline and carbon zinc batteries; · Alkaline batteries, based on superior technology to that of carbon zinc batteries, last longer, but cost more, than carbon zinc batteries of the same size; · The total range of battery types marketed and sold in Australia by Energizer include the following, which are listed in descending order of their power: Brand Sizes available General Consumer uses Relative power Energizer e2 Lithium AA, coin, photo High drain devices Highest power Energizer e2 Titanium AA, AAA, C, D, 9V High drain devices Higher power Energizer Advanced Formula Alkaline AA, AAA, C, D, 9V, 6V, miniatures All devices High power Eveready Gold Alkaline AA, AAA, C, D, 9V All devices Moderate to high power Eveready Super Heavy Duty/Heavy Duty/ General Purpose (carbon zinc) AA, AAA, C, D, 9V, 6V Moderate and low drain devices Low to moderate power Energizer and Eveready Rechargeables AA, AAA, C, D, 9V Specialist uses Variable power Zinc air 4 common sizes Hearing aids Moderate power Silver oxide Many sizes Watches, calculators, toys Moderate power

[25]

My conclusions 45 In par [75] of his reasons for judgment (pars [75]-[78] were set out in [41] above) the learned primary Judge set out Energizer's submissions relating to the three modified forms of the Race Bunny advertisement, but stated no views in relation to those submissions. In par [76] of his reasons, his Honour may have accepted, notwithstanding his use of the words "does purport", that the Modified Advertisement did indeed compare with the Duracell alkaline battery, "Energizer's cheaper non-alkaline Eveready Super Heavy Duty battery" alone. But he then recorded Energizer's submission that there remained "the fundamental problem" that that comparison itself was misleading or deceptive: because the Eveready SHD was not the most powerful battery in Energizer's range; because the word "cheaper" in the superscript was inadequate "for the purposes of comparative advertising"; because there was present a "rapier of suggestion", as distinct from a direct misrepresentation, to be found in the commercial; and because there were the five "additional criticisms" (at [77]), which his Honour identified. In par [78] his Honour concluded that there was "force in at least the greater part of these further submissions" and that Energizer's submissions in pars [75]-[77] were "substantially correct and must be sustained in principle in relation to all changes proposed to the original Bunny advertisement". 46 Paragraph [75] identified five submissions in relation to all modified forms of the Race Bunny advertisement, par [76] identified three in relation to the Modified Advertisement specifically, and par [77] identified an additional five in relation to that version. Accordingly, there were thirteen considerations, "the greater part" of which his Honour accepted "in principle". I find it convenient to address for myself the question whether the Modified Advertisement was misleading or deceptive by addressing all thirteen and will do so in the numbered paragraphs in [53] below. 47 I have carefully viewed the Modified Advertisement several times and tried to assess its likely effect on viewers. But, as I observed in the earlier Eveready case (at [38]), apart from the difference between a one-off viewing and repeated viewings, the circumstances in which a judge attends to a television commercial for the purposes of a case are not those in which members of the public do so. First, members of the public watch a commercial after and before viewing other things, rather than in isolation. Secondly, unlike the judge, they do not carefully view the commercial with a special interest in noting and memorizing its features. Thirdly, they view the commercial, not in the calm of chambers, but against a background of distractions, such as domestic activity, or simply a preoccupation with other more interesting or pressing concerns. Fourthly, usually they do not know in advance that the commercial is about to commence. 48 I have tried to make allowances for these considerations. 49 In assessing the likely effect the commercial would have on the viewing public, I have borne in mind the fact that the impressions conveyed and taken away are at once more and less than those conveyed by, and taken away from, a studied reading of the transcript in [40] above. A television commercial simultaneously stimulates the visual and auditory senses. There are subtleties of suggestion not available from a reading of the transcript. 50 Before turning to the thirteen considerations referred to above, I must deal with the threshold question of the identity of the comparator battery. In my opinion, viewers would understand the comparator with the Duracell battery to be the Eveready SHD battery. The reason is simply that the expression "Eveready Super Heavy Duty" occurs three times in the audio and twice in the superscript, in the latter case with capitalised initial letters. 51 I do not rely on the change of colour of the battery of the Duracell bunny's competitor from the light blue of the original Race Bunny advertisement to the nondescript black of the Modified Advertisement. Nor did the primary Judge find this change persuasive. His Honour also remarked, correctly in my opinion, that the battery of the competing bunny "does not in any event look like the Super Heavy Duty battery" (at 77). 52 All in all, however, I think that even a casual viewer would understand that the Modified Advertisement is making a fairly pointed comparison between a "Duracell" battery which is based on a superior "alkaline" technology, and an "Eveready Super Heavy Duty" battery of the same size based on a cheaper and inferior "non-alkaline" technology. 53 I turn now to the thirteen considerations identified by his Honour, referred to in [46] above and set out in [41] above.

[80]

MERKEL J: 56 The background facts and the issues arising on the appeal have been set out in the reasons for judgment of Heerey J and Lindgren J, which I have read in draft. 57 At the outset I turn to the contention of the appellant ("Duracell") that there was a breach of the rules of natural justice. Duracell contends that it was denied a fair trial because the primary judge referred to and relied upon the affidavits of Mr Hammel and Mr Axford, which were filed by the respondent ("Energizer") and were prejudicial to Duracell, but which were not read and did not form part of the evidence before the Court at the hearing. 58 The passages from Mr Hammel's affidavit to which the primary judge referred compared the technical attributes of carbon zinc and alkaline batteries. Mr Hammel, a highly experienced battery technologist, relied upon the different technical attributes of the two types of battery to conclude that a direct comparison of the performance of a carbon zinc battery and an alkaline battery is "neither a fair nor a meaningful comparison" and is "not a comparison of two batteries which have the same or equivalent technologies, or which sell for the same price, or which are targeted for use in the same devices". 59 The passages from Mr Axford's affidavit to which the primary judge referred provided information as to the composition and performance characteristics of carbon zinc and alkaline batteries and discussed test data concerning whether Duracell's alkaline battery lasts up to three times longer than Eveready's Super Heavy Duty battery. 60 Energizer accepted that the affidavits were not read or relied upon by it before the primary judge and did not form part of the evidence at the hearing. It contended, however, that the evidence did not affect the outcome of the case. 61 The evidence relating to a comparison between Duracell's alkaline battery and Energizer's Eveready Super Heavy Duty carbon zinc battery was relevant to whether the comparison made in the "Race Bunny" advertisements ("the advertisements") between Duracell's battery and Energizer's battery was a comparison that was "not of like commodities". That issue was raised by Energizer in the Amended Statement of Claim dated 7 December 2001 which alleged, inter alia, that the original advertisement's comparison of the Eveready Super Heavy Duty battery and the Duracell alkaline battery was misleading and deceptive as it made a comparison that was "not of like commodities" without disclosing that fact (see paras 11(d), 12(d) and 13 of the Amended Statement of Claim). In the original Statement of Claim the allegation that the comparison is "not of like commodities" was pleaded as a particular of the "false and misleading nature of the representations" made in the "Race Bunny" advertisement (see [21] of the primary judge's reasons). 62 On 6 December 2001 the primary judge ordered, pursuant to O 29 r 2, that all issues relating to liability be tried separately from and prior to all other issues. The only liability issue excluded from his Honour's order was whether the Duracell alkaline battery did last up to three times longer than the Eveready Special Heavy Duty battery, which was a matter addressed by Mr Axford in his affidavit. 63 In his reasons the primary judge dealt with the issues in general terms. As a consequence it is difficult to determine with precision the issues he was determining. However, the terms of his order for a separate determination of liability issues, his references to the amended Statement of Claim (in [20] of his Honour's reasons) and to the comparison being a comparison that was "not of like commodities" as a particular of the misleading nature of the advertisements (in [21] of his Honour's reasons), and the apparent adoption of Energizer's "not comparing like with like" submission ([65(ii)] and [73]), leave little room for doubt that that issue was, and was regarded by his Honour as, a live issue at the preliminary hearing. 64 I turn first to the primary judge's references in his reasons to Mr Hammel's and Mr Axford's affidavits. In the section headed "Additional evidence tendered in the proceedings on behalf of Energizer" the primary judge (at [36]-[37]) referred to Mr Hammel's affidavit: "Whilst in order to endeavour to confine these reasons for judgment within manageable limits, I have not reproduced the bulk of the technical material provided by affidavit testimonies of Energizer's technical experts, I would seek to complete my review of the thrust thereof by incorporating below certain conclusions of Mr Hammel, who is a US Battery Technologist having nearly thirty years experience with the Gates Corporation until its battery manufacturing business was sold in 1994, and who has been subsequently engaged by Energizer US for approximately one year or thereabouts. His testimony summarised below constitutes in essence a technical comparison between carbon zinc and alkaline batteries. Such conclusions of Mr Hammel were as follows: '(i) the construction and composition of an alkaline battery allows it to provide more of its available energy than a carbon zinc battery is able to do; while the alkaline battery has an advantage over carbon zinc in terms of the amount of energy stored in a given size, the alkaline battery far excels over the carbon zinc during high rates of discharge and continuous service; in a given size of battery, the advantage of alkaline over carbon zinc could be in the order of 60% at low rates of intermittent discharge; however this advantage would extend to over twice that of carbon zinc at high continuous rates of discharge; the discharge rate of the battery depends on the load placed on the battery, which depends on the nature of the device in which the battery is being used; (ii) items such as portable CD players, digital cameras or electronic game machines have higher discharge rates than items such as radios or battery powered clocks; moreover alkaline batteries, being more suited for use in such devices, will always provide power for a significantly longer period than a carbon zinc battery. The difference in the expected performance of the two battery technologies in high discharge rate devices is generally reflected in the price charged for the product, and the price of carbon zinc batteries is lower than the price of alkaline batteries; (iii) alkaline batteries and carbon zinc batteries are not equivalent technologies, and a direct comparison of the performance of a carbon zinc battery and an alkaline battery is neither a fair nor a meaningful comparison. It is not a comparison of two batteries which have the same or equivalent technologies, or which sell for the same price, or which are targeted for use in the same devices; and (iv) an alkaline battery will always provide power for longer than a carbon zinc battery installed in a battery powered toy. No person familiar with battery technology would ever expect a carbon zinc battery to show an equal performance to an alkaline battery and it would therefore be unfair to compare them in a way which suggests that they are capable of equal performance; the fact that International Electrochemical Commission has differing minimum performance standards for the two technologies supported the view that this is the case.'" 65 The primary judge referred to Mr Axford's affidavit in the following contexts. His Honour accepted Mr Axford's evidence as "expert testimony" on the characteristics of batteries generally and of alkaline and carbon zinc batteries in particular (see [9]-[15] and [33] of his Honour's reasons). Mr Axford's testimony as to the tests conducted on the Duracell alkaline and the Eveready Super Heavy Duty batteries was also referred to and relied upon by the primary judge (see [33]-[35] of his Honour's reasons). Mr Axford's conclusions, set out in [35] of his Honour's reasons, were: "…that it could not be asserted accurately that Duracell alkaline batteries: (a) last three times longer than the Eveready SHD carbon zinc batteries in all of the battery sizes referred to in the Test Table; (b) last three times longer than the Eveready Gold alkaline batteries in all of the battery sizes referred to in the Test Table; (c) last three times longer than the Energizer alkaline batteries in all of the battery sizes referred to in the Test Table; and (d) last three times longer than the Panasonic alkaline batteries in all of the battery sizes referred to in the Test Table." 66 The primary judge, in summarising Energizer's submissions, stated (at [65]): "Energizer's next submission was that the propensity for viewers to interpret the first advertisement as making a comparison with the best that Energizer (Eveready) and all other competitors have to offer is heightened by the following factors: … (ii) the only statement of difference between the batteries concerns their relative performances (ie "with up to three times more power"), thereby suggesting that the batteries are otherwise comparable, that is to say, that like is being compared with like; in particular, there is no mention of any price differential between the two batteries (see again [51] above relating to the price issue in Makita)." 67 His Honour observed (at [72]-[73]): "Gillette joined issue upon Energizer's contentions, and submitted that the comparison made in each advertisement is "clearly one between Gillette alkaline batteries and Eveready super heavy duty brand batteries". Duracell did not disagree that at least the first advertisement represents that Duracell alkaline batteries last three times longer, or up to three times longer, than all Energizer Super Heavy Duty batteries, but denied the falsity of that assertion. As I would understand the situation still to be, in the light of the course which the proceedings took before me, those Duracell performance claims require final scientific resolution at a future date, particularly if Energizer is to pursue its claim for damages. However, in the light of the combined testimonies of Mr Axford summarised at [9-15] and [33-36] above, and of Mr Hammel summarised at [37] above, it would follow that such representations are unsustainable, to the extent that the same are made in the first and second advertisements. Thus the reality of the course of the proceedings which has thus far been taken is an implicit acknowledgment on the part of Gillette of formidable difficulty in maintaining the viability in law of the first or Bunny advertisement, and hence Duracell's placement before me, albeit without admissions, of the succession of proffered modifications thereto set out in [25-27] above. In relation to the first or Bunny advertisement, I am clearly of the view that Energizer's submissions, which I have recorded at length in [58-70] above, should be generally sustained…" 68 When turning to consider the modified advertisement the primary judge at [76] referred to Energizer's submission: "…that the…[modified advertisement] does not address, adequately or at all, the fundamental problem of the inherently misleading comparison which it still makes…" and stated at [78] that: "…My conclusion is that Energizer's submissions in [75-77] above are substantially correct and must be sustained in principle in relation to all changes proposed to the original Bunny advertisement…" 69 The submissions of Energizer that his Honour appeared to accept led his Honour to conclude that the advertisements were misleading. 70 Duracell's natural justice ground relates primarily to evidence about "not comparing like with like". His Honour ultimately found the advertisements to be misleading, because, inter alia, they were not comparing "like with like". It is clear that Mr Hammel's and Mr Axford's evidence contributed to the factual sub-stratum that led to that finding by the primary judge, which was plainly prejudicial to Duracell. 71 In [72] of his reasons the "combined testimonies" of Mr Hammel and Mr Axford were also relied upon by the primary judge for his conclusion that the statement that Duracell's alkaline batteries last up to three times longer than all Energizer Super Heavy Duty batteries is "unsustainable". I have some difficulty with his Honour's conclusion as in the same paragraph he stated that Duracell's "performance claims require final resolution at a future date", which was consistent with his order for that issue to be tried at a later date. Nonetheless, although the conclusion related to an issue that was to be tried at a later date, it was highly prejudicial to Duracell. 72 The right to be heard must carry with it the right to know the case which is being put, the evidence that has been given, and a fair opportunity to respond to that case and evidence. As was observed by Kirby P in Government Insurance Office of New South Wales v Bailey (1992) 27 NSWLR 304 at 309: "An aspect of fair trial in our system of public trial by openly disclosed evidence, is that the case will only be determined, and the controversy resolved, by reference to lawful evidence given orally or in written or like form." 73 Scarman J in Brinkley v Brinkley [1965] P 75 at 78 stated: "…For a court to take into consideration evidence which a party to the proceedings has had no opportunity during trial to see or hear, and thus to challenge, explain or comment upon, seems to us to strike at the very root of the judicial process." 74 In such cases the inquiry is not whether the evidence did work to a party's prejudice. It is sufficient that it "might do so": see Kanda v Government of Malaya [1962] AC 322 at 337 and Kioa v West (1959) 159 CLR 550 at 587-588, 603, 629 and 634. 75 Energizer did not dispute these principles but, rather, contended that there was no breach of the rules of natural justice because the evidence of Mr Hammel and Mr Axford was not relied upon by the primary judge, was replicated by other witnesses, and could not have affected the outcome in any event. 76 The first two contentions can be disposed of briefly. I have already outlined in some detail the manner in which Mr Hammel's and Mr Axford's evidence was used and relied upon by the primary judge in respect of matters that his Honour regarded as live issues before him. While some aspects of the evidence were replicated in other evidence before the Court the evidence itself was not. In any event, the primary judge expressly referred to and relied upon the testimony of Mr Hammel and Mr Axford, rather than that of other witnesses. 77 The real issue is whether the denial of natural justice that occurred as a result of the primary judge's reliance on Mr Hammel's and Mr Axford's evidence deprived Duracell "of the possibility of a successful outcome": see Stead v State Government Insurance Commission (1986) 161 CLR 141 ("Stead") at 147. In order to negate that possibility it is "…necessary for the…Court to find that a properly conducted trial could not possibly have produced a different result." (Stead at 147) 78 While not every breach of the rules of natural justice invalidates the decision made, once the breach is proved the court should refuse relief only when it is confident that the breach could not have affected the outcome: see Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 at 122. That is because "It is no easy task for a court of appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact." (Stead at 145-146) 79 In Stead (at 145) the High Court pointed out that where the denial of natural justice affects the entitlement of a party to make submissions on an issue of fact it is more difficult to conclude that compliance with the rules of natural justice could have made no difference. 80 In the present case the approach taken by the primary judge of generally accepting the submissions of Energizer, including its submissions as to the misleading comparison of unlike commodities, makes it extremely difficult for Energizer to satisfy the Court that Mr Hammel's and Mr Axford's evidence could not have made a difference. While the approach of his Honour has the consequence that it may not be possible to determine precisely what role Mr Hammel's and Mr Axford's evidence played in his ultimate decision it also has the consequence that it is not possible to determine that it could not have had any bearing on the outcome. 81 The evidence of Mr Hammel and Mr Axford that related to not comparing "like with like": · was contrary to the case presented by Duracell; · supported the case presented by Energizer; · related to a live issue in the proceeding; · was accepted and relied upon by the primary judge; · was capable of supporting one of the bases for the primary judge's finding that the original and modified advertisements involved a misleading comparison. 82 Although the evidence of Mr Axford as to the test data did not relate to a live issue at the preliminary hearing it was nonetheless relied upon by the primary judge in a manner that was prejudicial to Duracell. 83 As I am not satisfied that the affidavits could have had no bearing on the outcome it must follow that in the normal course the orders of the primary judge, made in part in reliance on those affidavits, should be set aside. However, in the course of the hearing before the Full Court Duracell abandoned its appeal in so far as it related to the original advertisement and the earlier modified versions of it. It is not altogether clear whether the abandonment related only to the Trade Practices Act 1974 (Cth) ("the TPA") grounds of appeal concerning those advertisements or whether it also included the natural justice grounds of appeal. In these circumstances it is appropriate for the parties to file written submissions as to the orders (if any) that are appropriate in relation the earlier advertisements. Whatever might be the situation in relation to those advertisements, Duracell is entitled to an order setting aside the primary judge's order in so far as it prohibits the broadcasting of the most recent modified advertisement ("the modified advertisement"). 84 The substantive issue argued on the appeal was whether an injunction should be granted to restrain the broadcast of the modified advertisement on the ground that the broadcast would contravene ss 52 and 53(a) of the TPA. The trial before the primary judge was conducted on the basis of affidavit evidence without any cross-examination of witnesses. Thus, the Full Court is in as good a position as the primary judge to determine that issue and, in the circumstances, it is appropriate for it to do so. Of course, the evidence of Messrs Hammel and Axford is not to be taken into account. 85 I have viewed the modified advertisement on several occasions. I agree, for the reasons given by Heerey J and Lindgren J, that the impression that is likely to be created upon the viewer is that the modified advertisement compares the power of the Duracell alkaline battery and the Eveready Super Heavy Duty battery and not their price or value. Accordingly, I do not accept that the advertisement makes any representation as to price or value. Rather, the potential purchaser is left to make his or her own choice on those matters at the point of sale. 86 I also agree with the views expressed by Heerey J and Lindgren J on each of the aspects of the modified advertisement which their Honours found not to be misleading. I would, however, make the following additional observations. 87 The modified advertisement represents that the comparators, the Duracell alkaline battery and the Eveready Super Heavy Duty battery, are direct competitors. That representation is amply justified by the evidence that demonstrates that: · the batteries can be used interchangeably and in the same devices; · there is extensive cross purchasing and duplication between the carbon zinc and alkaline battery segments of the market; · notwithstanding the technical inferiority of carbon zinc batteries they have maintained a share of just under 50 per cent of the Australian battery market, of which Eveready carbon zinc batteries accounted for 68.7 per cent by volume of cells sold or 78.8 per cent by dollar value; · the Eveready Super Heavy Duty battery alone accounts for approximately 47.5 per cent by dollar value and 35 per cent by sales volume of the carbon zinc batteries sold in Australia; · since 1981 Duracell and Energizer television advertisements have been making comparisons between the two types of batteries; · Duracell's internal strategic planning was based, inter alia, on the assumption that the two batteries were direct competitors. 88 The evidence as to the different technical attributes, and recommended usages, of the alkaline and carbon zinc batteries does not have the consequence that they are not direct competitors or that the comparison of the power of each battery type is misleading. In a context where the evidence establishes that there is a significant lack of appreciation and awareness by consumers of the different power characteristics of the two types of batteries it would require some special circumstance before the accurate provision of that information to consumers in an advertisement could be said to be misleading. 89 The difficult question is whether the comparison made in the modified advertisement has been rendered misleading by the omission of any reference to Energizer's alkaline batteries, which have performance characteristics similar to Duracell's alkaline batteries: see Collier Constructions Pty Ltd v Foskett Pty Ltd (1990) 97 ALR 460 at 479 and Hoover (Australia) Pty Ltd v Email Ltd (1991) 104 ALR 369 at 375. See also Sterling Winthrop Pty Ltd v The Boots Company (Australia) Pty Ltd (1995) 32 IPR 361 at 365. Whether particular information needs to be provided to avoid a comparison being misleading as a consequence of the omission of particular information will depend on all of the circumstances of the case. 90 The modified advertisement makes representations about two battery types. It does not make any representation about, or comparison between, the two brands or their respective ranges of batteries. Thus, the modified advertisement does not represent that the Eveready Super Heavy Duty battery is the only direct competitor (within the Eveready range of batteries) of the Duracell alkaline batteries. It does no more than represent in graphic terms the power difference between two specified batteries which are direct competitors in the market place. In the absence of a representation, implication or impression that the Eveready Super Heavy Duty battery is the only Eveready competitor, I do not think that the disclosure of other competitive products in the Eveready alkaline range, having similar performance characteristics to Duracell's alkaline battery, is necessary to prevent the comparison from being misleading. The position might have been otherwise if the two comparators were not competitors or if the comparison were for some other reason inappropriate. That however, is not the situation in the present case. 91 There is also a further relevant circumstance, which has been referred to by Heerey J, which should lead to the Court acting with some caution before restraining the publication of information that the parties have accepted as accurate for the purposes of the present application, and which will assist in the making of better informed purchase decisions. His Honour pointed out that it is inconsistent with the policy and objectives of the TPA to restrict a trader from publishing, truthfully, a feature of its product which is superior to that of a competitor or to impede the making of better informed consumer choices. A similar approach has been taken in the United States where the Federal Trade Commission stated in respect of comparative advertising: "For purposes of this Policy Statement, comparative advertising is defined as advertising that compares alternative brands on objectively measurable attributes or price, and identifies the alternative brand by name, illustration or other distinctive information." (Federal Trade Commission Commercial Practices Rule, 16 C.F.R. s 14.15 n. 1 (2002)) "The Commission has supported the use of brand comparisons where the bases of comparison are clearly identified. Comparative advertising, when truthful and nondeceptive, is a source of important information to consumers and assists them in making rational purchase decisions. Comparative advertising encourages produce improvement and innovation, and can lead to lower prices in the marketplace. For these reasons, the Commission will continue to scrutinize carefully restraints upon its use." (16 C.F.R. s 14.15) 92 In relation to disparaging advertising the Commission stated that it "know[s] of no rule of law which prevents a seller from honestly informing the public of the advantages of its product as opposed to those of competing products…" (16 C.F.R. s 14.15) 93 Thus, while the authorities cited by the primary judge, Heerey J and Lindgren J point out the dangers in comparative advertising and caution against the "half truth" or the unqualified literal truth, it is also important that advertisers are not inhibited in the lawful provision of accurate and important information that will assist consumers to make rational purchase decisions. 94 Energizer also claimed that Duracell accepted that the "up to 3 times more powerful" representation is not accurate in 6V and 9V sizes. That point was raised in Energizer's written submissions but received little, if any, attention on the appeal and is at best an incidental and minor issue. Further, it is far from clear as to how it arises. The allegations of misleading conduct in the original and the amended Statement of Claim concerning the "3 times more powerful" representation, which were to be tried at a later date, only relate to "all battery sizes referred to in the advertisement", which did not refer to the 6V and 9V batteries. That pleading appears to accept that the superscript was successful in avoiding the making of any representation in the advertisement about those battery sizes. Ultimately, I have concluded that it is unnecessary to form a concluded view on whether the point is open on the appeal, and if it is, whether the superscript has achieved its purpose, as even if it has not I am satisfied that damages, rather than an injunction, would be the appropriate remedy for any misleading conduct that might occur in respect of those two battery sizes. 95 For the above reasons I have concluded that an injunction restraining the modified advertisement should not be granted. 96 Accordingly, I would refuse the application of the respondent for injunctive relief in relation to the modified advertisement and remit all other matters back to the trial judge for determination. 97 Duracell has substantially succeeded on the appeal. Consequently, its costs of and incidental to the appeal should be paid by Energizer. In the unusual circumstances of the present case, which include: · Duracell modifying the advertisement in significant respects in the course of the hearing before the trial judge; · Duracell abandoning its appeal on the merits in relation to the earlier advertisement; · Duracell succeeding on the natural justice ground and on the merits of the modified advertisement on the appeal;

Gillette Australia Pty Ltd v Energizer Australia Pty Ltd

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Judgment (84 paragraphs)

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Legislation Cited (1)

Cases Cited (18)

Cited By (17)