Luxottica Retail Australia Pty Ltd v Specsavers Pty Ltd

The Biggest Ever campaign 20 On 29 October 2010 a presentation was given to Specsavers field staff in each State setting out the details of the Biggest Ever campaign. One of the PowerPoint slides for the presentation included the statement that the 25% offer would be rested for the period of the campaign. A copy of the presentation was made available for staff to listen to on the company's intranet. 21 Mr Hawkins described the Biggest Ever campaign as "an extension and culmination" of previous offers (the UV and Sun Tint Offer, the Transitions Lenses Offer and the Contact Lenses Offer) as well as a promotion (beginning at the same time as the campaign) during which a customer who purchases one pair of glasses from the $179 range or above can receive a free upgrade to PENTAX multifocal lenses, which since February 2008 has cost $150 at Specsavers stores ("the Multifocal Lenses Offer"). 22 From 1 to 4 November Specsavers field staff gave the same presentation they were given to all "directors", meaning franchisees, of Specsavers branded stores setting out the details of the campaign. Between 1 and 3 November 2010 Specsavers head office issued a revised Clear Price Guide to all Specsavers branded stores. The new Clear Price Guide did not refer to the 25% offer, consistent with the Partner Communication to which I referred above. 23 On 6 November Specsavers took steps to remove all references to the 25% offer from the Specsavers website. 24 On 7 November Specsavers started advertising, in what could only be described as a major media campaign. As part of the promotion, Specsavers commissioned a television commercial, which was widely aired on prime time. The voiceover announced: Buy one pair of glasses from our $179 range or above And get rewarded with our biggest ever free offer You can choose from a free transitions lens upgrade or Free contact lenses (30 pairs) or Free UV and sun tint in a second pair That's pretty big but it gets bigger Because right now you can alternatively choose a free Multifocal lens upgrade Our biggest ever free offer. Yet another way we're delivering unbeatable value for all Australians. Want big value? Should've gone to Specsavers. 25 The script on the screen emphasised that all the offers contained in the promotion were mutually exclusive, were not offered in conjunction with any other offer, that the offers were for a limited time only, and that conditions applied. Advertisements were also placed in the print media and on the Specsavers website and there was point of sale material in all Specsavers stores, including window posters, leaflets and balloons. By the time the application was filed, the campaign had been running for four days, and by the time it was heard, for eight days. 26 Despite Specsavers's intention to "rest" the 25% offer and the steps it took to remove references to it from its advertising, on 9 November 2010 - two days after the Biggest Ever campaign started - the evidence of Ms Lee is that sales assistants from the following Sydney stores considered it was still available: Hunter Street, Greenwood Plaza, North Sydney, Bondi Beach, Bondi Junction, and Hurstville. Ms Bathurst gave similar evidence about 10 November at Brookside Shopping Centre and Westfield Carindale in Queensland. 27 Ms Bathurst was told by a sales assistant at one store (Leichhardt) that the 25% discount was not for a limited time but was "forever" but I note that that information was conveyed on 3 November, before the Biggest Ever campaign started. Nevertheless, in one case (the Bondi Beach store) after the campaign had started, Ms Lee was explicitly told by a Specsavers sales assistant that 25% off was "the normal price". At other times she was led to believe this was a longstanding deal but was not permanent. On one occasion when Ms Lee mentioned the reference to the 25% offer being advertised on the website, the sales assistant told her he was surprised it was still there but she could still get the benefit of it. She was also told about the other deals. Whenever Ms Lee mentioned the 25% offer being on the website she was told she could purchase the glasses at that price. In only one case was a purchase made. This was at the $134.25 price but Ms Lee was informed that that was a deal, its duration was uncertain and "deals are changing all the time". 28 The conclusion Luxottica urges from this evidence is that the 25% offer was (and is) still in place during the campaign and that therefore the Biggest Ever campaign advertisements were misleading because they promised add-ons for free when, in effect, they cost $44.75 because they required the customer to pay $179 for the glasses instead of $134.25 under the 25% offer. 29 At about 10 am on 10 November 2010 Mallesons sent a letter of demand to Minter Ellison seeking an undertaking that Specsavers immediately: cease placement of the promotion in any future publication or broadcast; remove the promotion from the Specsavers website; remove the promotion from point of sale; and cease making the false representations in any other medium. 30 At about 11.30 am the same day the remaining references to the 25% offer, which Mr Hawkins said were inadvertently left on the Specsavers's website, were removed from the website. No other action was taken in response to the letter of demand. 31 Minter Ellison replied to that letter at 3 pm. Ms Peach asserted that the 25% discount offer was not currently available at Specsavers stores and that before the promotion commenced, it had been withdrawn and all stores were so advised. She also explained that the 25% offer had not always been available in the past, including between 27 August and 4 October. 32 Despite this, Ms Bathurst's conversations with sales assistants at the Brookside Shopping Centre and Carindale stores, to which I referred earlier, took place at 4 pm. The same day, however, at six Specsavers stores (Gordon, Little Collins Street, Brunswick, Warringah Mall, Leichhardt and Eastgardens) sales assistants advised Ms Lee that the 25% offer was not available. Mr Friedrich also attended the Hunter Street store that morning, without notice to Specsavers, and when he asked for the "cheapest single pair of prescription glasses" was told that the price would still be $179, although he was told he could get one of a range of free options, including free transitions lenses. 33 Specsavers's evidence shows that the 25% offer should not have been available at any of the stores. The evidence shows that the 25% offer was not intended to be available during the Biggest Ever campaign and staff were informed both orally and in writing. There were also explanations for many, if not all, of the offers made to Ms Lee and Ms Bathurst. Where the putative customer mentioned the reference on the website, the sales assistant felt obliged to offer it. One was surprised by the evidence indicating she had, and said that, if that were so, she was mistaken. Another, who did not ordinarily work in sales, was unaware that the offer was no longer available, but now is. One realised her error during the course of the sale, but felt obliged to proceed with it. Another was confused and thought that the 25% offer had ceased only in part. Another was new to the store and was unaware that the offer had ceased. 34 The day after Luxottica's application was filed, Specsavers's head office issued a "Partner Communication" to all Specsavers branded stores reminding them that the 25% offer is being "rested" for the period of the promotion. This time it also stated that Specsavers had no intention of running the 25% offer again. The document is expressed to be for the week commencing 14 November 2010 but it is apparently accepted that it was issued on 12 November.

A serious question to be tried? 35 The resolution of this question does not involve an assessment of the evidence on the balance of probabilities. Rather, Luxottica needs to show that it has "a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial" (here, the status quo ante): ABC v O'Neill at 82. 36 Success at trial would require a finding that there is a real, and not remote, chance that a member of the public (here, the purchaser of spectacles) would be led into error by the advertisements: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87; Equity Access Pty Ltd v Westpac Banking Corporation & Westpac Savings Bank Ltd (1990) ATPR ¶40-994 at 50-950. 37 The particular error upon which Luxottica's case rested (at least until oral submissions) was that the extras or upgrades were not free because, to receive them the customer had to pay more for the glasses ($44.75 more to be precise) than she or he would without them. The evidence Specsavers called exposed the fallacy of Luxottica's argument and undermined its case, which was based on an assumption that the normal price was $134.25 because there was a permanent or standing offer of a 25% discount on one pair of prescription glasses in the $179 range and that the offer is still in place. 38 First, there is no evidence about when the 25% offer was first introduced, the evidence supporting only the inference that it was in place at least at the start of 2010. Secondly, on Specsavers's evidence, for a period of time before the Biggest Ever campaign was launched - 30 August to 2 October - it was not available. Any person wanting to buy a single pair of glasses from the $179 range would have had to pay the full price in that period. Thirdly, Specsavers did not market the price of a single pair of glasses as $134.50. $179 is the price, subject to an offer. An offer that after August was expressed to be temporary. A customer who wanted the glasses for which she or he would pay that price while the 25% offer was in place would know that the retail price was in fact $179 and she or he was getting a discount. Fourthly, there is no evidence that the 25% offer has been available since 10 November and there is good evidence to show that when it was made available to Ms Lee and Ms Bathurst that was due to employee error, what Mr Cobden described as "an extraneous cause". Mr Hall, Luxottica's counsel, made no submission that, if that were so, the advertisement still contravened the legislation. So there is no real prospect that a customer would be misled, because after the campaign started, save in these anomalous instances, you could not buy one pair of $179 glasses for $134.25 and so you would not pay $44 odd dollars more to acquire the extras. 39 In summary, if there were a probability on the evidence as it currently stands that customers are likely to be misled by the advertisements into thinking that they are getting something for free or at no extra cost when they are not, Luxottica could show there is a serious question to be tried. But there is ample evidence to show that any overlap between the two offers was short-lived. It was due to error or misunderstanding, and was no part of the company's design or policy. Doubtless the force of this evidence led Mr Hall while on his feet in argument to present an alternative case. 40 Mr Hall submitted: ... alternatively, there is a very strong arguable case that what the respondent has done is to increase the prevailing price of a single pair of glasses from 134 to $179 on 7 November, and then represent to consumers that they are getting a pair of glasses with an extra for the price for which the pair of glasses without the extra was previously offered, in circumstances where that representation also was false. But I do have to accept, of course, that that would require amendment by me to my fast-track statement before final hearing, but in circumstances where the evidence was provided only this morning, which makes clear the course of action taken by the respondent, I'd respectfully submit that I should be permitted to put the alternative basis for the interlocutory hearing today. 41 Mr Cobden SC, who appeared for Specsavers, complained that it would be unfair to allow Luxottica to run the alternative case. He said: Your Honour, we have come to meet a case that we were served on Thursday, business hours [sic]. We have had one working day to prepare evidence. That's the case we're here to meet. Amendments on the run shouldn't be permitted, with great respect. 42 Mr Hall denied he was seeking to amend on the run. He explained: I was seeking simply to put that there is a strongly arguable case that the campaign is misleading and deceptive as alleged. It may be that the precise representation made by the campaign is not as pleaded, but nonetheless we have attacked the campaign on the basis that it is misleading because of the $134 price being the standing price in the market, and that is the only submission that I'm clearly making to your Honour this morning. [Emphasis added.] 43 As Kirby J (who dissented in the result) observed in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63, 208 CLR 199 at 267: Of their nature, as in the present case, such injunctions are usually sought urgently. Such applications may not always be accompanied by well-prepared pleadings and evidence... it would be inappropriate, and contrary to the purpose of the remedy and of the statute, to impose a narrow rule obliging the demonstration in every case of a cause of action, fully pleaded and proved. In most cases it may indeed be appropriate to require pleading and proof. But in others (particularly in urgent circumstances) justice and convenience may warrant the issue of an interlocutory injunction without them. In this exceptional type of case, the substantive issues between the parties would normally come to trial and be resolved quite quickly.... 44 The dispute, however, seemed to die. In context, it seems to have been prompted by a specific submission that an adverse inference ought be drawn from a gap in Mr Hawkins's evidence. In putting his position, Mr Cobden said: MR COBDEN....but if there's a point raised against us, which is that we launched a misleading advertising campaign on 7 November, that's the point we came to answer, and that's - we answered what was in the evidence. MR HALL: But I do make clear, that is all I'm putting, is that the respondent started a misleading advertising campaign on 7 November by falsely representing that it was offering for free something for it was, in fact, charging a price. I'm tinkering with my form of representation, but I'm not stepping away from that fundamental proposition, which is that the behaviour commencing on 7 November misleads the public as to whether they are getting a benefit for free, when in fact they are being charged a price for it, because of the extra $44 that they are paying for the glasses, compared to, I say first, the price they can still have by asking for it, and secondly, I now say as my alternative, the price they were able to have at least up until Sunday, 7 November. [Emphasis added.] 45 Mr Cobden took no objection to this formulation. 46 Luxottica should be permitted to put the alternative case, but in my view, it suffers from some of the weaknesses of the principal case. That is, it relies for its success on what the price was before the Biggest Ever campaign was launched. Whichever way it is put, it depends on there being a price hike from 7 November. On the evidence before me there is no probability that Luxottica can establish that. If there was a price hike, it occurred, at the latest, on 29 August, more than two months before the launch of the campaign. 47 The evidence shows that the price was always $179. Customers could buy the glasses in the past for $134.25, but only as part of an offer which, from late August was marketed to consumers as limited in time and not available in conjunction with any other offer. 48 What is more, the evidence shows that what the Biggest Ever campaign advertisements do is advertise a set of offers, three of which were already in place: the Transitions lenses and the UV and Sun Tint Offers, which came in on 4 October, and the Contact Lenses Offer, which came in on 2 August 2010. During those periods when one or more of these offers overlapped with the 25% offer - August and October - customers who wanted these extras had to pay $179 because the 25% discount was not available in conjunction with any other offer. This evidence makes it clear that during the Biggest Ever campaign the extras were being offered for free. There was no artificial inflation of the price of the glasses to trick the customer into a false belief. 49 In any case, I have trouble seeing how the advertisements could be misleading on the premise necessary for the alternative case, namely, that the price before the campaign was $134.25. The advertisements make no comparison with the pre-campaign position unlike the advertisements in issue in Australian Competition and Consumer Commission v Prouds Jewellers Pty Ltd [2008] FCAFC 199, for example. 50 In the result, I am not satisfied that there is a serious question to be tried. In the circumstances it is unnecessary to consider the remaining questions but for more abundant caution I will deal with them too.

Damages not an adequate remedy 51 Luxottica argues that damages could not reasonably compensate Luxottica for losses it may suffer through diversion of customers to Specsavers, "lured by the false promise of free benefits". Mr Hall submitted that they are "notoriously hard to quantify". Although Luxottica called no evidence to support the contention, I accept it. It appears to accord with the evidence Mr Hawkins gave and I take it to be uncontroversial.

Balance of convenience 52 Bowen CJ noted in World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 ("Parish") at 186-7, that proceedings under the Trade Practices Act have a special character. The Act is concerned with the protection of the public interest and Part V, with which this proceeding is concerned, with the protection of consumers. Luxottica need not show that it has suffered any damage. The application may vindicate or protect its private interests while at the same time securing the public interest of consumer protection. This factor is important in assessing the balance of convenience. 53 Luxottica led no evidence on this question but Mr Hall made the following submissions: (1) There was a strong case that the advertising campaign was "materially false". In those circumstances the balance of convenience can "very rarely" favour leaving the campaign on air. As this is the busiest time of the year for the optical market (which is undisputed), many consumers are likely to be influenced by it. (2) It will be practically impossible to repair the harm to consumers if Luxottica succeeds at a final hearing. Although occasionally the Court has ordered or endorsed refund offers as part of the final relief, they are "rare, complex to administer and practically imperfect", (3) Specsavers has several other advertising campaigns "in its locker", which have not been the subject of any complaint and to which it can shift if enjoined from continuing with the promotion. 54 Dealing with the first submission, the weaker the case, the more the balance of convenience must tip against the grant of relief. 55 On the second point Mr Cobden submitted that Specsavers had records of all customers and the prices they paid for their purchases, so that they could easily be compensated if necessary. I do not doubt this. But on this question Mr Hall is right. On the assumption that the advertisement is misleading, the submission fails to take into account those who might be deterred from purchasing the extras at another store because of a misconception that they can be obtained for free at Specsavers. As Perram J observed in Australian Competition and Consumer Commission v SingTel Optus Pty Ltd [2010] FCA 1177 at [22]: In truth, ...it is a mistake to gauge the effect of advertising by what happens merely at the point of sale. Advertising provokes a whole congeries of effects not the least of which is getting the consumer to think about making a purchase and promoting brand awareness. It would be idle indeed to gauge the effectiveness of an advertising campaign that increased consumer visits to a shop (or a website) by 40% merely by reference to what happened at the point of sale because that 40% (whether they made a purchase or not) may well not have visited a competitor as a result of the impugned advertisement. Even without sales this may well be a detriment to competitor and consumer alike. So too, an advertising campaign may raise awareness of a brand without directly resulting at any particular time with a specifiable purchase but which over time may have the most profound and positive economic consequences for the firm involved and corresponding negative consequences for competitors. In this case, consumers may not ultimately be misled at the moment they buy a Think Bigger Plan from Optus but they have been, if the Commission's allegations be made good, misleadingly enticed to Optus and may have missed out on treating with some other competitor. 56 In relation to the third submission Mr Hawkins's evidence was that Specsavers does not have any new advertising campaigns to replace the current campaign. He said the company could re-run an old advertisement but "this is not optimal from a marketing perspective as it will not be as effective as any new campaign as customers would have already been exposed to the campaign". Mr Hall argued that this was no more than another way of saying that Specsavers would rather run the current campaign, but I do not think this is a fair analysis. 57 There is also the question of the cost of the campaign. 58 Mr Hawkins's evidence was that the campaign had cost over $1.1 million and 266 hours of management and employee time. This may not matter too much because of Luxottica's undertaking as to damages: Telstra Corporation Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 at [49]. Nevertheless, there is a substantial opportunity cost. The time and money could have been spent elsewhere. Moreover, Mr Hawkins went on to refer to other intangible costs, such as "significant confusion in stores about the strategy and marketing messages" and a lack of confidence by franchisees in both Specsavers's strategy decisions and the brand which might filter through to consumers. More importantly, he said it was impossible to quantify the extent to which consumer purchasing patterns would be affected and the consequential loss to the company if an injunction were put in place, especially at such a busy time of the year. 59 The remedy sought is discretionary. Specsavers relied on the fact that two components of the promotion - "free" transition lenses and contact lenses - were available with other purchases from early October in the first case and early August in the second. Mr Cobden argued that, as the evidence is that the promotions were widely published in metropolitan newspapers and in leaflets distributed to millions of Australian homes, Mr Sheedy has been regularly reviewing the website throughout 2010, and the companies are in keen competition, it is highly unlikely that Luxottica was not aware of them at the time. There is a history of litigation between these two parties. There is no doubt that Luxottica was keeping a close eye on the activities of its rival. In the case of the offer involving free transition lenses it was marketed concurrently with the 25% discount offer. Ms Bathurst was in contact with Specsavers's stores as early as 3 November. Yet, Luxottica did not move with an application until 11 November. I appreciate that delay is not determinative and, where the public interest is involved, relief is less likely to be refused on account of it: Parish at 190. Still delay is relevant. 60 Section 80(4) of the Trade Practices Act permits the Court to grant an interim injunction whether or not it appears to the Court that Specsavers intends to engage again, or to continue to engage, in conduct of the kind complained of and regardless of whether there is an imminent danger of damage to anyone: Parish at 189. Nevertheless, the likelihood of repetition is plainly relevant to the balance of convenience. 61 Here, I think it is highly unlikely that during the currency of the Biggest Ever campaign there will be a repetition of the 25% discount offer. All references to it have been removed from the website. The sales assistants who offered it to Ms Bathurst and Ms Lee have been disabused of their mistakes and a reminder letter has gone out to stores emphasising that it is no longer available. 62 Thus, putting to one side my views about whether there is a serious issue to be tried, I believe the balance of convenience weighs in Specsavers's favour.

Conclusion 63 I conclude that there is no serious issue to be tried. At best Luxottica has a weak case, the balance of convenience does not favour the grant of injunctive relief and, in any event, on discretionary grounds the order sought should be refused.

Confidentiality 64 Specsavers applies for the following order: Pursuant to s 50 of the Federal Court of Australia Act 1976 and until further order, Exhibit 2 (being the folder marked "Confidential Exhibit SH-2") be confidential and that it not be published other than to: (a) the Respondent; (b) the external legal representatives of the parties; and (c) Mr Michael Sheedy, in-house legal counsel for the Applicant. 65 Luxottica does not oppose the making of an order in this form. 66 Section 50(1) of the Federal Court of Australia Act 1976 (Cth) relevantly provides that the Court may, at any time during or after the hearing of a proceeding, make such order forbidding or restricting the publication of particular evidence as appears to the Court to be necessary in order to prevent prejudice to the administration of justice. 67 In Parish Bowen CJ said at pages 232-233: This court is a court established by statute. It is clear from section 17(1) of the Federal Court of Australia Act 1976 that, in general, it is obliged to exercise its jurisdiction in open court. This provision gives statutory force to the principle that justice must be administered publicly in open court and gives recognition to the weight of public interest which attaches to that principle. 68 The question, then, is whether the order is necessary to prevent prejudice to the administration of justice (that being the exercise by the Court of the judicial power of the Commonwealth): Hogan v Australian Crime Commission [2010] HCA 21, 240 CLR 651 at [30]. 69 As Bowen CJ indicated in Parish at 233, where disclosure would prejudice the proper exercise of the function the Court is appointed to discharge - doing justice between the parties - an order ought to be made. His Honour also emphasised that the categories of public interest are not closed. Here the parties are trade rivals. Mr Hawkins evidence was that the documents in question are confidential to Specsavers because they could be used by a competitor to determine Specsavers's marketing strategy with respect to its television commercials and to better position itself in the market. I accept the evidence. The material is commercially sensitive. I also accept Specsavers's submission that, in the absence of a confidentiality order, it could suffer prejudice in that its competitors could use the information to their commercial advantage and to Specsavers's commercial detriment. Promoting competition is one of the purposes of the Trade Practices Act. Without the protection of orders of this nature, a company is unlikely to want to come to court to vindicate its rights. 70 I am therefore satisfied that the order is necessary to prevent prejudice to the administration of justice.

Orders (1) Pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth) and until further order, the publication of Exhibit 2 (being the folder marked "Confidential Exhibit SH2") is restricted to the following persons: (a) the respondent; (b) the external legal representatives of the parties; and (c) Mr Michael Sheedy, in-house legal counsel for the Applicant. (2) The applicant's claim for interlocutory relief is refused. 71 Specsavers seeks a variation of the usual order. Mr Hall urges that the usual order should be made. The usual order set out in O 62 r 29 of the Federal Court Rules is: Subject to this order, the costs of any application or other step in any proceedings shall, unless the court otherwise orders, be deemed to be part of the costs of the cause of the party in whose favour the application or other step is determined and shall be paid and otherwise dealt with in accordance with the provisions of this order. 72 There are, it seems to me, reasonable arguments on both sides. Mr Hall submits that it was not unreasonable in view of the evidence available to Luxottica on 9 and 10 November to bring the proceeding. Certainly at the time the letter of demand was sent to Specsavers's lawyers there was evidence available to it that justified the course it took. The strength of that evidence declined by the time the application was brought. Nevertheless, it is understandable that Luxottica remained sceptical of Specsavers's position. 73 For Specsavers, Mr Cobden argued that Ms Peach's response to the letter of demand explained in some detail why Luxottica could not succeed in the case as it was then formulated and the position she outlined has been vindicated. The variation of that case or the alternative case did not emerge as I mentioned in my reasons until the course of oral argument. That case, of course, I have also found did not raise a serious issue to be tried. On balance, taking into account the submissions of both parties, I think the proper order in this case is that I should vary the usual order and give Specsavers its costs. I therefore order that: (3) The applicant pay the respondent's costs. (4) The proceeding be listed for directions before the docket judge on a date to be fixed. I certify that the preceding seventy three (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.