ISSUES ON THE APPEAL
32 The appellant submits that the trial judge erred in finding that it had made the Savings Representation. It advanced a number of matters in support of its submission. Before considering those matters it is useful to identify a number of general propositions which were not in dispute.
33 First, the question of the nature of the representation conveyed by words or conduct is a question of fact to be determined having regard to what was said or done considered against the background of all the surrounding circumstances: Taco Company of Australia Inc and Another v Taco Bell and Others.
34 Secondly, where a representation is made to the public, it is necessary to identify an "ordinary" or "reasonable" member of the relevant class for the purpose of determining the effect of the words or conduct. Persons whose reactions are extreme or fanciful are not within this category. In Campomar Sociedad, Limitada and Another v Nike International Limited and Another [2000] HCA 12; (2000) 202 CLR 45 the High Court said (at 86 - 87 [105]):
Nevertheless, in an assessment of the reactions or likely reactions of the "ordinary" or "reasonable" members of the class of prospective purchasers of a mass-marketed product for general use, such as athletic sportswear or perfumery products, the court may well decline to regard as controlling the application of s 52 those assumptions by persons whose reactions are extreme or fanciful. For example, the evidence of one witness in the present case, a pharmacist, was that he assumed that "Australian brand name laws would have restricted anybody else from putting the nike name on a product other than that endorsed by the [Nike sportswear company]". Further, the assumption made by this witness extended to the marketing of pet food and toilet cleaner. Such assumptions were not only erroneous but extreme and fanciful. They would not be attributed to the "ordinary" or "reasonable" members of the classes of prospective purchasers of pet food and toilet cleaners. The initial question which must be determined is whether the misconceptions, or deceptions, alleged to arise or to be likely to arise are properly to be attributed to the ordinary or reasonable members of the classes of prospective purchasers.
35 Thirdly, in considering the meaning to be attributed to words or conduct alleged to be misleading or deceptive or likely to mislead or deceive the Court may receive evidence from members of the relevant audience and, subject to the requirements of the laws of evidence, that evidence may include survey evidence and evidence of any complaints made about the words or conduct. Such evidence may be persuasive but it is not essential: Taco Company of Australia Inc and Another v Taco Bell Pty Ltd and Others at 202 per Deane and Fitzgerald JJ; Arnotts Limited and Another v Trade Practices Commission (1990) 24 FCR 313 at 358 - 364 especially at 362. In some cases the behaviour or reaction of a consumer may be generally unknown so that a propounding party may fail in the absence of evidence of consumer behaviour or reactions: WEA International Inc and Another v Hanimex Corporation Ltd (1987) 17 FCR 274 at 280 per Gummow J.
36 Fourthly, there is clearly a difference between an offer and an invitation to treat: Spencer v Harding (1870) LR 5 CP 561; Partridge v Crittenden [1968] 2 All ER 421. The statements in the catalogues and flyer may be more accurately characterised as invitations to treat rather than offers. However, for reasons which will become clear, the difference does not really matter in this case and it is convenient for me to refer to the statements as offers.
37 Fifthly, this is not a case where the alleged falsity lay in the fact that the goods had never been offered for sale at the Strike Through or Was price. That is not how the respondent put its case. The respondent's case at trial was that the relevant items of jewellery may well have been offered at the Strike Through or Was prices, but it had shown that the ordinary or reasonably unaware customer (or a significant portion of that class) would not have purchased at the Strike Through or Was prices if the items had been purchased before the sale period.
38 Sixthly, the respondent's claims at trial involved a claim for a civil penalty under s 76E of the TPA and in those circumstances in determining whether the elements of the respondent's claim were proved, the Court was required to take into account the nature of the subject matter of the proceeding and the gravity of the matters alleged: Evidence Act 1995 (Cth) s 140; Briginshaw v Briginshaw (1938) 60 CLR 336 at 361 - 362 per Dixon J (as his Honour then was).
39 Finally, in this case the Savings Representation as pleaded by the respondent involved implicitly a representation that had the unaware customer purchased the item of jewellery before the sale period to which the catalogue or flyer relates, then he or she would have paid the Strike Through or Was price. In other words, it was incumbent on the respondent to prove this element as part of its pleaded representation.
40 We turn now to the matters the appellant relied on to support its submission that the trial judge erred in finding that the Saving Representation was made. These matters were all related to the Strike Through price or Was price and what the ordinary or reasonable unaware customer would have understood the statements in the catalogues and flyer to mean.
41 The appellant submitted that the Sale or Now price was clearly an offer price and that the Strike Through and Was price should be construed in a similar way. In other words, they were represented to be no more than offer prices. We reject this contention because it seems to us that the Sale or Now price was not only an offer price, but also the price at which the unaware consumer would consider he or she could purchase the item during the sale period.
42 The appellant accepted that there might be a representation in relation to the Strike Through or Was price beyond a representation that it was an offer price and submitted that if that were so it was that it was represented to the ordinary or reasonable unaware customer that if he or she purchased the relevant item at the Sale or Now price, he or she would save the difference between that price and the Strike Through or Was price if the relevant item had been purchased at the Strike Through or Was price. The respondent contended that this argument had not been advanced in the Court below. We do not need to address that contention because we do not think it advances the appellant's case even if it is part of the bundle of representations that arise from the catalogues and flyer. In a sense, it is no more than an extrapolation by the representee of the offer price representation.
43 The appellant submitted that the Strike Through or Was price was no more than an offer price and that before the Court could conclude that it was anything more than that it would need evidence of consumer reactions. In other words, if confined to the "four walls" of the statements in the catalogues and flyer the question is one of construction and the Court should find that the only representation made was of an offer price. The appellant referred to the decision of Gummow J in WEA International Inc and Another v Hanimex Corporation Ltd.
44 The appellant sought to bolster this argument by reference to United States publications which question the conclusions consumers draw from dual pricing (e.g., Kaufmann P, Ortmeyer G and Craig Smith N, "Deception in Retail Sale Pricing" in Raaij WF and Bamossy GJ (eds), European Advances in Consumer Research (Vol 1, 1993)). These articles were given to the trial judge but were not in evidence before him. In the end, we do not think these publications advance the appellant's submissions very far. As counsel for the respondent submitted, they deal with a different jurisdiction and market and with consumers generally and not specifically with consumers of relatively low-priced jewellery.
45 We reject the contention that it was unsafe to find the Savings Representation in the absence of evidence of consumer behaviour or reactions. WEA International Inc and Another v Hanimex Corporation Ltd was quite an unusual case where one of the issues was how consumers would behave if there had been a warning that re-recording unauthorised by owners of copyright would amount to an infringement of copyright. It was in that context that Gummow J made his comments. In any event, Gummow J did not lay a rule, but said that in some cases evidence of consumer habits and attitudes may be necessary in the sense that without such evidence an applicant's claim may fail. The question is whether this is such a case.
46 The appellant contended that the decisions in Prouds Jewellers (Moore J) and Prouds Jewellers (Full Court) strongly support his submission that the Strike Through or Was prices were no more than offer prices.
47 The sequence in terms of when the various judgments were delivered in the Prouds Jewellers and Ascot Four cases was as follows:
Prouds (Moore J) 15 February 2008
Ascot Four (Mansfield J) 21 August 2008
Prouds (Full Court) 23 December 2008
Ascot Four (Full Court) 26 May 2009
48 The Australian Competition and Consumer Commission failed (relevantly) in the Prouds Jewellers cases and succeeded in the Ascot Four cases. An important difference between the two cases is the way in which the Commission pleaded its case in Prouds Jewellers. It did not plead the Savings Representation in Prouds Jewellers although what it did plead is something similar. The Commission's pleading as to the meaning of the Strike Through or Was price was that that was what consumers paid to purchase the items immediately prior to the publication of the catalogue. The distinction between that and a representation that the Strike Through or Was price was what the ordinary and reasonable member of the class of unaware customers would have paid prior to the sale period is a fine one, but it appears to be what Moore J had in mind when he said (at 322 [47]):
The pleading alleged that the Level of Savings Representations were false because they erroneously represented the amount a consumer would save. As pleaded, the saving falsely represented was the difference between the amount represented by the "now" price and the amount usually paid by consumers in the eight weeks preceding the publication. The case advanced by ACCC was based on the actual sales to consumers which, overwhelmingly in relation to most of the 17 items and entirely for the remainder, were at a sale price less than the "was" price. However, in my opinion, this is not the representation conveyed to the relevant hypothetical consumer by the juxtaposition of the "now" and the "was" price as they appeared, in context, in the catalogue. As I indicated earlier, the hypothetical consumer would not, in my opinion, have contemplated that the "was" price concerned what consumers actually paid if contemplating what savings the particular hypothetical consumer would achieve. That is, the hypothetical consumer would not have taken the "was" price as signifying the price actually paid by consumers including consumers who knew that discounting and bargaining was a feature of the jewellery industry and, accordingly, had negotiated or secured a price less than the regular market price. The hypothetical consumer would, when considering what savings might be made by purchasing during the sale, have viewed the "was" price as the price he or she would have paid had they bought the item before the sale period. Though, as I earlier indicated, this would have involved an erroneous assumption, it is not the case ACCC pleaded and presented.
49 The other point to note about the decision in Prouds Jewellers (Moore J) is that it appears that in that case none of the relevant items were offered for sale at the Was price.
50 On the appeal in Prouds Jewellers the Full Court upheld the decision of Moore J at first instance. In the course of their reasons the Full Court made certain observations which are relied on by the appellant in this case (at [36]):
This distinction, for purposes of characterising the "Was" price, between a price at which goods have been offered for sale and the price (or prices) at which they have actually been sold is consistent with the preponderance of authority on "dual pricing" noted at [30]. As a matter of impression, if, as the ACCC contended, we are required to form one, the "Was" price in the present case was likely to have been understood by the relevant hypothetical consumer as referring only to the price at which the item in question had been offered for sale.
51 In Ascot Four Mansfield J did not make an express finding as to the representation conveyed by the reference to the Strike Through or Was price even though he found in the result that the Savings Representation (or a representation very similar to it) had been made. On appeal, that was said to involve error. The Full Court rejected the argument and upheld the decision of Mansfield J. The Full Court made various observations in Ascot Four which support the approach taken by the trial judge in this case (at 115 [25], [26]):
… In contrast to Prouds Jewellers, the strike through price was in fact the ticketed price (or offer price) for the items the subject of counts 2 to 11 before the sale period. In this context, the primary judge found that the sale catalogue conveyed a representation that purchasers of the 11 items during the sale period would make a saving of the difference between the sale price and the strike through price. However, there had never been a sale of any item at or approaching the strike through price before the sale period. It may be accepted that the primary judge's characterisation of the representation does not contain an express finding about the meaning of the strike through price. But when the reasons are read as a whole it is clear that the primary judge considered that the strike through price meant the price at which the items had been offered for sale and which the relevant consumer of the items would have paid before the sale (in the same sense as explained by Moore J in Prouds Jewellers 75 IPR 306; [2008] FCA 75, namely, the price the consumer would have expected to pay before the sale). This is apparent from the primary judge's focus, in his description (at [100]) of the representation, upon the saving to be made by the consumer him or herself.
… It was open to the primary judge to characterise the dual pricing advertising as conveying a representation involving a saving by reference to the difference between the sale price and the strike through price on the basis (albeit implicit from the reasons) that the strike through price represented (at least to a significant section of the relevant class of consumers) more than a bare offer, namely, the price at which they would have bought the item before the sale period …
52 The support in Ascot Four for the approach taken by the trial judge is seen quite clearly when the Full Court addressed one of the submissions made by Ascot Four. The submission was as follows (at [14]):
(iv) A consumer unaware of the discount culture would have treated the strike through price as the price at which that consumer would have bought the item before the sale. Because this type of consumer would not have sought or obtained any discount, the price at which he or she would have bought the item would also be treated as the offer price before the sale period. This approach is consistent with the conclusions of Moore J in Prouds Jewellers 75 IPR 306; [2008] FCA 75 at [38] and [39].
53 The Court dealt with that submission by saying (at [29(iv)]):
The primary judge found that the consumer unaware of the discount culture in this market would not have understood the strike through price as representing a mere ticketed or offer price with no real relevance to the decision to purchase the item during the sale period. This consumer would have expected to save the difference between the strike through price and the sale price, when in fact this anticipated saving was illusory. In other words, while the strike through price did represent an offer price, to many customers it also represented the price they would have expected to have paid before the sale (see [25] above). This cannot be considered a true representation when the evidence shows that no sales had ever been made at or near the strike through price before the sale. It was open to the primary judge to make this finding, which was in fact consistent with Moore J's reasoning in Prouds Jewellers [2008] 75 IPR 306; [2008] FCA 75 .
54 The Full Court in Ascot Four also considered what the Full Court had said at [36] in Prouds and said (at [24]):
The Full Court found Moore J's conclusions to be open on the evidence (at [31]). It is true that the Full Court also referred to the "was" price as "referring only to the price at which the item in question had been offered for sale" (at [36] and see also [42]), but this was in the context of deciding whether the "was" price represented an actual sale price or an offer price. The need for this appraisal arose out of Moore J's decision that the ACCC had wrongly relied on the "actual sale price" conception of the "was" price. Preferring the offer price to the actual sale price interpretation, and thereby accepting Moore J's decision, the Full Court was not required to consider whether the offer price was the price at which the goods were in fact offered for sale and thus the price at which they would have been bought (as per Moore J at [37]).
55 With great respect, we do not think those observations entirely reconcile the differences between the two cases. At the same time the effect of the decision of the Full Court in Ascot Four is clear and it supports the approach taken by the trial judge in this case. Although the meaning of words or conduct is a question of fact, the similarities between this case and Ascot Four are such that Ascot Four provides powerful support for the approach taken by the trial judge.
56 The representations found to arise from dual pricing seem to be increasing in sophistication but they have the support of a recent decision of the Full Court of this Court which was followed by the trial judge in this case. We are not persuaded that the trial judge's approach was wrong.
57 We reject the appellant's submission that the trial judge erred in concluding that the Savings Representation had been made in the catalogues and flyer.
58 The appellant submits that the trial judge erred in finding that the Savings Representation was misleading or deceptive or likely to mislead or deceive and that it was a false or misleading representation with respect to the price of goods. It was accepted by the trial judge and the parties that if the representations in the catalogues and flyer were misleading or deceptive within s 52 of the TPA, then they were also false or misleading within s 53(e) of the TPA and it is appropriate to proceed on that basis.
59 Again, it is useful to identify a number of general propositions relevant in this case before examining the particular submissions made by the appellant.
60 First, the respondent bore the onus of establishing at trial that the representation that prior to the sale period the ordinary or reasonable unaware customer (or at least a significant number of unaware customers meeting that description) would have purchased the relevant item of jewellery at the Strike Through or Was price was false. In other words, it had to negate the represented counterfactual. It sought to do that by relying on actual sales at the Strike Through or Was price in the four month period prior to the relevant sale period and by relying on the appellant's aggressive discounting policy.
61 Secondly, the respondent made 44 items of jewellery the subject of its proceeding and all of those items appeared in one of the catalogues - the May 2010 catalogue. There were 298 items of jewellery in that catalogue and 55 items were advertised at a Was and Now price (Exhibit R20). Mr McCarthy excluded the other 11 items from his analysis and he candidly admitted that he did so because they did not support his analysis. The results including the 11 items are set out in Exhibit R11. It is clear also that considering the catalogues and flyer as a whole there were many other cases of Was and Now prices which are not included in the 44 items selected by the respondent. The respondent did not argue that only the matters directly relevant to the 44 items could be considered. It was content to accept that any matter rationally probative of the represented counterfactual can and indeed should be considered. It did not go as far as the trial judge may have thought it did at trial (see [24] above).
62 Thirdly, Mr McCarthy's analysis comprising Exhibit A7 and Schedule B to the trial judge's reasons shows that there were no sales at the Strike Through or Was price in the case of approximately 25 of the 44 items. However, the respondent did not conduct its case by reference to individual items. Nor did it argue in the alternative that if it lost as to the class of 44 items, it should succeed with respect to those items where there were no sales. As we understood it, there were a number of matters to be considered in determining whether the represented counterfactual had been shown to be false.
63 The appellant criticised the respondent's methodology in adopting a four month pre-sale period rather than a 12 month pre-sale period and in not including sales past the sale period. As to the former criticism, this was made before the trial judge and rejected by him for reasons which, with respect, appear to us to be sound (at [144]):
I accept the applicant's evidence that it was appropriate to have regard to the actual sales of the 44 items prior to the publication of the relevant brochure or the flyer over a period of four months. That period was appropriate because it was long enough to obtain an understanding of the sales history of the item. The period was longer than that suggested as relevant by the respondent's solicitors who would have used an eight week period to determine the actual sales. It was also an appropriate period having regard to the fact that the relevant sales periods occurred more than once a year, so that if a longer period was used, that longer period might include distortions caused by previous catalogue-identified sales periods. I reject the respondent's evidence to the contrary.
64 As to the latter criticism, there was nothing put to the Court that suggested that a lack of post-sale sales data was likely to have a material bearing on the results of a sales analysis.
65 The appellant submitted that there was insufficient evidence to find that the represented counterfactual was false. Although accepting that the precise size of the class of unaware customers was not established by the evidence, the appellant contended that it was well and truly in the minority. When compared with the sales figures in Exhibit R11 which deals with the 55 items and shows that on average nearly 6% of sales were at the Strike Through or Was price or within 10% thereof and even when compared with Exhibit A7 which dealt with the 44 items it could not be shown to the requisite standard that the representation to the class of unaware consumers was false. In other words, it was reasonable to infer that nearly all of the sales at the Strike Through or Was price were by unaware customers and there was such a correlation between the percentage of such sales and the size of the class of unaware customers that the trial judge should not have been satisfied that a substantial number of unaware customers would have purchased at below the Strike Through or Was price.
66 This argument has a good deal of force if it is correct to conclude that the size of the class of unaware customers is very small. We do not think it is correct to draw that conclusion. The trial judge reached the conclusion that the size of the class was fairly substantial and we are not persuaded that he erred in doing so.
67 Mr Murphy said that the aware customers made up the majority of the appellant's customers. He did not estimate the size of the class of unaware customers. The trial judge did not accept that evidence. The trial judge said (at [37] and [147]):
It is not possible to determine whether the majority of those readers were in the class of aware persons or unaware persons, but it is possible to say that the class would consist of both. Once that determination is made the question is: what would the advertisement mean to the two subclasses? It may be, as the respondent has contended, that the aware persons would know that they could buy the advertised jewellery at any time at the sale price or the now price, or at least at a price less than the was or strike through price. I accept that those persons would not be, nor be likely to be, misled or deceived by the advertisements.
…
If, as Mr Murphy said, 5-10% of people did not negotiate upon price, then the size of the totally unaware class to whom the savings representations were made was approximately 150,000 to 300,000 people. I think it was greater than that figure, but I cannot say by how much.
68 The trial judge referred to the size of and expenditure involved in the advertising campaign and concluded that the Savings Representation was made to a "significant unaware audience". We think that he was entitled to reach that conclusion and in the process to reject Mr Murphy's evidence which he said did not otherwise impress him (at [127] and [141]).
69 Once the conclusion is reached that the trial judge did not err in concluding that the Savings Representation was made to a significant unaware audience, we think it follows, bearing in mind the prior sales at or near the Strike Through or Was price and the appellant's aggressive discounting policy established by the evidence and, in particular, its own Pricing Guidelines, that it was open to the trial judge to conclude the respondent had negated the represented counterfactual.
70 It was put to the Court that the approach of the trial judge was erroneous because it would mean that a trader could not engage in the Was price/Now price form of advertising in circumstances where the trader had difficulty selling goods over a reasonable period and reduced their price in order to sell them. We do not think that is correct because the result will depend on all the circumstances. If there were no sales of the goods over an appropriate period and nothing more, then it is difficult to see how the represented counterfactual would be shown to be false. In other words, it is difficult to see how, in the case of an assumed sale, it could be inferred to the requisite standard that it would not have been at the Strike Through or Was Price. On the other hand, falsity might be shown if there was such a practice of aggressive discounting that it could be safely inferred that the hypothetical sale would not have been at the Strike Through or Was Price. These observations underscore the point that the critical matters in this case were both the lack of sales at the Strike Through or Was Price and Zamel's aggressive discounting policy.
71 We reject the appellant's submission that the trial judge erred in concluding that the Savings Representation was misleading or deceptive or likely to mislead or deceive.