TPG Internet Pty Ltd v Australian Competition & Consumer Commission

Federal Court of Australia (Full Court)|2013-04-04|Before: Murphy J, Ryan J, Gilmour JJ

Set aside the orders of Murphy J, made 15 June 2012. THE COURT DECLARES THAT:
The Appellant (TPG), between 25 September and 7 October 2010, in trade or commerce: (a) engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the Act); (b) made false or misleading representations with respect to the price of a service, in contravention of s 53(e) of the Act; and (c) made false or misleading representations concerning the existence or effect of a condition, in contravention of s 53(g) of the Act; by publishing or causing to be published advertisements on television for the supply of a broadband internet service by TPG, which contained a statement to the effect of "UNLIMITED ADSL2+$29.99 per month", and thereby represented that a customer could obtain an unlimited ADSL2+ broadband internet service for payment of only $29.99 per month, when in fact the broadband internet service was only offered upon terms that the customer: (d) pay to TPG a total of no less than $59.99 per month; (e) purchase, or bundle, home telephone line rental with the broadband internet service at an additional cost of $30 per month; and (f) pay to TPG "up front" charges of either $79.95 or $129.95 depending on the contract term.
TPG, between 25 September and 7 October 2010, in trade or commerce, and in connection with the supply or possible supply of a broadband internet service, contravened s 53C of the Act by publishing or causing to be published advertisements on television, its website, third party internet sites and in newspapers for the supply of a broadband internet service, which contained a statement to the effect of "UNLIMITED ADSL2+$29.99 per month" and thereby made a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the service, but did not specify, in a prominent way, the single price for the service.

Pursuant to s 76E(1) of the Act, the Appellant pay to the Commonwealth of Australia a pecuniary penalty in respect of the conduct referred to in paragraphs 2 and 3 above, in the amount of $50,000.
The proceeding is otherwise dismissed.
The respondent pay the appellant 75% of its costs of and incidental to the appeal, the proceedings at first instance before Murphy J and the application for an interlocutory injunction before Ryan J. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 455 of 2012

AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

JUDGES: JACOBSON, BENNETT & GILMOUR JJ DATE: 4 APRIL 2013 PLACE: PERTH (VIA VIDEO-LINK TO SYDNEY)

REASONS FOR JUDGMENT 1 The Court delivered judgment in this appeal in December 2012 and at that time reserved the question of penalty and consequential relief, if any: TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190 (the first judgment). 2 The parties have filed written submissions on these outstanding questions which we will now determine on the papers. 3 The substance of the declaratory relief has been agreed between the parties. The parties have also agreed (and the Full Court noted) that the trial judge's order in respect of corrective advertising ought to be set aside. Although Order 2 of the Orders of the primary judge, in effect, survived the appeal, we have set it aside and restated it as Order 3 in the orders we have made. This has the effect that all the declarations are found in one rather then two sets of orders.

Pecuniary Penalty 4 The general principles applicable to penalty were set out in the first judgment and these reasons should be read with that in mind. Nonetheless, it is convenient to observe that under s 76E(2) of the Trade Practices Act 1974 (Cth) (the Act), the Court must take into account all relevant matters including: (a) the nature and extent of TPG's act or omissions, including any loss or damage suffered as a result of TPG's act or omission; (b) the circumstances in which the act or omission took place; and (c) whether TPG has previously been found by the Court to have engaged in any similar conduct. 5 We concluded in the first judgment that there were three different messages that constituted separate episodes of conduct, referred to as categories of contraventions: (i) the "no bundling condition"; (ii) the no set-up fee; and (iii) the failure to prominently display a single price. 6 It was only the first category which involved the amended advertisements published after 7 October 2010. The findings of the primary judge of contraventions by the "no set up fee" representation and the failure to display prominently a single price were limited to the initial advertisements which ran for 13 days from 25 September 2010 to 7 October 2010. 7 The ACCC in its submissions has attempted, by reference to our conclusions at [163] in the first judgment, to erect an argument for penalties based on the primary judge's findings as to liability but translated to the much narrower range of contraventions found by this Court. 8 We should immediately observe, in fairness to the ACCC, that our earlier reasons at [163], whilst reflecting the qualitative equivalence across the categories of contraventions failed to reflect the quantitative disparity between them. Those findings of putative penalties going to the contraventions as found by the primary judge which we accept suffer from the flaw now identified should not be the foundation for constructing a penalty regime in respect of the much reduced number of contraventions as found by this Court. Qualitative equivalence of categories of contraventions is but one factor. It is as important to consider the quantitative aspect of the contraventions. 9 The consequence of accepting these submissions would see the overall penalty reduced from $500,000 as set out by the primary judge by only $100,000 to $400,000 for which the ACCC contends, in the circumstances where this Court has allowed the appeal in respect of most of the advertisements found by the primary judge to have contravened the relevant legislation. This result, TPG contends, would be perverse. We agree. 10 Moreover, as TPG submits, this approach fails to take into account the other costs and expenses which have been wrongly imposed on it as a result of the proceeding at first instance, which are referred to in TPG's earlier submissions. 11 We are required to consider an appropriate penalty, if any, in light of the surviving contraventions. The factors identified by the primary judge which TPG submits are relevant are as follows: (a) the television advertisement which was found to have infringed ss 52 and 53 was published over 4 days only between 3 October 2010 and 7 October 2010; (b) the initial advertisements that were found to have infringed s 53C were shown between 25 September 2010 and 7 October 2010; (c) as soon as the ACCC raised concerns about the initial advertisements, TPG immediately took appropriate steps to change those advertisements; (d) no relevant loss or damage was suffered by any person as a result of TPG's conduct; (e) TPG has not previously been found to have engaged, by the Court, to have engaged in similar conduct; (f) it was not a case of TPG acting deliberately or covertly in contravention of the legislative requirements; (g) TPG had a compliance program in place to ensure compliance with the Act, and this was independently reviewed; (h) TPG did co-operate with the ACCC and, in fact, went beyond what was necessary to ensure compliance; and (i) TPG is a substantial company but on the second tier of telecommunications companies (below companies such as Telstra, Optus and Vodafone). 12 We concluded that the "no bundling" representation applied only to the initial television advertisement, while the failure to display prominently the single price applied to the initial advertisements (other than the radio advertisement). TPG submits that, in the circumstances, if this Court had been imposing a penalty at trial based upon the contraventions that the Full Court has found then a penalty of $50,000 (being $25,000 for the television "no bundling" representation and $25,000 for the s 53C breach) would have been appropriate. 13 We do not accept TPG's submission that in the unusual circumstances of this case, no pecuniary penalty be imposed on it. Whilst the number of contraventions is considerably reduced as a result of the first judgment, they nonetheless, in the context of a national advertising campaign, remain serious although self-evidently less so than was the subject of the findings of the primary judge. 14 However, TPG submits that as a result of the manner in which this proceeding has been brought and prosecuted: (a) it has incurred costs of over $600,000 and, regardless of what orders this Court makes in respect of costs, it will be significantly out of pocket; (b) it was, after the decision of the trial judge, forced immediately to terminate an advertising campaign which has now been held not to have infringed against the law. The removal of the outdoor advertisements alone cost TPG in excess of $105,000 ex GST; and (c) further, it was required to write to all of the customers which signed up under the initial and the revised advertisements noting that it had been found by the Federal Court to have engaged in misleading and deceptive conduct. The extent of the unjustified reputational damage that was done to TPG is hard to estimate but is unlikely to be completely undone by the decision of the Full Court. 15 We consider an appropriate penalty for the first category (no bundling) to be $50,000; for the second category (no set-up fee) $25,000 and the third category (no prominent single price) $50,000. Apart from the legal costs incurred by TPG, which we do not consider relevant, we consider that this Court may take into account as a relevant factor that TPG has incurred loss and damage in the ways it has submitted by reason of the findings now set aside, of the primary judge. When account is taken of those factors as well as the principle of totality, we consider that a penalty of $50,000 is reasonable.

Injunctions 16 TPG did not in its appeal challenge Order 6 made by the primary judge which enjoined TPG for a period of 3 years from publishing any relevant advertisements without specifying, in a prominent way, the single price for the service or bundle of services. 17 However, the question of injunctions falls to be reconsidered generally in light of the judgment of the Court. 18 The ACCC contends that there is continued utility in the injunction sought by the ACCC, particularly insofar as it addresses the breaches upheld in respect of s 53C of the Act and the initial television advertisements. It argues that the public interest is served by preventing any recurrence of such conduct, especially in light of TPG's decision not to follow completely the legal advice it received and not to take a cautious approach about its advertisements. 19 This order relates to conduct engaged in for a period of a few days, almost two and a half years ago. The conduct ceased immediately upon the ACCC raising the issue with TPG. We agree that no useful purpose would be served by an injunction in these circumstances. 20 Further, as TPG correctly submits, in any event, the injunctions sought by the ACCC would apply for a period of 3 years from the date of the orders. This would mean that they would extend for a significantly greater period than even the trial judge's orders, which were for three years from 15 June 2012. 21 We would, in the exercise of our discretion, not order any injunctive relief. We do not consider it would serve any useful purpose.

Compliance Program 22 Paragraph 10 of the orders of the primary judge made on 15 June 2012 requires TPG to maintain a compliance program, in the form sought by the ACCC (which includes reporting obligations to the ACCC) for a period of 3 years. For essentially the same reasons that we decline to grant injunctive relief, we would not order a compliance program. 23 Moreover, as TPG contends, it already has an appropriate compliance program in place. The Telecommunications Consumer Protections Code, which was introduced in 2012, contains compliance obligations that overlap the compliance program ordered by the trial judge, particularly in terms of reviews and reporting. It would be oppressive to force TPG to participate in multiple layers of third party review and reporting such as would be required if TPG is ordered to maintain the compliance program sought by the ACCC.

Costs 24 TPG submits that, it was ultimately largely successful in this case and seeks all of its costs or alternatively, an apportionment on the basis we have set out below. The ACCC submits that TPG ought pay to it 50% of the trial costs and that it should pay TPG 50% of the appeal costs. 25 TPG submits that there is no reason why it ought not have its costs of the injunction application, which costs were ordered to be "in the cause". It points up that at trial, the issues of liability were heard over two days, as to which TPG was ultimately largely successful, and the penalty hearing was heard over another two days. It contends that its submissions as to penalty have almost all been upheld either by the primary judge or the Full Court. While it did not succeed on the s 53C point on appeal, it argues that this was a relatively small part of the case and it did succeed on most of the issues relating to bundling and on all points relating to the set-up fees and penalty. 26 It is appropriate in this case that there should be an apportionment of costs of the proceedings. This is not a calculation capable of precision. 27 However, TPG proffered, without objection being taken, the following assessment as to the court time taken by each of the hearings: injunction application - half a day, liability hearing - two days; penalty hearing - two days; appeal - one and a half days. It submits that on the basis that it succeeded on the matters that were the subject of the injunction application and on matters related to penalty, and had 80% success on liability on appeal then, of the six days in court, TPG succeeded in respect of 5.3 of those days. This equates to more than 88% of the court time. It submits that with this level of success, it ought have the entirety of its costs but in the exercise of a partial order, it seeks 90% of its costs of the trial and the appeal. 28 Moreover, TPG contends that it succeeded not only on the largest number of issues but also succeeded on the most important issues, being the revised advertisements which were continuing, and which were published over 13 months, rather than for only 12 days. 29 The ACCC submits that it was successful at trial in establishing, at least, contraventions of s 53C of the Act by TPG in relation to the initial television advertisements. These findings were not challenged on appeal. It contends correctly that, again, at least in part, TPG has not been successful in its appeal. 30 That there was a mix of success and failure on each part is plain. However, we broadly accept TPG's submissions and would order the ACCC to pay 75% of TPG's costs related to the injunction, the trial and the appeal. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jacobson, Bennett & Gilmour.

Trade Practices Act 1974(Cth)ss 52, 53(e),(g), 53C, 76E(2)

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