Vodafone Pty Limited v Hutchison Telecommunications

REASONS FOR JUDGMENT 1 In this matter Vodafone Pty Limited, a provider of, amongst other things, mobile phone telecommunication services, seeks orders against the respondent Hutchison Telecommunications (Australia) Limited, a like provider, in terms of an application and amended statement of claim that are before me. 2 Urgent interlocutory relief was sought yesterday. The parties helpfully refined the issue down to particular elements which yesterday were dealt with on the basis of submissions from the bar table, rather than evidence. I indicated a view about two aspects of the advertisements yesterday and the respondent, through Mr Gageler gave an undertaking covering the position today. 3 The matter came back before me today for a more considered interlocutory hearing to deal with the matter. The interlocutory injunction sought today has not been formalised with precision into a notice of motion, but it has been formalised into draft orders which are as I will indicate in a moment. These orders sought were amended during a course of discussion between myself and Mr Cobden and as I understand the application before me today, they are as follows: The applicant seeks, on the provision of the usual undertaking as to damages as set out in Practice Note 3 of this Court orders:

1. That until further order the respondent, whether by its servants or agents or otherwise, be restrained, in trade or commerce, from publishing or exhibiting or causing to be published or exhibited: (a) advertisements contained or as found in exhibit MGW2 to the affidavit of Michael John Williams of 16 August 2001 filed in these proceedings and as found in now non-confidential respondent's exhibit TACC13A to the affidavit of Mr Czinner of 17 August 2001; (b) any advertisement which contains a statement to the effect that "keep your existing mobile phone number" without adequately disclosing the conditions and/or costs of doing so; and (c) any matter which is substantially identical to (a) or (b) above.
2. That until further order the respondent, whether by its servants or agents or otherwise, be restrained, in trade or commerce, from making or causing to be made: (a) what is called the 18 cent call representations as defined in paragraph 4 of the statement of claim which are: (i) that the cost for each 30 second period of calls made from an Orange mobile phone connected to the JustGo plan is 18 cents; (ii) that the cost for each 30 second period of calls made from an Orange mobile phone connected to the JustGo plan is 18 cents made to anywhere in Australia; (iii) that the cost for each 30 second period of calls made from an Orange mobile phone connected to the JustGo plan is 18 cents at any time of the day; (iv) that the cost for each 30 second period of calls made from an Orange mobile phone connected to the JustGo plan is 18 cents at any time of the day and any time of the week; (v) that calls made from an Orange mobile phone connected to the JustGo plan are made over a national network owned or operated by Orange; (vi) that the cost for each 30 second period of calls made from an Orange mobile phone connected to the JustGo plan are 18 cents if they are made within an area covered by the Orange network; and (vii)that the cost for each 30 second period of calls made from an Orange mobile phone connected to the JustGo plan are 18 cents and thereafter are up to 50 cents cheaper than the same call made from a mobile phone connected to the Vodafone service; (b) the number portability representations as defined in paragraph 9 of the statement of claim (which I do not set out in full because in argument it was, I think, accepted that, distilled, the applicant's complaint is as set out in paragraph 9(b) thereof which is as follows:) that a mobile phone customer subscribing to a network other than the network operated by Orange can retain their current mobile phone number if they switch to the Orange JustGo plan without incurring any additional costs; and (c)any matter which is substantially identical with the representations in (a) and (b) above. 4 Before moving on, I should add that the 18 cent call representations set out in 2(a)(i) to (vii) above range somewhat wider than what I think really is in dispute about what I may call the 18 cent representation. The essence of the complaint, as will appear in a moment, is that there is a representation that the rate for all Orange calls is 18 cents per 30 seconds. The various refinements set out in the so-called 18 cent call representations referred to above are perhaps a little over-elaborate and, in the light of the balance of this judgment and what I propose to do, may need to be distilled somewhat. 5 Generally speaking, for the purposes of these reasons, it is convenient to deal with the advertisement which is part of exhibit MGW2 to which I referred. It is an advertisement. It is designed, on its face, to appeal not necessarily to clear logic, but to impression and a less than perspicacious reading. That is its natural commercial purpose and nature. 6 In this regard, it is clearly arguable that there should be clarity of layout in terms of any relevant necessary qualification to avoid false impressions being given in the context where perspicacity of approach of the reader is not to be expected. That is not to deny the entitlement of commercial entities to use simplicity and impressionistic attraction to attract and motivate potential customers without any need over-elaborately to qualify what can be said simply, straightforwardly and accurately. 7 It is unnecessary, I think, for the purposes of this judgment to go to any authorities in this Court and elsewhere in relation to misleading and deceptive conduct, but if an impression or a perusal is sought or anticipated leading to easily identifiable and easily grasped concepts in an advertisement and if those concepts and that advertisement have qualifications for the reader which should be made then, in such a context, those qualifications should be flagged to the reader to ensure that impression and perusal is not left unqualified, if, to be accurate, qualification is needed. 8 This is so, I think, where decisive action is encouraged which may commit a customer to a course of action with consequences for the customer and for the competitor of the person seeking to attract the customer. It may well be that in any given circumstance the monetary effect on the customer is small, but that is not to say that the combined commercial or monetary effect on the competitor may not be significant. 9 The comments I have just made are not intended to be other than a context for what follows and lest my expression from time to time betray something else which is not the case, I should add that the totality of this judgment is delivered on the basis that it is an interlocutory judgment and final expressions of view are not being made. However, it is fair to say, I think, that given that much of the debate which has taken place before me is about impression and first reading, the boundary between views drawn at an interlocutory level and a final level are not easy to identify, but they are real; and it should not be taken from anything I say that the matter on a final basis has been in some fashion prejudged. 10 I think it is fair to say that the advertisement tends to give an overall impression that Orange, (and I use the expression Orange from time to time that being the business name of the respondent under which it markets and sells these telecommunication services) can provide a consistent flat rate charge being Australia's lowest flat rate charge for mobile phone plans with an absence of attendant financial charges sometimes found in competitors' arrangements, such as minimum monthly "call spends", monthly access fees, connection fees and the like. The advertisement emphasises, I think, the transparent consistency and low rate of cost for the service provided such that there is a service provided whereby, as the advertisement says, you just pay for what you use and you pay a low amount for what you use. I do not set out the whole of the advertisement in this judgment. I have identified where the advertisement is. 11 The complaints made about the advertisement deal with two aspects of it. I need to set out parts of the advertisement that highlight the two aspects to which I have just referred. I emphasise that it would be a mistake to consider what I am about to say about these aspects without examining the whole of the advertisement to understand my comments. The two particular aspects are as follows. In the middle of the advertisement there are coloured bullet points in the shape of a capsule which, when the advertisement is in colour, are in orange and in which the words "keep" and "low" are placed. Adjacent to the capsule with "keep" within it there is the following: your existing mobile number - call Orange for details on call diversion options. 12 Adjacent to the orange capsule with the word "low" within it is the following: flat rate of 18 cents per 30 seconds, 24 hours, seven days a week. 13 Neither of those bullet points, or what appears adjacent to them, have any form of asterisk or annotation which would indicate that there is a qualification to the statements there contained. Towards the foot of the page there is one paragraph with a number of sentences dealing with diverse or different subject matters. I need to set out the whole of the paragraph. It is in the following terms: Based on competitors' advertised standard plans as at 13 August 2001 and does not include special offers or handset cost if applicable. Conditions apply to the 'keep your existing mobile number' diversion option. Flag fall of 18 cents applies for timed calls. Surcharge of 15 cents/30 sec applies until 26 August 2001 for calls made outside the greater Sydney and Melbourne Orange network coverage areas. Total new Samsung N-105 phone cost is $384, choose to pay over 12 or 24 months, balance payable on disconnection. 14 The reference to the Samsung phone refers to a telephone offered in the middle of the advertisement next to a picture of a mobile phone. 15 One needs to understand how the respondent's system works. The affidavit of Mr Czinner of 17 August 2001 which was filed by the respondent sets out these matters. I hope I will summarise them accurately and relevantly as follows. The respondent has two licence areas, being, first, the area of Melbourne and surrounding areas set out in exhibit TACC3 to Mr Czinner's affidavit and, secondly, an area broadly speaking from Wollongong to Newcastle including Sydney and to the west encompassing the greater metropolitan area of Sydney and parts of the Blue Mountains. This can be seen in exhibit TACC1 to Mr Czinner's affidavit. These two licence areas cover or include approximately 50 per cent of the population of Australia. The respondent can offer to people who give an address within this licence area a national mobile telephone network. The evidence before me is that people who give an address (which one assumes for most of such people would be a residential address or perhaps a business address) outside the licence areas are not signed by the respondent as customers. The people who give an address to the respondent within the licence areas can be signed as customers, and, as I said, if they decide to purchase mobile phone services from the respondent they can then take advantage of technical facilities provided by the respondent which give, in effect, a national mobile phone network. 16 To provide a national mobile phone network, however, the respondent needs to make arrangements with other providers in respect of the area outside the licence area in the manner which I will indicate. The evidence before me is that Orange uses Telstra for that facility outside the licence area. This assistance, arranged for a commercial fee with which it is unnecessary to deal, enables someone who is outside the respondent's licence area to phone anywhere in Australia. Within the licence area there is a coverage area, that is, the totality of the licence area is not actually covered by the facilities offered by the respondent. However, if someone who is otherwise a customer of the respondent tries to call from these areas uncovered but within the licence area there is no charge because a call cannot be made, that is, a call outside the coverage area but within the licence area will be ineffective. Telstra and its facilities do not extend to filling this gap. 17 The problem in this case arises because of the arrangements made between the respondent and Telstra for the making of calls outside the licence area. If a customer calls from outside the licence area there is charged by Telstra a fee, called a roaming fee, which is calculated by reference to time used. Relevantly, for today's purposes, it is 15 cents per 30 seconds. That means that if a customer of the respondent makes a call from outside the licence area to somewhere in Australia the flat rate is not 18 cents per 30 seconds but 33 cents per 30 seconds. There is also a flag fall of 18 cents, but no particular complaint is directed to that fact. It is important to understand that this position will in fact only obtain until next Wednesday, 22 August 2001. The footnote, if I may use that expression, to the advertisement indicated that the surcharge of 15 cents per 30 second applied until 26 August 2001. That was initially so arranged by the respondent but it has been able to bring forward its arrangements to next Wednesday. It is unnecessary to examine with any precision what those arrangements are. Suffice it to say that it appears that the respondent has made a commercial decision to bear that cost itself rather than passing it on to the customer. 18 The complaints are essentially of inadequate communication in the advertisement of qualifications to what appears adjacent to the capsule bullet points. In one sense this can be expressed otherwise as a lack of connection between what appears in the bullet points and what appears in the footnote although more than a connection between the two bodies of information is said to be required to avoid the production of a misleading impression. 19 This is an interlocutory hearing. Though it is a matter of impression I should not form a final view about these matters, as I said, but I need, I think, to express myself on the way matters strike me having heard counsel and having looked at the material placed before me today. I have come to the view that upon reading the advertisement in the light of the material which is before me there is a seriously arguable question that the advertisement is misleading. 20 There may not be many people who suffer particular financial consequence, but there is a real risk, I think, at least at a prima facie view or level that the advertisement will lead people who are less than perspicacious into thinking that whenever they use their mobile phone on the national network it will be at the rate identified in the middle of the advertisement adjacent to the second capsule bullet point. 21 I think that I should assume that there will be a number of people, or a good body of readers, who will not necessarily look at this advertisement with great perspicacity and attention to detail. I should add that at the moment I am dealing with the second of the bullet points, that is the "flat rate point". It seems to me that there is no reason why the connection of the two ideas, that is the attractive clarity of the low consistent rate set out in the bullet point and the qualification at the bottom of the page, could not have been made clear. 22 I think it is seriously arguable that it should have been. I don't think it can be gainsaid that someone who only read the centre of the advertisement near the bullet point would be misled into thinking that all calls on the national network were at 18 cents per 30 seconds. It is necessary to appreciate what lies at the foot of the page to understand the true position. It may well be that not many people will be affected materially by that, but that, I do not think, detracts from the potential to mislead. 23 I think the readers of this advertisement should be characterised as people who may or may not take the trouble to read it carefully. There has been evidence lead before me about the small percentage of existing customers of the respondent who make these calls from outside the licensed area. Two things can be said about that. The percentages of the respondents business translate into a not insignificant number of people. Although the percentage in call time for the respondent is low, for those people, it is also not necessarily insignificant. Secondly, it can also be said that these figures are the product of prior customer bases of the respondent and this advertising campaign is designed to bring as many people into the Orange customer base as it can. That is the commercial purpose of it. More telling however, is the point made by Mr Gageler that the second paragraph will be absolutely accurate and lacking any need for qualification, on the evidence, as of next Wednesday. In the light of the fact that there are some advertisements over the weekend which are unable to be withdrawn and so what we are talking about in relation to this is some advertisements identified in exhibit TACC13A which will be published between now and next Wednesday and which can be withdrawn, the matter is said not to warrant injunctive relief. 24 I will return to this matter after I have dealt with the second complaint, because I think it is interrelated with my views on the second complaint. The second complaint concerns the first of the bullet points that I have set out above dealing with the capacity to keep the existing mobile phone number if customers move to Orange now. A little further explanation is required. 25 At the moment people who own mobile phones are given mobile phone numbers that are specific to the provider from whom they gain their services. Thus, mobile telephone number prefixes display, to those who know these things, which provider the mobile phone customer is with. If a mobile phone customer wishes to move to another provider, at the moment, he or she or it must undergo the inconvenience of replacing his or her or its number with a new number. The personal and commercial inconvenience of this is evident and does not need any explanation. It is a product of the current regulation of the telecommunication industry. However, this is all to change in September of this year. Mobile phone numbers will become portable as of 25 September 2001. While they become portable something needs to be borne in mind. Many providers, as does the applicant, provide mobile phone services to people on what are called plans which are in effect contractual arrangements for fixed terms or usages. 26 Come 25 September, when people are able to change service providers and keep their mobile phone numbers, there will arise issues concerning when and how that transfer should occur. In particular, if people wish to move to another service provider and take their phone number with them, it may or will involve the termination of the arrangement with the existing service provider using that number. That may or may not, depending upon the particular service provider, lead to payment needing to be made by a customer to his or her or its erstwhile service provider in connection with the dissolution of the relevant contractual arrangements. 27 There is evidence before me that in respect of the applicant there will be charges to their customers ranging from $11 to $44 or thereabouts per customer, should people move from the applicant to another provider on 25 September. That is because of the prevalence in the applicant's business of these plans or fixed arrangements. There was no precise evidence before me as to what other providers do, but I can infer that other providers have these sorts of arrangements with some, if not all, of their customers. Indeed, the very advertisement with which we are dealing, indicates that the prevalence of these and that the advantage of Orange is that such costs are not to be borne by Orange customers: that is monthly access fees and minimum monthly call plans and the like. 28 As I have said above, portability will not occur until 25 September 2001. However, the respondent in the advertisement brings prominently to the attention of the reader a significant advantage that it can offer, in that if the customer desires to come to the respondent he, she or it - and I interpolate that the respondent identifies it as the first advantage in the list of advantages in the advertisement - can bring his, her or its existing mobile phone number to Orange. This is to be done by a mechanism using diversion of calls made to the existing number, otherwise provided by the existing provider, to Orange. There is a cost in this, a diversion cost. Until 25 September Orange will arrange for these diversions to occur. There has to be an unconditional - so the evidence displays - commitment by the customer to diversion of all calls, and as I understand the evidence, a commitment in effect to allow Orange then to effect on or about 25 September movement or transfer of a number to Orange involving the termination of the pre-existing account. Even if this is not unequivocally undertaken by the customer, it appears on the evidence, to be the likely consequence of signing up to the arrangement suggested by the advertisement. 29 As can be seen from the above, there are two potential costs to the new customer of Orange. There is a diversion cost of so many cents per diversion or for the time during which diversion occurs, and a possible cost at the point of transfer on or about 25 September, if the then current arrangements with the erstwhile provider are such that give that erstwhile provider an entitlement to claim sums from the customer. As is plain from what appears adjacent to the relevant bullet point, there is a clear suggestion that the prospective customer call Orange for details on call diversion options. Even the casual reader who sees this advantage of the existing mobile phone number, will see this suggestion. The more attentive and careful reader will also see that conditions apply to this option. That is, the option of maintaining the mobile number. 30 There is evidence before me as to what is likely to be communicated to the prospective customer if this call diversion option is investigated. In particular there is in the affidavit of Mr Czinner, exhibited as TACC11, a brochure, which, on the evidence, is made available to people if they physically make inquiries about this matter. Once again, although it is not directly relevant to the assessment of the advertisement, I should note that the brochure makes significant play of the advantage of keeping the existing mobile number. I think this is consistent with the appreciation of the significant advantage this matter has to the prospective customer. 31 The brochure, which is exhibit TACC11, then proceeds to identify the simplicity of the various steps to move to Orange and to keep the mobile number. A form is identified which will need to be completed which was in evidence as respondent's exhibit 1, being pages 11 and 12 of the exhibits to the affidavit of Mr Paul Ross Gray of 17 August 2001. I will return briefly to that form in a moment. The brochure to which I have just referred, TACC11, then proceeds, after its explanation of the simplicity of the matter, to ask rhetorically various questions which are relevant. I do not set them all out. Clear answers are then given to these questions. Then the brochure once again emphasises the simplicity and ease with which all this can be done. On the last page of the brochure TACC11, there are some terms and conditions: eleven in number, in quite small type. Relevantly there is term or condition 2, which says: You should be aware of your contractual obligations with your current carrier and the responsibilities you have with your carrier. This arrangement with Orange has no relationship or bearing on any previous or current contractual obligation you have with your current carrier. 32 In the form which is to be filled in, which is respondent's exhibit 1, there is a customer check list, and the customer before signing is to tick or cross a box which says: "The customer is aware of their contractual obligations with their current carrier." 33 The gravamen of the complaint of the applicant is that this advantage of portability in this modified form until September is offered in the advertisement without telling the customer that there is the potential for charges to occur. It is accepted by the applicant that there is a qualification indicating that there are details of the option to be understood and even that there are conditions applying if inquiry is made, but that falls short of indicating that there are or could be charges. 34 I should add the following facts. The arrangements to be put in place are such that the respondent will, in fact, give a monetary credit of amounts in the order of $15 to $25 which will cover, or are said to cover, diversion costs. The evidence is that these amounts may or may not be fully adequate to cover all diversion costs in the intervening month. It will depend upon the length of time taken up in incoming calls. 35 If this were the only potential financial charge I would be of the view that the question was of sufficiently doubtful weight not to justify separately an order. The amounts identified as the credit have not been displayed to be manifestly inadequate and there may or may not be some people who have a cost by reason of the amount of incoming calls, but I would not necessarily be persuaded that this was sufficiently important or material to justify interlocutory intervention. 36 However, if the choice to move to Orange and to take the existing mobile number is undertaken by the customer, there is the other charge not levied by Orange which may potentially be levied, contractually rightfully, by the existing carrier upon termination of the arrangement in September when transfer occurs, pursuant to, or as a consequence of, having moved to Orange under this new arrangement identified in the advertisement. 37 Nothing is said in the advertisement about the possibility of this further charge. In exhibit TACC 11, to which I have referred and which makes much of the ability to switch and keep the existing number, as I have said, simplicity and ease is emphasised, as I think in a general way it is communicated by word and impression in the advertisement. 38 As I have said, the possible disadvantage of the charge by the erstwhile carrier is but obliquely referred to in the terms and conditions and the form. This is not a hearing about the misleading nature of the form or that brochure - rather about this advertisement and the cognate advertisements, but it does indicate that there is likely to be no clarity of communication by the respondent to someone who has read this advertisement and who wishes to keep his or her mobile number and who makes inquiry as suggested. 39 Mr Gageler, of Senior Counsel, who appeared for the respondent, quite properly agreed with me that I could infer from exhibit TACC 11 that a similar lack of emphasis would be likely to be made in discussion about this subject matter unless specifically raised by a customer. 40 At this level of interlocutory debate, I am of the view that there is a sufficiently evident prima facie case or serious issue to be tried, to the effect that in the advertisement which emphasises low cost, predictable flat rate, the lack of any attendant or collateral costs, just pay for what you use and with a facility to keep your existing number, without warning of the possibility of the financial consequence of taking that apparently straightforward option, there is the capacity to mislead the reader into believing that the call diversion option of which they can get details and of which conditions may apply will not otherwise have financial consequences. Mr Gray's affidavit of 17 August, in particular at paragraph 19, sets out what may well be the magnitude of those charges for Vodafone customers who undertake what is suggested by the advertisement before 25 September. 41 Thus, in my view, there is a serious issue to be tried in relation to both the subject matters dealt with and I turn to the balance of convenience. 42 I have earlier dealt with the balance of convenience in part in relation to the flat rate representation and noted that it was one which alone perhaps should be seen in the light of what is going to happen next week. 43 Given the view I have about the existing mobile phone number representation and the fact that these parties have been communicating for some time about various aspects of these advertisements, I propose to discount what otherwise would be the effect of that marginality and view the representations as being ones which, if a sufficiently real prima facie case is made out as I think it is, take me to look at the public interest generally and the commercial interests of the respective parties. 44 I think there is a real public interest to be considered in relation to the existing mobile phone number representation. While I emphasise that I have not made this finding on a final basis at all, given the view I have of the arguable nature of the case, I think the question of the public becomes important. Likewise the position of the applicant: to the extent that I have formed the view that there is a real issue about the legitimacy of these advertisements, then I think the applicant is entitled to have its customer base protected until the resolution of these matters on a final basis. Important in the consideration of these matters and the balance of convenience, is the fact that I am able to hear the matter on a final basis on Monday week which appears to be suitable to both parties. I may not be able to give judgment on that day, but I would anticipate not needing to delay very long after that day of 27 August. 45 I am of the view that balancing the interests of both parties and what I see as the lack of any significant and long lasting prejudice to the respondent in not being able to use these particular representations unqualified and if the prima facie case turns out to be correct, the difficulty in quantifying damage to the applicant I should weigh the balance of convenience together with the public interest in favour of an order that prevents, at least until Monday week, the use of these advertisements with these matters within them in the form in which they are and subject to the ability of the respondent, if it be the case that from next Wednesday the representation about flat rate becomes accurate, to be able to make that representation from Wednesday. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop.