Australian Competition and Consumer Commission v Telstra Corporation Limited (ACN 051 775 556)

• Jurisdiction: Australia Federal only
• Court: Federal Court
• Judgment Date: 06 December 2007
• Neutral Citation: [2007] FCA 1904

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Telstra Corporation Limited (ACN 051 775 556) [2007] FCA 1904

TRADE PRACTICES – misleading and deceptive conduct – effectiveness of a disclaimer – false representations about services – representations that goods or service have performance or other characteristics they do not have – television, print and internet advertisements – assessing conduct by reference to a specific class or classes of consumers – whether conduct by a licensed dealer can be said to have been “engaged in on behalf of” the licensor company or “at the direction or with the consent or agreement of” a servant of the licensor company under s 84(2)(b) of the Trade Practices Act 1974 (Cth) if the licensor company had a direct interest in the conduct and failed to take steps to stop it

Trade Practices Act 1974 (Cth) ss 51A, 52, 53(aa), 53(c), 84(2)(b)

.au Domain Administration Ltd v Domain Names Australia Pty Ltd (2004) 207 ALR 521 cited and followed

Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd (2003) 11 Tas R 242 cited

Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd [2006] ATPR 42-106 cited and followed

Australian Competition and Consumer Commission v Telstra (2004) 208 ALR 459 cited

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 cited and followed

Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 cited and followed

Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) 14 IPR 293 cited and followed

Finucane v New South Wales Egg Corp (1988) 80 ALR 486 cited

Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 cited

Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 cited and followed

Johnson & Johnson Pacific Pty Ltd v Unilever Australia Ltd (No 2) (2007) ATPR 42-136 cited

Karmot Auto Spares Pty Ltd v Dominelli Ford (Hurstville) Pty Ltd (1992) 35 FCR 560 cited

Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] ATPR 46-048 cited

Lisciandro v Official Trustee in Bankruptcy (1996) 69 FCR 180 cited

National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] ATPR 42-000 cited and followed

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 cited

Singtel Optus Pty Ltd v Telstra Corporation Ltd [2004] FCA 859 cited

Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 cited

Talmax Pty Ltd v Telstra Corporation Ltd [1997] 2 Qd R 444 cited

Telstra Corporation Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 cited and followed

Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326 cited

Trade Practices Commission v Sun Alliance Australia Ltd [1994] ATPR 41-286 cited

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v TELSTRA CORPORATION LIMITED (ACN 051 775 556)

VID 855 OF 2007

GORDON J

6 DECEMBER 2007

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 855 OF 2007

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	TELSTRA CORPORATION LIMITED (ACN 051 775 556) Respondent

JUDGE:	GORDON J
DATE OF ORDER:	6 DECEMBER 2007
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The Applicant, after conferring with the Respondent, file and serve minutes of proposed orders to give effect to these reasons for decision by no later than 13 December 2007.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 855 OF 2007

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	TELSTRA CORPORATION LIMITED (ACN 051 775 556) Respondent

JUDGE:	GORDON J
DATE:	6 DECEMBER 2007
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION

1 Australia was one of the first countries in the world to embrace mobile telephone technology. As at 30 June 2006, the Australian mobile telecommunications industry had 19.76 million mobile telephone services in operation and mobile services, as a proportion of the Australian population, were at 96% (Australian Mobile Telecommunications Association Ltd, 2007 Annual Report (Australian Mobile Telecommunications Association Ltd, Canberra, 2007) http://www.amta.org.au/default.asp?id=28 viewed 3 December 2007, p 8). This puts Australian usage of mobile telephone technology among the highest in the world.

2 It is therefore not surprising that when Telstra Corporation Limited (“Telstra”) decided to replace its existing mobile phone networks with a third generation mobile telecommunications network, the Next G network, both the announcement and the implementation of the Next G network attracted the attention of politicians, users of the Core Division Multiple Access Network (“CDMA Network”), users of the Next G network, and the Australian Competition and Consumer Commission (the “ACCC”).

accc allegations

3 This proceeding concerns 12 events in Telstra’s advertising campaign and other public announcements about the Next G network (“the 12 Events”). The ACCC alleges that as a result of those 12 Events, contrary to s 52 of the Trade Practices Act 1974 (Cth) (“the Act”), Telstra engaged, and continues to engage, in conduct that is misleading or deceptive, or is likely to mislead or deceive.

4 The ACCC also alleges that the 12 Events make false representations about services (contrary to s 53(aa) of the Act) and make representations that goods or service have performance or other characteristics they do not have (contrary to s 53(c) of the Act).

the 12 events

5 The 12 Events which the ACCC submits are in breach of ss 52, 53(aa) and 53(c) of the Act are:

(1) the Everywhere Advertisement, which was televised in, and in the surrounding areas of, Sydney, Melbourne, Brisbane, Adelaide, Perth, Newcastle and Wollongong from 20 May 2007 to 30 June 2007;

(2) the Cramer Testimonial Advertisement, which was published in the following newspapers on the following dates:

NEWSPAPER	DATE
Sunday Mail, Brisbane	19 August 2007
Gladstone Observer	20 August 2007
Gold Coast Bulletin	22 August 2007
Toowoomba Chronicle	31 August 2007
Sunday Mail, Brisbane	2 September 2007
The Age	4 September 2007
Courier Mail	10 September 2007*

* This publication was inadvertent.

(3) the AFL Website Advertisement, which appeared on the Australian Football League’s website from 1 March 2007 until 17 September 2007;

(4) the Telstra Website Information which appeared on Telstra’s website from 1 October 2006 until 3 October 2007;

(5) a Brochure first distributed in its initial form on 10 May 2007 and then replaced by a variation on 4 June 2007. The 4 June 2007 replacement brochure has not been printed since 25 June 2007;

(6) a Telstra Media Release of 8 August 2007;

(7) the Telstra Shop Business Centre Website page;

(8) selected pages from the Telstra Next G website available since 6 October 2006;

(9) the Next G network for Business brochure available from the website http://www.commsaut.com.au/Uploads/Images/NextGBusiness.pdf since October 2006;

(10) a television advertisement aired in the Cairns area on 8 September 2007;

(11) two Brisbane radio commercials aired on the 15 September 2007; and

(12) the Next G Family Brochure first distributed on 6 October 2006 and not printed since 22 January 2007.

6 The 12 Events were alleged by the ACCC to contain one or more of the following representations, namely that:

(1) mobile coverage on the Next G network is available to Next G customers:

(a) everywhere in Australia geographically (“the First Coverage Representation”); or

(b) everywhere the customer, from time to time, needs to use their mobile telephone (“the Second Coverage Representation”),

(collectively “the Coverage Representations”); and

(2) a customer subscribing to the Next G network will receive the same or better coverage than is available currently on the CDMA network (“the CDMA Comparison Representation”).

7 The ACCC alleges that each of the 12 Events conveyed each of the Coverage Representations in breach of ss 52, 53(aa) and / or 53(c) of the Act because:

(1) coverage on the Next G network is not available to Next G customers everywhere in Australia;

(2) as at 8 August 2007, the area of Australian land mass covered by the Next G network was only CIC-1% without an external antenna and only CIC-2% with an external antenna. (I have not included the actual area of land mass covered. The figures, set out in Schedule 1, are commercial in confidence (“CIC”) and are to remain confidential);

(3) physical features including man-made structures, hills, mountains and trees may impede coverage; and

(4) mobile telephony reception (and therefore effective coverage) is significantly affected by mobile handset quality, a matter to which Telstra has not drawn consumers’ attention in its promotion of the Next G network sufficiently or at all.

8 The ACCC also alleges that 3 of the 12 Events (“the 3 Events”) conveyed the CDMA Comparison Representation in breach of ss 52, 53(aa) and / or 53(c) of the Act because:

(1) coverage on the Next G network is not always available to Next G customers where they previously had and / or presently have coverage on the CDMA network;

(2) independent testing supports the conclusion that the coverage of the Next G network is less than the historical and / or present coverage of the CDMA network; and

(3) independent testing supports the conclusion that the coverage of the Next G network is not the same as, or better than, the coverage of the CDMA network.

telstra’s response

9 Telstra submits that the ACCC’s claim should be dismissed because:

(1) none of the 12 Events convey either of the Coverage Representations;

(2) none of the Events convey the CDMA Comparison Representation if the CDMA Comparison Representation is a...