CATCHWORDS TRADE PRACTICES - consumer protection - comparative advertisina - point of sale display material and television commercials making comparisons of life and value of drv cell batteries - whether misleading and deceptive. Trade Practices Act 1974 ss. 52, 53(a), 53(c) Stuart Alexander & Co. (Interstate) Ptv. Ltd. v. Blenders Ptv. Ltd. (1981) 37 ALR 161 Insurance Commissioner v. Australian Associated Motor Insurers Ltd. (1982) 45 ALR 391 *+ate Government Insurance Commission v. J.M.Insurance Ptv.Ltd. (1984) 6 ATPR 45, 359 UNION CARBIDE AUSTRALIA LIMITED v. DURACELL AUSTRALIA PTY.LIMITED No. G400 of 1986 oO CORAM: FOX J. > ie 27 November 1986 3 Svdney FEDERAL COURT OF KI AUSTRALIA Js! ERING Par REGILIPY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No.G400 of 1986 ~~ eye wew GENERAL DIVISTON BETWEEN : UNION CARBIDE AUSTRALIA LIMITED Applicant AND: DURACELL AUSTRALIA PTY. LIMITED Respondent ao oO Bo) FOX J. DATE: 27 NOVEMBER 1986 REASONS FOR JUDGMENT FOX J. The applicant brings this case in reliance upon s.52 and s.53(a) and (c) of the Trade Practices Act 1974. Both parties are engaged in the sale of drv cell electric batteries. and the applicant alleges that in advertisements by the respondent the latter falselv compares the useful life and value of its "Duracell" batteries with those of the applicant's Evereadv Heavy Duty ("Eveready Red") batteries. On the printed advertising cards which are in evidence. I think thev would be called point of sale display material, six of the respondent's Eveready Red batteries are represented. at less than actual size, and above each battery in large print is the word "spend". There is then an "or" introducing the prominent comment - "Save with Duracell". On each of the cards. a single Duracell battery is shown prominentiv in the middle of the card at several times the size of the Eveready Red batteries. There is then a prominent announcement: "Lasts up to six times longer". One of the points at issue is recoqnised by an asterisk. It appears at the end of the word "longer" and relates to a sentence thereunder. in minute printing which reads "depending upon equipment used". It is fair to say. I think, that the ordinarv shopper would not see these words: to do so would require a close study of the placards. No mention has been made of the words in the course of the case. There are television advertisements which are also the subject of the proceedings, and I shall deal separately with those later. The principal manufacturing distinction between the two brands of batterv is that the Evereadv Red batteries are carbon-zine batteries. while the Duracell batteries are alkaline. There are four relevant differences between alkaline and carbon batteries:- (1) Alkaline batteries last longer than similar carbon batteries. (ii) Alkaline batteries are more expensive than carbon batteries. (iii) While all batteries recover some power if turned off after a period of use, alkaline batteries recover proportionally less power than carbon batteries. (iv) Alkaline batteries have a longer "shelf life" than carbon batteries. An accepted method of testina the performance of a battery is the application of "discharge tests". In these tests the batterv is discharaed through a stated resistance. taken as a figure for the resistance of a particular appliance for which the battery is likely to be used. The voltage of the battery is monitored and the tester records the time taken for it to reach a predetermined "end point" namely the voltage bevond which the battery will not effectively operate the appliance. Discharge tests may be continuous or intermittent depending on whether the battery is discharded continuously or intermittently for prescribed periods (e.g. 1 hour on, 6 hours off), The performance of brands of battery may be compared by ' bestina representative samples of each and making statistical comparisons of the results. Both the Standards Association of Australia and the American National Standards Institute have tests for measuring in this wav in hours or minutes the useful life of batteries. Thev do not stipulate desirable time results for particular goods, but only the limits in operative time for usage on tvpes of aoods Classified in general terms. Both "Standards" (Australian Standard 2176-1986 and American National Standard C18.1 - 1979) are in evidence. Thev contain discharage standards for different sizes of batteries and different electrical appliances. which are intended to approximate to actual usage of particular items. e.q. flashlichts. toys. Hence the discharage mav be continuous (e.qa. watch/calculator: Australian test 26) or intermittent (e.da. portable lantern: Australian test 1). and the resistance or "drain" and end point are tailored to the assumed characteristics of the appliance. The maior difference between the Australian and American Standards is that the American Standards provide for continuous hich drain discharge tests for items such as tovs (tests 40 and 41) whereas the corresponding Australian Standards (tests 11 and 12) provide for intermittent tests. The item "Tovs" is taken in both Australian and American tests without further description, although there is in each case an assumed drain. In relation to toys it is relativelv high. Because of the different properties of alkaline and carbon batteries, continuous hich drain discharge tests work to the advantage of Duracell batteries in their comparison with Eveready Red. Both parties tendered evidence of the comparative discharge tests which they had commissioned. out according to The applicant pointed to certain of the Eveready Red and Duracell batteries. intermittent basis. the applicant) results batteries, ll C_ SIZE represent an over a total The tests were carried the results of Australian Standards results of tests carried on both Each test chosen was on an out (by emplovees of period of many months. and the average of the useful life the exact number of which is not known. The following results were 'obtained: Description Intermittent Lighting Industrial Lichting Cassette Plaver Tovs Transistor Radio Intermittent Lichting Cassette Plaver Transistor Radio Load Cohms ) 2.2 2.2 2.2 3.9 End Point (V) Discharce Pattern 4 min/hr 8 times/dav 4 min/15 min 32 times/day 2 hres once/day l hr/8 hrs twice/dav 4 hrs once/day 4 min/hr 8 times/dav 2 hrs once/dav 4 hrs once/dav of many Ratio-Duracell: Eveready Red 1.8 2.1 1.8 2.1 2.0 2.2 2.1 2.2 AA_ SIZE 4 Intermittent 3.9 0.9 4 min/hr 2.4 Lighting 8 times/dav 10 Cassette 10 0.9 l hr once/dav 2.2 Player 13 Motor Drive 250mA 1.0 4 min/15 min 3.0 32 times/day 18 Transistor 39 0.9 4 hrs once/dav 1.8 Radio 22 Electronic 15 0.9 30 min once/dav 2.1 Calculator (These sizes. D, C, and AA are all that are relevant for present purposes the main accent being on C and D cells. which are those portraved in the point of sale material) Applying these results. it would be a considerable exaqgeration to say that a Duracell battery lasts six times longer than an Eveready Red battery, having the same use, or is six times the value. The ratio of Duracell's life to that of Evereadv Red was more of the order of 2:1 to 3:1. All ratios were between 1.8:1 and 3:1 and in relation to C andD size atteries none exceeded 2.2:1. The respondent also commissioned an intermittent test, namely Australian test ll which relates to a D size batterv, and the ratio obtained was 2.4:1. The respondent relies upon the results of continuous tests some of which approximate closely to American tests 40 and 41 on both Eveready Red and Duracell batteries. These tests were carried out independentlv over a short period. using six batteries, selected at random. for each. The following ratios of average Duracell useful life to average Eveready Red life were obtained: AA c D End Point 0.9V 3.65 4.22 4.97 End Point 0.8V 3.03 3.52 4.17 The ratios for comparison of minimum lives were:- AA Cc D End Point 0.9V 3.96 7.21 6.42 End Point 0.8V 3.32 5.37 5.81 The ratios for maximum Duracell life against minimum Evereadv Red life were: AA C D End Point 0.9V 4,21 7262 6.83 End Point 0.8V 3.77 6.18 6.51 These results do show some ratios approachina and some exceeding 6:1, but onlv where the minimum C and D size Evereadv Red are compared with the minimum Duracell or minimum C and D Eveready are compared with maximum Duracell. The ratios of average life range between 3:1 and 5:1. When the fiaqures for the minimum performances of Eveready Red batteries are compared with average performance of those batteries, there is sometimes a areat disparitv. This could arise if some batteries sold were unusuallv weak. but the results certainly show that the standard deviation in Duracell batteries from the average of those tested was less as a rule q than with the Eveready Red batteries. The applicant also did some continuous tests similar to those of the respondent. The ratios for comparison of averade lives obtained were:- AA c D End Point 0.9V 2.3 2.8 4.1 The ratios for comparison of minimum lives were:- AA c D End Point 0.9V 3.3 3.74 5.22 End Point 0.8V 2.54 3.01 5.09 The ratios for comparison of maximum Duracell life with minimum Eveready Red life were: AA Cc D End Point 0.9V 3.63 4.53 7.24 End Point 0.8V 3.43 4.16 6.04 These results fall into the same pattern as the continuous test results of the respondent. but are overall less favourable to it. Each party criticised the testing methods of the other. The applicant savs that the small sample size (six) of the respondent's continuous tests makes 1t unsafe to base comparisons on the results. The respondent savs that the Evereadv Red batteries in the applicant's continuous tests were tested at an unrealistically short period after manufacture: that the Duracell batteries in the tests were older and thus that the comparisons are unreal. Eve) The applicant obiects to the comparison of maximum and minimum Duracell life with minimum Evereadv Red life in the continuous test results, saving that it is most appropriate to compare the averaces, The respondent submits, on the other hand that it is not unreasonable to base comparisons on the minimum fiqure because, apart from their separate use. the batteries are often 'used in series with other batteries. and the whole operation will be dependent on the life of the weakest. Emphasis is also placed on the words "up to" in the challenged material. Leaving aside such considerations. it is evident that much can depend on whether an intermittent or a continuous test is used. The question is of course one as to what the ordinarv purchaser would understand bv the life of a batterv. and in particular whether he would understand statements about life as referring to comtinuous use of the batteries. or something less. such as intermittent use. There is no evidence as to the wav in which purchasers would use batteries. except. perhaps the methodology of the Australian Standards. Plainly these Standards are arbitrarv. and do not represent actual use. althoudh thev could perhaps be taken as a rough guide. To an extent. the Court is left to form its own view about likely methods of use. It was put to me on behalf of the respondent that a mechanical tov mav well be left on. to use up its power according to the times shown for continuous use, while the applicant submits that this is most unlikely, and a better view would be that adopted for the Australian Standards. I was in effect invited to form a judament 10. on this matter. but plainly the situations are infinitely various. All I can say is that it is likely that at leasta large percentage of buyers would understand the advertisements as relating to the way they would be using the batteries, and that manv, perhaps most, would not contemplate continuous use for most purposes. Both parties tendered evidence of the relative prices of Duracell and Evereadv Red batteries based on retail price surveys. The survev methods and results varied but there is little disagreement that the price ratio of Duracell to Eveready Red ranges approximately between 2.5:1 and 2:1. The applicant submits that the point of sale material would convey to the ordinary purchaser the impression that over a wide field Duracell batteries would last six times lonaer, Counsel relies not simply on the words "Lasts up to six times lonaer" but also on the fact that diaqramaticallv six Eveready batteries are opposed to one Duracell. It is pointed out that it is only when the test comparison is made in a verv special wav that the ratio closelv approaches (or exceeds) six. Counsel also submits that the material. particularlv the phrase "Save with Duracell" convevs the further distinct representation that Duracell batteries are substantially better value than Evereadv Red (i.e. the ratio of Duracell life to Evereadv Red life exceeds appreciably the corresponding price ratio). The applicant's intermittent test results taken together with its price survevs 11. establish the contrary. The respondent naturally relies on the words "up to" in the advertising material as being indicative of a maximum and suggestive of the fact that manv. perhaps most Eveready Red batteries mav be at a much lower ratio. It is pointed out that the continuous test results support the literal truth of the words "up to". Similarly. "Save with Duracell" is not to be understood as meaning that Duracell batteries are alwavs better value; but if the continuous test results are adopted thev are. If it is accepted that many consumers will use their batteries intermittentlv, the crucial issue is what representations are made in the material: whether the claims made are to be understood in their literal sense. or as a qeneral summary. It seems to me that the submissions of counsel for the applicant in this reqard are in substance to be accepted. It is necessarv for the Court to form a view as to the wav in which the advertisements would be understood by the ordinarv purchaser. There 1S no express evidence of anv purchaser or potential purchaser on the subject: it is a matter of judament and perhaps of impression. It has been said that s.52 of the Trade Practices Act applies with special strictness to representations made in comparative advertising, see Stuart Alexander & Co. (Interstate) Pty. Ltd. v. Blenders Pty. Ltd. (1981) 37 A.L.R. 161 at 163: 12. Insurance Commissioner v. Australian Associated Motor Insurers Ltd. (1982) 45 A.L.R. 391 at 397; State Government Insurance Commission v. J.M. Insurance Ptv. Ltd. (1984) 6 A.T.P.R. 45. 359 at 45, 362. The Act does not lay down such a principle in terms, but it may be that the public, although used to exaggeration in describing the virtues of a product, expect comparisons between specific competing products to be reasonably fair and accurate. In any event, it is not necessary to invoke the principle in this case. It seems to me that "up to six times lonaer" together with the pictorial equation of six Eveready Red with one Duracell battery is suggestive of a ratio which, in qeneral, approaches six, and probabliv at some point or points reaches six. The advertisement savs nothing about intermittent or continuous use. Nor does it indicate that it is dealing with a proportion of Evereadv Red batteries, or, for that matter a proportion of Duracell batteries, although the phrase "up to" is suagestive of some variation. either according to usage, or in relation to all usages. Put another way. the ordinary purchaser would understand the advertisement as a whole as intended to be a reasonablv fair statement, applying toa fairly wide range of uses and not limited to the special situations and comparisons upon which the respondent relies, He would not know of. or be concerned with, special standards for testing, but allowing for the inevitable enthusiasm of advertisers. he would still expect that if he purchased a Duracell batterv. it would last for a time 13. approaching six times the life of a corresponding Evereadv battery. and he would be likely to obtain a large saving in price. Put negatively, he would feel cheated if he found the ratio of longevity was only 2.5:1. and the saving in cost virtually nil. It is clear that a substantial number. if nota majoritv, of consumers. namelv those who use their batteries intermittently, would feel cheated in this way. There is excessive exaageration combined with over-qeneralisation. Tt follows that the point of sale material is misleading and deceptive. There have been 5 television advertisements for Duracell batteries which have been shown in eastern capital cities. Each is shown for 15 seconds. The central theme has been that bv using those batteries monev is saved. I set out copies of the scripts, which include visual with spoken elements: "CASSETTE PLAYER ~- 15 second VIDEO AUDIO 1. Open on male listening to MVO Cassette Plaver. Tt's no fun watching vour 2. Chain of Red Batteries are hard earned money being being fed into the eaten up bv ordinarv cassette Plaver and carbon batteries. and simultaneouslv beind ejected from the top of the machine. 3. Close up of Duracell So use Duracell being fed. into Cassette the lona life battery Player. ' 4. Boy Reacts dancina. 5. Close up of Duracell No ordinarv batterv 14. Battery. saves like it because no ordinary batterv lasts like it. (The number of batteries ejected, so far as they could be counted, were 11 red and 1 blue). TORCH - 15 second VIDEO AUDIO 1. Open on man examining If you're constantly type of car with torch. spending money for ordinarv carbon batteries. 2. Torch fails as it ejects stream of red batteries. 3. Close up of Duracell You need Duracell the lond battery being fed into life battery. torch. 4, Man inspecting tvre with look of satisfaction. 5. Close up of Duracell No ordinarv batterv saves Battery. like it because no ordinarv batterv lasts like it. (14 batteries, all red. so far as could be seen). CAMERA ~ 15 second VIDEO AUDIO 1. Open on women at front MVO of Church with Camera If vou're endlessly paving trying to take photos out for ordinary carbon at wedding. batteries. 2. Camera ejects red batteries. 3. Close up of Duracell You need Duracell being fed into camera. the long life batterv 4, Women sighing with delight. 5. Close up of Duracell No ordinary batterv saves battery. like it because no ordinary batterv lasts like it. 15. (12 batteries, all red. so far as could be seen). TOY TRUCK ~ 15 second VIDEO AUDIO 1. Open on boy playing MVO toy truck in sand. To stop vour money being burned up by ordinarv 2. A chain of red carbon batteries. batteries are beind fed into the truck and simultaneously beina ejected from top of truck. 3. Close up of Duracell Use Duracell being fed into truck. the long life batterv 4. Bov's delighted reaction. 5. Close of Duracell No ordinary battery saves Battery. like it because no ordinary batterv lasts like it. (10 red batteries. 1 blue battery). CALCULATOR - 15 second VIDEO AUDIO 1. Open on man working MVO with calculator. Spending money on ordinarv carbon batteries just 2. Red batteries are being doesn't paz in the londa ejected from the top of run. calculator. 3. Close up of Duracell So use Duracell battery being fed into the lona life batterv calculator. 4. Man's look of pleasure. 5. Close up of Duracell No ordinary battery saves Batterv. like it because no ordinary batterv lasts like it. {12 red batteries. 2 blue batteries). 16. WALKMAN - 15 second VIDEO AUDIO 1. Open on girl on exercise MVO bike wearing a Ordinarv carbon batteries Walkman. do have a habit of chewing up your money. 2. Red batteries are being ejected from the Walkman as qirl cycles. 3. Close up of Duracell So use Duracell battery being fed into the long life batterv Walkman 4. Girl has happy reaction. 5. Close up of Duracell No ordinary battery saves batterv. like it because no ordinary battery lasts like it." {15 red batteries. 1 blue battery) The notations which have been added under the script are mine. As I have indicated, nearly all the batteries depicted were red. According to the scripts. thev were all to be red. It was not possible to see the name of the manufacturers or anv trade name or mark on them. The evidence is however, that the only completelv red batteries on the market are Evereadv Red batteries. These batteries have apporimately 43% of the market. The word "Eveready" is not spoken nor does it appear. The advertisements are unflattering to carbon batteries and red carbon batteries in particular. The question is however, whether the advertisements are misleading or deceptive. It 1s submitted for the applicant that the television commercials convev the representation that Duracell batteries are 17. very much better value than carbon batteries including Eveready Red and that they last many times longer. These elements are of course related and expressed to be related in the euphonic key line. The advertisements do not express a numerical comparison but the general effect when one has in mind the number of other batteries which are ejected and the fact that only one Duracell batterv is shown is to suggest that the Duracell batteries have many times the life and represent many times the value of the other batteries. Considerations arise such as I have alreadv discussed. If intermittent test results are taken the statements are far from accurate and indeed represent a qross exaqgeration. When the results of the relevant Australian tests for 5 of the appliances depicted (i.e. excluding the camera) are compared with the applicant's price survevs Duracell is in fact worse value in each case. I donot think that the ordinary purchaser could be thinking in terms of a continuous running of the batteries for the items depicted. The particular usages shown would convey a contrary impression. Taking the items in turn, it would seem unlikelv that a prospective purchaser would anticipate running a cassette plaver continuouslv until its batteries were flat. It would not be expected that the torch mentioned in the second 18. advertisement I have mentioned would be operated continuously. until it ran down. It was more than once put that a qood example of a item which would be run continuously was a tov truck but apart from anv general observations one midaht make about this proposition the truck was shown as going over a small hill of sand and this I imagine would not be thought to be a continuous operation. Similar observations can be made about the calculator and the "walkman". The overall impression which I take from the advertisements (excluding the camera flash advertisement) is that thev represent a qrossly exaggerated view of the capacity and value of Duracell batteries when compared with carbon batteries and in particular Evereadv carbon batteries. The use of the camera batterv to take a flash photoaraph requires separate consideration. IT do not think that the television advertisement should in this case be taken as offendina aqainst s.52. It is acknowledqed by Mr Clark. qualitv assurance manager of the applicant, that the Duracell battery is four or five times more efficient than Eveready carbon batteries when used for camera flashes. There were no fidures produced by the applicant comparing the life of Duracell and Eveready batteries when used for that purpose. Mr Clark says that his company recommends alkaline batteries (in aqeneral) for camera ve ry flash. IT am therefore of the view that five of the advertisements are misleading and deceptive within the meaning of s.52. This excluding the complaint advertisement. the applicant has succeeded. respecting means that in relation to both aspects of the case. the camera flash I will hear arqument from the parties on the question of the exact form of relief. "3 Counsel for the Aprlicant: Solicitors for the Applicant: Counsel for the Respondent: Solicitors for the Respondent: Dates of hearina: Date Judgment delivered: I certifv that this and the an (f&) preceding pages are a true copy of the Reasons for Judement herein of his Honour Mr. Justice Fox. Associate: busi hur Date: 27 November 1986 Mr M A Pembroke Messrs Anisimoff Davenport & Co Mr R.B.S. Macfarlan with Miss H A Coonan Messrs Baker & Mackenzie 25, 26 September: 3, 9. 10 October 1986 27 November 1986