Australian Competition & Consumer Commission v World Netsafe Pty Ltd [2000] FCA 1827

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v World Netsafe Pty Ltd & Anor [2000] FCA 1827

Federal Court of Australia Act 1976, s 21 Trade Practices Act 1974, ss 52, 53AA, 53(c), 53(d), 57, 58, 59, 61, 80, 80A, 83, 87(1)(B) AUSTRALIAN COMPETITION AND CONSUMER COMMISSION V WORLD NETSAFE PTY LTD AND TERENCE BUTLER Q 297 of 1999 SPENDER J BRISBANE 8 DECEMBER 2000

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 297 OF 1999

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

APPLICANT

AND: WORLD NETSAFE PTY LTD (ACN 087 515 848)

FIRST RESPONDENT

TERENCE BUTLER

SECOND RESPONDENT

JUDGE: SPENDER J

DATE OF ORDER: 8 DECEMBER 2000

WHERE MADE: BRISBANE

THE COURT FINDS AND DECLARES THAT:

1. The First Respondent engaged in the following conduct and made the following representations in connection with the promotion and operation of the scheme described in "Schedule A" ("the World Netsafe Scheme"): (a) that arrangements had been made which would enable holders of World Netsafe ATTM Cards under the World Netsafe Scheme ("the Card") to use the Card to make telephone calls anywhere in the world at competitive rates; (b) that arrangements had been made which would enable members and holders of the Card to purchase a "universal currency" called "teleminutes" on their Card; (c) that arrangements had been made with a bank: (i) for the establishment of accounts linked to Cards; (ii) for the managing of such accounts in a manner which would enable prepaid teleminutes to be managed and handled; (d) until in or about August 1999, that such arrangements had been made with Chase Bank of Texas; (e) that arrangements had been made with two Australian banks through which money could be credited to the Card; (f) that arrangements had been made with participating banks in Australia through which money could be credited to the Card; (g) that arrangements had been made with Price Waterhouse for that firm to certify the ATTM software; (h) until about October 1999, that arrangements had been made with Visa which would enable members and holders of the Card to make purchases from any of the 35 million establishments in the world that traditionally accept Visa cards; (i) from about November 1999, that arrangements had been made with Maestro which would enable members and holders of the Card to make purchases from any establishment in the world that accepted Maestro cards; (j) that arrangements had been made which would enable members and holders of the Card to make purchases from establishments that accepted well known debit cards; (k) until about October 1999, that arrangements had been made with Visa for the issuing of the Card with Visa debit card facilities; (l) from about November 1999, that arrangements had been made with MasterCard for the issuing of the Card with Maestro/Cirrus debit card facilities; (m) that: (i) in the professional opinion of World Netsafe, the offer made by Maestro/Cirrus was clearly superior to the offer made by Visa; (ii) this professional opinion was the reason for the change from Visa to Maestro/Cirrus; (n) that arrangements had been made which would enable members and holders of the Card to obtain cash from large numbers of automatic teller machines; (o) until about October 1999, that arrangements had been made with Visa which would enable members and holders of the Card to obtain cash from any automatic teller machine which was linked to the Visa system; (p) from about November 1999, that arrangements had been made with Cirrus which would enable members and holders of the Card to obtain cash from any automatic teller machine which was linked to the Cirrus system; (q) until about October 1999, that arrangements had been made with Visa for the issuing of the Card with Visa debit card facilities; (r) that arrangements had been made which would enable a prior member to receive, at the time when a subsequent member purchased teleminutes on their card or redeemed them for goods and services, a percentage (paid in teleminutes) paid directly into the account of the prior member; (s) that arrangements had been made which would enable a prior member to receive, when the subsequent member used their Card at an automatic teller machine, a percentage (paid in teleminutes) paid directly into their account; (t) prior to August 1999 that it had reasonable grounds for the opinion that the Card would be launched in early August 1999; (u) on 29 November 1999, that it had reasonable grounds for the opinion that the Card should be available for distribution in the next week or so; (v) on 1 December 1999, that it had reasonable grounds for the opinion that the Card should be available for distribution within the next couple of days; (w) in November and December 1999, that the Card was being printed right now; (x) that the World Netsafe Scheme had been cleared or approved by regulatory authorities, such as the Applicant or the Western Australian Office of Fair Trading; (y) that the Card existed, and could be obtained by members; (z) that it was feasible for members to earn in excess of $14,788 per month from their membership or from holding a World Netsafe Platinum Founder's Card; and in doing so: (aa) in respect of the matters at 1(a), 1(b), 1(c), 1(d), 1(e), 1(f), 1(g), 1(h), 1(i), 1(j), 1(k), 1(l), 1(m), 1(n), 1(o), 1(p), 1(q), 1(r), 1(s), 1(t), 1(u), 1(v), 1(w), 1(x), 1(y), 1(z) above, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of section 52 of the Trade Practices Act 1974 (Cth); (bb) in respect of the matters at 1(a), 1(b), 1(c), 1(d), 1(e), 1(f), 1(h), 1i), 1(j), 1(k), 1(l), 1(n), 1(o), 1(p), 1(q), 1(r) and 1(s) above, falsely represented that services were of a particular standard quality, value or grade in contravention of section 53(aa) of the Trade Practices Act 1974 (Cth); (cc) in respect of the matters at 1(a), 1(b), 1(c), 1(d), 1(e), 1(f), 1(h), 1(i), 1(j), 1(k), 1(l), 1(n), 1(o), 1(p), 1(q), 1(r), 1(s) and 1(x) above, falsely represented that goods or services had sponsorship, approval, performance characteristics, accessories, uses or benefits they did not have in contravention of section 53(c), of the Trade Practices Act 1974 (Cth); (dd) in respect of the matters at 1(c), 1(d), 1(e), 1(f), 1(g), 1(h), 1(i), 1(j), 1(l), 1(o), 1(p), 1(q), and 1(x) above, falsely represented that the First Respondent had a sponsorship, approval or affiliation it did not have in contravention of section 53(d) of the Trade Practices Act 1974 (Cth); (ee) in respect of the matters at 1(a), 1(b), 1(c), 1(d), 1(e), 1(f), 1(g), 1(h), 1(i), 1(j), 1(k), 1(l), 1(m), 1(n), 1(o), 1(p), 1(q), 1(r), 1(s), 1(t), 1(u), 1(v), 1(w), 1(x), 1(y) and 1(z) above, made false or misleading representations concerning the profitability or risk or any other material aspect of a business activity in contravention of section 59 of the Trade Practices Act 1974 (Cth); (ff) accepted payment for goods or services as part of the World Netsafe Scheme where, at the time of the acceptance, there were reasonable grounds, of which the First Respondent was aware or ought reasonably to have been aware, for believing that the First Respondent would not be able to supply the goods or services within the periods variously specified by the First Respondent, or within a reasonable time; in contravention of section 58 of the Trade Practices Act 1974 (Cth). 2. In the operation of the World Netsafe Scheme as described in "Schedule A": (a) the First Respondent induced persons to acquire goods or services by representing that the persons would, after the contract for the acquisition of the goods or services was made, receive a rebate, commission or other benefit in return for giving the First Respondent the names of prospective customers or otherwise assisting the First Respondent to supply goods or services to other consumers where receipt of the rebate, commission or other benefit was contingent on an event occurring after that contract was made in contravention of section 57 of the Trade Practices Act 1974 (Cth); and (b) the First Respondent promoted the World Netsafe Scheme in which persons who were participants in the World Netsafe Scheme, or had applied or been invited to become participants in the World Netsafe Scheme, made a payment to or for the benefit of the First Respondent, being a payment that they were induced to make by reasons that the prospect was held out to them of receiving payments or other benefits in respect of the introduction (whether by themselves or by another person) of other persons who became participants in the World Netsafe Scheme in contravention of section 61 of the Trade Practices Act 1974 (Cth). 3. The Second Respondent was knowingly concerned in and a party to the contraventions of the First Respondent: (a) described in paragraph 1(aa), as regards the representations in 1(a), 1(b), 1(c), 1(d), 1(h), 1(i), 1(j), 1(k), 1(l), 1(m), 1(o), 1(p), 1(q), 1(y) and 1(z) above; (b) described in paragraph 1(bb), as regards the representations in 1(a), 1(c), 1(d), 1(h), 1(i), 1(j), 1(k), 1(l), 1(o), 1(p) and 1(q) above; (c) described in paragraph 1(cc), as regards the representations in 1(a), 1(c), 1(d), 1(h), 1(i), 1(j), 1(k), 1(l), 1(o), 1(p) and 1(q) above; (d) described in paragraph 1(dd), as regards the representations in 1(c), 1(d), 1(h), 1(i), 1(j), 1(l), 1(o), 1(p) and 1(q) above; (e) described in paragraph 1(ee), as regards the representations in 1(a), 1(c), 1(d), 1(h), 1(i), 1(j), 1(k), 1(l), 1(m), 1(o), 1(p), 1(q), 1(y) and 1(z) above; and (f) as regards the conduct described in paragraph 1(ff) above; and (g) as regards the conduct described in paragraph 2 above. THE COURT ORDERS THAT: 4. The First Respondent is restrained by itself, its servants or agents or otherwise howsoever, and by any means whatsoever including by utilising the Internet World Wide Web and electronic mail system, in connection with the promotion or operation of the World Netsafe Scheme and any other similar such scheme, whether in Australia or elsewhere, from: (a) engaging in conduct that is misleading and deceptive or is likely to mislead or deceive in contravention of sections 52 of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 1(aa) above, or representations to a similar effect; (b) making false representations in contravention of section 53(aa) of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 1(bb) above as applying section 53(aa) or representations to a similar effect; (c) making false representations in contravention of section 53(c) of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 1(cc) above as applying section 53(c) or representations to a similar effect; (d) making false representations in contravention of section 53(d) of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 1(dd) above as applying section 53(d) or representations to a similar effect; (e) making false or misleading representations in contravention of section 59 of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 1(ee) above as applying section 59 or representations to a similar effect; (f) accepting payment for goods or services of the kind the subject of the World Netsafe Scheme where, at that time of the acceptance, there are reasonable grounds, of which the First Respondent is aware or ought reasonably to be aware, for believing that the First Respondent will not be able to supply the goods or services within a period specified by the First Respondent or within a reasonable time, in contravention of section 58 of the Trade Practices Act 1974 (Cth); and (g) inducing persons to acquire goods or services of the kind the subject of the World Netsafe Scheme by representing that the persons will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for giving the First Respondent the names of prospective customers or otherwise assisting the First Respondent to supply goods or services to other consumers where receipt of the rebate is made in contravention of section 57 of the Trade Practices Act 1974 (Cth); and (h) promoting the World Netsafe Scheme, or any similar scheme in which persons who are participants in the scheme, or have applied or been invited to become participants in the scheme, make a payment to or for the benefit of the First Respondent, being a payment that they are induced to make by reason that the prospect is held out to them of receiving payments or other benefits in respect of the introduction (whether by themselves or by another person) of other persons who become participants in the scheme in contravention of section 61 of the Trade Practices Act 1974 (Cth). 5. The Second Respondent is restrained by himself, his servants or agents or otherwise howsoever, and by any means whatsoever including by utilising the Internet World Wide Web and electronic mail system, in connection with the promotion or operation of the world Netsafe Scheme and any other similar such scheme whether in Australia or elsewhere from: (a) engaging in conduct that is misleading and deceptive or is likely to mislead or deceive in contravention of section 52 of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 3(a) above, or representations to a similar effect; (b) making false representations in contravention of section 53(aa) of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 3(b) above as applying to section 53(aa) or representations to a similar effect; (c) making false representations in contravention of section 53(c) of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 3(c) above as applying to section 53(c) or representations to a similar effect; (d) making false representations in contravention of section 53(d) of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 3(d) above as applying to section 53(d) or representations to a similar effect; (e) making false or misleading representations in contravention of section 59 of the Trade Practices Act 1974 (Cth) by making representations to the effect of those identified in paragraph 3(e) above as applying to section 59 or representations to a similar effect; (f) accepting payment for goods or services of the kind the subject of the World Netsafe Scheme where, at that time of the acceptance, there are reasonable grounds, of which the person accepting payment is aware or ought reasonably to be aware, for believing that the person accepting payment will not be able to supply the goods or services within a period specified by the person accepting payment or within a reasonable time, in contravention of section 58 of the Trade Practices Act 1974 (Cth); and (g) inducing persons to acquire goods or services of the kind the subject of the World Netsafe Scheme by representing that the persons will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for giving a person the names of prospective customers or otherwise assisting the person to supply goods or services to other consumers where receipt of the rebate is made in contravention of section 57 of the Trade Practices Act 1974 (Cth); and (h) promoting the World Netsafe Scheme, or any similar scheme in which persons who are participants in the scheme, or have applied or been invited to become participants in the scheme, make a payment to or for the benefit of a person, being a payment that they are induced to make by reason that the prospect is held out to them of receiving payments or other benefits in respect of the introduction (whether by themselves or by another person) of other persons who become participants in the scheme in contravention of section 61 of the Trade Practices Act 1974 (Cth); and (i) from being in any way directly or indirectly knowingly concerned in or a party to such conduct and representations insofar as: (j) the Second Respondent is in any way directly or indirectly knowingly concerned in the conduct of a corporation; (k) section 5 or section 6 of the Trade Practices Act 1974 (Cth) is applicable to the Second Respondent, or any person in whose conduct the Second Respondent is in any way directly or indirectly knowingly concerned or to which the Second Respondent is party, through: (i) engaging in conduct outside Australia when an Australian citizen or ordinarily resident within Australia; (ii) trade or commerce: (A) between Australia and places outside Australia; (B) among the States; (C) within a Territory; (D) between a State and a Territory (E) by way of the supply or services to the commonwealth or an authority or instrumentality of the Commonwealth; (iii) engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast. 6. The First and Second Respondents at their expense maintain the websites: (a) http://www.worldnetsafe.com; and (b) http://www.worldnetsafe.com.au and publish on the whole of the home page thereon the Notice at Schedule B ("the Notice"), as an htm page into the frameset of the homepage of World Netsafe in the same dimensions and layout as specified by the Applicant so that the htm page dominates the whole page of the homepage, providing a hotlink thereon to the web address http://www.accc.gov.au continuously for 6 months commencing forthwith. 7. The First and Second Respondents at their expense publish the Notice by forwarding it forthwith: (a) by electronic mail transmission to all past and current members of the World Netsafe Scheme whose electronic mail address is known to the respondents, including to those persons who have an electronic mail address containing the symbols "@worldnetsafe.com", each such message being simultaneously sent in the same electronic mail transmission to the Applicant at http://www.bnecompl@accc.gov.au; and (b) by the postal service to all past and current members of the World Netsafe Scheme, a copy of the notice and a list of the names and addresses of the persons to whom it was sent being served immediately thereafter upon the Applicant. 8. The First and Second Respondents at their expense publish the Notice, apart from the words and symbols "[insert hotlink to:]", in the publications: (a) "The Weekend Australian" newspaper; (b) "Money" magazine; and (c) "The Courier Mail" newspaper in Queensland within 28 days of the making of this order, on the right hand side of a right hand page within the first 7 pages of the publication, occupying a space not less than one-fifth of a page of the publication. 9. In respect of each publication of the Notice, the First and Second Respondents cause the Notice to be published in accordance with specifications provided to the Respondents by the Applicant, including specifications as to the colours, text sizes, fonts, layout and space occupation. 10. The First and Second Respondents refund within 28 days of the making of this order any monies paid to the First or Second Respondents by each person participating or who has participated in the World Netsafe Scheme at any time whether in Australia or elsewhere, after deducting any monies paid to that participant by the First or Second Respondent in respect of their participation in the World Netsafe Scheme. 11. The First and Second Respondents return forthwith any payment, held by or for them at the date of this order or received in the future, from persons attempting to participate in the World Netsafe Scheme. 12. The First and Second Respondents deliver forthwith to the Applicant particulars of each person participating, or who has participated in the World Netsafe Scheme at any time whether in Australia or elsewhere including: (a) The name and address of the person; (b) The date the person joined the World Netsafe Scheme; (c) The amount the person paid to the First Respondent, including any monies held in trust; (d) The designated number of any card paid for by the person; (e) Where the First Respondent has paid any monies to the person, the date, amount and purpose of each such payment. 13. The Second Respondent undertake a Trade Practices Compliance Program in the form at "Schedule C". 14. The First and Second Respondents pay the Applicant's costs of and incidental to the Notice of Motion filed on 13 November 2000 and heard on 17 November 2000 including the hearing date, on an indemnity basis. The First and Second Respondents pay the Applicant's costs of and incidental to this proceeding, including any reserved costs.