FEDERAL COURT OF AUSTRALIA Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 TRADE PRACTICES – misleading or deceptive conduct – misrepresentations – failure to comply with requirement to state cash price or minimum price – mobile telephone and telephone services – advertising of package – consent order – function of Court – undesirability of overlapping relief in relation to s 52 and other provisions of Part V – declaratory relief – need to precisely specify contravening conduct – injunction – notice to consumers – corrective advertising – probation order – corporate compliance program – precision of order – community service order – educational website Trade Practices Act 1976 (Cth) ss 52, 53, 86C Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 cited Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 cited Australian Competition and Consumer Commission v Office Link (Aust) Pty Ltd (1997) 19 ATPR 41-598 cited Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 cited HCF Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1988) ATPR 40-834 cited AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v VIRGIN MOBILE AUSTRALIA PTY LTD (ACN 092 726 442) W134 OF 2002 FRENCH J 11 DECEMBER 2002 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W134 OF 2002 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: VIRGIN MOBILE AUSTRALIA PTY LTD (ACN 092 726 442) RESPONDENT JUDGE: FRENCH J DATE OF ORDER: 11 DECEMBER 2002 WHERE MADE: PERTH THE COURT ORDERS THAT: BY CONSENT, the Court declares that: 1. The Respondent, in trade or commerce in connection with the supply, possible supply or promotion of the supply, of mobile telephones (the "goods"), mobile telephone services and short message services (the "services") and packages comprising the goods and services ("Telephone and Service Packages") to consumers within Australia engaged in a breach of s 53C of the Trade Practices Act 1974 (the "Act") by causing advertisements to be published, distributed or broadcast nationally during the period October 2001 to March 2002 in which it made representations with respect to an amount that, if paid, would constitute part of the consideration for the supply of: 1.1 the goods, without specifying the cash price of the goods; and 1.2 the Telephone and Service Packages, without specifying the cash price or minimum cost of the Telephone and Service Packages. 2. The Respondent, in trade or commerce, in connection with the supply, possible supply or promotion of the supply of the goods or the Telephone and Service Packages, made false or misleading representations with respect to: 2.1 the price for which consumers could obtain the goods and/or the Telephone and Service Packages from the Respondent in contravention of s 53(e) of the Act; and 2.2 the conditions on which consumers could obtain the goods and/or the Telephone and Service Packages from the Respondent in contravention of s 53(g) of the Act, by causing advertisements to be published, distributed or broadcast nationally, during the period October 2001 to March 2002, containing: 2.3 a representation with respect to amounts that, if paid, would constitute part of the consideration for the supply by the Respondent of: 2.3.1 the goods; and/or 2.3.2 Telephone and Service Packages; 2.4 the implied representation that a consumer who obtained a Telephone and Service Package from the Respondent was not required to pay the specified minimum monthly charge for telephone calls and/or SMS for any particular period; 2.5 the implied representation that a consumer who obtained a Telephone and Service Package from the Respondent could terminate the Telephone and Service Package without any additional payment upon termination, in circumstances in which: 2.6 there was a cash price for the goods and a minimum amount payable for the Telephone and Service Packages; 2.7 consumers who obtained a Telephone and Service Package were required: 2.7.1 to pay the minimum monthly charge for mobile telephone calls and/or SMS for a period of 24 months in order not to be liable to pay to the Respondent the Termination Payment; or 2.7.2 if the consumer wished to terminate within 24 months of entering into the Telephone and Service Package, to give 1 month's notice from the date of the next bill and then pay to the Respondent the Termination Payment, calculated as the Telephone Charge multiplied by the number of months remaining of the 24 month period; and 2.8 a Termination Payment was payable and the consumer was required to pay the Telephone Charge multiplied by the number of months remaining of the 24 month period. BY CONSENT, the Court orders that: Injunctions 3. For a period of 3 years from the date of this Order, the Respondent, its servants and agents, in trade or commerce, in connection with the supply, possible supply or promotion of the supply, of the goods, the services and/or Telephone and Service Packages to consumers within Australia, be required, when making representations to consumers in relation to the consideration by, or terms and conditions on, which consumers can obtain the goods, the services and/or the Telephone and Service Packages from the Respondent, to clearly state the following matters: 3.1 the cash price of the goods; 3.2 the cash price or minimum cost of the Telephone and Service Packages; and 3.3 the method by which any amount payable by a consumer on termination of a Telephone and Service Package is calculated. Notice to affected consumers 4. Within 28 days of the date of this Order, the Respondent, at its expense, write in the terms of Annexure "A" to each existing Virgin Mobile customer who entered into a Dial High Club Level 30 or Level 50 package with the Respondent in the period from October 2001 to March 2002. Public Advertisements 5. Within 28 days of this Order or in the next edition following expiry of that period, the Respondent cause to be published at its expense, an advertisement of a size not less than 15 cm wide and 15 cm deep in the form of Annexure "B" within the first twenty pages of a weekend edition of each of the following newspapers: 5.1 the Sydney Morning Herald; 5.2 the Age; 5.3 the Brisbane Courier Mail; 5.4 the Adelaide Advertiser; 5.5 the West Australian; 5.6 the Hobart Mercury; and 5.7 the Northern Territory News. 6. Within 28 days of this Order the Respondent cause, at its expense, to be published on the home page of its internet site located at URL:www.virginmobile.com.au for a period of 3 months a prominent one click link to a website containing a notice in the form of Annexure "B". Probation Orders 7. Within 90 days of the date of this Order, implement for all of its officers and employees a Trade Practices Corporate Compliance Program ("Compliance Program") tailored to the Respondent's circumstances and, to the Respondent's reasonable endeavours, consistent with Australian Standard AS-3806, in relation to ss 52, 53 and 53C of the Trade Practices Act. 8. The Compliance Program be designed to ensure that the officers and employees of Virgin Mobile are aware of their responsibilities and obligations in relation to ss 52, 53 and 53C of the Trade Practices Act. 9. The Respondent, at its expense, cause an audit of the Compliance Program to be undertaken annually from the date of implementation for a period of 3 years. The first, second and third such audits shall be conducted by an independent external professional or organisation with trade practices law experience who is acceptable to the Applicant. 10. The Respondent, at its expense, cause to be produced and provided to the Applicant a certificate confirming the performance of the first and third Compliance Program annual audits performed in accordance with the preceding order. Community Service Order 11. Within 120 days of the date of this Order, the Respondent, at its expense, create or cause to be created an internet site to be maintained for a period of 6 months that explains to consumers the obligations of advertisers under the Act promoting mobile telephones, mobile telephone services and/or SMS specifically including, but not limited to, ss 52, 53 and 53C of the Act. Such internet site is to be linked to the home page of the Respondent's internet site located at URL:www.virginmobile.com.au. Costs 12. The Respondent pay the Applicant's costs as agreed or assessed. 13. The parties have liberty to apply within forty eight hours to vary any of the preceding orders to the extent that they depart from the Minute of Consent Orders. Annexure "A" Sal name surname St address Suburb State Postcode Dear (name), Hi, Virgin Mobile has recently settled Federal Court action taken by the ACCC in relation to Virgin Mobile's Dial High Club advertising late last year/early this year. More particularly, during the period October 2001 to March 2002 Virgin Mobile ran a series of advertisements promoting the: . Nokia 8310 Level 50 Dial High Club package; . Nokia 8250 Level 50 Dial High Club package; and . Nokia 3310 Level 30 Dial High Club package. These advertisements did not comply with some of the consumer protection provisions of the Trade Practices Act 1974 because they didn't: . state the full cash price of the mobile phones/mobile phone packages; and . clearly advise consumers of the likely costs payable on termination of the packages, in the advertisements. We want to make sure that the main features of your mobile phone package are crystal clear, so here is a brief explanation of how it works; . you are required to spend a minimum of $[x] each month on calls/SMS; . [if Level 50 $199] you pay the amount of $199 upfront for the Nokia 8310 mobile phone handset. . [if Level 30/Level 50 no upfront] you pay nothing upfront for the [y] mobile phone handset; . for each month that you spend $[x] minimum on calls/SMS, Virgin Mobile will pay $[z] towards the repayments on your mobile phone handset. The $[z] is the monthly instalment of the residual amount owing on your phone spread over 24 months; . you are able to leave Virgin Mobile at any time you like provided that you pay the remaining instalments on your handset which is $[z] for the number of months remaining of the 24 month period since you joined us and any outstanding call/SMS costs. If you stay with us on your plan for at least 24 months, no outstanding payments are required on your handset if you leave us. As part of the orders, Virgin Mobile has agreed that, in future, it will make sure its advertisements clearly state the full cash price and/or minimum cost of mobile telephone/mobile telephone and service packages and the method by which any amounts payable on termination are calculated, create an internet site explaining to consumers the obligations of advertisers in promoting mobile telephone packages and institute a trade practices compliance program. At Virgin Mobile, we pride ourselves on providing great value and strongly believe in maintaining open and honest relationships with our customers at all times. If you have any queries or concerns about your package, please do not hesitate to contact our customer service team on xxxxxxx. Yours sincerely, Annexure "B" Virgin Mobile Federal Court Ordered Notice In settlement of Federal Court action taken by the Australian Competition and Consumer Commission, Virgin Mobile Australia Pty Ltd has admitted that it made misleading claims in advertisements, from October 2001 to March 2002, for the Nokia 8310 and 8250 Level 50, and Nokia 3310 Level 30, Dial High packages. The Court declared that Virgin Mobile breached the Trade Practices Act by failing to state the full cash price of the mobile phones/phone packages and not clearly stating the costs payable on termination. We should have stated that the full cash price of the Nokia 8310 was $ $1039: the Nokia 8250 was $840: and the Nokia 3310 was $268.20 and that the minimum cost of the packages was $1069, $870 and $288.40 or $306.40, respectively. We should also have stated that if you leave the packages within 24 months, you must pay out the remaining instalments on your handset for each month remaining of the 24 months (+ any outstanding call/SMS costs) and that these monthly amounts are: $35p/m for the Nokia 8310 and 8250, and $10.35 or $11.20p/mfor the Nokia 3310. Virgin Mobile has agreed to orders which require us to state the full cash price and/or minimum cost of mobile phones/ phone packages and how any costs on leaving the packages are calculated in all future advertisements. We have also agreed to create an internet site explaining advertisers' obligations in promoting mobile phone packages to consumers and to publish this notice. If you have any queries about your package or this notice, please contact our customer service team on xxxxxxx. Note: Heading: 18pt Bold Italic Comic Sans Subheading: 10pt Comic Sans Body Text: 10 pt Arial Top Margin: Min: 8mm Left & Right Margins Min 8mm Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W134 OF 2002 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: VIRGIN MOBILE AUSTRALIA PTY LTD (ACN 092 726 442) RESPONDENT JUDGE: FRENCH J DATE: 11 DECEMBER 2002 PLACE: PERTH REASONS FOR JUDGMENT Introduction 1 The Australian Competition and Consumer Commission ("ACCC") instituted proceedings against Virgin Mobile Australia Pty Ltd ("Virgin Mobile") on 3 May 2002 alleging contraventions of the Trade Practices Act 1974 (Cth). The contraventions relate to Virgin Mobile's advertising of a group of mobile telephone services under the general title "The Dial High Club" between October 2001 and March 2002. The advertisements are said to involve mis-statements and contravening non-disclosures of certain aspects of the pricing of the packages being promoted. The ACCC and Virgin Mobile have now agreed to settle the proceedings on the basis that they consent to certain orders which the Court is asked to make. In deciding whether to make the orders the Court must be satisfied that they are within power and appropriate. 2 In considering the proposed consent orders it is not a function of the Court to impede settlements between parties legally represented and able to understand and evaluate the desirability of agreeing to that settlement, nor to refuse to give effect to the terms of settlement by refusing to make orders or accept undertakings where they are within the Court's jurisdiction and are otherwise unobjectionable. Further, the Court will not simply substitute its own view of the orders or undertakings which it would have made if those proffered fall within the range of an appropriate disposition of the case – Australian Competition and Consumer Commission v Real Estate Institute of Western Australia (1999) 161 ALR 79 at 67 and authorities there cited. 3 The factual background that follows reflects facts not in dispute based upon the statement of claim and relevant admissions in the defence. In addition, some reference is made to uncontroversial affidavit material put before the Court on an earlier application to transfer these proceedings to Sydney. Factual Background 4 Virgin Mobile is a company incorporated in New South Wales. It is a supplier of mobile telephones and mobile telephone services and short message services to consumers within Australia. It conducts its business by way of its own retail outlets, through its website and telephone sales and through the retail outlets of unrelated companies known as "affinity partners". The company's retail outlets are at three locations in Sydney and at Cheltenham, Melbourne and South Yarra in Victoria. Its telephone sales are conducted from a call centre located at its principal place of business in Sydney. Its affinity partners include Kmart, Coles, Harvey Norman, David Jones and Tandy. These agency arrangements allow it to promote and sell its goods and services throughout Australia without having to establish retail outlets of its own in every State and Territory. The nature of its marketing operation is national in its scope. Its website is administered from its principal place of business in Sydney. 5 Between October 2001 and March 2002, Virgin Mobile published, distributed and broadcast advertisements, including a point of sale brochure promoting mobile telephones, mobile telephone services and short message services. It also promoted through its advertisements a package comprising a mobile telephone and mobile telephone services and/or SMS. The advertisements included offers by Virgin Mobile to consumers to acquire one of a set of Telephone and Service Packages by joining what was called the "Dial High Club". This was the designation given to package offers launched in September 2001. It was said to be based on customers spending a minimum amount per month on mobile telephone calls and/or short message services. The customer could purchase a mobile telephone from Virgin Mobile or use the customer's own phone. There was a variety of packages available as part of the Dial High Club. 6 Persons who obtained a Telephone and Service Package from Virgin Mobile were required to: 1. Pay a minimum amount per month in charges for telephone calls and/or SMS (the "Minimum Monthly Package Charge"); or 2. If the customer wished to terminate within twenty four months of entering into the Telephone and Service Package, to give one month's notice to Virgin Mobile from the date of the next bill and then pay a sum of money to Virgin Mobile, designated the "Termination Payment", calculated as an amount depending on the type of mobile telephone obtained and designated the "Telephone Charge", multiplied by the number of months remaining of the twenty four month period. 3. If the customer were to obtain a Nikia 8310 mobile telephone, they were to pay an upfront fee of $199. The particulars of the packages by reference to telephone type, Minimum Monthly Package Charge and Telephone Charge are as follows: Telephone Type Minimum Monthly Package Charge Telephone Charge Nokia 8310 $50.00 $35.00 Nokia 8250 $50.00 $34.65 or $35.00 Nokia 3310 $35.00 $10.35 or $11.20 7 Each of the advertisements contained representations with respect to amounts that, if paid, would constitute part of the consideration for the supply by Virgin Mobile of a mobile telephone and/or a Telephone and Service Package. So for the Nokia 8310 mobile telephone various of the advertisements represented that the amount payable was $199 upfront with $50 per month in calls and/or SMS. For the Nokia 8250, the amount payable was $50 per month in calls and/or SMS. For the Nokia 3310, the amount was $30 per month in calls and/or SMS. In these advertisements Virgin Mobile did not separately state the cash price for the relevant mobile phone and the Telephone and Service Package. 8 It is not in dispute that each of the advertisements also conveyed an implied representation that a consumer who obtained a Telephone and Service Package from Virgin Mobile was not required to pay the Minimum Monthly Package Charge for any particular period. They also conveyed the implied representation that a customer who obtained a Telephone and Service Package from Virgin Mobile could terminate the Telephone and Service Package without making any additional payment on termination. 9 On 3 May 2002, the ACCC commenced proceedings in this Court claiming various forms of declaratory, injunctive and other relief, including corrective advertisements, cancellation of agreements and refunds and probation orders against Virgin Mobile. The statement of claim that accompanied the application alleged that, in the twenty seven advertisements referred to above, Virgin Mobile had breached ss 52, 53 and 53C of the Trade Practices Act. 10 Following the making of directions and the undertaking of interlocutory steps, the application was set down for hearing for four days commencing on Monday, 2 December 2002. In the event it did not go to trial. Instead the parties filed a minute of proposed consent orders against Virgin Mobile and asked the Court to make orders in the terms of the minute. It now falls to the Court to consider whether or not the proposed orders should be made. The text of the minute is set out in the Schedule to these reasons. It is to be noted that, apart from admissions on the pleadings, there was no agreed statement of facts nor was there any joint submission filed in relation to the proposed consent orders. Neither an agreed statement of facts nor a joint submission is necessary, but may often be helpful in assisting the Court in determining whether the consent orders are appropriate and within power. The Contraventions of Sections 52 and 53 11 The statement of claim of the ACCC alleges contraventions of ss 52 and 53 of the Trade Practices Act. The contraventions of s 52 are said to arise from implied representations in each of the advertisements: 1. That a consumer who obtained a Telephone and Service Package from Virgin Mobile was not required to pay the Minimum Monthly Package Charge for any particular period (par 9). 2. That a consumer who obtained a Telephone and Service Package from Virgin Mobile could terminate the Telephone and Service Package without making any additional payment on termination (par 10). 12 The representations are admitted in Virgin Mobile's defence, which was amended pursuant to leave granted on 2 December 2002. Each of the representations was said to be misleading or deceptive or likely to mislead or deceive contrary to s 52. By each of the advertisements in which one or more of the representations was made, it is said that Virgin Mobile: 1. Failed to state adequately or at all the minimum amount payable for the Telephone and Service Package. 2. Failed to state adequately or at all that customers who obtained a Telephone and Service Package were required to pay a minimum monthly charge for mobile telephone calls and/or SMS and that if the customer wanted to terminate within twenty four months of entering into the package the customer would be required to give one month's notice and pay a Termination Payment. 3. Failed to state adequately or at all how the Termination Payment was calculated and that each customer was required to pay the Telephone Charge multiplied by the number of months remaining of the twenty four month period. 13 Generally speaking the characterisation of representations as misleading or deceptive depends upon their falsification by some pleaded facts. On this basis par 14 of the statement of claim is defective for, instead of simply pleading falsifying facts, it pleads a failure to state falsifying facts adequately or at all. The structure of the pleading is in the following form: Virgin Mobile represented statement A. Statement A was a misleading or deceptive statement because Virgin Mobile failed to state adequately or at all the converse. I am prepared to accept, for the purpose of considering the consent orders, that par 14 does plead falsifying facts as such by implication and that they are admitted in the amended defence save as to 14.2.1. In my opinion, the declaratory relief claimed should be varied to embody a clear statement of the falsifying facts implicitly pleaded rather than the proposed statement, reflecting the pleadings, that there was a failure to disclose, "adequately or at all" the falsifying facts. Moreover, I do not accept that a failure "adequately" to state a falsifying fact discloses a case of misleading or deceptive conduct without some further facts. In this case I would not be prepared to make declarations reflecting that aspect of the statement of claim. A failure adequately to disclose something is not misleading or deceptive unless accompanied by qualifying facts which indicate how the alleged inadequacy leads into error. In any event, the declarations sought assert, in the alternative, that there was no disclosure of the falsifying facts. The two cannot stand together. 14 The representations underlying the alleged misleading or deceptive conduct are also said to have been variously: 1. Misleading representations with respect to the prices for which a customer could obtain a mobile telephone and/or Telephone and Service Package from Virgin Mobile in breach of s 53(c) of the Act. 2. Misleading representations with respect to the conditions on which customers could obtain a mobile telephone and/or Telephone and Service Package from Virgin Mobile in breach of s 53(g) of the Act. The contraventions of ss 52, 53(e) and 53(g) overlap almost completely in this case. It is not at all clear why separate declarations are sought in respect of each such contravention. The characterisation of a corporation's conduct as constituting multiple contraventions carries with it the risk of spuriously inflating the true extent of the contraventions. It does not, on the face of it, serve any legitimate purpose and senior counsel for the ACCC was unable to point to any. There has been a tendency in some cases for applications to be made for multiple remedies, some of which are redundant. Such a practice runs the risk of devaluing the importance of the remedies. The contravenor should be sanctioned with appropriate relief. It is not necessary or desirable that the contravenor be metaphorically mummified under overlapping layers of redundant orders. I do not therefore consider it appropriate to make declarations of contraventions of s 52 in addition to declarations as to the contraventions of ss 53(e) and 53(g) which have been identified. 15 I am prepared to make a modified form of the declaration relating to the contraventions of s 53, deleting the reference to inadequate disclosure, and expressly referring to the falsifying facts which are implicitly pleaded in par 14 of the statement of claim. The Contravention of Section 53C 16 A further contravention alleged in pars 7 and 8 of the statement of claim is a contravention of s 53C of the Act. This is said to arise out of the failure of Virgin Mobile to state, in its advertisements, the cash price of the relevant mobile phone and/or the cash price, alternatively the minimum cost, of the Telephone and Service Package. 17 Section 53C of the Act provides: "A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the corporation also specifies the cash price for the goods or services." This provision was enacted with the Trade Practices Revision Act in 1986. As appears from the Explanatory Memorandum for the Trade Practices Revision Bill (1986) at par 93, the section is directed against traders who advised that a customer may buy a product for a low deposit without disclosing the total price payable. 18 The declaratory relief sought in respect of the contravention of s 53C is appropriate and within power and I will make a declaration accordingly. The Proposed Injunction 19 The proposed injunction is framed in mandatory terms which have an appropriate nexus to the contravening conduct conceded in this case – Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 at 131 (French J); Australian Competition and Consumer Commission v Office Link (Aust) Pty Ltd (1997) 19 ATPR 41-598 (Carr J) and Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 202 (Merkel J). Notwithstanding that it is mandatory, it is authorised by s 80 – see s 80(5). It also appears to fall within the scope of the power conferred on the Court by s 86C(2)(c). Relevantly, s 86C provides: "86C(1) The Court may, on application by the Commission, make one or more of the orders mentioned in subsection (2) in relation to a person who has engaged in contravening conduct. (2) The orders that the Court may make in relation to the person are: (a) a community service order; and (b) a probation order for a period of no longer than 3 years; and (c) an order requiring the person to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to; and (d) an order requiring the person to publish, at the person's expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order." It is to be noted that by subs (3) the section does not limit the Court's powers under any other provision of this Act. The further provisions of s 86C which are relied upon in this case, will be referred to below. I am satisfied that the proposed injunction relating to future representations to consumers about the terms and conditions upon which they can obtain goods and services from Virgin Mobile, is appropriate and within power and I will make an order accordingly. Notice to Consumers 20 The proposed notice to affected consumers referred to in par 5 of the Minute of the Consent Order and Annexure A to the Minute also falls within the scope of s 86C(2)(c). It is directly related to the contravening conduct and is appropriate and within power and I will make an order accordingly. Public Advertisement 21 Paragraph 6 of the Minute of the Consent Order proposes the publication of an advertisement. 22 I have previously observed that there is power to make such orders under s 80 – Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 at 133. The power to order such advertising under that section is protective and not punitive – HCF Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1988) ATPR 40-834. As I observed in Australian Competition and Consumer Commission v Real Estate Institute of Western Australia it is important that such advertisements are seen to do more than merely announce a "win" for the ACCC and the contrition of the respondent. In this case the proposed advertisement is consistent with the objectives of consumer protection for which such advertisements should be ordered in respect of contraventions of Pt V. The advertisement sets out what should have been stated as to the cash price of the mobile telephones being offered and the minimum cost of the packages respectively. This will assist in drawing it to the attention of consumers generally who may have acquired Virgin Mobile packages or may be contemplating doing so. It also properly alerts consumers to the fact that the Court has made orders requiring statements of the full cash price and/or minimum costs in future. It serves the positive function of alerting consumers to the obligation imposed on Virgin Mobile to disclose those things. The proposed advertisement is appropriate and within power and I will make an order in accordance with the Minute. It is to be noted that this is not a punitive order of the kind contemplated by s 86D. The Probation Orders 23 The proposed probation order which is an order for the institution of a trade practices corporate compliance program by Virgin Mobile, is to be made pursuant to s 86C(2)(b). In s 86C(4) the term "probation order" is defined as follows: "probation order, in relation to a person who has engaged in contravening conduct, means an order that is made by the Court for the purpose of ensuring that the person does not engage in the contravening conduct, similar conduct or related conduct during the period of the order, and includes: (a) an order directing the person to establish a compliance program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and (b) an order directing the person to establish an education and training program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and (c) an order directing the person to revise the internal operations of the person's business which led to the person engaging in the contravening conduct." 24 The terms of the proposed probation order are wide and do not define the nature or objectives of the Trade Practices Corporate Compliance Program which is directed. As a general rule, mandatory orders should be expressed with sufficient precision to enable a breach of the order to be readily ascertained and effectively punished. Neither the parties nor the Court should be left, as a general rule, with uncertainty as to the scope and limits of the obligations imposed by the order. On the other hand, the Court must respect the legislative intention reflected in the definition of "probation order" in s 86C which plainly contemplates that the Court will make directions for the undertaking of compliance programs where it will be neither practicable nor useful to prescribe with minute particularity the content of such programs. In my opinion, it is desirable to include within the proposed probation order a direction that the program, in the terms of the definition of "probation order" be "designed to ensure" the awareness of Virgin Mobile's employees, and other persons involved in its business, of their responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct. This may be effected by inserting an additional paragraph in the proposed probation orders in the following terms: "The Compliance Program be designed to ensure that the officers and employees of Virgin Mobile are aware of their responsibilities and obligations in relation to ss 52, 53 and 53C of the Trade Practices Act." The incorporation by reference of Australian Standard AS-3806 is qualified by a reasonable endeavours requirement which, in my opinion, makes it reasonable to include reference to the Standard in the order. On that basis I am prepared to make probation orders in the terms sought. Community Service Order 25 The community service order proposed would be made pursuant to s 86C(2)(a). The definition in s 86C(4) of "community service order" is in the following terms: "community service order, in relation to a person who has engaged in contravening conduct, means an order directing the person to perform a service that: (a) is specified in the order; and (b) relates to the conduct; for the benefit of the community or a section of the community." The creation of an internet site for a period of six months explaining to consumers the obligations of advertisers under the Act in relation to the promotion of mobile telephones, telephone services and short message services is, in my opinion, an appropriate order and within the scope of the community service orders contemplated in s 86C. I will make an order accordingly. Conclusion 26 As will be seen, I have varied the proposed orders in some respects from those the subject of the Minute of Consent Orders. I will allow the parties liberty to apply within two days to vary the terms of the orders in the event that there are any practical difficulties in their implementation as varied. I certify that the preceding twenty six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. Acting Associate: Dated: 11 December 2002 Counsel for the Applicant: Mr EM Corboy SC Solicitor for the Applicant: Phillips Fox Counsel for the Respondent: Mr CG Colvin SC Solicitor for the Respondent: Clayton Utz Date of Hearing: 4 December 2002 Date of Judgment: 11 December 2002 MINUTE OF PROPOSED CONSENT ORDERS BY CONSENT, THE COURT DECLARES THAT 1. The Respondent, in trade or commerce in connection with the supply, possible supply or promotion of the supply, of mobile telephones (the "goods"), mobile telephone services and short message services (the "services") and packages comprising the goods and services ("Telephone and Service Packages") to consumers within Australia engaged in a breach of section 53C of the Trade Practices Act 1974 (the "Act") by causing advertisements to be published, distributed or broadcast nationally during the period October 2001 to March 2002 in which it made representations with respect to an amount that, if paid, would constitute part of the consideration for the supply of: 1.1 the goods, without specifying the cash price of the goods; and 1.2 the Telephone and Service Packages, without specifying the cash price or minimum cost of the Telephone and Service Packages. 2. The Respondent, in trade or commerce in connection with the supply, possible supply or promotion of the supply of the goods or the Telephone and Service Packages, engaged in misleading or deceptive conduct in contravention of s 52 of the Act by causing advertisements to be published, distributed or broadcast nationally during the period October 2001 to March 2002, containing: 2.1 a representation with respect to amounts that, if paid, would constitute part of the consideration for the supply by the Respondent of: 2.1.1 a mobile telephone; and/or 2.1.2 the Telephone and Service Packages; 2.2 the implied representation that a consumer who obtained a Telephone and Service Package from the Respondent was not required to pay the specified minimum monthly charge for telephone calls and/or SMS for any particular period; 2.3 the implied representation that a consumer who obtained a Telephone and Service Package from the Respondent could terminate the Telephone and Service Package without making any additional payment on termination, but which: 2.4 failed to state adequately or at all the minimum amount payable for the Telephone and Service Package; 2.5 failed to state adequately or at all that consumers who obtained a Telephone and Service Package were required; 2.5.1 to pay a minimum monthly charge for mobile telephone calls and/or SMS for a period of 24 months in order not to be liable to pay to the Respondent a termination payment (the "Termination Payment"); or 2.5.2 if the consumer wished to terminate within 24 months of entering into the Telephone and Service Package, to give 1 month's notice from the date of the next bill and then pay to the Respondent the Termination Payment, calculated as the monthly instalment price of the telephone (the "Telephone Charge") multiplied by the number of months remaining of the 24 month period; and 2.6 failed to state adequately or at all how the Termination Payment was calculated and that the consumer was required to pay the Telephone Charge multiplied by the number of months remaining of the 24 month period. 3. The Respondent, in trade or commerce, in connection with the supply, possible supply or promotion of the supply of the goods or the Telephone and Service Packages, made false or misleading representations with respect to: 3.1 the price for which consumers could obtain the goods and/or the Telephone and Service Packages from the Respondent in contravention of s 53(e) of the Act; and 3.2 the conditions on which consumers could obtain the goods and/or the Telephone and Service Packages from the Respondent in contravention of s 53(g) of the Act, by causing advertisements to be published, distributed or broadcast nationally, during the period October 2001 to October 2002, containing: 3.3 a representation with respect to amounts that, if paid, would constitute part of the consideration for the supply by the Respondent of: 3.3.1 the goods; and/or 3.3.2 Telephone and Service Packages; 3.4 the implied representation that a consumer who obtained a Telephone and Service Package from the Respondent was not required to pay the specified minimum monthly charge for telephone calls and/or SMS for any particular period; 3.5 the implied representation that a consumer who obtained a Telephone and Service Package from the Respondent could terminate the Telephone and Service Package without any additional payment upon termination, but which: 3.6 failed to state adequately or at all the cash price of the goods or the minimum amount payable for the Telephone and Service Packages; 3.7 failed to state adequately or at all that consumers who obtained a Telephone and Service Package were required: 3.7.1 to pay the minimum monthly charge for mobile telephone calls and/or SMS for a period of 24 months in order not to be liable to pay to the Respondent the Termination Payment; or 3.7.2 if the consumer wished to terminate within 24 months of entering into the Telephone and Service Package, to give 1 month's notice from the date of the next bill and then pay to the Respondent the Termination Payment, calculated as the Telephone Charge multiplied by the number of months remaining of the 24 month period; and 3.8 failed to state adequately or at all how the Termination Payment was calculated and that the consumer was required to pay the Telephone Charge multiplied by the number of months remaining of the 24 month period. BY CONSENT, the Court orders that: Injunctions 4. For a period of 3 years from the date of this Order, the Respondent, its servants and agents, in trade or commerce, in connection with the supply, possible supply or promotion of the supply, of the goods, the services and/or Telephone and Service Packages to consumers within Australia, be required, when making representations to consumers in relation to the consideration by, or terms and conditions on, which consumers can obtain the goods, the services and/or the Telephone and Service Packages from the Respondent, to clearly state the following matters: 4.1 the cash price of the goods; 4.2 the cash price or minimum cost of the Telephone and Service Packages; and 4.3 the method by which any amount payable by a consumer on termination of a Telephone and Service Package is calculated. Notice to affected consumers 5. Within 28 days of the date of this Order, the Respondent, at its expense, write in the terms of Annexure "A" to each existing Virgin Mobile customer who entered into a Dial High Club Level 30 or Level 50 package with the Respondent in the period from October 2001 to March 2002. Public Advertisements 6. Within 28 days of this Order or in the next edition following expiry of that period, the Respondent cause to be published at its expense, an advertisement of a size not less than 15 cm wide and 15 cm deep in the form of Annexure "B" within the first twenty pages of a weekend edition of each of the following newspapers: 6.1 the Sydney Morning Herald; 6.2 the Age; 6.3 the Brisbane Courier Mail; 6.4 the Adelaide Advertiser; 6.5 the West Australian; 6.6 the Hobart Mercury; and 6.7 the Northern Territory News. 7. Within 28 days of this Order the Respondent cause, at its expense, to be published on the home page of its internet site located at URL:www.virginmobile.com.au for a period of 3 months a prominent one click link to a website containing a notice in the form of Annexure "B". Probation Orders 8. Within 90 days of the date of this Order, implement for all of its officers and employees a Trade Practices Corporate Compliance Program ("Compliance Program") tailored to the Respondent's circumstances and, to the Respondent's reasonable endeavours, consistent with Australian Standard AS-3806, in relation to ss 52, 53 and 53C of the Trade Practices Act. 9. The Respondent, at its expense, cause an audit of the Compliance Program to be undertaken annually from the date of implementation for a period of 3 years. The first, second and third such audits shall be conducted by an independent external professional or organisation with trade practices law experience who is acceptable to the Applicant. 10. The Respondent, at is expense, cause to be produced and provided to the Applicant a certificate confirming the performance of the first and third Compliance Program annual audits performed in accordance with the preceding order. Community Service Order 11. Within 120 days of the date of this order, the Respondent, at its expense, create or cause to be created an internet site to be maintained for a period of 6 months that explains to consumers the obligations of advertisers under the Act promoting mobile telephones, mobile telephone services and/or SMS specifically including, but not limited to, ss 52, 53 and 53C of the Act. Such internet site is to be linked to the home page of the Respondent's internet site located at URL:www.virginmobile.com.au. Costs 12. The Respondent pay the Applicant's costs as agreed or assessed. Annexure "A" Sal name surname St address Suburb State Postcode Dear (name), Hi, Virgin Mobile has recently settled Federal Court action taken by the ACCC in relation to Virgin Mobile's Dial High Club advertising late last year/early this year. More particularly, during the period October 2001 to March 2002 Virgin Mobile ran a series of advertisements promoting the: . Nokia 8310 Level 50 Dial High Club package; . Nokia 8250 Level 50 Dial High Club package; and . Nokia 3310 Level 30 Dial High Club package. These advertisements did not comply with some of the consumer protection provisions of the Trade Practices Act 1974 because they didn't: . state the full cash price of the mobile phones/mobile phone packages; and . clearly advise consumers of the likely costs payable on termination of the packages, in the advertisements. We want to make sure that the main features of your mobile phone package are crystal clear, so here is a brief explanation of how it works; . you are required to spend a minimum of $[x] each month on calls/SMS; . [if Level 50 $199] you pay the amount of $199 upfront for the Nokia 8310 mobile phone handset. . [if Level 30/Level 50 no upfront] you pay nothing upfront for the [y] mobile phone handset; . for each month that you spend $[x] minimum on calls/SMS, Virgin Mobile will pay $[z] towards the repayments on your mobile phone handset. The $[z] is the monthly instalment of the residual amount owing on your phone spread over 24 months; . you are able to leave Virgin Mobile at any time you like provided that you pay the remaining instalments on your handset which is $[z] for the number of months remaining of the 24 month period since you joined us and any outstanding call/SMS costs. If you stay with us on your plan for at least 24 months, no outstanding payments are required on your handset if you leave us. As part of the orders, Virgin Mobile has agreed that, in future, it will make sure its advertisements clearly state the full cash price and/or minimum cost of mobile telephone/mobile telephone and service packages and the method by which any amounts payable on termination are calculated, create an internet site explaining to consumers the obligations of advertisers in promoting mobile telephone packages and institute a trade practices compliance program. At Virgin Mobile, we pride ourselves on providing great value and strongly believe in maintaining open and honest relationships with our customers at all times. If you have any queries or concerns about your package, please do not hesitate to contact our customer service team on xxxxxxx. Yours sincerely, Annexure "B" Virgin Mobile Federal Court Ordered Notice In settlement of Federal Court action taken by the Australian Competition and Consumer Commission, Virgin Mobile Australia Pty Ltd has admitted that it made misleading claims in advertisements, from October 2001 to March 2002, for the Nokia 8310 and 8250 Level 50, and Nokia 3310 Level 30, Dial High packages. The Court declared that Virgin Mobile breached the Trade Practices Act by failing to state the full cash price of the mobile phones/phone packages and not clearly stating the costs payable on termination. We should have stated that the full cash price of the Nokia 8310 was $ $1039: the Nokia 8250 was $840: and the Nokia 3310 was $268.20 and that the minimum cost of the packages was $1069, $870 and $288.40 or $306.40, respectively. We should also have stated that if you leave the packages within 24 months, you must pay out the remaining instalments on your handset for each month remaining of the 24 months (+ any outstanding call/SMS costs) and that these monthly amounts are: $35p/m for the Nokia 8310 and 8250, and $10.35 or $11.20p/mfor the Nokia 3310. Virgin Mobile has agreed to orders which require us to state the full cash price and/or minimum cost of mobile phones/ phone packages and how any costs on leaving the packages are calculated in all future advertisements. We have also agreed to create an internet site explaining advertisers' obligations in promoting mobile phone packages to consumers and to publish this notice. If you have any queries about your package or this notice, please contact our customer service team on xxxxxxx. Note: Heading: 18pt Bold Italic Comic Sans Subheading: 10pt Comic Sans Body Text: 10 pt Arial Top Margin: Min: 8mm Left & Right Margins Min 8mm