FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Telstra Corporation Limited [2004] FCA 1132 Trade Practices Act 1974, ss 52, 53(e), 80 Australian Competition and Consumer Commission v Telstra Corporation Limited [2004] FCA 987 related AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v TELSTRA CORPORATION LIMITED (ACN 051 775 556) N 1039 OF 2003 GYLES J 19 AUGUST 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1039 OF 2003 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: TELSTRA CORPORATION LIMITED (ACN 051 775 556) RESPONDENT JUDGE: GYLES J DATE OF ORDER: 19 AUGUST 2004 WHERE MADE: SYDNEY THE COURT DECLARES THAT: 1. The respondent (Telstra) contravened s 52 and s 53(e) of the Trade Practices Act 1974 (the Act) by representing, in advertisements using pictures of mobile telephone handsets and the symbols '$0*': (a) in a brochure distributed in June 2003 in Australia; and (b) in The Daily Telegraph newspaper published on 4 July 2003 in Australia, that Telstra was offering to supply specified bundles of goods and services (including the pictured mobile telephone handsets) at the same price as the price at which Telstra was offering to supply the same bundles of goods and services excluding the handsets when, in fact, the bundles of goods and services excluding the handsets were being offered by Telstra for lower prices and with lesser early termination charges (in the event of early termination). 2. Telstra contravened s 52 of the Act by representing, in advertisements using pictures of mobile telephone handsets and the symbols '$0*': (a) in a brochure distributed in June 2003 in Australia; and (b) in The Daily Telegraph newspaper published on 4 July 2003 in Australia, that a customer could acquire from Telstra pictured mobile telephone handsets as part of specified bundles of goods and services at no extra cost compared to the cost to the customer of acquiring the same bundles of goods and services excluding the handsets when, in fact, the bundles of goods and services excluding the handsets could be acquired from Telstra at a lower cost to the customer and with lesser early termination charges (in the event of early termination). 3. Telstra contravened s 52 of the Act by representing, in advertisements using pictures of mobile telephone handsets and the symbols '$0*': (a) in a brochure distributed in June 2003 in Australia; and (b) in The Daily Telegraph newspaper published on 4 July 2003 in Australia, that Telstra was offering to supply pictured handsets as part of a bundle of goods and services subject to conditions and that the conditions were not inconsistent with the handsets being available at the same price or at no extra cost to the customer compared to the price or cost to the customer of the bundle excluding the handset when, in fact, the bundle including the handset could not be acquired from Telstra for the same price or at no extra cost. THE COURT ORDERS THAT: 4. Telstra be restrained, for a period of five years from 24 September 2004, from representing that it is offering to supply a mobile telephone handset, as part of a bundle of goods and services, without cost to a customer (by using the symbols '$0' or any symbols or expressions to substantially the same effect) unless the cost to the customer of the bundle (including the handset) is equivalent to and no greater than, the combined ordinary cost to the customer of all of the items in the bundle (excluding the handset) being offered for supply by or on behalf of Telstra. 5. The costs of today be costs in the cause. 6. Telstra pay the costs of the applicant. 7. The proceeding be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1039 OF 2003 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: TELSTRA CORPORATION LIMITED (ACN 051 775 556) RESPONDENT JUDGE: GYLES J DATE: 19 AUGUST 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 30 July 2004 I delivered judgment (Australian Competition and Consumer Commission v Telstra Corporation Limited [2004] FCA 987) and stood the proceeding over for the making of formal orders. I have heard argument as to alternative drafts of the form of those orders today. I will run through the issues and counsel can remind me if I have missed any. 2 I think that 'impliedly' should not be included in the declarations. You either represent or you do not. For the reasons I have mentioned in the course of discussion with counsel, I do not think that declaration three reflects any internal inconsistency in the judgment and I am satisfied that it does deal with an issue which is appropriate to reflect in a declaration. I appreciate that in one sense, as counsel for Telstra has put, one may see declarations one, two and three as saying the same thing in different language. However, they are saying the same thing in different language in accordance with the case that was presented and reflect the findings which were made. So far as declaration four is concerned, whilst flattered by the submissions of counsel for the applicant, I do not think that it either matches precisely the case pleaded or is necessary in view of the prior declarations. It certainly reflects a process of reasoning about these matters which finds its way into the justification for declarations one to three and for any injunction which is to be granted. So I decline to make that declaration. 3 In my opinion, an injunction is appropriate in a case of this character. Section 80 is framed so as to grant a wide discretion to the Court. It is not necessary to find the existence of the sort of threat which may be necessary for the grant of an injunction in the general jurisdiction of the Court. It has been customary for negative injunctions to be granted where misleading conduct has been appropriately identified. 4 I have been pressed with the decision of the Full Court in BMW Australia Limited v Australian Competition and Consumer Commission [2004] FCAFC 167; (2004) 207 ALR 452 particularly, paragraphs [36] to [39] inclusive. In my opinion, that decision, together with the passage from the decision of Gummow, Hayne and Heydon JJ in Rural Press Ltd v Australian Competition and Consumer Commission in the High Court (2003) 78 ALJR 274; 203 ALR 217 at paragraphs [89] to [90], make it particularly important to identify with some precision that conduct which has been held to be in breach. Once that is satisfactorily done, then there is no reason for not granting an injunction. Misleading conduct should not be occurring and the injunction should be framed to prohibit clearly only that which is misleading. If there is a problem, then the injunction should not be granted in that form. 5 The applicant seeks an injunction with a duration with five years. It is put on behalf of Telstra that, in a practical sense, it is not necessary to go beyond a two year injunction. It is said that all that is being added is the penalties for contempt of Court. I am also asked to take into account that the use of zero dollar advertising is, on the evidence in the case, common. It is submitted that Telstra should not be singled out. In my view, where you have properly identified misleading conduct, granting an injunction does not simply add a potential penalty, it marks out and defines for the parties, and particularly for the respondent, that which can and cannot be done. I find it difficult to understand why, that being the case, the injunction should not be made permanent, bearing in mind that s 80 (by contrast with the position in equity) specifically contemplates that there may be variation to an injunction in the future (see s 80(3)). As I would have been inclined to make the injunction permanent, it would follow as a matter of logic that I find no problem with a five year injunction and I do not. 6 That then leads to a consideration of the text of the injunction. I agree with the addition of the words, 'being offered for sale by or on behalf of Telstra'. I do not agree with having both (a) and (b) in the injunction. I think it will just confuse everybody and make it difficult to comply with. It does not particularly concern me whether you take price and define that or take cost and define that; or if you say price you can say: 'meaning thereby the cost of the purchase of the bundle'. That is what has been argued in this case and I do not want to go any further than I need to. For the reasons I have advanced, the injunction should be very precise. Then there is the question as to the use of the symbol in the substantive part of the injunction. I do not think that it should be there. 7 In my opinion the proposed order 5, that is, the proceedings otherwise be dismissed, is appropriate. I indicated in the course of argument some concern about it but there is a point in Mr Scerri's argument that relief was sought going beyond that which is to be granted. 8 I am disposed to grant a suspension of the injunction. I have read the affidavits and, whilst there is some force in Mr Wright's submissions about this, I am satisfied that, given the extent of the operations of Telstra, it is reasonable to order a suspension up to and including 23 September. I expressly do not take into account in that regard the arguments based upon what Telstra's competitors are said to be doing. The suspension, of course, does not mean that Telstra is free to continue to break the law in the meantime as if it has received some sort of blessing. What will be will be, but the injunction does not run in the meantime. 9 The costs of today will be costs in the proceedings. Order 6 is that Telstra will pay the applicant's costs. 10 (Short minutes to give effect to these rulings were later handed up and formal orders made.) I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 1 September 2004 Counsel for the Applicant: RJ Wright SC, VF Kerr Solicitor for the Applicant: Phillips Fox Counsel for the Respondent: CM Scerri QC, AS McGrath Solicitor for the Respondent: Mallesons Stephen Jaques Date of Hearing: 19 August 2004 Date of Judgment: 19 August 2004