FEDERAL COURT OF AUSTRALIA Gillette Australia Pty Ltd v Energizer Australia Pty Limited [2005] FCA 1647 TRADE PRACTICES – consumer protection – comparative advertising – whether television advertising about the superior performance of the advertiser's batteries is misleading or deceptive Trade Practices Act 1974 (Cth) s 52 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 - applied Telstra Corporation Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 - cited Campomar Sociedad Limitada & Anor v Nike International Ltd & Anor (2000) 202 CLR 45 - applied General Newspapers Pty Limited & Ors v Telstra Corporation (1993) 45 FCR 164 - cited Pappas & Anor v Soulac Pty Ltd & Anor (1983) 50 ALR 231 - cited GILLETTE AUSTRALIA PTY LTD (ACN 000 011 914) AND THE GILLETTE COMPANY v ENERGIZER AUSTRALIA PTY LIMITED (ACN 003 539 026) AND EVEREADY BATTERY COMPANY, INC VID 1352 OF 2005 MERKEL J 17 NOVEMBER 2005 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 1352 OF 2005 BETWEEN: GILLETTE AUSTRALIA PTY LTD (ACN 000 011 914) FIRST APPLICANT THE GILLETTE COMPANY SECOND APPLICANT AND: ENERGIZER AUSTRALIA PTY LIMITED (ACN 003 539 026) FIRST RESPONDENT EVEREADY BATTERY COMPANY, INC SECOND RESPONDENT JUDGE: MERKEL J DATE OF ORDER: 17 NOVEMBER 2005 WHERE MADE: MELBOURNE THE COURT DECLARES THAT: 1. In causing the television advertisement, a copy of which is exhibit GSO-4 to the affidavit of George Staley O'Neil sworn 28 October 2005 ('the Advertisement') to be broadcast, the first respondent, Energizer Australia Pty Ltd ('Energizer Australia'), has engaged in conduct in trade or commerce, which was misleading and deceptive or likely to mislead and deceive, in contravention of s 52 of the Trade Practice Act 1974 (Cth). AND THE COURT ORDERS THAT: 2. Energizer Australia, whether by itself or by its servants, agents or howsoever otherwise, be restrained from causing the Advertisement to be broadcast for so long as the Advertisement contains a representation to the effect that Energizer's lithium batteries are the world's longest lasting batteries. 3. Each party bear its own costs of the proceedings unless the parties file submissions within seven days seeking a different order as to costs. 4. Reserve liberty to apply. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 1352 OF 2005 BETWEEN: GILLETTE AUSTRALIA PTY LTD (ACN 000 011 914) FIRST APPLICANT THE GILLETTE COMPANY SECOND APPLICANT AND: ENERGIZER AUSTRALIA PTY LIMITED (ACN 003 539 026 FIRST RESPONDENT EVEREADY BATTERY COMPANY, INC SECOND RESPONDENT JUDGE: MERKEL J DATE: 17 NOVEMBER 2005 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The present matter is another round in the comparative advertising battle between the applicants ('Gillette'), who sell batteries under the well known 'Duracell' brand, and the respondents ('Energizer'), who sell batteries under the well known 'Energizer' and 'Eveready' brands. 2 The last round concerned a television advertisement known as the 'Race Bunny' advertisement, in which Gillette claimed that the Duracell alkaline battery provided 'up to three times more power' than the Eveready Super Heavy Duty battery. The present round concerns a television advertisement referred to by the parties as 'the Chariot advertisement', in which Energizer claims that the Energizer lithium battery performs 'up to seven times longer' in high powered devices (such as digital cameras) than Duracell's standard alkaline battery. 3 In Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 ('Gillette v Energizer'), the Full Court found that a modified form of Gillette's Race Bunny advertisement was not misleading or deceptive, and therefore did not contravene s 52 of the Trade Practices Act 1974 (Cth) ('TPA'), because it accurately depicted the power difference between the Duracell alkaline and the Eveready carbon zinc batteries that were direct competitors in the market. Acting partly in reliance on the observations of the members of the Full Court in that case, Energizer prepared and broadcast its Chariot advertisement. Energizer claims that the advertisement accurately depicts the power difference between the Energizer e2 lithium AA and AAA battery and the Duracell AA and AAA standard alkaline battery, which are direct competitors in the market for batteries used in high powered devices, such as digital cameras. 4 Gillette commenced a proceeding in the Court claiming that the Chariot advertisement: (a) is misleading or deceptive or is likely to mislead or deceive and therefore contravenes s 52 of the TPA; and (b) makes false representations in connection with the supply and promotion of goods and therefore contravenes ss 53(a) and 53(c) of the TPA. 5 Gillette also claims that the advertisement breaches the terms of an agreement made on 10 January 1992 ('the 1992 agreement') by which Energizer and Gillette agreed not to use their respective pink bunny images in comparative advertising unless the advertising party makes an unambiguous and truthful claim that the advertiser's brand possesses service life superiority. 6 Gillette sought an interlocutory injunction restraining the further broadcasting of the Chariot advertisement but, with the co-operation of the parties, the proceeding was brought on for an early final hearing, rather than an interlocutory hearing. 7 The Chariot advertisement, which has been broadcast in Australia since 7 October 2005, is simple and graphic. The visual content of the advertisement is as follows. The advertisement, through a digital camera lens, depicts a hurdle race between Gillette's well known Duracell bunny and an animated caricature of an Energizer battery known and advertised as the 'Energizer Man'. The Duracell bunny stops at the second hurdle exhausted but the Energizer Man moves on with ease at great speed, overtaking the Duracell bunny seven times. Throughout the advertisement, a tally of the number of shots taken on a digital camera is shown in the upper right corner of the screen. At the point at which the Duracell bunny stops, the tally reads 80; when the Energizer Man stops, the tally reads 600. After completing the race the Energizer Man is shown posturing on the winner's podium. The advertisement ends with a brief shot of a packet of two Energizer e2 lithium AA batteries. 8 The audio and superimposed text of the Chariot advertisement are as follows: Voice-over Text In digital cameras, Duracell standard alkaline batteries will only take up to eighty shots. Energizer Lithium performs up to seven times longer Based on ANSI digital camera test using AA batteries taking up to a massive six-hundred shots. Energizer Lithium, the world's longest lasting battery in high powered devices. The world's longest lasting battery in high-powered devices Now available in AA and AAA 9 It is not seriously in dispute that the evidence establishes that the Energizer e2 lithium AA and AAA batteries compete with Duracell's AA and AAA standard alkaline batteries for use in digital cameras and other high powered devices and that the Energizer AA and AAA e2 lithium batteries last up to seven times longer than the same size Duracell standard alkaline batteries. It is also not seriously in dispute that the Energizer e2 lithium battery takes up to 600 shots in a digital camera and that Duracell's standard alkaline battery takes up to 80 shots in a digital camera. 10 Gillette's application commencing the proceeding, and its letters of demand prior to the commencement of the proceeding, alleged a variety of breaches of ss 52 and 53 of the TPA. However, Gillette confined its TPA case at trial to two allegations, which were expressed as follows: '(a) The Advertisement is likely to lead consumers into error for the simple reason that the Energizer Man, who features so prominently throughout the Advertisement, closely resembles Energizer's standard alkaline battery, the Energizer Max. The latter has been, and continues to be, sold in this country in very large numbers. Gillette contends that the Advertisement is therefore likely to mislead or deceive and conveys false representations. The Energizer Max does not have any of the service life superiority claimed in the Advertisement. (b) Even if it is accepted that Energizer's e2 lithium battery has the claimed service life superiority over the less expensive Duracell alkaline battery, those claims are untrue when regard is had to Duracell's CR-V3 lithium battery. The CRV3 battery is not out-performed by Energizer's e2 lithium battery in high-powered devices, including digital cameras.' 11 Before determining Gillette's allegations, it is appropriate to make the following findings of fact. Energizer and Duracell batteries are well known to, and widely used by, the public throughout Australia. The respective Energizer and Duracell brand names are also well known by the public throughout Australia. The three main types of batteries sold in Australia are carbon zinc, alkaline and, in more recent years, lithium. The lithium battery is the most technologically advanced and expensive battery of the three types. Energizer has recently engaged in extensive television advertising of its AA and AAA e2 lithium battery for use in digital cameras. The power advantages of the lithium battery also make it appropriate for use in other high powered devices such as MP3 players, CD players, electric toothbrushes, electric shavers, hand held electronic games, personal organisers, wireless computer mouses, global positioning systems and high powered toys. The most common batteries sold in Australia are the AA and AAA alkaline batteries of Energizer and Duracell. Energizer's lithium batteries have a total share in value in the battery market in supermarkets of between about 1.2% to 2.6%. However, they are also sold in shops selling digital cameras. 12 Although Duracell does not sell AA or AAA lithium batteries, Duracell and Energizer directly compete with their respective CRV3 lithium batteries, which are roughly rectangular shaped batteries that are often interchangeable with two AA batteries in high powered devices. Although there is evidence of superior performance by the Duracell CRV3 lithium battery in comparison with two Energizer AA lithium batteries, it is sufficient for present purposes that I find that the performance of the Duracell CRV3 lithium battery in a digital camera (and in other high powered devices) is not less than the performance of two AA size Energizer e2 lithium batteries. In fact, the evidence is to the effect that the CRV3 lithium batteries of Duracell and Energizer provide over 680 shots on a digital camera, compared with over 610 shots for two Energizer AA e2 lithium batteries. There was some dispute as to the extent to which CRV3 lithium batteries are used in digital cameras but I am satisfied that the potential use of those batteries in digital cameras is significant. The relevant evidence in that regard is that: (a) of the cameras sold that can take two AA size batteries, 45% (in terms of units) can also take a CRV3 battery instead of the AA batteries; (b) 64% of all digital cameras sold can take AA batteries; and (c) the top selling and second top selling camera can take either two AA size batteries or a CRV3 battery. 13 Finally, both Duracell and Energizer have widely and extensively used their respective bunny and Energizer Man images to advertise their respective ranges of batteries. Gillette's market research in relation to the 'Brand Personality/Icon' aspects of the two images, which was carried out on its behalf in October and November 2004, showed that 79% of the respondents identified the bunny as representing Duracell and 86% of the respondents identified the Energizer Man as representing Energizer. By far, the largest volume of Energizer products that have been advertised, packaged and sold by reference to the Energizer Man are the Energizer Max AA and AAA alkaline batteries. These two sizes account for approximately 84% of total battery sales. However, other Energizer products, including its e2 lithium batteries, are also advertised, packaged and sold by reference to the Energizer Man. I am satisfied that, by October 2005, the Energizer Man had become widely known as representing Energizer's battery products generally and therefore represented a brand, rather than a specific product, image or icon. 14 Before turning to consider Gillette's two allegations about the Chariot advertisement, it is appropriate to restate the following observations, which were made in Gillette v Energizer in the context of the comparative advertising in the Race Bunny advertisement. Factual assertions made by an advertiser must be true and accurate (at 634 [20] per Heerey J and at 641 [44] per Lindgren J). Generally, comparative advertising should be between actual competitors and competing products (at 654 [90] per Merkel J) and the comparisons between competitors should also be 'appropriate' comparisons (at 644 [53] per Lindgren J and at 654 [90] and 655 [94] per Merkel J). Notwithstanding the above requirements, comparative advertising can have the valuable effect of encouraging and enabling 'better informed consumer choices' (at 634 [20] per Heerey J; at 645 [53] per Lindgren J and at 654-655 [91]-[93] per Merkel J). Thus, it was said that 'it would be inconsistent with the policy and objectives of the TPA to restrict a trader from publicising, truthfully, a feature of its product which is superior to the same feature of a competitor's product' (at 634 [24] per Heerey J and at 654 [91] per Merkel J). In respect of television advertising, it was observed that the audio and superscript messages shown during a commercial are not to be regarded as ineffective, although they must be viewed in the full context of a particular commercial, with regard for the length of time they were shown and other similar considerations (at 635 [26] per Heerey J; at 647 [53] per Lindgren J and at 655 [94] per Merkel J). See also Telstra Corporation Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 at 523-524. 15 An advertiser is only responsible for the representations, be they passive or active, made in the course of a commercial. Thus, a viewing consumer may make assumptions, not on the basis of those representations but on the basis of the consumer's self-induced and incorrect assumptions, which ought not to be attributed to any conduct of the advertiser. (see 635 [28] per Heerey J and at 646 [53] per Lindgren J). See also Campomar Sociedad Limitada & Anor v Nike International Ltd (2000) 202 CLR 45 ('Nike') at 86-87 [105]. Finally, when comparing two competing products, there is no obligation to compare all relevant factors that might influence consumers (see at 634 [22]-[24] per Heerey J; at 646 [53] per Lindgren J and at 653 [85] per Merkel J). 16 Having regard to the above observations, I now turn to consider Gillette's primary contention that the use of the Energizer Man in the Chariot advertisement will be understood by a certain section of the public to be a comparative advertisement in relation to Energizer's and Duracell's standard alkaline batteries, rather than in relation to Energizer's lithium and Duracell's standard alkaline batteries. In my view the contention is wrong for a number of reasons. 17 First, Gillette's contention requires a viewer to disregard the combined effect of the voice-over and the text which clearly identify the comparison to be between Energizer's lithium battery and Duracell's standard alkaline battery. There is no basis in the evidence for concluding that the voice-over and the text would be, or has been, disregarded by consumers. Further, the Chariot advertisement does not refer to the Energizer Max standard alkaline battery nor does it feature the distinct packaging or colours used to market that product. Indeed, the packaged product displayed at the conclusion of the advertisement is Energizer's e2 lithium battery. 18 Secondly, I have found that the image of the Energizer Man is widely known by the public to be a brand image, rather than a specific product image. In particular, I do not accept Gillette's contention that the use of the image in the Chariot advertisement would be taken by reasonable or ordinary members of the public, or a significant part thereof, to be an advertisement relating to Energizer Max alkaline batteries. Gillette's contention was based upon the Energizer Man's appearance or 'get up' which, so it was said, would be recognised by viewers as being the Energizer Max alkaline battery. While it can be accepted that some aspects of the Energizer Man's 'get up' are similar to that battery, other aspects make it dissimilar. However, most importantly, the wide and extensive advertising of the Energizer Man has led him to be identified as representing Energizer's range of products rather than just a particular product (ie Energizer Max batteries), albeit that that product forms the major part of the sales from the Energizer range. In pursuance of that brand connection, the Energizer Man currently appears on Energizer's packaging for the Energizer e2 Advanced, Max, Rechargeable and e2 lithium ranges. He is also used prominently in Energizer's general marketing and advertising. 19 Thirdly, the limited sales figures for the period in which the advertisement has run do not support Gillette's contention. Those figures reveal a significant increase in sales of Energizer's lithium batteries, with little change in the sales of the Energizer alkaline batteries. It can be accepted that a number of factors can affect those sales and that the figures relate to a short period of time. However, if the advertisement's representation was perceived to be a statement of the superior performance of Energizer's alkaline batteries over Duracell's alkaline batteries (which are sold at competing and broadly equivalent prices), it would be reasonable to expect that to be reflected by some increase in sales of Energizer's alkaline batteries. There is no evidence of any such increase. 20 Fourthly, Energizer's creative briefs and correspondence that led to the creation of the Chariot advertisement do not reveal any intent on Energizer's part to promote or obtain an increase in its alkaline battery sales. The briefs and correspondence confirm that the advertisement was to promote the substantially higher power of Energizer's lithium battery when compared with its direct competitor in the market, Duracell's standard alkaline battery. Of course, the advertisement also sought to enhance Energizer's brand image over Duracell's brand image, but that is a quite different representation to that contended for by Gillette. While such briefs and correspondence cannot displace the actual representations made in the advertisement, the fact that Energizer did not intend to make any representation of the kind alleged by Gillette does not support Gillette's case. 21 Fifthly, Gillette sought to rely on the limited market share of, and the limited display area made available to, lithium batteries to suggest that Energizer was, in truth, seeking to advertise and compare alkaline batteries, which was the main area of competition between Energizer and Duracell. Even if the matters relied on by Gillette are correct, they cannot override the unambiguous comparative message conveyed by the Chariot advertisement, which I have found does not include a representation in relation to Energizer's alkaline batteries. In any event, Gillette's argument failed to take account of the increased promotion and sales of Energizer's lithium batteries. In that regard, it is relevant that the Chariot advertisement is part of a sequence of television advertisements concerning Energizer's lithium batteries, the sales of which have increased significantly in the period between October 2004 and September 2005, presumably in response to the advertisements. 22 Finally, there is no evidence that any viewers formed the view contended for by Gillette. Even if some members of the public might have formed the view that the comparison is between alkaline batteries, that view will have been formed as a result of the viewers' wrongful assumptions, rather than as a result of any representation made by Energizer. Put another way, any misconception arising in the minds of those viewers is not properly to be attributed to the ordinary and reasonable members of the relevant class of viewers or prospective purchasers: see Nike at 86-87 [105]. 23 It follows from the foregoing that I do not accept Gillette's primary allegation in respect of the Chariot advertisement. 24 Gillette's secondary allegation has more merit. The Chariot advertisement contains a clear and explicit representation in both the voice-over and the text that Energizer's lithium battery is the 'world's longest lasting battery in high powered devices'. That representation is not true or accurate because Duracell's CRV3 lithium battery, which is both competitive with, and generally substitutable for, Energizer's AA e2 lithium battery, lasts at least as long as that battery. 25 Energizer contended that the representation would be regarded as mere puffery or exaggeration and should not be elevated to misleading conduct: see General Newspapers Pty Limited & Ors v Telstra Corporation (1993) 45 FCR 164 at 178 and Pappas & Anor v Soulac Pty Ltd & Anor (1983) 50 ALR 231 at 234. I do not accept that contention. In the context of the Chariot advertisement's proclamation of the significantly superior power of Energizer's lithium batteries over that of Duracell's alkaline batteries, the representation that the Energizer batteries are also the world's longest lasting batteries in high powered devices is a significant and unambiguous representation of fact, which would not be perceived by the public to be mere exaggeration. The representation in the Chariot advertisement may be contrasted with the representation made by Energizer on the packaging of Energizer's lithium e2 AA and AAA batteries, which state the batteries to be 'The world's longest lasting AA [or AAA] battery in high-powered devices'. It is also relevant that one of the purposes identified by Energizer in its creative brief for the Chariot advertisement was to 'communicate the superior nature, from a pure performance perspective, of Energizer lithium versus all other ordinary battery products when used in digital cameras'. The brief also stated the 'Proposition' being put forward was that: 'Energizer Lithium is the world's longest lasting battery in high powered devices…' 26 The representations to that effect that were made in the Chariot advertisement were made with the intention that consumers would accept and make their purchasing decisions on the basis that the representations made in the advertisement were true and accurate. While the representations may have been accurate if they only related to AA and AAA batteries, I do not accept that the representations were, or would be, perceived by ordinary or reasonable viewers to be so confined. In summary, the 'world's longest lasting battery' representations travel well beyond what might be ascribed to be mere puffery or exaggeration. 27 Energizer also challenged Gillette's bona fides in making its second allegation. It claims, with some justification, that Gillette had not previously complained about the 'world's longest lasting battery' representation, notwithstanding that it had been made by Energizer in a number of previous advertisements. However, Gillette claimed that it complained about the representation on this occasion because it is the first time Energizer has made the representation in comparative advertising. I am not satisfied that any delay on the part of Gillette is such that Gillette should be refused relief, which would protect the public against misleading and deceptive advertising. 28 For the above reasons, I accept Gillette's secondary contention and am therefore satisfied that the broadcasting of the Chariot advertisement in its present form is likely to mislead and deceive, is misleading and deceptive and contravenes s 52 of the TPA. Plainly, that continuing contravention justifies the grant of an injunction restraining the further broadcast of the Chariot advertisement. However, as the only aspect of the advertisement that contravenes s 52 relates to the 'world's longest lasting battery' representations in the voice-over and text, the injunction should only be in respect of the Chariot advertisement containing representations to that effect. It would follow that if the offending representations were removed from the advertisement, the broadcast of the Chariot advertisement in that modified form would not be in breach of the injunction. 29 Gillette has therefore succeeded in establishing that it is entitled to relief in respect of its cause of action based on a contravention of s 52 of the TPA. It is therefore unnecessary to determine Gillette's claims under s 53 of the TPA. The same situation also arises in relation to Gillette's claims concerning the 1992 agreement. In any event, I have some doubt as to whether the broadcast of the Chariot advertisement breaches that agreement because I have not found the use of Duracell's pink bunny to be misleading and deceptive or to be in any way related to the representation that I have found to be misleading and deceptive. Also, there is a real issue as to whether the agreement was only to apply to a comparative advertisement which used the pink bunnies of both Energizer and Duracell. However, as the contractual cause of action could not add to the relief to which Gillette is otherwise entitled, it is unnecessary to finally determine those issues. 30 Gillette also sought injunctive relief in respect of certain other representations set out in [6] of the application, but the contentions it advanced did not seek to uphold those representations which, in substance, were that the Chariot advertisement compared the performance of all Energizer batteries (including 'Energizer Max' alkaline batteries) with Duracell's standard alkaline batteries. 31 Gillette has failed in its main contention but succeeded in its secondary contention, which was first raised shortly prior to the hearing. Also, while Gillette has succeeded in its TPA claim for declaratory and injunctive relief, the injunction will not prevent the Chariot advertisement from being broadcast if the advertisement is modified by the removal of the offending representations. Having regard to the above matters I have concluded that, unless I receive submissions within 7 days seeking a different order as to costs, it is appropriate to order that the parties bear their own costs of and incidental to the proceeding. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel. Associate: Dated: 17 November 2005 Counsel for the Applicant: J Nicholas SC with MA Tran Solicitor for the Applicant: Minter Ellison Counsel for the Respondent: JL Sher QC with PJ Cosgrave Solicitor for the Respondent: Gilbert & Tobin Dates of Hearing: 9 and 10 November 2005 Date of Judgment: 17 November 2005