New South Wales Supreme Court CITATION : Luxottica Retail v Specsavers [2010] NSWSC 37 HEARING DATE(S) : 20/1/2010 JURISDICTION : Equity Division JUDGMENT OF : McDougall J at 1 EX TEMPORE JUDGMENT DATE : 20 January 2010 DECISION : See paragraphs [47] to [49] of the judgment. CATCHWORDS : EQUITY - application for interlocutory injunctive relief - whether defendant should be restrained from continuation of television advertisement - comparing its products with plaintiff's products - misleading and deceptive conduct - whether serious question to be tried as to whether plaintiff is likely to obtain final relief - whether balance of convenience favours grant of injunctive relief. - TRADE AND COMMERCE - Trade Practices Act 1974 (Cth) - misleading and deceptive conduct - comparison advertising. LEGISLATION CITED : Trade Practices Act 1974 (Cth) CASES CITED : Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 RHG Mortgage Securities v BNY Trust [2009] NSWSC 1011 PARTIES : Luxottica Retail Australia Pty Limited (Plaintiff) Specsavers Pty Ltd (Defendant) FILE NUMBER(S) : SC 2010/16265 COUNSEL : J N West QC / P L Dodson (Plaintiff) D B Studdy SC (Defendant) SOLICITORS : Norton White (Plaintiff) Minter Ellison (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION McDOUGALL J 20 January 2010 16265/10 LUXOTTICA RETAIL v SPECSAVERS JUDGMENT 1 HIS HONOUR: The plaintiff provides optometry services and supplies optical products, mainly spectacles, from about 280 stores across Australia. Those stores are known as "OPSM" stores and it is convenient to refer to the plaintiff as OPSM. The defendant (Specsavers) operates a number of similar stores across Australia. However, in contrast to OPSM, "Specsavers" stores are operated by franchisees. 2 Specsavers has instituted an advertising campaign that purports to compare spectacles of a certain description available from it with what it says are equivalent spectacles available from OPSM. As one might expect, the comparison is to the disadvantage of OPSM. OPSM complains that the advertisement in question is misleading or deceptive. It seeks interlocutory relief to restrain the continuation of the advertising campaign. The issues 3 The debate was conducted by reference to the well known threefold test: (1) has OPSM made out a serious question to be tried (in the sense I shall shortly explain) as to whether it is likely to obtain final relief? (2) if a serious question to be tried has been made out, does the balance of convenience favour the grant, or the withholding, of interlocutory injunctive relief? (3) (a point allied to the last) are damages an adequate remedy for any harm that OPSM may suffer if interlocutory injunctive relief is refused, and on a final hearing it is found that the advertisement in question was misleading or deceptive? 4 The principal debate focused on the first issue. That in turn focused on the representations that were made, or said to be made, in the advertisement in question. I will return to the detail of that advertisement. The applicable principles: grant of interlocutory injunctive relief 5 I looked at this question in RHG Mortgage Securities v BNY Trust [2009] NSWSC 1011 at [8] to [10]. The parties accepted that I should guide myself by the principles that I there set out. Accordingly, I shall repeat what I said and move on: [8] The principles by reference to which the courts grant interlocutory injunctive relief were examined, although in the somewhat different context of an application to restrain publication of defamatory material, in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57. Gummow and Hayne JJ discussed the principles from 81 [65]. Their Honours said that the first question was whether the plaintiff had made out a prima facie case "in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief". (The quotation comes from the earlier judgment of the Court in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622 – 623: a passage cited by Gummow and Hayne JJ.) [9] Gummow and Hayne JJ explained that the expression "prima facie case" did not mean that it was more probable than not that at trial the plaintiff would succeed. Their Honours said that "it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial". In these reasons, from both force of habit and a preference for English over Latin, I use the phrase "serious question to be tried". It should be understood as equivalent to the phrase "prima facie case" as that expression was explained by Gummow and Hayne JJ in O'Neill . [10] At 84 [72], Gummow and Hayne JJ referred to "the particular considerations which arise where the grant or refusal of an interlocutory injunction in effect would dispose of the action finally in favour of whichever party succeeded on that application". Their Honours took the principles from the judgment of McLelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533. In that case, McLelland J summarised the applicable principles as including the following: (1) where the plaintiff's entitlement to final relief is uncertain, the court should consider what is best calculated to achieve justice between the parties in the circumstances of the particular case, until the uncertainty can be resolved at a final hearing; (2) in doing so, the court should bear in mind the consequences to the parties of the granting or withholding of interlocutory relief; (3) where the uncertainty depends on a contested question of fact, the court should not decide that question on the interlocutory application; (4) where the uncertainty depends on a contested question of law, the court can decide (but is not bound to decide) that question on the interlocutory application; and (5) whether the court should decide a contested question of law will depend on all of the circumstances of the case, including the novelty or difficulty of the question, whether it could be resolved on the state of the evidence, and whether the urgency of the matter meant that the court could not give proper consideration to the question. The principles: comparison advertising 6 Both parties referred me to the decision of the Full Court of the Federal Court of Australia in Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629. In that case, all three of their Honours who constituted the Court looked at the relationship between "comparison advertising" and the relevant provisions of the Trade Practices Act 1974 (Cth). Heerey J said at 633 [20] that there was nothing in the Trade Practices Act to justify the conclusion that comparison advertising was inherently disreputable or to be viewed with suspicion. On the contrary, his Honour said, if the advertising were accurate and provided "hard facts", it could assist in the making of better informed choices by consumers and thereby give effect to the Act's object of promoting competition. 7 Lindgren J at 640 [43] appeared to accept the views expressed by Heerey J. So too did Merkel J at 655 [93]. 8 One matter of potential significance to which Lindgren J referred at 641 [44] is that a company contemplating undertaking a comparison advertising campaign should be aware that the company with which the advertiser's goods or services are compared is likely to look closely at the content of the comparative advertisement. Thus, his Honour said, "the advertiser can reasonably expect a challenge, including a challenge to the point of litigation". The advertisement 9 The advertisement in question was shown on national television, during major national sporting events. Unless restrained, Specsavers proposes to continue the advertisement during January 2010 particularly, as I understand it, by reference to the Australian Open Tennis Championship. 10 The advertisement consists of a voice-over accompanied by "visuals", including a "visual" of Mr Peter Larsen, who appears to be the managing director of Specsavers. It starts by stating in words, reinforced by images, that Specsavers will sell two pairs of multi-focal glasses for only $329 "in any store you visit". It then points out that "at OPSM we found the price for two pairs of their cheapest multi-focals varied by over $500 from store to store". That is followed by the observation, which both contextually and syntactically should be conjoined with what I have just set out, that the variation is anywhere up to $988 "for up to two pairs". Those words are accompanied by images showing the Specsavers logo, two pairs of spectacles and the sum of $329 in one column and in an adjacent column the OPSM initials, two pair of spectacles, and the words and figures "Up to $988". Beneath those words and images the following appears: "Excludes health fund rebates. Based on 24 mystery shoppers nationally between 8/12/09 and 13/01/10". 11 After an exhortation from the voice to shop at Specsavers, the advertisement finishes by stating: "If you're paying too much for glasses you should have gone to Specsavers". The other evidence 12 OPSM's evidence, which for the purposes of this application I accept, was given substantially by Ms Anthea Kylie Muir, who describes herself as the Vice President of product and IT of the plaintiff company. In addition, there was an affidavit of a solicitor, Mr David Robert Fox, proving the advertisement. 13 Ms Muir's evidence covers a number of matters. Of particular significance, she said that: (1) the price of a pair of spectacles comprises the cost of the frame, the cost of the lenses and the cost of any additional features; (2) the price will vary according to the differing costs of those integers; (3) OPSM stores price lenses and frames at the same figure for the same product in all stores across Australia. That is done through a central computer system which lists and gives the retail prices for each product and enables stock levels at each store to be monitored. Each store has access to that system; (4) prices may vary during sales and promotional campaigns but the products will still be priced by reference to their standard retail price to which the relevant discount or promotional figure is applied; (5) the lowest price for frames offered by OPSM is $99 per pair, and there is a range of frames at various "price points" thereafter; (6) progressive addition lenses (which I think are substantially what is in issue in this case) start at $270 per pair and increase thereafter; (7) accordingly, the least expensive combination of frame and progressive addition lenses would be $369; (8) when a customer buys two pairs of spectacles from OPSM, he or she is given a discount of 50 per cent off one of those pairs (the less expensive); (9) accordingly, a customer who purchased two pairs of spectacles with the cheapest frame and the cheapest progressive addition lens would pay $553.50: $369 for the first pair and $184.50 for the second. 14 Ms Muir reinforced the proposition that the prices were "available for these products at all OPSM stores". She said that all those stores "Stock frames from the $99 price range". Likewise, she said, "every store has the full range of lenses available". 15 In relation to the second and third issues, (balance of convenience and adequacy of damages) Ms Muir said, in somewhat generalised and unsupported terms, that "an allegation that OPSM has a policy or practice of charging substantially different prices for the same or identical products from store to store is a very damaging allegation and is untrue". She said that consumers would likely regard retailers who did that "with great suspicion", and referred to what she said was "considerable publicity in the media about this practice in relation to supermarkets". She expressed a fear that OPSM's reputation might be seriously damaged. 16 Specsavers' evidence came through its solicitor Ms Lynne Elizabeth Anne Peach. Much of the evidence was given on information and belief. Because of the attack made on the form of the evidence, and submissions put as to the weight that should be given to it, it is necessary to record that these proceedings started with an ex parte application for interlocutory injunctive relief made at 2pm on 18 January 2010. I refused to grant that relief, but gave leave to serve on short notice and made the proceedings returnable before me at 2pm on 19 January 2010. The summons and affidavits in support were served (in accordance with my directions) a little before 4pm on 18 January 2010. Ms Peach's affidavit, which includes a substantial body of exhibits, was made available within 24 hours. 17 I accept that, with world enough and time, it would have been possible for Specsavers to produce a great deal more evidence. In particular, I accept, it would have been possible for Specsavers to call evidence from the mystery shoppers in question, and not, as it did, what purported to be their evidence mediated through several mouths. However, the practicalities have to be borne in mind; and in my view it is a little uncharitable to criticise the form and content of Ms Peach's affidavit when one bears in mind the time available for its preparation. 18 Ms Peach said, on information and belief, that Specsavers engaged both external and (I think) internal sources to carry out its mystery shopping campaign. Each mystery shopper was briefed "to purchase two pairs of the cheapest frames and cheapest multi-focal lenses available" from particular OPSM stores. Each mystery shopper was required to be an existing spectacle wearer and to have a prescription within a certain range. That was said to be "a standard range for multi-focal wearers" that does not require "any specialist lenses". The purpose of the campaign was said to be "to collect information about the lowest prices available for two pairs of glasses with multi-focal lenses at OPSM stores around Australia". 19 Ms Peach said that she was informed by a named employee of Specsavers, and believed, "that each of the 24 mystery shoppers confirmed that they had complied with the assignment and purchased two pairs of the cheapest frames with the cheapest multi-focal lenses made available to them at the OPSM store". 20 Some 24 mystery shoppers carried out the exercise. They went to OPSM stores in New South Wales, Queensland, South Australia, Victoria, Tasmania, Western Australia, the Australian Capital Territory and the Northern Territory. In some cases there is evidence in the form of e-mails either from or recording the observations of mystery shoppers as to what they did. In other cases there is not. 21 The outcome of the mystery shopping campaign is summarised in a table. That shows that, in New South Wales, the cheapest combination price for two pairs of spectacles was $469 and the highest combination price was $988. There was only one purchase (in New South Wales) at the higher level. Other prices are set out in the table, but it is not necessary to go to them. The same table shows that, in Victoria, the lowest price achieved was $468 and the highest price was again $988. There is again only one purchase at the higher price. 22 Some of the mystery shoppers were queried as to why they had bought what they did. In a number of cases, e-mails that, as I have said, either come from them or record their comments are available. They record the following matters: (1) "I asked for the cheapest frames available. When I selected the frames I was advised there was only one pair available at that price so I needed to make another selection."; (2) "She said she asked for the basic lenses and cheapest frames...the sales lady says with the lenses she has to get a frame which is a bit bigger..."; (3) "He said that after ordering the lenses he had a look around and chose the frame that he thought was the cheapest on display. He then asked staff if this was the cheapest one. Staff told him they have one frame that is even cheaper...so be (sic) purchased this one"; (4) "After choosing the MF lenses he was asking for the cheapest frame available..."; (5) "The glasses are the cheapest recommended...this one is the basic necessary lens"; (6) "When she chose the lenses the staff showed her a selection of the cheapest frames available. She asked for the most basic and cheapest, staff told her that...this one would be the cheapest". 23 Ms Peach said further, and again on information and belief third hand, "that at no time were the mystery shoppers who sought to purchase two pairs of the cheapest multi-focals offered the opportunity to purchase frames for $99 or $119". The value of that evidence, directed to establishing a negative fact, is limited except to the extent it is supported by the contents of the e-mails to which I have referred. 24 Ms Peach also gave evidence directed to the balance of convenience. That evidence showed, among other things, that: (1) Specsavers had spent, or committed to spending, well in excess of 1 million dollars on the campaign; (2) if the advertisements were not permitted to be shown it would be difficult to replace them with something useful to fill the space that had been bought; (3) there is a complementary advertising campaign being carried on in Specsavers stores that depends, for its efficacy, on the particular advertisement in question; (4) an injunction would have a significant impact on Specsavers' franchisees, which impact could not be quantified in terms of damages if in due course OPSM failed to make out its case. First issue: serious question to be tried The parties' submissions 25 Mr West QC, who appeared with Mr Dodson of counsel for OPSM, put OPSM's case as follows. He submitted that, on the uncontroverted evidence of Ms Muir, OPSM's cheapest multi-focals cost $369 for one pair and would cost $553.50 for two pairs; and there was no variation in this price from store to store. Thus, he submitted, the core of the representation - "the price for two pairs of their cheapest multi-focals varied by over $500 from store to store anywhere up to $988 for two pairs" - was not objectively correct. It followed, he submitted, that if Specsavers were to justify the advertisement it would have to show that the mystery shoppers had indeed sought in each case to buy the cheapest possible combination of frames and lenses and that the prices they were charged reflected the outcome of that endeavour. This, he submitted, was precisely what was not shown by the evidence of Ms Peach. 26 Further, Mr West criticised the reference to a variation of over $500. He submitted that it should have stated specifically that this variation was found in only two cases. Likewise, he submitted, the reference to "up to $988" should have been similarly qualified. 27 Mr West noted that there was no qualification in the advertisement, to the effect that the comparison exercise was limited to what was "available" in the 24 stores in question on the days in question. Thus, while he accepted that a reasonable viewer of the advertisement would understand that the statements were purportedly based on the mystery shopping exercise, he submitted that it was defective because it was not so qualified. 28 I should note that Mr West took no point based on the limited nature of the exercise (relating to 24 out of some 280 stores). 29 For Specsavers, Mr Studdy SC submitted that the words in question, in the context in which they appear in the advertisement, clearly related the comparison to the particular mystery shopping exercise that had been undertaken. He submitted (correctly) that the figures that were set out could be justified from the results of that exercise, and that it did not matter that the variation in question, to the extent of $500, occurred only twice. 30 Further, Mr Studdy submitted it was not appropriate to focus on what might, in theory, be available through OPSM's stock system. He submitted that what consumers were interested in was what was available in store on the day they went there. Decision 31 It is necessary to look at the representation in context. That context starts with the proposition, unchallenged for today's purposes, that Specsavers will supply two pairs of multi-focal glasses for only $329 in any store. Of course, that statement is qualified: by a statement that it is referable to glasses "with Pentax standard multi-focal lenses" and that "prices for other lens types may differ". 32 The advertisement then moves on to a comparison with what is available from OPSM. In context, it is plain that the comparison is based on the mystery shopping exercise. That is apparent not only from the statement to that effect that I have set out above but also from the words "we found the price...". Those words reinforced the proposition that what is being compared with the Specsavers' offer is the mystery shoppers' empirical experiences in OPSM stores. 33 I do not think that it is sensible to read the representation as stating that the cheapest price that might be available from OPSM in any store for any product has the qualities that are referred to in the advertisement. In other words, I think, the representation should not be read as going to the point that Ms Muir was at pains to establish in her evidence. In my view, the appropriate reading of the representation is that it summarises the empirical experiences of the 24 mystery shoppers. 34 Thus, I do not think that it is to the point that the cheapest multi-focal lenses and frames combinations available from OPSM (as Ms Muir would have it) are other than those obtained by the mystery shoppers or that (again as Ms Muir would have it) those prices should not vary from store to store. 35 In one sense, it could be said that the comparison may not be of like with like. That is because the Specsavers part of the comparison - "two pairs of multi-focal glasses for only $329 in any store" is not said to be based on some mystery shopping exercise but, rather, on Specsavers' policy. It might have been more realistic to compare that with the evidence available from OPSM's stock system, but Specsavers could hardly have been expected to have that sort of evidence available to it. 36 Whether the comparison is a valuable exercise is thus open to doubt. But that is not the point. The point is whether the advertisement is misleading or deceptive (or, more accurately, whether there is a serious question to be tried as to whether it is misleading or deceptive). It could only be misleading or deceptive, given the view that I have expressed as to how it should be read, if it did not state accurately results obtained from the mystery shopping exercise. Since the figures that it states are available from the exercise, and justified by the results obtained, it does not seem to me to be seriously arguable that the advertisement is misleading or deceptive in that respect. 37 However, it is necessary to notice Mr West's submission that this could only be the case if Specsavers established that the mystery shoppers had asked for the cheapest possible combination in each case. If that had not been done, he submitted, the burden of showing that the representation was not misleading or deceptive had not been discharged. (Mr West submitted that this burden fell on Specsavers because, he said, Ms Muir's evidence established objectively that the figures stated in the advertisement did not reflect what would be "available" from OPSM.) 38 As I have said already, in discussing Ms Peach's affidavit, it is not in every case possible to ascertain, in any reasonably satisfactory way, what the mystery shopper asked for. However, when one combines the instructions that were given with the proposition (admittedly indirect and vague) that each of the mystery shoppers had complied with those instructions, there is some basis for thinking that the mystery shoppers did indeed seek to purchase the cheapest combination, within the relevant parameters, at the various stores to which they went. Further, when one takes into account the comments made by those mystery shoppers (appearing from the emails to which I have referred), it is clear that, in at least those six cases, the mystery shoppers appear to have done what they were asked, namely seek out the cheapest frames and leases available. 39 I accept that the evidence could have been clearer. I accept that it would have been possible to call evidence, either directly or on information and belief, of the actual instructions given and of the actual steps undertaken by each mystery shopper. No doubt, the matter could be adjourned for that evidence to be obtained. But if it were to be adjourned, it would still be necessary to decide whether to do so on the basis of granting, or holding, interlocutory relief. 40 On the view to which I have come, there is sufficient material to suggest that it is likely that the mystery shoppers did indeed carry out the tasks on which the advertisement is predicated. If that is, then there is a basis for thinking that the relevant statement, read in the way that I have interpreted it, should not be regarded as misleading or deceptive. 41 For those reasons, whilst I am not prepared to say that OPSM's case must fail, I conclude that the case that it seeks to make out is so weak that it does not justify the grant of interlocutory injunctive relief. Balance of convenience 42 In view of what I have just said, it is not necessary to look at this in any detail. It is however something that should be taken into account in conjunction with what I perceive as the weakness of OPSM's case (for the reasons that I referred to above in discussing the relevant principles). If - a hypothesis that still remains to be finally tested - Specsavers did undertake a campaign in which it sent out the mystery shoppers with instructions to seek the lowest price for the relevant combination at each store, then it cannot be said that Specsavers' decision to mount an advertising campaign based on the results of that survey, involving the expense to which I have referred and the consequences to which I have referred, is irrelevant to the question of balance of convenience. 43 I accept that there is a risk of reputational damage. Equally, I accept that, as Lindgren J pointed out in Gillette at 641 [44], that Specsavers should have been aware of the likelihood that OPSM would engage in litigation to challenge its campaign. To some extent I accept, therefore, that Specsavers undertook the campaign knowing of the risks; or should be taken to have known of the risks. But in circumstances where it seems to me there is a real likelihood that the factual basis of the campaign may be made good, the damage and waste of expense that would be caused if the campaign were injuncted is a significant factor in the balance of prejudice. 44 It is also necessary to note that the campaign commenced some five days ago, and that the advertisement has been aired on a number of occasions. Although, no doubt, repetition of itself is a factor to be taken into account in assessing the efficacy of the advertisement (as Heerey J recognised in Gillette at 635 [26]), the fact that the advertisement has run for a number of days seems to me to be something, although of relatively limited weight, to be taken into account in assessing balance of convenience. 45 Thus, to the extent that it is necessary to go to questions of balance of convenience, I think that those considerations tend against the grant of injunctive relief; a fortiori when they are aligned to what I perceive to be the weakness of OPSM's case. Adequacy of damages 46 It is not necessary to go into this. Conclusion 47 I refuse to grant injunctive relief in terms of prayer 7 of the summons. I will hear the parties on costs and on directions for the future conduct of the proceedings. [COUNSEL ADDRESSED] 48 I order that the costs of this application be the defendant's costs in the proceedings. 49 I stand the proceedings over to 22 January 2010 for directions. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.