EnforcementThe following are reports on new and concluded Commission actions in the courts, settlements requiring court enforceable undertakings (s. 87B) and mergers opposed by the Commission. Other matters currently before the court are reported in appendix 1. Section 87B undertakings accepted by the Commission and non-confidential mergers not opposed by the Commission are listed in appendix 2.

Anti-competitive agreements (Part IV)

South Australian fire protection com panies

Alleged agreements lessening competition (s. 45)On 17 October 2002 the Commission instituted proceedings in the Federal Court, Adelaide, against a number of participants in the South Australian fire protection industry, alleging they made, or attempted to make, illegal anti-competitive and price fixing agreements. It alleged that participants included several companies and that nine individuals, all either current or former directors or employees of companies involved in the industry, were knowingly concerned in or aided and abetted the conduct.

The Commission alleges that the conduct began in about 1992 and continued until at least 1997. It is alleged it generally involved the installation of sprinklers, alarms, and other fire protection systems on major construction projects, both private and public.

The companies are:

■ FFE Building Services Ltd

■ Tyco Australia Pty Ltd

■ Australian Fire Services Pty Ltd (and Australian Fire Services (SA) Pty Ltd)

■ On-Line Fire Protection Pty Ltd.

The Commission investigation began because the Tyco Group discovered the illegal conduct through

its trade practices compliance and training program and voluntarily approached the Commission with information. The Commission is seeking injunctions and declarations against all the companies. It is also seeking penalties and costs against FFE Building Services Ltd, Australian Fire Services Pty Ltd (and Australian Fire Services (SA) Pty Ltd) and On-Line Fire Protection Pty Ltd.

The Commission instituted court proceedings in 1999 alleging similar conduct in Queensland. The Federal Court in the Queensland case imposed total penalties of $14.79 million and made orders for almost $600 000 in costs. That case covered 38 individuals and more than 20 companies in the Queensland fire protection industry. Note that in the Queensland proceedings there were no allegations against Australian Fire Services Pty Ltd (or Australian Fire Services (SA) Pty Ltd) or against On-Line Fire Protection Pty Ltd.

The first directions hearing was held on 28 November 2002 and a further directions hearing listed for 7 February 2003.

D erm alogica Pty Ltd

Alleged resale price maintenance (s. 48)On 20 November 2002 the Commission filed proceedings in the Federal Court, Brisbane, against national supplier of beauty products, Dermalogica Pty Ltd.

The Commission alleges that between July and September 2002 Dermalogica attempted to induce two retailers to stop discounting Dermalogica products below Dermalogica’s suggested retail prices. On 16 September 2002 Dermalogica Pty Ltd wrote to the two retailers asking them to refrain from offering the Dermalogica product range for lower than the recommended retail price and to adjust their prices to reflect Dermalogica’s consistent pricing strategy.

Dermalogica’s web guidelines also stated that a violation of its policy could result in account termination and legal action.

36 ACCC Journa l No. 43

Enforcement

The Commission is seeking declarations, pecuniary penalties and injunctions restraining Dermalogica from:

■ representing to any person that it will not supply Dermalogica products to them unless they agree not to sell the products at a price less than one specified by it

■ attempting to induce any person not to sell Dermalogica products below a price specified by it

■ representing to any person that the price of the Dermalogica products must not be discounted below a price specified by it

■ making a statement of price or prices that is likely to be understood as the price or prices below which Dermalogica products cannot be sold.

A directions hearing was held on 18 December 2002.

Berw ick Springs M edical Practice

Alleged agreements lessening competition (s. 45), primary boycotts (s. 45, 4D)On 2 December 2002 the Commission instituted proceedings in the Federal Court, Melbourne, against AK Freund Pty Ltd and Dr Abraham Freund, for allegedly attempting to make or induce an arrangement or understanding with a competitor to boycott bulk-billing and boycott after-hours medical services.

AK Freund Pty Ltd is a lessee of the Berwick Springs Medical Centre. Dr Abraham Freund is a director of AK Freund Pty Ltd and a general practitioner providing medical services from the centre. The Berwick Springs Medical Centre is located within the City of Casey, Victoria.

The Commission alleges that AK Freund Pty Ltd and Dr Abraham Freund, insisted on the incorporation of ‘rules’ in any leases of the medical centre suites. The rules included obligations on general practitioners operating separate businesses in competition with AK Freund Pty Ltd and Dr Abraham Freund not to provide:

■ bulk billing services to patients, other than to pensioners, Health Card holders or the GP’s immediate family members

■ medical services to patients after 8 pm Monday to Saturday or after 1 pm on Sundays.

The Commission alleges it was AK Freund Pty Ltd and Dr Abraham Freund’s intention that, by the

incorporation of the rules into leases for the medical centre suites, anyone who entered into a lease for a suite at the medical centre would be subject to the rules.

The Commission further alleges it was AK Freund Pty Ltd and Dr Abraham Freund’s primary concern that any general practitioners who might practice from the medical centre in competition with Dr Freund, be obliged not to bulk bill generally without the consent of AK Freund Pty Ltd and be restricted as to their hours of practice.

The Commission is seeking court orders including declarations, injunctions, the implementation of a trade practices compliance program, findings of fact and costs.

A directions hearing was scheduled for 7 February 2003 in the Federal Court, Melbourne.

Q ueensland N ew spapers Pty Ltd

Misuse of market power (s. 46)On 5 December 2002 the Commission accepted court enforceable undertakings from Queensland Newspapers Pty Ltd regarding the advertising of internet or email addresses in the classified sections of its newspapers.

Complaints were made to the Commission that several internet businesses could not advertise in the classified sections of Queensland Newspapers, including The Courier Mail.The Commission expressed concern that Queensland Newspapers Pty Ltd has a substantial degree of power in the Queensland markets for newspaper advertising and/or newspaper classified advertising, and having refused supply, may have contravened s. 46 of the Trade Practices Act.

Queensland Newspapers Pty Ltd has given court enforceable undertakings to the Commission that it will:

■ establish a new classified advertisement category entitled ‘Internet Classified Services’ for the general and lift-out sections of its newspapers

■ publish this new category next to the ‘Internet Services’ category in general classifieds

■ advertisements for a specific good, service or opportunity that contains an internet/email address less than 25 per cent of the total advertisement will be permitted in the specific good, service or opportunity classified

ACCC Journa l No. 43 3 7

Enforcement

column—advertisements containing an internet/email address greater than 25 per cent of the total lineage of the advertisement may be placed in the general or business pages of the paper

■ also place the Internet Classified Services category in lift-outs such as the real estate or motoring lift-outs where it can include display advertising.

George W eston Foods Lim ited

Alleged price fixing (s. 45)On 5 December 2002 the Commission instituted proceedings in the Federal Court, Sydney, against George Weston Foods Limited and Mr Paul Benedict Loneragan, a former director of George Weston, alleging an attempt by George Weston and Mr Loneragan to induce a competitor to agree to increase the wholesale price of wheaten flour in contravention of the Trade Practices Act.

The Commission alleges that in November 1999 Mr Loneragan called senior representatives of a competitor stating that George Weston was raising its prices and that they should cooperate and do the same. At the time Mr Loneragan was a divisional chief executive of George Weston, responsible for its milling activities nationally.

The Commission further alleges that Mr Loneragan made a second call to the same competitor stating that George Weston was putting flour prices up and was looking for cooperation from that competitor.

The Commission is seeking:

■ declarations that George Weston and Mr Loneragan breached the Trade Practices Act

■ penalties

■ injunctions restraining George Weston and Mr Loneragan from engaging in similar conduct to that alleged in the future

■ a comprehensive review of George Weston’s trade practices compliance program

■ findings of fact

■ costs.

A directions hearing was set for 7 February 2003.

Fair trading (Part V)

Sydney O pera H ouse

Alleged misleading or deceptive conduct (s. 52), misrepresentations (s. 53(c))On 3 October 2002 the Commission filed proceedings in the Federal Court, Sydney, against Mr Richard Chen, the operator of a website that allegedly fraudulently mirrored the Sydney Opera House official website.

The website < www.sydneyopera.org> allegedly purported to be the official booking site of the Sydney Opera House. The site is affiliated with other sites including < www.witestar.com>, < www. worldsboxoffice.com> and < www.scholarscircle. com> all of which allegedly claim to be booking sites for various entertainment venues worldwide. The official website for the Sydney Opera House is < http ://w ww. Sydney operahouse. com. au >.

The Commission alleges that several consumers from the United Kingdom and Europe have attempted to purchase tickets through the imitation sites, and while their credit cards have been charged for tickets, they have either been overcharged or have not received them.

The Commission alleges Mr Chen, a resident of New York, operates the site from US-based servers. He has not, to date, responded to the Commission’s proceedings.

The Commission is currently seeking to have the offending sites removed and has obtained interim court orders to this effect. The temporary orders also prohibit Mr Chen from creating, operating or maintaining similar sites.

D avid Francis

Alleged misleading or deceptive conduct (ss. 52, 53 and 55)On 31 October 2002 the Commission instituted civil proceedings in the Federal Court, Melbourne, against Mr David Francis. It is alleged that during 2001 Mr Francis promoted products that were misrepresented as being able to assist in weight loss.

These were:

■ a moulded plastic device called ACU-SLIM 2000 which was designed to be inserted into a person’s ear—it was claimed that use of ACU- SLIM 2000 could eliminate craving for food

38 ACCC Journa l No. 43

Enforcement

■ a report called ‘Foods That Can Cause Weight Loss’— it was represented that the report included a list of 19 foods with ‘negative calories’ and that the consumption of such foods could cause weight loss by burning more calories than they contribute to the person eating them

■ a wafer biscuit called ‘ThermoSlim’ which was represented as being able to cause weight loss by burning the body’s fat.

The Commission is seeking declarations that Mr Francis breached and was knowingly concerned in contraventions of ss. 52, 53 and 55 of the Trade Practices Act, injunctions and costs. A directions hearing was held on 21 November 2002. A further directions hearing was listed for 3 February 2003.

On 31 October 2002 the Commission also instituted proceedings against Mr Francis in the Federal Court, Melbourne, for contempt of court. It is alleged that by engaging in the conduct that is the subject of the civil proceedings Mr Francis also breached previous court orders made against him in relation to the promotion of products that were represented as being able to assist in weight loss. The hearing of the contempt proceedings has been set down for 17 February 2003.

Harvey Norm an Holdings Pty Ltd

Alleged misleading or deceptive conduct (s. 52), bait advertising (s. 56)On 7 November 2002 the Commission instituted proceedings in the Federal Court, Melbourne, against three companies in the Harvey Norman group.

It also instituted proceedings against two Harvey Norman corporate group individuals, Mr John Slack-Smith and Mr Paul D’Ambra, and 15 Harvey Norman franchisees.

The proceedings allege bait advertising and misleading and deceptive conduct in contravention of the Trade Practices Act.

It is alleged that before the introduction of the GST in June 2000, national advertising was conducted for Harvey Norman Computers and Communications stores that featured a promotion for GST-related software, Quicken Quickbooks, for $199 with a bonus software bundle valued at more than $900.

The Commission alleges the Harvey Norman, Quicken Quickbooks promotion was advertised when the parties were aware that quantities of the bonus software were insufficient to meet consumer demand.

The Commission further alleges that representations made in catalogue advertising misled consumers about the eligibility for taxation benefits associated with the purchase of Quicken Quickbooks software and digital cameras before the introduction of the GST.

The Commission is seeking declarations, injunctions, a corrective public notice, findings of fact and an independent audit of the companies’ trade practices compliance program.

Investigation of this matter began in July 2000 but was delayed as a result of other court proceedings during the process of investigation. The Commission also took action to have five franchisee companies reinstated that were voluntarily de-registered during the investigation process.

A directions hearing was held on 13 December 2002.

Pest Free Australia Pty Ltd

Alleged misleading or deceptive conduct (s. 52), representations as to future matters (s. 51 A), misrepresentations that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have (s. 53(c))On 14 November 2002 the Commission instituted proceedings in the Federal Court, Sydney, against Pest Free Australia Pty Ltd, a company that supplies a device it claims to rid premises of rats, cockroaches and other pests.

The Commission alleges that Pest Free made false and misleading representations about the performance characteristics of its ‘Plug In Pest Free’ electronic device in various television advertisements, newspaper advertisements, on its website and in various brochures and promotional material. These included claims that the device, when plugged into a normal power supply outlet within the person’s premises, will:

■ prevent the intake of water and food nutrients by any noxious or destructive insects and vermin which inhabit the person’s premises in proximity to the device

■ cause the death by dehydration and/or starvation of such insects and vermin if unable to escape the effects of the device

■ generate vibrations that repel such insects and vermin

■ provide continuous protection from noxious or destructive insects and vermin all day every day

A C C C Journal No. 43 3 9

Enforcement

m break the breeding and feeding cycles of cockroaches, mice, rats and other noxious or destructive insects and vermin

■ not cause the noxious or destructive insects and vermin to develop an immunity against the protection to be provided

■ eliminate cockroaches, mice, rats and other noxious or destructive insects and vermin all day every day continuously into the future

■ gradually cause noxious or destructive insects and vermin (including cockroaches, rats and mice) to move out of a person’s home

■ disorientate noxious or destructive insects and vermin such that they become easier to catch

■ stress, disorientate and dehydrate noxious or destructive insects and vermin to such an extent that they will eventually die

■ create an environment where things such as cockroaches, mice and rats cannot eat, sleep or breed.

The Commission alleges that the representations are false and misleading because the device does not work as claimed and Pest Free has no reasonable basis for making the claims.

The Commission is seeking court orders including declarations, corrective advertisements, injunctions, refunds to consumers, removal of the products from sale and costs.

A directions hearing was held on 6 December 2002.

Internet TV Australia Pty Ltd t/a Free2aiR

Consumer unconscionable conduct (s. 51AB), misleading or deceptive conduct (s. 52)On 21 November 2002 the Federal Court,Brisbane, declared that Internet TV Australia Pty Ltd (receiver and manager appointed), formerly trading as Free2aiR, and its director, Mr James Young, had engaged in misleading and deceptive conduct, unconscionable conduct and harassment and coercion.

The Commission had alleged that Free2aiR represented to consumers that:

■ its internet access services included free internet access time

■ there was a once-off ‘set-up’ fee for subscribing to its internet access services

■ there were no ongoing fees and charges payable for its internet access services other than a charge for any downloads in excess of a specified amount each month.

The court declared, by consent, the internet access services supplied by Free2aiR were subject to terms and conditions that were not brought to the attention of potential customers. The conditions included that Free2aiR could, at its discretion, charge customers a quarterly administration fee in addition to the set-up fee. Some consumers later received ‘quarterly administration’ invoices demanding further payment for their internet services and threatening disconnection if they did not pay.

It further declared that Free2aiR engaged in unconscionable conduct in breach of the Act in its dealings with customers. This included threatening to disconnect customers if they contacted Free2aiR by telephone to query the imposition of the administration fee and by deducting administration fees from customers’ credit cards without express authority.

Free2aiR was also declared to have used undue harassment and coercion by threatening to disconnect customers who failed to pay administration fees. Free2aiR also advised customers that outstanding administration fees would be referred to a debt collection agency for recovery which may involve additional charges and result in damage to the customer’s credit history with credit reference agencies.

The court declared that the sole director of Free2aiR, Mr James Young, was knowingly concerned in each of the alleged breaches, or aided, abetted and procured each of them.

The Federal Court orders were made by consent of the parties. The appointed receiver did not oppose the making of the orders. The orders also included injunctions restraining the respondents from similar conduct in the future, and costs.

Contiki H olidays (Australia) Pty Ltd

Misleading or deceptive conduct (s. 52), misleading representations about the standard, quality, value, grade, composition, style, model, or history of goods or services (s. 53(aa)), misrepresentations about the performance characteristics of goods (s. 53(c))On 28 November 2002 Contiki Holidays (Australia) Pty Ltd provided the Commission with a court enforceable undertaking to reform its quality assurance systems.

40 ACCC Journa l No. 43

Enforcement

The undertaking was given by Contiki without admitting liability, in response to the 1999 Swiss canyoning disaster.

The Swiss courts have already determined criminal liability for the tragedy. On 11 December 2001 a Swiss judge found six managers of the now defunct Swiss company, Adventure World, guilty of manslaughter by culpable neglect. Each was given a suspended sentence of between three and five months and fined. In September 2002 those convicted withdrew their appeals and accepted their criminal responsibility for the accident. The families of the victims are now free to lodge compensation claims with the company’s insurer.

After an investigation, the Commission considered that Contiki might not have had reasonable grounds for making representations on its website and in advertising material promoting the European Tour for July 1999. The representations included that Contiki Travel Europe Limited would provide a safe environment where a customer’s personal safety and security would never be compromised.

In Australia Contiki Australia sells the tours organised and conducted by Contiki Europe in Europe. Several parents of the Australian victims lodged complaints with the Commission alleging that Contiki Europe’s advertising, some of which had been distributed by Contiki Australia, induced their children to undertake a Contiki Europe tour and to leave safety concerns to the Contiki Europe tour guides while on tour.

Although it is not alleged by the Commission that Contiki Australia was in any way responsible for the tragedy, the Commission is nevertheless of the view that it may have induced Australian consumers to travel with Contiki Europe in July 1999 on assurances of safety, when these assurances could not be adequately supported. For jurisdictional reasons, the Commission’s investigation did not consider issues of negligence, or extend to the conduct of either Contiki Europe or Adventure World, but was limited to the safety representations made in Australia by Contiki Australia.

In concluding that there may not have been reasonable grounds for Contiki Europe’s promotional representations, which were made in Australia by Contiki Australia, the Commission alleged that:

■ the nature, risks or safety of the activitiesinvolved in the canyoning excursion offered by Adventure World had not been thoroughly and adequately investigated

■ Adventure World had not been thoroughly and adequately investigated with regard to the safety measures it had in place

■ travellers undertaking the Contiki Europe tour in July 1999 may not have been provided with sufficient information on canyoning and its risks

■ Adventure World was not required to cease or restrict excursions likely to be jeopardised by a storm or other event.

Contiki provided undertakings to the Commission that:

■ it will implement a quality assurance system aimed at providing reasonable and verifiable grounds for any representations concerning safety and well being of Contiki travellers that are contained in advertising material distributed by Contiki, including references to third party operators

■ appoint a quality assurance officer with overall responsibility for quality assurance systems

■ implement an auditing process for its quality assurance system

■ it will not make representations concerning standards of safety and quality control unless they can be or have been verified by its quality assurance system or auditing process

■ it will refrain from distributing any new advertising and promotional materials containing representations concerning issues of safety until such time as the quality assurance and auditing systems are in place

■ it will implement a trade practices compliance program.

City International Duty Free Pty Ltd, D ow ntow n Duty Free Pty Ltd and N uan ce Group (Australia) Pty Ltd

Misleading or deceptive conduct (s. 52) and bait advertising (s. 56)On 29 November 2002 the Commission accepted court enforceable undertakings from the Nuance Group Australia Pty Ltd over the misleading advertising by Downtown Duty Free and City International Duty Free earlier this year.

The items advertised included watches, conventional and digital cameras, palm pilots, films, portable CD players, camera lenses and a recording mini-disc.

ACCC Journal No. 43 41

Enforcement

The Commission alleged that City International Duty Free published an advertisement in the Sunday Telegraph on 24 March 2002 which was misleading and deceptive in representing that consumers could get savings off the particular products’ prices when the products had not been advertised at the higher prices for a reasonable time before the sale.

The Commission also alleged that City International Duty Free and Downtown Duty Free made similar representations about price savings available on products in their respective catalogues distributed between 18 March and 30 April 2002.

The Commission expressed concern about claims by both Downtown Duty Free and City International Duty Free that products were exclusive to each store, when this was not so. It has also sought undertakings from Nuance that it will pay full refunds to consumers who were misled.

Nuance has accepted that it had engaged in misleading and deceptive conduct and made false or misleading representations by advertising products at prices claimed to be lower than previous selling prices when the products had not been sold at the higher prices.

Nuance has undertaken:

■ not to represent that particular price savings are available when the products have not been offered at the higher price for a reasonable period before the sale

■ not to represent that products are exclusive to their stores when this is not so

■ to publish corrective newspaper advertisements and place corrective notices in-store for three weeks

■ to offer full refunds to consumers who claim to have been misled by the representations

■ to implement a trade practices compliance program.

D aew oo Australia Pty Ltd, M r Eui H wan Kang and D aew oo Heavy Industries and Machinery Lim ited

Misleading or deceptive conduct (s. 52), unconscionable conduct (ss. 51AA or51AC)On 6 December 2002 the Federal Court, Sydney, declared that Daewoo Australia Pty Ltd engaged in unconscionable and misleading conduct in connection with the 1998 appointment of Porter

Crane Imports Pty Ltd (in liquidation), then trading as Betta Machinery Sales, as its Queensland dealer of excavators and wheel loaders. Former manager, Mr Eui Hwan Kang, was found to have been involved in some of the conduct.

The proceedings were initiated by the Commission in December 2001 after its investigation of Daewoo Australia and the Korean-based manufacturer of Daewoo heavy earthmoving equipment, formerly Daewoo Heavy Industries Limited (which became Daewoo Heavy Industries and Machinery Limited when the Daewoo companies were restructured in 2000).

The court found, with the consent of the parties, that Daewoo Australia:

■ entered into an agreement with Porter Crane leading it to believe that it would be the only Queensland dealer for the term of the agreement, would have an option to renew the initial term of the agreement and that it would be ongoing and long term

■ did not intend to appoint Porter Crane as its exclusive Queensland dealer but intended to later appoint a national dealer whose territory would include Queensland and did not inform Porter Crane of this before entering into the agreement

■ during the term of Porter Crane’s agreement also appointed Construction Equipment Australia Pty Ltd (CEA) to be its Queensland dealer and gave effect to this appointment to the detriment of Porter Crane by:

■ refusing to supply Porter Crane with machines, instead supplying these machines to CEA for on-selling to customers in Queensland

■ supplying machines to CEA at lower prices than it supplied Porter Crane

■ not referring all sales leads in Queensland to Porter Crane and referring sales leads to CEA

■ not assisting Porter Crane to perform warranty work

■ refusing to extend or renew its agreement with Porter Crane, and in doing so relying on the wording and strict effect of the agreement.

The court declared that Daewoo Australia engaged in misleading and unconscionable conduct in breach of the Trade Practices Act and that Mr Kang caused Daewoo Australia to engage in this conduct.

42 ACCC Journal No. 43

Enforcement

The court separately declared that Daewoo Australia also engaged in misleading and unconscionable conduct by appointing CEA and giving effect to its agreement with CEA in the circumstances.

The court granted injunctions, for five years, restraining Daewoo Australia and Daewoo Heavy Industries and Machinery from:

■ entering into an agreement with a person for any specified territory in Australia without first disclosing to that person whether it will be appointed as the exclusive or non-exclusive dealer or agent for that territory

■ where either Daewoo company has entered into an agreement with a person to be their exclusive dealer or agent in a specified territory in Australia

■ entering into an agreement with another person to also be a dealer or agent for the same goods in that territory during the term of the agreement with the first person

■ failing or refusing to honour their contractual obligations for the purpose of causing or inducing that dealer or agent to end or terminate that agreement.

The court also restrained Daewoo Australia, Daewoo Heavy Industries and Machinery and Mr Kang from being involved in such conduct by any corporation.

The court ordered Daewoo Australia, if it recommences trading in Australia, to implement a trade practices compliance program, and Mr Kang to undergo trade practices training if he returns from Korea to work in Australia. Daewoo Heavy Industries and Machinery was ordered to implement a written trade practices compliance program for the benefit of its employees and agents who are involved with the appointment of dealers or agents on its behalf.

The Daewoo companies were also ordered to pay the Commission’s costs. By separate arrangement, both companies have reached a confidential monetary settlement with the liquidator of Porter Crane.

Virgin M obile (Australia) Pty Ltd

Misleading or deceptive conduct (s. 52), failing to state full cash price (s. 53C), misrepresentation about the price of goods or services (s. 53(e)), misrepresentation about the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (s. 53(g))

On 11 December 2002 the Federal Court, Perth, found that Virgin Mobile (Australia) Pty Ltd made false and misleading representations and has also failed to state the full cash price of mobile phones in national advertisements for its Dial High Club mobile phone packages.

Virgin Mobile’s advertisements contained representations such as ‘Nokia 8310 on us, handcuffs off you’, ‘No long-term contracts’, and ‘Leave when you like’ and implied to consumers that they were not obliged to pay the specified monthly call charges for any particular period and that they could leave their contract without making any additional payment on termination.

In fact, unless consumers continued to pay the monthly call charges for the full period of 24 months, they had to pay the full cost of the telephone handset. Further, Virgin Mobile failed to disclose to consumers the cash price of the handset (up to $1039 for one package) or the minimum cost of joining the Dial High Club package (as high as $1069 for one package).

Apart from declaring that Virgin Mobile made false and misleading representations, the Federal Court made other orders, all with the consent of Virgin Mobile, including ones to:

■ write to consumers who signed up to the relevant Dial High Club packages from October 2001 to March 2002, informing them of the court’s findings and explaining to consumers all the relevant costs and consequences of their signing up to the packages

■ publish a public notice in newspapers nationally as well as on its website

■ state the full cash price of mobile phones and the full cash price/minimum cost of mobile phone packages as well as the method by which any termination costs are calculated in its future advertisements

■ introduce a trade practices compliance program

■ pay the Commission’s costs.

Purple Harm ony Plates Pty Ltd

Alleged misleading or deceptive conduct (s. 52)On 13 December 2002 the Commission filed proceedings in the Federal Court, Canberra, for breach of conditions of suspended sentences. The Federal Court has again found Neal Arthur Lyster and Helen Therese Glover guilty of contempt and

ACCC Journal No. 43 43

Enforcement

issued warrants of committal for a prison term of one month, suspended on condition that they comply with other orders.

The warrants follow a Commission application to bring contempt proceedings against Purple Harmony Plates Pty Ltd and its directors for failing to obey court orders and pay fines previously imposed.

The suspension of the term of imprisonment is conditional upon Mr Lyster and Ms Glover taking all steps necessary to affect a transfer of the domain name < www.purple-plates.com> to the Commission for the purpose of placing a consumer notice on that site. The suspension is also conditional upon them not being involved in any further publication of representations previously found to be misleading and deceptive and in contravention of the Trade Practices Act.

Goldberg J rejected submissions from Mr Lyster that previous decisions of the court were null and void. There were clear findings of the Federal Court on this issue that had not been the subject of further appeal and, even if such an appeal had been filed, Goldberg J regarded such an application as having no prospects of success.

Unlike Mr Lyster, Ms Glover now accepted the authority of the Federal Court and that her actions were in contempt of earlier orders. While she apologised unreservedly for her actions, she has belatedly apologised for her earlier attitude.

Previously, the Federal Court imposed a $20 000 fine on Purple Harmony Plates Pty Ltd and $10 000 fines on the company directors, Mr Lyster and Ms Glover. The Federal Court imposed the fines because the respondents failed to implement court orders after a decision last year. That earlier decision related to the making of unsubstantiated health and other claims for products promoted on the internet.

The original Federal Court orders included a direction to publish a corrective statement on its website within 14 days. The corrective statement should have been displayed immediately upon accessing the website’s homepage and order form.

The latest orders of the Federal Court include orders to transfer the domain name <www.purple- plates.com > to the Commission for the purpose of placing a corrective notice on the website.

Goldberg J was satisfied that orders of this nature were appropriate and within the power of the Federal Court even though the domain name is registered in the United States.

The Commission sought the cooperation of the US Federal Trade Commission and led evidence at the trial of this matter on the operation of the Domain Name System in the US. It is an example of the Commission cooperating with its partners in the International Consumer Protection and Enforcement Network (ICPEN) (formerly IMSN) to achieve an effective outcome on an e-commerce matter involving cross jurisdictional issues.

A llans M usic G roup Pty Ltd

Misrepresentation about the price of goods or services (s. 53(e))On 12 December 2002 Allans Music Group Pty Ltd, which claims to be Australia’s largest musical instrument retail group, was fined $80 000 in the Federal Court, Adelaide.

The fines follow a guilty plea by Allans to nine counts of making false or misleading representations concerning price. Nine other counts were withdrawn. Allans made the false ‘was-now’ price claims in its Christmas 2000 catalogue.

Tamberlin J found that Allans advertising was ‘false in the sense that for all practical purposes, the items in question had not been sold in the pre-Christmas period at the ‘was’ price but rather at prices substantially below the claimed ‘was’ price’.

The Commission commented that this is the first time a retailer has been convicted by the Federal Court for the use of false ‘was-now’ advertising.The case is important to anyone who advertises goods or services for sale by reference to a claimed saving or discount. The Commission regarded the conduct as particularly blatant and reckless and therefore pursued it as a criminal prosecution.

Tamberlin J said:

1 do not accept that a customer would understand the pricing policies of the suppliers in the market as referring to reductions from a prior recommended price as opposed to a prior actual price.

In mitigation of its conduct, Allans offered to contact the consumers who purchased the nine items and offer them a $50 gift voucher or, if they cannot be contacted, to donate $50 to charity.

j Justice Tamberlin noted this offer but also noted that

the extent to which Allans departed from the true position as to earlier pricing is significantly in excess of $50 and in some cases amounts to a difference in respect of $1000 in respect of an individual item.

44 ACCC Journa l No. 43

Enforcement

Sensis Pty Ltd

Misleading or deceptive conduct (s. 52), misrepresentation aboutprice (s. 53(e))On 20 December 2002 the Federal Court found that the Yellow Pages 12451 Connect service misled consumers in its promotion and operation.

The service is run by Sensis Pty Ltd (formerly Pacific Access Pty Ltd), a wholly owned subsidiary of Telstra Corporation Limited. The finding follows Commission action.

Yellow Pages Connect is a live, operator-assisted business-referral service to help consumers find products or services when they do not have a specific business in mind or only have partial details.Callers to the service are able to ask for a search on all or a combination of business type, suburb and keywords. Consumers are charged $1.21 per call to the service. If they want to be connected to a business they are charged a connection fee.

The Commission alleged that Sensis had engaged in misleading and deceptive conduct in what are known as out-of-area listings and the use of advertising keywords associated with promotion of the Yellow Pages connect service. Sensis offers priority advertising to out-of-area listings for an extra fee, which enables businesses to advertise their goods or services outside of the area in which they are located.

The Commission alleged that the Yellow Pages Connect practice of promoting preference to a priority paying advertiser ahead of and in preference to a non-priority advertiser even when the non­priority advertiser might be a better or closer match to the search criteria given by the consumer was misleading. Of particular concern to the Commission was that priority paying advertisers who had businesses outside the geographic location specified by callers were referred to consumers even when a relevant business existed in the location specified.

The Commission also alleged that Sensis misrepresented the keyword search element of the Yellow Pages Connect service. Keywords are a significant aspect of Yellow Pages Connect. They enable a priority advertiser, which must provide at least three keywords, to be matched against a caller’s specific request. The entitlement of priority advertisers to specify keywords provides them with a significant advantage over other businesses.

Merkel J declared that Sensis Pty Ltd had engaged in misleading conduct, or conduct that is likely to mislead in relation to the ‘out-of-area listings’ aspect of the Commission’s case.

Merkel J also made an order that Sensis Pty Ltd amend its Yellow Pages Connect Complete Consumer Advisor manual to ask a consumer whether the caller wants a business located in the area specified or is content to be given a business that services the area specified.

He considered that Sensis had structured the operation of the service to keep calls short so that it remained efficient and profitable.

He found that Sensis had contravened s. 52 of the Act and this was sufficient to find the Commission’s claim for injunctive relief so he did not believe it necessary to consider whether Sensis had breached other provisions of the Act.

Dell Com puter Pty Ltd

False or misleading representations about the price of goods or services (s. 53(e))On 20 December 2002 the Full Federal Court declared that advertisements published by Dell Computer Pty Ltd before November 2001 breached s. 53(e) of the Trade Practices Act after the Commission appealed the previous findings.

The advertisements did not disclose the compulsory nature of Dell’s delivery charges— customers could not purchase a Dell computer for its prominently advertised price as an additional delivery charge of up to $99 generally applied. The decision expands on the earlier finding of the trial court that the advertisements contravened s. 52 of the Act.

The Federal Court had ruled on 2 July 2002 that from about June 1994 to 30 November 2001 Dell had published advertisements that were misleading or deceptive by not making clear to customers that they had to pay a compulsory delivery charge on top of the advertised price for Dell computers. The Federal Court made injunctions restraining Dell from advertising in that manner in the future and ordered Dell to publish corrective advertisements in major newspapers in each capital city of Australia explaining how Dell misled its customers. It also ordered Dell to pay the Commission’s costs of the proceedings.

However, the Federal Court had found that the advertisements were not in contravention of ss. 53(e) and 53C, dealing with a false or misleading representation with respect to the price of goods and specifying the cash price of goods. The Commission appealed the ss. 53(e) and 53C findings. The Full Court found a breach of s. 53(e) but no contravention of s. 53C.

ACCC Journal No. 43 45

Enforcement

Product safety (Part V)

Trans Oriental Import and Export Pty Ltd

Alleged misleading or deceptive conduct (s. 52), misleading representations about the standard, qualify, value, grade, composition, style, model, or history of goods or services (s. 53(a)), misrepresentations about the performance characteristics of goods (s. 53(c)), misleading conduct to which Industrial Property Convention applies (s. 55), product safety standards (s. 65C(l)(b))On 10 December 2002 the Commission instituted proceedings in the Federal Court, Perth, against Trans Oriental Import and Export Pty Ltd and one of its directors, Mr Thai Tran, alleging the company sold to consumers banned mini-cup jelly confectionaries containing the ingredient konjac.

On 21 August 2002 an 18-month temporary ban was applied to the supply of mini-cup jelly confectionaries containing konjac under s. 65C(5) of the Trade Practices Act.

The ban was announced by the Parliamentary Secretary to the Treasurer, Senator Ian Campbell, after a number of deaths in Australia and overseas from consumption of the product. The ban applies to any mini-cup jellies containing the ingredient konjac, also known as glucomannan, conjac, konnyaku, konjonac, taro powder or yam flour. Similar confections not containing the banned ingredient are also available.

The Commission alleges that on 1 November 2002 the company supplied two mini-cup coconut jellies containing the banned ingredient konjac from the Trans Oriental Supermarket in Leederville.

The Commission is seeking remedies including the following:

■ declarations that Trans breached the Act

■ injunctions restraining Trans from misleading the public as to the characteristics of its products, and selling mini-cup jellies containing the ingredient, konjac

■ orders for publication of a recall notice by Trans in the West Australian newspaper and appropriate Asian community newspapers in metropolitan Perth

■ orders for publication of corrective informative notices to Trans wholesale customers and consumers

■ orders that Mr Tran attend a trade practices training program

■ costs.

A directions hearing was listed for 12 February 2003.

D r LeW inn’s Private Formula

Product safety standards (s. 65D)On 13 December 2002 the Commission accepted court enforceable undertakings from Private Formula that it will re-label the cosmetic products, Dr LeWinn’s Cosmetic Lift Pack, containing A+ Revita Cell, and Dr LeWinn’s Cosmetic Lift Powder, which did not comply with the mandatory product ingredient labelling requirements.

After being approached by the Commission, the company initially advised it was aware of the issue and had already taken steps to address the problem. Those steps included providing retailers with new ingredient information, re-labelling of new products, and introducing procedures to ensure compliance with the standard.

However, the Commission again became aware that incorrectly labelled product remained on sale at some retail outlets. Private Formula acknowledged its endeavours to have retailers amend the labelling was not as successful as anticipated.

In resolving this matter, Private Formula provided a court enforceable undertaking to:

■ stop distributing the product that does not meet the mandatory standard

■ implement procedures to re-label all old stock in the marketplace

■ publish corrective advertising in newspapers and retail outlets

■ implement a trade practices compliance program

■ institute an effective complaint-handling system.

Corrective advertisements were placed in the Sydney Morning Herald and The Australian on 24 December 2002.

46 ACCC Journa l No. 43