TPG loses appeal, AU$2m fine restored by Australian High Court

The High Court of Australia has ruled in favour of the ACCC, reinstating the AU$2 million fine for misleading advertising handed down to TPG by the Federal Court last year.
Written by Corinne Reichert, Contributor

The High Court of Australia has overturned last year's ruling by the Full Bench of the Federal Court on the years-long case between the Australian Competition and Consumer Commission (ACCC) and TPG on the latter's allegedly misleading advertising of its AU$29.99 fixed broadband service, ruling that the internet service provider must pay the AU$2 million penalty originally mandated by the Federal Court.

The decision, handed down on Thursday, will see TPG pay the full AU$2 million in penalties, along with all court costs, due to the High Court finding that its advertising was misleading.

In a majority judgment, Chief Justice Robert French and Justices Crennan, Bell, and Keane stated that the Full Bench of the Federal Court erred in the appeal by "failing to appreciate that the tendency of TPG's advertisements to mislead was not neutralised by the Full Court's attribution of knowledge to members of the target audience that ADSL2+ services may be offered as a 'bundle'".

"The circumstance that many consumers might know that ADSL2+ services are commonly offered as a 'bundle' was not apt to defuse the tendency of the advertisements to mislead, especially where the target audience is left only with the general thrust or dominant message after the evanescence of the advertisement," they added.

Due to the lapse of time between the original judgment and today's findings, however, the High Court stated that it is "not necessary to reinstate the injunctions, corrective advertising, and compliance programs" that were originally ordered by the Federal Court.

The matter was first taken to court by the ACCC back in December 2010, with the consumer protection watchdog arguing that TPG had failed to disclose an additional monthly AU$30 line-rental cost on top of its advertised AU$29.99 per month fixed-line broadband plans, bringing the total of the plans up to AU$59.99 per month, as well as an initial setup payment.

TPG's allegedly misleading ads appeared between September and October 2010 on three national TV stations and seven capital city radio stations, in one nationwide and six capital city newspapers, on the internet, in newspapers, on billboards, and on public transport and stations.

In June 2012, the Federal Court fined TPG AU$2 million after ruling in November 2011 that these ads had been misleading to consumers. TPG appealed the decision, however, and the Full Bench of the Federal Court overturned most of the decision in December last year, finding that only the television ads had been misleading.

"We've found that all of the advertisements, other than the original television advertisements, were not misleading," Justice Peter Jacobson said at the time.

The Full Bench of the Federal Court found that the requirements for line-rental and start-up fees were adequately disclosed, and that an ordinary or reasonable consumer would know about their existence.

At this time, TPG was ordered to pay the amended pecuniary penalty of AU$50,000.

The ACCC then sought leave to appeal the decision to the High Court of Australia, which was granted in August.

During the High Court hearing last month, TPG barrister Norman O'Bryan argued that line rental is "inevitable" for broadband services, including "so-called naked" services. He said that it was reasonable by that time to presume that an ordinary, reasonable consumer knew that bundling is prevalent because the use of a telephone line for ADSL is unavoidable.

"[Consumers] know enough about the technology by 2010 to know that it requires a home telephone line to get it into the house at all. What they will seek to learn in the advertisements and what they will be told is whether the price that is being offered and the service that is being offered to them is or is not a bundled service; that is to say, am I required to take the service from TPG for my home telephone service or not; that is all," he said in November.

As proof of this presupposed knowledge, O'Bryan pointed to ads from Telstra BigPond, iiNet, and SuperNerd from the same time, in which the line-rental charges were also separate from the advertised ADSL cost.

ACCC barrister Justin Gleeson argued, on the contrary, that an ordinary consumer would not realise that a further product would have to be purchased for AU$30 per month in order to attain the advertised AU$29.99 ADSL2+.

"The consumer naturally knows, 'Well, there is that fine print down there. If I'm interested in this product, perhaps I'll read that or perhaps I'll pay attention to that in due course.' But what the consumer is not expected to think is, 'This person in fact is requiring me to take a second product from them for the same amount of money, doubling the price,' and if that is what the real deal is, the non-misleading way of advertising this is, 'It's AU$59.99 a month and I'm selling you ADS2+ and telephony,' and then people can say, 'If I don't want telephony', which the young people do not want, 'AU$59.99 is a lot of money to pay for internet'. People are then able to make that judgment," Gleeson said last month.

Gleeson added that it had been "almost Freudian" for the ISP to ask in its ads, "why pay more?" because costumers would be "in fact paying AU$60, and you are paying AU$60 because you are getting another product, whether you like it or not".

The High Court noted today that off the back of the misleading 2010 marketing campaign, TPG generated a profit of almost AU$8 million and grew its customer base from 9,000 to 107,000 in the space of one year.

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