July 2011

Misleading and deceptive conduct: Federal Court hands down largest ever civil penalty for a consumer protection matter

On 7 July 2011 the Federal Court ordered Singtel Optus (Optus) to pay the Commonwealth a pecuniary penalty of $5.26 million in respect of a series of misleading and deceptive television, internet, newspaper and billboard advertisements launched by Optus in April 2010 promoting their 'Think Bigger' broadband internet plans.

Essentially the advertisements failed to convey to the consumer the true amount of broadband data the consumer would receive. One advertisement offered a 150GB allowance of broadband data, split between 75GB peak and 75GB off-peak ? when in fact the 150GB was a 'theoretical maximum' unlikely ever to be reached.

Why was it only a theoretical maximum? Because as soon as the consumer used up their 75GB peak allowance, the service was reduced to a speed of 64kbps for both peak and off-peak usage ? far below normal broadband speed.

The Court found that the prominence of the expressions \"Broadband\" and \"Think bigger\", together with the depiction of large \'moose\' antlers, meant that the small print disclaimer \"Speed limited once peak data exceeded\" was inadequate to dispel the impression that the consumer would get the full 150GB at broadband speed.

In ordering Optus to pay a $5.26 million penalty, the Federal Court considered, among other issues, the serious nature of the misleading and deceptive conduct, that Optus is a market leader in the telecommunications industry, and that it lacked a corporate culture conducive to compliance.

Important lessons

  • The advertisement as a whole must be considered. The fine print did not save Optus because its terms were not sufficiently prominent or clear to clarify the data allowance offer. Care is needed with advertising disclaimers to ensure that any message that qualifies the main impression of the advertisement is both clear and sufficiently prominent to balance the overall impression of the advertisement. Saying for example, that an item is \"FREE\" but then including fine print to say, in fact, consumers must pay a charge, would be insufficiently prominent as well as confusing and unclear.

  • Serious penalties apply and it is important to maintain a robust corporate compliance culture where all employees have at least a general understanding of what is expected.

  • This is a useful reminder that in some instances the use of a disclaimer will not dispel an impression that is inherently misleading and deceptive. However, in most cases a carefully drafted and placed disclaimer can and should be used to qualify or clarify an express representation or general impression of an advertisement.

 

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