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Case Study: Australian Competition And Consumer Commission V TPG Internet Pty Ltd Add in library

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Questions:

1.  Briefly describe the nature of TPG’s advertising which caused ACCC to bring these proceedings?

2.  What statutory provisions did ACCC allege that TPG’s advertising contravened?

3.  What were the findings (conclusions) of the primary judge about the following aspects of the advertising?

• bundling.

• the set up fee.

• single price.

4.  What were the differences in principle between the approach of the Full Court and the approach of the primary judge in evaluating whether the TPG advertising was misleading?

5.  The High Court concluded that the approach taken by the Full Court was not correct. For what reason or reasons did the High Court come to this conclusion?

6.  The Full Court, in coming to its conclusions, applied as a precedent the ratio in a case called Parkdale Custom Built Furniture v Puxu (“Puxu”). The High Court said that the Full Court wrongly applied the principle in Puxu. Explain why the High Court thought Puxu was not a proper precedent to apply to the TPG advertising?

7.  What did the High Court have to say about the “dominant message” approach?

8.  What did the High Court say about the assumed level of knowledge in TPG’s target audience?

9.  Is an intention to mislead essential for advertising to be misleading? Explain what the High Court thought about this?

10.  If you were employed in the marketing section of an internet service provider or a fitness centre which was about to launch an advertising campaign promoting an attractive “plan” for membership in which there were several “parts” (costs and benefits) to be taken into account by potential customers, what advice would you give about the format of the advertising, based on your understanding of the High Court’s ruling in ACCC v TPG?
 
 

Answers:

1. TPG Internet Pty is a company which provided internet and telephone connections to the consumers. The company gave its internet and phone connections under the name ADSL2+. The careless nature of TPG Internet Pty provoked ACCC to bring these proceedings. The company didn’t accomplish its promises and in return, made customers pay more than the amount advertised. TPG Internet Pty advertised about its services in newspapers and online and didn’t mention about any set-up cost and related additional cost. In the advertisement, it was mentioned that the exact cost of taking internet service from TPG Internet Pty was $29.99. But most shocking part about the company’s nature was that in spite of advertising a fixed amount for internet services, they charged some hidden costs. The hidden charges included set-up fee and telephone charges. The consumer had to pay a total of $149.95 instead of $29.99, as advertised by the company. The costing of $149.95 included telephone charges of $30 and other hidden charges (Taylor, 2009). Hence, the company didn’t meet its promises as advertised and made consumer pay hefty sum for internet connections. This was the reason that ACCC took action against TPG Internet Pty.

2. By definition, statutory provisions are defined as the details about a law passed by the government. As TPG Internet Pty charged consumers extra and made them pay hefty sum for internet connections, strict actions were taken against the company. As per ACCC, TPG Internet Pty had been misleading consumers by advertising wrong amount for their internet services. The amount mentioned in the advertisement for the services was different than what was charged from consumers. The company, predominantly asked the consumers to pay certain hidden charges such as setting-up internet connection, phone set-up charges etc which increased the bill to $149.95. This was against the Trade Practices Act 1974. Under this Act, consumers are protected against unfair trade practices led by companies. Many times, companies exploit their consumers and charge them extra than what was being agreed (Taylor, 2009). Hence, this act intends to protect consumers. In this case, TPG Internet Pty exploited consumers by charging them extra than what was promised. Hence, their practices were against Trade Practices Act 1974 as they didn’t give any single amount to consumers and misled them.

3. There are three perspectives on which primary judge gave his opinion. These included Bundling, The set up free and Single Price.

Bundling: Primary judge stated that any such effect should be advertised by the company clearly. The company should declare a unified figure for its services without misleading consumers and making them pay extra afterwards. However, in case of TPG Internet Pty, company didn’t give any unified figure in the advertisement and also didn’t make clear that what all would be included in the hidden costs. They misled consumers by advertising fake amount and hence charged extra (Jeffrey, 1994).

Set Up Free: Judge stated that set-up fee is usually charged from the consumers whose connection is less than 2 years. Hence, customers must be given an idea about its cost by the company. However, in this case, the company didn’t mention anything about set up fee and hence, it was assumed that the set-up might be free. Moreover, the advertisement mentioned one-line fee about the internet connection which misled consumers about set-up charges.

Single Price: Judge stated that consumers must be given a single price which would cost them after including all costs. In this case, TPG Internet Pty didn’t mention any clear figure instead misled them by including a low amount and then adding many additional charges. Hence, the final amount that consumers had to pay was $509.89. It was against the Trade Practices Act 1974.

4. There was a considerable difference between the judgements given by primary judge and full court regarding whether the advertisement posted by TPG Internet Pty was misleading or not. Primary judge stated that it was the fault of the company that it misled consumers by adding up bundling charges, set-up fee and didn’t mentioning about one price. TPG Internet Pty advertised that cost of an internet connection was $29.99. However, there were numerous additional charges which were hidden and didn’t make clear in the advertisement. Hence, the total cost of service amounted to be $149.95. Hence, he advised that TPG Internet Pty should correct their advertisement if they didn’t want their ad to be misled by consumers (Dennis, 1996). Alternatively, full court had a different approach. He stated that consumers were at fault in the case of TPG Internet Pty. Consumers should go through the advertisements carefully before taking up any such service from a company. Consumers were expected to be diligent and careful in this case. If they would have acted carefully, they might not face such trouble.

 

5. The high court stated that full court didn’t adopt correct approach in this case. As per full court, consumers were at fault since they should have read advertisement properly. The court argued that consumers were at fault in the case of TPG Internet Pty. Consumers should have gone through the advertisements carefully before taking up any such service from a company. Consumers were expected to be diligent and careful in this case. If they would have acted carefully, they might have not faced such trouble. Secondly, the statements that full court used were wrong and appeared weird. Thirdly, the court decided that misleading can be neutralized and this was not the right method to do so. Fourthly, the high court found out that the full court didn’t apply the principles of Puxu case correctly to the case of TPG Internet Pty. Hence, high court found out that full court didn’t adopt correct method.

6. As per High court, Full court wrongly applied the principles of Puxu case due to many reasons. In case of Parkdale Custom Built Furniture v Puxu, the company was selling furniture and misled consumers due to which the court had argued that consumers must check the furniture carefully before buying it. However, in the case of TPG Internet Pty, the company didn’t sell any kind of furniture but internet connection. Hence, the principles applied to Puxu case couldn’t be applied to TPG Internet Pty case. In this case, the company was at fault. It misled consumers by adding up bundling charges, set-up fee and didn’t mentioning about one price (Bradbrook, 1989). Due to this reason, the high court argued that full court wrongly applied the principles of Puxu.

7. The ‘Dominant Message’ approach was adopted by high court. The High Court liked the dominant message approach as consumers didn’t go to showrooms with a fixed mindset about their purchase. In case, when consumers are required to go to showrooms to buy the product, they have fixed conditions about their purchase. But in this case, consumers just had an advertisement to rely upon. Moreover, consumers don’t go through advertisements carefully. Hence, they relied mostly on prominent messages (Kercher, 1985). The court stated that consumers must be careful. Alternatively, company should not advertise such messages with dominant messages that mislead consumers.

8. Generally, consumers have some knowledge about a commodity or service before buying. However, the information if incomplete can lead to trouble. In case of TPG Internet Pty, the court assumed that customers might have some general knowledge about the connection. In other words, customers might assume that connection comes with a bundling package with telephone line. But the message advertised by TPG Internet Pty stated something different. As per the advertisement, it was assumed that there were no additional costs associated with the connection. However, the same was proved wrong by the company later on.

9. In advertising, it is not essential to mislead consumers in order to allure consumers. However, in this case of TPG Internet Pty, the company didn’t have any intensions to mislead consumers. The primary objective of TPG Internet Pty was to attract consumers and present the services in the best way possible (Kercher, 1985). ACCC also didn’t mention anything about the wrong intensions of the company instead stated that TPG Internet Pty had the intension of presenting their best features in the advertisement.

10. If I have been employed in the marketing team of an internet service provider company, the advice I would have given to the company was to provide customers with clear information about the service and its features. The one of the most crucial things I will focus on is providing correct information to customers and never misleading them. I would have advised that presenting features in best possible way isn’t wrong but misleading consumers is wrong and unfair as per Trade Practices Act 1974. Hence, the best way to present features of a service is to clearly mention the amount, the additional charges and a unified figure which will be charged from consumers.

 

References

Taylor, P. (2009). “Street v Queensland Bar Association.”, 168 CLR 461.

Jeffrey, B. (1994). "Statutory Interpretation, Law Reform and Sampford's Theory of the Disorder of Law" Part One (1994) 22 Federal Law Review 116; Part Two, (1995) 23 Federal Law Review 77.

Dennis, C. (1996).  “Statutory Interpretation in Australia.”, (4th edition, Butterworths: Sydney, 1996), p. 3.

Bradbrook, M. (1989).  “The Emergence of Australian Law.”, (Butterworths: Sydney, 1989) at 70.

Kercher, B. (1985).  “An Unruly Child: A History of Law in Australia.”, (Allen & Unwin, Sydney, 1995) at 157.

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