The ACCC has announced that it intends to appeal the recent Federal Court decision which found that Google was not liable for misleading and deceptive conduct in publishing Adwords advertisements.

In its recent press release the ACCC said:

The ACCC alleged that Google had engaged in misleading or deceptive conduct by publishing these advertisements on Google’s search results page where a headline of the advertisement comprised a business name, product name or web address of a business not sponsored, affiliated or associated with the advertiser. When a user clicked the words in the heading of the advertisement associated with the competitor’s business or product, he or she was taken to the advertiser’s website.

Justice Nicholas found that although a number of the advertisements were misleading or deceptive, Google had not made those representations. Google merely communicated representations made by the advertiser. As such, Justice Nicholas ruled that Google had not breached the Trade Practices Act.

On appeal the ACCC has indicated that it will be challenging this finding by the Court with respect to 4 advertisements. The ACCC also indicated:

The ACCC takes the view that Google’s key word insertion system, plus the role of Google staff, were fundamental to the representations being made.

This is a significant case as there is a lack of Australian case law on Google Adwords advertisements, which are now one of the most commonly used advertisement methods for Australian businesses, with some businesses spending thousands of dollars per week.

The ACCC has failed in its bid to have the Federal Court declare that the manner in which Google differentiates sponsored links to organic search results was misleading and deceptive within the meaning of the Australian Consumer Law.

The ACCC had argued that by failing to adequately distinguish advertisements from search results, Google had engaged in misleading or deceptive conduct.

While the Court failed to agree with the ACCC, Google has since changed the labeling of advertisements from ‘sponsored links’ to ‘Ads’ in line with comments by the Court, that the labeling was unclear, but not misleading and deceptive within the sense of the Australian Consumer Law.

Optus has been hit with a $5.26m penalty in the Federal Court, for falsely advertising  broadband download quotas.  The decision heralds a new level of risk in communications advertising in Australia.

The clear rule is that high-powered headlines plus small print equals advertising danger.

This bulletin explains:

• what Optus advertised
• how the advertised plans really worked
• how Optus defended the plans
• why ACCC took action
• what the court said and did in 2010
• what the court did on 7 July 2011
• why a $5.26m penalty is now possible
• other provisions that can attract penalties.

What Optus advertised

(a)            In April 2010, Optus campaigned for a new range of ‘Think Bigger’ broadband plans.

(b)            Each plan included a large data allowance (120/150/170GB) divided into ‘peak’ and ‘off-peak’ entitlements eg the 120GB plan was advertised with 50GB peak usage and 70GB off-peak usage allowance.

(c)             The disclaimers stated:  ‘Speed limited once peak data exceeded’.

How the advertised plans really worked

(a)            When peak allowance was used, entire service was shaped to 64kbps for rest of month.

(b)            Shaping applied to remaining off-peak allowance as well.

(c)             So, for instance, if customer used whole 50GB peak allowance first, then entire 70GB off-peak allowance shaped to 64kbps.

(d)            But if off-peak was exhausted first, further off-peak MBs were deducted from peak allowance, and shaping applied when that was exhausted.

How Optus defended the plans

Optus said that ‘Speed limited once peak data exceeded’ was a sufficient explanation:  Once your peak allowance is reached, speed is limited.

Why ACCC took action

ACCC disagreed that the disclaimer was a clear and proper explanation.  It argued:

(a)            Public would assume that peak and off-peak entitlements were independent.

(b)            Public would not understand that exhausting peak use would result in off-peak speed shaping to non-broadband speed.

What the court said and did in 2010

(a)            The court agreed with ACCC.

(b)            Court said that ordinary people simply wouldn’t understand the full rules of the plans, based on the advertising.

(c)             Court particularly attacked ‘headline advertising’ where a powerful headline told one story and small print told a different story.

(d)            Said there was:

(i)              misleading and deceptive behaviour generally, and

(ii)            likely specific misleading about ‘the quantity of services’.

(e)            29 October 2010:  Court ruled that advertising was deceptive.

(f)              2 November 2010:  Court banned Optus from repeating that kind of advertising for 3 years[1].

(g)             19 November 2010:  Court ordered Optus to write to all affected customers offering remedies.

(h)            8 December 2010:  Court held a penalty hearing.

What the court did on 7 July 2011

Announcing the result of the penalty hearing, the court ruled that Optus must pay the Commonwealth a pecuniary penalty of $5.26m.

Why a $5.26m penalty is now possible

(a)            Before 2010, no financial penalty was possible under the law in a case like this.

(b)            In 2010, the Competition and Consumer Act[2] (‘CCA’) was amended to allow the court to impose penalties on a company of up to $1.1m per breach of certain sections of the CCA.  That includes breaches of the law against misleading about ‘the quantity of services’.

Other provisions that can attract penalties

The new penalties are available for a wide range of breaches that communications providers should keep in mind.  Here’s a non-exhaustive list:

(a)            misrepresentations that goods are of a particular standard, quality, value, grade, composition, style or model

(b)            misrepresentations that services are of a particular standard, quality, value or grade

(c)             misrepresentations that a particular person has agreed to acquire goods or services

(d)            misrepresentations that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits

(e)            misrepresentation that the person making the representation has a sponsorship, approval or affiliation

(f)              misrepresentation with respect to the price of goods or services

(g)             misrepresentation concerning the availability of facilities for the repair of goods or of spare parts for goods

(h)            misrepresentation concerning the need for any goods or services.

Summary

Obviously, communications advertising has just become more challenging.  It’s a strong argument for having every advertisement checked by an expert in the area.

The ACCC has fined Singtel Optus Pty Ltd $178,000 for misleading conduct arising out of its ‘Max Cap’ marketing campaign.

The ACCC’s view is that the Optus’ Max Cap advertisements:

“….gave the impression that a consumer could purchase these cap plans and expect to pay a maximum specified amount per month, when in fact the specified amount was the minimum the consumer would pay each month.“

The advertisements at issue contained the Max Cap $49, which wasn’t a cap, but rather the minimum a customer would need to spend.

In commenting on the conduct of concern to the ACCC, acting ACCC Chairman Mr Peter Kell said:

“If you advertise a service as a ‘$49 Max Cap’ when $49 is the minimum that consumers have to pay, then you risk breaching the law by misleading consumers about the cost of the service,” and “Claims that a service allows consumers to call ‘anyone’ are likely to be misleading if the reality is that some types of calls are excluded“.

All ISPs and Telcos should have a process in place to review advertisements, not only to ensure compliance with the Competition and Consumer Act 2010 but also the Telecommunications Consumer Protections Code.

We have more IT Law, Domain Law and Telecommunications Law posts coming soon.

Watch this space.

The Australian Consumer and Competition Commission (ACCC) has released a draft report into the pricing model of fixed line telephony services, proposing radical price reductions, which is likely to see Telstra’s fixed line revenues fall even further.

The ACCC has suggested a move away from the traditional wholesale pricing model based Retail Price less Retail Cost, instead the ACCC has suggested an alternative model:

The ACCC has used a building block pricing model (also known as a regulated asset base, or “RAB” model), which calculates prices based on the assets and costs associated with providing the regulated services. It is consistent with the ACCC’s approach in other regulated industries. All submissions received in response to the ACCC’s December discussion paper supported such an approach.

The new model has suggested an across the board charge of $20 per month for line rental down from the two consumer and business rates that exist, while the ACCC has suggested a reduction of wholesale local call costs from 17c to 7c, a massive drop, which is likely to anger Telstra. Below we have extracted the draft pricing for the period 2011 to 2014:

Draft indicative prices

For ULLS services, the Bands relate to different geographical areas.

• Band 2 covers non-CBD metropolitan areas, where approximately 70 per cent of Australia’s population live.
• Band 4 price for more remote areas is notional, as there is very little demand, significant technological limitations on the copper and no reliable information on which to determine a price using the ACCC’s model. In June 2010, there were only about 144 active ULLS services in Band 4 compared to over 690,000 active ULLS services across Bands 1, 2 and 3.

Consumers will have the choice of barring all premium SMS from their mobile phones as of 1 July 2010, with the latest package of measures announced by the ACMA.

The ACMA has said that the package has been created so that “…mobile users can feel confident they will only receive and pay for services they actually want”.

In a meeting with senior representatives of mobile phone companies the ACMA will discuss the possibility of the introduction of a service where consumers can request quick and easy barring via SMS.

Complaints to the Telecommunications Industry Ombudsman regarding premium SMS services have decreased by an astonishing rate of 50% following measures introduced by ACMA last year. As the ACMA is hoping that this trend will continue, it will be closely monitoring the industry over the next 12 months to ensure that consumer concerns are adequately being dealt with.

Recent enforceable undertakings that the ACMA has accepted from Funmobile Australia Pty Limited, which included a payment of $55 000, emphasize the ACMA’s commitment to pursuing telcos which repeatedly operate in breach of the law.

Industry has welcomed the new package as a further reinforcement of the existing suite of consumer protection measures included in the Communications Alliance Mobile Premium Services Industry Code C637:2009.

Despite both consumers and industry receiving the package with a warm welcome, the telcos will be hit hard. In a quote published by Computer World, Warren Chaisatien, research director and principle analyst at Telstyle, says that although the rule will aid consumers who have unintentionally signed up to a premium services, it is likely to have a negative impact on telco revenues as the premium SMS market was worth approximately $250 million in 2009.

To all of our clients and visitors to our blog, we wish you seasons greetings and a safe and prosperous new year.

Thank you for your support in 2009, and we look forward to working with you in 2010.

Our office will be re-open on 11 January 2010.

Stay tuned for our new IT Law, Telecommunications Law, Domain Law and general Commercial Law articles / posts.

We are working on bringing you some more new and interesting IT Law and Domain Law posts and articles shortly.

To assist us to cater to our audience, if you have any specific requests for IT Law, Domain Law or Telecommunications Law articles or information, feel free to drop us a note at info@coopermills.com.au

The ACCC has announced the launch of an Information Paper entitled “Mobile and Other Wireless Internet Speed Claims and the Trade Practices Act 1974”.

The Paper has been developed to assist ISPs in ensuring that their advertising for mobile and wireless internet is compliant with the Trade Practices Act 1974, and in particular the consumer protection provisions.

In launching the Paper, ACCC Chairman, Graeme Samuel said that:

“The ACCC is concerned by companies over-promising and under-delivering the speeds available on mobile and wireless internet, particularly in the context of network upgrades and increasing wireless internet subscriptions,” “This Information Paper is intended to assist the whole industry – mobile and wireless internet retailers, resellers, and network owners – to comply with the law.“

The ACCC has warned ISPs not to advertise terms such as ‘maximum’, ‘up to’ or ‘peak network’ speeds, “if those speeds are not generally achievable or likely to be achieved by consumers using the network.”. The ACCC warning indicates that it is taking a similar approach to that previously taken with ADSL2+ advertising.

The ACCC has expressed the view that ISPs should:

1. only make speed claims based on ‘appropriate tests of network performance’ to show speeds that can generally be achieved; and
2. prominently state the factors affecting mobile and wireless internet speeds such as congestion, location, and other variables.

The Paper also contains an Industry Checklist to assist with compliance – ISPs are reminded that they should also remember to ensure compliance with CommsAlliance Code C628:2007 TCP Code.

Compliance takes added significance in light of the ACCC’s recent actions in securing enforceable undertakings against some of Australia’s largest ISPs.