Nationwide News Pty Ltd (publisher of Sydney's Daily Telegraph newspaper) has been found guilty of misleading the public in a 'free' mobile phone offer after Australian Competition and Consumer Commission Federal Court action.
"This decision should act as a warning to promoters claiming to offer 'free' goods or services but attaching conditions which contradict the 'free-ness' of the offer", ACCC Chairman, Professor Allan Fels, said today. "Advertisers know the attractiveness of the word free and seem to use it often. 'Free' is indeed a powerful psychological magnet, and advertisers should not abuse the reasonable trust of the public by using conditions, not then fully revealed, to make the offer something quite different in reality."
Justice Heerey of the Federal Court, said in his decision, handed down in Hobart yesterday, that: "The heavy emphasis on the phones being 'free' would convey the impression that, whatever the conditions were, they would not be inconsistent with the basic promise ... ... would not be conditions relating to charges or payments. But in truth the conditions meant that a person would have to part with a substantial sum of money .. .. before he or she could get a phone. The true effect of the conditions were thus misrepresented".
Professor Fels said the advertisements, mostly on the front pages of the newspaper, were very eye-catching, using the word 'free' in large lettering, and also using the words conditions apply.
"The advertisements begged readers 'Dont miss Mondays [the-then] Telegraph Mirror'," Professor Fels said. "The conditions eventually revealed included signing up to a 15 month service contract with monthly charges of at least $130, a total cost of over $2,000 to in order to take up this offer of a 'free' mobile phone.
"Advertisements were also broadcast on radio and television, also emphasising 'free', noting that conditions applied to the offer, but not revealing any more. Nationwide News has been found guilty of misleading it readers. The readership claimed for the newspaper is about 1.3 million people.
"I hope that this decision will give advertisers pause to think about the appropriateness of the word 'free' when they next advertise an offer. Does the consumer seeing the advertisement get the whole truth and nothing but the truth?"
Justice Heerey adjourned the question of penalty and costs.
Release # MR 109/96
Issued: 9th August 1996
The promotion
The subject of the charges were a total of eight different advertisements, part of a promotional campaign. The early advertisements (Thursday 28 July and Friday 29 July 1994) were 'pointers' in the-then Daily Telegraph Mirror which said nothing more than 'Free mobile phone for every reader'. Dont miss Mondays Telegraph Mirror.'
The later advertisements (Friday 29 July and Sunday 31 July) had 'Conditions apply' added. The television and radio ads were in similar terms. The full terms and conditions were given in different parts of the newspaper on Monday 1 August 1994 and over the following week. The ACCC raised concerns about the promotion with Nationwide News during the run of the campaign but the alterations the newspaper chose to make were insufficient to allay the Commissions concerns.
The conditions of the offer required applicants to take up a 15 month contract for services with Vodafone at a rate of $130 per month, which included some call fees. Applicants also had to pay a $65 connection fee, a $260 security deposit, a $19.95 delivery charge and have a credit card. There was a limit of 5,000 phones available.
The charges
The ACCC brought a total of 24 charges against Nationwide News - The reason for this was that there were three different sections of the Trade Practices Act which may have been breached for each of the eight advertisements, and were put to the court as alternatives.
The sections of the Act concerned provide in part:
s. 53(e) which prohibits a corporation making "false or misleading representations with respect to the price of goods."
s. 53(g) which prohibits corporations making a "false or misleading representation concerning the existence, exclusion or effect of any condition..."
s. 54 which prohibits corporations "offering gifts, prizes or other free items with the intention of not providing them, or of not providing them as offered."
As the case was decided, Justice Heerey made comments on each section but found Nationwide News guilty only in relation to six charges which concerned misleading statements as the effect of conditions.
Penalties
The maximum penalty which can be applied to each offence is $200,000 for a corporation and $40,000 for a person.
INTERNATIONAL AIR SERVICES COMMISSION/AUSTRALIAN COMPETITION AND CONSUMER COMMISSION SIGN MEMORANDUM OF UNDERSTANDING
The International Air Services Commission and the Australian Competition and Consumer Commission today signed a Memorandum of Understanding to formalise consultation arrangements between the organisations.
The MOU was signed by the IASC Chairman, Mr Jim Bain, and the ACCC Chairman, Professor Allan Fels, in Canberra.
The IASC is an independent body which makes determinations on public benefit grounds on the allocation of international aviation capacity to Australian international carriers.
The ACCC is an independent body which promotes competition and fair trading and to provide for consumer protection.
Under the MOU the two agencies have agreed to cooperate in undertaking their respective responsibilities when those responsibilities overlap. Legislation for both organisations aims to encourage competition and provide greater protection of and choice for consumers. The memorandum will also seek to avoid duplication of effort.
