"Nationwide News Pty Limited, publisher of Sydney's Daily Telegraph newspaper, has been fined a total of $120,000 for misleading the public over a 'free' mobile phone promotion.

The fines follow Australian Competition and Consumer Commission Federal Court action.

Justice Heerey today imposed six fines of $20,000 each and ordered Nationwide to pay the ACCC's costs.

In an earlier judgement, Nationwide was found guilty on six charges of misleading the public as to the effect of the conditions applying to the mobile telephone offer. The advertisements on the front page of the-then Telegraph Mirror promised readers a free mobile phone but the conditions attaching to the offer meant readers had to pay more than $2,000 in related charges. Those conditions were not disclosed until readers had bought a copy of the Telegraph Mirror.

"The decision underlines the seriousness of misleading the public with this type of promotion," ACCC Chairman, Professor Allan Fels said today. "Individual consumers may have purchased the paper only because of the promotion, then found it was not as good a deal as they expected. They may have individually only lost a small amount of money, but collectively that amount could add up to a large amount of money.

"This case shows that it is not enough to put an asterisk or 'conditions apply' at the bottom of an advertisement when those conditions contradict the basic thrust of the advertisement."

In determining the size of the fine, Justice Heerey emphasised the following factors:

  • the size of the defendant;
  • the degree that the statement departs from the truth;
  • the degree of dissemination;
  • what efforts have been made to correct the situation;
  • any contrition expressed by the defendant; and
  • the deterrent effect of the penalty.

"In my view, this is a serious contravention of the Act," Justice Heerey said. "Nationwide is a subsidiary of a major public company [News Limited] and the publisher of a leading Australian metropolitan newspaper... Offences of this nature have the characteristic that an individual person who is misled into paying a small amount... is not likely to take any action, but the total aggregate effective loss is potentially very substantial.

"The fact that the offences were committed in disregard of specific warnings from the Commission is a factor going to severity of penalty. Nationwide was not being asked to abandon the promotion [by the ACCC]. It would not have taken a great deal of ingenuity or expense to find a substitute for the offending word 'free'."

Professor Fels said the decision demonstrated the importance of correcting potentially misleading promotions early.

"When a corporation realises that an advertisement may breach the Trade Practices Act, it should fix the basic problem. It should not compound it by making minimal changes in an attempt to cover it up," he said.

Justice Heerey noted that there was no apology or expression of contrition by Nationwide prior to the penalty hearing.

During the course of argument, Nationwide drew attention to an earlier news release issued by the ACCC on the matter, which it claimed was unfair and inaccurate.

Justice Heerey considered the news release an accurate summary of the effect of the judgment and agreed with earlier decisions supporting the role of the ACCC in issuing moderately worded, accurate news releases.

"There is an element that since the offence was committed very publicly, the penalty needs to have an element of vindication, so that the public, who saw the law broken, will see the law being enforced," he said.

Professor Fels said he hoped the decision will give advertisers pause to think about the way in which they use the word 'free' when they next advertise an offer.

"If there are hidden conditions which make the 'free' offer expensive to take up, it could end up being very expensive for the advertiser as well," he warned.