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.