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| Image courtesy of yachtfan |
So you want a new leather lounge? Ever wondered why different lounge suites at different retailers look similar but are priced unequally? Sure, you say, it's because of quality. You're generally right, of course.
But when Retailer A comparative advertises against Retailer B and says in a television advertisement (TVC) 'don't pay more elsewhere for this leather recliner lounge', ordinary consumer viewers might be justified to believe that, if purchased from Retailer B, the subject lounge will cost the viewer more than the price for which it can be purchased from Retailer A. In other words, the viewer should purchase "this leather recliner lounge" from Retailer A, who will not be beaten on price.
This very scenario was considered in Nick Scali Limited v Super A-Mart Pty Ltd [2011] FCA 751 before Justice Yates.
The complaint
Nick Scali alleged Super A-Mart had contravened ss 52 and 53 of the Trade Practices Act 1974 (Cth) (Act) when it made price comparisons about lounge suites offered by both retailers. Nick Scali argued that in a television advertisement, in-store placards and through sales representatives, Super A-Mart represented that its "Excellence" lounge suite was of the same or equivalent 'standard, quality, grade or composition' as Nick Scali's "Rajah" lounge suite.
The TVC
Super A-Mart's TVC is described by Yates J in detail at paragraph 87 of His Honour's judgment. In summary, the TVC's theme was price. Images of the Rajah suite appeared against the background of an image of the Excellence suite, where the image of the Rajah suite was shown with the words: "NICK SCALI $7030" and the image of the Excellence suite was shown with the price of "$2999.95". This display was accompanied by a female voice saying: 'At Nick Scali you’ll pay over $7,000' and 'Don’t pay more elsewhere for this leather recliner lounge'.
The Court's consideration of the issues
Yates J reviewed the evidence of expert witnesses to determine the differences between the Excellence lounge suite and the Rajah lounge suite. His Honour considered the size, leather, seat areas, wing areas, back cushions, lumbar support, outside backs, metal frames, wooden frames, recliner frames, inside arm cushions, footrests, stitching and recliner mechanisms. His Honour came to the conclusion that the two lounge suites were very different:
Overall, the Rajah suite is larger in size and is upholstered in significantly more top grain leather than the Excellence suite .... I am satisfied that, overall, the quality of both the top grain leather and the split leather used in the Rajah suite is superior to the quality of the corresponding leather used in the Excellence suite .... In my view the Rajah suite is, overall, of sturdier construction than the Excellence suite.Yates J also analysed the TVC in light of his conclusions as to the differences between the two lounge suites. He found the TVC conveyed to consumers that the lounge suites are relevantly 'the same'. His Honour drew a correlation between that representation and the words spoken in the voice-over during the TVC, namely 'this leather recliner lounge', which suggested that consumers only had to compare the price of the two lounge suites and would 'understand from viewing the commercial that the lounge suites possess materially the same physical attributes'.
His Honour was satisfied that Super A-Mart's TVC:
... falsely represented that the Excellence suite is of a particular “quality” or “composition” (namely, that it has the same qualities and composition - the same physical attributes - as the Rajah suite) contrary to s 53(a) and s 52 of the Act.In assessing other elements of Nick Scali's claim, Yates J held:
- Super A-Mart's in-store placards made different representations from those contained in the TVC. Rather than draw an association between the respective lounge suites' attributes by saying 'this leather recliner lounge', the placards invited comparison and evaluation of the products and did not contravene ss 52 and 53(a) of the Act.
- Despite 'compelling' evidence from Nick Scali's Queensland State Manager (posing as a customer) who recorded a conversation he had with a sales representative at Super A-Mart's Benowa store, establishing that Super A-Mart had contravened of ss 52 and 53(a) of the Act, other evidence of conversations between Nick Scali representatives and Super A-Mart sales staff at its MacGregor, Oxley and Virginia stores did not assist Nick Scali's case. The latter evidence did not prove that Super A-Mart represented in the course of conversations at those stores that the lounge suites offered by the competitors were the same.
Despite finding that Super A-Mart had contravened the Act, Yates J determined that on the evidence Nick Scali had not suffered loss or damage as a result. Nick Scali's claim for damages was therefore dismissed. In relation to injunctive relief, his Honour thought it appropriate in light of the findings he made that the parties address the Court on the question of both injunctive relief and costs. The matter was stood over to 18 July 2011.
Why is this case instructive?
The case illustrates why comparative advertising can be, in Conti J's words in Energizer Australia Pty Limited v Gillette Australia Pty Limited [2001] FCA 1887, 'potentially fraught with risk' (at 47). In that decision, Conti J cited Gummow J in Hoover (Australia) Pty Ltd v Email Ltd [1991] FCA 511 who was of the opinion that comparative advertising may be misleading, because it creates a "half truth" by omitting material necessary in order to make the comparison fair (at 375).
Super A-Mart omitted from its TVC that there were significant differences between the Excellence and Rajah lounge suites. By relying on price comparisons and representing the two lounge suites were the same, ordinary consumers were misled.
Apart from illustrating the legal principles that are applied by courts considering comparative advertising and misleading or deceptive conduct, the Nick Scali case demonstrates the level of interrogation that judges will apply to evidence in Australian courts. Yates J delved deep into expert and lay evidence to determine the facts of the case and assess liability. His Honour's conclusion demonstrates how important it is for a company building a trade practices claim against a competitor to brief lawyers before undertaking investigations and take comprehensive notes of all relevant evidence, including conversations with competitors' sales representatives.
Note: with the introduction of the Australian Consumer Law from 1 January 2011, sections 52 and 53 of the former Trade Practices Act (which relate to misleading and deceptive conduct and false or misleading representations) are now found in ss 18 and 29 of the Australian Consumer Law.
Partner: Paul Kallenbach
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