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Kapnoullas, Stephen; Clarke, Bruce --- "Navigating 'Muddied Waters': The Regulation of Mass Marketing and Advertising By Section 52 of the Trade Practices Act" [2008] UWSLawRw 5; (2008) 12(1) University of Western Sydney Law Review 103



This article is concerned with the regulation of mass marketing by the Trade Practices Act 1974 (Cth), in particular s 52, which prohibits conduct that is ‘misleading or deceptive’, or ‘likely to mislead or deceive’.[1] Determining whether s 52 of the Trade Practices Act 1974 (Cth) has been breached in situations where the conduct complained of is directed at a diverse group (mass marketing), rather than an individual, presents particular problems. When conduct, such as advertising, is widely disseminated, as opposed to being tightly targeted, the likelihood of it misleading or deceiving some members of the general public exponentially increases. But at what stage can it be said that the conduct has overstepped the boundaries of fair play and become misleading? How does one measure the likelihood or propensity of the conduct to mislead? In particular, what members of the general public do we use as a benchmark to determine if conduct is misleading (the criterion issue)?

The criterion issue is a longstanding one[2] and has troubled courts, not only in Australia,[3] but in the United States[4] and Europe.[5] In spite of the adoption of the ‘ordinary or reasonable’ consumer test by the High Court in Campomar Sociedad, Limitada v Nike International Ltd (‘Campomar’),[6] a test that is problematic in itself, a question that still remains unresolved is the standard of care that consumers themselves need to employ when assessing mass advertising or marketing claims. Do the courts resort to the ‘reasonable person’ test employed in contract and tort law,[7] the ‘gullible’ or ‘credulous’[8] consumer, or some other standard? Or, to put it another way, what is the test to apply in determining whether a person is engaging in misleading or deceptive conduct? As Gummow J recently stated in a special leave application to the High Court,[9] this still remains ‘a very large question’.[10]

This article will examine several recent Federal Court decisions, including Australian Securities & Investments Commission v National Exchange Pty Ltd,[11] National Exchange Pty Ltd v Australian Securities & Investments Commission,[12] Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd[13] and Gillette Australia Pty Ltd v Energizer Australia Pty Ltd,[14] as well as a special leave application to the High Court regarding the first mentioned case.[15] However, whilst these cases provide some guidance, until the High Court rules authoritatively on this matter, the law is destined to remain in a state of some uncertainty.


When determining if s 52 has been breached, the allegedly misleading conduct needs to be analysed ‘by considering what is said and done against the background of all surrounding circumstances’.[16] A court will usually begin such an analysis by seeking to identify the relevant section of the public, which in situations involving mass marketing, will be the public at large. The seminal approach to this task has been provided by Taco Company of Australia Inc v Taco Bell Pty Ltd,[17] which in summary stated the role of the court to be as follows:

• to identify the relevant sections of the public who are likely to be misled

• to examine the conduct by reference to all who fall within that class, and

• to determine if persons in that class have been misled by the conduct in question (as opposed to an erroneous assumption on the part of any person misled).

A. Identifying the relevant section of the public – the target audience

This article is primarily concerned with mass marketing conduct, where the target audience will be extensive and include a wide cross section of the community. The type of case where such issues are likely to arise in Australia are those where the Australian Competition and Consumer Commission (‘ACCC’) is prosecuting a respondent (defendant), or an action involving rival traders where one of them is intent on proving that the conduct being engaged in is liable to mislead consumers in general. Cases taken to court by individual applicants seeking a remedy or compensation are usually concerned with conduct aimed at specific persons or an identifiable class of person. In these latter type of cases the nature of the conduct will normally be assessed by reference to the particular person (or type of person) to whom the conduct is addressed, where the relevant person may be a ‘thoughtful or reasonably careful businessman’,[18] a person with ‘considerable commercial experience’,[19] or one with the experience, wealth and capacity to check what was said.[20] Similar views can be applied when the audience is a specialist one, as in Parkview (Keppell) Pty Ltd v Mytarc Pty Ltd,[21] where an advertisement aimed only at travel agents was deemed unlikely to mislead, even though the court considered that the statement may have been misleading if directed to the public at large. Much more recently, the same reasoning was applied in Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd,[22] where a drug company’s promotional material directed to general practitioners was held not to be misleading.

This is not to say that there may not necessarily be debate as to the relevance of the personal characteristics of the parties involved when determining the outcome of a Section 52 case. For example, in Butcher v Lachlan Elder Real Estate Pty Ltd,[23] the majority of the High Court characterised purchasers of real estate exceeding $1 million in value as being shrewd, intelligent and self-reliant, resulting in the allegation of misleading conduct being dismissed. Kirby J, on the other hand, considered these personal characteristics as being largely irrelevant.[24]

In cases where the conduct is aimed at a very wide audience or the public at large, an amorphous target market, very different criteria come into play. As Lockhart states:

[E]xperience suggests that the train of thought which acts or omissions provoke will often be influenced by the individual, and perhaps idiosyncratic beliefs, assumptions, knowledge, skill and level of care of the audience. It is hardly surprising, therefore, that the courts have had to frequently grapple with the question of how the likelihood of divergent responses to the impugned conduct is to be accounted for in the ascertainment of its meaning for s 52 purposes.[25]

B. The Criterion for Identifying a Representative Member of a Class (Target Audience)

Once the class of persons (target audience) likely to be affected by the impugned conduct is isolated, the approach set out in Taco Bell[26] requires the court to consider the likely effect of the conduct on the members of that class. When the composition of the class is the general public en masse, should the effect on all members be taken into account? Should the effect be measured only in relation to ‘reasonable’ or ‘average’ members, or should some other objective standard be applied?[27] In dealing with this issue in Campomar,[28] the High Court said:

Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of that class.[29]

This issue was first addressed by the High Court in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (‘Parkdale’)[30] more than 25 years ago. In that extensively cited case divergent views were expounded by the court. Gibbs CJ commented that s 52 must be ‘regarded as contemplating the effect of the conduct on reasonable members of the class’ to whom it was addressed, as ‘the heavy burdens which the section creates cannot have been intended to be for the benefit of persons who fail to take reasonable care of their own interests.’[31] Mason J assessed the nature of the conduct complained of by asking whether the ‘ordinary purchaser’[32] would have been deceived in the circumstances. Even more liberal in approach, Murphy J declared that the court should consider the reactions of the ‘ignorant, the unthinking and the credulous’[33] to the conduct in question. In support of such a view, Murphy J made reference to US authorities concerned with the interpretation of analogous US statute law.[34]

The lack of consensus in Parkdale subsequently made life challenging for Federal Court judges looking for ‘guidelines’ to help with the issue of determining whether conduct was likely to mislead consumers. How was one to define the typical consumer, given that the impugned conduct in a particular case is likely to create different impressions on different people? As Webb and Farrelly have stated:

Persons with differing characteristics are unlikely to attach the same significance to the statements of another. The train of thought which acts or omissions provoke will often be influenced by individual perceptions determined by levels of care, skill and knowledge.[35]

It is probably fair to say that the majority of judges in the Federal Court have largely disregarded ‘reasonableness’ when discussing the typical consumer, and have tended to refer to such a consumer as ordinary or credulous.

In the widely relied on Taco Bell case quoted above, it was acknowledged that the court should take into account all persons who come within the relevant section of the public, which would include the astute and the gullible, the intelligent and not-so-intelligent, the well-educated and the poorly educated, men and women of various ages pursuing a variety of vocations. As was noted by Wilcox and Heerey JJ in Siddons Pty Ltd v Stanley Works Pty Ltd,[36] persons ‘who have failed to take reasonable care of their own interests have frequently succeeded in s 52 claims.’[37] This is not to suggest that all Federal Court judges ignored the views of Gibbs CJ in Parkdale, as some have supported the approach that consumers should be obliged to take reasonable care of their own interests.[38]

Not surprisingly, given the divergence and incompatibility of the above approaches, ‘there has also been widespread endorsement of a standard such as that employed by Mason J in Parkdale which lies between these two extremes.’[39]

It was against this background that the criterion issue once again came before the High Court, in Campomar in the year 2000, eighteen years after Parkdale. If the expectation was that the issue would finally be clarified, disappointment was the result. Unlike Parkdale, where there were separate judgments, in Campomar the members of the court delivered a joint judgment. However, the criterion issue was left unresolved. Whilst acknowledging the need to objectively attribute ‘certain characteristics’ to the target audience, the court chose not to endorse a particular standard. Instead, the High Court emphasised the need for consideration of whether ‘the “ordinary” or “reasonable” members of the class of prospective purchasers of a mass marketed product for general use’[40] would be likely to be misled by the impugned conduct. In doing so, evidence of ‘extreme or fanciful’ responses by consumers (that is, the adoption of erroneous assumptions) to the conduct in issue was to be disregarded. In other words there must be a sufficient nexus between the impugned conduct and the misconception or deception that arises in consequence of the impugned conduct. Unfortunately the High Court does not provide clear guidelines between assumptions that are extreme or fanciful and those that are ordinary or reasonable.

Given the decision by the High Court not to endorse a particular objective standard in Campomar, what impact would this have on subsequent Federal Court decisions? In this regard, Lockhart has provided an insightful analysis as to how matters now stand, post-Campomar, with respect to the criterion issue:

There now appears to be agreement, at least at appellate court level, that extreme, fanciful or unusually foolish interpretations of the impugned conduct will not be determinative of whether s 52 or its equivalents have been breached. Uncertainty remains, however, as to the extent to which the courts will take account of responses to the conduct in issue that cannot be so characterised, but might nevertheless be classed as ‘unreasonable’. The High Court’s approach in Campomar, that the ‘likely reactions of “ordinary” or “reasonable” members’ of the target audience are to be considered, left that question unresolved, and, hence, lower courts, litigants and legal advisers must continue to grapple with the divergent views that have been expressed to date concerning the issue.[41]

With respect to the judges of the High Court in Campomar, the juxtaposition of the descriptors ‘ordinary’ and ‘reasonable’ for the target audience of mass marketers not only fails to clarify the issue, but in fact leaves the law in the same state of uncertainty that has existed since Parkdale. The High Court almost seemed to treat these terms as synonymous, whereas in reality there is a ‘very clear distinction that can (and arguably should) be drawn between them.’[42] That such is the case is reinforced by several post-Campomar Federal Court decisions, all of which involve the mass marketing of goods or services to diverse target audiences. Some of these decisions are discussed below.

Whilst all judges, naturally enough, refer to the ‘ordinary or reasonable’ person criterion adopted by the High Court in Campomar, the cases differ in the application of this criterion. We have categorised the cases under three headings. The first involves the application of the ‘reasonable’ person criterion. The second involves a case, ACCC v Cadbury Schweppes Pty Ltd (Cadbury Schweppes),[43] where, although Gray J referred to the ‘reasonable’ purchaser, he applied the criterion by utilising characteristics more often associated with the ‘ordinary’ person. The third category illustrates the application of the ‘ordinary’ person criterion. Overall, most judges appear to have adopted the ‘ordinary’ person criterion in reaching their respective decisions.

C. Application of the ‘Reasonable’ Person Criterion

Professor J D Heydon, the author of Trade Practices Law, considers that the Gibbs CJ approach in Parkdale has been endorsed by the High Court in Campomar:

The reference by Gibbs CJ to reasonable care ... has been read as not suggesting that the character of the respondent’s conduct is to be tested only by reference to the reasonable man; it is said that the character of the respondent’s conduct is not tested by the effect or likely effect on the reasonable man only, but by reference to the entire class of possible victims (Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 180; (1984) 2 FCR 82, 91 (Bowen CJ, Lockhart and Fitzgerald JJ)). However, the recent approach of the High Court [referring to Campomar], with its search for a “hypothetical” representative member of the relevant class, suggests a repudiation of [other] approaches [ie the view that ‘all members of the class are relevant’, or at least all ‘persons other than the unusually stupid’].[44]

A case that lends some support to the view of Professor Heydon, although Campomar was not referred to in the proceedings, is Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (Gillette).[45] This case involved the mass marketing of batteries, utilising a comparative battery advertisement aired widely on Victorian television. The comparison involved a Duracell alkaline battery and an Eveready Energizer carbon zinc battery. Not surprisingly the Duracell battery (Gillette’s most powerful and expensive battery), was shown significantly out-performing the Energizer Eveready battery (the fifth most powerful battery in Energizer’s product range). Basically, Energizer alleged that the commercial was misleading in breach of s 52 of the Trade Practices Act 1974 (Cth), on the grounds that the comparison compared ‘apples with oranges’ without adequately revealing that different quality and type of batteries were being compared. The trial judge (Conti J) agreed, and found the advertisement was misleading citation.

However, the Full Federal Court overturned the decision, suggesting that a widely disseminated advertisement will only be considered likely to mislead or deceive where the overall impression conveyed would lead members of the viewing public into error. Thus, for example, Lindgren J was able to conclude that:

Most goods have several ‘selling features’ and consumers understand that a comparative advertisement referring to only one of them does not necessarily exhaust the field. Consumers understand that the advertiser has selected a feature that favours the advertised product, in the hope that that feature will be so important to consumers that they will not be interested to inquire into other potential bases for comparison.[46]

The decision reached by the Full Federal Court has not been without controversy. Shirrefs argues that the decision, which ‘moves the law away from a requirement for ‘apples with apples’ comparisons is appropriate from both a legal and economic perspective’.[47] Birchall[48] disagrees, and is critical of the decision. We believe the criticism is justified.

The Full Federal Court took the view that if a consumer thought that Energizer had no other batteries, then that conclusion arose from the viewer’s mistaken assumptions, rather than an implied representation in the advertisement that Energizer did not produce an equivalent battery.[49]

We consider the level of sophistication attributed to the consumer in this case is questionable. As Birchall argues:

[T]he result [in Gillette] may have been different if one took into account certain relevant underlying assumptions that are, to postulate, not erroneous, unreasonable or fanciful and would be held by most consumers.

The Duracell commercial depicted a side by side performance test. Moreover, the test was conducted in the form of an athletics running race [involving battery-powered toy bunnies] in which one competitor vanquished all others. What underlying assumptions would colour the consumer’s understanding of this spectacle in an advertising context?

It is submitted that consumers assume subjects of a performance test, especially a sporting contest such as a race, are fundamentally equal in the sense of being an equivalent class or grade ... If [so], then consumers viewing the Duracell commercial would be likely to have believed, without being told otherwise, that the batteries being compared were of an equal technological grade or class of battery.[50]

Thus, whilst the doctrine of erroneous assumption represents good law, we would suggest, with respect, that it was inappropriately applied in Gillette. We believe the application was coloured in this case by the use of an inappropriate objective standard that seemed to be based on the views of the ‘reasonable’ or sophisticated consumer rather than an ‘ordinary’ or credulous one.[51]

D. A ‘Half-Way House’ Approach to Applying the ‘Reasonable’ Person Criterion

Cadbury Schweppes[52] is an example of a case where a Federal Court judge followed Campomar, in the sense of utilising the concept of the ‘reasonable’ person (rather than the ‘ordinary’ person) in the course of his judgment, but applied it in a realistic and commonsense way. The judge, Gray J, adopted a broad interpretation of how the ‘reasonable’ consumer is likely to conduct him or herself in the marketplace, so that the relevant person has scant resemblance to the reasonable person so familiar to those knowledgeable in tort and contract law.

The case involved the depiction of real fruit on packages and labels of mass marketed flavoured cordial containing no real fruit juice. In assessing whether such conduct was in breach of s 52, Gray J stated that it was ‘necessary to have in mind some model of consumer’,[53] which he went on to define as ‘reasonable potential purchasers’.[54] Within this category, Gray J acknowledged that there existed

a significant element among purchasers of cordial products who would prefer to purchase a cordial flavoured by means of real fruit and who are prepared to make their decisions on the basis of a fleeting impression from the labelling and packaging of the product, rather than consult the ingredients list.[55]

This hardly describes the reasonable person utilised in common law jurisprudence, a person who would undoubtedly have carefully read and scrutinised the label. It is the typical ‘ordinary’ consumer, desirous of completing their shopping expedition as quickly as possible, who is likely to place reliance on mere appearances and illustrations on labels.

E. Application of the ‘Ordinary’ Person Criterion

One of the first cases decided post-Campomar was Telstra Corp Ltd v Cable & Wire Optus Ltd (Optus),[56] where Goldberg J suggested that

the concept of looking at an advertisement through the eyes of an ordinary or reasonable consumer must also take into account that an advertisement published to the world at large is designed and calculated to be seen and read by a wide range of persons. Identifying the relevant class as ordinary and reasonable people conceals the fact that within that range will be included, in the words of Sheldon and Sheppard JJ in CRW Pty Ltd v Sneddon (1972) AR (NSW) 17, 28: ‘The shrewd and the ingenuous, the educated and the uneducated and the experienced and inexperienced in consumer transactions’.[57]

Goldberg J considered that, despite Campomar, this approach was still generally applicable, although ‘[t]he extremely stupid, and perhaps gullible may well be excluded from the class of persons who read ... advertisements [of the kind the subject of the case] in newspapers.’[58]

A recent Federal Court case lending support to this approach is Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd (‘Henry Kaye’).[59] In this case Henry Kaye announced the ‘$1 million Challenge’. The ‘Challenge’ involved five free seminars during which Kaye proposed that one person would be chosen from attendees at each seminar and that Kaye would teach these people to become property millionaires within 12 months. The ‘Challenge’ and the free seminars were mass marketed, being advertised on radio in Melbourne and Sydney, as well as on the Internet and in newspapers. As such, it is obvious that the advertisements were conveyed to a very wide class of persons. The ACCC brought proceedings against Kaye and his company, alleging that the respondents, by claiming that a randomly selected member of the diverse target audience could be easily converted into a property millionaire, had engaged in misleading or deceptive conduct in breach of s 52 of the Trade Practices Act.

In the course of her judgment, Kenny J noted that newspapers are read by a wide spectrum of the public, including the ‘intelligent and the wary and also by the unsuspecting, the gullible and the impressionable’.[60]

Kenny J acknowledged that this ‘is equally true of the advertisements in this case that were conveyed by radio and on the Internet.’[61] After then referring to Campomar, with its reference to the ‘ordinary’ or ‘reasonable’ members of the class of prospective purchasers, Kenny J instructively stated:

I do not consider that ... [the High Court judges in Campomar] adopted a different view from that expressed in Taco Co of Australia and in Tobacco Institute. Certainly their Honours did not expressly say that they did ... In considering the effect of representations on the public, including their meaning, the court is to consider the effect on ordinary or reasonable members of the class in question. This does not mean that the court cannot consider the diversity of the experience and knowledge within the class and other matters pertinent to members of the class.[62]

Kenny J concluded that the advertising claims were misleading and deceptive, as there was no reasonable likelihood that an average member of the public had any realistic prospect of becoming a property millionaire.

In Cat Media Pty Ltd v Option Healthcare Pty Ltd[63] (a case involving weight loss products promoted to a wide and diverse audience), Branson J indicated that the court’s primary concern, when interpreting s 52,

is with the behaviour to be expected of, and the judgments likely to be made by, ordinary (even if it might be thought, somewhat credulous) members of the community intent on making a relatively modest purchase in a conventional way.[64]

Another relatively recent Federal Court case of some note dealing with this issue is ASIC v National Exchange Pty Ltd (‘National Exchange’).[65] This case involved David Tweed, a share trader. Through his company National Exchange Pty Ltd, Tweed specialised in making off-market offers to buy shares, directing his offers to a broad audience.

In 2003, the Australian Securities and Investments Commission (‘ASIC’) passed a requirement that off-market share offers must disclose the market price of the shares. National Exchange subsequently made direct offers to around 5000 small ‘mum and dad’ shareholders to buy shares valued at $1.93 for $2.00, which appeared to be seven cents above the market value. However, a clause in the fine print of the offer document provided for payment by fifteen annual instalments. One potential seller was nearly eighty years old, so it was doubtful therefore whether she would have lived long enough to receive payment in full.

ASIC brought an action under s 1041H of the Corporations Act 2001 (Cth), a section that is virtually identical to s 52 of the Trade Practices Act 1974 (Cth), alleging that the conduct of the defendant was misleading and deceptive.

In denying liability, the central thrust of defendant’s argument was that shareholders who received the offer and acting reasonably would take the opportunity to read the document carefully and ascertain the terms of payment. This has overtones of the approach of Gibbs CJ in Parkdale, who opined that consumers are expected to take reasonable care of their own interests.

Finklestein J concluded that a number of shareholders had been misled into thinking that they had received a cash offer for their shares.[66] In doing so His Honour stated:

[Section 1041H] is not there for experts; it is there to protect the general shareholding public, many of whom do not analyse offer documents in any great detail, but act on appearances and impressions. This cannot be characterised as unreasonable conduct on their part. It is just the natural order of things.[67]

On appeal, the Full Federal Court went on to unanimously uphold the decision that the document was misleading or deceptive, even though it contained nothing that was literally false.[68] lacking citation. Insufficient prominence had been given to the terms of payment in the offer document, leaving some shareholders, especially those who were less than careful readers, with a misleading impression as to the cash amount they were to receive upon acceptance.

When seeking leave to appeal to the High Court, National Exchange argued that it should not be liable for misleading or deceptive conduct if the shareholders were misled only because they failed to read the document given to them, when the document was expressed in relatively clear and unambiguous terms. The High Court rejected the submission and refused special leave to appeal from that decision,[69] thereby endorsing the decision of the Full Federal Court.


In the context of determining whether conduct is misleading in a mass marketing situation, the main area that requires further analysis is the current status of the criterion issue. However, before undertaking this analysis, two related matters need to be briefly discussed.

A. Is there any need to identify a ‘hypothetical individual’?

In National Exchange the trial judge, Finklestein J, considered himself bound to follow the High Court judgment in Campomar, but clearly felt quite constrained:

[I]t is necessary to consider the effect of the conduct on the “ordinary” or “reasonable” member of the addressed section or class, and see whether he or she has been misled ... No guidance is given about the selection of the criteria which this hypothetical representative will have ... [I]t is difficult to work out just how one is to go about identifying those criteria in the case of an extremely diverse group when the selection is being made for attribution to only one hypothetical individual, which is what the High Court seems to have mandated. Indeed, the mere fact that one will often be confronted with a diverse group suggests that the task is nigh on impossible.[70]

One of the grounds for appeal to the Full Federal Court in National Exchange was that the trial judge did not refer to the ‘ordinary or reasonable shareholder’ in his analysis, or identify a hypothetical representative member of that class, but rather alluded to ‘a number of shareholders’ and the ‘general shareholding public’. Dowsett J thought it was irrelevant that Finklestein J had failed to identify any particular criteria for selecting the reasonable or ordinary member of the class. However, in reaching this conclusion, Dowsett J rejected the view of Finklestein J that the High Court had mandated the need to isolate ‘one hypothetical individual’ in cases of this type:

It is true that the High Court spoke of isolating “by some criterion a representative member of that class”. I understand that process to be more concerned with describing the class than with identifying any particular member.[71]

In a later case, .au Domain Administration Ltd v Domain Names Australia Pty Ltd (‘Domain Names’),[72] Finklestein J acknowledged that he was probably in error on this issue in National Exchange; although His Honour stressed that this did not affect the ultimate outcome of the case. It would therefore appear to be settled that there is in fact no need to isolate a hypothetical individual in s 52 cases involving mass marketing.

B. Does a significant section of the target audience need to be misled?

Another related issue that appeared to trouble Finklestein J in National Exchange was whether there is a need for a significant number of members of the public to be misled for s 52 to be breached. This can be described as the quantum (or quantitative) issue. In other words, is the conduct of a respondent (defendant) to be tested by reference to the effect or likely effect upon a single person only, or to the entire class of possible victims? This clearly has important implications in a mass marketing situation.

As noted above, in Campomar, the High Court suggested that the task is to determine the effect upon a ‘hypothetical’ representative member of the relevant class. Finklestein J expressed the view that it followed from this that there is no need for a significant section of the public to be misled by the impugned conduct before there can be a contravention of s 52.[73]

The Full Federal Court disagreed.[74] In doing so, Jacobson and Bennett JJ conflated the quantitative and the qualitative aspects of the criteria laid down in Campomar. The Full Federal Court concluded that a finding that reasonable members of a class would be likely to be misled carried with it the determination that a significant number of recipients of a representation would be misled. On appeal, the High Court endorsed this approach.[75]

National Exchange, in our view, demonstrates that the quantum issue is not a particularly important one, and we believe it is unlikely to have much influence on the outcome of future decisions. In National Exchange the Full Federal Court disagreed with Finklestein J’s analysis of the law, but nevertheless concluded that this did not affect the ultimate conclusion. On appeal to the High Court Gummow J agreed. The prevailing view appears to be that a significant portion of the public must be misled before s 52 is contravened.[76]

Nevertheless, this requirement is not a difficult hurdle to overcome. As Gummow J emphasised, s 52 can be breached without proof of actual deception. The section applies where conduct is misleading or deceptive or ‘likely’ to mislead or deceive an ordinary or reasonable person. In the words of Gummow J, a ‘reasonable person is ordinarily understood to be significantly numerous.’[77] Thus, if it is found that a ‘reasonable’ or ‘ordinary’ consumer is likely to be misled by the conduct of the respondent, then it can be assumed that a significant number of consumers will be misled. This approach appears to settle any dilemma relating to the quantum issue.[78]

As these two preliminary issues appear to have been resolved, we now return to the main focus of our article.

C. The Criterion Issue

The debate surrounding the application of the criterion issue in a mass marketing context is in part due to the fact that s 52 is written in broad language. This was recognised by Gibbs CJ in Parkdale:

The words of sec. 52 have been said to be clear and unambiguous… Nevertheless they are productive of considerable difficulty when it becomes necessary to apply them to the facts of particular cases. Like most general precepts framed in abstract terms, the section affords little practical guidance to those who seek to arrange their activities so that they will not offend against its provisions. [79]

A consequence of this is that one is left with the feeling that some of the decisions relating to s 52 in cases involving the mass marketing of goods or services are based on impression, or a judge’s intuitive assessment of the facts.[80] This partly explains the courts’ reluctance to attach a great deal of weight to expert evidence.[81]

The debate has not been quelled by Campomar. In fact, if anything, it has been further fuelled, due to the failure to acknowledge a difference between the ‘reasonable’ and ‘ordinary’ person criterion. We believe there is an important distinction to be made between the ‘reasonable’ and the ‘ordinary’ or credulous consumer. This distinction is illustrated by the finding in Gillette. As previously indicated, the Full Federal Court’s conclusion that the advertisement was not misleading or deceptive seems to have been based on standards expected of the reasonable or sophisticated consumer, rather than the ordinary consumer.

This can be contrasted with the strong view of Finklestein J on this topic, as evidenced in National Exchange. His Honour reiterated this view in Domain Names.

Another potential difficulty arises because the class to whom the impugned conduct is directed will often comprise a diverse group. That is, the members of the group might include the uneducated, the inexperienced, the ignorant and the unthinking as well as the educated, the intelligent and the informed consumer.[82]

On appeal, the Full Federal Court held that his Honour had ‘accurately’ summarised the Campomar test.[83]

A similar sentiment is evident in the judgment of Kenny J in Henry Kaye:

An inexperienced property investor, or ‘ordinary Australian’, having been taught the Kaye strategies, would not be in a position to take practical advantage of these strategies in any real market. An ordinary Australian would have virtually no prospects of accumulating sufficient wealth to be a ‘property millionaire’.[84]

The criteria used by Finklestein J and Kenny J to reach their respective decisions are reflections of what Harland describes as

a tendency to hold that, in considering whether an advertisement is likely to mislead, one applies not so much the traditional ‘objective’ or ‘reasonable man’… test frequently applied in the law of tort and contract, but a less stringent standard taking account of the characteristics of the audience addressed. It follows from this approach that one must have regard to the particular limitations or susceptibilities of the audience.[85]

The distinction between the ‘reasonable’ and the ‘ordinary’ (or credulous) consumer has been well summarised, although perhaps a little extravagantly, in a recent article by Romano:[86]

Several elements distinguish the reasonable consumer from the credulous purchaser. The reasonable consumer is the attentive, mature, and critical one who does not rely solely on the advertisement. On the contrary, he “critically perceives the information given, carefully evaluates and analyses its content and meaning and finally bases a rational decision on such analysis.” However, he is not a knowledgeable, sophisticated, or highly-educated consumer and the fact that consumers are not always capable of understanding all relevant facts is considered when judging advertising. Additionally, the reasonable consumer exercises common sense and does not necessarily believe and rely on all statements contained in the advertisement. He is the average target consumer. By contrast, the credulous consumer is a vulnerable, inattentive, uncritical, trusting, non-discerning, unrealistic, and unsophisticated person. He does not consult information available about the product before the purchase and only relies on the advertisement. In short, he attaches significance to any vague and general claim and is incapable of understanding the ad as a mere statement of opinion.[87]

The diverse range of judicial and academic opinion outlined above demonstrates that there is still debate concerning the current status of the criterion issue in the context of mass marketing.


The criterion issue, as applied in mass marketing cases, remains unresolved. In fact it has been suggested that what Campomar has done with regard to defining an objective standard by which to measure the likelihood of consumers being misled in breach of s 52 of the Trade Practices Act 1974 (Cth) is to ‘significantly muddy the waters’.[88] The hope of Lockhart,

that clearer guidelines may well begin to emerge from lower court decisions in the near future as to how the distinction is to be drawn between assumptions relating to the impugned conduct that are extreme or fanciful and those that are ordinary or reasonable,

has not really eventuated.

It is unfortunate that the law remains in such a state of uncertainty, given Professor Heydon’s view that the level of care is ‘relevant in many respects to s 52 actions.’[89] However, the conclusion reached by Professor Heydon that Campomar supports the approach of Gibbs CJ in Parkdale is open to debate.

Opinions in the Federal Court remain as diverse as ever. One only has to look at the Gillette decision and compare it with the Henry Kaye and National Exchange cases to confirm this. We believe the objective standard should be based on the realistic ‘ordinary’ person as described by a number of Federal Court judges.[90] The ‘ordinary’ person criterion encompasses a category in which there is a wide diversity of experience and knowledge. It should not be assumed that the target of misleading and deceptive representations will always act reasonably and ‘react dispassionately and logically to its lure...The enthusiasm and false sense of security that misleading or deceptive conduct is calculated to engender casts caution to the wind.’[91]

It is our contention that the High Court, by only disregarding the ‘extreme and fanciful’ responses of consumers to alleged misleading conduct, has actually lent support to the view that all persons other than the ‘unusually stupid’ must be considered – in other words, ‘ordinary’ consumers. On our analysis, this has been the interpretation adopted, appropriately, by the majority of Federal Court judges post-Campomar.

Such an approach is consistent with the aim of consumer protection legislation. As McKeough, Stewart and Griffith emphasise:

The whole point of consumer protection legislation, including Part V of the Trade Practices Act, is that people do not take reasonable care of their own interests, that traders need to be restrained from taking advantage of innate susceptibility of so many of us to modern marketing methods. [92]

[*] Senior Lecturer in Law, Faculty of Business & Enterprise, Swinburne University of Technology (Hawthorn campus).

[†] Lecturer in Law (formerly Associate Professor and Deputy Head of Studies), Faculty of Higher Education, Swinburne University of Technology (Lilydale campus).

[1] Trade Practices Act 1974 (Cth) s 52 is mirrored by provisions in State and Territory Fair Trading Acts.

[2] See the discussion by J D Heydon, ‘The Relevance of the Victim’s Level of Care in Misleading and Deceptive Conduct and Deceptive Conduct Actions’ (1995) 2 Competition & Consumer Law Journal 230. See also Lawbook Co, Trade Practices Law, (at Update 89) [11.410]-[11.433]; Stephen Kapnoullas and Bruce R Clarke, ‘The Legal Regulation of Comparative Advertising: Old Game, New Rules’ [1995] QUTLawJl 2; (1995) 11 Queensland University of Technology Law Journal 7.

[3] As in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.

[4] See Ira Millstein, ‘The Federal Trade Commission and False Advertising’ (1964) 64 Columbia Law Review 439 and Victor F Schwartz and Cary Silverman, ‘Common-Sense Construction of Consumer Protection Acts’ (2005) 52 Kansas Law Review I.

[5] See the discussion by David Harland, ‘The Control of Advertising – A Comparative Overview’ (1993-94) Competition & Consumer Law Journal 95, and Charlotte J Romano, ‘Comparative Advertising in the United States and in France’ (2005) Oxford University Comparative Law Forum 1 <> at 22 July 2008.

[6] [2000] HCA 12; (2000) 202 CLR 45. See the discussion by Eileen Webb and Diana Farrelly, ‘Before the High Court: Campomar Sociedad Limitada & Anor v Nike International Ltd & Anor[1999] SydLawRw 11; (1999) 21 Sydney Law Review 278.

[7] See the discussion in Harland, above n 5, and Jill McKeough, Andrew Stewart and Philip Griffith, Intellectual Property in Australia (3rd ed, 2004) 482-6.

[8] As in Siddons Pty Ltd v Stanley Works Pty Ltd (1991) ATPR 41-111 and McDonald’sSystem of Australia Pty Ltd v McWilliams Wines Pty Ltd (1979) 28 ALR 236.

[9] Transcript of Proceedings, National Exchange Pty Ltd & Anor v ASIC (High Court of Australia, Gummow, Hayne JJ, 10 December 2004) [2004] HCA Trans 557.

[10] Ibid 2.

[11] [2003] FCA 955; (2003) 202 ALR 24.

[12] (2004) 49 ACSR 369 (Full Federal Court appeal decision).

[13] [2004] FCA I363 (Unreported, Federal Court, Kenny J, 22 October 2004).

[14] [2002] FCAFC 223; (2002) 193 ALR 629. See analysis of case by Doug Shirrefs ‘Gillette v Energizer – good law and good economics’ (2004) 12 Trade Practices Law Journal 135.

[15] Transcript of Proceedings, National Exchange Pty Ltd & Anor v ASIC (High Court of Australia, Gummow, Hayne JJ, 10 December 2004); [2004] HCA Trans 557.

[16] Taco Company of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177, 199 (Deane and Fitzgerald JJ).

[17] [1982] FCA 136; (1982) 42 ALR 177 (‘Taco Bell’).

[18] Brown v Jam Factory Pty Ltd [1981] FCA 35; (1981) 53 FLR 340, 349-350 (Fox J).

[19] Pappas v Soulac Pty Ltd [1983] FCA 3; (1983) 50 ALR 231, 233 (Fisher J).

[20] Squibb & Sons Pty Ltd v Tully Corp Pty Ltd (1986) ATPR 40-691, 47,594-5 (Gray J).

[21] [1984] FCA 254; (1984) ATPR 40-486.

[22] [2006] FCAFC 22; (2006) ATPR 42-106.

[23] [2004] HCA 60; (2004) 218 CLR 592, analysed by Warren Pengilley, ‘Misleading or deceptive conduct considered by the High Court. Does Butcher’s case indicate a new judicial conservatism?’ (2005) 12 Competition & Consumer Law Journal 314.

[24] Butcher v Lachlan Elder Real Estate Pty Ltd [2004] HCA 60; (2004) 218 CLR 592, 649 (Kirby J).

[25] Colin Lockhart, The Law of Misleading and Deceptive Conduct (2nd ed, 2003) 74.

[26] Taco Bell [1982] FCA 136; (1982) 42 ALR 177.

[27] Deborah Healy & Andrew Terry, Misleading or Deceptive Conduct (1991) 173.

[28] Campomar [2000] HCA 12; (2000) 202 CLR 45.

[29] Ibid 85 (emphasis added).

[30] (1982) 149 CLR 191.

[31] Ibid 199.

[32] Ibid 210.

[33] Ibid 215.

[34] See discussion in Schwarz & Silverman, above n 4; Millstein, above n 4.

[35] Webb & Farrelly, above n 6, 10, referring to observations made in Pappas v Soulac Pty Ltd [1983] FCA 3; (1983) 50 ALR 231, 233 (Fisher J).

[36] (1991) 29 FCR 14; (Full Federal Court).

[37] Ibid 501.

[38] WEA International Inc v Hanimex Corp Inc [1987] FCA 379; (1987) 17 FCR 274; Commercial Dynamics Pty Ltd v M Hawke Nominees Pty Ltd (1996) ATPR 41-503.

[39] Lockhart, Colin Lockhart, The Law of Misleading and Deceptive Conduct (2nd ed, 2003), 76.

[40] [2000] HCA 12; (2000) 202 CLR 45, 86 (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ).

[41] Colin Lockhart, The Law of Misleading and Deceptive Conduct (2nd ed, 2003) 74., 77 (emphasis added).

[42] McKeough, Stewart and Griffiith, above n 7, 485.

[43] [2004] FCA 516; (2004) ATPR 42-001.

[44] Lawbook Co, Trade Practices Law (at Update 89) [11.433].

[45] [2002] FCAFC 223; (2002) 193 ALR 629. See analysis of case by Shirrefs, above n 13.

[46] [2002] FCAFC 223; (2002) 193 ALR 629, 646.

[47] See above n 13.

[48] Sydney Birchall, ‘Comparing apples with oranges – when is comparative advertising misleading?’ (2005) 17(8) Intellectual Property Law Bulletin 129.

[49] See [2002] FCAFC 223; (2002) 193 ALR 629, 635 (Heerey J).

[50] See above n 45, 130-131.

[51] Both parties were subsequently involved in further litigation in Gillette Australia Pty Ltd v Energizer Australia Pty Limited [2005] FCA 1647 (Unreported, Federal Court, 17 November 2005), concerning a claim by Energiser that its lithium batteries performed ‘up to seven times longer’ than Duracell’s standard alkaline batteries.

[52] [2004] FCA 516; (2004) ATPR 42-001.

[53] Ibid 48,735.

[54] Ibid 48,736.

[55] Ibid. A factor which some courts have taken into account, but which we believe has not been sufficiently emphasised in some cases, is the price paid for goods or services. A purchaser of an inexpensive item such as a $2 socket tool (see Siddons Pty Ltd v Stanley Works Pty Ltd (1991) ATPR 41-111) is not likely to pay too much attention to the labelling compared to the purchaser of an expensive sofa (as in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191) or residential property (as in Butcher v Lachlan Elder Real Estate Pty Ltd [2004] HCA 60; (2004) 218 CLR 592). See the discussion by Pengilley, above n 22; Ross Gittins ‘Flying right with product appeal’ The Age (Melbourne), October 17, 2007, 3.

[56] [2001] FCA 1478 (Unreported, Goldberg J, 19 October 2001).

[57] Ibid [21] (emphasis added).

[58] [2001] FCA 1478 (Unreported, Federal Court, 19 October 2001) [23]. Subsequently, in Cantarella Bros Pty Ltd v Valcorp Fine Foods Pty Ltd (2002) ATPR 41-856. Lindgren J, at 44,713, expressed the view that the approach taken by Goldberg J was not ‘inconsistent’ with that taken by the High Court in Campomar.

[59] [2004] FCA 1363 (Unreported, Kenny J, 22 October 2004). See Damien Millen, ‘Who Wants to be a Millionaire? Misleading and Deceptive Seminar Spruiking’ (2005) 13 Trade Practices Law Journal 163.

[60] Relying on Sheppard J in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1992] FCA 630; (1992) 38 FCR 1, 49-50 (Tobacco Institute). Similar views to those expressed (and noted above) by Goldberg J in Telstra Corporation Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 (Unreported, Federal Court, 19 October 2001) [21].

[61] [2004] FCA I363 (Unreported, Federal Court, 22 October 2004) [105].

[62] Ibid [107] (emphasis added). In support of this view Kenny J referred to National Exchange Pty Ltd v ASIC (2004) 49 ACSR 369, 375-6 (Dowsett J) and 383 (Jacobson and Bennett JJ); Medical Benefits Fund of Australia Ltd v Cassidy (2004) 205 ALR 402, 414-5 (Stone J).

[63] [2003] FCA 133; (2003) ATPR 41-933. See also Johnson & Johnson Pacific Pty Ltd v Unilever Australia Ltd (No 2) [2006] FCA 1646; (2006) 70 IPR 574, relating to a claim that ‘7 out of 10 Johnson’s Holiday Skin users preferred new Dove Summer Glow’.

[64] [2003] FCA 133; (2003) ATPR 41-933, 46,937.

[65] [2003] FCA 955; (2003) 202 ALR 24.

[66] ASIC v National Exchange Pty Ltd [2003] FCA 955; (2003) 202 ALR 24, 30.

[67] Ibid 31 (emphasis added).

[68] National Exchange Pty Ltd v ASIC (2004) 49 ACSR 369.

[69] Transcript of Proceedings, National Exchange Pty Ltd & Anor v ASIC (High Court of Australia, Gummow, Hayne JJ, 10 December 2004): [2004] HCA Trans 557.

[70] National Exchange [2003] FCA 955; (2003) 202 ALR 24, 28.

[71] National Exchange Pty Ltd v ASIC (2004) 49 ACSR 369, 376.

[72] [2004] FCA 424; (2004) 207 ALR 521, 528.

[73] A view supported by Russell V Miller, Miller’s Annotated Trade Practices Act (28th ed, 2007) 540, and seemingly by Professor J D Heydon Trade Practices Law Lawbook Co (Update 89) at [11.433]. In support of this conclusion, Finklestein J noted, the offer in National Exchange was sent to some 5000 shareholders, and it would clearly not be necessary to hear evidence from all, or even a substantial number of these shareholders.

[74] (2004) 49 ACSR 369.

[75] National Exchange Pty Ltd & Anor v ASIC [2004] HCA Trans 557 (Unreported, High Court, Gummow, Hayne JJ, 10 December 2004), 6.

[76] In ACCC v Signature Security Group Pty Ltd [2003] FCA 3; (2003) ATPR 41-908, Stone J said, at 46,537: ‘Since actual deception need not be shown the court must consider whether a reasonably significant number of potential purchasers would be likely to be misled or deceived.’ In ACCC v Cadbury Schweppes Pty Ltd [2004] FCA 516; (2004) ATPR 42-001 Gray J said at 48,737: ‘I am of the view that each was capable of conveying to a significant body of reasonable consumers a representation that the product contained extracts of the real fruit depicted.’ See also Cantarella Bros Pty Ltd v Valcorp Fine Foods Pty Ltd (2002) ATPR 41-856) and Kenny J in Henry Kaye [2004] FCA 1363 (Unreported, Kenny J, 22 October 2004) [167] where her Honour said. ‘I find, on the balance of probabilities, that a not insignificant part of the listening and reading public ... were mislead or deceived or likely to be misled or deceived by the representations’.

[77] Transcript of Proceedings (High Court of Australia, Gummow, Hayne JJ, 10 December 2004), [2004] HCA Trans 557, 3 of 6,. This was an endorsement of the views expressed in the Full Federal Court decision: National Exchange Pty Ltd v ASIC (2004) 49 ACSR 369, 384 (Jacobson & Bennett JJ).

[78] A recent case dealing with this issue is Osgaig Ltd v Ajisen (Melbourne) Pty Ltd [2004] FCA 1394; (2004) 213 ALR 153.

[79] (1982) 149 CLR 191, 197.

[80] See Harland, above n 5, 102. See also Heydon, above n 2, 242, who says ‘the extreme generality of the relevant statutory language, particularly s 52 and 82, has given the courts a degree of room in which to manoeuvre.’

[81] For example, in Cat Media Pty Ltd v Opti-Healthcare Pty Ltd [2003] FCA 133; (2003) ATPR 41-933, 46,937 Branson J said ‘I have found the expert evidence of no real assistance’ and then went on to endorse the comment of Beaumont J in Pacific Publications Pty Ltd v IPC Media Pty Ltd [2003] FCA 104 [92] ‘that where a claim is essentially a matter for the Court’s impression, expert views which are merely ‘impressionistic’ can be given no more than nominal weight.’ However, McKeough, Stewart and Griffith, above n 7, 488-9, express a contrary view: ‘Subjective judicial impression cannot substitute for a properly conducted survey designed to assess, as accurately as possible, the reactions of real life consumers in real life situations.’ As to the weight to be given to expert evidence generally, see the recent High Court decision in Fox v Percy [2003] HCA 22; (2003) 77 ALJR 989.

[82] [2004] FCA 424; (2004) 207 ALR 521, 528 (emphasis added).

[83] ‘Within a large class there may be a number of subclasses of ordinary and reasonable people. Thus in the present case there may be ordinary and reasonable persons who were well informed about the internet and the domain name registration system and other persons, equally ordinary and reasonable, who were not.’ [2004] FCAFC 247; (2004) 139 FCR 215, 222 (Wilcox, Heerey and RD Nicholson JJ).

[84] ACCC v Henry Kaye and National Investment Institute Pty Ltd [2004] FCA I363 (Unreported, Federal Court, Kenny J, 22 October 2004) [164] (emphasis added).

[85] Harland, above n 5, 101.

[86] Above n 5, text after note 131 of article. Romano’s views appear to be analogous to that of the Federal Court in Annand & Thompson Pty Ltd v TPC [1979] FCA 36; (1979) 40 FLR 165; and, by excluding conclusions that are unreasonable (or extreme or fanciful), consistent with those expressed in Campomar.

[87] Interestingly Romano argues that United States courts are showing a preference for the ‘reasonable’ consumer approach at the expense of the ‘credulous’ consumer. On the other hand, French courts have moved from the ‘bon pere de famille’ – a highly attentive consumer – to the ‘consommateur moyen’, described as much more vulnerable and credulous.

[88] McKeough, Stewart and Griffith, above n 7, 484.

[89] Heydon, above n 2, 242.

[90] For example, see Goldberg J in Optus, Branson J in Cat Media and Kenny J in Henry Kaye, who followed Campomar by referring to the ‘ordinary or reasonable’ consumer, but then adopted a wide interpretation more consistent with an ‘ordinary’ consumer standard.

[91] CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232; (2005) ATPR 42-042, 42,511 (Nettle JA).

[92] McKeough, Stewart and Griffith, above n 7, 484. The authors concede that this view could be seen as paternalistic. See also Harland, above n 5, 104, who says; ‘The essential problem is that while there may be general community acceptance that misleading and deceptive advertising should be controlled, such a general consensus is likely to be much more difficult to achieve in relation to the types of issue now under consideration, especially as different perceptions will be held in this context on such issues as the importance to be attached to values like freedom of expression and the degree to which the law should be paternalistic in seeking to limit the use of persuasive techniques in advertising. Differing perceptions as to the extent to which advertising is in fact able to manipulate consumers, fostered by a lack of sufficient empirical evidence as to the actual ways in which advertising operates compound the problem.’ (emphasis added). See also Lynden Griggs, ‘The irrational consumer and why we need national legislation governing unfair contract terms’ (2005) 13 Competition and Consumer Law Journal 51. Contrast these views with Justice Lindgren, ‘Section 52 and the unconscionability provisions of the Trade Practices Act(2002) 10 Trade Practices Law Journal 111, 112, and Romano, above n 5.

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