CONSUMER PROTECTION LAW -

Regulation of Unfair Marketing Practices

NOVEMBER 2001

TIME ALLOWED: 2 HOURS
READING TIME: 15 MINUTES

CANDIDATES MUST ATTEMPT TWO (2) QUESTIONS.
ALL QUESTIONS ARE OF EQUAL VALUE. EACH QUESTION MUST BE WRITTEN IN A SEPARATE BOOK.
THIS IS AN OPEN BOOK EXAMINATION.

Question 1

Bob Shock is one of the most popular talk back radio announcers in Sydney. His show is broadcast by Radio 2OW (owned by Radio 2OW Pty Ltd) and appeals mainly to a middle aged to elderly audience of listeners of above average education and income.
Due to his astronomic salary and shrewd investments Shock appears regularly on the "rich lists" published in the financial press.
Radio 2OW's advertising rates are highest for those announced by Shock himself, a feature of these ads being that he is expected to make ad lib laudatory comments in addition to the text supplied to him.
For a considerable time he had been doing ads for Devil Airlines, a well established airline whose advertisements on 2OW regularly featured special deals claimed to be cheaper than those of its rivals.
In fact the majority of its fares were the same or slightly higher than those of the opposition, and with the approximately 25% which were cheaper the saving was usually in the order of 5%.
During the ads Shock regularly described Devil Airlines as being "the best in the Australian skies - the value for money airline, with service and reliability that the opposition can't match".
He often concluded the ads by saying "you can trust Devil, I sure do".
It appears that passenger surveys conducted by travel magazines regularly rated Devil lower than the opposition both for service and on-time performance and that Shock usually himself flew with the major competitor, in which he has made a big investment.
The ads continued in the same manner during a period of media speculation on the quality of management and the financial resources of Devil Airlines, and ceased only when the Airline announced it was insolvent and was ceasing all operations.
Helen, a regular listener to Shock's programme, had purchased from Devil Airlines a ticket to Hong Kong (where she had been born) for $1000. She was stranded by the closure of Devil Airlines.
The purpose of her trip was to attend a series of family celebrations for her father's 80th birthday. She was greatly distressed when she discovered that no seat was available on any other airline for four days after her original departure date, and even then she had to pay $3000 for a business class fare with a competitor. She missed most of the celebrations.
Helen seeks your advice as to any remedies she may have against Shock and Radio 2OW. She also wants to know what (if any) action could be taken against them by the Australian Competition and Consumer Commission.

Question 2

(Attempt both part a) and part b); each part is of equal value)

a) Ajax Delicatessens Pty Ltd (Ajax) conducts a number of up-market delicatessens in various suburbs of Sydney. One of its largest selling items, which has attracted a large following after some laudatory comments in a number of columns in newspaper food sections, is Eiffel brand virgin olive oil.
Ajax does not advertise this item, but it is prominently displayed in all stores. The label shows prominently the words "Eiffel Virgin Olive Oil" superimposed on a representation of the Eiffel Tower. At the bottom of the label, though in print that many people find difficult to read without picking up the bottle, are the words "Made in France".
Although the oil is pressed and bottled in France, most of the olives used are imported from Spain, the cost of these olives representing about 40% of the cost of producing the product.

Eiffel Olive Oil is only sold in Australia by Ajax, which directly imports it from France. A competitor, which markets olive oil produced in France using only olives grown in France, is objecting to Ajax continuing to sell Eiffel oil with its present labelling and seeks your advice as to all contraventions (if any) of the law which may have been committed by Ajax.
Would your answer differ if Ajax had stuck on each jar a label stating "exclusively imported into Australia by Ajax Delicatessens Pty Ltd"?

b) John, an experienced businessman, wanted to start a branch of his established chain of menswear boutiques in the Surfside Shopping Centre, owned by Surfside Pty Ltd ("Surfside"). He inspected the only shop which was vacant and was assured by Mary, the manager of Surfside, that "based on our projections for the Centre and the figures you have shown us from your other stores you should have no trouble in getting a turnover of $50,000 a week after three months' trading".
It transpired that Mary had underestimated the impact which a newly opened competing centre would have on Surfside's tenants, and after six months' trading John's store never in fact exceeded $30,000 turnover.

The lease contained the following clause (printed in bold type):
22. This document represents the entire agreement between the parties and the lessee acknowledges, warrants and represents that no representations whatsoever have been made by or on behalf of the lessor or relied upon by the lessee".

Advise John as to any remedies which may be available to him against Surfside or Mary.

Question 3

EITHER

"It is now established that a failure to disclose facts will often amount to misleading conduct under the Trade Practices Act, even though such a failure to speak would give rise to no liability at common law.
This is a most unsatisfactory state of affairs which challenges the adversarial approach commonly adopted by parties negotiating large commercial deals".
Discuss.

OR

In discussing the decision of the High Court in Gates v City Mutual Life Insurance Society Ltd (1986) 160 CLR 1, Price said:
"Since the Gates decision, the courts have acknowledged that the measure of damages recoverable under s82 is not governed by common law concepts ... Notwithstanding, ... the courts have generally failed to give full effect to the legislation.
As the law stands at present, in order to recover expectation damages, an applicant must demonstrate that a contract of the type (mis)represented, could and would have been entered into, but for relying on the misrepresentation.
A rule of law such as this discourages any party from using innovative or one-of-a-kind products and also affords greater protection to a more extreme misrepresentation."
("Opening Gates: Measure of Damages under the Trade Practices Act" (1994) 1 Competition and Consumer Law Journal 257 at 276).
In light of this comment, discuss critically the approach taken to the assessment of damages under s82 of the Trade Practices Act by the High Court in Marks v GIO Australia Holdings Ltd (1998) 73 ALJR 12.

OR

"The defences available in criminal prosecutions under the Trade Practices Act, while at first sight seeming to temper the strictness of the Act's criminal liability, are in practice virtually useless to large corporations".

Discuss.

[end of examination]