Telstra recently brought a legal proceeding against Optus claiming that a recent advertising campaign constituted misleading or deceptive conduct in breach of the Competition and Consumer Act 2010 (Cth). The advertising campaign (pictured above) features a decayed blue-and-orange phone booth, unmistakably associated with Telstra, in desert sands along with the headline: ‘Empires end. That’s what they do.’ The advertisement also referenced a report in which Optus outranked Telstra through the subheading: ‘The Optus Mobile Network has been ranked the best overall in voice and data.’
Telstra claimed that the advertisement conveyed the representation that “there has been a significant and permanent change in the relationship between the Telstra and Optus mobile networks with Optus now undisputedly operating a better mobile network overall than Telstra.” Telstra also asserted that this representation was misleading.
In deciding whether the conduct was misleading or deceptive, the Court applied a two-stage test, being namely;
- whether the advertisement conveyed the alleged representation claimed above; and if so
- whether that representation was misleading or deceptive, or was likely to mislead or deceive.
The Court determined this second step by considering the conduct in light of the class of consumers likely to be affected by it. This test will be met if a significant number of reasonable persons within the affected class have been, or are likely to be, misled or deceived by the conduct.
The conduct that is complained of must be considered in the context in which it occurred. Further reinforcing the “reasonable person” test, assumptions by persons within the affected class whose reactions are extreme or fanciful will not be considered.
In addition for cases involving advertising the Court determines misleading or deceptive conduct on the basis of whether or not the advertisement is likely to induce consumers to deal with the advertiser rather than with their competitor because of an erroneous belief about the competitor due to the advertisement. The question is not whether the advertising encourages consumers to enter into contracts with the advertiser.
The Victorian Supreme Court determined that Telstra failed to prove both elements of the test explained above. The Court did not accept that the advertisement showed that the market positions of Telstra and Optus had been permanently changed. Nor did the Court accept that the advertisement represented Optus as undisputedly a better provider then Telstra.
Businesses should tread carefully when disparaging their competitors in advertisements. If representations made in advertisements cause a reasonable person to be led into error, the aggrieved party may be entitled to compensation or other relief to address the misleading conduct.
 ACCC v Telstra Corporation Ltd  FCA 1904.
 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd  HCA 44; Hansen Beverage Co v Bickfords (Aust) Pty Ltd (2008) 171 FCR 579.
 Bodum v DKSH Aust Pty Ltd  FCAFC 98; Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45.
 ACCC v TPG Internet Pty Ltd  HCA 54 .