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Consumer Law – Misleading or Deceptive Conduct

The Australian Consumer Law is the principal consumer protection law in Australia. It applies in the same way nationally and in every state and territory. Under the Australian Consumer Law (ACL), businesses are not to engage in misleading or deceptive conduct or conduct which is likely to mislead or deceive the consumer (Section 18).  A person includes both an individual and a legal person so companies can also be held liable for providing false or misleading advice. Conduct can be found to be in breach of this section regardless of whether their misleading or deceptive nature was intentional.

An overly embellished, fanciful or vague statement (known as “puffery”) is not considered misleading or deceptive under the ACL. Puffery is common in advertising and is not perceived as serious enough to be categorised as misleading. It is however, incumbent upon companies not to create a false impression and to ensure that all reasonable information about a product or service is disclosed.

Breaches of Section 18 may be litigated by an individual who has been affected by the alleged misleading or deceptive conduct or by a regulator such as the Australian Competition and Consumer Commission.

Two important court decisions relating to misleading and deceptive conduct are summarised below.

Optus Case

In a 2012 decision of the Federal Court of Australia, Optus was found guilty of misleading and deceptive conduct under the Trade Practices Act (which was subsequently replaced by the Australian Consumer Law). The internet service provider had claimed “unlimited” downloads for some of its plans but failed to disclose deceleration of internet speed after a certain data threshold.

Optus published newspaper and television advertisements claiming that consumers could obtain ‘unlimited broadband’. In fact, the plans contained a condition that once consumers reached a specified data allowance, their service would slow down to a speed not suitable for popular online activities such as downloading movies, streaming videos and making video calls. This condition was disclosed only in very small print in the advertisements, and its effect on the user experience was not explained.

The Australian Consumer Competition Commission alleged that Optus failed to adequately disclose that the service would be speed limited after a data amount was exceeded.

The Federal Court found the advertisements were misleading and deceptive. On appeal, the full Federal Court ordered that Optus pay a total penalty of $3.61 million for 11 contraventions of section 55A of the Trade Practices Act 1974.

The Federal Court found that Optus’ failure to clarify or qualify the unlimited download statement to consumers constituted a breach of Section 18. (Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20)

It is important to note that in order to fall foul of Section 18, the conduct does not need to actually mislead or deceive a person. If the proceeding is bought by a regulator such as the ACCC, the conduct need only be misleading or deceptive to amount to a breach.

Coles Case

In a 2015 decision, Coles was found guilty of engaging in misleading and deceptive conduct. Coles had claimed that its bread was freshly baked in-store. In fact, these products were partially baked, then frozen off-site by a supplier and subsequently finished at Coles’ in-store bakeries

There were four representations by Coles which contravened the ACL, namely:

  • The packaging stating “Baked Today, Sold Today”;
  • The packaging stating “Freshly Baked In-Store”;
  • The packaging stating both “Baked Today, Sold Today” and “Freshly Baked In-Store”;
  • The signage stating “Freshly Baked” and “Baked Fresh”.

The courts ordered a correction to advertising whilst also imposing a monetary penalty of $2.5 million on the supermarket giant. (Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330)

Different Types of Misleading or Deceptive Conduct

Prediction of the future

Making a statement projecting or forecasting the future can be deemed misleading and deceptive. For example, if a seller states that the company will make one million dollars a month and the seller possesses no reasonable ground for such an assertion.

Delivery information

Any person who states misleading information can be found to be breaching Section 18. This includes when a third party “creates, adopt or endorses’ misleading or deceptive representations.

Silence as conduct

Omissions or silence in relation to relevant information can also amount to misleading or deceptive conduct.  For instance, a property developer’s failure to disclose material information about real estate, can amount to misleading and deceptive conduct.

Remedies

There a several consequences of being found guilty of misleading or deceptive conduct.

Section 236 of the ACL provides for damages to be ordered in favour of those who have suffered a loss or injury or potentially could have experienced loss or injury as a result of misleading or deceptive conduct.

The ACL also gives courts broad powers to issue various types of injunctions restraining a Defendant from continuing in its misleading or deceptive conduct. Interim injunctions, pending the determination of an application, may also by ordered under the ACL.

If you think you have a cause of action relating to misleading or deceptive conduct, contact Go To Court lawyers for quality legal advice.

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