Misleading and Deceptive Conduct

The Australian Consumer Law is the principal piece of consumer protection legislation in Australia. It applies in the same way nationally and in the states and territories. Under Section 18 of the Australian Consumer Law (ACL), businesses must not engage in misleading or deceptive conduct or conduct that is likely to mislead or deceive consumers. A person includes both individuals and legal persons so companies can also be held responsible for providing false or misleading advice. Conduct can be found to be in breach of this section regardless of whether the misleading or deceptive nature of the conduct was intentional. 

‘Puffery’ (an overly embellished, fanciful or vague statement) is not considered misleading or deceptive under the ACL. Puffery commonly occurs in advertising and is not perceived as serious enough to be categorised as misleading. However, it is incumbent upon companies not to create false impressions and to ensure that all reasonable information about products and services is disclosed.

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

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

Optus Case

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

Optus published newspaper and television advertising claiming that consumers could obtain ‘unlimited broadband’. In fact, the plans contained a condition whose effect was that once consumers reached a specified data allowance, their service they received would slow down to a speed not suitable for popular online activities like streaming videos, downloading movies and making video calls. This condition was only disclosed in very small print in the advertisements, and there was no explanation of its effect on the user experience.

The Australian Consumer Competition Commission alleged that Optus had failed to adequately disclose that the internet service would be speed limited after a data amount had been exceeded and had therefore engaged in misleading or deceptive conduct. 

The Federal Court found the ads were misleading and deceptive. On appeal, the full Federal Court ordered that Optus pay a penalty totalling $3.61 million for its 11 contraventions of the Trade Practices Act 1974. 

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

It is important to note that for conduct to fall foul of Section 18, a person does not need to actually have been misled or decieved. If the proceeding is bought by a regulator like the ACCC, the conduct can amount to a breach purely because it is misleading or deceptive in nature.

Coles Case

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

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

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

The court ordered Coles to publish a correction to its advertising and also imposed a monetary penalty of $2.5 million on the supermarket. 

Different Types of Misleading or Deceptive Conduct

There are a number of types of conduct that may be found to amount to misleading and deceptive conduct. 

Predictions of the future

When a statement is made projecting or forecasting the future this can be deemed misleading and deceptive. For example, if a seller states that the company will make one million dollars per month and has no reasonable ground for making such an assertion. 

Misleading statements

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

Silence as conduct

Misleading or deceptive conduct can also consist of omissions or silence in relation to relevant information. For instance, if a property developer fails to disclose material information about real estate, this can amount to misleading and deceptive conduct.

Remedies

There are several consequences of being to have engaged in misleading or deceptive conduct.

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

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

If you require legal advice or representation in any legal matter, contact Armstrong Legal.