Misleading and deceptive conduct is a behaviour that misleads or deceives or is likely to mislead or deceive. People often use the phrase in the context of consumer law. It includes cases of making false or exaggerated claims, hiding important information, or using bait-and-switch tactics.
Its objective is to gain an unfair advantage by not being completely honest and transparent to the public. This can confuse customers or businesses, causing them to make different decisions than they would have otherwise. The law aims to protect consumers from making decisions based on incorrect information.
In Australian Consumer Law, misleading and deceptive conduct is a serious offence that can have far-reaching implications. If your business is dishonest and inaccurate or misleads customers, you may face legal consequences.
In this article, we explain what misleading and deceptive conduct is. In particular, we look at section 18 of the Australian Consumer Law, relevant case law and what it means to engage in this conduct. And remember, it’s always important to seek advice from a qualified marketing lawyer.
Legislation dealing with Misleading and Deceptive conduct
The Australian Consumer Law (ACL) is the main law in Australia that deals with misleading and deceptive behaviour. You can find this law in Schedule 2 of the Competition and Consumer Act 2010 (CCA). Section 18 of the ACL prohibits businesses from misleading consumers, to protect them from deception.
The ASIC Act also deals with deceptive behaviour. However, that legislation applies to financial goods and services.
The law applies to acts of misleading and deceptive conduct, even if there was no intention to deceive. A business may face accountability for unintentionally causing misleading results, even if it did not intend to deceive. Businesses must be watchful and take initiative to ensure their actions and communications are clear, accurate, and transparent.
Competition and Consumer Act
This law applies to all aspects of business, including advertising, product descriptions, sales tactics, and customer interactions. This also covers:
- the definition of misleading and deceptive conduct
- the application of this concept
- acts considered as false or misleading representations of goods, services, sale of land, certain business activities and employment.
Section 18 of the ACL aims to protect consumers by preventing businesses from misleading customers. Section 18 of the ACL states:
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive.”
A breach of section 18 of the ACL requires that:
- the relevant conduct must occur in the course of “trade or commerce”; and
- the relevant conduct must be misleading or deceptive or likely to mislead or deceive.
ASIC Act: Misleading and Deceptive Conduct
The ASIC Act is a law that regulates dishonest behaviour in finance. It specifically targets misleading and deceptive actions involving financial products and services. Further, it aims to protect consumers and uphold the integrity of Australia’s financial markets.
Sections 12DA and 12DB prevent misleading or deceptive behaviour in financial services. This includes providing false information about financial products or services, regardless of intent.
Further, the law outlines various remedies and penalties for breaches, including injunctions, corrective advertising orders, and substantial financial penalties. In extreme cases, authorities can disqualify individuals involved from managing corporations. Businesses must be honest, accurate, and transparent to avoid breaking the ASIC Act and facing serious consequences.
Click here to access the link to the Australian Competition and Consumer Commission’s Advertising and Selling Guide.
Examples of Misleading and Deceptive Conduct
Businesses can engage in misleading and deceptive conduct in business-to-business environments or toward individual consumers.
In Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin), the Court found that both airlines violated the (ACL). The Australian Competition and Consumer Commission sued both airlines for misleading and deceptive behaviour. This was in relation to making false or misleading representations about the cost of certain advertised airfares.
The authorities fined Jetstar Airways $1.95 million for lying about consumer rights.
In Optus Internet Pty Ltd (Optus), the Federal Court ordered Optus to pay a $10 million fine for misleading customers who inadvertently bought games, ringtones, and other digital content via its third-party billing service. Optus confessed to deceiving customers and violating the law. They did this by charging customers for content from third parties that the customers did not intend to purchase. This occurred through Optus’ DCB service.
The following are the potential legal consequences you will face if you made Misleading and Deceptive Conduct in your business:
- If a business engages in misleading or deceptive conduct, authorities can impose hefty fines on it. ACL states that corporations may receive fines of up to $10 million, while individuals may face penalties of up to $500,000.
- victims of misleading and deceptive conduct can seek damages for losses suffered as a result of the conduct. This can include both direct and indirect losses.
- Courts can also issue injunctions to prevent businesses from continuing their misleading or deceptive conduct. This can result in the cessation of certain business activities or practices.
- businesses may be ordered to engage in corrective advertising to rectify the misleading information disseminated. This can be a costly exercise and can also damage the business’s reputation.
- individuals involved in misleading or deceptive conduct can be disqualified from managing corporations.
- sometimes, if a business or person knowingly or recklessly makes false or misleading statements, they may face criminal charges.
How Businesses Can Avoid Misleading and Deceptive Conduct
To avoid the severe legal consequences associated with such conduct, businesses must ensure their activities are truthful, accurate, and transparent. Here are some tips on how to avoid Misleading and Deceptive conduct.
The first step to avoiding misleading and deceptive conduct is to understand what it entails. Familiarise yourself with the ACL and the ASIC Act, which explicitly prohibit such behaviour. These laws apply to all aspects of business, including advertising, product descriptions, sales tactics, and customer interactions.
Transparency is key in avoiding misleading and deceptive conduct. Make sure all information given to customers is clear, accurate, and complete in advertising, product descriptions, and sales interactions. Avoid hiding crucial information in fine print or using complex jargon that may confuse customers.
All staff members must understand the importance of avoiding misleading and deceptive conduct. Employers need to give regular training to make sure they know the law and can honestly talk to customers.
Regularly review your advertising materials to ensure they are not misleading. Furthermore, the employer must verify the accuracy and substantiability of all claims made about products or services. And avoid making exaggerated claims or using ‘bait-and-switch’ tactics.
Develop and implement robust compliance procedures to ensure your business adheres to the ACL and the ASIC Act. This includes checking how the business works, dealing with customer complaints, and updating rules as needed.
Seek advice from a marketing lawyer. A marketing lawyer will be able to analyse your business practices. They will also have the ability to suggest changes that your business needs to make to avoid breaking the law.
If you determine your business did something wrong, fix it quickly. This could involve withdrawing the misleading advertising, contacting customers to correct the misinformation, as well as offering refunds.