Misleading and deceptive conduct is one of the most important concepts in Australian Consumer Law (ACL). The prohibition protects consumers and businesses by ensuring honesty in advertising, sales, and trade practices.
This article, written by our competition and consumer lawyers, explores the legal frameworks governing misleading and deceptive conduct in Australia and key court cases.
Key Takeaways
- Section 18 of the Australian Consumer Law (ACL) prohibits misleading or deceptive conduct in trade or commerce.
Businesses must ensure accuracy in advertising, marketing, and product claims.
Consumers have rights to compensation and remedies if they are misled.
Non-compliance can result in large fines, reputational damage, and litigation.
What is Misleading and Deceptive Conduct?
Misleading and deceptive conduct refers to behaviour that leads or is likely to lead someone into error. This can include false claims, omissions of critical information, or tactics that confuse or mislead consumers.
Importantly, intent is not required for a breach -unintentional actions can still be deemed misleading under the law.
Examples of misleading and deceptive conduct include:
- Advertising false discounts or promotions
- Omitting critical information that influences consumer decisions
- Making unsubstantiated claims such as “100% organic”
- Using fine print to obscure key terms or conditions
- Employing bait-and-switch tactics
Legal Framework
Section 18 of the Australian Consumer Law (ACL)
Under section 18 of the Australian Consumer Law (ACL) (found in Schedule 2 of the Competition and Consumer Act 2010):
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
Key points of section 18 of the ACL:
Applies to all businesses, regardless of size.
Intent is not required, even unintentional conduct may breach the ACL.
Covers statements, advertisements, omissions, and representations that could lead a reasonable consumer into error.
Unsure if your business advertising complies with section 18? Speak to one of our lawyers before problems arise.
Section 29 of the ACL
Section 18 does not operate in isolation. It interacts with other critical provisions of the ACL to strengthen consumer protections.
Section 29 of the ACL explicitly prohibits false or misleading representations about goods and services. This includes making untrue claims, such as overstating a product’s benefits or hiding significant limitations in fine print.
ASIC Act
The Australian Securities and Investments Commission Act (ASIC Act) plays a vital role in regulating misleading conduct in financial products and services.
Sections 12DA and 12DB of the ASIC Act specifically address deceptive practices in this domain, ensuring transparency and fairness in financial transactions, such as insurance or financial advisory sectors.
State and Territory Fair Trading Acts
Complementing the ACL are the State and Territory Fair Trading acts, which reinforce consumer protections at the local level (e.g. NSW Fair Trading Act 1987, VIC Fair Trading Act 1999). These laws:
Mirror the ACL’s prohibition on misleading conduct
Provide consistent enforcement across Australia
Give consumers local avenues for complaints
Key Australian Cases on Misleading Conduct
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
This landmark case set important precedents in determining what constitutes misleading conduct. In particular, the High Court:
- emphasised evaluating the conduct in its full context and considering the target audience’s perspective
- established that misleading conduct is assessed based on the likely reaction of an ordinary and reasonable member of the public
ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640
This case highlighted the importance of clarity in advertising. In particular, the High Court:
- ruled that disclaimers must be prominent enough to dispel any misleading impressions
- advertisements should not rely on fine print to correct misleading headlines or prominent statements. It is the overall impression of the representation that matter.
Google Inc. v ACCC (2013) 249 CLR 435
This case examined liability concerning misleading advertisements in the digital space. In particular, the High Court:
- found that Google was not responsible for misleading ads created by its advertisers
- clarified that search engine providers are not publishers of the content but rather conduits
Tip for businesses: Always check the overall impression your marketing creates.
How Businesses Can Avoid Misleading and Deceptive Conduct
To better understand how businesses can avoid misleading and deceptive conduct under Australian Consumer Law, let’s explore practical compliance tips:
Understand the Law
Familiarise yourself with the ACL and ASIC Act to ensure compliance with their provisions.
Be Transparent
Provide clear, accurate, and complete information in all business communications. Avoid hiding critical details in fine print disclaimers or using complex jargon.
Train Staff
Educate employees on the importance of compliance with consumer laws and how to communicate honestly with customers.
Review Advertising Materials
Regularly review marketing materials to ensure accuracy and substantiation of claims. Avoid exaggerated statements or deceptive tactics.
Implement Compliance Procedures
Develop robust compliance systems to monitor business practices, handle complaints, and update policies as needed.
Act Swiftly to Correct Mistakes
If misleading or deceptive conduct occurs, take immediate steps to rectify it, such as taking down advertisements, informing affected customers, and offering refunds where necessary.
Legal consequences of Non-Compliance
Failure to comply with the ACL can result in severe consequences. The consequences of breaching the ACL include:
- significant fines being imposed by regulatory bodies like the Australian Competition and Consumer Commission (ACCC)
- eroding consumer trust and harming brand reputation
- litigation from consumers or competitors
Need legal advice about misleading or deceptive conduct? Contact our misleading and deceptive conduct lawyers today.
Information For Consumers
Rights and protections
The ACL empowers consumers to:
Rely on truthful and accurate representations.
Cancel contracts or seek compensation if misled.
Lodge complaints with the ACCC or their state Fair Trading agency.
Taking Action
If you believe you’ve been misled:
Try resolving the issue directly with the business.
Report it to the ACCC or your state Fair Trading authority.
Seek advice from an Australian consumer lawyer.
Frequently Asked Questions (FAQs)
What is considered misleading or deceptive conduct?
Any action or statement that leads, or is likely to lead, a reasonable person into error is considered misleading or deceptive. This includes false representations, exaggerated claims, or omitting important information
Does intent matter in cases of misleading conduct?
No, under Section 18 of the ACL, intent is not a required element. Even unintentional conduct can be deemed misleading if it has the effect or potential effect of deceiving someone.
Businesses should also be cautious when making comparisons with competitors, as comparative advertising can sometimes cross the line into misleading or deceptive conduct under Australian Consumer Law.
How can businesses ensure compliance with the ACL?
- Regularly audit all advertisements and promotional content for accuracy.
- Educate employees about legal obligations and the importance of honesty in representations.
- Engage legal professionals to review practices and provide guidance.
- Do not mislead potential employees
What should consumers do if they believe they have been misled?
- Keep records of all relevant communications and representations.
- Attempt to resolve the issue directly.
- If unsatisfied, lodge a complaint with the ACCC or state fair trading agency.
- Consider consulting an eCommerce lawyer for further action.
Are disclaimers enough to avoid liability?
Not always. Disclaimers can reduce liability only if they are clear and prominent, and do not seek to correct any misleading impressions in the key message. Hidden or unclear disclaimers are not sufficient.
What penalties can a business face for breaching Section 18 of the ACL?
For corporations, fines can reach up to $10 million or three times the benefit derived from the conduct, whichever is greater. For individuals, penalties can include fines of up to $500,000, disqualification from managing corporations, or even criminal charges if the conduct involved knowingly making false statements.
