What Is Misleading And Deceptive Conduct in Australia?

Misleading and Deceptive conduct in Australian Consumer Law is a behaviour that misleads or deceives or is likely to mislead or deceive consumers and competitors. This 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 behaviour can lead customers or other businesses into error, causing them to make decisions they wouldn’t have otherwise made.

In the realm of Australian Consumer Law, misleading and deceptive conduct is a serious offence that can have far-reaching implications. Hence, if your business activities aren’t truthful and accurate or give an impression that leads customers into error, you could be subject to legal consequences.

In this article, we explain what are the misleading and deceptive conduct in relation to Section 18 of the Australian Consumer Law, cases related to it and what it means to engage in such acts.

Farrah Motley, a qualified Australian lawyer, wrote this article. Farrah joined the Supreme Court of Queensland in 2014 and is the Director of Prosper Law. Further, she has provided legal advice for companies and their customers.

Governing law on Misleading and Deceptive conduct in Australia

In Australia, the primary legislation that tackles misleading and deceptive conduct is the Australian Consumer Law (ACL), which is encapsulated within Schedule 2 of the Competition and Consumer Act 2010 (CCA). Section 18 of the ACL expressly forbids such conduct, with its primary objective being to safeguard consumers from being misled by businesses.

While it’s clear that the law applies to deliberate acts of misleading and deceptive conduct, it’s crucial to understand that intent is not a prerequisite for an act to be deemed as such. This means that even if a business did not set out with the intention to mislead or deceive, it could still be held accountable if its actions inadvertently led to such an outcome. Hence, it is important for businesses being vigilant and proactive in ensuring their actions and communications are clear, accurate, and transparent.

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.

Each of these two requirements is explained above.

ASIC Act: Misleading and Deceptive Conduct

The Australian Securities and Investments Commission Act, or the ASIC Act, is the law that regulates misleading and deceptive conduct, especially concerning financial products and services. Further, it aims to protect consumers and uphold the integrity of Australia’s financial markets. Sections 12DA and 12DB specifically outlaw misleading or deceptive conduct in relation to financial services, including making false or misleading representations about financial products or services whether intentional or not.

Further, the law outlines various remedies and penalties for breaches, including injunctions, corrective advertising orders, and substantial financial penalties. In extreme cases, individuals involved can be disqualified from managing corporations. Therefore, businesses must ensure their activities are truthful, accurate, and transparent to avoid breaching the ASIC Act and facing the severe consequences that may ensue.

Click here to access the link to the Australian Competition and Consumer Commission’s Advertising and Selling Guide.

Examples of Misleading and Deceptive Conduct

Misleading and deceptive conduct can be seen in a B-2-B environment, or towards individual consumers, as is the case in a B-2-C scenario.

In a business-to-business (B2B) setting, it is other businesses that may be the recipients of the behavior in question. This could involve interactions between manufacturers and wholesalers, or between wholesalers and retailers, for instance.

Conversely, in a business-to-consumer (B2C) scenario, it is individual consumers who may find themselves on the receiving end of the behavior under scrutiny. This could involve misleading advertising, deceptive pricing strategies, or false claims about a product or service. In these cases, the misleading or deceptive conduct could lead to consumers making uninformed decisions, spending money on products or services that do not meet their needs or expectations, and ultimately losing trust in the business.

In the case of Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin), the Federal Court ruled that both airlines violated the Australian Consumer Law (ACL). The Australian Competition and Consumer Commission brought proceedings against both airlines, accusing them of engaging in misleading and deceptive conduct. This was in relation to making false or misleading representations about the cost of certain advertised airfares.

Jetstar Airways Pty Ltd (“Jetstar”) was ordered to pay $1.95 million in penalties for making false or misleading representations about consumer guarantee rights.

Further, in one case of Optus Internet Pty Ltd (Optus), the Federal Court ordered Optus to pay $10 million fine for misleading customers who inadvertently bought games, ringtones, and other digital content via its third-party billing service. Optus conceded that it had deceived customers and violated the ASIC Act by charging them for content produced by third parties, which they had unintentionally purchased or subscribed to through its “direct carrier billing” (DCB) service.

Legal Consequences of Engaging in Misleading and Deceptive Conduct

The following are the potential legal consequences you will face if you made Misleading and Deceptive Conduct in your business:

• If a business is found guilty of misleading or deceptive conduct, it can face hefty fines. According to ACL, corporations can be fined up to $10 million, while individuals can face penalties up to $500,000.
• Further, 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.
• In some cases, 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.
• However, in severe cases, individuals involved in misleading or deceptive conduct can be disqualified from managing corporations.
• In certain circumstances, particularly where false or misleading representations have been made knowingly or recklessly, criminal charges may be brought against the business or individuals involved.

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 conducts:

Understand the Law

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.

Be Transparent

Transparency is key in avoiding misleading and deceptive conduct. Ensure all information provided to customers, whether in advertising, product descriptions, or during sales interactions, is clear, accurate, and complete. Avoid hiding crucial information or using complex jargon that may confuse customers.

Train Your Staff

It’s essential that all staff members understand the importance of avoiding misleading and deceptive conduct. Hence, the employer must provide regular training to ensure they are aware of the legal requirements and understand how to communicate with customers in a truthful and transparent manner.

Review Your Advertising

Regularly review your advertising materials to ensure they are not misleading. Further, the employer must check that all claims made about products or services are accurate and can be substantiated. And avoid making exaggerated claims or using ‘bait-and-switch’ tactics.

Implement Compliance Procedures

Develop and implement robust compliance procedures to ensure your business adheres to the ACL and the ASIC Act. This also includes regular audits of business practices, a system for handling customer complaints, and a process for reviewing and updating compliance procedures as necessary.

Seek Legal Advice

If you’re unsure about whether a particular business practice could be considered misleading or deceptive, seek legal advice. A lawyer can provide guidance based on the specific circumstances of your business and help you navigate the complexities of the law.

Act Swiftly to Correct Mistakes

If you discover that your business has engaged in potentially misleading or deceptive conduct, act swiftly to correct the mistake. This could involve withdrawing the misleading advertising, contacting customers to correct the misinformation, as well as offering refunds.

How can Prosper Law help?

Prosper Law is Australia’s online law firm. We provide legal advice to businesses and individuals across Australia. Our areas of legal practice include contracts, eCommerce, publishing, legal counsel, employment law as well as business law.

If you need to talk to a business lawyer, get in touch today.

Contact the team at Prosper Law today to discuss how we can provide you with business legal advice for a fixed fee or at affordable hourly rates.

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Farrah Motley | Director

PROSPER LAW – Australia’s Online Law Firm

M: 1300 003 077

E: enquiry@prosperlaw.com.au

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