A cause of action in misleading or deceptive conduct is founded in the Australian Consumer Law (ACL). The ACL provides a range of protections to consumers in relation to goods and services.
One of the most commonly applied sections of the ACL is the provision that prohibits misleading or deceptive conduct in relation to consumer transactions made in the course of trade or commerce.
Section 18(1) of the Australian Consumer Law provides:
‘A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’.
A ‘person’ is not just restricted to individuals and may also include partnerships and corporations (even corporations that are based outside of Australia).
Elements for Establishing a Cause of Action in Misleading or Deceptive Conduct
The following elements must be established in order to make a claim for misleading or deceptive conduct:
- The conduct was engaged in ‘in trade or commerce’.
- The conduct must have been misleading or deceptive or likely to mislead or deceive.
What is ‘in Trade or Commerce’?
Section 2 of the ACL establishes that ‘trade or commerce’ includes any business or professional activity within or between places outside of Australia (whether or not it was carried on for the purpose of making a profit). In Australia, ‘in trade or commerce’ has been held in common law to be conduct that is carried out in a trading or commercial business or that has a trading or commercial character.
In the case of Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited, Perry J held that trade or commerce has a wider definition that is not restricted to activities designed to make a profit. The court in this case further established that ‘in trade or commerce’ is an expression of fact and common knowledge and should not be restricted to dealings or communications between parties who are at ‘arm’s length’ (i.e. transactions that are within open markets or between strangers only, or transactions that have the dominant objective of profit-making).
What is Considered ‘Misleading or Deceptive’ Conduct?
In the case of Google Inc v Australian Competition and Consumer Commission, the judges held that the words ‘likely to mislead or deceive’, with reference to the general and ordinary meaning of the words, make it clear that it is not necessary to demonstrate actual deception to establish a contravention of section 18 of the ACL. The test for whether conduct is misleading or deceptive is an objective test that depends on:
- The effect the conduct is likely to have had on ordinary or reasonable members of a particular class.
- Whether the members of that class would have been misled or deceived or are likely to have been misled or deceived.
The courts have also noted that intention is not an element of misleading or deceptive conduct. This means that conduct can be misleading or deceptive even if the defendant believed they acted reasonably and honestly.
The test that the courts have developed to establish whether or not conduct is misleading or deceptive was stated in Australian Competition and Consumer Commission (ACCC) v Dukemaster. The case lays out the following elements must be established in order to prove misleading or deceptive conduct:
- The ‘conduct’ in the circumstances must lead, or be capable of leading, a person into error.
- The error or misconception must result from ‘conduct’ of the individual or corporation (defendant), and not from other circumstances for which the individual or corporation is not responsible.
- ‘Conduct’ is likely to mislead or deceive if there is a ‘real or not remote chance or possibility regardless of whether it is less or more than fifty per cent’ that a reasonable person in the circumstances would be misled or deceived.
Misleading and Deceptive Conduct Examples
Common examples of conduct that may be deceptive or likely to mislead or deceive include:
- False advertising about a company’s goods or services
- False advertising concerning a competitor’s goods or services
- The use of small fine print or disclaimers to conceal important information
- Bait advertising and special offers misrepresenting a company’s products or prices to lure in consumers
- Pricing errors, where products are advertised at an incorrect price, including circumstances where companies deliberately offer a ‘discount’ when in fact the product has not been discounted
- Silence or non-disclosure of important information that is likely to lead the consumer into error
Can Silence or Non-Disclosure Be Misleading or Deceptive?
Silence or non-disclosure of information may, in some circumstances, constitute misleading or deceptive conduct. For conduct to be misleading or deceptive, it is not necessary that the conduct conveys either an express or implied representation, but that the conduct is sufficient to lead, or likely to lead, a consumer into error.
The courts use an objective test in determining whether silence or non-disclosure may have amounted to misleading or deceptive conduct by looking at whether or not there was a reasonable expectation of disclosure in the circumstances. If there was, the conduct is likely to indicate misleading or deceptive conduct. However, the courts do not impose a general duty of disclosure on a person or corporation in every business transaction or circumstance and will determine whether or not misleading or deceptive conduct has been engaged in on a case-by-case basis.
Can Representations as to Future Matters Amount to Misleading or Deceptive Conduct?
A person who makes a representation about a future matter may be engaging in misleading or deceptive conduct if that person does not have reasonable grounds to make those representations.
A representation is in respect of a future matter if the representation displays relevant characteristics or benefits that a particular product or service will present in the future after the purchase of that particular product or service was made. For example, the courts have held that making a representation that a product will have anti-cancer benefits with continued use in the future was a representation as to future matters.
Remedies for a Cause of Action in Misleading or Deceptive Conduct
If a person breaches section 18 of the ACL by engaging in misleading or deceptive conduct, the consumer that has suffered loss or damage as a result of that conduct will have a right to seek damages under section 236 of the ACL.
It is important to note that individuals may be liable for engaging in misleading or deceptive conduct even during the course of their employment. For example, if a salesperson of a company makes a misleading or deceptive representation about a product on behalf of the company, the consumer will be entitled to pursue the salesperson personally, notwithstanding that the salesperson’s company may have been the supplier of the particular good or service in question.
Action
- Ensure all advertising and marketing materials are accurate and transparent.
- Avoid making unsubstantiated claims about products or services.
- Clearly disclose all relevant information to consumers to avoid misleading them by omission.
- Implement internal compliance programs to regularly review and update business practices to align with the ACL requirements.
Cases
- Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited [2014] FCA 1412
Established a broad definition of ‘in trade or commerce’. - Google Inc v Australian Competition and Consumer Commission [2013] HCA 1
Affirmed that it is not necessary to demonstrate actual deception to establish a contravention. - Telstra Corporation Ltd v Singtel Optus Pty Ltd [2020] FCA 1372
Affirmed that any number of consumers could fall under the definition of ‘ordinary and reasonable consumers’. - Australian Competition and Consumer Commission (ACCC) v Dukemaster [2009] FCA 682
Clarified the elements required to prove misleading or deceptive conduct.
Seeking Advice
If you believe that you have been the victim of misleading or deceptive conduct and you’re based, or you have been accused of engaging in misleading or deceptive conduct, our litigation lawyers at Fox Piper are here to assist you. Book a consultation with Fox Piper today to discuss your matter and explore your legal rights and options.
Conclusion
Misleading or deceptive conduct is a significant issue under the Australian Consumer Law. Understanding your rights and obligations is crucial for both consumers and businesses. Seeking legal advice can help you navigate these complexities and ensure compliance with the law.
