04 Apr Misleading and Deceptive Conduct
Protections against misleading and deceptive conduct form part of the general protections provided by Schedule 2 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law, or ACL).
These protections attempt to create a norm of conduct in the Australian consumer market to ensure fair trading practices.
Australian Consumer law
The ACL sets out a range of protections for consumers against unfair trade practices and contract terms.
Section 18(1) of the ACL provides as follows:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
To prove misleading and deceptive conduct under section 18 of the ACL, it must be shown that:
1. representations were made;
2. the representations were made “in trade and commerce”;
3. the representations were misleading or deceptive; and
4. the innocent party suffered loss or damage because of the representation.
Whether a representation has been made is a question of fact that would need to be determined on a case-by-case basis.
The definition of “in trade and commerce” is intentionally broad and includes trade or commerce within Australia, or between Australia and places outside Australia. The ACL will apply to conduct engaged in outside of Australia if some aspect of the trading relationship between the business and consumer takes place within Australia. It also includes any business or professional activity, whether or not it is carried out for profit.
A future representation will be considered misleading when a person does not have reasonable grounds for making the representation. The person making the representation does not have to intend for the representation to be misleading. A person is not taken to have had reasonable grounds for making a representation unless evidence proves otherwise.
Examples of conduct that might be considered misleading or deceptive include:
- False advertising
- Incorrect price labeling
- Omitting important information
A person who has been subject to misleading and deceptive conduct can apply to a court for an order to receive compensation for the loss or damage suffered because of the conduct.
Accessorial Liability
A person who has been affected by misleading and deceptive conduct can recover compensation from a person who was involved in the contravention.
For the purposes of the ACL, “involved” is defined as:
1. has aided, abetted, counselled or procured the contravention; or
2. has induced, whether by threats or promises or otherwise, the contravention; or
3. has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
4. has conspired with others to effect the contravention.
This means, for example, that a company director can be found to have contravened section 18 of the ACL despite the company being the focus of the claim.
For more information on accessorial liability, see our article here.
Commercial Case Example
In matter of Wyzenbeek v Australasian Marine Imports Pty Ltd (No 2) [2018] FCA 1517, the respondents made representations that a boat was capable of trans-ocean or extended ocean voyaging. These representations were found to be significant selling points that persuaded the applicants to purchase the boat.
The Court found that the boat was not capable of trans-ocean or extended ocean voyaging, and might not have even been suitable for coastal cruising. Accordingly, the respondents were required to pay a significant sum to compensate the applicants such that they were put into the same position they would have been had they not been misled and deceived.
Employment Case Example
Misleading and deceptive conduct can also extend beyond consumer protections and into workplaces. Generally, these types of matters will concern misleading and deceptive conduct used to persuade a potential employee into an engagement.
In Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430, the respondent made false representations as to the employer’s financial performance. The applicant then commenced employment under the assumption that she would receive greater financial compensation through a profit-sharing arrangement.
As the representations were false, the applicant sought a remedy under sections 18 and s 31 of the ACL. As the applicant relied on the representations to her detriment, the court found in her favour. The court found that either of the claims under section 18 or 31 of the ACL could succeed.
For more information on industrial and workplace law, please see out other articles here.
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