ACL Misleading and Deceptive Conduct Guide 2023

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ACL misleading and deceptive conduct

Misleading and deceptive conduct, a significant concern under the Australian Consumer Law (ACL), has profound legal implications.

The ACL, part of the Competition and Consumer Act 2010, is a comprehensive legal framework, with Section 18 specifically prohibiting misleading or deceptive conduct in trade or commerce.

Breaches can result in substantial penalties, injunctions, and damages. Our commercial lawyers are here to provide a comprehensive overview of these legal consequences, aiding businesses, legal professionals, and consumers in navigating this critical aspect of consumer law in Australia.

What is ACL Misleading and Deceptive Conduct?

Misleading and deceptive conduct refers to a business practice where a company provides false, misleading, or otherwise deceptive information about their products, services, or conduct. This practice is prohibited under the Australian Consumer Law (ACL), specifically Section 18 of the ACL.

The ACL is designed to protect consumers against fraudulent and unfair business practices. Misleading and deceptive conduct can encompass a range of behaviours, including false advertising, misrepresentation of a product or service, or any other action that may mislead the consumer in a significant way.

Determining whether conduct is misleading or deceptive is based on the overall impression of a consumer, considering all circumstances and not only the literal truth or falsehood of words used.

For conduct to be deemed misleading or deceptive, a consumer doesn’t need to be misled or deceived—the potential to mislead or deceive is sufficient. It is a serious offence and can result in heavy fines, penalties, and damage to the company’s reputation.

Also read: The Consumer’s Guide to Lemon Laws in QLD

Misleading or Deceptive Conduct vs False or Misleading Representation

Misleading or Deceptive Conduct and False or Misleading Representation are related concepts under the Australian Consumer Law (ACL), but they have distinctions.

Misleading or Deceptive Conduct (Section 18 of the ACL)This provision concerns conduct in trade or commerce that is likely to mislead or deceive. It doesn’t require any intention to mislead or deceive. Instead, the focus is on the impact of the conduct on the consumer—whether the conduct is likely to lead them into error. This broad provision applies to almost any type of business conduct.

False or Misleading Representation (Section 29 of the ACL): This provision is more specific and deals with false or misleading representations about some issues, like the standard, quality, value, grade, composition, style, model, or history of goods or services. It also covers false or misleading representations about testimonials or the price of goods or services, among other things. In contrast to Section 18, a false representation is a false statement in a material particular, whereas a misleading representation is likely to lead a person into error.

In some cases, conduct may contravene both provisions. However, while misleading or deceptive conduct under Section 18 does not require any intention to mislead or deceive, some false or misleading representations under Section 29 require knowledge or recklessness.

In both cases, businesses found to violate these provisions may be subject to penalties and required to compensate consumers for any loss or damage suffered. Companies must ensure they are aware of and compliant with their obligations under the ACL to avoid such consequences.

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What are the Examples of Misleading or Deceptive Conduct?

Misleading or deceptive conduct can take many forms. Here are several examples:

False Advertising: This includes making false claims about a product or service’s effectiveness, benefits, or features. For instance, a sunscreen product claims to be “100% UV protective” when it doesn’t offer full UV protection.

Bait Advertising: This happens when a business advertises goods or services at a specified price when they know they can’t supply reasonable quantities at that price. For example, promoting a product at a ‘sale’ price but not having sufficient stock available.

Misleading Product Descriptions: This could involve describing a product as being of a particular standard or quality when it’s not. For example, it was selling synthetic gems as “natural gemstones”.

Omitting Important Information: This might involve leaving out or hiding critical information about a product or service that could affect a consumer’s purchasing decision—for example, not disclosing that a car had been previously involved in a significant accident.

Unfair Contract Terms: This includes any contract terms that heavily favour the business over the consumer and could deceive or mislead consumers about their rights.

After-sale Tactics: Offering after-sale services, warranties, or guarantees that don’t exist or are far less beneficial than represented.

Pyramid Schemes: Misleading individuals about potential earnings from business opportunities such as multi-level marketing schemes can be deceptive.

Misrepresentation of Business Activities: This could involve a business falsely claiming to be part of a specific industry association or to hold certain certifications or qualifications.

Please note that this is not an exhaustive list, and other practices could also be considered misleading or deceptive under Australian Consumer Law.

How Do Courts Determine ‘Misleading and Deceptive Conduct’?

Courts determine whether a conduct is ‘misleading and deceptive’ by evaluating the overall impression that the conduct, statement, or advertisement may have on a reasonable or ordinary member of the audience it was intended for. Several factors are typically taken into consideration:

Context: The court will consider the circumstances surrounding the conduct, including the nature of the goods or services, the likely audience, the manner of the conduct or representation, and the use of any disclaimers or qualifying statements.

Audience: The court will consider the likely reaction of an ordinary or reasonable member of the intended audience. What might mislead one population segment may not deceive another, so the targeted audience’s characteristics are also considered.

Actual deception not necessary: The significant point is that the court does not require proof that anyone was misled or deceived, suffered loss, or was likely to suffer loss. It’s enough that the conduct could potentially mislead or deceive.

Silence: In some situations, failing to disclose certain information could be considered misleading or deceptive conduct. This often arises when a person must disclose information or if the silence may otherwise give a misleading impression.

Predictions and Opinions: Statements about future matters can also be misleading based on unfounded, undisclosed, or unreasonably optimistic assumptions.

Conduct of Business: Misleading and deceptive conduct can extend beyond false or misleading claims about products and services. It can also relate to business conduct or behaviour, like falsely representing a business affiliation or endorsement.

Remember, a court will often rely on evidence, such as consumer testimony, expert reports, and market research, to help determine whether conduct is misleading or deceptive. The court will assess the conduct and decide based on all the circumstances.

How to Avoid Misleading and Deceptive Conduct?

To avoid engaging in misleading or deceptive conduct, businesses should take several precautions:

Honesty and Accuracy in Advertising and Marketing: Ensure all advertising and marketing materials are accurate, clear, and unambiguous. Avoid making unsubstantiated claims about products or services, and ensure all benefits or features are accurately represented.

Transparency: Be upfront about all terms, conditions, fees, and charges. All pertinent information should be clear and easily accessible to the consumer, not hidden in fine print or obscured.

Training: Staff should be well-trained and knowledgeable about the products and services they’re promoting. They should understand what constitutes misleading or deceptive conduct and be educated on how to avoid it.

Customer Complaints: If a customer complains that they’ve been misled or deceived, take the complaint seriously. It could be an opportunity to identify and rectify misleading practices.

Reviewing Practices: Regularly review your business practices and advertising campaigns to ensure they comply with the law.

Legal Advice: If you need clarification about whether your business conduct could be seen as misleading or deceptive, seek advice from a legal professional familiar with consumer law.

Future Representations: When making representations about future matters, ensure you have reasonable grounds for making such claims. False predictions or forecasts can constitute misleading conduct.

Competitor Conduct: Don’t follow suit if you see a competitor engaging in misleading or deceptive conduct. Their non-compliance doesn’t justify your own.

How Do I Know If My Business is Misleading and Deceptive?

Determining whether your business engages in misleading or deceptive conduct involves scrutinising your business practices closely and objectively, usually from your customers’ perspective. Here are some steps to help identify any potentially misleading or deceptive activities:

Review Your Advertising and Marketing: Examine all your advertising and promotional materials, including your website, brochures, and social media posts. Do they accurately represent your products or services? Are there any exaggerated claims or omitted details that could mislead consumers?

Evaluate Customer Feedback: Listen to your customers. Are they often surprised or disappointed by some aspect of your product or service? Have they complained about feeling misled? Their feedback could be a valuable indicator of potential issues.

Check Your Sales Practices: Review your sales practices to ensure they’re transparent and fair. For example, if you offer a ‘free trial’, are customers informed that they’ll be automatically charged if they don’t cancel before the trial ends?

Assess Your Pricing: Are your prices clear and unambiguous? Do you disclose any extra fees or charges that may apply?

Review Contracts and Terms of Service: Ensure your contracts and terms of service are transparent, fair, and don’t contain any potentially deceptive clauses.

Compare with Competitors: While it’s not a definitive measure of legality, comparing your practices to reputable competitors can provide a reference point. If your methods are drastically different, it might be worth investigating why that is.

Legal Consultation: If you need clarification on the legality of your practices, consult with a lawyer or legal advisor familiar with Australian Consumer Law. They can provide advice tailored to your business.

What Are the Penalties for Misleading and Deceptive Conduct?

The penalties for misleading and deceptive conduct under the Australian Consumer Law (ACL) can be severe. They may include:

Infringement Notices: The Australian Competition and Consumer Commission (ACCC) may issue infringement notices for alleged contraventions of specific consumer protection provisions of the ACL. As of January 1, 2023, the penalty was up to $16,500 for a corporation and $3,300 for an individual per infringement.

Pecuniary Penalties: Depending on the nature of the business, the court may impose payment surcharges not of $1.7 million for corporations and $356,125 for individuals per contravention.

Damages and Compensation Orders: If a consumer or another business has suffered loss or damage due to misleading or deceptive conduct, they may be able to take action to recover their losses.

Disqualification Orders: In serious cases, company directors and others involved in the contravention may be disqualified from managing corporations for a while.

Non-punitive Orders: These include injunctions and corrective advertising orders. Injunctions can stop the trader from engaging in misleading or deceptive conduct, while corrective advertising orders require the trader to correct the misinformation.

Orders to Establish a Compliance Program: The court can also order the business to establish a compliance program to ensure such contraventions do not happen.

Client Opening a Small-Scale Factory Sought Our Help

Launching a small-scale factory, our client sought Walker Pender Group’s legal counsel to preempt future complications. We ensured compliance with laws, facilitated necessary permits, drafted employment contracts respecting labour rights, and guided environmental regulations. We also advised ACL to avoid deceptive conduct and helped secure intellectual property rights.

Need Expert Guidance on ACL Misleading and Deceptive Conduct?

Trust in the expertise of Walker Pender Group. Our experienced team navigates you through the complexities of the Australian Consumer Law, protecting your business from potential legal pitfalls. Don’t let uncertainty hold you back. Reach out to Walker Pender Group now and secure your business future.

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