As we discussed in an earlier article outlining Australia’s Consumer Law, section 18 which prohibits a corporation from engaging in misleading or deceptive conduct, is the best known and most litigated provision in the Australian Consumer Law (ACL). Although section 18 is primarily designed to protect consumer rights, competitors more commonly use section 18.

In fact, section 18 claims are often pleaded in all types of jurisdictions, together with various types of claims. For example, a section 18 claim is often pleaded as an alternative to the tort of passing off, a common law tort whereby a trader passes off their products as the goods of another manufacturer. In many cases, whether it is a section 18 case or an add on, and whether the ACCC or a competitor brings forward the matter, the party will typically argue a breach of section 29 as well. Section 29 deals with false representations made by corporations.

So, what types of conduct amount to breaching the ACL in advertising and marketing? Below, we step you through some examples to help you avoid falling foul of illegal conduct in advertising.

‘Special’ Price Offers

You may not have known, but it is illegal to advertise that a product or service is being sold at a ‘special’ price where the customer believes they are making a substantial saving when, in fact, the product or the service is always sold at that ‘special’ price.

Price Comparisons

Price advertisements such as “Was $500/Now $250” are likely to be classified as misleading and deceptive conduct where the seller offers a product or service at an inflated price, and then shortly after reduces the price with the intention of making it appear to customers that they are making a saving. In order for a price comparison to be legal, the ‘before’ price must have been sold for a ‘reasonable period’ immediately before the price was reduced.

Non-Stop ‘Sales’

Another example of misleading and deceptive conduct may be when a retailer continuously advertises their products as being on ‘sale’. In situations such as this, the advertised ‘sale’ price becomes the retailer’s normal selling price.

Other Illegal Advertising and Marketing Practices

The ACL prohibits some more specific illegal advertising and marketing practices. Unlike breaches of section 18 referred to above, breaches of section 29 and any of the following provisions is a criminal offence, for which a fine can be imposed. Due to the extensive nature of the ACL, only some of the most common unfair practices will be discussed below.

False and Misleading Representations for Goods and Services

Under s 29 it is illegal, amongst other things, to make a false or misleading representation regarding the quality or standard of a product.

Section 29 of the ACL is prescriptive in comparison with s 18. Its essence, however, is to protect consumers from suppliers of goods or services who use false or misleading representations to induce customers to purchase their products.

Bait Advertising

Under section 35 of the ACL, bait advertising is the practice of advertising products, usually at a ‘sale’ price when there are reasonable grounds for believing that the goods are unavailable or are only available in very limited quantities. Sellers commonly use bait advertising to lure in customers, hoping that they will purchase more expensive products.

To avoid bait advertising, a person who offers goods or services at a ‘sale’ price must do so for a “reasonable period” and must be able to offer a “reasonable quantity” of the product. Although they are slippery concepts, what constitutes a “reasonable quantity” or “reasonable period” depends on the nature of the market and the advertisement.

Free Gifts and Prizes

It is also illegal under section 32 of the ACL for a retailer to advertise a free gift or prize with the intention of not actually supplying that gift to the consumer. Where the gift or prize is supplied, it must be the same gift or prize as that which is advertised. For example, where a retailer advertises a $50 cash prize but only intends to provide a $50 store voucher, the advertisement is likely to be illegal.

Misleading Conduct About the Nature of Goods and Services

Under sections 33 and 34, it’s unlawful to engage in conduct that is likely to mislead the public as to the goods and services:

  • Nature,
  • Characteristics,
  • Manufacturing process,
  • Suitability for their purpose, or
  • Quantity.

Conclusion

As you can see, all of the conduct discussed above relate to fairly blatantly disreputable business conduct.  However, even if the conduct does not fall within one of those specially defined types of conduct, it may still yet fall within the wider ambit of section 18.

In this way, section 18 operates as sort of a safety net for consumers to catch behaviour that is not caught by specific types of conduct. So, how can you avoid falling foul of these wide-ranging laws? It’s actually pretty simple and we will look at this in our next article, ‘Using Truth in Advertising.’

Catherine Logan

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