In Short
- Under the Australian Consumer Law, businesses must not engage in conduct that is misleading or deceptive, or likely to mislead or deceive.
- This applies to advertising, promotions, pricing, promises and silence where key information is omitted.
- Penalties include compensation orders, damages and potential disqualification from running a business.
Tips for Businesses
Review your advertising, sales practices and customer communications to ensure all claims are accurate and not misleading. Avoid vague guarantees or promises you cannot substantiate, and be cautious with “special offers” or stock claims. When in doubt, seek legal advice—misleading conduct can be costly even if unintentional.
As a business owner, it is essential that you avoid misleading or deceiving consumers, as this is illegal. Misleading and deceptive conduct is conduct that is likely to mislead or deceive. The Australian Consumer Law (ACL) provides that, in trade or commerce, you must not engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
This covers conduct including:
- marketing and advertisements;
- any published promotions; and
- anything you say or promise to someone during trade or commerce.
If you mislead someone in the course of operating your business regarding the price, value, goods, or services you are offering, you may be in breach of the ACL.
Examples of Misleading Behaviour
Let us explore some common examples of misleading behaviour.
A shop advertises an item ‘on sale’ for $150 rather than the usual price of $300. However, this item has never been offered at this ‘usual’ price.
A person sells a mobile phone with the advertisement saying it provides “full coverage around the state” when it actually does not.
A health store sells a product that promises to reduce the person’s weight when the product does not have that effect.
A mechanic promises a “full service” at a certain price, but does not disclose that a “full service” actually only covers a bare minimum of service not what most people would regard as a “full service”.
A cleaning service offers a “full bond recovery service” for a rental house, but does not clean or vacuum the carpets as part of this service.
A gym advertises “guaranteed results in 30 days” but makes this claim on unrealistic assumptions about a client’s commitment, failing to disclose that effort and attendance will determine results.
An online retailer advertises “only 2 left in stock” to create urgency when they actually have ample inventory.
How Courts Determine ‘Misleading and Deceptive Conduct’
Courts determine whether certain conduct falls within that statutory definition. When doing so, courts consider several things, including the following five matters.
1. Silence Can Amount to Misleading and Deceptive Conduct
Here, the court will examine the context in which the silence occurred. For example, suppose a vendor of a business takes a potential purchaser through 95% of the trade debts of a company but omits the largest one. This silence as to the debt may amount to misleading and deceptive conduct. Additionally, this can also arise when a person has made a statement but fails to qualify it sufficiently.
2. Conduct at the Time of Occurrence
Courts have found that making a promise and later not keeping it is not misleading conduct unless the promise was not genuinely made in the first place. When considering this, the relevant examination time is when the promise was made. A statement about the future that does not turn out to be true is not necessarily misleading or deceptive. However, promises, opinions and predictions may mislead or deceive if:
- the business knew it was incorrect;
- the business did not care for the truth of the statement; or
- there were no reasonable grounds for the business making it.
3. A ‘Mere Conduit’ Will Not Be Liable
If a person simply passes on information, and it ought to be clear to the receiving party this is the case, they will not be liable for breach of this law.
4. No Requirement for Intention to Mislead
While ‘deception’, by its nature, involves a guilty mind, this is not the case with misleading. Consequently, courts can hold a party liable even if the misleading conduct was unintentional.
5. The Conduct Must Be ‘In Trade or Commerce’
Courts look at the context of the conduct, as someone must have made the false or misleading statement must have been done ‘in trade or commerce’ for the ACL to apply. For example, stating on an Internet dating profile that you have ‘the body of an Adonis’ may be false and mislead unsuspecting persons to date you. However, it is not an action done in trade nor commerce and, thus, would not attract the provision of section 18 of the ACL.
Continue reading this article below the formRequirements for Free Offers and Promotional Items
When you advertise rebates, gifts, prizes or complimentary items, they must actually deliver these items to consumers. Making promises about free offers without any intention of providing them violates consumer protections under the ACL.
You should deliver promotional items within any advertised timeframe or, where no specific deadline exists, within a reasonable period.
Accepting Money Without Delivery Capability
You must not take customer payments for products or services when you:
- never planned to deliver the goods or services; or
- knew, or reasonably should have realised, they lacked the ability to deliver goods or services promptly.
Penalties
Businesses face several steep penalties under the ACL if courts find they have misled or deceived someone during their business. Misleading and deceptive conduct can lead to civil actions, including:
- having to pay compensation orders;
- awards in damages against you (which means you have to pay more than just compensation for the other side’s loss); and
- disqualification from operating a business.
Tips to Avoid Misleading and Deceiving Conduct
Disclaimers May Not Protect You
Generally, misleading and deceiving depends on the “overall impression” of your conduct, not the fine print. Thus, a disclaimer may be insufficient.
Proof of Actually Misleading Anyone is Unnecessary
As long as it can be proved that your conduct would likely deceive or mislead someone, you may be prosecuted under the Act.
Intention is Irrelevant
It does not matter if you did not intend to mislead or deceive anyone. If the conduct misleads or deceives someone, then the fact you acted honestly will not factor in.
Silence Can be Misleading or Deceiving
Suppose you omit information that you ought to have told the other party. Here, you may breach the Act, particularly if these facts were only known to you.
Slight ‘Puffery’ is Okay
‘Puffery’ is generally defined as exaggeration which cannot be quantified and that no reasonable person would ever regard as true. For instance, under Australian consumer laws, “the best coffee in Brisbane” is unlikely to be misleading or deceiving.
Demonstrate Reliance on Representation
The other party must show that they relied on your representation. Furthermore, they must demonstrate how they suffered a monetary loss because of the misleading or deceptive statement.
Predictions
Predictions about the future are not usually considered to be misleading or deceptive. However, if you make a promise or prediction that you know is false and have no grounds for making it, you may be liable for misleading or deceptive conduct.
As a franchisor, you must not engage in misleading and deceptive conduct. We explain what it is and how to avoid it.
Key Takeaways
The Australian Consumer Law prohibits you from engaging in misleading or deceptive conduct or conduct likely to mislead or deceive, in the course of trade or commerce. Accordingly, it is your responsibility as a business owner to ensure you abide by these rules.
If you require assistance determining whether your business is complying with the ACL, our experienced commercial lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Misleading and deceptive conduct is conduct that is likely to deceive or mislead. This may include false advertising and the value or results of a good or service.
You should review your marketing materials, advertisements, and customer communications to ensure all claims are accurate and true. Consider whether a consumer might interpret your statements differently than intended. When in doubt, seek legal advice to ensure your business practices comply with the ACL.
If you discover that your business may have engaged in misleading or deceptive conduct, you should immediately cease the behaviour and seek legal advice. Consider whether you need to provide refunds, rectification measures or other solutions to affected customers. Taking prompt action may help mitigate any potential adverse penalties you may face.
We appreciate your feedback – your submission has been successfully received.
