18 Misleading or deceptive conduct PDF

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Legislation 18 Misleading or deceptive conduct

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Copyright © 2021 Thomson Reuters (Professional) Australia Limited

Millers Australian Competition and Consumer Law Annotated

18 Misleading or deceptive conduct • Millers Australian Competition and Consumer Law Annotated : Competition and Consumer Act 2010 Annotated as at 05 Nov 2017 > Schedule 2 – The Australian Consumer Law > Chapter 2 – General protections (ss 18–28) > Part 2-1 – Misleading or deceptive conduct (ss 18–19)

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POINT IN TIME LEGISLATION Competition and Consumer Act 2010 at 5 November 2017 18 Misleading or deceptive conduct (1) [Misleading and deceptive conduct prohibited] A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) [Section 18(1) not limited by Pt 3–1] Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1). Note:

For rules relating to representations as to the country of origin of goods, see Part 5-3.

Commentary

SECTION 18 COMMENTARY CONTENTS Summary Concept: engage in conduct

[ACL.1.18.20] [ACL.1.18.40]

Concepts: in trade or commerce Concepts: misleading or deceptive

[ACL.1.18.60] [ACL.1.18.80]

Concepts: misleading or deceptive – a question of fact Concepts: misleading or deceptive – not limited to representations Concept: likely to mislead or deceive

[ACL.1.18.100] [ACL.1.18.120] [ACL.1.18.140]

Doctrine of erroneous assumption Intent

[ACL.1.18.160] [ACL.1.18.180]

Representations on "reasonable grounds" Puffery Who must be misled? Public versus private conduct

[ACL.1.18.200] [ACL.1.18.220] [ACL.1.18.240]

Who must be misled? The reasonable person test Who must be misled? Injunction claims for representations to the public

[ACL.1.18.260] [ACL.1.18.280]

Who must be misled? Claims for damages or compensation by identified individuals Who must be misled? Foolish people Who must be misled? Lack of reasonable care

[ACL.1.18.300] [ACL.1.18.320] [ACL.1.18.340]

Misleading conduct: spoken words Silence as misleading conduct

[ACL.1.18.360] [ACL.1.18.380]

Predictions, promises and opinions Disclaimers and exclusion clauses Misleading conduct: confusion

[ACL.1.18.400] [ACL.1.18.420] [ACL.1.18.440]

Misleading conduct: transitory effect Liability of intermediaries passing on information

[ACL.1.18.460] [ACL.1.18.480]

Contract negotiation, breach of contract and misleading conduct Corporations law and misleading conduct Trade marks and misleading conduct Misleading conduct and business names Private contracts and misleading conduct

[ACL.1.18.500] [ACL.1.18.520] [ACL.1.18.540] [ACL.1.18.560] [ACL.1.18.580]

Misleading advice Legal advice Without prejudice negotiations

[ACL.1.18.600] [ACL.1.18.620] [ACL.1.18.640]

Misleading conduct and illegal transactions Advertising: general principles Advertising: comparative advertising Advertising: disparaging advertising

[ACL.1.18.660] [ACL.1.18.680] [ACL.1.18.700] [ACL.1.18.720]

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Millers Australian Competition and Consumer Law Annotated Advertising: using common words Advertising: character advertising Advertising: half-truths in advertising Advertising: humorous ads Advertising: conditions apply Advertising: money back guarantee

[ACL.1.18.730] [ACL.1.18.740] [ACL.1.18.760] [ACL.1.18.780] [ACL.1.18.800] [ACL.1.18.820]

Internet advertising Advertising: small print

[ACL.1.18.840] [ACL.1.18.860]

Advertising: liability of advertising agents Advertising: prices Labels: overview Labels: origin labelling Labels: inadequate labelling

[ACL.1.18.880] [ACL.1.18.900] [ACL.1.18.920] [ACL.1.18.940] [ACL.1.18.960]

Advertising: was/now pricing Packaging Free offers

[ACL.1.18.980] [ACL.1.18.1000] [ACL.1.18.1020]

Newspaper articles Predatory conduct Misleading conduct: action by manufacturers Misleading conduct: First in the market Reliance

[ACL.1.18.1040] [ACL.1.18.1060] [ACL.1.18.1080] [ACL.1.18.1100] [ACL.1.18.1120]

Practice and procedure: jury trial Practice and procedure: pleadings

[ACL.1.18.1140] [ACL.1.18.1160]

Practice and procedure: evidence of consumers Practice and procedure: expert evidence Practice and procedure: result of breach

[ACL.1.18.1180] [ACL.1.18.1200] [ACL.1.18.1220]

Cases Cases: art Cases: automotive Cases: aviation Cases: banking

[ACL.1.18.1240] [ACL.1.18.1260] [ACL.1.18.1280] [ACL.1.18.1300]

Cases: building and construction Cases: business names

[ACL.1.18.1320] [ACL.1.18.1340]

Cases: business disputes Cases: clothing Cases: computers and computer services

[ACL.1.18.1360] [ACL.1.18.1380] [ACL.1.18.1400]

Cases: consumer products Cases: corporate disputes

[ACL.1.18.1420] [ACL.1.18.1440]

Cases: employment Cases: education Cases: electricity & gas Cases: entertainment Cases: finance and credit

[ACL.1.18.1460] [ACL.1.18.1480] [ACL.1.18.1500] [ACL.1.18.1520] [ACL.1.18.1540]

Cases: food and beverages Cases: franchises Cases: household appliances Cases: health and beauty products & services Cases: industrial products Cases: industrial services Cases: insurance Cases: investment schemes

[ACL.1.18.1560] [ACL.1.18.1580] [ACL.1.18.1600] [ACL.1.18.1620] [ACL.1.18.1640] [ACL.1.18.1660] [ACL.1.18.1680] [ACL.1.18.1700]

Cases: lobby groups and public advocacy Cases: media & advertising

[ACL.1.18.1720] [ACL.1.18.1740]

Cases: motor vehicles Cases: office equipment Cases: parking infringements

[ACL.1.18.1760] [ACL.1.18.1780] [ACL.1.18.1800]

Cases: personal services Cases: professions

[ACL.1.18.1820] [ACL.1.18.1840]

Cases: real estate sales

[ACL.1.18.1860]

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Millers Australian Competition and Consumer Law Annotated Cases: real estate – general

[ACL.1.18.1880]

Cases: real estate leasing Cases: retailing

[ACL.1.18.1900] [ACL.1.18.1920]

Cases: sale of businesses Cases: share purchase Cases: sport

[ACL.1.18.1940] [ACL.1.18.1960] [ACL.1.18.1980]

Cases: surveys Cases: telecommunications & power

[ACL.1.18.2000] [ACL.1.18.2020]

Cases: tenders & bids Cases: toys Cases: travel and holidays Cases: warranties and guarantees Passing off: general principles

[ACL.1.18.2040] [ACL.1.18.2060] [ACL.1.18.2080] [ACL.1.18.2100] [ACL.1.18.2120]

Passing-off cases: building and construction Passing-off cases: clothing and footwear Passing-off cases: consumer products

[ACL.1.18.2140] [ACL.1.18.2160] [ACL.1.18.2180]

Passing-off Passing-off Passing-off Passing-off Passing-off

[ACL.1.18.2200] [ACL.1.18.2220] [ACL.1.18.2240] [ACL.1.18.2260] [ACL.1.18.2280]

cases: design similarities cases: domain names cases: entertainment and sport cases: finance and credit cases: food and beverages

Passing-off cases: geographic locations Passing-off cases: industrial products

[ACL.1.18.2300] [ACL.1.18.2320]

Passing-off cases: leisure and holidays Passing-off cases: personalities Passing-off cases: professions

[ACL.1.18.2340] [ACL.1.18.2360] [ACL.1.18.2380]

Passing-off cases: publications and telecommunications Passing-off cases: religion

[ACL.1.18.2400] [ACL.1.18.2420]

Passing-off cases: retailing Passing-off cases: similar names Further reading

[ACL.1.18.2440] [ACL.1.18.2460] [ACL.1.18.2480]

HISTORY OF THE TPA/ACL For previous provision (pre

ACL reform) see s 52.

[ACL.1.18.20]

Summary When this section was introduced in 1974, as TPA s 52, it was described as a "new exocet" because of its potential to reshape our approach to commercial dealings and to dispatch the "buyer beware" philosophy. Although there are some limitations on its operation, it has certainly lived up to its potential. The power of the section is that it simply states a moral standard and has left it to the courts to uphold that standard, applying it according to its terms. The standard the section establishes is that a person must not, in trade or commerce, engage in misleading or deceptive conduct, or conduct likely to mislead or deceive. It does not purport to create liability; rather, it establishes a norm of conduct. However, failure to observe that norm of conduct has consequences. Anyone who suffers loss or damage may recover compensation and injunctions are available to restrain conduct that does not live up to the standard, but unlike other provisions of the ACL, no pecuniary penalty is payable for a contravention. The ACL is "fundamentally remedial and protective legislation" giving effect to "matters of high public policy"; and is thus to be construed so as to give the fullest relief which the fair meaning of the legislation will allow: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at 528–529, [99] – [103]. The legislative purpose is to promote, in the broad sphere of Australian economic activity (trade and commerce), informed commercial activity, not based on misinformation, but rather on accurate information. That purpose goes beyond honest dealing in good faith: Bullabidgee Pty Ltd v McCleary [2011] NSWCA 259 (Allsop P). Consequently, as the cases summarised in the following paragraphs of this annotation show, the section has been called on in a very wide range of circumstances – to protect commercial reputations and products, to protect consumers in from sharp practices in relation to the products and services they buy, to compensate for incorrect legal, financial and real estate advice, and to resolve business, construction and employment dispute, to name a few.

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Millers Australian Competition and Consumer Law Annotated

The following helpful summary of the principles the courts have developed in relation to ACL s 18 (extracted from ACCC v Dukemaster Pty Ltd [2009] FCA 682; [2009] ATPR 42-290; [2009] ASAL 55-196 and see also Equity Access Pty Ltd v Westpac Banking Corp [1990] ATPR 40-994; (1989) 16 IPR 431): •

• • • • • •

•

ACL s 18(1) applies to "conduct" that is misleading or deceptive or likely to mislead or deceive. "Conduct" can include making a statement which is misleading or deceptive or likely to mislead or deceive. Although many of the cases refer to representations, that is merely one form of conduct. The "conduct" must lead, or be capable of leading, a person into error and the error or misconception must result from "conduct" of the person and not from other circumstances for which the person 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". The section is concerned with the effect or likely effect of conduct on the minds of those likely to be mislead or deceived. The test is objective and the court must determine the question for itself, but the section is not designed for the benefit of those who fail to take reasonable care of their own interests. It is wrong to select particular words or acts which, although misleading in isolation, do not have that character when viewed in context. A person's intention or its belief concerning the accuracy of the statement of fact is not relevant, unless the statement involved the maker's state of mind. The question is whether the statement conveys a meaning that is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false. A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or impliedly) that the maker of the statement had a particular state of mind when the statement was made and, commonly, that there was a basis for that state of mind.

•

•

A statement of opinion will not be misleading or deceptive merely because it turns out to be incorrect. An incorrect opinion does not, of itself, establish that the opinion was not held by the person who expressed it or that it lacked any or any adequate foundation. An expression of an opinion that is identifiable as an expression of opinion conveys no more than that the opinion is held and perhaps that there is a basis for the opinion. If that is so, an expression of opinion, however erroneous, misrepresents nothing. However, an opinion may convey that there is a basis for it, that it is honestly held and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise. If the evidence shows that the opinion was not held or that it lacked any or any adequate foundation, particularly if the opinion was expressed as an expert, a statement of opinion may contravene the section.

As noted above, the test is objective and fact-based. It is to be determined having regard to all of the contextual circumstances within which something was said or done: see [ACL.1.18.80], [ACL.1.18.100]. Global One Mobile Entertainment Pty Ltd v ACCC [2012] FCAFC 134. No question of intent arises, even in Victoria where it has been argued that, as a result of the Charter of Human Rights and Responsibilities (Vic), the section required a mental element in its application in that State: Noone, Director of Consumer Affairs Victoria v Operation Smile (Australia) Inc [2012] VSCA 91. See also Director of Consumer Affairs Victoria v Palamara [2012] VSC 311. The standard against which the conduct it to be tested is the standard of a reasonable person of the class to which the conduct is directed. This requires the court to identify the relevant section of the public and consider the conduct by reference to all those who come within that class to see whether or not a not insignificant number of reasonable members of the class would be likely to be misled: see [ACL.1.18.260]. The section does, however, have some limits, although the High Court has declined to proscribe the precise boundaries within which the section operates: as the High Court foundin Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594; 64 ALJR 293; 92 ALR 193. In that case, the High Court said: [T]he section was not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities. What the section is concerned with is … conduct … towards persons, be they consumers or not, with whom it (or those whose interest it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. One limit is that it only applies to conduct in trade or commerce. Examples are at [ACL.1.18.60]. A second is that the section does not apply to financial services: s 131A. The term "financial services" is defined by reference to the Australian Securities and Investments Commission Act 2001, Pt 2, Div 2. One limit is that it only applies to conduct in trade or commerce. Examples are at [ACL.1.18.60]. A second is that the section does

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Millers Australian Competition and Consumer Law Annotated not apply to financial services: s 131A. The term "financial services" is defined by reference to the Australian Securities and Investments Commission Act 2001, Pt 2, Div 2. In considering whether the facts of a case disclose tmileading or deceptive conduct, a two-step analysis is required: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 (McHugh J). The first, involves asking whether facts establish the conduct pleaded: Campomar Sociedad, Ltd v Nike International Ltd (2000) 202 CLR 45; 74 ALJR 573; 169 ALR 677; [2000] HCA 12; [2000] ATPR (Digest) 46–201 at [105]; National Exchange Pty Ltd v ASIC [2004] ATPR 42-000 (Dowsett J); AstraZeneca Pty Ltd v GlaxoSmithKline Aust Pty Ltd [2006] FCAFC 22; [2006] ATPR 42-106; [2006] ASAL 55-155. The second involves asking whether, as a question of fact, the conduct is false, misleading or deceptive or likely to mislead or deceive: ACCC v Telstra Corp Ltd [2004] FCA 987; (2004) 208 ALR 459; [2004] ATPR 42-017. See also au.Domain Administration Ltd v Domain Names Australia Pty Ltd [2004] FCA 424; (2004) 207 ALR 521; 61 IPR 81; ACCC v SMS Global Pty Ltd [2011] FCA 855; [2011] ATPR 42-364 (Murphy J). As French CJ said in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304; 83 ALJR 903; 257 ALR 610: As noted above, ACL s 18 sets a norm of conduct and it is left to other sections to remedy failures to live up to that norm. For instance, damages may be recovered for loss or damage as a consequence of misleading or deceptive conduct: ACL s 236. The distinction between characterisation of the conduct and determination of the causation of the claimed loss said to result from it must be maintained. There may be practical overlaps in the resolution of these logically distinct questions. The characterisation of conduct may involve assessment of its notional effects, judged by reference to its context. The same contextual factors may play a role in determining causation: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25 (French CJ). [ACL.1.18.40]

Concept: engage in conduct Although, in the context of claims under ACL s 18, reference is made to "representations", the section is not limited to representations. It applies to conduct, whatever form it may take, if that conduct is objectively determined to be misleading or deceptive: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592; 79 ALJR 308; [2004] ATPR 42-033 (McHugh J). Reference to engaging in conduct is defined by CCA s 4(2) to include: • • •

doing or refusing to do any act; giving an effect to a provision of a contract or arrangement; arriving at or giving effect to an understanding.

The effect of CCA s 4(2)(a) is to make warranties contained in contracts "conduct" for the purposes of the Act, with the consequent effect that, if false or misleading, the warranties will breach ACL s 18: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470; 114 ALR 355; 27 IPR 133; [1993] ATPR 41-269. Intent is not a requirement except where the conduct involves an omission. That is because s 4(2)(a) includes "refusing to do an act" within the term "engaging in conduct", and s 4(2)(c) makes it clear that the term ‘refusing to do an act’ includes refraining from doing the act, other than inadvertently; See ACCC v Homeopathy Plus! Australia Pty Ltd (2014) 146 ALD 278; [2014] FCA 1412 (Perry J). As intent is not otherwise a requirement for a breach of ACL s 18, when will an innocent third party who merely passes on information be regarded as having engaged in relev...