8.3 - false or misleading representations PDF

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Advertising and Sales: Consumer Law 1 Topic 3: False or misleading representations Introduction A representation is statement or communication. Consequently, a false or misleading representation is a statement or communication that is false or misleading in some significant respect. Section 29 of the Australian Consumer Law (ACL) prohibits the making of false or misleading representations. Section 29 is in the following terms: 29 False or misleading representations about goods or services (1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services: (a) make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or (b) make a false or misleading representation that services are of a particular standard, quality, value or grade; or (c) make a false or misleading representation that goods are new; or (d) make a false or misleading representation that a particular person has agreed to acquire goods or services …

Not all of the section has been reproduced as it is a lengthy and detailed provision. The main point to note is the prohibition on the making of a ‘false or misleading representation’ in relation to a good or service, a phrase that is repeated throughout the section. The specific categories of false or misleading representation prohibited under the section will be outlined later in this topic. Section 29 bears a number of similarities to s 18. As with s 18, s 29 applies to all business structures (‘person’ in s 29 carries the meaning discussed earlier). Section 29 also mirrors s 18 in the way the courts work out whether the representation is ‘false or misleading’. This is determined by making a finding about what the Module!9:!Advertising!and!Sales:!Consumer!Law!1! Topic!3:False!or!misleading!representations! 1! Copyright!©!Western!Sydney!University,!2016!

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representation actually is and then assessing how that representation would be understood by the relevant class of consumers. Once again, the intention of the person making the representation is irrelevant: if a business is found to have made a false or misleading representation, it will be liable. The main difference of s 29 is that it applies to representations rather than conduct and specifically, representations that are false or misleading. A representation that is false or misleading may be different from (and involve more wrongdoing than) one that is misleading or deceptive. Consequently, it is clear that s 29 applies to a more specific type of conduct than that contemplated by s 18. Nevertheless, a representation is a type of conduct; that is clear from everyday experience. It follows that a false or misleading representation will breach both s 29 and s 18. Why have two separate sections? The answer is that representations which are false or misleading are considered to be more serious than general conduct which is misleading or deceptive. For this reason, a separate section has been introduced to address false or misleading representations. Very importantly, in addition to attracting liability under the civil law, breach of s 29 constitutes a criminal offence for which a business (and business people) can be prosecuted. The maximum penalties for breach of s 29 are fines of $220,000 for individuals and $1.1 million for corporations. Given the particularly serious consequences of breaching s 29 it is appropriate to examine this provision in some detail.

Prohibited types of representation Section 29 applies to a range of commercial and product-related representations, divided broadly into 13 categories. Some of these categories apply to goods, some to services and some to both goods and services. A breach of s 29 occurs when a representation that falls into one of these categories has been made and that representation is false or misleading to consumers. Statements about products or services that are accurate and do not mislead customers do not attract the operation of the section.

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Representations+about+goods+and+services+ The following categories of false or misleading representation may involve either goods or services. Category of false or misleading representation

Example of false or misleading representation

Relevant sub-section

Standard, quality, value, or grade of goods or services s 29(1)(a),(b)

That a particular person has agreed to acquire goods or services

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Standard: compliance with ‘official’ types of standards, such as Consumer Safety Standards for flammability of children’s nightclothes or Standards Association of Australia Standards

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Quality: claiming a toothpaste inhibits plaque formation when this is not proven; inaccurate ‘green’ or ‘organic’ statements

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Value: ‘unlimited’ download times; ‘per minute’ charges for overseas calls

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Grade: ‘restaurant grade’ meat

This may involve claiming payment for orders that have not actually been made.

s 29(1)(d) •

‘Testimonials’ are endorsements or recommendations of a business or product by previous purchasers or other third parties (sometimes celebrities). They create the impression that other people are happy with the product or service, which encourages new customers to buy it.

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Fictitious testimonials (i.e. where the business has made the ‘testimonials’ up itself) or false or misquoted testimonials (where the person’s comments have been changed) are prohibited.

Representations that appear to be testimonials s 29(1)(f)

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Category of false or misleading representation

Example of false or misleading representation

Relevant sub-section

Sponsorship, approval, performance characteristics, accessories, uses or benefits of goods or services s 29(1)(g)

Sponsorship, approval or affiliation of persons making the relevant representations

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Sponsorship or approval: this aspect is covered below under ‘Character merchandising’

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Performance characteristics: effectiveness of an air freshener or a weight loss program; scientific or medical results and (possibly) also the safety of products

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Uses: inaccurate claims about what a product can be used for

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Benefits: inaccurate claims about benefits the product or service has, eg, healing qualities of ion mats

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Sponsorship or approval: This aspect is covered below under ‘Character merchandising’

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Affiliation: describing oneself as a CPA (‘Certified Practising Accountant’) when not a member of that representative body.

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Advertising the wrong price for goods or services

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Inflating the price before reducing it so the ‘saving’ looks bigger

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Offering goods as ‘marked down’ although they have never been offered at the higher price

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Not including on-road costs in the ‘full’ price of a car

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Not including compulsory delivery charges in the price of a computer

s 29(1)(h)

Price s 29(1)(i)

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Category of false or misleading representation

Example of false or misleading representation

Relevant sub-section •

Advertisements inaccurately suggesting particular medical conditions are serious and require treatment

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Misrepresenting the need to be included in a directory claimed to be affiliated with the government

Need for goods or services s 29(1)(l)

Representations+about+goods+only The following categories of false or misleading representation may involve goods only. Category of false or misleading representation

Example of false or misleading representation

Relevant sub-section

Composition, style, model, history or previous use of goods s 29(1)(a)

Goods are new s 29(1)(c)

Availability of repairs and spare parts s 29(1)(j)

Composition: type and amount of fruit in fruit juices and cordials; the ingredients in pre-prepared foods (eg, beef pies that contain lamb); the components of fabrics (e.g. 50% wool) Style / Model: the type of product e.g. a Subaru Forrester History or previous use: ex-rental cars sold as ex-executive cars (i.e. used by executives of the manufacturer); mileage of cars. New, as opposed to used or second-hand. A ‘new’ car may have much older compliance plates (up to 20 months in one case) but still be considered ‘new’, as opposed to second-hand. However, in some circles new may mean ‘recently made’. The particular audience should be kept in mind when making such claims. Promoting the availability of facilities for repair and / or of spare parts for goods when none are available. Manufacturers are also required to provide spare parts and repair facilities for reasonable periods after purchase of goods — see Module 10 for more detail.

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Category of false or misleading representation

Example of false or misleading representation

Relevant sub-section

Origin of goods s 29(1)(k)

Making a false or misleading representation about the origin of any goods is a breach of this section. The issue has particular relevance to foods, with a new Country of Origin Food Labelling ('CoOL') information standard taking effect in Australia from 1 July 2016 that requires food (packaged and fresh) offered for retail sale to have a label stating where the food originated - but also governs the use of labels claiming that food was either 'Produced', 'Grown' or 'Made' in Australia. More information about the CoOL Code and examples of the correct types of labels can be found here.

Representations+about+the+legal+rights+of+the+consumer The following categories of false or misleading representation relate to the consumer’s rights in respect to either goods or services. Category of false or misleading representation

Example of false or misleading representation

Relevant sub-section Existence, exclusion or effect of any condition, warranty, guarantee, right or remedy s 29(1)(m) Requirement to pay for existing rights s 29(1)(n)

‘No refunds’ signs (consumers have a right to a refund under the ACL if goods are faulty or services are deficient — a sign stating the opposite is therefore false). Telling a customer that they must pay for the right to a refund if a good is faulty or a service is deficient (this right already exists under the ACL and consequently, the statement is false).

If, in the course of your business, representations of any of these types are to be made, it is of the greatest importance to ensure that the representation is not false or misleading. If in doubt, seek the advice of a lawyer.

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Case study: character merchandising Character merchandising is a marketing practice that involves using the name, image or other likeness of a well-known character, who may be real or fictional, to market products. There is a suggestion of affinity between the product and the character that is intended to make consumers want to buy the product. It can be a good way to form a positive association in the consumer’s mind between a celebrity or sportsperson whom people admire and a product. However, there are some legal pitfalls to be aware of. These include potential breaches of the prohibitions in both sections 18 and 29 and also, the common law action of passing off, which we met briefly back in Module 2. The following case illustrates some of the difficulties that can arise.

Duff+Beer+ In late 1995, South Australian Brewing Co and Lion Nathan Australia Pty Ltd (both large brewers) launched a new product called ‘Duff Beer’. As many of you will already be aware, the television show ‘The Simpsons’ often features a fictional beer called ‘Duff’. This show has been broadcast in Australia since early 1991 and Twentieth Century Fox, the show’s producers, had already licensed the sale of a large range of Simpson’s merchandise, including hats and t-shirts that featured Duff beer. The Australian brewer’s product was presented in a can that was quite different to the can used in the show. Nevertheless, Twentieth Century Fox sued the two Australian brewers for misleading or deceptive conduct, false or misleading representations as to ‘sponsorship or approval’ and also, for passing off. Relevant(facts( Although the name of the beer was the same, the design of the can was different from that used in the television show. Issue(to(be(decided( The court was required to decide: had the brewers committed any actionable wrong against Twentieth-Century Fox? The(court’s(decision( The Federal Court of Australia found in favour of Twentieth Century Fox on all three grounds. The Court was satisfied that the extent of other merchandising activities in relation to the show, with many licensed items being sold in Australia for some time, would create the false impression in consumers’ minds that the beer product was also licensed Module!9:!Advertising!and!Sales:!Consumer!Law!1! Topic!3:False!or!misleading!representations! 7! Copyright!©!Western!Sydney!University,!2016!

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or in some other way approved by Twentieth Century Fox. Furthermore, the brewers had intended to exploit the association with the popular TV show and lead consumers into error about the nature of their relationship with the show’s producers. This intention supported a finding that the brewers had succeeded, or would succeed, in misleading consumers. Although the brewers had used a different can design from the one used in the show this did not prevent their conduct from being misleading or deceptive. Although disclaimers can remove the misleading tendency of the product, there were no disclaimers on the actual can or on any of the advertising or promotional materials. As such any disclaimers in this case were not effective. A suggestion that ‘Unauthorised’ could be placed in large letters across the can as a means of negativing the deceptive tendency was rejected on the basis that consumers of this product who were familiar with the show would probably just think it was part of the joke and not a serious disclaimer. Importance(to(businesses( Any promotional use of famous names, images or other likenesses must be licensed to avoid liability, either under the provisions of the ACL or in passing off. ‘Duff Beer’ makes it clear that this is so even if the name or image is not that of a real person or a real product — fictional characters and even fictional products can be protected. Businesses should therefore resist the temptation to base their products on other successful products (or, as this case shows, on fictional products) unless a licence with the copyright holder has been agreed. It is not advisable to assume (as the brewers in ‘Duff Beer’ did) that your business will be able to make its product different enough to avoid liability. Citation( Twentieth Century Fox Film Corporation v The South Australian Brewing Co Ltd (1996) 66 FCR 451

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