Australian consumer Law section 18 PDF

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Australian consumer Law section 18 summarised notes...

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Australian consumer Law section 18 A person Although s 18 (1) of the ACL refers to ‘persons’, in practice the Commonwealth ACL (as enacted in Sch 2 of the CCA) is restricted mainly to corporations. The authorities provide that a corporation is a trading corporation where a ‘substantial’, or ‘sufficiently significant’ proportion of the current activities of the corporation are 'trading activities', meaning the acquisition and supply of goods or services for reward However section 6(3) of the CCA extends the legislation to natural persons where they engage in conduct by means of postal, telegraphic or telephonic services, or through radio or TV broadcast. In trade or commerce The phrase ‘in trade or commerce’ refers to the ‘central conception’ of trade or commerce, namely conduct which of itself is of a trading or commercial character. Thus, the conduct must occur in, or as part of, a particular commercial dealing or transaction; it is not sufficient that it merely took place as part of the organisation’s overall business activities - Concrete Constructions v Nelson. The conduct of a private individual may occur ‘in’ trade or commerce where it is part of a business enterprise. The sale of personal property, such as a private house or car, will not be ‘in’ trade or commerce where it is not done in the course of a business activity: Walker v Sell [2016] FCA 1259. - Where the person making the representation is carrying on a business of acquiring properties for the purposes of generating rental income, that conduct will be in trade or commerce - Carter v Delgrove Holdings Pty Ltd. In Roo Roofing Pty Ltd v The Commonwealth of Australia [2019] VSC 331 it was confirmed that the development and announcement of government policy is purely a governmental and not a commercial activity. In that case, representations made during the course of developing and announcing a fiscal stimulus program as part of a policy response to the (actual) GFC were said not to bear a commercial character.

Conduct While it is clear that conduct extends beyond a representation, the applicant will usually plead the case on the basis that the conduct conveyed a representation of some kind to the persons to whom it was directed. In this respect the plaintiff might rely upon a

representation that is not express, but rather is implied from all the surrounding circumstances (a ‘contextual’ representation). For example: An advertisement will contravene s 18 where it conveys a false impression through the visual images used. Or false advertising written on a product packaging would also be the conduct that is misleading or deceptive. Strict liability Section 18 imposes a strict prohibition as generally there is no requirement to prove an intention to mislead consumers – (S&I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd) Misleading or deceptive ORDINARY REASONABLE MEMBER OF THE TARGET AUDIENCE: Would an ordinary or reasonable member of the target audience be led into error taking into account the full context in which the conduct occurs – (Campomar Sociedad, Limitada v Nike International Limited). Conduct directed at individuals: - Conduct directed to identified individuals is judged by its effect on the ordinary or reasonable person in their position – (Campbell) - But some of the applicant’s own (subjective) characteristics can be attributed to the ordinary or reasonable person – (Butcher) Conduct directed at individuals: - Where the conduct is directed to a diverse cross-section of the public, the ordinary or reasonable person is generally considered to be not particularly astute, sceptical, well-educated, well-informed or experienced in transactions of that kind, but not exceptionally careless or gullible either – (ACCC v Prouds Jewellers Pty Ltd) CONTEXT 1. Consider the seriousness of the transaction - For example: the more money involved, the more it is expected that the principle will take greater care/time making the purchase decision and thinking about the claim – (ACCC v Telstra Corporation) - They would scrutinise claims, check the branding of the product, examine relevant documents, making their own inquires, seeking legal advice etc. – ( Butcher) 2. Also consider the knowledge of the respective parties on the topic matter Causation There must be a causal link between the impugned conduct and the error made Section 18 will not be contravened where:

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The ordinary or reasonable member of the target audience would merely be confused by the respondent’s conduct rather than led into an actual error, or

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Where they would only be led into error as a result of drawing an erroneous assumption from the conduct that is not logically justified.

It is in this sense that it is sometimes said that s 18 was not enacted for the benefit of persons who fail to take reasonable care for their own interests.

False representations of nature or characteristics -

These include all form of communication between a business and its actual or prospective customers: The packaging, name, appearance, design of goods, and oral representations made by customer service representatives.

Representations based on Scientific studies Where the claim is of a scientific or medical nature, it will often convey the representation that there is an adequate scientific basis for the claim. In particular, if a claim is made about the effectiveness of a particular medication or procedure, it will usually convey a representation that that claim is supported by rigorous scientific and medical testing. Where that testing does not exist, or is not adequate to support the claim, the maker of the claim will contravene s 18 – (ACCC v Safe Breast Imaging Pty Ltd). Representations based on future matters The non-fulfilment of a representation when the time for performance arises does not of itself establish a contravention of s 18. Section 18 will however be contravened where, at the time of making the representation, the respondent did not intend to fulfil it or the respondent’s intention lacked any adequate foundation – (Global Sportsman Pty Ltd v Mirror Newspapers) S 4 ACL: 1) Where a corporation makes a representation with respect to any future matter, and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading 2) A corporation that makes a representation about a future matter will be deemed, in the absence of evidence adduced to the contrary, not to have had reasonable grounds for making the representation

Disclaimers in advertising

A disclaimer is not an automatic defence to a claim based on misleading or deceptive conduct. However, a disclaimer might be effective to prevent liability arising where it operates so as to in effect correct what otherwise would be a misleading claim – (Campbell v Backoffice Investments). To have this effect, the disclaimer must be clear, specific and unambiguous, and must feature prominently and in close proximity to the impugned claims – ( Butcher). -

All information relevant to understanding the terms of an offer or the information provided must be prominently displayed in proximity to the ‘headline claim’ in order to avoid a contravention of s 18.

Applied to internet advertising, the inclusion of ‘standard form’ terms and conditions on a separate webpage to the impugned information is unlikely to be effective to erase the misleading nature of that information – (ACCC v Homeopathy Plus! Australia) Comparative advertising A comparative advertisement which suggests that the advertiser's products or services are superior to those a competitor is highly likely to be the subject of a court challenge. -

The courts expect that particular care will be taken with comparative advertisements as they have a particularly influential effect on consumers, who assume that the comparison must be fair and accurate: Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd

False representations of connection with another business (Passing off claims) Tort of Passing off The tort is committed where the defendant falsely represents that its business, goods or services are those of the plaintiff, or are associated with that of the plaintiff. The underlying rationale of the passing off action is that the plaintiff will suffer economic loss from the passing off because either: -

consumers may be misled by the representation and transfer their custom to the defendant, or

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consumers, having purchased the defendant’s goods believing them to be those of the plaintiff, may be disappointed that their expectations as to quality are not realised (thus having a reputational effect on the plaintiff’s business), and may simply cease buying those goods or services altogether.

1. Established reputation The tort of passing off requires proof of a substantial reputation in the branding element said to have been appropriated (name, design, get-up etc) as a formal element of the cause of action. While proof of reputation is not a formal requirement for establishing misleading or deceptive conduct (Kosciuszko Thredbo) in practice it will be critical to show that consumers associate the relevant branding element with the applicant, or its products or services. 2. Misrepresentations There are five key types of misrepresentation actionable in the tort of passing off: -

Using an existing name for a new business Using an existing name for a new product Copying a design or a ‘get up’ Copying an existing product Character merchandising

Using an existing name for a new business A business cannot use a name which is already used by an existing business where the existing business has built up a substantial reputation under that name and where people are likely to be misled or deceived into believing that the new business is, or is connected with, the existing business – (Bridge Stockbrokers Ltd & Moore v Bridges) On the other hand, the use of a similar name that is merely descriptive of the function of the business, or the geographical area in which the business operates, will not contravene s 18 of the ACL – provided that a small change is made to differentiate the businesses – (Shape Shopfitters Pty Ltd v Shape Australia Pty Ltd) -

Conduct that early confuses or uncertainty is not misleading or deceptive, thus where a there is a small change in a business name, the consumers may think there might be a connection between the two company but would not take the next step of actually concluding that.

Using an existing name for a new product As with use of a similar business name, use of a similar product name to that of an existing product will contravene s 18 where the ordinary or reasonable consumer would be misled into believing that the new product is made by, or associated with, the same business who makes the existing product – (Campomar Sociedad Limitada v Nike International Limited).

However, a contravention is less likely to occur where the products are sold in disparate markets – (Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd). In addition, the use of aspects of a competitor’s name might be legitimate where the new product is sufficiently distinguished through use of different packaging, labelling and logos, and/or where the name merely describes the function or nature of the product – (S&I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd). -

Everyday English words that merely describe the product would not contravene this tort as the courts are reluctant to grant a statutory monopoly over such descriptive terms (eg. Shampoo, chocolate, laptop etc.)

Copying a design or a ‘get up’ The adoption of a similar logo, symbol, packaging or ‘get-up’ to that used by a competitor might contravene s 18 depending on the surrounding context. Note that ‘get-up’ is a reference to the ‘style, appearance and trade dress of goods - it includes colours, shapes, and packaging’ – (Moroccanoil Israel Ltd v Aldi Foods Pty Ltd). In determining whether there is a contravention, consideration will be given to the similarities in design and get-up, but other factors are taken into account as well, such as primary branding (trade names and logos) and surrounding circumstances such as branding positioning, promotional strategies, retail supply and pricing – (Homart Pharmaceuticals v Careline Australia). - Even where there are similarities in design, it will be difficult to establish a contravention where the primary branding (trade names and logos) is sufficiently differentiated and there are key differences in pricing, product positioning and retail supply – (MIL v Aldi) -

“Cadbury does not own the colour purple and does not have an exclusive reputation in purple in connection with chocolate. [A competitor] is entitled to use purple, or any other colour, as long as it does not convey to the reasonable consumer the idea that it or its products have some connection with Cadbury” – (Cadbury Schweppes v Darrell Lea Chocolate Shops).

Copying an existing product A manufacturer does not contravene s 18 of the ACL merely by copying an existing product, provided that it does not represent that its product is the original. No representation of this kind will be made provided the manufacturer has adopted an adequate branding strategy to identify the product as its own. Thus, the mere copying of another’s product will not of itself mislead consumers, provided that the imitation product is sufficiently differentiated from the original through pricing, branding and branding positioning, promotional strategies and retail supply – (Parkdale Custom Built Furniture v Puxu)

Character merchandising Character merchandising refers to the use of image of a well-known public figure, such as a celebrity or sports person, or a movie character, to sell the advertisers goods or services. A false representation that a celebrity or a fictional character endorses or sponsors a product will contravene s 18. -

In Talmax Pty Ltd v Telstra Corp, Kieran Perkins established that Telstra had contravened s 52 by falsely representing that the swimmer endorsed Telstra. Telstra had published a picture of the swimmer in a newspaper advertisement wearing a cap with a Telstra logo (Telstra had sponsored the swim event in question). It was held that the advertisement conveyed the false representation that Perkins had agreed to sponsor Telstra’s service.

Remedies available where conduct contravenes s 18 of the ACL Business competitors Business competitors are able to claim damages under s 236 for loss or damage suffered as a result of a misleading advertisement by a competitor. However, it can often be difficult to prove a causal link between a competitor’s misleading advertisement and a drop in sales experienced by the applicant’s business. Accordingly, the usual remedy sought is an injunction pursuant to s 232 of the ACL, which can include an order for corrective advertising.

Injunctions: s 232 of the ACL The ACCC and ‘any other person’ can apply for an injunction under s 232 of the ACL restraining the respondent from engaging in conduct contravening the ACL.

An injunction should not be used for ‘public relation’ purposes or to punish the defendant – (ACCC v Dataline.Net.Au). Accordingly, although s 232(4) provides that an injunction can be awarded even though there is no evidence of likelihood of repetition of the conduct, in practice the courts refuse to award an injunction if satisfied that it is an isolated breach that occurred in the past which is unlikely to still be influencing consumer choice, and where there is no real chance of repetition – (ACCC v Cadbury). Corrective advertising: s 232 of the ACL As well as prohibitive injunctions, s 232 confers a power on the court to order a mandatory injunction; for example, an order that the respondent engage in corrective advertising or introduce an internal compliance or staff training program. However, there must be a public interest for such an order to be made. An order for corrective advertising will be refused where the misleading advertisement is no longer likely to be operating in the minds of consumers, and therefore the order would serve no purpose – (TPC v Telstra Corp) The ACCC Non-punitive orders: s 246 of the ACL Section 246 of the ACL empowers the court to make a range of orders on the application of the ACCC. These orders can be made against a person who has contravened s 18. The range of orders is set out in s 246(2), and includes corrective advertising. Undertakings: s 218 of the ACL Section 218 of the ACL empowers the ACCC to accept an undertaking from a person who has contravened, or been involved in a contravention of, the ACL. The undertaking is accepted in settlement of the ACCC’s complaints against that person. The provision of an undertaking to the ACCC does not preclude a civil claim by third parties. Action on behalf of consumers The ACCC has a range of powers to seek compensation orders on behalf of consumers who have suffered loss because of the misleading conduct. The ACCC has the power to seek a compensation order on behalf of one or more persons who are injured as a result of the contravening conduct: s 237(1)(b). Marketing class actions The class action is brought by a private law firm on behalf of consumers who have suffered loss because of the misleading claims – (Hardy v Reckitt Benckise), a class action commenced on behalf of consumers who purchased Nurofen specific pain relief products during the period where the packaging was held in ACCC v Reckitt Benckiser to be misleading. Reckitt Benckiser ultimately settled this action for $3.5 million....