A general introduction to misleading or deceptive conduct laws in advertising

by The FindLaw Team

One of the primary means in which suppliers and manufacturers promote their wares is through advertising, and in some instances, the representations being made may be too good to be true – because they are – and in such instances, the actions undertaken by a supplier or manufacturer may be considered as false or misleading under the provisions of the Australian Consumer Law (the ACL).

An introduction to the provisions

The general misleading conduct provisions can be found under s 18 of the ACL and give rise to civil liabilities. Additionally, under Part 3-1 of the ACL prohibits numerous business practices that are false or misleading, and gives rise to both criminal and civil liabilities.

Generally speaking, the ACL is broken down between civil liabilities which are subject to Chapter 3, and the criminal liabilities which are the subject of Chapter 4. Interestingly, both the civil and criminal liabilities encompass dealings undertaken with both consumers and businesses. However, this piece will be primarily concerned with the consumer aspects of the provisions.

False or misleading representations: Civil liability

The s 18 provisions of the ACL are general prohibitions which are directed at the conduct of a supplier or manufacturer, and the section is a catch-all provision that is broad and general in scope. Because Part 2 and 3 of the ACL prohibits misleading or deceptive conduct in a broad manner via s 18 – while prohibiting particular practices found in ss 29-50 – therefore, s 18 has the potential to be applied to conduct which may escape liability in other provisions under the ACL.

What types of ‘conduct’ is prohibited by the ACL regarding false or misleading representations?

Because the false or misleading representation provisions in s 18 deals with conduct, it is important that we outline what ‘conduct’ in the ACL makes reference to, which is outlined in s 2(2) of the ACL:

“(a) a reference to engaging in conduct is a reference to doing or refusing to do any act, including:

                (i) the making of, or the giving effect to a provision of, a contract or arrangement; or

                (ii) the arriving at, or the giving effect to a provision of, a contract or arrangement or

                (iii) the requiring of the giving of, or the giving of, a covenant; and

(b) a reference to conduct, when that expression is used as a noun otherwise than as mentioned in paragraph (a), is a reference to the doing of or the refusing to do any act, including:

                (i) the making of, or the giving effect to a provision of, a contract or arrangement; or

                (ii) the arriving at, or the giving effect to a provision of, an understanding; or

                (iii) the requiring of the giving of, or the giving of, a covenant; and

(c) a reference to refusing to do an act includes a reference to:

                (i) refraining (otherwise than inadvertently) from doing that act; or

                (ii) making it known that act will not be done; and

(d) a reference to a person offering to do an act, or to do an act on a particular condition, includes a reference to the person making it known that the person will accept applications, offers or proposals for the person to do that act or to do that act on that condition, as the case may be.”

One of the interesting aspects of s 18 is how it interacts with s 29 of the ACL. While s 18 imposes a strict liability in the regulation of misleading conduct in trade or commerce, s 29 imposes a liability for false representations regarding a supplier because they are in the more powerful position when it comes to the knowledge of a particular good or service, therefore, the section requires that if any information is disclosed that it must be accurate.

When are representations made in relation to goods or services considered misleading?

In determining whether a representation is misleading, both ss 18 and 29 of the ACL applies the same test, and although the test in s 18(1) has not been explicitly defined, direction can be found in regards to future matters under s 4(1), which states that there are no reasonable grounds for making a representation if:

“(a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and

(b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading.”

One may ask if there is no definition of what is considered misleading or deceptive: how will the concept be applied? Using the former Trade Practices Act (the TPA) and the judgment of Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, can give some guidance to what is misleading or deceptive, and the interpretation of both statute and the common law, is the prohibiting of unfair conduct that induces a person into error, due to the conduct in question.

On the other hand, if a representation is directed towards the wider public, the applicable test when determining whether a representation is misleading – is whether the ordinary or reasonable person to whom the representation is being made towards, is likely to be deceived or be misled.

In Campomar v Nike International the High Court said:

“It is in these cases of representations to the public, of which the first appeal is one, that there enter the “ordinary” or “reasonable” members of the class of prospective purchasers. Although a class of consumers may be expected to include a wide range of persons, in isolating the “ordinary” or “reasonable” members of that class, there is an objective attribution of certain characteristics…Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of that class.”

Additionally, when determining whether an advertisement is misleading under the s 29 provisions, in establishing who is the representative of the ‘ordinary’ or ‘reasonable person’ as stated by the High Court in Nike, may include matters such as:

  • age;
  • location;
  • the level of sophistication of the person (a higher standard of accuracy will expected in advertising which is directed towards a less sophisticated audience, such as children);
  • familiarity with the subject matter.

It’s important to be aware that it is the ‘reasonable’ members of the audience in which a determination will be made in regards to whether a representation is misleading, rather than the audience whose reactions are considered to be ‘extreme’ or ‘fanciful’.

If you are experiencing any issue to do with consumer law, it’s advisable that you engage the services of a lawyer who will be able to assist you with any inquiries or questions you may have.


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