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What is misleading or deceptive conduct?
‘Conduct’ includes actions and statements, such as:
- any representation made by a person.
Business conduct is likely to break the law if it creates a misleading overall impression among the audience about (for example) the price, value or quality of consumer goods or services.
It is the business’s actions and statements that matter – not their intentions. A business can mislead and deceive, without intending to.
A trader’s business name suggests an affiliation with a long-established institution. The name may mislead or deceive because of this similarity. The trader’s intentions when choosing the name did not matter.
‘Puffery’ is wildly exaggerated, fanciful or vague claims that no reasonable person could possibly treat seriously or find misleading.
A café owner claims to make ‘the best coffee in the world’.
A business claims ‘all your dreams will come true’ if you use a certain product.
A business can break the law by failing to give relevant information to a customer.
Silence can be misleading or deceptive when, for example:
- one person fails to alert another to facts known only to them, and the facts are relevant to a decision
- important details a person should know are not conveyed to them
- a change in circumstance meant information already provided was incorrect.
Whether silence is misleading or deceptive will depend on the circumstances of each case.
For example, the following may be misleading:
A restaurateur is selling her restaurant. When asked the reason for sale, she does not mention that she is selling because a similar restaurant is opening nearby.
A consumer who lives in a regional area is buying a mobile phone. The salesman knows where the consumer lives but fails to tell him that the coverage is poor in that area and the phone may be of no use.
Relying on disclaimers and small print
A business cannot rely on disclaimers buried in small print as an excuse for misleading or deceptive conduct.
A large department store was found to have engaged in misleading conduct when it advertised ‘25 per cent off all clothing’ and ‘15-40 per cent off housewares’, but in small print excluded certain clothing and manchester.
However, consumers cannot ignore disclaimers that are prominently displayed. Prominent disclaimers may be enough to protect a business, depending on the circumstances.
A bank advertises low credit card interest rates for the first 12 months. The advertisement clearly indicates the low rates are only available to new customers who apply within a certain period. This disclaimer is sufficient because it clearly informs consumers about the terms and conditions.
We recommend businesses prominently display all disclaimers and any terms and conditions.
Predictions and opinions
A statement about the future that does not turn out to be true is not necessarily misleading or deceptive.
But promises, opinions and predictions may be misleading or deceptive if, for example, the person making the statement:
- knew it was untrue or incorrect
- did not care whether it was true or not
- had no reasonable grounds for making it.
A real estate agency was selling apartments with a view of the sea. The agency assured prospective buyers that the view was protected because the land between the apartment block and the sea was zoned for low-rise development. This was based on information provided by a council officer.
However, the council officer was wrong. The zoning was about to change, allowing high-rise development. The agency had made a false statement about a future matter but had reasonable grounds, so was not liable for misleading consumers.
A court will consider all the relevant circumstances and the impact on the consumer when deciding if a prediction or opinion is misleading or deceptive.
Exceptions for information providers
‘Information providers’ include media organisations such as:
- radio stations
- television stations
- publishers of newspapers or magazines (including online).
Information providers are exempt from liability for misleading and deceptive conduct. There are some exceptions, to this, including:
- where the matter relates to goods or services supplied by the information provider
- the publication of advertisements.
Information providers may still be liable for publishing an advertisement that is misleading or deceptive. However, they may not be responsible if they can prove that they:
- are in the business of publishing or arranging for the publication of advertisements
- received the advertisement for publication in the ordinary course of this business; and
- did not know, and had no reason to suspect, that the advertisement was misleading or deceptive.
A tradesman publishes an advertisement in a major newspaper. The advertisement states that he is a registered builder, when he is not. The newspaper staff was unaware of the builder’s unregistered status. Although the advertisement may be misleading or deceptive, the newspaper will not be liable because it had no reason to suspect the information was false. However, the tradesman’s conduct would be misleading or deceptive.
Misleading and deceptive conduct may lead to civil remedies including:
- compensatory orders
- orders for non-party consumers
- non-punitive orders.
Criminal sanctions do not apply, but penalties may apply if the conduct breaches the Australian Consumer Law in other ways.
Last updated: 17/05/2013