Tertiary education program

General principles in determining whether conduct is misleading or deceptive

In considering whether conduct contravenes section 18 of the ACL, the overall impression created by the representation is considered to determine whether it is likely to lead a significant number of people into error or has the tendency to deceive such persons. Other general principles, like the ones listed below, apply when considering whether conduct is misleading or deceptive.

No-one need actually be misled

The prohibition applies to conduct that is likely to mislead or deceive, as well as conduct that actually is misleading or deceptive.

It applies to private as well as public conduct

The prohibition is not restricted to conduct only directed towards consumers (for example in representations made on a product), or the public at large (for example in representations contained on a billboard or television advertisement). It applies equally to private communications undertaken in the course of business (for example, by a waiter on behalf of a restaurant to a customer).

Fault or intent is not necessary

The law is not restricted to cases where there is some moral or conscious fault on the part of the business. The law can be breached by accident, even when the business acted honestly and had no intention of misleading or deceiving anyone. This is because the effect of the conduct (usually a misrepresentation) is considered rather than its purpose, that is, is the advertisement likely to have been misleading?

Conduct is not limited to words or positive representations

Any form of conduct on the part of a business can breach the ACL if it causes its customers, or suppliers, to be misled. For example, the publication of images or pictures that exaggerate the quality or features of an advertiser's products could be misleading or deceptive. Silence can amount to misleading conduct, where that silence causes its customers or suppliers to be misled.

Case study

A supplier of wood shavings (to be used for the export of live crayfish) was guilty of misleading conduct because the supplier failed to inform the buyer that a toxic chemical had been used to treat the wood.

See: Forwood Products Pty Ltd v Gibbett [2002] FCA 298

Repeating information can amount to misleading conduct

A business that passes on incorrect information provided by someone else will break the law about misleading or deceptive conduct if the business gives the impression that the information is its own. However, if the business makes clear that it was merely passing on the information and did not give any assurance about the accuracy of that information, it will not be legally responsible.

Case study

A real estate agency innocently relayed to a prospective buyer, incorrect information provided by the vendor as if it was the source of that information. The agency was subsequently found to have engaged in misleading or deceptive conduct.

See: Argy v Blunts and Lane Cove Real Estate Pty Ltd [1990] FCA 51

Statements about the future can be misleading or deceptive

A business will be liable for engaging in misleading or deceptive conduct if it makes a statement about the future that later proves to be incorrect, unless the business had reasonable grounds for making the statement.

Case studies:

The court ruled that the following statements about the future (that later proved to be incorrect) were misleading or deceptive:

  1. All the shops in the shopping centre will be let when the centre opens (see: Lyons v Kern Konstructions (Townsville) Pty Ltd [1983] FCA 33).
     
  2. Investors could expect capital growth of around eight per cent per annum (see: ACCC v  Oceana Commercial Pty Ltd [2004] FCAFC 174).

When deciding whether an advertisement is misleading or deceptive, the court will consider:

  • the audience to whom the advertisement is directed: For example, an advertisement that does not mislead adults may mislead children. Conversely, an advertisement that would mislead the general public may not be misleading if it was directed only at people with a special knowledge and understanding of the subject matter.
  • the whole advertisement: For example, words that are read in isolation may be misleading or deceptive, however they may not have this effect when read with the rest of the advertisement.
  • the transaction and the product advertised: For example, advertisements about inexpensive transactions, or directed at impulse buyers, are unlikely to be scrutinised carefully and consequently have a greater potential to mislead their audience. Conversely, advertisements relating to expensive items are likely to be scrutinised more closely and are less likely to mislead.