If you want to avoid your business or employer getting slugged millions of dollars in fines and potentially even more costly brand damage through bad publicity, you must understand Australia’s misleading and deceptive conduct laws.
Let’s start by looking at an example from our neighbours in New Zealand about how dishonesty in marketing can really hurt businesses.
From Business Success to Penalties in the High Court
Business had been going well for successful young Aucklander Daniel Hunt.
Then came a series of serious missteps.
Mr Hunt’s company The Career Academy (TCA) – an unregistered education provider – was convicted and stung with a $56,000 fine in the New Zealand High Court in July 2019 after the company was found to have made a number of false statements when pitching courses to potential studentson their website.
Right at the time when business was booming – the number of his students expanded from 3,000 to over 20,000 in the space of two years – his staff made a number of blatantly incorrect statements in their website marketing material. Namely, TCA claimed some of its contents were either approved by or assessed against New Zealand Qualifications Authority and New Zealand Qualification Framework when they were not.
See the Problem?
The business was misleading potential clients with misinformation. That is illegal.
Whilst Mr Hunt, didn’t personally approve and may not have known about the content because the business was growing so quickly, he was still liable as a company director.
As an individual Mr Hunt was also ordered to pay $24,000 in legal costs and several negative articles were published about him and his business in New Zealand’s national newspaper.
One of the Most Important Laws Impacting Australian Businesses
While Mr Hunt was charged under New Zealand’s Education Act, there are crucial lessons to be learned for Australian businesses about not engaging in misleading or deceptive conduct in advertising and marketing.
Under section 18 of the Australian Consumer Law Act; this prohibits a person, in trade or commerce, from engaging in misleading or deceptive conduct, or is likely to mislead or deceive and it is One of the Most Litigated Laws in Australia.
It is illegal for a business to engage in conduct that is likely to lead people into error:
- Whether it was deliberate or not.
- Whether someone was actually deceived or not.
- Whether somebody actually lost money or not.
If the representation is likely to lead the average person into error then it will be considered misleading or deceptive conduct.
- If a body corporate breaches this law in Australia they may be fined to the greater of $10 million, 3 times the value of the benefit received, or where the benefit cannot be calculated, 10 percent of annual turnover in the preceding 12 months for corporations.
- If an individual breaches this law there are criminal or civil pecuniary penalties of up to $500,000 for individuals.
- If the consumer has suffered loss or damage as a result of that conduct will have a right to seek damages.
How do I stop this happening to my Business?
For starters, you need to apply common-sense, honesty and decency in all aspects of your business.
You can be creative in marketing and advertising, just not creative with the truth.
You cannot mislead or deceive about or in relation to:
- What the good or service does and does not do;
- The efficacy and results of the good and service;
- Whether goods are new or not;
- The necessity of the product or service;
- Pictorial representations and any subsequent digital enhancing;
- Whether the good or service is “environmentally friendly” or made with “fair trade” manufacturing;
- Whether prices are actually discounted or not;
- How one product is better or even different to another;
Make sure you don’t lie impliedly. GlaxoSmithKline and Norvatis worked in marketing and selling ‘Osteo Gel’ and ‘Emulgel’ as different products. Osteo Gel was sold for a higher price, and was marketed as more effective than Emulgel. However, both products were the exact same product with the exact same active ingredients. The Australian Competition and Consumer Commission (ACCC) who prosecuted the matter and the Justices of the Federal Court were less than impressed. In May 2020 the companies were ordered to pay $4.5 million in penalties.
The fine print won’t help you. December 2013 Australia’s High Court found that internet provider TPG misled customers into the need to purchase an expensive telephone bundle as part of its package. Whilst other parts of its marketing strategy to qualify some of its other assertions The High Court held that the “general thrust” and “dominant message” chosen by TPG was ultimately misleading.
Silence and omissions have been held many times to be deceptive and misleading in Australian courts. The website HealthEngine was fined $2.9 million in August 2020 for manipulating 3,000 consumer reviews by removing negative comments on health practitioners and failing to publish an additional 17,000 reviews.
But you can still have fun. While the substance must match the claim in your marketing or advertising, you can get away with a bit of humour and puffery – that is claims that the average person will recognise as simply part of a sales pitch. Like “world’s best hamburgers” or “hair that will make you say ‘wow’” are generally acceptable.
Learn How Businesses Can Avoid Legal Trouble in Marketing Campaigns…
With our comprehensive Business StartUp Online Training Course by way of a series of FREE videos: take a look now.
You will learn how to make smart, creative and effective marketing material, without flouting the law. Additionally you will also learn:
- How to put all other legal requirements in place prior to start-up
- How to choose the right structure for your business
- whether it be sole trader
- partnership or company
- listing as a public company
- The benefits and disadvantages of each structure so that you can start your business under the ‘right’ umbrella
- Business names and ABNs and the validity of registering for GST
- Supplementary legal requirements for businesses in certain fields. E.g. hospitality, travel, real estate etc.
If you think you have been adversely affected by a misleading or deceptive act by businesses (and this applies to all business conduct, not just marketing and advertising) then you can contact the ACCC.