The Australian Consumer Law (ACL) prohibits businesses from making false or misleading statements about goods and services, regarding:
- the standard, quality, value or grade of goods or services
- whether the goods are new
- a particular person agreeing to acquire goods or services
- testimonials by any person relating to goods or services
- the price of goods or services
- the availability of repair facilities or spare parts
- any guarantee, warranty or condition on the goods or services.
Courts have found false and misleading representations in these cases:
- a manufacturer sold socks, which were not pure cotton, labelled as 'pure cotton' (Trade Practices Commission v Pacific Dunlop Limited (1994) FCA 1043)
- a business made a series of untrue representations about the therapeutic benefits of negative ion mats it sold (ACCC v Giraffe World Australia Pty Ltd (1999) FCA 1511).
Whether a representation is considered false or misleading will depend on the circumstances of each case. A representation that misleads one group of consumers may not necessarily mislead another group. A representation can be misleading even if it is true or partly true.
Testimonials are statements from previous consumers about their experience with a product or service. Misleading testimonials can persuade consumers to buy something based on the belief in the testimonial, even if it is not true. A business accused of making a misleading testimonial must provide evidence to show it is not misleading in court.
Offering rebates, gifts, prizes and other free items
It is unlawful to offer rebates, gifts, prizes or other free items without intending to provide them. It is also unlawful to fail to provide them as promised.
Businesses must not mislead the public into believing a product is available at a certain price, only to find out the business does not have the stock to sell. Businesses must have a reasonable supply of the goods on hand when offering it to consumers. Reasonable supply will be determined by several factors including the type of goods and what was in the advertisement.
Wrongly accepting payment for goods
Businesses must not accept payment for goods and services if they:
- do not intend to supply
intend to supply a different product or service
- know they would not be able to supply the goods or services.
Making false or misleading representations is an offence and carries maximum criminal penalties of $220,000 for individuals and $1.1 million for a body corporate.
Civil remedies for the same amount apply. Other civil remedies include:
- orders for non-party consumers
- corrective advertising orders
- adverse publicity orders
- disqualification orders.
Case study: Apple iPads
Section 33 of the Australian Consumer law states: ‘A person must not in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods’. Apple admitted that it disobeyed this requirement during the period 8 March 2012 to 12 May 2012, in the marketing of one of their popular iPad devices.
The ACCC alleged four breaches of section 33, as the iPads were advertised online at Apple’s website and online store, on signage with demonstrator models in Apple stores; in promotional and marketing materials provided to Apple resellers; and in promotional and marketing information provided to resellers for use on their websites.
The iPads were marketed as ‘iPad with WiFi and 4G’, which implied that they were able to use networks described as ‘4G’ in Australia, which Apple knew they could not. By using of the designation ‘iPad with WiFi + 4G’ Apple implied that the new iPad cellular model could connect directly to the Telstra LTE mobile data network in Australia. Apple admitted that this conduct was liable to mislead consumers as to the ability of the new iPad cellular model to connect to the Telstra LTE mobile data network, the only network in Australia described as ‘4G’.
In a decision of the Federal Court, Justice Bromberg noted that the facts of the case suggested that ‘global uniformity was given a greater priority than the need to ensure compliance with the ACL’ and warned that when global campaigns are used in Australia, they ‘need to be attuned to the understandings and perceptions of Australian consumers’.
Apple was fined $2.25 million and ordered to pay $300,000 towards the ACCC’s court costs. Among the factors which the court took into consideration in determining the penalty were the size of the corporation and the deliberateness of the contravention. The court noted that it was important to impose a penalty of sufficient severity to provide specific deterrence. Apple’s cooperation with the ACCC, which avoided a contested hearing, was also taken into consideration.
See Federal Court decision ACCC v Apple Pty Ltd  FCA 646 and ACCC website for more information.