Section 18 of the ACL prohibits conduct, in trade or commerce, that is misleading or deceptive or is likely to mislead or deceive. It is a broad, general provision that applies to almost all forms of communication that take place in the course of business. The prohibition applies even if there was no intention to mislead or deceive – it is no defence to say that the misleading conduct was an ‘honest mistake’.
The concept of ‘misleading’ someone is broad and may include lying to them, leading them to a wrong conclusion, creating a false impression, leaving out or hiding important information and making false or inaccurate claims. The following types of representations can be misleading or deceptive, depending on the circumstances in which they are made:
- representations that cause confusion or uncertainty if they would lead an ordinary reasonable member of the target audience into error;
- silence where what is not mentioned may be an important element in creating an accurate overall impression;
- representations as to future matters if there were no reasonable grounds for making the representation;
- statements that are literally true if the statement conveys a secondary meaning that is false; and
- statements of opinion if the opinion was not held honestly or had no rational basis.
A consumer that has suffered loss or damage as a result of a breach of s 18 will be entitled to seek damages under s 236 of the ACL.
In addition to the blanket prohibition of misleading or deceptive conduct under s 18, s 29 of the ACL prohibits certain types of false or misleading representations about goods and services. The prohibited representations are listed in s 29 and include false or misleading representations in relation to quality, sponsorship, price, the availability of spare parts, place of origin and the existence or effect of any warranty or guarantee. These apply to dealing with other businesses as well as consumers.
Section 29 requires the identification of a ‘representation’ which may be active or passive and may arise as a result of statements made orally, or in writing. The requirement of a representation in s29 means that it differs from s 18, which refers more broadly to ‘conduct’. Notwithstanding this distinction, courts have found that a representation can still arise as an implication from conduct in certain circumstances.
Another important difference is that, unlike contraventions of s 18 which only entitles affected consumers to damages, a contravention of s 29 of the ACL may also constitute an offence giving rise to significant penalties.
Comparative advertising occurs where a company compares their goods or services to another company’s goods or services. Whilst comparative advertising can be very effective, there are three major risks associated with these types of promotions:
- it can be difficult to ensure that the comparison is accurate;
- the goods or services being compared must be sufficiently similar to justify the comparison; and
- the comparison must be valid for the life of the advertisement or promotion.
It is important to be vigilant when engaging in comparative advertising, as competitors generally keep a close eye on comparative advertising and will alert the ACCC to any potentially misleading comparisons.
Section 35 of the ACL prohibits persons from advertising goods or services for supply at a specified price when there are reasonable grounds to believe or the person ought to be aware that they will not be able to offer those goods or services in reasonable quantities for a reasonable time. Bait advertising generally involves offering goods or services at cheap prices in order to attract customers’ interest, but the goods or services are offered in such small quantities that most customers would not be able to purchase them.
An offer to supply goods at a special price must be made for a period and in quantities that are reasonable, having regard to:
- the nature of the market in which the business is being carried on; and
- the nature of the advertisement.
An organisation can reduce its risk of engaging in bait advertising by:
- anticipating the likely demand for an advertised good or service when determining the quantities that should be made available at the special price;
- keeping in mind the extent of the advertisement, noting that a heavy advertising campaign will translate into a greater take up of the offer at the offer price; and
- outlining the specifics of the offer in the advertisement, for example, ‘200 widgets will be available for 2 weeks only’.
Fine print and qualifications
It is important to ensure that the overall message conveyed by an advertisement is accurate and includes any qualifications to the main message necessary for accuracy. However, a disclaimer in fine print will not necessarily be sufficient to avoid liability for misleading conduct. When drafting fine print, the following rules apply:
- you cannot correct a misleading main statement with fine print;
- you can qualify a potentially ambiguous but not misleading main statement with an appropriate disclaimer if it is appropriately brought to the customer’s attention;
- it is insufficient to say that ‘conditions apply’ – the limitation or qualification must be explained appropriately for the context;
- very important conditions, limitations or qualifications should be brought to the customer’s attention, not just be hidden in the small print; and
- the relevant qualifications should be provided at the same time as the main message.
Any qualifications must be in a font size and colour that is legible and sufficiently prominent, having regard to the size of the main message and material.
Component pricing occurs when a business advertises its price in component parts (e.g. $20,000 + on road costs), rather than as a single, all-inclusive figure (e.g. $22,500 drive away).
Section 48 of the ACL requires companies and persons to prominently specify the single figure price a consumer must pay to purchase the good or service. The single figure price is the ‘minimum quantifiable consideration’ for the supply of the good or service at the time of the representation and must include:
- any charges payable by the person unless they are optional and not pre-selected for the customer (see below);
- any tax, duty, fee or levy, including GST; and
- any other amount payable in relation to the supply of the goods or services.
Optional charges associated with any extras that are pre-selected for the customer must be included in the single figure price. For example, if an airline advertises a flight for sale and the carbon offset is pre-selected for customers on the airline’s booking system, the advertised single price must include the carbon offset charge.
When advertising component prices, the single figure price must be easily identifiable and be specified at least as prominently as the most prominent of the other components of the price. However, this does not apply when services are being supplied and:
- the contract provides for the supply of the services for the term of the contract;
- the contract provides for periodic payments of the services to be made during the term of the contract; and
- if the contract also provides for the supply of goods, the goods are directly related to the supply of services.
For example, a company may offer telecommunications at the cost of $20 per month, provided that the customer enters into a contract for the provision of those services for a minimum of 24 months. The single price for those services is $480 ($20 x 24 months). The company must state the $480 single price prominently, but may display the $20 per month price more prominently.
Was / now pricing
‘Was / now pricing’, also known as ‘strike through pricing’, occurs when a business advertises a good or service by reference to the price at which the good or service has previously been advertised or sold. For example, an item for sale will be tagged ‘was $220 / now only $75’ or $220 now $75. This type of pricing represents to consumers that they are likely to save an amount by purchasing the good during a specific period, being the difference between the higher and lower prices advertised.
Was / now pricing may be misleading or deceptive if:
- the good or service was not offered for sale at the ‘was’ price for a reasonable period before the sale commenced, or at all; or
- the good or service was rarely or never sold at the ‘was’ price before the sale commenced, for example, because the business has an established practice of discounting its products.
What is considered to be a ‘reasonable period’ will depend on the circumstances, including the type of product and the usual frequency of price changes for that product.
The ACCC vigilantly monitors was / now pricing to ensure that corporations are not engaging in misleading or deceptive pricing behaviour.
Drip pricing occurs where a headline price is advertised, but a number of additional elements, such as credit card surcharges and booking fees, increase that price as the customer proceeds through the sales process. It generally occurs in relation to online sales of goods or services.
Drip pricing is sometimes considered to be misleading because:
- the headline price is gradually qualified and increased until the final, larger price for the particular good or service is arrived at; and
- the overall effect of this process is that the headline price is initially and repeatedly emphasised, whilst less attractive aspects, such as booking and service fees, were de-emphasised and only disclosed piecemeal and late in the process.
In order to avoid misleading consumers with drip pricing, it is important to:
- advertise prices as being “from” a particular amount;
- where relevant, clearly express that advertised prices are subject to fees and surcharges or subject to conditions;
- make the relevant terms and conditions that will lead to price increases readily accessible and available to consumers, for example, through links or pop up boxes; and
- ensure that it is possible for a consumer to purchase the good or service at the advertised headline price, for example, by allowing the consumer to elect a payment method that is not subject to surcharges.
As always with misleading or deceptive conduct, the overall impression created by the advertisement is key. Any qualifications or conditions must be clearly expressed and obvious to the consumer.
The Unit Pricing Code is a mandatory industry code that applies to:
- grocery retailers with more than 1,000 square metres of floor space who sell the minimum range of food-based grocery items; and
- online retailers who sell the minimum range of food-based grocery items.
The minimum range of food-based grocery items means that the retailer must sell all of these categories of food product: bread, breakfast cereal, butter, eggs, flour, fresh fruit and vegetables, fresh milk, meat, rice, sugar and packaged food.
Such retailers must display the ‘unit price’ for all grocery items by displaying the price of a good as a standard unit of measurement, as follows:
- if sold by volume – per 100 millilitres;
- if sold by weight – per 100 grams, except for fruit and vegetables – per kilogram;
- if sold by length – per metre; and
- if sold by number – per item for a pack of 40 or fewer items or per 100 items for a pack of 41 or more items.
Certain products are exempt from unit pricing, including electrical items, furniture, toys, alcoholic beverages and books, magazines and stationery.
The courts will consider the allegedly misleading conduct as a whole, including any disclaimers. To be effective, a disclaimer must clearly be brought to the attention of the parties concerned and must be clear, prominent and unambiguous. A disclaimer will not be effective if it contradicts the main representation being conveyed.
Exclusion clauses that seek to oust the operation of s 18 of the ACL have been held to be ineffective. However, the courts will have regard to exclusion clauses if they can be said to bear on the question of whether or not a party relied on the relevant representations in engaging in the detrimental conduct. To this extent, acknowledgments in a contract that a party has made its own inquiries into certain matters or has not relied on certain information provided to it by the other party may be effective in avoiding liability under s 18 of the ACL by proving an absence of reliance.
Like other regulators around the world, the ACCC is prioritising ‘greenwashing’ and closely scrutinising environmental and sustainability claims made by businesses. The ACCC has provided the below guidance to businesses when making environmental and sustainability claims:
- Ensure that your claims are clear and specific, including detail on the specific part of the product or process being referred to;
- Avoid vague (e.g. ‘green’) or technical language, as well as claims which are technically true only if certain conditions are met;
- Only rely on robust, up to date standards;
- Consider the entire lifecycle of a product and identify if your claim only relates to one aspect of the product lifecycle;
- Do not hide or downplay negative impacts that, notwithstanding the claimed environmental benefits, may also result from the product or process being referred to;
- Be transparent about your products and environmental policies;
- Transparency may require that information about environmental indicators (e.g. energy use and emissions, types of materials used and how they are sources, water usage and pollution, etc) is publicly available in an easy accessible and understandable format; and
- Consider collaborating with reputable third-party certification bodies, but take care not to misrepresent the meaning or significance of any certification this is obtained.
If your business is making representations to consumers about the sustainability or environmental impact of its products or services, be sure that you can substantiate those claims to the ACCC with credible evidence.