Misleading and Deceptive Conduct

It is necessary for the organizations to comply with the Australian Consumer Law, the Fair Trading Act, and Australian Consumer Law for the purpose of reducing the risk related to breaking of law, and also for avoiding the legal conflicts. While complying with these laws, organizations can ensure better relations with consumers and also increase their goodwill as it deals fairly with the consumers and other stakeholders. It is necessary for the organization to meet the following requirements:

• Fair contracts: organizations must enter into fair and clear contracts, which mean there must be equal balance between the organization and consumer.
• Advertising: description provided by organization related to product and service must be clear and correct. Price related to products and services must not be changed for reasonable period of time and organization must ensure that reasonable quantities related to product are available.
• Unconscionable conduct: this type of conduct includes pressurizing the consumers, unscrupulous behavior, behavior which is not acceptable, etc.
• Unfair market practices: organizations must ensure that their business practices are fair in nature, and use measures for preventing the unfair business practices (Business Victoria 2016).

This report states the different terms of Australian contract law, Fair Trading Act, and Australian consumer law such as misleading and deceptive conduct, actionable misrepresentation, unfair contract terms, etc. Lastly, this report is concluded with brief conclusion. 

It is not legal for business organizations to engage in any conduct which is misleading or deceives by nature, or likely to mislead or deceive any other person. This law will apply even though no one suffers any loss or damage and organization does not intend to mislead or deceive anyone.

Section 18 of Australian Consumer Law defines the concept of misleading and deceptive conduct. According to this section, any person in trade or commerce must not engage in any such conduct which is misleading or deceptive or is likely to mislead or deceive (Competition and Consumer Act 2010).

It is the duty of the business organization to consider the effect of business practices on consumer such as impression of goods and services provided by business. For the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive, the most important element considered is whether overall impression of product and service is false or inaccurate.

The main question of fact is whether any conduct is misleading or deceptive, and it is considered after analyzing the facts and circumstances of the case. Section 18 states the wording “likely to have”, which actually means that there is no burden on plaintiff to prove that conduct mislead or deceive any particular person, and it is sufficient for the applicability of this section that conduct is misleading or deceptive in nature. Conduct which is put in question is fall under section 18 if it leads any person into error. This results in Causal connection between the conduct and the error made by individual who rely on the misleading and deceptive conduct. In case any loss or damage is suffered by person because of the misleading and deceptive conduct, then such person can claim for damages.

Misleading or Deceptive Advertisement

It is not necessary that misleading or deceptive conduct is intentional by nature, and this can be understood through case law Google Inc v Australian Competition and Consumer Commission (Google Inc v ACCC 2013). In this case, claim was filed by ACCC that Google engaged in conduct which was misleading and deceptive in nature for displaying advertisements which were paid on its search engine, and these advertisements were misleading and deceptive. The class of persons was considered on the grounds of conduct was relevant. The main question entertained in this case was whether any ordinary person in the class of affected person would have been misled or deceives (Legal Vision 2016).

In the present case, latest phone is produced by Virgo and named as “Eyephone”. This phone shares the similar look with the phone produced by the competitors of Virgo that is “I phone”. This concern is reported to the management and Corey makes comment on this issue “that all phones look same these days”.

Name and look of the phone is similar to the “I phone” and it can be considered that overall impression of the product is false or inaccurate, even though Virgo did not intend to mislead or deceive the audience. Virgo satisfied the provisions of section 18 of ACL and it is considered as misleading and deceptive conduct. Therefore, use of the name “Eyephone” and its similar look with “I Phone” will constitute misleading and deceptive conduct.

Section 52 of the Trade Practices Act 1974 states, that any corporation in trade or commerce must not engage in any such conduct which is misleading or deceptive in nature (Trade Practice Act 1974). 

Section 18 of the ACL states any that person in trade or commerce must not engage in any such conduct which is misleading or deceptive or is likely to mislead or deceive.

It must be noted that, section 18 includes the wide range of business practices such as contractual agreements, advertisements, business negotiations, etc.. Engaging in misleading or deceptive conduct actually means ‘doing or refusing to do any act’.

There are two fundamental rules of advertisement and selling, and these rules are stated below:

• Organization must not engage in any such conduct through advertisement which is misleading or deceptive in nature.
• Organization must not make any false or misleading statements and claims in the advertisement.

It must be noted that any particular statement or claim in the advertisement can breach both the fundamental rules. However, this law also applied on statements and claims which are made in online advertisement.

Generally, it is not necessary for business organization to disclose the information in all circumstances, but there are some situations when it became necessary for business organization to provide necessary information for the purpose of preventing themselves in engaging in misleading or deceptive conduct. Business organization must provide additional information to the customer and other business organizations when there are chances that their conduct will create misleading impression.

Disclaimers and small print

This can be understood through case law Singtel Optus Pty Ltd v ACCC (Singtel Optus Pty Ltd v ACCC 2012). In this case, an internet company offered plans for unlimited download for those users who adopt their services. In actual these plans were subject to number of limitations such as reduction of speed when particular amount of data was used by user. Court decided that company used the term unlimited for the purpose of introducing their plans which were subject to number of limitations and these limitations were not disclosed by the company. Therefore, this conduct was considered as misleading and deceptive conduct (ACCC 2014) (Austlii 2012).

Free: it is the duty of business organization to put extra care while using the word “free”, because when hears the word which means they are getting the goods without any charge, then it create keen interest of consumers in the goods. Generally, consumer considers the term free as absolutely free, and it is a justified expectation of consumers. In case complete truth related to free offers is not revealed by business organizations, then they will face serious trouble. For example- business organizations make the buy one and get one offer, but in actual they increase the price of the first product for the purpose of covering the cost of the second product which is free. This conduct of organization is considered as misleading or deceptive conduct.

Disclaimers and small print: it is not possible for business to use the disclaimers as their defenses for the purpose of avoiding legal consequences related to misleading and deceptive conduct, if those disclaimers are stated in small print on the advertisement. This can be understood through example; advertisement is published by large department store which states that ‘25% off on all clothing’ and ’15-40 % off on housewares’, and this advertisement in small prints excluded some particular clothes and Manchester. Therefore, this conduct is considered as misleading or deceptive conduct. 

In the present case, advertisement states that “get the Eyephone for free on the 24 month plan which includes free calls, free texts, and 10GB data for only $30 per month”, and this advertisement also state the disclaimer in small letters that this plan is not available with any other phone. This conduct is considered as misleading and deceptive conduct, and in future Virgo cannot rely on this disclaimer.

Advertisement also contains the false statement related to the premium pricing of the phone, but in actual company intentionally sets high price for believing the consumers that Eyephone is comparable to the high quality phones. This statement in advertising is false and inaccurate. Therefore, this advertisement is misleading and deceptive in nature.

Generally, misrepresentation is applicable in non-commercial contexts. When one party makes false representation to another party either in oral, writing or by conduct then it is considered as actionable misrepresentation. It must be noted that actionable misrepresentation occurs when following conditions are satisfied:

• Representation must be related to some fact, which means it must not be a statement of opinion or any prediction related to future.
• Statement or claim must be made by one party to the contract or his or her agent to the other party to the contract.
• Such representation must induce the contract(Legal Service Commission 2009).

In other words, misrepresentation is considered as false statement related to fact made by one party to the contract to the other party. This statement is not included in the term of the contract, but it induces the other party to enter into contract. Actionable misrepresentation makes the contract voidable, and it also give right to the innocent party to cancel the contract or claim damages.

As per section 29 of Competition and Consumer Act 2010, actionable misrepresentation related to goods and services is an offense (Competition and Consumer Act 2010 n.d.). Misrepresentation can be understood through these examples:

• Goods and services are of particular standard, quality, style, etc.
• Goods and services have specific history or they are used for some particular matter.
• Goods and services are new, and they are not previously used by any person.
• Goods and services are acquired by particular person.
• All the facilities such as repair and availability of spare parts.
• Place of origin of goods.
• Testimonials related to goods and services.
• Any sponsorship is providing to goods and services(Legal Service Commission 2013).

This can be understood through case law ACCC v Cadbury Schweppes Pty Ltd (ACCC v Cadbury Schweppes Pty Ltd 2004). In this case company made the representation related to fruit extracts, but in actual product does not contain any fruit extract. This representation was made by the company for the purpose of promoting the supply of goods and services, and ACCC served notice to the supplier. This notice was served for the purpose of requiring:

• Information and documents which support the representation or claim made by the company.
• Information and documents which support the quantity of the product and relevancy of the time period for the supply of goods and services.

Therefore, it is clear that misrepresentation is the claim or statement which induces another party to enter into contract.

In the present case, company does not publicize the statement that simcard provided by them does not work in any other phone except Eyephone, and if any consumer ask any question related to this matter then sales staff of Virgo is trained to say that they are not technical experts but sim card looks like other sim cards, so it should fit into other phones also.

Sales staff of Virgo also made false statement related to the term of increase in cost, that it is just a term which is included for precaution against increased operating cost and may not happen.   

Above stated statements are false in nature and they are related to the fact which is made by one party to the contract to the other. These statements induce the other party to enter into contract. Therefore, it constitutes actionable misrepresentation.

Unfair terms are described by the schedule 2 of the Competition and Consumer Act 2010, and there are two important sections related to unfair terms that are section 23 and section 24.

Section 23 states the unfair terms related to consumer contracts. As per this section any term related to consumer contract is considered as void term if term is not fair in nature and term is incorporated in standard form of contract (ACL 2016).

Clause 2 of this section states that if it is possible to continue the contract without unfair term then contract is enforceable and bind the parties.

Clause 3 of this section states that consumer contract must be a contract for supply of goods and services and sale of interest in land.

Section 24 of this Act states the definition of unfair terms, and as per this section term of a contract is considered as unfair term if:

• Because of that term there would be imbalance in the rights and obligations of the parties.
• Interest of the party who get advantaged from this term is not necessary to protect.
• That term under the contract cause detriment to the party.

Clause 2 of this section states that court consider necessary matters to and following things for the purpose of determining whether term is unfair or not:

• Transparency related to the term.
• Complete contract.

Clause 3 of this section states that term is transparent if it is stated in plain and simple language, legible, clearly presented, and readily available to party who is affected by such term.

Clause 4 of this section states that interest of the party who get advantaged from this term is not necessary to protect, unless it is proved by the parties (Competition and consumer Act 2010).

This can be understood through case law Director of Consumer Affairs Victoria v AAPT Limited (Civil Claims) (Director of Consumer Affairs Victoria v AAPT Limited (Civil Claims) 2006), in this case legitimate commercial interest of the business against the effect caused by unfair term to the consumer was balanced by the court for the purpose of considering the contract as whole.

This can also be understood through example, consumer contract of telecommunication service provider state the term that services were cancelled in case of excessive or unusual use. Later contract was amended for the purpose of providing the definition of excessive and unusual use which increases the transparency of the term.

In the present case, terms stated in the contract are not fair in nature and it is incorporated in standard form of contract. These terms satisfied the following factors:

• Terms cause imbalance in the rights and obligations of the Virgo and consumer.
• Interest of the party who get advantaged from this term is not necessary to protect.
• It causes detriment to the consumer.

Therefore, stated terms are not fair in nature.

A frustrated contract is a contract which is not able to be performed because of an unforeseen event after its formation. In this contract there is no fault of any party. Contract which becomes frustrated can be automatically terminated at the point of frustration. It must be noted that from the beginning stage contract is not void ab initio, but it is possible to discharge only future obligations. As per common law, obligations which are due for performance before the event which is frustrating in nature are still performed by parties to the contract.

In other words, there are some cases in which contract will be end by the parties because of any happening which is not in the control of the parties. This can be understood through example, A and B entered into contract for the purpose of acquiring the theatre of A by B for particular night, but theatre is destroyed because of the terrorist attack before the date of the performance of the contract. It can also be understood through case law Taylor v Caldwell (Taylor v Caldwell 1863).

Doctrine of frustration is applied in some particular circumstances only. Usually, in case when the event affect the contract’s performance in different way which is not assumed by the parties. Court does not cancel the contract if event is already considered by the parties and stated in the contract by the parties. As per common law, when it is established by the parties that contract is frustrated then contract is terminated automatically, and no option is available to discharge or perform the contract (ACL 2010).

In the present case, Dick Tate is correct to terminate the lease on the ground of frustration because blockage of road is not in the hands of either party and because of this Virgo is not able to continue its production for the period of 6 months.

Conclusion:

After considering the above facts of the case, it is clear that business organizations must ensure fairness and transparency in their business practices. Various provisions are introduced by the Australian Consumer law, Trade practices Act 1974, and Australian contract law for the purpose of ensuring fair business practices. In this report different terms of these statutes are discussed such as section 18, section 29, section 23, and section 24.

After discussing these sections it is clear that interest of the consumer is protected by the statutes in different ways, and business organizations are under obligation to take measures for avoiding future conflicts.

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ACCC v Cadbury Schweppes Pty Ltd . 516 (FCA, 2004).

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“Competition and Consumer Act .” Section 18, 2010.

“Competition and Consumer Act 2010.” Section 29, n.d.

Director of Consumer Affairs Victoria v AAPT Limited (Civil Claims). 1493 (VCAT, 2006).

Google Inc v ACCC. 249 (CLR 435, 2013).

Legal Service Commission. 03 2009. https://www.lawhandbook.sa.gov.au/ch10s02s10.php (accessed 08 09, 2017).

Legal Service Commission. 02 2013. https://www.lawhandbook.sa.gov.au/ch10s03s03s03.php (accessed 08 09, 2017).

Legal Vision. 04 14, 2016. https://legalvision.com.au/a-basic-guide-to-misleading-and-deceptive-conduct-and-false-misrepresentations-australian-consumer-law/ (accessed 08 09, 2017).

Singtel Optus Pty Ltd v ACCC. 20 (FCAFC , 03 07, 2012).

Taylor v Caldwell . 826 (3 B & S , 1863).

“Trade Practice Act.” Section 52. , 1974.

Victoria, Business. Business Victoria. 11 29, 2016. https://www.business.vic.gov.au/marketing-sales-and-online/online-business-and-technology/fair-trading-laws (accessed 08 9, 2017).