Misleading and deceptive conduct is behaviour that misleads or deceives or is likely to mislead or deceive. In other words, if your business activities aren't truthful and accurate or give an impression that leads customers into error, you may be facing legal consequences.
Depending on the context, the misleading and deceptive conduct may be targeted at other businesses (in a B-2-B setting) or individual consumers (in a B-2-C setting).
In this article, we explain what it means to engage in misleading and deceptive conduct in Australia.
Author: Farrah Motley, Legal Principal of Prosper Law.
Basic principles of misleading and deceptive conduct
Misleading and deceptive conduct essentially means conduct (including a representation, advertising or other behaviour) in trade or commerce that is not truthful, including where important information is omitted.
It includes doing or refusing to do something, making or giving effect to a contract or arrangement or refusing to or refraining from doing something.
It does not matter if the conduct didn't actually mislead or deceive anyone, but rather it is sufficient that the conduct was likely to. The correct test to be applied is whether ordinary and reasonable members of the class of person to whom the conduct was directed, would be or would be likely to be misled or deceived.
This is a low bar. Unlike breach of contract and other legal causes of action, a claim of misleading and deceptive conduct is relatively easy to prove.
The meaning of misleading and deceptive conduct
Some further guiding principles include:
to be misleading or deceptive, conduct must lead or be likely to lead into error;
there must be a sufficient connection between the conduct and the misconception on the part of the person to whom the conduct is directed;
it is insufficient that the conduct causes confusion;
where the conduct is directed at the public or a section of the public, it is necessary to identify the class of consumers likely to be affected by the conduct and assess whether a hypothetical representative, the ordinary or reasonable member of that class, would be misled or deceived; and
extreme or fanciful reactions are excluded from the analysis.
Misleading and deceptive conduct: "In Trade or Commerce"
The meaning of "in trade or commerce", which is a key criteria of misleading and deceptive conduct, includes "any business or professional activity". The courts have interpreted this to mean "conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character" (ref: Concrete Constructions (NSW) Pty
Ltd v Nelson (1990) 169 CLR 594)).
Mere conduct, without the requisite dealing between supplier and customer, may be too divorced from a trading or commercial nature for it to be considered "in trade or commerce".
Context is everything
Determining whether something is misleading or deceptive is highly dependent on the factual circumstances surrounding the conduct. It's important to step back and consider whether the overall impression has the potential to lead the customer or audience into error.
Misleading and deceptive conduct: relevant legislation
National legislation dealing with misleading and deceptive conduct includes the Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth) ("CCA") and the Australian Securities and Investment Commission Act 2001 (Cth) ("ASIC Act").
Competition and Consumer Act
Schedule 2 of the CCA contains the Australian Consumer Law (also known as the "ACL"). Section 18 of the ACL aims to protect consumers by preventing businesses from misleading customers. Section 18 of the ACL states:
a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive.
A breach of section 18 of the ACL requires that:
the relevant conduct must occur in the course of "trade or commerce"; and
the relevant conduct must be misleading or deceptive or likely to mislead or deceive.
Each of these two requirements are explained above.
ASIC Act
Click here to access the link to the Australian Competition and Consumer Commission's Advertising and Selling Guide.
How can Prosper Law help?
We are Australia's online law firm. We provide legal advice to businesses across Australia. Our experience dealing with commercial legal matters is second-to-none.
If you need legal advice regarding the Australian Consumer Law, misleading and deceptive conduct and your legal rights and obligations, contact us today.
Author: Farrah Motley | Legal Principal
PROSPER LAW - A Law Firm for Businesses
M: 0422 721 121
A: Suite No. 99, Level 54, One One One Eagle Street, Brisbane, Queensland, Australia
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