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Misleading or Deceptive Practices

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Nick Dowse Misleading or Deceptive Practices Misleading or Deceptive Practices – Structure of Answer 1. Issue: “[Plaintiff] can bring an action for [damages/injunction/other orders] under s [82/80/87] TPA for a contravention of s [52/etc] TPA.” 2. STOP: Check is this a financial service or a code of conduct? a. If there’s a possibility that the corporation has contravened an industry code (ie franchising code of conduct)  go to “Codes of Conduct” notes. b. If there is a “financial service” being supplied, Part V TPA does not apply (s 51AF(1))  go to “Financial Services” notes. i. A financial service is providing financial product advice, dealing in financial products etc (managed investment schemes, derivates, supply of credit like mortgage etc)). ii. Note further complication: certain dealings in securities are dealt with under the Corps Act (not ASIC Act or TPA). iii. Full definition in “Financial Services” notes. 3. Note also the other prohibitions in Part V Div 1 TPA (point out which ones are relevant, tests are the same as for s 52 TPA): a. False or misleading representations (s 53) i. Corporation shall not, in trade or commerce, in connexion with supply/promotion of goods/services (supply = sale, lease, hire, hire purchase, provide, grant or confer (s 2 defn)): 1. Falsely represent that goods are of a particular standard, quality, value, grade, style or model, or have had a particular history or previous use (s 53(a)) a. Standard i. Label saying “banana mango” but in smaller print “flavoured” = rep that it had real banana = contravention of s 53(a) and s 55 (ACCC v Cadbury Schweppes). b. Quality i. If make a positive performance claim but no scientific basis for claim = contravention of s 53(a) (Colgate v Rexona). c. Composition i. If label says 50% wool but actually has less than 50% wool = contravention of s 53(a) (Wilkinson v Katies Fasions) ii. Packet says “beef steak pies” but actually made of sheep mince = breach of s 53(a) (Adams v Eta Foods). 2. Falsely represent that goods are new (s 53(b)) a. Car described as new but was in fact 2 years 9 months old, but only other two options on order form were “demo” or “used”, of which it was neither = no false representation that good was new, was only used in contradistinction to the other two options (need to look at context) (Annand v TPC). i. Possible meanings for new: 1. Not previously sold by retail 2. Not second hand 3. Current not superseded model 4. Of recent origin 5. Suffered a measure of damage but repaid and now otherwise new 3. Represent that goods/services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have (s 53(c) & (d)) 4. Make a false or misleading representation with respect to the price of goods/services (s 53(e)) a. Where there is a price tag with the WAS price crossed out and then a new NOW price written in, it will be misleading if the product was never Page 1 of 15 Nick Dowse Misleading or Deceptive Practices offered for sale at the WAS price (ACCC v StoresOnline per Edmonds J). b. Things like “limited time offer” etc that are not actually for a limited time will contravene s 53(e) (ACCC v StoresOnline per Edmonds J). 5. Make false/misleading representation about availability of facilities for repairs/spare parts (s 53(ea)) 6. False/misleading rep concerning the place of origin (s 53(eb)) 7. False/misleading rep about the need for goods/services (s 53(f)) 8. False/misleading rep about existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (s 53(g)). a. For example, where a corporation misrepresents that a refund is not available or include an exclusion of liability clause that contravenes s 68 and s 68A TPA. b. False representations or undue influence in relation to land (s 53A) i. Must not: 1. (a) represent that the corporation has a sponsorship, approval or affiliation it does not have; 2. (b) make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land; or 3. (c) offer gifts, prizes or other free items with the intention of not providing them or of not providing them as offered. c. Misleading conduct in relation to employment (s 53B) i. Must not engage in conduct that is liable to mislead persons seeking the employment as to the availability, nature, terms or conditions of, or any other matter relating to, the employment (s 53B). d. Misleading conduct as to nature, manufacturing process, characteristics or suitability for purpose of goods/services (s 55/55A) i. A person shall 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 (s 55, use 55A for services). e. Misleading representations about business activities (s 59) i. Concerning the profitability or risk or any other material aspect of any business activity that the corporation has represented as one that can be, or can be to a considerable extent, carried on at or from a person’s place of residence (s 59(1)). ii. Where a corporation, in trade or commerce, invites persons to engage or participate, in a business activity requiring the performance by the persons concerned of work, or the investment of moneys by the persons concerned and the performance by them of work associated with the investment, the corporation shall not make, with respect to the profitability or risk or any other material aspect of the business activity, a representation that is false or misleading in a material particular (s 59(2)). 4. Overview of elements of s 52 action: a. Defendant must be a corporation, or a natural person caught by s 6; and b. Conduct involved must occur “in trade or commerce”; and c. Conduct must be “misleading or deceptive” or be “likely to mislead or deceive”. 5. Is the defendant a corporation or natural person caught by the TPA? a. Defined in s 4(1) TPA to include: i. (a) is a foreign corporation; 1. A corporation incorporated outside Australia. ii. (b) is a trading corporation formed within the limits of Australia or is a financial corporation so formed; 1. To determine whether a corporation is a “trading corporation” need to use the Page 2 of 15 Nick Dowse Misleading or Deceptive Practices current activities test (Hughes v WACA). a. Trading denotes providing goods or services for reward” b. Must be “substantial” trading in relation to corporation’s overall activities, but not necessarily its sole or main activity. i. Can still be a “trading corporation” if your core business does not result in “reward” but you still receive a large proportion of revenue from other trading activities (E v Australian Red Cross). 2. A “financial corporation” is also defined in s 4(1) to mean: a. Banking (other than state banking) i. Must be interstate banking b. Insurance (other than state insurance) i. Must be interstate insurance c. Lending or borrowing money, as distinct from transactions that merely involve the use of money (Ku-ring-gai Co-op Building Society (No 12)) d. Needs to be significant activities but not necessarily sole or main activities e. The term “financial corporation” is not a term of act, no special or settled legal meaning; merely describes a corporation which engages in financial activities or is intended to do so (State Superannuation Board v TPC). iii. (c) is incorporated in a Territory; or 1. A company incorporated in Australian Capital Territory or Northern Territory. iv. (d) is the holding company of a body corporate of a kind above. b. Can also apply to natural persons i. Part V TPA extends to the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business within Australia or by Australian citizens or persons ordinarily resident within Australia (s 5(1)). ii. The effect of s 6(2)(a) is to extend the operation of Part V TPA to: 1. Conduct overseas where the person involved is an Australian citizen (s 6(2) (a)(i)); or 2. Conduct occurring in interstate trade or commerce (s 6(2)(a)(ii)); or 3. Conduct occurring in trade or commerce in a territory, between a state and territory, or between two territories (s 6(2)(a)(iii)); or 4. Conduct supplying goods or services to the Commonwealth (s 6(2)(a)(iv)). iii. The effect of s 6(3) is to widen a reference to a “corporation” as including an individual (s 6(3)(b)) where that individual uses “postal, telegraphic or telephonic services” (s 6(3)(a)). 1. i.e. where natural person uses telephone, internet, radio advertisement or television advertisement. c. Can also apply to the Commonwealth Crown i. TPA applies to the Commonwealth Crown “in so far as [it] carries on a business” whether that be directly, or by an authority of the Commonwealth (s 2A(1) TPA). 1. An authority of Commonwealth is: a. A statutory corporation (s 4(1)); or b. Corporation in which a statutory corporation has a controlling interest (s 4(1)). ii. The effect of s 2A(2) is to apply the TPA as if the Crown (or its authority) were a corporation. iii. The Crown is sometimes referred to as the “government” – it is a separate legal person 1. Includes the executive branch of government, represented by the Ministries and Departments and officers who attend to its business 2. Government departments are not separate legal entities (but they are still the Crown) Page 3 of 15 Nick Dowse Misleading or Deceptive Practices iv. Three-step analysis to determine if government body is caught 1. Step 1: Is the relevant entity the Crown? a. Does it enjoy the rights and privileges of the crown? b. If it is a statutory corporation it is necessary to have regard to the particular legislation under which it was constituted to determine whether it has the status of the Crown c. If the statute is silent, this suggests that the corporation is not the Crown. As a matter of statutory construction, it seems that the courts will require a clear indication that the corporation is the Crown 2. Step 2: If it is the Crown, does it carry on a business? a. Instrumentality providing government printing services, crown decides to sell it off as a one-time measure = not carrying on a business, not a substantial activity (J S McMillan v Cwth) b. Cwth contracting for goods/services for its own use = not carrying on business, public procurement in nature (GEC Marconi Systems) i. Note: criticism from Finn J: 1. ‘Government contracting (in procurement and otherwise) is of major significance in the economic life of this country… It is somewhat surprising, that when the State enters the market place to acquire goods or services, it should exempt itself from those norms of conduct considered appropriate to the conduct of trade and commerce that it has imposed upon the private sector as of course….” 3. Step 3: If it is the Crown and does carry on a business (steps 1 and 2 satisfied), does one the exemptions apply? a. Exemptions in s 2C TPA: i. Imposing or collecting taxes (s 2C(1)(a)(i)), or levies (s 2C(1)(a) (ii)), or fees for licences (s 2C(1)(a)(iii)); or ii. Crown bodies that merely grant licences in relation to goods/services (s 2C(1)(b) + 2C(3)) 1. Taxi licences = exempt 2. Operate private hospitals = exempt 3. Licence/permit to acquire goods/services = NOT exempt iii. Wholly intra- or inter-governmental transactions (s 2C(1)(c)). b. State or territory crowns are not bound by Part V TPA (s 2B). i. But s 7 FTA (Qld) still applies to QLD Crown. 6. Is the conduct in “trade or commerce”? a. Generally requires conduct to be commercial in nature. b. Consumer transactions involving acquisition of goods/services from a business will always occur in trade or commerce. c. Most things will occur in “trade or commerce” so it’s easier to just list what’s NOT trade and commerce: i. Personal tractions (private sale of property) (Argy v Blunts) 1. Business-like steps could not convert a sale of a private residence into trade and commerce. 2. However, if lending money at commercial interest rates, or investing in property may come within “trade and commerce”. ii. Lectures about religious matters (Plimer v Roberts) iii. Olympic selection (amateur sport) (Forbes v Aust Yachting Federation) iv. Educational and political campaigns (Orion v RSPCA (Vic)) v. Misleading statement by one employee to another in the course of construction work on building site (Concrete v Nelson) d. An employee may be liable under the state equivalent (s 9 FTA) if employer engaged in Page 4 of 15 Nick Dowse Misleading or Deceptive Practices trade or commerce and conduct occurred in the course of trade or commerce. e. Must take place “in” trade and commerce i. Not merely connected with or incidental to trade or commerce (Hearne v O’Rourke). f. Includes almost all external transactions or communications carried out to further commercial interests. This includes trade between Australia and outside Australia (s 4(1) TPA). g. Provision of professional services (lawyers, accountants, doctors etc) can come within “trade and commerce” (Bond v Theiss). h. Government policy statements or announcements are unlikely to occur in trade or commerce (Unilan Holdings v Kerrin). i. But if designed to encourage commercial transaction with crown, may come within. i. The trade or commerce complained of does not need to be that of the defendant (Houghton v Arms). 7. Is the conduct misleading or deceptive? a. The test for whether conduct is misleading or deceptive was set down in Parkdale v Puxu per Gibbs CJ @ 199: i. Whether the conduct is likely to mislead a reasonable member of the class at which the conduct is directed. ii. This is an objective question of law for the court. iii. Not necessary to prove anyone was actually misled. iv. No consideration of subjective intention of defendant to mislead or not. v. Not enough for the conduct to merely cause a person to be confused or uncertain. 1. Advertisements for wine describing them as “Big Mac” = not misleading, members of class would only wonder, not be misled (McWilliams v McDonalds) vi. STATE THE CLASS OF PERSONS. vii. In advertising context: 1. Identify a hypothetical individual, an ordinary or reasonable representative member of the class, who takes reasonable care of their own interests (Campomar v Nike). 2. Disregard conduct that is: (Campomar v Nike) a. Extreme or fanciful (eg extreme or fanciful assumptions); and b. Merely causes wonderment or confusion. 3. Where a manufacturer always uses the same colour (ie purple) on its products, but other manufacturers in the same field use the same or similar shades, there will only be confusion, not misleading or deceptive conduct (Cadbury Schweppes v Darrell Lea). 4. Expert opinions based on market research of consumer behaviour will rarely be of assistance (Cadbury v Darrell Lea per Heerey J). b. In answer, address: i. Context in which the conduct occurs; 1. Refer to remaining words appearing in a written text, or conversation and any surround circumstance which has a bearing on the proper interpretation to be placed on the conduct. a. NOTE: restricted to material the existence or significance of which would have been reasonably apparent to member of class. Doesn’t extend to all material which, although available, would not have been considered by a reasonable member of the class (National Exchange v ASIC). 2. Common assumptions by parties prior to conduct (ie party assumes mortgage limited in amount, but was in fact unlimited) (Money v Westpac) 3. Remaining parts of an advertisement (where argumentative but expressing opinions and conclusions about merits of takeover, not misleading in context) (Industrial Equity v North Broken Hill) Page 5 of 15 Nick Dowse Misleading or Deceptive Practices 4. Length and complexity of negotiations (statements designed to induce purchase at or before start of negotiations not misleading where long negotiations ensue) (Pappas v Soulac) 5. Existence of label identifying true manufacturer (selling copied furniture resembling a different manufacturer not misleading because labelled correctly as coming from a different manufacturer) (Parkdale v Puxu) 6. In advertising context: a. The advertising medium used: was the target audience’s impression a fleeting glance or did they have an opportunity for careful consideration? i. Newspaper advertisements are more ephemeral (temporary), and are usually used to raise interest rather than to used to make a decision to purchase (ACCC v Telstra). ii. Brochure: designed to be taken away and read with care prior to making a decision (ACCC v Telstra). iii. Television: maybe only 30 second impression, fleeting (R&C Products v SC Johnson). iv. Supermarket shelf: longer time available to consider. b. A flyer distributed to children may not be misleading as they would assume nothing more than the provenance of the poster as from the trademark stamped on the poster – but if it was distributed to travel agents, for example, it may well have been misleading (Honey v Australian Airlines) i. Need to look at the context in which the advertisement is presented – what is misleading in one context may not be in another. c. Regard must be had to the overall impression the ad creates, and not merely to the literal meaning of the words used (Tobacco Institute v AFCO). ii. Nature of target audience (are they dumb/unsophisticated or smart/sophisticated?); 1. Heavy burden imposed by the TPA will not operate to protect persons who have failed to take reasonable care of their own interests (Campomar v Nike). 2. Initial question to be answered is whether the misconceptions or deceptions alleged to arise are properly attributable to the ordinary or reasonable members of the classes of prospective purchasers (Campomar v Nike). 3. Consider the “astute and gullible, the intelligent and stupid, the well educated as well as poorly educated, the men and women of various ages pursuing a variety of vocations” in the class (Taco Co v Taco Bell per Deane and Fitzgerald JJ @ 202). 4. The more vulnerable the target audience, the greater the likelihood of there being misleading conduct. 5. In advertising context: a. Mobile telephone services: wide cross-section, but not as wide as for a necessity of life (ACCC v Telstra). i. “$0 and $0 upfront” = $0 is misleading because was a handset bundled with telephony services, for which there was a charge. $0 upfront not misleading because it was true. b. Furniture advertisements pitched at sophisticated buyers of upmarket design furniture, not to a single individual, but to the public at large (Parkdale v Puxu). c. Pitching to teenagers by producing unauthorised copies of official INXS merch = target audience is vulnerable teenagers who are unlikely to check labelling (labelling revealed it was unauthorised but this not enough) (INXS v South Sea Bubble). Page 6 of 15 Nick Dowse Misleading or Deceptive Practices i. Important to consider target audience’s age. d. Where flyer distributed to children, the target audience will be very unsophisticated (Honey v Australian Airlines) e. Email sent to specialist sales staff of major retailers = target audience will be sophisticated, harder to show misleading (Hoover v Email). i. But they can still be misled if the comparative advertising used in the email is false (filling washing machine with lead instead of clothes to make it malfunction) f. Ad in medical magazine distributed to doctors = very sophisticated target audience, confined to doctors, not general public (Astrazeneca v GlaxoSmithKline). iii. Whether private negotiations between buyers/sellers, or conduct directed at public at large; 1. If to public at large, wider class, easier to show reasonable member likely to be misled iv. Focus on erroneous assumption by audience, as opposed to conduct of the defendant. v. Each case turns on its own facts. vi. In advertising context: 1. Must consider the advertisement in its entirety (Tobacco Institute v AFCO) a. If have a bald statement of fact that readers would consider as such, although they may only read it fleetingly and not make close study of it, risk of being misleading if not true (Tobacco Institute v AFCO). i. Advertisement in print on risks of passive smoking said “little evidence (and none that proves scientifically) that smoke causes disease in non-smokers” ii. Can’t argue that it’s a mere opinion if you state it as fact. 2. Must consider the nature of the transaction, its value, what the product is a. Pharmaceutical product = scrutinised closely b. Expensive products = scrutinised closely (Country Road v Najee). c. Impulse buyers not inclined to scrutinise ads with meticulous care … consumers cannot be expected to critically approach ads relating to small value transactions (Roses Only v Mark Lyons) d. More expensive = less likely to mislead. c. No need for a representation of some kind, though that is the normal case which presents itself under s 52 (S&I Publishing v Aust Surf Life Saving). d. Case examples: i. Copying and selling unauthorised copies of very expensive furniture = target audience: people looking to buy expensive furniture, sophisticated purchasers, would have checked authenticity = not misleading (Parkdale v Puxu) ii. Manufacturing fragrance sold as “Nike Sports Fragrance” but not made by Nike, sold in pharmacies beside other fragrances including Adidas = target audience: prospective purchasers of mass-marketed product for general use, not particularly sophisticated = misleading, likely to be misled that was made by Nike or under Nike’s licence (Campomar v Nike) iii. Small real estate business makes mistake placing swimming pool inside freehold but in fact it was partly outside freehold, was very expensive property, had disclaimer saying “do not guarantee accuracy” = target audience: purchasers of expensive property, very sophisticated = not misleading because reasonable purchaser in class that small suburban real estate agent would not independently verify details, not source, merely passing info on (Butcher v Lachlan Elder). iv. Offer to shareholders to buy shares at a very good price, but fine print says payment in instalments over 15 years (so not that good a deal after all) = target audience: mum and dad investors, not sophisticated = misleading representation even though Page 7 of 15 Nick Dowse Misleading or Deceptive Practices literally true, qualified in fine print which was
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