Updated as at 1/8/2001.

1. Introduction

A corporation shall not in trade or commerce engage in conduct in Australia that is misleading or deceptive or is likely to mislead or deceive.(1)

The prohibition applies to statements about existing facts, predictions about the future and even silence. (2)

Such conduct must convey or contain a misrepresentation and not merely be confusing. Intent is irrelevant in determining whether a contravention has occurred.(3)

The prohibition applies to material viewed on a website (4) and to online conduct including advertising, writing, conducting business, putting information on the Internet about the business, products or services.

2. Who is liable?

Any organisation engaging in the conduct may be found liable under the legislation. (5)

3. Who can sue?

In order to sue for damages, there must be reliance by a person on the misleading or deceptive conduct and a causal link between the conduct and the damage suffered by that person (6). A person must show he or she was induced to do something or refrain from doing something by virtue of the conduct and suffered damages as a result. The test is a matter of fact in each case. The prohibition is not intended to protect an "extraordinarily stupid person" or a "fool in a hurry".

The Australian Consumer Competition Commission (ACCC) or any other person or organisation may seek an injunction for a breach of the prohibition. Competitors of organisations have commenced proceedings for breach of the prohibition. An organisation that commences proceedings must show that the misleading and deceptive conduct led to some sort of damage to their business.

The ACCC is able to seek an injunction on its own behalf or on behalf of a group of people. (7)

4. In trade or commerce

Conduct will breach the prohibition provided the conduct is not incidental to the business but occurred while the business was engaged "in trade or commerce". An activity or transaction is "in trade or commerce" if its nature bears a trading or commercial character (8).

5. What does "engage in conduct" mean?

Engaging in conduct includes (9):
* doing or refusing to do any act;
* giving effect to a provision of a contract or arrangement; or
* arriving at or giving effect to an understanding.

Misleading or deceptive warranties or disclaimers may breach the prohibition.

6. Conduct outside Australia

The prohibition extends to conduct engaged in outside Australia by companies incorporated or carrying on business in Australia. (10) A foreign company may be carrying on business in Australia if it carries out its business though a subsidiary in Australia.

7. Misleading and deceptive

Whether conduct is "misleading or deceptive" is a question of fact and will be determined with reference to the relevant surrounding facts and circumstances. Generally the prohibition includes acts, omissions or silence.

A court considers the following steps when deciding whether conduct is misleading or deceptive (11):
* the relevant section of the public that is misled or that is likely to be misled must be identified;
* the matter must be considered by reference to all people who come within that section of the public including the astute and the gullible, the intelligent and not-so-intelligent, the well-educated and the poorly-educated;
* evidence that some person has in fact formed an erroneous conclusion is not conclusive of misleading or deceptive conduct but may be persuasive; and
* it is necessary to inquire why the misconception has arisen.

Given the Internet can be viewed by anyone in the world with a computer and a modem, the first step may be difficult to apply.

Predictions or statements about the future may be misleading and deceptive unless the company has reasonable grounds to believe the statement to be true at the time of making it. (12)

8. Disclaimers and Exclusion Clauses

It is not possible to avoid liability under trade practices legislation by using exclusion clauses or disclaimers. Although a disclaimer may go some way in demonstrating that reliance on a representation was unreasonable, a disclaimer hyperlink at the bottom of a website in tiny print will not be enough. (13)

An example of an advertisement which is likely to breach trade practices legislation is provided by the ACCC website (http://www.accc.gov.au).

An advertisement which stated Internet access for $1.00 a day, Conditions apply, would not be sufficient to correct the statement of $1.00 a day if there were registration fees and a minimum purchase each week. This advertisement would be likely to breach the Act.

9. Are ISPs liable for misleading and deceptive information posted on their Internet service?

Generally any organisation or person who relays misleading or deceptive information may be found liable under the ancillary liability provisions of the trade practices legislation. (14) An ISP may be liable in this situation if it has some knowledge of the content or the nature of the misleading or deceptive information. An ISP that expressly states in a disclaimer that it is a mere conduit of the information may avoid liability.

10. Defences

It is a defence if an organisation establishes its business is to publish or arrange for the publication of advertisements and receives the advertisement for publication in the ordinary course of business. The organisation must demonstrate that it had no reason to suspect that publication would contravene the legislation. (15) This defence may assist ISPs or Internet Content Hosts (ICHs) who publish advertisements on their websites as part of their business.



Other relevant Fact Sheets:

Sources of Law
Trade Practices Act 1974 (Cth)
Fair Trading Act (NSW)
Fair Trading Act (Qld)
Fair Trading Act (SA)
Fair Trading Act (Tas)
Fair Trading Act (Vic)
Fair Trading Act (WA)
Fair Trading Act (ACT)
Consumer Affairs and Fair Trading Act (NT)

End Notes
1. This prohibition is contained in section 52 of the Trade Practices Act 1974 (Cth) , and is mirrored in each of the state and territory Fair Trading Acts. It is also mirrored in the Australian Securities and Investments Commission Act ("ASIC") in relation to financial services.
2. For example, Hill J in section Winterton Constructions v Hambros (1992) ATPR "If the circumstances are such that a person is entitled to believe that a relevant matter affecting him or her would, if it existed, be communicated, then the failure to communicate it may constitute conduct which is misleading or deceptive because the person who may ultimately act to his or her detriment is entitled to infer from the silence that no danger or detriment existed."
3. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216, per Stephen J.
4. If individuals or businesses are transacting with people in other countries there are consumer protection laws in those countries that should be adhered to.
5. General corporations will be liable under the Trade Practices Act. Licenced financial services providers will be liable under the ASIC Act 1989 , and all other organisations will be liable under state fair trading laws.
6. section 82 Trade Practices Act 1974 (Cth)
7. Class actions are provided for by section 87(1B) of the Trade Practices Act 1974 (Cth)
which enables the ACCC to make an application to the court on behalf of people who have suffered loss or are likely to. The Federal Court of Australia Act 1976 (Cth) also allows for class actions where claims, arising out of the same or similar circumstances relating to a substantial common issue of law or fact, are made by 7 people or more, see section 33C.
8. In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 , the High Court held that the phrase "in trade or commerce" in section 52 has a restricted operation. It said that "it is plain that section 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business. The reference to conduct in "trade or commerce" in section 52 can be construed as referred only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character."
9. section 4(2) Trade Practices Act 1974 (Cth)
10. section 5(1)Trade Practices Act 1974 (Cth) . The Act also extends to businesses operated by persons ordinarily resident in Australia.
11. Taco Co Of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
12. section 51(A)Trade Practices Act 1974 (Cth)
13. Henderson v Pioneer Homes Pty Ltd (1990) ATPR 40-159
14. section 75B Trade Practices Act 1974 (Cth) imposes liability on a person or organisation who has aided, induced or conspired in a contravention of the legislation or who has been directly or indirectly knowingly concerned in or party to it.
15. section 85(3) Trade Practices Act 1974 (Cth)