Consider the following when advertising online.

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Online Advertising in Australia

Have you investigated whether your advertising is compliant with the Australian Consumer Law?

Have you investigated whether your advertising is compliant with the Australian Consumer Law?

If you’re planning to set-up, or already have, an online store, making sure you comply with the Australian Consumer Law (ACL) is crucial. The ACL is part of the Competition and Consumer Act 2010 (Cth) and is a national law which is intended to protect consumers and ensure fair trading. The ACL is administered by the Australian Competition and Consumer Commission (ACCC) who can either investigate complaints made by consumers or initiate investigations into businesses themselves.

The ACL is enforced by all courts and tribunals within Australia and there are significant penalties to be incurred by businesses which fail to comply with the law. Just this year, the ACCC won its case against Trivago when the Federal Court found the hotel comparison website to have breached the ACL for misleading and deceptive conduct via its Online Advertising in Australia. No penalties were determined at the time of writing this article, but are anticipated to be in the millions.

When undertaking Online Advertising in Australia you need to ensure you are compliant with the ACL otherwise you run the risk of being penalised by the ACCC. If you are unsure about whether your advertisements are permitted under the ACL, contact us for a free 15 minute consultation.

In the meantime, here are a few things to consider regarding your Online Advertising in Australia and compliance with the ACL.

Misleading or deceptive conduct and Online Advertising in Australia

An overview of misleading and deceptive conduct

Under the ACL, it is illegal for a business to engage in conduct that misleads or deceives or is likely to mislead or deceive consumers or other businesses. Business conduct breaks the law where it misleads or deceives the intended audience about the price, value or quality of consumer goods or services.

Conduct can include actions and statements such as:

  • advertisement;
  • promotions;
  • quotations;
  • statements; or
  • any representations made by a person.

Furthermore, failure to disclose relevant information, promises, opinions and predications can also constitute misleading or deceptive.

This law applies strictly, and it is irrelevant whether you intended to mislead or deceive, what matters is how the conduct could affect the thoughts and beliefs of a consumer. It is also irrelevant whether a consumer has in fact suffered a loss or damage as a result of the conduct.

Businesses cannot rely on small print or disclaimers to indemnify them for misleading or deceptive conduct. When you engage in Online Advertising in Australia you need to ensure your material is not misleading, deceptive or likely to mislead or device.

Legislative Reference: Competition and Consumer Act 2010 (Cth), Sch 2, s 18-19.

How ACCC dealt with Trivago’s Online Advertising in Australia

In January 2020, hotel comparison giant Trivago was found by the Federal Court to have breached the Australian Consumer Law by making misleading representations on its website and advertising. The company had claimed to consumers that it would easily help users identify the cheapest rates available for a given hotel. However, what was found was that the algorithm Trivago used, ranked online booking sites based on which paid the highest commission, not which provided the cheapest rate for consumers. Furthermore, Trivago had mislead consumers into thinking they provided an impartial, objective and transparent price comparison for hotel rates. There is no word yet on what penalties Trivago will face, but it has been predicted to be in the millions.

Misleading consumers about their rights

Misleading consumers about their rights in Online Advertising in Australia is a common mistake. Website terms and conditions which purport to exclude all liability may be guilty of this.

It is unlawful for businesses to make false or misleading representations about the existence, exclusion or effect of any consumer guarantees protected by the ACL.

Part 3-2, Division 1 of the Australian Consumer Law stipulates certain consumer guarantees which all consumers are entitled to.

Such guarantees include, but are not limited to:

  • that goods sold are of an acceptable quality;
  • that goods sold are fit for purpose;
  • businesses provide reasonable facilities for repair;
  • services will be supplied within reasonable time; and
  • services will be rendered with due skill and care.

A business cannot make signs or statements that limit, or seem to limit, these consumer guarantees. These guarantees cannot be excluded or modified in any way. Additionally, consumers cannot sign away their consumer guarantees. Therefore, if a supplier of goods or services attempts to put into their contract terms, which seek to avoid consumer guarantees, this constitutes misleading the consumer and is illegal.

The maximum civil penalty for misleading consumers about their rights is $1.1 million for body corporates and $220,000 for an individual. As such if you are Starting and Online Store you need to be conscious of this when undertaking Online Advertising in Australia or drafting Website Terms and Conditions or Terms of Use.

Legislative reference: Competition and Consumer Act 2010 (Cth), Sch 2, s 29(1)(m).

Hewlett-Packard and the ACCC

In July 2013, Hewlett-Packard (the computer hardware manufacturer and retailer) was ordered by the Federal Court to pay a $3 million penalty for making misleading representation to consumers and retailers regarding consumer guarantees. This included misleading them on what remedies were available, that a product had to be repaired multiple times till a replacement could be given, that the warranty only extended to a specific period and that products purchased online could only be returned to HP at their own discretion.

Bait advertising, special offers and Online Advertising in Australia

Special care must be taken in how this form of advertising is undertaken

Bait advertising is the practice of offering items for sale at low prices to attract consumers to a business. Although bait advertising can be a legitimate way to entice customers, businesses should be careful under which circumstances they use them.

It is illegal to advertise goods or services for sale at a discounted price where they are not available in reasonable quantities or for a reasonable period of time. In other words, if there’s no reasonable chance that a consumer can access the product for the discounted price you offer, you may be in breach of the ACL. If supply or time is limited, this must clearly be stated on any form of advertising.

If there is not a reasonable chance the offer will be available at the discounted price, there may be circumstances in which you offer a “rain check” whereby you provide an acceptable substitute product or take corrective action.

Legislative Reference: Competition and Consumer Act 2010 (Cth), Sch 2, s 35.

While bait advertising can be used in Online Advertising in Australia businesses must still be transparent and comply with the ACL

The Harvey Norman example

In June 2011, six Harvey Norman franchisees in Perth were each issued infringement notices of $6,600 for bait advertising. The stores had advertising a particular pocket video camera across Perth when in fact they were not stocking the product. This breached the ACL as they could not reasonably supply the advertised product to consumers.

Was/Now pricing

Online Advertising in Australia using the was / now must be true and accurate

A popular method of advertising for businesses is to use was/now pricing to sell their goods or services (e.g. our product used to cost $200 and it’s now only $150!). This can be in comparing the businesses’ previous pricing, “wholesale” pricing, a competitors’ price or the recommended retail price. When using such advertising, it is important to ensure you do not mislead consumers on what savings they can achieve.

The important factor to note is whether the “was” or “strike through” price mentioned in the advertising was the price of the item for a reasonable period before the sale commenced. What constitutes a reasonable period will vary case to case but can depend on the type of product or how the market tends to operate.

Legislative Reference: Competition and Consumer Act 2010 (Cth), Sch 2, s 29(1)(a)-(b).

How 4WD Supercentre ran into problems with Online Advertising in Australia

January 2020 saw 4WD Supacentre pay $63,000 in penalties for using misleading “was/now” advertising. The ACCC had found that the business was advertising certain products at a high “was” price and low “now” price, despite the fact that 4WD Supacentre had not sold those products at the “was” price in the previous three months.

Wrongly accepting payment

Particularly pertinent when supply chains are challenged, such as in the context of COVID-19

Businesses are not permitted under the ACL to accept payment for goods or services where they do not intend to supply the goods or services, intends to supply something materially different or should have known that it could not supply them within the specified time or reasonable time.

This law is not intended to affect businesses who genuinely attempt to meet supply agreements (by exercising due care and taking reasonable precautions) and are unable to do so (e.g. for reasons beyond their control). When undertaking Online Advertising in Australia you must have a reasonable understanding of your supply chain.  For those with drop shipment arrangements you can find further information about Dropshipping Legal Requirements.

Legislative Reference: Competition and Consumer Act 2010 (Cth), Sch 2, s 36.

Online Store example

In June 2017, Dhruv Chopra (the operator of two online electronic stores) was sentenced to three months imprisonment after failing to comply with a court order made against him for having breached the ACL under a number of grounds, including wrongly accepting payment. Mr Chopra had on multiple occasions accepted payment for goods but had failed to supply those goods within a reasonable timeframe.

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