Business Law Report: Misleading and Deceptive Conduct in Australia

This report delves into key aspects of Australian Business Law, focusing on consumer protection. It examines the legal provisions against misleading and deceptive conduct under section 18 of the Australian Consumer Law, providing examples and relevant case laws like Google Inc v Australian Competition and Consumer Commission (ACCC). The report also covers false or misleading representations, exploring section 29 of the Australian Consumer Law and case examples such as ACCC v Apple Pty Ltd. Further, it analyzes pyramid schemes, as outlined in Part 3, division 2 and section 44 of the Act, along with case law like Australian Competition and Consumer Commission v Lyoness Australia Pty Limited. The report also addresses pricing regulations under section 48 of the ACL, including examples and the case of ACCC v AirAsia Berhad Company, and concludes with a discussion on unsolicited transactions, as per Part 3-1, Division 2 sections [39-43], along with examples and the case of Australian Competition and Consumer Commission v Neighborhood Energy Pty Ltd. The report aims to provide a comprehensive understanding of these crucial aspects of business law in Australia.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

1BUSINESS LAW
Table of Contents
Misleading and Deceptive Conduct.................................................................................................3
Examples:....................................................................................................................................3
Case laws.....................................................................................................................................4
False or Misleading representations................................................................................................4
Example:......................................................................................................................................5
Case laws.....................................................................................................................................5
Pyramid Schemes.............................................................................................................................6
Example.......................................................................................................................................6
Case law.......................................................................................................................................7
Pricing..............................................................................................................................................7
Example.......................................................................................................................................8
Case Law.....................................................................................................................................9
Unsolicited Transactions.................................................................................................................9
Example.....................................................................................................................................10
Case law.....................................................................................................................................10
References......................................................................................................................................11

2BUSINESS LAW
Misleading and Deceptive Conduct
Under the legal provision stipulated in section 18 of the Australian Consumer law, a
person engaged in trade or commerce is prohibited from misleading or deceiving or must not be
involved in any conduct that is likely to deceive or mislead other businesses or consumers. In
order to determine whether any conduct is misleading or deceptive in nature, the court shall take
into account of the impression that such business conduct has created upon the consumers
(Australian Competition and Consumer Commission 2018).
While it is not important to disclose information related to business in every
circumstance, at times, it becomes important to reveal any material information for averting any
deceiving or misleading conduct. The revelation of the information becomes important if the
business is aware that such conduct is likely to create an impression with respect to the goods
and services upon the consumers, which would be misleading or deceiving. The aggrieved party
may claim damages for loss suffered due to such misleading or deceiving conduct under section
[236] or may be entitled to compensatory costs as per court’s order under section [237] of the
Act.
Examples:
For instance, a consumer decides to purchase a new photo-printing device for which such
consumer obtains advice from the electronic section of the departmental store. The consumer
talks about the computer brand that he has, to the seller and purchases the photo-printing device
on the advice of the seller. However, upon purchasing the printing device, the consumer finds out
that the device purchased is not compatible with his computer.

3BUSINESS LAW
The seller was aware that the computer brand the customer talked about would not be
compatible with the printing device that he purchased from the store, still he did not advise about
the same. This conduct of the seller shall amount to misleading and deceiving conduct as the
non-disclosure of the material information created an impression upon the mind of the customer
regarding the compatibility of the device with his computer, which was misleading or deceiving.
Case laws
Google Inc v Australian Competition and Consumer Commission (ACCC) [2013] 249 CLR 435
Here, Google Inc was alleged to have been engaged in deceptive or misleading conduct
as it displayed paid advertisements on its search engine, which created misleading and deceptive
impression upon the minds of the targeted consumers. The intention of the consumer is not
necessary to establish, as it is sufficient if any reasonable person within the targeted consumers
would have been misled or deceived by such advertisement.
False or Misleading representations
Under the Competition and Consumer Act 2010 (Cth) Schedule 2, [section 29] of the
Australian Consumer law, misleading or false representations with respect to products or
services is prohibited. The legal provision stipulated under section [151] of the ACL imposes a
pecuniary penalty up to $1,100,000 in case a corporate infringes section [29] and $220,000 for
individuals committing such breach. The aggrieved parties are also entitled to other civil
remedies in the form of injunctions, damages, corrective advertising or disqualifying orders.
While the supplier of goods and services has made representation or claim, the ACCC may
serve an authentication notice under section 219 of the ACL that requires such suppliers to:

4BUSINESS LAW
i. provide information and/or documents to confirm the periods or quantities that are
relevant to the supply of services or goods;
ii. provide documents and/or material information that renders such claims or
representations as valid;
Example:
False and misrepresentation of products and services may take place in either or all of the
following forms:
 a specific standard, value, goods, grade, composition or style;
 availability of repairing facilities of goods;
 place of origin of products and services;
 particular person agreeing to purchase such products and services;
 warranty, guarantee or condition of particular goods or services;
Bait advertising is an example of offering a product or service at a price even though the
product is out of stock as it amounts to misleading advertisements.
Further, for instance, if a business accepts payment for goods and services but has no
intention to provide or supply the goods or render the services, for which payment is already
made by the consumers. This amounts to misleading or false claims made by
businesses(Australian Competition and Consumer Commission 2018). .
Case laws
ACCC v Apple Pty Ltd [2012] FCA 646

5BUSINESS LAW
Apple Inc was alleged to have misled consumers by falsely misrepresenting the
manufacturing process, characteristics or quantity of any products. The corporate giant
contravened the provision while marketing one of their iPad devices claiming that the device
may be used with 4G networks, which the company knew to be false claims and was subjected to
a penalty of $2.25 million.
Trade Practices Commission v Pacific Dunlop Limited [1994] FCA
A manufacturer sold socks that he claimed to be made of pure cotton whereas it was not,
thus, it amounted to false or misleading claims.
Pyramid Schemes
Under Part 3, division 2 and section [44] of the Act, a businessperson is prohibited from
taking part in or attempting to convince others to take part in a pyramid scheme. The maximum
criminal and civil penalties include $1.1 million in case of a corporate body and $220,000 in case
of an individual.
Pyramid schemes or referral selling includes participants who earn money by hiring
people or other businesses instead of selling a legitimate product or service. These schemes
comprise participants who provide financial and other benefits to the existing participants in such
scheme. The new participants are persuaded to join the scheme with the assurance that they will
also benefit with recruitment of further new participants (Australian Competition and Consumer
Commission 2018). Pyramids schemes also offer services and products but making money out
of recruitment remains to be its primary objective. It is often perceived as the only way to
recover any money by persuading persons to join the scheme.

6BUSINESS LAW
Example
For instance, a game or a scheme that is related to a fictitious aircraft that comprise four
levels of players including two co-pilots one pilot, eight passengers and four crewmembers. New
players in the form of passengers enter into the aircraft by paying an amount that is deposited
directly into the trust account. After all the seats are loaded with passengers as new players, the
aircraft takes off and the pilot leaves with the gains where the remaining ‘players’ are promoted.
This demonstrates the primary objective of pyramid selling, which is that the person at the top of
pyramid is heavily rewarded, but at the expense of every person below the pyramid.
Case law
Australian Competition and Consumer Commission v Lyoness Australia Pty Limited [2015] FCA
1129
The Lyoness program included the ability of members to earn several bonuses and
rebates from shopping which also includes various ways in which customers may make money
by introducing new members who shops or make down payments. The Lyoness scheme was
alleged to have been offering commissions to the existing members who recruited new members
who either shopped or made any payments into the scheme.
However, the courts found the scheme was not the likeness of pyramid schemes and the
members only obtained benefits if the new recruited members shopped. The ACCC failed to
establish that the in order to become a member to the scheme, the new member must make some
down payment. Hence, the Lyoness Australia did not contravene the referral selling and pyramid
scheme provisions under ACL.

7BUSINESS LAW
Pricing
Section [48] of the ACL prohibits businesses to represent to the consumers that price of a
component amounts to the total price. The underlying notion is that when a price of a product is
presented before the consumers, the total price of product or services must be provided. This rule
is applicable to advertising regardless of its medium. If the price promoted is only part of the
total price of services or products, it is important to include the total price as clearly as the part
price is mentioned. The single or the total price that is represented must encompass the duty
charges, tax, fee, levy or any other extra charges like airport custom fee or GST.
However, the single price requirement is subjected to the following exceptions:
i. in case a corporate entity represents price for another business entity/entities, does not
amount to advertising intended for the customers;
ii. any optional or additional charges that cannot be measured such as conversion into a
dollar amount) while making the representation;
The ACL provides a exception to cafes and restaurants as well from the pricing requirement
component as long as they display a surcharge for supply of food and beverage clealy and in
specific words.
Example
A ticket seller sells its tickets at $50 and imposes a mandatory booking fee of $2 per
ticket on every consumer, regardless the manner in which the ticket is purchased. The purchase
of the tickets shall also include 10 percent GST taxes. Under such circumstances, the seller may
advertise as:
 $57.20 (including $2 as booking fee and 10% GST)

8BUSINESS LAW
 $52+ $5.20 GST= $57.20
 $50 +$2 booking fee + $5.20 GST= $57.20
This single price must be mentioned clearly and at a conspicuous place which is visible to
the consumers (Australian Competition and Consumer Commission 2018). The visibility or
prominence of such price depends on the advertising medium, placement, color, size,
background as well as font of the price. For instance, if any price is printed in smaller font or in
color than the component price, which is difficult to read, it lacks prominence.
Case Law
ACCC v AirAsia Berhad Company [2012] FCA 1413
In this case, the air travel service published a price without clearly specifying the total
price and as a single figure, which amounted to a breach of section 48 of the ACL. The airline
service failed to ensure that the total price is made prominent and must be a single figure
inclusive of all relevant charges.
Unsolicited Transactions
Under Part 3-1, Division 2 sections [39-43] deals with rules related to unsolicited sales
practices or transaction, which includes telemarketing, door-to-door selling and other kinds of
direct selling practices(Australian Competition and Consumer Commission 2018). In regards to
unsolicited agreements, the business entities in Australia must comply with the following
disclosure obligations:
i. If the agreement is made in person, a cop of the assignment must be provided to the
consumers after the same has been signed;

9BUSINESS LAW
ii. If the agreement is made over the phone, a document evidencing the agreement should be
provided to the consumer within five days subsequent to the entering of the agreement.
In regards to the unsolicited door-to-door telemarketing, the ACL allows a 10 day cooling-off
period with respect to consumers facilitating them to change their mind and cancel the contract.
A door-knocking salesperson is prohibited from visiting consumers on Sundays or public
holidays. They are not allowed to visit customers prior to 9 am and after 6 pm on weekdays and
on Saturdays, they are not supposed to visit customers after 5pm.
Example
A salesperson passes through suburbs in order to sell alarm systems and succeeds in
selling several alarm systems. However, the seller does not provide the consumers with a copy of
agreement regarding the sale of alarm systems. Three days after such sale, a consumer wished to
terminate the agreement against which the seller prohibited the customer from cancelling the
agreement.
The court held such refusal amounted to breach of ACL as the customer is entitled to
receive a copy of the agreement and are entitled to a 10 days cooling-off period during which
they may terminate the agreement.
Case law
Australian Competition and Consumer Commission v Neighborhood Energy Pty Ltd (ACN 109
118 578) and Australian Green Credits Pty Ltd (ACN 139 641 679) [2012] FCA 1357
As per the decision in this case, the ACL provisions related to misleading and deceptive
conduct were applicable to all forms of direct selling. In case, door-to-door selling, the staffs
must make true claims about the products and that agreements must be entered into on spot, with

10BUSINESS LAW
the consumers regarding the sale of the products. The defendant breached the misleading and
deceiving conduct provisions along with the provisions of unsolicited transactions.

11BUSINESS LAW
References
ACCC v AirAsia Berhad Company [2012] FCA 1413
ACCC v Apple Pty Ltd [2012] FCA 646
Australian Competition and Consumer Commission v Lyoness Australia Pty Limited [2015]
FCA 1129
Australian Competition and Consumer Commission v Neighborhood Energy Pty Ltd (ACN 109
118 578) and Australian Green Credits Pty Ltd (ACN 139 641 679) [2012] FCA 1357
Australian Competition and Consumer Commission. (2018). Advertising and selling guide -
Misleading or deceptive conduct. [online] Available at:
https://www.accc.gov.au/publications/advertising-selling/advertising-and-selling-guide/avoid-
misleading-or-deceptive-claims-or-conduct/misleading-or-deceptive-conduct [Accessed 19 May
2018].
Australian Consumer law (Competition and Consumer Act 2010 (Cth) Schedule 2)
Google Inc v Australian Competition and Consumer Commission (ACCC) [2013] 249 CLR 435
Trade Practices Commission v Pacific Dunlop Limited [1994] FCA

12BUSINESS LAW