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Productivity / Processes

Misleading or deceptive conduct

Did you know that you can fall foul of the law if you engage in misleading or deceptive conduct, or conduct that is likely to mislead or deceive?

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Section 52 of the Trade Practices Act prohibits corporations from engaging in misleading or deceptive conduct and there are “mirror provisions” in state fair trading acts that apply to unincorporated businesses – that is, to sole (solo) traders and partnerships.

The prohibition applies to every statement made by a soloist in the promotion of their business, such as in printed advertising material and websites, as well as statements made to clients in face-to-face meetings.

It is illegal for businesses to make statements that are wrong, inaccurate, or that are otherwise likely to be misunderstood.

The test for working out whether a statement is misleading or deceptive is to ask whether a reasonable member of your customer base is likely to misunderstand the statement. Fortunately, the law here does not protect the “extraordinarily stupid” customer.

"It is illegal for businesses to make statements that are wrong, inaccurate, or that are otherwise likely to be misunderstood."

Soloists should also be aware that failing to tell a client something can also be a problem. For example, if you do not tell a client that you will not be working on their project, because you are getting someone else to do the work, it could be problematic if it’s the client’s belief that you are doing the work.

Want more articles like this? Check out the processes section.

If you make a statement that is misleading or deceptive, a few things could happen. Your customer may complain to a regulator – the Australian Competition and Consumer Commission or the local state fair trading body. Usually the regulator will ask the customer whether they have tried to work out the problem with your business. A regulator will only get involved once the customer has been down a “self-help” route and failed.

If the misleading or deceptive statement affects several customers, has caused a lot of loss or damage, or relates to a priority area, the regulator may decide to bring a court action against you. An example of a priority area would be green marketing claims.

If the complaint does not fit into any of the priority categories, the regulator is likely to refer the customer to a local small claims tribunal.

If a regulator decides not to investigate, and a customer is not satisfied with any of their self-help options, that customer has the right to bring their own court action against you.

There are a number of things that a court can do if it finds that your business has engaged in misleading or deceptive conduct. You may be required to publish corrective advertisements, or to refund consumers.You may be ordered to pay the legal costs of the other party, or to pay damages.

As well as being sound business practice, there are many legal and practical reasons to ensure that your business never engages in misleading or deceptive conduct.

Michael Terceiro

is a trade practices lawyer with 15 years specialist expertise. He has advised on consumer protection law, competition law, mergers, franchising, unconscionable conduct, and product safety.

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