Section 9 of the Fair Trading Act 1986 prohibits a person from engaging in misleading or deceptive conduct (or conduct that is likely to mislead or deceive). However, there is often confusion around what misleading and deceptive conduct actually means. In this article we break this down and explain clearly why understanding this matters.
What is misleading or deceptive conduct?
There is no legal definition in a statute approved by Parliament of what is “misleading or deceptive”. However, it involves conduct, representations, or silence that may mislead or deceive a reasonable person in the claimant’s situation. Importantly, no intention to mislead or deceive is required to meet the standard.
You can be held liable for engaging in misleading or deceptive conduct where it occurs in trade or employment and affects consumers, businesses, or other parties who may rely on the information.
Some examples of misleading or deceptive conduct
It is probably most helpful to provide some examples of what this conduct involves. Misleading or deceptive conduct has been found to apply in a wide range of circumstances including sales promotions, hidden costs, comparative advertising and pricing, and sponsorship. Some common examples include:
- Misrepresentation: for example, if a sale was advertised with a price drop from $200 to $150, but the normal price was already $150. In other words, the consumer thinks one thing (such as that it is a good price) when the reality is different.
- Misleading packaging: this may also be deemed misleading or deceptive conduct. For example, if packaging states a bottle contains 500mL when it only contains 400mL.
- Silence: even silence may be deemed misleading or deceptive conduct. For example, if you offer to sell someone your cafe for a price which appears reasonable based on the turnover. However, you fail to mention the number of customers has been high over the last three months while a neighbouring cafe has been closed and that things may change, or there has been a sporting event which lifted figures from what they normally would be. The turnover figure is misleading as it was not an accurate representation of the cafe’s income.
How is conduct assessed?
The approach taken by courts will help to decide whether actions amount to misleading or deceptive conduct. They will consider whether a reasonable person with the characteristics of the claimant would reasonably have been mislead. In practice, this means that conduct directed at an experienced businessperson may be less likely to be regarded as capable of misleading or deceiving such a person, compared to similar conduct directed towards a consumer.
Importantly, it is not necessary to establish that the conduct actually mislead or deceived a person, only that it had the potential to do so.
Considering your organisation’s conduct
The case law surrounding misleading and deceptive conduct can be complex and difficult to understand. Therefore, as a starting point you can think about:
- Whether the conduct is true, as even partly incorrect information could be misleading.
- Who is relying on the conduct? Would the average consumer be confused or get the wrong impression?
- Could exaggerated or attention-grabbing conduct be regarded as factual?
- Have all people you included as sponsoring, endorsing, or being associated with the conduct approved?
- Can any statement about future obligations be made with certainty?
- Is there any “fine print” that may make the overall impression of the conduct misleading?
This article only aims to summarise misleading or deceptive conduct, but it applies in wide range of circumstances. Therefore, if you are advertising to consumers, consider speaking with us so that we can provided tailored advice.
