What are your RIGHTS as a CONSUMER
where you believe a company has been misleading and deceptive when dealing with you.
In every day life, we are all consumers in the general sense of the word. It is therefore important to know what rights we have as consumers when we buy goods and services. This article seeks to identify a few key areas that may assist everyday people in knowing their rights and what protection is available to consumers under the Commonwealth legislation.
This article only deals with the responsibilities of Corporations when dealing with consumers. When dealing with businesses that are not incorporated as Pty Ltd companies, there are equivalent protection under state law [Fair Trading Act 1987 (WA) and Sale of Goods Act] in respect of the topics discussed below.
The issue is:
As a consumer, what rights do we have against a company in respect of the goods and services supplied by the Companies or Corporations when we are unhappy with the products or services supplied.
This article will give a general insight into the rights afforded to consumers by Commonwealth law. This article deals solely with the area of Misleading and Deceptive Conduct by a Corporation.
Countless cases have been reported in law books in respect of this very basic but crucial legal question.
The Trade Practices Act (“the Act”) is the single most important piece of Federal legislation governing the rights of consumers, and the liabilities and responsibilities of suppliers and manufacturers in Australia. The Act covers the responsibilities of suppliers regarding:
- Misleading and Deceptive Conduct;
- Unconscionable Conduct;
- Merchantable Quality; and
- Manufacturer’s Liability.
You watch a television advertisement or listen to a radio advertisement that says that if you use this “contraption” or “consume this product”, you will lose weight miraculously.
You rush to send your money to the advertiser and they post the “contraption” or “product” to you. You use the “product” religiously for a few months and to your surprise, your waistline does not change.
You then ask yourself, gee, was it me or did the company sell me a dud “product”. You seek legal advice as to whether you can sue the Company.
The following points below will be easier to understand with regards to the above SCENARIO.
The Act allows you protection as a Consumer if you can identify the entity being sued as a “Corporation”. Corporations, or companies are usually easy to identify by additional captions at the end of their trading names, such as “Pty Ltd”. Otherwise, all Corporations fall under the jurisdiction of the Australian Securities Commission (“ASIC”) which contains a register of all companies registered in Australia. It is a simple task of going to the ASIC office and doing a Company Search for a particular corporation.
The first question you must ask is who was the seller of the weight loss contraption? Secondly, you must identify whether the seller was a Company. The Act will only help you if the seller was a Company.
In our scenario, let us assume that the seller is a Company, whom we shall call “Company X Pty Ltd”.
You cannot commence legal action against sellers under the Act, unless they are Companies. If the seller is merely a business, do not be disheartened. You will then have to refer to the State Laws to assist you, such as the Fair Trading Act and Sale of Goods Act. The State laws usually provide the same protection as the Commonwealth Acts. Where the seller is a business, the best place for you to seek advice would be the Department of Consumer Protection & Employment.
Is it a Trading Corporation?
You will also need to identify whether the Company is a “Trading Corporation”. This may not be a simple task because sometimes companies engage in a variety of different corporate activities besides selling and buying goods or services. It has been held by the Court that any corporation that engages in a substantial level of trading as part of its corporate activity can be deemed a Trading Corporation.
SCENARIO: So was the seller of the weight loss “product” a trading corporation? This means that you must prove that the seller is a company that deals with a significant or substantial amount of selling and buying of goods and services. Most companies usually fall under this category anyway, and with some minor exceptions, it is unlikely that you will find a company advertising products for sale that does not trade substantially. Again, in our scenario, let us assume that Company X is indeed a Trading Corporation that deals mainly in selling weight loss products.
Misleading and Deceptive Conduct by a Corporation
You then have to ask yourself whether the Company has been particularly misleading in selling us their product. You may even believe that you had been deceived in some way or another. Section 52 of the Act prohibits a Corporation from engaging in conduct that is misleading or deceptive, including conduct that is likely to mislead or deceive.
To “engage in conduct” means doing or refusing to do any act. This means that a Corporation cannot do anything or refuse to do any act which is misleading or deceptive. Any conduct will suffice, and encompasses a variety of things such as verbal or written statements in advertising, any form of representation – whether verbal or written, as well as pictorials, images, visuals and graphics just to name a few.
SCENARIO: In our scenario, you saw the product in a television advertisement. Advertising is the most common way for sellers to market their product. Therefore, it is often the case that the misleading or deceptive conduct came from advertising. In our scenario, what we would be alleging is that Company X’s advertisement on the weight loss “product” was misleading or deceptive to viewers because the commercial promised that the product would result in weight loss, and when you bought and used it, you did not lose any weight at all! We would be alleging that Company X was misleading and deceptive because it was advertising a ‘dud product’.
It is also important to note that a Corporation does not have to intentionally or deliberately mislead. It has been held by the Court that any intention to deceive is irrelevant, and the only relevance is whether the Company’s conduct had a consequence of being misleading or deceiving. It is quite clear that under the Act, Corporations have very strict duties and responsibilities not to do anything that is misleading and deceptive, or that is likely to mislead and deceive the “Target Audience”.
SCENARIO: So it is quite clear that you don’t have to worry about whether Company X intentionally or deliberately set out to mislead and deceive its viewers. Not only does Company X have a big responsibility not to do anything that is misleading or deceptive, but its duty is extended to making sure that it doesn’t do anything that is likely to mislead or deceive. You can see that the Act ensures you, as the consumer, have adequate protection from the Trading Companies.
Who is the Target Audience?
For a good case of misleading and deceptive conduct, it is necessary to identify the “Target Audience” of the particular conduct. The Court has held that “Target Audience” is the relevant section of the public exposed to the misleading or deceptive conduct.
SCENARIO: In our scenario, it could be claimed that advertising the weight loss “product” on television or radio was misleading to the public as a whole, and that everyone and anyone that watched the advertisement was exposed to the conduct of Company X. However, there has been cases held by the Court to say that the Target Audience is often limited to specific people, or to a particular group only. In our scenario, it may be the case that only people who are interested in weight loss products would be considered the Target Audience.
Sometimes it is necessary for the Court to limit the exposure of a particular conduct so that not everyone can claim they were misled or deceived by that alleged conduct. Only those that fall within the “Target Audience” of the conduct could claim to have been misled or deceived.
What is the Standard Test to Apply whether a Person was Misled or Deceived?
How does the Court work out whether a person would be misled or deceived by a particular conduct of a Corporation? In this respect, there are a few different views put forward by the Court:
The standard should be that of “reasonable members” of the class to which the conduct is directed; OR
The standard to be applied is the impact or consequence of the conduct on the “ignorant, the unthinking and the credulous” who in making their purchases do not stop to analyse but are governed by “appearance and general impressions”; OR
The test is whether, in an “objective sense”, the conduct was such as to be misleading or deceptive when viewed in the light of the type of person who is “likely to be exposed to that conduct”. The question is to be tested by the effect on a person, “not particularly intelligent or well-informed”, but perhaps somewhat “less than average intelligence and background knowledge”, although the test is not the effect on a person who is for example, quite unusually stupid”.
SCENARIO: What does each of these views mean? According to the view expressed in (a), a Court would look at “reasonable people” in society, and judge whether a reasonable person would have been misled or deceived by the alleged conduct. If view (a) was used by the Court in our scenario, the question then becomes – would a reasonable person watching Company X’s advertisement be misled or deceived into thinking that Company X was offering to sell a product that resulted in weight loss?
Clearly any reasonable person who saw a commercial that was selling a weight loss “product” would think that using the product would indeed result in weight loss. But this may be dependent on the advertisement as a whole, and what was actually stated or represented to viewers on the commercial. Perhaps there were statements made that the product was 100% effective, perhaps not. It could have been stated on the advertisement that the product had been tested and proven effective. But what if it only said “proven effective on most people?” Does this make any difference? There may also have been statements made that the product does not work for everyone and that one should also not entirely depend upon the product for weight loss. Often with weight loss products, Companies will say that a person should not depend on the product to lose weight, but weight loss must be accompanied by variation in diet and good exercise. All these things are facts that the Court will take into account in assessing whether a reasonable person would have been misled or deceived by Company X in watching the advertisement.
According to the view expressed in (b) the Court is not talking about whether a reasonable person would be misled by the commercial of Company X. Rather it is talking about whether a person who was ignorant, unthinking, and credulous, who only made purchases using general appearances and impressions would be misled or deceived by the advertisement. If this was the test to be used by the Court, one can see that a consumer is offered more protection in a sense.
Further, according to the view expressed in (c), the Court would be looking objectively at whether a person of somewhat less than average intelligence and little background knowledge would be misled by Company X’s commercial. Although, bearing in mind that view (c) does not include people who are unusually stupid. Again, as with (b), this view offers the consumer a bit more protection than that of a reasonable person. This is because it is not difficult to show that an individual who is a little less bright than the average person would be easily misled or deceived. It is a bit harder to show that a reasonable person of acceptable intelligence would fall for silly advertisements promising weight loss wonders and other miracles.
There is also case law to suggest that where a Corporation is aware, or has knowledge of a person’s “disabilities” or lack of intelligence, and engages in misleading or deceptive conduct, there may be a case to answer under the Act, even though in the usual circumstances of things, a reasonable man would not have been misled by such conduct.
The standard of test to apply appears to be unresolved by the Courts. There would appear to be more protection afforded to consumers using the views expressed in sub-paragraphs (b) and (c) above. The view in sub-paragraph (a) seems to afford consumers less protection, unless the Corporation knew or was aware that their conduct was directed at persons who had “special disabilities”. Nevertheless, it is clear that whether a particular conduct is misleading or deceptive is a question for the court to determine. Evidence given by consumers or the public is not conclusive, although it has been suggested that such evidence must be given sufficient and considerable weight by the Courts in making their decision.
Silence and Reliance
Sometimes the misleading and deceptive conduct can include a situation where a Corporation “refuses to do any act”. Therefore, one can appreciate that a Corporation that remains silent or fails to disclose certain facts may be engaging in deceptive or misleading conduct. However, a consumer must show that the Corporation deliberately remained silent on the issue, because if the Corporation was merely ignorant, or careless, that will not suffice to attract a case under the Act. It may be hard to prove that a Company was deliberately silent, unless the evidence is so clear that the Court can infer from the facts that its silence was intentional.
There is also case law to suggest that where a representation has created false impressions on a buyer of goods, the seller has a duty to disclose the true position of the facts, especially where that particular representation has been relied upon by the consumer. In that type of situation, the consumer has no obligation to check the true nature or accuracy of the representation. It is the Corporation’s duty to disclose the true facts, and not to create false impressions on buyers. Consumers should also note that Corporations have a duty to disclose matters that a person would reasonably expect to be disclosed, for example, the fact that a car has no transmission, or that a particular product is due to expire. Such matters must be disclosed and failure to do so will contravene Section 52 of the Act.
SCENARIO: So in our scenario, if the weight loss product only works in conjunction with regular exercise and a well balanced diet, and the advertisement merely promises a ‘miracle weight loss cure without having to do anything else’, then Company X would have failed its duty to disclose necessary facts. One could argue that Company X was misleading and deceptive because it was ‘silent’ on matters that a viewer watching the commercial would reasonably be expected to be informed. If there were side effects from using the weight loss “product”, one would also reasonably expect to be informed of such things. If Company X failed to disclose this particular fact, it would also have breached its duty to consumers under the Act.
Now that we have ascertained that the television advertisement may be misleading or deceptive, is there any possibility of the Company preventing us from suing them?
It is important to know whether a particular conduct is actually misleading or deceptive as prohibited by the Act, or whether it is a mere puff. Expressions such as “best value” or “best offer” are used a lot in advertising by Corporations to market and sell their products. Where expressions and exaggerations are used as a marketing ploy, a Court may find that a reasonable person would simply regard the statements to mean that the particular Corporation took pride in its work and quality of product.
It is therefore important for a person to be able to distinguish mere puffery from actual misleading and deceptive conduct which falls under the Act. However, consumers should also note that where a Corporation decides to make statements of fact that can be proven or tested, that statement will be considered misleading and deceptive if it is shown to be false.
SCENARIO: In our scenario, let us assume that the advertisement said that the product was the “best weight loss contraption or product”. Clearly this is an exaggeration, and would fall as Puffery. If the Court finds that particular statements made in the advertisement are mere Puffery, you will not have a case for Misleading and Deceptive conduct. This is because in the eyes of the Court, a reasonable person can distinguish between allegations of fact, and exaggerations used simply as marketing ploys. In the eyes of the Court, Puffery is an acceptable means of marketing products because reasonable people do not rely on the truth of such statements.
You may have received together with the “product” a brochure that contained what is called an “exclusion clause”. Exclusion clauses are included in contracts and agreements made between parties usually with the intention of protecting some of the parties to the agreement from certain liabilities.
For example, the brochure that advertises the “product” may say that :
Neither Company X nor its suppliers or distributors guarantees the effectiveness of this product.
There is case law to suggest that the existence of an exclusion clause does not have any effect when it comes to the operation of the Act with regards to Misleading and Deceptive conduct. Simply speaking, public policy does not allow for the inclusion of clauses which have the effect of defeating the purpose of Commonwealth legislation that was enacted to afford consumers protection from the conduct of Trading Corporations.
SCENARIO: However, assuming that there was a Clause similar to the example given above, would it protect Company X from liability under the Act? The example provided would amount to a disclaimer to the effectiveness of the product. An Exclusion Clause with the intention of defeating the operation of the Act could be worded like this:
“Neither Company X nor its suppliers or distributors accepts any responsibility for any representations made for the purpose of marketing its product(s).
Public Policy would not allow the existence of a clause such as the above to prevent a successful case of Misleading and Deceptive Conduct against Company X, even if the consumer was aware of the clause.
Assuming you can show liability of the Company for selling you the “product”, what are your rights as a consumer?
These are the remedies that are available to consumers who have been misled or deceived by the conduct of Corporations.
The Act allows for consumers to apply for an Injunction to:
- stop a Corporation from continuing its particular conduct;
- restrain a Corporation from engaging in a particular conduct; or
- force a Corporation to engage in a particular conduct.
The Act also allows for a consumer to recover any amount of loss or damage from a Corporation or any person who has caused the loss or damage as a result of its misleading or deceptive conduct. In order to recover for loss, a consumer must show that they would have acted differently if not for the misleading or deceptive conduct, or that they had forgone other opportunities in reliance of the misrepresentation.
SCENARIO: In our scenario, it is unlikely that we would apply for an Injunction, although it may be necessary for Governmental Bodies such as the ACCC to stop Company X from continuing to broadcast its advertisement on the weight loss “product”.
In our case, we would want to sue for the amount of money which we had spent on the product, and we would have to show that had we known that the representations made on the product was false, we would not have bought it to begin with. You may also be able to show that whilst under the false impression that the product worked, you used it religiously, and lost the opportunity of trying out other weight loss products or programs as a result. But sometimes, it isn’t practical to sue because of the costs associated with legal proceedings. This is where the ACCC comes in handy for consumers. The practicalities of suing and the role of the ACCC is explained in more detail below.
Powers of the Court
The Act gives the Court a wide range of powers with regards to awarding Remedies to consumers who have proven their case on a balance of probabilities that they suffered as a result of a Corporation’s misleading or deceptive conduct. The Act basically allows the Court to make any Orders it thinks fit, or any Orders which the Court considers is appropriate against the Corporation who has engaged in misleading or deceptive conduct. The Court has great discretion to compensate any person:
- who has suffered loss;
- who is likely to suffer loss;
- who will suffer further loss or damage.
Consumers can therefore be content that if they win a case of Misleading and Deceptive Conduct against a Corporation, the Court has wide ranging powers and is well equipped to deal with compensation and other remedies.
Specifically, a Court can also make a wide range of Orders with regards to contracts, for example:
- declaring the whole or any part of a contract void;
- varying a contract;
- refusing to enforce any or all provisions of a contract;
- directing the person who engaged in the conduct to refund money or property;
- directing the person who engaged in the conduct to repair or provide parts;
- directing the person who engaged in the conduct to supply specified services; and
- varying or terminating an instrument creating or transferring interest in land.
Contracts can be set aside by the Court under the Act because the Court is not restricted by common law principles with regards to contracts. The common law will act as a guide, but will not constrain the Court in exercising its jurisdiction under the Act.
So if you have signed a contract with a Company, and you feel that you would not have signed but for the false representation made to you, rest easy to know that the Court has wide powers to vary, set aside, or ‘fix’ the contract, if you are eventually successful in your case.
Time to Commence Action
Consumers must bear in mind that under the Act, court proceedings must commence within 3 years from the time that the misleading or deceptive conduct occurred. Any action that is brought beyond the 3 year limitation period will be statute barred and will not be allowed to proceed.
The Australian Competition and Consumer Commission (ACCC)
The ACCC is the primary Consumer Watchdog against Trading Corporations, and is the prosecutorial body invested with power to bring cases under the Act before the Courts in the public interest. If you have a particular concern about a Trading Corporation, the most practical and cost efficient way of dealing with that concern is to make a complaint to the ACCC.
Unless you have suffered significant loss as a result of the misleading and deceptive conduct of the Company , it is not likely to be practical to personally sue the Company. For example, in our scenario, it would be impractical to sue and spend up to thousands in legal fees if you have only spent a few hundred on the product.
The ACCC is a very useful Agency where a Trading Corporation has engaged in conduct that affects the public as a whole. The ACCC has been proven effective in many cases, often bringing to light the unacceptable conduct of big business and large corporations.
If you believe that you may have a claim against any suppliers of goods and services, it pays to check with a lawyer your legal rights as soon as possible.
On the lighter side
A farmer who’s been involved in a terrible road accident with a large truck ended up in court fighting for a big compensation claim. “I understand you’re claiming damages for the injuries you’re supposed to have suffered?” Stated the counsel for the insurance company.
“Yes, that’s right,” replied the farmer, nodding his head.
“You claim you were injured in the accident, yet I have a signed police statement that says that when the attending police officer asked you how you were feeling, you replied, ‘I’ve never felt better in my life.’ Is that the case?”
“Yeah, but…” stammered the farmer.
“A simple yes or no will suffice,” counsel interrupted quickly.
“Yes,” Replied the farmer.
Then it was the turn of the farmer’s counsel to ask him questions.
“Please tell the court the exact circumstance of events following the accident when you made your statement of health,” his lawyer said.
“Certainly,” replied the farmer. “After the accident my horse was thrashing around with a broken leg and my poor old dog was howling in pain. This cop comes along, takes one look at my horse and shoots him dead. “Then he goes over to my dog, looks at him and shoots him dead too. Then he come straight over to me and asked me how I was feeling.
“Now, mate, what the hell would you have said to him?