Buying products & services Advertising Misleading representations and deceptive conduct

Misleading representations and deceptive conduct

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Misleading or deceptive conduct is when a business makes claims or representations that are likely to create a false impression in consumers as to the price, value or quality of goods or services on offer. This is against the law.

It’s also against the law for businesses to make false claims or misleading representations about their goods or services. This means businesses are not allowed to make statements that are incorrect or likely to create a false impression.

It doesn’t matter if the business intended to mislead or deceive, what matters is how their statements and actions affect the thoughts and beliefs of a consumer. The law applies even if no one has suffered any loss or damage as a result of the business conduct.

The maximum penalty for each offence is $500, 000 for an individual.

Body corporates can be charged whichever is greater:

  • $10 million, or
  • three times the value of the benefit received, or
  • 10 per cent of annual turnover in the preceding year (if the Court cannot determine the benefit obtained from the offence).

Misleading or deceptive claims and conduct can include:

Fake reviews and testimonials

It’s against the law to make false or misleading testimonials and reviews. Fake or misleading testimonials and reviews can persuade customers to buy something they otherwise wouldn’t.

Testimonials are statements from previous customers about their experience with a product or service. They give consumers confidence in a product or service on the basis that another person (sometimes a celebrity) is satisfied with the goods or services.

See an example

A supplier published a newspaper advertisement about a 'nasal delivery system' to treat impotence or erectile dysfunction. The advertisement quoted an interview with a celebrity that falsely claimed he had suffered from impotence and the nasal delivery system had assisted in dealing with this condition.

Unfounded predictions and promises

Businesses must not make promises they know they cannot keep or make predictions without reasonable basis.

A statement about the future that does not turn out to be true is not necessarily misleading or deceptive. However, promises, opinions and predictions can be misleading or deceptive if the business making the claim:

  • knew it was false
  • did not care whether it was true or not
  • had no reasonable grounds for making it.

See an example

A real estate agency was selling apartments with a view of the sea. The agency assured prospective buyers that the view was protected because the land between the apartment block and the sea was zoned for low-rise development. This was based on information provided by a council officer. But the council officer was wrong. The zoning was about to change, allowing high-rise development. The agency had made a false statement about a future matter but had reasonable grounds for making these statement, so was not liable for misleading consumers.

Wild exaggeration and vague claims

A wildly exaggerated or vague claim about a product or service is known as ‘puffery’. This type of claim is one that no reasonable person could treat seriously or find misleading. It is not considered misleading or deceptive under Australian Consumer Law.

See an example

A café claims to make the best coffee in the world. It is unlikely a potential customer would believe this claim without any evidence to support it (like an award from an international coffee-making competition).

Offering rebates, prizes and other free items without providing them

Businesses cannot offer rebates, gifts, prizes or other free items if they are not going to provide them.

The rebate, gift, prize or other free item must be provided within the specified time or, if no time was specified, within a reasonable time.

See an example

A stereo equipment retailer had a promotion where customers went into a draw to win prizes when they bought stereo equipment. The retailer felt the promotion had not been a financial success, so the closing date was extended and fake names were added to the draw. The retailer pleaded guilty and was fined.

Bait advertising

Bait advertising occurs when a business advertises a product, usually at a discounted price and does not have a reasonable supply of goods (considering the extent of advertising and the expected consumer response). As the consumer has been drawn into the shop by the ‘attractive’ price, they may be persuaded to buy another item at a higher price.

What is considered a ‘reasonable supply’ of goods will depend on several factors, including the type of goods and what is said in the advertisement.

See an example

An electronics retailer runs a major national campaign, advertising 50-inch televisions at a low price of $799 for a week-long sale. The retailer usually sells about 30 televisions of this type every week. The retailer only stocks two televisions at the advertised price and refuses to take customer orders. When customers attempt to buy the television at the advertised price, they are told it is out of stock and are offered a more expensive unit for $999.

Misleading or altered guarantees, conditions and warranties

It’s against the law to make false or misleading representations about consumer guarantees.

Under Australian Consumer Law, most products and services bought in Australia come with automatic consumer guarantees that the product/service you purchased will work and do what you asked for.

Businesses cannot:

  • add conditions to your rights under consumer guarantees
  • force you to give up your rights under consumer guarantees
  • force you to pay for consumer guarantees, warranty or extended warranty

Find out more about your rights under consumer guarantees and warranties.

See an example

An online store implemented an illegal returns policy. The policy misrepresented consumer rights under Australian Consumer Law, particularly the right to a repair, replacement or refund for a faulty item.

Relying on disclaimers and fine print

A business cannot rely on disclaimers and fine print as an excuse for misleading or deceptive conduct.

While it is common practice for advertisements to include some information in fine print, this information must not contradict the overall message of the advertisement.

See an example

A large department store advertised '25 per cent off all clothing' but in small print excluded certain clothing. A court said this was misleading conduct.

With this in mind, you should not ignore disclaimers. Prominently displaying disclaimers may be enough to protect a business, depending on the circumstances.

See an example

A bank advertises low credit card interest rates for the first 12 months. The advertisement clearly indicates the low rates are only available to new customers who apply within a certain period. This disclaimer is enough because it clearly informs consumers about the terms and conditions.

Silence or failure to disclose

A business can break the law if it fails to disclose relevant facts to you. Silence can be misleading or deceptive when:

  • one person fails to alert another to facts known only to them, and the facts are relevant to the decision
  • important details a person should know are not conveyed to them
  • a change in circumstance meant information already provided was incorrect.

Whether silence is misleading or deceptive will depend on the circumstances of each case.

See an example

A consumer who lives in a regional area is buying a mobile phone. The phone salesperson knows where the consumer lives but fails to tell them that the coverage is poor in that area. In this instance, silence is misleading because facts relevant to the decision are withheld from the consumer.

Misleading conduct as to the nature of goods and services

A business must not engage in conduct likely to mislead the public about the nature, manufacturing process, characteristics, suitability for purpose, or quantity of any goods or services.

See an example

An allergy treatment provider claimed it could identify and cure or eliminate a person’s allergies or allergic reactions. However, the company could not do this. A Court found that the company had engaged in false, misleading or deceptive conduct.

False representations about employment and business activities

It is illegal for a business to make false or misleading representations about the:

  • availability, nature or terms and conditions of employment
  • profitability, risk or other material aspect of any business activity that requires work or investment by a person.

See an example

A second-hand truck dealer falsely told buyers they could get employment from certain places if they bought the dealer’s trucks. The truck dealer was found guilty of misleading the buyers and fined.

Wrongly accepting payment for goods or services

Businesses are not allowed to accept payment for goods or services:

  • they do not intend to supply
  • if they know, or should have known, they would not be able to supply the goods or services in a timely manner.

See an example

A landscaper contracts to provide yellow paving stones, knowing that only grey paving stones are available at the time of the agreement.

This aspect of the law is not intended to affect businesses who genuinely try to meet supply agreements but are unable to do so because something is beyond their control. Businesses are expected to exercise due diligence and take reasonable precautions.

False or misleading representations about the sale/grant of an interest in land

A business must not make false or misleading representations in the sale or grant of an interest in land. This means businesses must not:

  • promote a sponsorship, approval or affiliation they do not have
  • make false or misleading representations about the:
    • nature of the interest in the land
    • price, location, characteristics or use that can be made of the land
    • availability of facilities.

See an example

A real estate agent could be making a false or misleading representation about a property if they advertised ‘beachfront lots’ that do not front the beach.

For more information on the sale or grant of land, refer to NSW Department of Planning, Industry and Environment or NSW Land Registry Services.

Unconscionable conduct

Unconscionable conduct is a statement or action so unreasonable it defies good conscience (as judged against the norms of society). For conduct to be unconscionable, it must be more than just unfair or unreasonable.

For example, certain conduct may be unconscionable where one party knowingly exploits the special disadvantage of another. This might be:

  • not properly explaining the conditions of a contract to a person who does not speak English or has a learning disability
  • taking advantage of a low-income consumer by making false statements about the real cost of a loan
  • using a friend or relative of the consumer to influence their decision.

Conduct that is particularly harsh or oppressive may also be considered unconscionable, like:

  • not allowing the consumer enough time to read an agreement, ask questions or get advice
  • forcing a person to sign a blank or one-sided contract
  • failing to disclose key contractual terms
  • using high pressure tactics, such as refusing to take no for an answer.

Note: These are examples and not a complete list of unconscionable conduct. Sometimes these instances will not be unconscionable – it depends on the circumstances.

Further information

Small businesses in need of assistance can contact the NSW Small Business Commissioner.

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