False or misleading representation

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Business / companyConsumer

It is unlawful to make false or misleading representations about goods and services when supplying, offering to supply or promoting those goods or services.

For instance, a business must not make false or misleading representations about:

  • the standard, quality, value or grade of goods or services; 
  • the composition style, model or history of goods; 
  • whether the goods are new; 
  • a particular person agreeing to acquire goods or services; 
  • testimonials by any person relating to goods or services; 
  • the sponsorship, approval, performance characteristics, accessories, benefits and uses of goods or services; 
  • the price of goods or services; 
  • the availability of repair facilities or spare parts; 
  • the place of origin of a product - for example, where it was made or assembled; 
  • a buyer's need for the goods or services; and 
  • any guarantee, warranty or condition on the goods or services.

Courts have found false and misleading representations in these cases:

  • a manufacturer sold socks, which were not pure cotton, labelled as ‘pure cotton’;
  • a retailer placed a label on garments showing a sale price and a higher, crossed-out price. However, the garments had never sold for the higher price; 
  • a business made a series of untrue representations about the therapeutic benefits of negative ion mats it sold; and 
  • a motor repairer told a customer more repair work was needed on their car than was necessary.

What are false or misleading representations?

Whether a representation is considered false or misleading will depend on the circumstances of each case, and what misleads one group of consumers may not necessarily mislead others.

Example:

People concerned about their body image may be more vulnerable to products claiming to enhance beauty. Whether a representation about a beauty product was misleading would depend on whether it would mislead a reasonable person within this group.

A representation can be misleading even if it is true or partly true.

Example:

On the front of their product packaging, a business claimed their batteries lasted as long as those of two other competitors. The claim was supported by tests, but only against some (not all) of the competitors’ batteries. This was explained on the back of the packaging. A court found the message on the front of the packaging had misled consumers, even though there was a clearer message on the back of the packaging.

Testimonials

It is unlawful to make, or use, false or misleading testimonials.

Testimonials are statements from previous customers about their experience with a product or service.

These can give consumers confidence in a product or service on the basis that another person - particularly a celebrity or well-known person - is satisfied with the goods or services.

Misleading representations can persuade customers to buy something to their detriment, based on belief in the testimonial.

Examples:

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.

An advertisement where an actor is portrayed as a real person and falsely claims to have reaped financial benefits from distributing health care products.

A court will presume a testimonial is misleading but not false. A business accused of making a misleading representation has to provide evidence to show it is not.

Make sure testimonials are true and correct when using them to endorse products. You can do this by getting a true and accurate account from real customers about their actual experience.

Sale or grant of an interest in land

Your business must not make false or misleading representations about the sale or grant of an interest in land.

You must not:

  • represent it has a sponsorship, approval or affiliation when it does not; or
  • make false or misleading representations about the:
    • nature of the interest in land; 
    • price, location, characteristics or use that can be made of the land; or
    • availability of facilities.

Example:

A real estate agent would be misrepresenting the characteristics of a property if advertising 'beachfront lots' that do not front the beach.

Employment and business activities

It is unlawful to make false or misleading representations about the:

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

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.

Offering rebates, gifts, prizes and other free items

When supplying or promoting goods or services, it is unlawful to offer rebates, gifts, prizes or other free items without intending to provide them.

It is also unlawful to fail to provide them as promised.

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.

Example:

A stereo equipment retailer held a promotion. 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 fake names were added to the draw (among other things) and those fake names were declared the winners. This meant no prizes were awarded by the retailer. The retailer pleaded guilty and was fined.

Misleading conduct as to the nature of goods and services

Your business must not engage in conduct likely to mislead the public about any goods or services:

  • nature; 
  • manufacturing process; 
  • characteristics; 
  • suitability for purpose; or
  • quantity.

Example:

An importer sells bicycle helmets with labels indicating the helmets met a mandatory safety standard, even though the helmets had not been laboratory tested to check whether they meet the standard.

When stocks of organic eggs ran out, a supplier packed eggs in a carton labelled as ‘organic’ even though the eggs were not.

Bait advertising

Bait advertising’ usually happens when a business advertises goods at a certain price but does not have a reasonable supply for customers to buy.

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

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 offered a more expensive unit for $999. This is likely to be bait advertising as the retailer does not have a reasonable supply of the advertised television.

Wrongly accepting payments for goods or services

Businesses must not accept payment for goods or services:

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

Example:

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

This part of the law is not intended to affect businesses who genuinely try to meet supply agreements.

A business may avoid prosecution if:

  • the failure to supply was due to something beyond its control; and
  • it exercised due diligence and took reasonable precautions.

Consumer guarantees - guarantees, conditions and warranties

It is unlawful to make false or misleading representations about consumer guarantees

Penalties

Making false or misleading representations is an offence.

The maximum criminal penalty is $220,000 for an individual and $1.1 million for a body corporate. Civil penalties for the same amount apply.

Before prosecution, consumer protection agencies can:

  • require a business to provide information that will support claims or representations made about goods or services; 
  • accept court-enforceable undertakings; and
  • issue public warning notices.

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