Misleading or deceptive conduct

It is against the law for businesses to engage in misleading or deceptive conduct and to make false claims or misleading representations about goods or services.

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Conduct that is misleading or deceptive

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 does not 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 because of the business conduct.

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.

An example of unfounded predictions and promises

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 statements, 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.

An example of wild exaggeration and vague claims

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 the claim, such as an award from an international coffee-making competition.

Offering rebates, prizes and other free items without providing the items

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.

An example of offering rebates, prizes and other free items without providing the item

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.

An example of bait advertising

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 or 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.

An example of misleading or altered guarantees, conditions and warranties

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.

An example of relying on disclaimers and fine print

A large department store advertised '25% 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.

An example of when you should read a disclaimer

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.

An example of silence or failure to disclose

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.

Wrongly accepting payment for goods or services

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

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

An example of wrongly accepting payment for goods or services

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.

Penalties

The maximum penalty for each offence is $2.5 million for an individual.

For corporations the maximum pecuniary penalties for breaches are the greater of:

$50 million
if the Court can determine the value of the 'reasonably attributable' benefit obtained, 3 times that value, or
if the Court cannot determine the value of the 'reasonably attributable' benefit, 30% of the corporation's adjusted turnover during the breach turnover period for the contravention.

Making a complaint

When making a complaint, you should include:

details of the issues you are experiencing
copies of any correspondence that shows how you have tried to resolve the matter.

How Fair Trading will handle your complaint

Your complaint will be reviewed to determine the most appropriate resolution. This may include:

providing you with information to help resolve your complaint
recording the complaint issues to assist in future compliance programs, or
contacting the other party to try and resolve the dispute.

You can lodge a complaint:

Online

If you cannot resolve your matter, submit your complaint by using our form.

Make a complaint

By mail

Post your complaint form and documentation to:

NSW Fair Trading

PO Box 972

Parramatta NSW 2124

Ask a question

If you are unable to find the information you need, you can call us between 8:30am to 5pm on Monday to Friday. You can also use our form to make an enquiry.

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