In brief – Companies can be held responsible for
statements by third parties
On 10 February 2011, the Federal Court of Australia handed down
judgment in contempt proceedings that may have significant
implications for businesses which use social media to market
themselves. The Court held that a company and its sole
director were responsible for statements made by third
parties on the company's Facebook site.
Allergy Pathway and the ACCC
Allergy Pathway Pty Ltd operates clinics that it asserts
diagnose and treat allergies. The techniques that it uses have not
been medically validated. In 2009, the Australian Competition
& Consumer Commission took action against the company,
alleging that it was engaging in misleading and deceptive conduct,
in contravention of what was then section 52 of the
Commonwealth Trade Practices Act 1974 (now dealt with
under section 18 of the Australian Consumer
Allergy Pathway did not defend the matter and, on the basis of
expert medical evidence, the Court found that the company was
engaging in misleading and deceptive conduct. The company and its
sole director gave certain undertakings to the Court that they
would not make the same or similar representations for three
Continued representations on Facebook and Twitter
Following the decision, the ACCC become concerned that Allergy
Pathway was continuing to make representations through its website
and its presence on Facebook and Twitter. There were four
categories of representations of concern, namely:
Statements and links to statements posted by the
company on its website and Facebook and Twitter pages and
in a video posted on Youtube and on its Facebook and Twitter
Testimonials written by clients of the company and
posted by the company on its website and Facebook
and Twitter pages
The company's responses to queries posted
by the public on its Facebook "wall"
Testimonials written by clients and posted by
those clients of the company on Allergy
Pathway's wall on Facebook
Representations by third parties on the Facebook wall
The company, and its director, conceded that the first three
categories breached the undertakings that they had given in the
previous proceedings. No concession was made in relation to
testimonials written by third parties, and it is this matter which
the Court had to decide.
The Court found that the testimonials were similar to the
representations that were the subject of the earlier proceedings
and that the company knew that these testimonials (which were
misleading) had been posted on its wall. The Court accepted
that the company was not responsible for the initial publication of
the third party testimonials. However, it took no steps to
have them removed. The Court made an inference that the
company did not take the steps to remove the testimonials because
it wanted the benefit of the praise for its services or the
legitimacy of third party testimonials may have added to its
The company acquired responsibility for the material posted on
the wall at the point when it knew of those postings and decided
not or took no steps to remove them. Once the company was aware of
the postings on the Facebook wall, it had the necessary means of
control to remove the content and stop the testimonials from being
communicated to other members of the public.
Implications for business
The decision makes it clear that any business that is using
social networking, including promotions through Facebook fan pages
or other means, must have processes in place to monitor the content
of those sites, including material posted by third parties, and
exercise appropriate control over content that is misleading or
otherwise in contravention of any undertaking or code of
advertising practice or law.
Swaab Attorneys was the highest ranking law firm and the
13th best place to work in Australia in the 2010 Business Review
Weekly Best Places to Work Awards. The firm was a finalist in the
2010 BRW Client Choice Awards for client service and was named the
winner in the 2009 Australasian Legal Business Employer of Choice
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In some cases these fees or surcharges are higher than what a bank charges to these merchants for use of the system.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).