Company found liable for posts made by customers on the Company's Facebook & Twitter pages
Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd (No. 2)  FCA 74 (10 February 2011)
A very significant decision of the Federal Court of Australia in February 2011 has implications for all businesses (including direct selling organisations and other consumer goods suppliers) using social media. Statements posted on a company's Facebook "fan" and Twitter pages by third parties were held to be publications by the company. As a result, the company was found to be in contempt because the publications had breached undertakings previously provided to the Federal Court to not engage in conduct which would amount to misleading and deceptive conduct in breach of the Trade Practices Act (now known as the Australian Consumer Law).
Businesses involved in direct selling and which supply products which are the subject of a high level of regulatory scrutiny, such as foods, beverages, therapeutic goods and nutritional supplements, should exercise particular caution when using social media. Businesses of this nature should seriously consider monitoring and reviewing all posts made by third parties (including consumers) on their website(s), Facebook and Twitter pages to ensure that any posts which are likely to be considered misleading and deceptive are removed.
Allergy Pathway (AP) operates a number of clinics which provide allergy diagnosis and treatment services.
In 2009, the Australian Competition and Consumer Commission (ACCC) commenced Federal Court proceedings against AP and its sole director Paul Keir (the Respondents), in respect of representations concerning AP's allergy diagnosis and treatment services, which were contained in its advertising and promotional materials.
The Respondents did not contest the ACCC's allegations.
The Federal Court determined that the Respondents had falsely represented in a number of publications that:
- AP could test for allergies;
- AP could cure or eliminate allergies and allergic reactions;
- AP could treat allergies or allergic reactions successfully;
- its treatment was safe or low risk; and
- after AP's treatment it was safe to have contact with the allergen which had previously caused an adverse reaction.
At the time, the Respondents were unable to substantiate the claims.
The Respondents subsequently provided undertakings to the Federal Court, which included an undertaking that they would not make false representations concerning AP's ability to diagnose and treat allergies.
In 2010, the ACCC alleged in the Federal Court that
- The Respondents had breached the undertakings they had previously given to the Court in 2009; and
- The breaches amounted to contempt of court.
The contempt was said to have occurred by way of various publications, which could be grouped into the following categories:
- Various statements made by AP which had been posted on its website, Facebook and Twitter pages; links to the statements; and a video posted on Youtube which AP had also embedded on its Facebook and Twitter pages, for example, "What is ALLERGY PATHWAY? A non-invasive drug-free means to address adverse reactions such as allergies, intolerances and sensitivities".
- Client-written testimonials which AP had posted on its website and Facebook and Twitter pages, for example, "My asthma and eye symptoms no longer happen after my treatment".
Client-written testimonials posted by clients on AP's Facebook wall, for example:
- "Allergy Pathway is amazing. It has worked wonders for me in so many ways. I had food allergies for as long as I can remember, avoiding seafood and shellfish and even bread! After one treatment I could eat seafood with no noticeable reaction ... [name], Medical Practitioner"; and
- "As a practicing naturopath, I have found this technique to be the most effective method of treating allergic reactions and intolerances"; and
AP's replies to enquiries on its Facebook wall by members of the public. For example,
"[name] posted:I have recently become a fan and am curious if the treatment may be able to cure food allergy??? For years I have loved and eaten eggs, not realising that they were the cause of my upset stomach. The funny thing is that while I was pregnant, I could eat eggs without a problem.
Response by Allergy Pathway:In response to your question, we have many clients who visit our clinic with troublesome egg reactions. Food reactions can contribute to digestive symptoms such as bloating, gas, diarrhoea and cramping. We take a detailed client history, and we ask clients if they suspect any substances because they are usually right. After identifying what substances you are reacting to, using our muscle testing technique, we address those substances using our non-invasive, positive conditioning technique. The treatments we do here may be able to ease your digestive symptoms. :)"
The Respondents conceded that the statements falling into categories 1, 2 and 4 mostly breached the undertakings. However, the Respondents were not willing to make this concession in respect of the category 3 statements on the basis that these statements had been posted by third parties on AP's Facebook wall and not by AP per se.
Accordingly, the issue for determination by the Court was whether AP was responsible for the statements made by third parties on its Facebook wall. His Honour considered the nature of AP's use of Facebook and Twitter.
How did AP use Facebook and Twitter?
AP had created a Facebook "fan" page. Users of Facebook are able to become a fan of AP or its services. Facebook users who are "fans' of AP are able to post messages on the wall of AP's Facebook fan page. AP is able to delete messages posted by third parties. His Honour recognised that many "corporations now use Fan pages to promote their business".
"Tweets" are posts or status updates placed on Twitter, which allows short posts to be displayed. Tweets posted on the user's Twitter page are able to be viewed by the public. When a Twitter user posts a Tweet on AP's Twitter page, AP's followers can see their Tweet.
Liability of AP for posts placed by customers on Facebook and Twitter pages
The ACCC argued that:
- If the testimonials posted on AP's Facebook fan or Twitter pages by a member of the public would have rendered AP liable for contempt if AP had posted the same statements itself; and
- AP is aware of the statements; and
- AP does not remove the statements,
it follows that AP will be liable for contempt.
In considering whether AP had published the client testimonials, Justice Finkelstein noted that the usual meaning of "publish" is "to make known or produce a thing for publication. In a broad sense, it can also mean to expose or display to public view". His Honour then considered numerous cases including earlier bulletin board cases and cases involving the Internet and the liability of ISPs in the context of defamation law. His Honour noted that:
AP knew that third parties had published the testimonials in question on its Facebook fan and Twitter pages but did not take any steps to remove the statements. Justice Finkelstein inferred that the statements were not removed because AP "wanted to take the benefit of the praise for its services" and that AP may have thought that the testimonials "added legitimacy to its business".
While AP was not responsible for the initial publication of the testimonials, when AP knew the publications had taken place and had decided not to remove them, AP allowed the publications. As a result, the Respondents breached the undertakings previously provided to the Federal Court in 2009.
The Court declared that the Respondents were guilty of contempt, fined them each $7,500 and ordered them to pay the ACCC's costs on an indemnity basis. The Respondents were also restrained for three years from making various representations in respect of AP's services and were required to publish corrective advertising, including on AP's website, Twitter and Facebook pages.
What does this mean?
This Federal Court decision recognises the growing use of social media, such as Facebook and Twitter, by businesses to promote their goods and services. This is particularly relevant for direct selling organisations. These businesses should seriously consider monitoring and reviewing regularly all posts made by third parties to ensure that any representations, which may be considered false or misleading and deceptive, are removed.
This is particularly important for businesses operating in industries where their claims will be subject to not only regulatory scrutiny but also scrutiny by competitors. Businesses which have previously been subject to regulatory review should exercise particular caution as there will be an increased risk that their products and marketing activities will continue to be periodically reviewed by the relevant regulator(s) and/or competitors.
The assistance of Cate Sendall, Solicitor, of Addisons in the preparation of this article is noted and greatly appreciated.
 Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd  FCA 960 (27 August 2009 ).
 Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd (No. 2)  FCA 74 (10 February 2011) (Allergy Pathway (No.2)).
 Allergy Pathway (No. 2) at 10.
 Allergy Pathway (No.2) at 11.
 Allergy Pathway (No.2) at 11.
 Allergy Pathway (No. 2) at 12.
 Allergy Pathway (No. 2) at 16.
 Allergy Pathway (No. 2) at 18.
 Allergy Pathway (No. 2) at 23.
 Allergy Pathway (No. 2) at 24 to 31.
 Allergy Pathway (No. 2) at 30.
 Allergy Pathway (No. 2) at 32.
 Allergy Pathway (No. 2) at 33.
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.