Australia: Businesses may be liable for misleading and deceptive statements made on their social networking sites by third parties
Intellectual Property Update

Many businesses have now embraced social networking sites as a means of advertising their products and services. Facebook fan pages are particularly popular.

However, a recent Federal Court decision has emphasised the need for businesses to develop an effective online compliance strategy to mitigate the risk of being liable for the publication of statements made by customers or members of the public on the business's social networking sites.

Businesses need to monitor statements posted by customers or members of the public on their website or social networking sites and delete any comment that may be in breach of the Consumer and Competition Act 2010 (Cth), other laws or offensive to competitors or customers.

In the case of the Australian Competition and Consumer Commission (ACCC) v Allergy Pathway Pty Ltd (Pathway) (No 2) [2011] FCA74, the Federal Court found that Pathway and its former director, were liable for testimonials posted on its Facebook and Twitter pages, even though the company itself did not post the testimonials.

Facts

In 2009, the ACCC alleged that Pathway, an allergy clinic, had made misleading and deceptive statements about the ability of Pathway to identify, treat and cure allergies. The Federal Court found that misleading and deceptive statements had been made and ordered Pathway and its former director Mr Paul Keir to comply with undertakings not to publish or make any further misleading or deceptive statements.

In 2010, the Federal Court fined Pathway and Mr Keir, for contempt of court, finding that they breached undertakings made to the court in relation to "false, misleading or deceptive" posts published on the company's website, Twitter, YouTube and Facebook pages.

Allergy Pathway and Keir conceded they were in breach of their undertakings in relation to the social media posts that the company had made containing client testimonials. However, Pathway and Mr Keir argued that they were not liable for testimonials posted by clients of Pathway.

Federal Court Justice Finkelstein found that the glowing testimonials on the sites, including claims that Pathway could "cure or eliminate virtually all allergies or allergic reactions" were false.

Justice Finkelstein was satisfied that liability for publication was established by two factors:

1. knowledge of the testimonials; and
2. the fact that although Pathway and Mr Keir had the ability to remove the testimonials, they did not do so.

Justice Finkelstein said "While it cannot be said that Allergy Pathway was responsible for the initial publication of testimonials, it is appropriate to conclude that Allergy Pathway accepted responsibility for the publications when it knew of them and decided not to remove them" and hence "it became the publisher of the testimonials".

ACCC Chairman, Graeme Samuel said the landmark decision sends a message to businesses "to be careful if you're going to host a website, be it Facebook or Twitter or your own separate web address that permits third parties to publish representations or comments in relation to your business which are misleading and deceptive".

"As the host of the website you become responsible for them so you must take steps to have them removed".

What can businesses do to mitigate liability?

• frequently monitor their own websites and their social media presence;
• implement an effective online compliance strategy that is regulated by people with the necessary skills to understand the kinds of statements and content that are likely to get it into trouble with regulators, competitors or customers;
• appoint an internal response team and response protocols;
• immediately notify social media platforms of any concerns and request removal of any concerning or infringing content
• deal with negative, false or misleading content promptly and transparently; and
• beware of public open access.

For more information, please contact:

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.