Misleading consumers can be a costly exercise for businesses. Consumer rights are quite strong in Australia and businesses should be wary of pushing the sales pitch too far.
A major carpet cleaning franchise was recently ordered by the Federal Court in Sydney to pay a $215,000 penalty for its involvement in the publishing of fake testimonials on the Internet.
The Court found the company posted, and requested that its franchisees post fake customer testimonials about the quality of carpet cleaning services.
In his judgment, Justice Yates stated that all fabricated testimonials, once posted and searchable, were equally capable of misleading or deceiving consumers. Along with other forms of false or misleading advertising, the fabricated testimonials had the potential to mislead a large number of consumers, divert customers from law-abiding competitors, and generate a positive perception of the carpet cleaning company that was based on falsehoods.
The Australian Competition and Consumer Commission, which brought the case to court, said while online testimonials can be a useful marketing tool it is important for businesses to understand making false or misleading testimonials breaches Australian Consumer Law.
The hefty penalty came as a Gold Coast franchise of a leading electronics chain was fined $52,000 for repeatedly telling customers with new but problem plagued computers that it couldn't help them. The Federal Court found the store breached two sections of consumer law by falsely telling customers it had no obligation to provide a remedy and couldn't assist without payment. The ACCC case brought the total fines paid by the chain to $286,000 for misleading customers about their rights.
Under consumer law, businesses must guarantee products and services they sell, hire or lease. Retailers must provide these automatic guarantees regardless of any other warranties they give to you or sell you. If it's a minor problem the business can repair it or give a free replacement. For major problems customers have the right to a replacement or refund. There is no specific expiry date and shops are responsible for transporting large items. This doesn't apply to auctions of second hand goods. Customers should think whether they need to buy an extended warranty offered by the retailer as it is likely they are already protected by consumer law.
"Consumer law is quite strong and it has changed over the years so businesses should get legal advice on their responsibilities under the existing laws," said Stacks Law Firm lawyer Anneka Frayne.
"The consequences for breaching the law can be much more than the fine. Losing your good business name through the adverse publicity can be far more costly."
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