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
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
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 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."
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.
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Businesses should ensure that any promotions do not cross a 'fine line' between acceptable and misleading or deceptive.
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