Australia: Shopping around for misleading and deceptive conduct

Retailers carry a heavy burden to educate staff about complex matters, but written materials will be useful as a complement to oral representations.

Mystery shopping and concepts underpinning actions based on misleading and deceptive conduct are familiar features of the Australian legal landscape.

A recent decision of the Federal Court has expanded the scope of mystery shopping and the regulator's powers, and in the process blurred the line between pursuing offending conduct and actively creating such conduct (Director of Consumer Affairs v The Good Guys Discount Warehouses (Australia) Pty Ltd (2016) 334 ALR 600).

Although the regulator failed on the facts, the case is noteworthy because the court made a number of important findings of law:

  • first, the regulator had the power to enter stores and secretly record exchanges;
  • second, the tape recordings were admissible in evidence; and
  • third, the exchanges constituted conduct "in trade or commerce" within the meaning of the Australian Consumer Law ("ACL"), even though that they were made in an artificial environment.

Consumer Affairs Victoria goes mystery shopping

Inspectors from Consumer Affairs Victoria entered stores of The Good Guys posing as customers, and engaged in conversation with salespeople about consumer warranties. The inspectors taped these conversations without the knowledge of the salespeople. The regulator alleged that responses elicited from the salespeople were misleading and deceptive in contravention of the ACL.

The Good Guys succeeded in the proceeding because the court found that statements made by the salespeople were not misleading or deceptive. Many of the inspectors' questions were framed by reference to general practice and anecdotal experience, rather than the consumer warranties applicable in a particular case. For example, the inspectors asked: "Does anyone do refunds anymore?" This and similar questions were held to be too open-ended and vague so that the responses could not be said to be misleading or deceptive.

In addition, it was held that the salespeople's responses had to be considered in conjunction with customer information brochures which the inspectors received while in the stores. The brochures contained detailed and accurate information about consumer rights. The court therefore considered that the conduct as a whole was not misleading or deceptive.

Consumer Affairs Victoria's power to enter and record

On the face of it, the regulator does not have the power to enter premises and secretly record conversations. The Australian Consumer Law and Fair Trading Act 2012 (Vic) ("ACLFTA") gives the regulator the power to enter and search premises but only with consent, a warrant or in an emergency.

The Good Guys argued that because the legislature had conferred a carefully delineated set of powers on the regulator, those powers were exhaustive; the regulator's conduct was therefore unlawful and amounted to trespass (as it was not in dispute that there was no consent, warrant or emergency).

The court rejected this argument. First, the court held that as a matter of statutory construction, the power to enter premises and record conversations without a warrant or consent was conferred on the regulator by a general provision in the legislation which gave the regulator "all powers necessary to perform his or her functions."

Second, the court considered that such powers could be inferred because it was "not incongruous" for the powers to exist alongside other powers contained in the Act.

Admissibility of the regulator's recordings

The Good Guys further argued that even if the regulator had the power to enter the stores and secretly record the exchanges, the evidence of the exchanges should be excluded on public policy grounds, including breach of privacy and certain other exclusionary principles.

For example, section 138(2)(b) of the Evidence Act 2008 (Vic) confers a discretion to exclude "admissions" made as a result of questioning if the questioning contains false statements. Unremarkably, the court found that the relevant statements made by the salespeople constituted admissions against their interest as the regulator sought to rely on them as constituting misleading and deceptive conduct. Further, it found that the statements made by the inspectors to the salespeople were false, which again is not surprising because the entire operation was a contrivance.

Despite those findings, the court concluded that the evidence could be admitted because the admissions were not "caused" by the inspectors' questioning. The court concluded that the inspectors did not know that making false statements was likely to cause the salespersons to make admissions.

Conduct "in trade or commerce"

Despite the admission of the tape recordings into evidence, there remained a threshold question of whether the whole exercise undertaken by the regulator, and the responses elicited, could fairly be said to be conduct in trade or commerce. If not, then the regulator was bound to fail as a matter of law because the ACL only prohibits conduct that is misleading or deceptive "in trade or commerce".

It was argued by The Good Guys that the conduct was not in trade or commerce because it occurred in a contrived environment devoid of commerciality.

The court rejected the submission and found that the conduct was in trade or commerce because even though the responses of the salespeople occurred in an artificial environment, they formed part of the promotion by The Good Guys of goods and services for sale.

Being prepared for the mystery shopper - and all consumers

This case raises interesting legal and philosophical questions, given that the supposed promotional activity never went beyond the inspectors and therefore was not promotional in any real or operative sense. The statements were made to the inspectors only, and were not overheard by any real customers. Accordingly, no harm could ever have come from them.

This artificiality was compounded by the fact that the statements would never have been made at all but for the inspectors' quasi cross-examination. It could not be said (and was not argued) that the statements were likely to be repeated in the future or were part of a pattern of behaviour.

No doubt these principles will attract further comment and consideration. In the meantime, retailers carry a heavy burden to educate staff about complex matters. If possible, they would do well to have accurate written material to complement their oral representations, which was shown in this case to offer protection.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

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”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions