A robust system of accountability for individuals and corporations engaging in misleading and deceptive conduct has been established under the Australian Consumer Law (ACL). This is enforced by the Australian Competition and Consumer Commission (ACCC) to ensure individuals and corporations found to be engaging in such behaviours are punished. This blog post will outline:
- What constitutes misleading and deceptive conduct;
- The penalties imposed when an individual or corporation is found to have engaged in misleading and deceptive conduct; and
- The recent legal action commenced by the ACCC against eHarmony for alleged misleading and deceptive conduct.
What is misleading and deceptive conduct?
Under the Competition and Consumer Act, misleading and deceptive conduct is unlawful. Specifically, section 18(1) states that:
"A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
Section 29 of Schedule 2 of the ACL, as contained in the Competition and Consumer Act, specifies that a business must not make 'false or misleading representations about goods or services' particularly in relation to:
- The standard of the quality, value, grade, composition, style, or model of the goods;
- The history and prior use of the goods;
- Whether the goods are new;
- That a specific person agreed to acquire the goods or services;
- Testimonials of consumers relating to the goods or services;
- The sponsorship, approval, performance characteristic, accessories, uses or benefits of goods or services;
- The place the goods originated from;
- The consumer's need for the goods or services;
- Any condition, warranty, guarantee, right or remedy on the goods or services; and
- The requirement to pay for any condition, warranty or guarantee on the goods or services.
Accordingly, NSW Fair Trading outlines what constitutes misleading or deceptive conduct including:
- Bait advertising;
- Fake reviews and testimonials;
- Misleading or altered conditions, warranties and guarantees;
- Silence or failure to disclose;
- Unfounded predictions and promises;
- Relying on disclaimers and the fine print;
- Wrongly accepting payments for goods and services;
- Falsely representing the sale or grant of an interest in land;
- Offering rebates, prizes and other free items without providing them;
- False representation about employment and business activities;
- Misleading conduct as to the nature of goods and services; and
- Wild exaggeration and vague claims.
Penalties for misleading and deceptive conduct
Substantial penalties have been imposed on corporations that engage in misleading and deceptive conduct as outlined by NSW Fair Trading. Corporations found to have misled and deceived will be charged either $10 million or must pay three times the value of the benefit they have received, or 10% of their annual turnover in the preceding year where the benefit they received cannot be determined by the Court. The corporation will be penalised by whichever of the penalties is greater.
Individuals engaging in misleading and deceptive conduct will be charged $500,000 for such offence.
The ACCC and eHarmony
The ACCC hasn't been shy in pursuing legal action against corporations who have allegedly engaged in misleading and deceptive conduct. This includes Samsung, Honda, Airbnb, Tiger Mist and Uber.
Recently, the ACCC announced it had commenced legal action against dating service eHarmony on 7 September 2023. The ACCC outlined four ACL violations that eHarmony has allegedly engaged in:
- Automatic subscription trap
The ACCC alleges that eHarmony may have given customers a false impression upon signing up for paid premium memberships. Specifically, the ACCC argues that eHarmony gave the impression that the subscription period for a premium subscription is only for the six, 12 or 24-month period. However, the duration and cost are increased because of automatic renewal. Allegedly, eHarmony does not make the term regarding automatic renewal noticeable, only displaying it in a small font upon purchase. In turn, the ACCC argues that in some cases, premium subscription costs are much higher than advertised due to automatic renewal.
- False advertising of 'free dating' with basic membership
According to the ACCC, eHarmony allegedly advertised that their 'basic membership' allows consumers to have 'two-way' and ongoing conversations with other users for free with the basic membership. However, the ACCC stated that consumers with the basic membership could only view blurry profile pictures and were unable to have ongoing conversations. Users could only view and like profiles and send and receive single text messages.
- Failure to disclose correct purchase prices
The ACCC alleges that eHarmony didn't accurately advertise minimum and total prices of their memberships. Specifically, eHarmony didn't include the additional fee that is applied to members who choose to pay monthly. Additionally, eHarmony allegedly failed to display the minimum total price of their membership subscription until late in the commencement of the purchase.
- Ability to cancel monthly memberships
The ACCC alleges that from September 2019, eHarmony advertised that consumers could subscribe to premium memberships for one month. In fact, memberships were only obtainable for six, 12 and 24-months with automatic renewal. This advertising continued for three and a half years. The ACCC also alleges that from August 2019 eHarmony falsely advertised over a two-year period that consumers could withdraw from a subscription after signing up.
Finally, the ACCC argues that eHarmony was aware of its need to be transparent under the ACL because the ACCC had consulted eHarmony in developing its 'Best Practice Guidelines for Dating Websites' which emphasise the importance of dating sites demonstrating transparent information.
The ACCC is seeking penalties, declarations, injunctions, consumer redress, costs and other orders.
The key takeaways
The key takeaways that individuals and corporations must be aware of are:
- Misleading and deceptive conduct is unlawful under the ACL;
- Corporations and individuals who engage in misleading and deceptive conduct can face severe penalties; and
- The ACCC actively pursues legal action to ensure individuals and corporations who engage in misleading and deceptive conduct are held accountable for violations of the ACL.
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.