The Meriton proceedings could clear up some legal issues in online reviews.
On 24 November 2016, the ACCC commenced proceedings against Meriton Property Services Pty Ltd concerning reviews posted on the Australian website of TripAdvisor, Inc.
The proceeding is interesting for two reasons.
First, online reviews play an important role in decision-making by consumers and promotion by businesses. This role is likely to become even more important with time.
Second, this proceeding illustrates that a respondent doesn't have to make a misleading representation directly to its customers through an online review to attract an allegation of misleading or deceptive conduct. Misleading or deceptive conduct may be alleged on the basis of a manipulation or interference with the process by which consumers post online reviews. This is something which the ACCC has referred to in its guidance on online reviews.
The ACCC's allegations against Meriton Property Services
The ACCC does not allege that Meriton posted misleading reviews on TripAdvisor's website or procured others to do so. Instead, it alleges that Meriton manipulated a process TripAdvisor used to prompt customers to post reviews so that those customers, who were likely to post a negative review, would not receive any prompt. At the time of writing, Meriton had not filed a defence, so it may be some time before the outcome of the case is known.
The operation of TripAdvisor's website is central to the allegations made by the ACCC. TripAdvisor allows customers to post reviews on its website via a TripAdvisor account or a Facebook account. TripAdvisor also offers a service to accommodation providers called "Review Express". If an accommodation provider uses this service, it must provide TripAdvisor with the email addresses of guests who stayed at its property and agreed to their details being provided to TripAdvisor. TripAdvisor sends an automated email to such guests shortly after their stay which prompts them to post a review on TripAdvisor's website. Meriton allegedly used Review Express.
The ACCC alleges that Meriton identified guests who had complained about its services or whom it suspected had a negative experience and were hence more likely to post a negative review on TripAdvisor's website. It then alleges that Meriton altered the email addresses of those guests before sending them to TripAdvisor as part of the Review Express service so that they would not receive an email from TripAdvisor prompting them to post a review.
The ACCC seeks a declaration that Meriton engaged in misleading or deceptive conduct in breach of section 18 of the Australian Consumer Law (ACL) and engaged in conduct that was "liable to mislead the public" as to the nature of its services in breach of section 34 of the ACL. It also seeks pecuniary penalties, a corrective publication, the implementation of a compliance program and injunctive relief.
Online reviews, false testimonials and the ACL
There are provisions in the ACL which are tailored to address false testimonials. Section 29(1)(e) of the ACL prohibits the making of "a false or misleading representation that purports to be a testimonial by any person". Section 29(1)(f) prohibits the making of "a false or misleading representation concerning
- a testimonial by any person; or
- a representation that purports to be such a testimonial".
Under section 29(2), a representation is taken to be misleading for the purposes of sub-sections 29(1)(e) and (f) unless evidence is adduced to the contrary. Sub-sections 151(1)(e) and (f) create an offence in similar terms to sub-sections 29(1)(e) and (f).
In the past, the ACCC has used on section 29(1)(e) to bring proceedings in relation to online reviews. For example, in ACCC v P&N Pty Ltd  FCA 6, the Court ordered penalties of $145,000, injunctive relief and corrective publications in relation to video testimonials posted on YouTube and the respondents' website which featured actors purporting to be customers of the respondents.
In ACCC v A Whistle & Co (1979) Pty Limited  FCA 1447, the Court ordered penalties of $215,000, injunctive relief and corrective publications in relation to testimonials published on google.com.au and productreview.com.au by the respondent and its franchisees that purported to be by customers but were not.
In addition to court proceedings, the ACCC has issued infringement notices relying on section 29(1)(e). In July 2015, Citymove Pty Ltd paid $30,600 in response to three infringement notices alleging that it used fabricated customer identities to post testimonials on Google+ and YouTube. In November 2011, Citymove also paid $6,600 in response to an infringement notice and provided a court enforceable undertaking after it published false consumer testimonials on its website, movingreview.com.au.
Misleading or deceptive conduct without any direct representation
Sections 29(1)(e) and (f) both require a "false or misleading representation". In the proceeding against Meriton, the ACCC does not allege that Meriton made any misleading representation directly to consumers. Instead, it alleges that a process for the posting of online reviews was manipulated by Meriton and that this conduct resulted in consumers being misled or deceived.
Section 18 does not require any representation. It simply requires conduct that is likely to mislead or deceive. In this way, section 18 has a broader reach than sub-sections 29(1)(e) and (f).
What other conduct may be misleading in relation to online reviews?
The proceeding against Meriton concerns allegations that a business removed a source of encouragement for dissatisfied customers to post online reviews, but what about the opposite: encouraging only satisfied customers to post reviews? Some guidance has been provided by the ACCC on this issue.
In November 2013, the ACCC published guidance on the use of online reviews by businesses. This is important reading for any business which encourages its customers to post online reviews. The ACCC says that incentives to write online reviews should only be offered if "incentives are offered equally to consumers likely to be complimentary and consumers likely to be critical", the consumer is told that the incentive is available whether their review is positive or negative and the incentive is disclosed to users who rely on the reviews. The ACCC also says that reviews "may mislead consumers where they are presented as impartial, but were in fact written by ... someone ... who writes an inflated review because they have been provided with a financial or non-financial benefit".
The ACCC guidance addresses selectively providing incentives to satisfied customers, but what about simply asking satisfied customers to write a review and not making a similar request to dissatisfied customers? In that situation, no-one is offered any incentive.
Whether or not this conduct contravenes section 18 largely depends on whether it is likely to mislead or deceive consumers by giving them the impression the business has a more satisfied customer base than it actually does. This will depend on factors such as how many customers provided a review after receiving the request, would they have provided a review had they not received the request, and the total number of positive and negative reviews available about the business.
A judgment in the Meriton proceeding may provide some guidance on this issue, since removing a source of encouragement for dissatisfied customers to post reviews is likely to have a similar effect to providing a source of encouragement for satisfied customers to post reviews.
Online reviews are important to the decision-making process of consumers and can significantly assist a business in building a strong reputation (as well as a poor one!). Any guidance from the courts on what a business may legitimately do to encourage its customers to post online reviews is welcome. For this reason, ACCC v Meriton is one to watch.
- Bridging the business-consumer divide: comparison websites in focus
- Shopping around for misleading and deceptive conduct
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.