Section 18 of Schedule 2 of the Competition and Consumer Law Act 2010 (Cth), also known as the Australian Consumer Law (ACL), prohibits individuals and companies from engaging in misleading or deceptive conduct in the course of trade or commerce. It is not unusual for parties to use this provision to make a claim under the ACL in the context of intellectual property disputes. This article will explore the nature of misleading or deceptive conduct claims, what constitutes misleading or deceptive conduct, and provide tips to avoid being the subject of such claims yourself.
What sort of conduct will be misleading or deceptive?
An individual or company engages in misleading or deceptive conduct when their words, statements, actions, or omissions amount to a representation which is misleading or deceptive (or likely to be misleading or deceptive) to a reasonable person in the relevant class of consumers. This is very broad, and can potentially cover any type of representation – so long as it is misleading or deceptive. Some common misleading or deceptive representations are in relation to the price, value, quality, properties or origin of goods or services.
NOTE: The Court will consider all surrounding factors when determining whether conduct is misleading or deceptive. If a claim is so outlandish or exaggerated in the circumstances that a reasonable consumer is unlikely to view it as factual (this is known as ‘puffery’) then it may not be misleading or deceptive. For example, it is probably unlikely that a reasonable consumer would treat a coffee shop sign advertising ‘World’s Best Coffee’ as a serious factual representation.
One of the most common situations where misleading or deceptive conduct claims arise – particularly in the context of intellectual property disputes – is where one trader (the Respondent) adopts a trade mark and/or branding which is similar to another trader (the Applicant). If the Applicant can establish that it had a reputation in Australia amongst a ‘not insignificant number of persons’ for a trade mark (whether registered or not) or its overall branding, courts have interpreted section 18 of the ACL to prohibit the Respondent from using a trade mark or overall branding that is similar enough to cause confusion amongst Australian consumers about the source or affiliation of the Respondent’s goods or services.
EXAMPLE: Crustacean Pty Ltd is a leading and well-known retailer of sea-themed books under the brand CRUSTACEANS, which it launched in 2000. Lobster Books Pty Ltd is a new entrant into the sea-themed books market and began providing its own retail services for sea-themed books in 2020 under the brand CRUSTACEAN BOOKS.
In order to succeed in a claim for misleading or deceptive conduct, Crustacean Pty Ltd would need to be able to show that consumers – specifically, Australian consumers of sea-themed books – have been or are likely to be misled or deceived by Lobster Books Pty Ltd’s use of the CRUSTACEAN BOOKS brand. Crustacean Pty Ltd could, for example, point to the similarity of the two brands and the services to which they relate to argue that a reasonable consumer is likely to be deceived into thinking the retail services provided under the brands CRUSTACEANS and CRUSTACEAN BOOKS come from the same company.
What needs to be shown for a misleading or deceptive conduct claim?
In order to successfully make out a misleading or deceptive conduct claim under section 18 of the ACL, the Applicant will need to demonstrate:
- that the Respondent engaged in conduct in the course of trade or commerce (in other words, that the Respondent engaged in conduct which was directed at a commercial or profit-making outcome);
- that the Respondent has, by some aspect of their conduct, made a representation to consumers; and
- that the Respondent’s representation has actually misled or deceived, or is likely to mislead or deceive, a reasonable person in the relevant class of consumers.
Other similar claims
Section 29 of the ACL concerns specific false and misleading representations made in trade or commerce in connection with the promotion and/or supply of goods or services. This includes false and misleading representations regarding the standard, quality, value, grade, composition, style, testimonials, sponsorship, approval, performance characteristics and price of goods and services, among other things. There is often an overlap between sections 18 and 29 of the ACL.
The common law tort of passing off prevents a trader from misappropriating the goodwill and reputation of another trader. The elements required for passing off are very similar to misleading or deceptive conduct, with the additional requirement that the conduct must be causing some damage to the goodwill and reputation of the original trader.
If an Applicant also has a registered trade mark and a Respondent is using a deceptively similar or substantially identical trade mark (similar to the situation described above), then the Applicant may also have a claim for trade mark infringement under the Trade Marks Act 1995 (Cth).
These alternative claims are not identical to misleading or deceptive conduct, so merely because one is present does not mean that the others necessarily will be. However, in practice these alternative claims do often overlap with misleading or deceptive conduct, and as a result they are often relied on concurrently.
Tips for avoiding a misleading or deceptive conduct claim
- When launching a new brand, conduct detailed searches to determine whether any other traders are already using that brand and, if so, the extent and nature of their use. This should include searches of both the trade mark register maintained by IP Australia (www.ipaustralia.gov.au) and general internet searches.
- Ensure any promotional material you produce for your goods or services – including website, social media, advertising, brochures, etc – is accurate as to the nature, attributes, source, and use of your goods or services.
- Remember that the Court will consider all the surrounding circumstances when determining whether conduct is misleading or deceptive – the mere fact that accurate detail is provided in fine print and/or a separate disclaimer does not necessarily prevent a finding of misleading or deceptive conduct being made if consumers are unlikely to see that.
What are the potential consequences of misleading or deceptive conduct?
The consequences of contravening the ACL can include injunctions preventing the contravening conduct from continuing, and an order requiring the payment of compensation.
Additionally, a person who is involved in a contravention by another person or entity of sections 18 and 29 of the ACL may also be found liable as an accessory to the contravening conduct. Accessorial liability could result in the director of a contravening company being required to personally compensate the victim.
Key takeaways
A wide range of conduct can constitute misleading or deceptive conduct, which is prohibited under section 18 of the ACL. It is important that businesses understand the ACL rules governing this kind of conduct to ensure that they don’t run afoul of these provisions, as well as so that they know when to take action against a competitor for misleading or deceptive conduct (where necessary).
If you have been accused of engaging in misleading or deceptive conduct or believe one of your competitors has engaged in such conduct, it is best to seek legal advice. Actuate IP has a team of intellectual property experts who can assist with Misleading and Deceptive Conduct & Passing Off. If you require assistance, you can contact our team on 1300 851 138 or info@actuateip.com.au and our friendly staff will make sure you are directed to the best person to assist you with your matter.
FAQs
What can be misleading or deceptive conduct?
Any kind of behaviour – be it words, actions, or even silence – can potentially constitute misleading or deceptive conduct if it results in some sort of representation to consumers, and that representation is misleading or deceptive.
Will using a brand or packaging similar to my competitor’s brand or packaging be misleading or deceptive?
Using branding or packaging similar to a competitor’s brand or packaging can be, and regularly is, found to be misleading or deceptive. However, it is worth noting that whether an act amounts to misleading or deceptive conduct is determined in light of all surrounding circumstances and, as such, is important to seek legal advice if you have been accused of engaging in misleading or deceptive conduct.
Is misleading or deceptive conduct the same as trade mark infringement / passing off?
Often claims for contravention of section 29 of the ACL, the tort of passing off, and trade mark infringement are made in addition to a claim for misleading or deceptive conduct. However, these alternative claims are not identical to misleading or deceptive conduct, so merely because one is present does not mean that the others necessarily will be.
