False and misleading advertisements or statements

Contributed by Ian Macdonald and Su Mahalingham and current to 1 September 2005

A common complaint of consumers is that they were induced to enter into a contract for the purchase of goods as a result of some misleading advertisement or as a result of some representation made by a salesperson at the point of sale as to the quality, nature or performance of the goods.

Section 52 of the TPA is an important consumer protection law which prohibits corporations from engaging in conduct that is misleading or deceptive or likely to mislead or deceive. This covers misleading or deceptive advertising such as TV or newspaper advertisements as well as statement made to a particular consumer. Section 52 is duplicated in Section 10 of the Fair Trading Act.

Businesses which engage in conduct prohibited by the TPA and the Fair Trading Act expose themselves to large penalties. For example, section 75AZ1 of the TPA provides that misleading conduct in relation to services exposes an individual to a fine of 2,000 penalty units, or a company 10,000 penalty units. A penalty unit is defined in section 4AA of the Commonwealth Crimes Act to mean $110. Accordingly, the maximum fines are respectively $220,000 for an individual, and $1.1 million for a company. Offences against the Fair Trading Act expose a person to a fine not exceeding $20,000, and a company to a fine not exceeding $100,000 (FTA s.69 (2)).

The TPA (s.52) and the Fair Trading Act (s.10) give consumers the right to bring actions for damages, injunctions and ancillary relief, which are dealt with below. The remedy is in addition to general contractual remedies such as misrepresentation.

The TPA (s.53) and the Fair Trading Act (s.12) also prohibit false representations, which attract similarly large penalties. Specifically prohibited statements include statements as to sponsorship, approval, performance characteristics, accessories, uses, benefits, places of origin and price. The section also prohibits false or misleading statements concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.