Misleading or deceptive conduct and defamation: when the Australian Consumer Law applies

Defamation is not the only legal response to a damaging statement about a business. Where the statement was made in trade or commerce, s 18 of the Australian Consumer Law may apply, and it operates on quite different principles: it asks whether conduct was misleading, not whether it damaged reputation, and it is available to companies that cannot sue for defamation at all. This article explains the elements of a s 18 claim, the media exemption, who can sue, the remedies, and the limits that stop the consumer law from becoming a way around the defences and procedures of defamation. The companion article on injurious falsehood covers the other main claim for businesses that cannot sue in defamation.

The prohibition

Section 18(1) provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.¹ The Australian Consumer Law is Schedule 2 to the Competition and Consumer Act 2010 (Cth). It applies as a law of the Commonwealth to the conduct of corporations,² and each state and territory applies the same text as a law of that jurisdiction to individuals and others connected with it, for example through the Fair Trading Act 1989 (Qld) and the Fair Trading Act 1987 (NSW).³ The result is a single national rule that binds companies and individuals alike, provided the conduct is in trade or commerce.

The elements are few. There must be conduct, which includes statements and representations; the conduct must be in trade or commerce; and it must be misleading or deceptive or likely to be so, judged by its effect on the ordinary and reasonable members of the audience to whom it was directed. A representation about a future matter is taken to be misleading unless the person had reasonable grounds for making it.⁴ Nothing in s 18 requires the plaintiff to prove that the defendant intended to mislead, knew the statement was false, acted maliciously or damaged anyone’s reputation. A statement made honestly and carefully can still contravene s 18 if it in fact misleads.

In trade or commerce

The phrase “in trade or commerce” is the central limit. In Concrete Constructions (NSW) Pty Ltd v Nelson, the High Court held that it refers to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. It does not extend to everything done in the course of running a business.⁵ A foreman’s misstatement to a fellow worker about the safety of a site, although made at work, was not conduct in trade or commerce.

Applied to statements about other people, the requirement means that a consumer law claim usually lies only where the speaker was acting in a commercial capacity. A competitor disparaging a rival’s products, a supplier making false claims about a former distributor, or a business publishing statements about another business to win its customers are all within the section. A private individual complaining about their own experience with a business, a former employee venting about an employer, or a community group campaigning about a development are generally outside it, however damaging the statements may be, because the conduct is not part of the speaker’s own trading activity. Those statements, if false and damaging, belong to defamation or injurious falsehood.

The line is not always obvious. In Madden v Seafolly Pty Ltd, a swimwear designer posted on her personal Facebook page and emailed the media alleging that a larger competitor had copied her designs. The Full Federal Court upheld the finding that her posts had a trading or commercial character: she was the principal of a competing business, the allegations concerned a rival’s products, and some of her readers were in the fashion industry. The posts were misleading because the comparisons rested on incorrect facts about when the competitor’s designs had been released, and she was ordered to pay damages.⁶ Seafolly’s own press releases describing her allegations as false and malicious were also conduct in trade or commerce, and the Full Court held that the representation that she had knowingly made false claims was itself misleading, because she honestly, if wrongly, believed that her designs had been copied and so could not have made the claims knowing them to be false; the matter was remitted for assessment of her loss.⁷ The same case shows how the two bodies of law diverge: Seafolly’s press releases were defamatory of the designer but protected by qualified privilege, a defence that has no counterpart under s 18.⁸

The media exemption

Section 19 exempts information providers. The Part containing s 18 does not apply to a publication of matter by an information provider made in the course of carrying on a business of providing information, and in the case of the national broadcasters and licensed broadcasters it does not apply to their radio and television broadcasts.⁹ An information provider is a person who carries on a business of providing information, and the definition expressly includes broadcasting licensees, the ABC and SBS.¹⁰ In Bond v Barry, the Full Federal Court held that a freelance journalist who transmitted an article about alleged corporate misconduct to a newspaper was within the equivalent exemption in the Trade Practices Act, and that in the ordinary case the transmission of a news article by a freelance journalist to a media organisation falls within it.¹¹

The exemption has limits. It does not apply to the publication of an advertisement,¹² and it does not apply to publications connected with the supply or promotion of goods or services that the information provider or a related body corporate itself supplies, or that are published on behalf of or under an arrangement with a supplier of goods or services of the same kind.¹³ A newspaper is therefore protected for its reporting and commentary but not for its advertisements or for promoting its own products. The exemption is the main reason a consumer law claim cannot be used against mainstream media reporting in the way defamation can: a person aggrieved by a news report is generally confined to defamation, injurious falsehood or breach of confidence.

Whether a blogger, influencer, review site or online forum is an information provider depends on whether it carries on a business of providing information. A commercial review platform may well qualify as an information provider. By contrast, an individual posting reviews does not carry on such a business; in any event, that individual’s review is usually outside s 18 because it is not made in trade or commerce.

Who can sue

Any person who suffers loss or damage because of a contravention may recover the amount of that loss by action against the contravener or anyone involved in the contravention.¹⁴ There is no restriction on corporate plaintiffs. This is the point of greatest practical importance for businesses. Under s 9 of the Defamation Act, a corporation has no cause of action for defamation unless it is a not for profit body or has fewer than ten employees and is not an associated entity of another corporation.¹⁵ A company with ten or more employees that is the target of false statements by a competitor or a commercial rival therefore cannot sue for defamation but can sue under s 18, and does not need to prove malice as it would for injurious falsehood. Individuals, partnerships and small companies can also sue under s 18, and often plead it together with defamation where the facts allow.

Remedies

The remedies are more flexible than in defamation.

Injunctions. On the application of the regulator or any other person, a court may grant an injunction in such terms as it considers appropriate if satisfied that a person has engaged, or is proposing to engage, in conduct that would contravene the Act.¹⁶ The restrictive approach to interlocutory injunctions in defamation, explained by the High Court in Australian Broadcasting Corporation v O’Neill, is tied to the special features of defamation and the public interest in free speech,¹⁷ and does not govern a consumer law claim, although where the material concerns matters of public interest the court will still weigh the balance of convenience carefully.

Damages. A person who suffers loss or damage because of the conduct may recover it, and the action may be brought within six years after the cause of action accrued.¹⁸ Damages are compensation for proven loss, typically lost sales or profits, and are not capped. They do not include damages for hurt feelings, which belong to defamation.

Compensation and other orders. A court may make such orders as it thinks appropriate in favour of a person who has suffered or is likely to suffer loss, including orders varying contracts and directing refunds or the payment of money.¹⁹ Corrective advertising orders are available on the application of the regulator,²⁰ and a private applicant may seek an injunction framed to require a correction.

Consumer law claims that are really defamation claims

Plaintiffs sometimes plead s 18 to avoid the features of defamation that inconvenience them: the serious harm element, the concerns notice process, the one year limitation period, the defences of honest opinion and qualified privilege, the damages cap or the bar on corporate plaintiffs. Courts do not refuse to hear a consumer law claim merely because the same facts would support a defamation claim; the two causes of action are distinct and can be pleaded together. But the statutory limits already described do most of the work. The in trade or commerce requirement excludes private commentary, and the information provider exemption excludes media reporting, so the typical defamation publication, a news article or a personal post, is outside s 18 from the outset. Where a claim does fall within s 18, the court asks whether the audience was misled, not whether reputation was harmed, and a representation that is substantially accurate, or that would be understood by its audience as mere opinion or puffery, is not misleading even if it is unflattering.

In Google Inc v ACCC, the High Court held that a search engine that displayed advertisers’ sponsored links did not itself engage in misleading conduct, because ordinary and reasonable users would have understood the links as the advertisers’ own statements, which Google was merely passing on without adopting or endorsing them.²¹ The same principle applies to intermediaries generally: a person who passes on another’s statement, making clear that it is not the source and expressing no view on its truth, is not ordinarily engaging in misleading conduct.²² That is a narrower form of liability than defamation imposes on intermediaries, where a page operator, or anyone else who participates in communicating the matter to a third party, can be treated as a publisher.

Examples

Competitor statements. A business tells customers that a rival has gone into liquidation, lost its licence or is under investigation when it has not. If the statement was made in the course of the business’s trading activity, s 18 is contravened whether or not the speaker believed it, and the rival can seek an injunction and damages for lost custom regardless of its size.

Reviews by competitors. A business, or a person acting for it, posts fake customer reviews disparaging a competitor. The reviews are conduct in trade or commerce because they are part of a commercial strategy, and they will usually be misleading as to the identity and experience of the reviewer as well as in content. Genuine reviews by actual customers are different: the customer is not acting in trade or commerce, and any claim about a false review is in defamation or injurious falsehood.

Former employees and contractors. Statements by a former employee about a past employer are generally not in the employee’s trade or commerce. If the former employee has set up a competing business and makes the statements to win clients, the statements are likely to be in trade or commerce, as Madden illustrates.

Responses to allegations. A business that responds publicly to criticism by asserting that the critic is lying or acting maliciously is itself making representations in trade or commerce, and if those representations are wrong it may be liable under s 18 even where a defamation claim over the same words would fail on privilege.

Practical points

• Ask first whether the speaker was acting in trade or commerce. If not, the consumer law does not apply and the claim is in defamation or injurious falsehood.
• Check whether the publisher is an information provider and whether the publication is an advertisement or promotes the publisher’s own goods or services.
• Identify the representations conveyed to the ordinary and reasonable audience, and gather evidence of their inaccuracy; the plaintiff bears the burden of proving the conduct was misleading.
• Quantify the loss. Damages depend on proof of financial loss, and the absence of loss does not prevent an injunction but limits the monetary remedy.
• Consider pleading s 18 alongside defamation or injurious falsehood where the facts support both; the claims have different elements, defences and limitation periods.
• For defendants, the absence of defamation defences means the focus is on whether the conduct was in trade or commerce, whether the information provider exemption applies, and whether the representations were in fact misleading.

Differences between jurisdictions

The Australian Consumer Law is uniform. Section 18 and the related remedy provisions apply in the same terms throughout Australia, to corporations under the Commonwealth Act and to other persons under the applied law of each state and territory. The restriction on corporate defamation plaintiffs in s 9 of the uniform defamation Acts is in the same terms in every jurisdiction, including Western Australia, although the territory provisions are numbered differently.

Getting advice

The consumer law is a powerful tool for businesses damaged by false commercial statements, and, together with injurious falsehood, one of the only realistic options for companies barred from defamation by s 9. It is not a general substitute for defamation, and most publications that people want to sue over, such as news reports, personal posts and customer complaints, fall outside it. Working out at the outset which of defamation, injurious falsehood and the consumer law fits the facts, and whether more than one should be pleaded, is the first step in any dispute about a damaging statement concerning a business.