> Business advice  > False or misleading representations

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• What are false or misleading representations?
• Testimonials
• Sale or grant of an interest in land
• Employment and business activities
• Offering rebates, gifts, prizes or free items
• Misleading the nature of goods and services
• Bait advertising
• Wrongly accepting payments for goods or services
• Exceptions for information providers
• Guarantees, conditions and warranties
• Penalties

What are false or misleading representations?

It is unlawful to make false or misleading representations about goods and services when supplying, offering to supply or promoting those goods or services.

For instance, a business must not make false or misleading representations about:

• the standard, quality, value or grade of goods or services
• the composition style, model or history of goods
• whether the goods are new
• a particular person agreeing to acquire goods or services
• testimonials by any person relating to goods or services
• the sponsorship, approval, performance characteristics, accessories, benefits and uses of goods or services
• the price of goods or services
• the availability of repair facilities or spare parts
• the place of origin of a product - for example, where it was made or assembled
• a buyer's need for the goods or services
• any guarantee, warranty or condition on the goods or services.

Courts have found false and misleading representations in these cases:

• a manufacturer sold socks, which were not pure cotton, labelled as ‘pure cotton'
• a retailer placed a label on garments showing a sale price and a higher, crossed-out price. However, the garments had never sold for the higher price
• a business made a series of untrue representations about the therapeutic benefits of negative ion mats it sold
• a motor repairer told a customer more repair work was needed on their car than was necessary.

Whether a representation is considered false or misleading will depend on the circumstances of each case, and what misleads one group of consumers may not necessarily mislead others.


For example:
• People concerned about their body image may be more vulnerable to products claiming to enhance beauty. Whether a representation about a beauty product was misleading would depend on whether it would mislead a reasonable person within this group.

A representation can be misleading even if it is true or partly true.

For example:
• On the front of their product packaging, a business claimed their batteries lasted as long as those of two other competitors. The claim was supported by tests, but only against some (not all) of the competitors' batteries.
This was explained on the back of the packaging. A court found the message on the front of the packaging had misled consumers, even though there was a clearer message on the back of the packaging.

Testimonials

It is unlawful to make, or use, false or misleading testimonials.

Testimonials are statements from previous customers about their experience with a product or service.

These can give consumers confidence in a product or service on the basis that another person - particularly a celebrity or well-known person - is satisfied with the goods or services.

Misleading representations can persuade customers to buy something to their detriment, based on belief in the testimonial.

Examples of false and misleading representations about testimonials include:
• A supplier published a newspaper advertisement about a ‘nasal delivery system' to treat impotence or erectile dysfunction. The advertisement quoted an interview with a celebrity that falsely claimed he had suffered from impotence and the nasal delivery system had assisted in dealing with this condition.

• An advertisement where an actor is portrayed as a real person and falsely claims to have reaped financial benefits from distributing health care products.

A court will presume a testimonial is misleading but not false. A business accused of making a misleading representation has to provide evidence to show it is not.

Make sure testimonials are true and correct when using them to endorse products. You can do this by getting a true and accurate account from real customers about their actual experience.

Sale or grant of an interest in land

Your business must not make false or misleading representations about the sale or grant of an interest in land.

You must not:

• represent it has a sponsorship, approval or affiliation when it does not
• make false or misleading representations about the:
• nature of the interest in land
• price, location, characteristics or use that can be made of the land
• availability of facilities.

For example:

• A real estate agent would be misrepresenting the characteristics of a property if advertising 'beachfront lots' that do not front the beach.

Employment and business activities

It is unlawful to make false or misleading representations about the:

• availability, nature or terms and conditions of employment
• profitability, risk or other material aspect of any business activity that requires work or investment by a person.

For example:
• A second-hand truck dealer falsely told buyers they could get employment from certain places if they bought the dealer's trucks. The truck dealer was found guilty of misleading the buyers and fined.

Offering rebates, gifts, prizes or free items

When supplying or promoting goods or services, it is unlawful to offer rebates, gifts, prizes or other free items without intending to provide them.

It is also unlawful to fail to provide them as promised.

The rebate, gift, prize or other free item must be provided:
• within the specified time, or
• if no time was specified, within a reasonable time.

For example:
• A stereo equipment retailer held a promotion. Customers went into a draw to win prizes when they bought stereo equipment.
The retailer felt the promotion had not been a financial success, so fake names were added to the draw (among other things) and those fake names were declared the winners.
This meant no prizes were awarded by the retailer. The retailer pleaded guilty and was fined.

Misleading the nature of goods and services

Your business must not engage in conduct likely to mislead the public about the:

• nature
• manufacturing process
• characteristics
• suitability for purpose
• quantity of any goods or services.

For example:

• An importer sells bicycle helmets with labels indicating the helmets met a mandatory safety standard, even though the helmets have not been laboratory tested to check whether they meet the standard.

• When stocks of organic eggs ran out, a supplier packed eggs in a carton labelled as ‘organic' even though the eggs were not.

Bait advertising

‘Bait advertising' usually happens when a business advertises goods at a certain price but does not have a reasonable supply for customers to buy.

What is a ‘reasonable supply' will depend on several things, including the type of goods and what you said in your advertisement.

For example:
• An electronics retailer runs a major national campaign advertising 50-inch televisions at a low price of $799 for a week-long sale. The retailer usually sells about 30 televisions of this type every week.
The retailer only stocks two televisions at the advertised price and refuses to take customer orders.
When customers attempt to buy the television at the advertised price, they are told it is out of stock and offered a more expensive unit for $999. This is likely to be bait advertising as the retailer does not have a reasonable supply of the advertised television.

Wrongly accepting payments for goods or services

Businesses must not accept payment for goods or services:

• they do not intend to supply
• if they know, or should have known, they would not be able to supply the goods or services in a timely manner.

For example:

• a landscaper contracts to provide yellow paving stones, knowing that only grey paving stones are available at the time of the agreement.

This part of the law is not intended to affect businesses who genuinely try to meet supply agreements.

A business may avoid prosecution if:

• the failure to supply was due to something beyond its control, and
• it exercised due diligence and took reasonable precautions.

Exceptions for information providers

‘Information providers' include media organisations such as:

• radio stations
• television stations
• publishers of newspapers or magazines (including online).

Information providers will be liable for publishing an advertisement that is misleading or deceptive.

However, they may not be responsible if:

• they are in the business of publishing or arranging for the publication of advertisements
• they received the advertisement in the ordinary course of this business, and
• they did not know, and had no reason to suspect, that the advertisement was misleading or deceptive.

For example:
A tradesman publishes an advertisement in a major newspaper. The advertisement states that he is a registered builder, when he is not. The newspaper staff was unaware of the builder's unregistered status. Although the advertisement may be misleading or deceptive, the newspaper will not be liable because it had no reason to suspect the information was false. However, the tradesman's conduct would be misleading or deceptive.

Guarantees, conditions and warranties

It is unlawful to make false or misleading representations about consumer guarantees.

For more information, see Guarantees, warranties and refunds.

Penalties

Making false or misleading representations is an offence.

The maximum criminal penalty is $220,000 for an individual and $1.1 million for a body corporate. Civil penalties for the same amount apply.

Before prosecution, consumer protection agencies can:
• require a business to provide information that will support claims or representations made about goods or services
• accept court-enforceable undertakings
• issue public warning notices.

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