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Advertising - Criminal provisions under Part VC of tpa

STEP 1 – What is False Representation? Advertising plays an essential role in a market economy by disseminating product

information to potential consumers Advertising is useful because it can make it easier for new firms to enter a market Advertising is now so pervasive and plentiful that it has become part of the fabric

of life

What is this topic about?Deals with representations which lead to finesAn alternative to civil penaltiesBut DO req a higher standard of proofPart VC imposes criminal penalties on advertisers who engage in false advertising

Section 75AZB applies in cases where a firm has made a representation about a future matter.

What is s 75AZC?Section 75AZC provides that a corporation shall NOT, in trade or commerce, or:

in connection with the supply or possible supply of goods or services or in connection with the promotion of the supply or use of goods or services, make a false representation about the matters which are listed in subsections

75AZC(1)(a)-75AZC(1)(k)

To prove this must firstly prove that there is a representation:

What is a representation?A representation means whatever ordinary or reasonable members of the relevant section of the public think it means.If that message is FALSE then the representation = misrepresentation

Do you need intention to prove misrepresentation?The Representor’s intention is largely irrelevant: CASE: Given v Holland

A breach of s 75AZC is strict: there is NO requirement to establish intention

Notes by All Things Law – http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs.

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STEP 2 – False Representations and TermsHas there been a FALSE Representation of a GOOD?Section 75AZC(1)(a) of the TPA prohibits false representations that goods are of a particular standard, quality, value or grade, composition, style or model or have a particular history or particular previous use.

What is STANDARD?‘Standard’ usually suggests that a level recognized as a model for imitation or measurement has been reached

i.e. falsely suggesting that a microwave oven or a range of fire extinguishers has complied with the standards set by the Standards Association of Australia or the Yachting Association of Australia respectively would amount to offences

CASES:Hartnell v SharpGivenv SnuffaEvav Southern Motors

What is QUALITY?‘Quality’ refers to an ‘attribute, property, special feature’

The nature, kind or character of something - Given v C V Holland Pty Ltd

CASE: Doolan v MagnamailHi-freq insect repeller had NO repellent effect at all

What is VALUE?Goods were of a particular value must be correctly accurateCASE: Ducret v Chaudhary’s Oriental Carpet Palace

A retailer of imported carpets had advertised a rug as ‘Usually $4,675, Sale Price $1,759, Now Only $407’. This was held in the circumstances not to be a representation as to the standard or quality of the rug.

What is GRADE?‘Grade’ is a term which could be used as a synonym for ‘standard’ or ‘quality’

an advertisement which failed to disclose that the advertised goods were ‘seconds’ or ‘shopsoiled’ would be an example of a false representation as to the true grade of goods

What is COMPOSITION?‘Composition’ overlaps with the terms ‘quality’, ‘standard’ and ‘grade’.The main reason behind the introduction of the term ‘composition’ was to prohibit deceptive labeling - Wilkinson v Katies Fashions

Advertising rings with no silver as ‘silver rings’ would clearly offend the section

CASE: Adams v Eta Foods LtdSold its pies as ‘pure beef’ when at least one batch had contained sheep meat as well as beef was making a false representation as to quality and composition



What is STYLE?‘Style’ has not been closely considered by the courts

CASE: Ducret v Chaudary's Oriental Carpet PalaceDescribed a rug as a ‘Shah Prayer Rug’ when in fact it was an inferior type of rug called an ‘Afghan Runner’ was held to have made a misrepresentation as to the style of goods

What is MODEL?‘Model’ has also not been considered often but refers to model of a car etc

CASE: Ransley v Spare Parts & ReconditioningA 1965 car described as a 1968 model was held to be a breach

CASE: Korczynski v West LoftsHistory of a good has importance‘Made in Australia’Falsely advertising that imports are local produce

What is ‘Particular history’? (IMPORTANT) Where the good or product originated from and what is its current history.Follows 3 steps:

1. It has considerable importance to the retail car industry where sales of secondhand vehicles comprise a significant proportion of total sales.

a. Consumers often base their purchasing decisions on such factors as the number of kilometres travelled, the number and characteristics of previous owners or the service history of the vehicle.

b. Falsely advertising a motor vehicle as a model made in a particular year is falsely representing the particular history of that vehicle.

c. Winiding Back Odometer - Finger v Malua Motors Pty

2. Second, the history of a good has importance where consumers make buying decisions based on the place where a good is made.

a. The classic case is falsely advertising that imported goods are ‘Made in Australia’.

i. Korczynski v West Lofts (Aust) Pty Ltd

3. Third, the history of goods is of importance where consumers make buying decisions on the basis of the way in which a product is produced.

a. Consumers may be particularly attracted to goods that are advertised to be ‘hand-made’ as opposed to ‘machine-made’



Has there been a FALSE Representation of a SERVICE?Section 75AZC(1)(b) prohibits false representations that services have a particular standard, quality, value or grade

The considerations with respect to standard, quality, value and grade ARE AS ABOVE

Has there been a FALSE Representation of the NEWNESS OF THE GOOD?Section 75AZC(1)(c) prohibits false representations that goods are new

What does NEW mean? ‘New’ can mean ‘novelty’ or ‘invention’.

o Promote a new washing powder which has a ‘new and improved’ formula. If in fact the washing powder has NOT been materially changed, RATHER has simply been put in a new package, AN OFFENCE WILL have been committed.

‘New’ can also mean ‘recently produced’ or ‘of recent origin’

‘New’ can mean that goods are in ‘mint condition’ in the sense of not being secondhand, used, refurbished, repaired or rebuilt

o CASE: Henderson v Bowden Ford - Selling an unused but superseded Ford motor vehicle with a 20 month old compliance plate as a ‘new’ vehicle. FOUND GUILTY

Has there been a FALSE Representation of ACQUIRING NEW GOODS?Section 75AZC(1)(d) prohibits false representations that a particular person has agreed to acquire goods or services.

Has there been a FALSE Representation of GOOD PERFORMANCE etc?75AZC(1)(e) prohibits representations that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have.

False claims that goods have been ‘approved’ by the Standards Association will be a breach of s 75AZC(1)(e)

o CASE: Hartnell v Sharp Corp - Sharp falsely advertised that some of its microwave ovens had been approved by the Standards Association of Australia

o CASE: Barton v Croner Trading - claimed that plush toys exceeded ‘all Australian Safety Regulations including the Inflammability Act’. NO such Act existed.

‘Performance characteristics’ covers a wide range of advertising claims.Advertisers must be careful not to convey the impression that their goods have uses or benefits they do not have

Given v Snuffa Pty Ltd – misrepresented their fire extinguishers had been tested for efficiency by the NSW Board of Fire Commissioners when the fire extinguishers had failed the test



Dawson v World Travel Headquarters Pty Ltd - advertised a tour as 16 days when in fact it was only 15 days in duration. This was a false representation that a service had benefits it did not have.

Has there been a FALSE Representation of GOOD SPONSORSHIP etc?Section 75AZC(1)(f) prohibits representations that a corporation has sponsorship, approval or affiliation it does not have

Has there been a FALSE Representation of PRICE OF GOODS etc?Section 75AZC(1)(g) prohibits misrepresentations concerning the price of goods or services.

CASE: ACCC v Signature Security Group - advertise goods or services for sale at $295 without indicating that GST is not included could be misleading

What are examples of false representations as to price?Advertisement RealityReduced from … Product never offered for sale at the higher price50% off Never been offered for sale at 100% priceWas $50 Now only $30 Never been offered for sale at the higher priceSpecial price — only $10 $10 is the regular price2 for the price of 1 No evidence of single salesReduced — only $9.99 Normal price is $10$10 — Recommended price $15 Recommended price never followed in practice$10 — List price $15 List price is never followed in practiceGoods from $10 Only one available at $10. Rest considerably moreSpecial liquidation price Price is normal priceSpecial clearance price Price is normal priceSpecial closing down price Price is normal price

CASE: Sest v CopperartOutline:

1. Ran advert campaign promoting a ‘No Nonsense, Half Price Sale’. It claimed all its prices were ‘50% off regular prices’.

2. Lied about RRP so no real savings at allDecision:

1. The representations were false and breach occurred

CASE: ACCC v TargetOutline:

1. Target used TV ad’s to announce ‘a massive 25%…off every stitch of clothing’2. Also put disclaimer lasting 1.5 seconds was shown at the end of the advertisement

stating that the offer did not extend to accessories which includes ties, scarves, gloves, hats, underwear, socks or hosiery.

Decision:1. that this was a breach of the TPA.

Has there been a FALSE Representation of FACILITIES FOR REPAIR etc?



Section 75AZC(1)(h) prohibits misrepresentations concerning the availability of facilities for the repair of goods or of spare parts for goods

Has there been a FALSE Representation of PLACE OF ORIGIN etc?Section 75AZC(1)(i) prohibits misrepresentations concerning the place of origin of goods.

Has there been a FALSE Representation of NEED FOR GOODS OR SERVICES etc?Section 75AZC(1)(j) prohibits misrepresentations concerning the need for any goods or services.

Trade Puffery - ‘You need Blogg’s Shampoo’, no offence is committedo i.e. a company marketing fire extinguishers by falsely representing in

advertising brochures that fire extinguishers must be fitted adjacent to each exit door of caravans

o CASE: Given v Snuffa A co marketing fire extinguishers Falsely representing in brochures that fire extinguishers must be

fitted adjacent to each exit door of caravans The law is breached

Has there been a FALSE Representation of RIGHTS OF CONSUMERS etc?INCLUDING “NO RETURNS OR NO WARRANTIES” – Use of word “FREE”Section 75AZC(1)(k) prohibits misrepresentations concerning the existence, exclusion, or effect of any condition, warranty, guarantee or remedy.

where a television advertisement for sunglasses offers an unconditional five year guarantee on the product,

o but the swing-tag attached to the sunglasses limits the guarantee to the frames alone (specifically excluding the lens) AND

o only if the damage occurs during normal usage, there would be a breach of s 75AZC(1)(k).

CASE: Ballard v Sperry RandOutline:

1. A manufacturer of electronic calculators2. Said in brochure that its calcs had a 12 month warranty3. HOWEVER a stub inside the box only said a 90 day warranty

Facts:1. Breach

CASE: Miller v Fiona's Clothes Horse of Centrepoint1. The TPA and the Goods Act give consumers the right to return goods in certain

circumstances. 2. The retailer is NOT permitted to exclude or modify those rights by having signs

such as “No Warranties or No Refunds”

CASE: Nationwide News Pty Ltd v ACCCOutline:

1. Newspaper said “Free mobile phone for every reader. *Conditions apply.”Notes by All Things Law – http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs.


2. Don’t miss Monday’s Telegraph Mirror.’ (condition was in very small print)3. The ACCC claimed that this breached ss75AZC(1)(g) and 75AZC(1)(g)

Decision:1. The ad was likely to be understood as an offer to get a mobile phone WITHOUT

1st having to outlay any money. This was NOT correct.2. Nationwide HAD made a false representation about the effect of a condition or

right

Note: The word ‘Free’ when used in advertising can have a magnetic effect and accordingly can easily mislead where it is not used accurately. Advertisers must be care-ful to qualify the use of the word when in fact there are any charges associated with an offer.



STEP 4 – Criminal Conduct, 75AZF, AZH, AZIHas the FULL PRICE been stated in all circumstances?Section 75AZF prohibits a firm from making a representation about an amount that, if paid, would constitute a part of the consideration for goods or services, unless the firm specifies the cash price

CASE: ACCC v Signature Security Group - $295 plus GST WOULD breach s 75AZF

o BUT $295 plus GST of $29.50 would be in conformity with s 75AZF:

Has there been MISLEADING conduct in relation to GOODS or QUANTITY? Section 75AZH prohibits misrepresentations with respect to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods

Manufacturing process’ covers claims that goods are handmade when in fact they are machine-made - Kisherboim v Salmon & Gluckstein Ltd

Section 75AZH also prohibits misleading conduct with respect to the ‘quantity’ of goods.

Has there been MISLEADING conduct in relation to SERVICES? Section 75AZI prohibits misrepresentations with respect to the nature, the characteristics, the suitability for their purpose or the quantity of any services

CASE: Doherty v Traveland1. Continued to advertise in its brochure a 13-day trip to Bali and Singapore after the

trip had been reduced to 11 days.2. Breach as public would be mislead to the quantity of the services – ‘the trip’

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The Liability of Advertising Agencies and Accessory LiabilityAre Advertising Agencies liable as well?

1. Advertising agencies play a major role in the creation and dissemination of advertising material.

2. It is expected that they take some responsibility for ensuring that advertising is not misleading or deceptive.

3. A person who is an accessory to a contravention of Part VC of the Act may be fined and ordered to pay damages: s 79

What is the usual outcome in agency accessory cases?The trend in recent cases has been not to impose primary liability on the advertising agency.

1. Provided advertising agencies make sure that they get their clients to sign-off on any campaign, it is difficult to envisage them being liable as a principal

a. Cassidy v Saatchi & SaatchiWhat is an accessory?

An accessory is any person aiding, abetting, procuring, counselling, inducing, attempting to induce, conspiring in or being knowingly concerned in a breach of the TPA: ss 75, 79

When will an accessory be liable? A person will only be liable as an accessory if that person KNEW that the

advertising was FALSE or was reckless as to its truth, Although it is NOT necessary to prove that the person was aware that the

advertising was in breach of the TPA

CASE: Yorke v LucasOutline:

1. Lucas was a real estate agent2. Lucas told Yorke, that the turnover of the bussiness was $35003. This was NOT correct4. This info was received from his client and Lucas DID NOT doubt them

Decision:HELD: NOT liable

1. To be liable as an accessory it was necessary to establish that Lucas had intentionally participated in the breach.

2. Although ‘Lucas was aware of the representations — indeed they were made by him — he had no knowledge of their falsity and could not for that reason be said to have intentionally participated in the contravention’

CASE: MBF v CassidyOutline

1. MBF is an insurance co2. Bevins was its advert agency3. Incorrectly said that MBF would waive the normal waiting period for pregnant

women. However, both MBF and Bevins knew that ‘waiting periods did apply in this case’

4. The advertisements contained disclaimersNotes by All Things Law – http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs.


Decision:1. Accessory liability would only arise if it was shown that Bevins knew of the facts

which constituted the conduct of MBF which contravened the Act2. It DID NOT.3. There was no evidence that Bevins knew that some members of the public might

be misled



STEP 5 – DefencesAre Information Providers Liable? i.e. publishers of informationA prescribed information provider is anyone who operates a business providing information, and includes radio and television stations as well as newspaper and magazine publishers.

s 65A means that media proprietors cannot be held liable for misleading or deceptive content carried by the media. The media, however, remain potentially liable for any false advertising they carry.

Are Publishers Liable?Section 85(3) of the TPA provides a special defense for persons involved with publishing advertisements. It reads:

a person is in the business of publishing or arranging for the publication of advertisements; and

that person received the advertisement in the normal course of business; and the person did not know and had no reason to suspect that publication of the

advertisement would breach the Act.

Useful too:1. The defense is relevant to all media proprietors - United Telecasters [10.53C]. 2. It would also apply to Internet sites that carry advertising and to advertising

placement agencies.

Does not apply to:1. apply to the advertising agency that ‘creates’ the advertisement2. Nor will it apply where the advertising agency or media proprietor was aware or

ought to have been aware that the advertisement contained misleading or deceptive material.

What there a reasonable mistake ? s 85(1)(a) - if the defendant establishes that the contravention was caused by a reasonable mistake of fact, including a mistake of fact caused by reasonable reliance on information supplied by another person.

What is a reasonable mistake?Three things:

1. A mistake means an error and a reasonable mistake means an error made without negligence or carelessness

a. An ‘honest’ mistake is not necessarily a reasonable mistake.

2. A mistake which can only be detected by technology which is not generally available is probably a reasonable mistake: see Adams v Eta Foods Pty Ltd

What must you prove if you say you have relied on someone else?If the defendant intends to rely on a mistake of fact caused by reliance on information supplied by another person it is MUST show:Notes by All Things Law – http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs.


the other person was not a director, employee or agent of the defendant: s 85(1A); AND

the mistake was reasonable.

ExampleWholesaler had NOT bothered to read the manufacturer’s label could NOT rely on s 85(1) as it turned out that the manufacturer’s label contained a misrepresentation as to the standard of the goods - Gardam v George Wills -

What is the defense for relying on Third Parties?If the third party had NOT been provided with the full facts a defendant CANNOT rely on advice given by a third party. The reliance is not considered reasonable - ACCC v Murray

CASE: Wilkinson v Katies FashionsOutline:

1. Katies, a retailer of women’s clothing, sold garments to which the supplier had attached a label mis-stating the content of the material from which the garments were made

Decision:1. Katies breached section 53(a) by falsely rep the ‘composition’ of the garments.2. UNABLE to rely on the defence that it had reasonably relied on info supplied by

the manufacturer (s 85(1)),3. BECAUSE simple and inexpensive checks WERE available for checking the fibre

content of the garments.

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What is the defense for taking reasonable precautions and acting in due diligence?The defence is under s 85(1)(c).Notes by All Things Law – http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs.


Has two parts:1. the contravention must be due to the act of another person or an accident or some

other cause beyond the defendant's control and2. the defendant must have taken reasonable precautions and exercised due diligence

to avoid the contraventionBoth parts of the defense must be proved by the defendant

Taking reasonable precautions and exercising due diligence normally means: setting up a system for detecting possible breaches of Part VC of the TPA; putting in place reasonable procedures for avoiding those breaches; and monitoring the procedures.

CASE: United Telecasters Queensland Ltd v Guthrie1. United Telecasters was a television station2. Ran an ad for a car dealer who falsely claimed sales tax deductions would end on

30 Apr.3. A viewer complained that the advertisement was false and incorrect and reported

to United4. This officer was experienced in advert & passed the ad WITHOUT making any

checks5. Action was brought against United6. United pleaded a defence of reasonable mistake under s 85(1)(c) and the

publishers’ defence under s 85(3).Decision:

1. No requirement for United to check the contents of the advertisement 2. There was no adequate system for handling complaints about the advertisements3. The system of handling complaints did not amount to taking reasonable

precautions or exercising due diligence and, therefore, the defence under s 85(1)(c) failed

STEP 6- Court OrdersNotes by All Things Law – http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs.


What are the Maximum Monetary Penalities for breach?The max fine for contravention of most provisions of Part VC is set at 10,000 penalty units. A penalty unit is presently $110 = $1.1 million.In the case of a person the maximum fine is $220,000.

What are the objectives to bear in mind when assessing the relevant penalty?Smithers J in CASE: TPC v Stihl Chain Saws

Penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act

The court should take into consideration: the importance of the misrepresentation in any transaction; the degree to which the misrepresentation departed from the truth; the degree of wilfulness or carelessness in making the misrepresentation; how widely the misrepresentation was spread; and whether the defendant had taken any and what steps to counteract the

misrepresentation

When are Injunctions Granted? Interim injunctions are granted to ensure the STATUS QUO is maintained until the matter has come to trial.

Court must be satisfied that: there is a serious question to be tried that the balance of convenience favors’ the grant of interim relief that damages will not be an adequate remedy in considering the balance of convenience the relative strength of the applicants

case on the merits can be taken into account

CASE: Tooheys Pty Limited v Coopers BreweryOutline:

1. Tooheys wanted an interim injuction to prevent the release of Coopers ‘New Draught’ beer

Decision:2. Was refused on the grounds that the damage and inconvenience likely to be

caused to Coopers outweighed the inconvenience and hardship asserted by Tooheys

CASE: Colgate-Palmolive Pty Ltd v Smithkline Beecham HoldingsOutline

1. Colgate toothpaste had peroxide2. New rival toothpaste Mcleans claimed that its product contained ‘No peroxide’

and ‘No harsh abrasives’Decision

1. Refused an injunction pending the hearing of the case on the basis that the balance of convenience DID NOT favour such an order

2. The comment ‘No harsh abrasives’ was NOT deceptive

When does an order for Corrective advertising occur?



Corrective advertising will only be ordered if it is appropriate in the circumstances having regard to the nature and likely effect of the advertisement and of the corrective advertising

The purpose of corrective advertising is to protect and educate consumers, not punish the defendant (HCF Australia Ltd v Switzerland Australia Health Fund Ltd)

Case: ACCC v Virgin Mobile Australia Pty LtdCorrective advertising was ordered because it would:

assist in drawing the contravention to the attention of consumers generally who may have acquired Virgin Mobile packages or may be contemplating doing so

the positive function of alerting consumers to the obligation imposed on Virgin Mobile to disclose those things

Case: ACCC v Hungry Jack'sHungry Jack's as part of a large promotional campaign, which included significant television and radio advertising, sold sunglasses to the public which should have carried the warning that the sunglasses were not suitable for driving.

Court Ordered Hungry Jacks to: Hungry Jack's made changes to its advertising to show the appropriate warning The court ordered specific corrective advertising in both print and on television

When are Damages issued?The court may award damages to persons who have suffered losses by conduct in contravention of the TPA.

Can the ACCC get damages on behalf of consumers?NO, ACCC cannot receive an award for consumers who are not a party to an action: CASE: ACCC v Danoz Direct Pty Ltd CASE: Medibank Private v Cassidy

The ACCC can, however, bring representative proceedings on behalf of injured consumers under s 87(1B) of the TPA. The ACCC must obtain prior written consent from each consumer on whose behalf the proceedings are brought.

When are Enforceable Undertakings Issued?1. The ACCC is empowered under s 87B to accept written undertakings from a firm

alleged to have breached the TPA. 2. These undertakings may include a requirement to re-imburse customers, to

implement a compliance program or to publish corrective advertising. Such undertakings are enforceable in court.



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