Fines Ordered For Misleading Or Deceptive Conduct And False Or Misleading Representations
Companies alleged to have engaged in misleading or deceptive conduct and/or false or misleading representations are often prosecuted by the Australian Competition and Consumer Commission (“ACCC”) and the Australian Securities and Investments Commission (“ASIC”). The prohibitions against behaving in such a manner and the liabilities associated with breaches are referred to in multiple legislative instruments, including, but not limited to the Competition and Consumer Act 2010 (Cth) (“CCA”) (including Schedule 2 – The Australian Consumer Law) and the Corporations Act 2001 (Cth) (“Corporations Act”), to name a few.
Depending on the severity of any breaches upon a finding of guilt by the ACCC or ASIC, civil or even criminal liabilities may include jail terms, monetary fines (which may include equitable relief) and/or suspensions from acting in an executive position (for Corporations Act breaches).
In simple terms under the CCA, misleading or deceptive conduct is described as conduct that is misleading or deceptive or likely to mislead or deceive and is usually conduct which ultimately induces or could likely induce someone to purchase a good or service from that company. Similarly, false or misleading representations are described as statements in relation to goods, services or business practices that are simply not true. Under the Corporations Act there are several sections that refer to false or misleading statements and/or misleading and deceptive conduct being considered prohibited conduct and carries various penalties. Under both Acts, misleading representation in respect of future matters is also considered to be prohibited and similarly carries penalties commensurate with the severity of the breach.
Recent Cases and Updates SmileDirectClub
On 11 November 2022, SmileDirectClub was ordered by the Federal Court to pay $3.5m for misleading claims about health insurance reimbursement for teeth aligners. The Federal Court made orders for SmileDirectClub Aus Pty Ltd along with its US parent company, SmileDirectClub LLC (together SmileDirectClub), to pay penalties totalling $3.5 million and to compensate customers, after court action by the ACCC. SmileDirectClub ultimately admitted that between May 2019 and October 2020, it had made false or misleading statements to consumers on its website and in emails, SMS text messages and in-store information cards, in contravention of the Australian Consumer Law. Approximately 98.5% of the Australian private health insurance market did not provide coverage for the costs of SmileDirectClub’s aligner treatment.
GetSwift
This year, the Federal Court has delivered the largest ever single penalty against a company for breaching continuous disclosure laws and engaging in misleading and deceptive conduct. In ASIC v GetSwift Ltd [2023] FCA 100:
former director, CEO and executive chairman, Bane Hunter was ordered to pay a penalty of $2 million and was disqualified from managing corporations for 15 years;
another former director, Joel Macdonald was ordered to pay a penalty of $1 million and was disqualified from managing corporations for 12 years; and
a “significantly less important player”, Brett Eagle, was also fined $75,000 and banned from managing corporations for two years.
It was held by Justice Lee that GetSwift and its directors had made numerous misleading announcements to the ASX, in breach of sections 1041H of the Corporations Act and section 12DA of the ASIC Act, and that they have breached its continuous disclosure obligations on 22 separate occasions between February and December 2017 (in breach of section 674 of the Corporations Act). The Court found that GetSwift’s former directors were individually liable for their actions and omissions as all three were “knowingly involved” in the breaches.
Other Updates
On 11 November 2022, Australia’s three largest internet service providers were ordered to pay a combined $33.5 million for misleading statements about NBN maximum speeds. Telstra Corporation Ltd, Optus Internet Pty Limited, and TPG Internet Pty Ltd each admitted to making false or misleading representations to consumers when promoting certain NBN internet plans, following proceedings initiated by the ACCC.
More recently, on 27 January 2023, the ACCC has started a social media sweep to target influencers. The ACCC has been alerted to and has started an investigation to identify misleading testimonials and endorsements by social media influencers. It will also look at more than 100 influencers mentioned in over 150 tip-offs from consumers who have responded to the ACCC’s Facebook post asking for information. In conducting this investigation, the ACCC is also considering the roles of other parties such as advertisers, marketers, brands and social media platforms in facilitating misconduct.
Key Take Away
Engaging in misleading or deceptive conduct and/or providing false or misleading representations can have significant consequences for any company and its directors. Before publishing any information or engaging in conduct that you may be unsure about it is always wise to seek independent legal advice. Palisade Corporate’s lawyers are well versed in Corporations Act compliance and compliance with Trade Practices and are always happy to provide advice to help safeguard you and your business.