How to Seek Damages for Misleading Conduct Under the Australian Consumer Law (ACL)

Introduction

The Australian Consumer Law (ACL), found in Schedule 2 of the Competition and Consumer Act 2010 (Cth), prohibits misleading or deceptive conduct in trade or commerce. Section 18 of the ACL is particularly significant for businesses, as it prevents competitors from engaging in conduct that misleads or deceives consumers or other businesses.

When a competitor engages in misleading conduct, affected businesses may suffer financial losses, reputational damage, or loss of market share. In such cases, the ACL provides remedies, including damages, to compensate for losses incurred. This article examines the legal framework for claiming damages under the ACL for competitor misleading conduct.

Key Elements of Misleading Conduct Under the ACL

To succeed in a claim for damages under the ACL, the plaintiff must establish:

• Misleading or Deceptive Conduct – The competitor made false or misleading representations (e.g., false advertising, false comparisons, or deceptive claims about products/services).
• In Trade or Commerce – The conduct must occur in a business context, not in private dealings.
• Causation – The misleading conduct must have caused the loss or damage suffered by the plaintiff.
• Loss or Damage – The plaintiff must prove actual financial loss, such as lost sales, reputational harm, or increased costs.

Types of Misleading Conduct by Competitors

Common forms of misleading conduct by competitors include:

• False or Exaggerated Advertising – Making unsubstantiated claims about a product’s benefits.
• Comparative Advertising – Misrepresenting a competitor’s product to make their own appear superior.
• Bait Advertising – Advertising products at a discounted price when they are not reasonably available.
• Misleading Testimonials or Reviews – Fabricating endorsements or reviews to mislead consumers.

Remedies Available for Misleading Conduct

Under the ACL, affected businesses can seek:

• Damages – Compensation for financial losses (s 236).
• Injunctions – Court orders to stop the misleading conduct (s 232).
• Corrective Advertising – Orders requiring the competitor to publish corrective statements.
• Declaratory Relief – A court declaration that the conduct was misleading.

Calculating Damages Under the ACL

Damages under s 236 aim to place the plaintiff in the position they would have been in had the misleading conduct not occurred. Courts consider:

• Direct Financial Losses (e.g., lost profits, reduced sales).
• Reputational Damage (if quantifiable).
• Corrective Advertising Costs (expenses incurred to counteract the misleading conduct).

Case Example: Australian Competition and Consumer Commission (ACCC) v TPG Internet Pty Ltd (2013)

TPG was found to have engaged in misleading advertising by promoting "unlimited" broadband plans with undisclosed charges. The High Court upheld penalties and compensation orders, emphasizing that businesses must clearly disclose all material terms in their promotions.

Defences to Misleading Conduct Claims

A defendant may argue:

• The conduct was not misleading (e.g., claims were true or substantiated).
• The plaintiff did not suffer actual loss.
• The loss was not caused by the defendant’s conduct.

Conclusion

Businesses harmed by a competitor’s misleading conduct can seek damages under the ACL to recover losses. To succeed, they must prove the misleading nature of the conduct, causation, and quantifiable loss. Given the complexities of such claims, legal advice is essential to assess the merits of a case and pursue appropriate remedies.

Proactive compliance with the ACL is crucial for businesses to avoid liability, while affected parties should act promptly to mitigate losses and seek legal redress where necessary.

Contact SDC Lawyers for a tailored advice if you are worried that you have been misled by an ad or a product from organisations.