Australian competition and consumer commission (accc) v mobileworld operating systems Pty Ltd (CRAZY J’S)
A. The case against Crazy J’s
Issue: Does ACCC’s claim of misleading or deceptive conduct hold water?
Rules: Section 18 of the Australian Consumer Law (ACL) 2010 (Cth) provides that a business or individual should not engage themselves in conduct that misleads or deceives or is likely to do the same as this would be unfair practice. The consequences for breach are that an aggrieved party can seek remedies by way of injunctions and compensation by way of damages (Commonwealth of Australia, 2010). In a decided case, an internet company was ordered to compensate subscribers after its offer of unlimited download plans was found misleading and deceptive. It was discovered that the plans were subject to various limitations and thus not entirely unlimited (Singtel Optus Pty Ltd v ACCC, 2012). Businesses have also been cautioned against the use of the word ‘free’ as it generates the interest among consumers (ACCC, 2014).
Application: As the plaintiff, in this case, the ACCC has raised the issue that Crazy J’s, the defendant, has engaged in misleading or deceptive conduct. The grounds for this argument are that the promotional material issued to consumers stated that they would be getting ‘free’ handsets. However, the phone plans offered by the company are much higher than those of similar companies meaning that the consumers would be paying for the handsets through their call rates. As mentioned, the word ‘free’ is likely to have been used to attract consumers and the rates rose to cover this cost; this is evidence of deception on the part of the defendant.
Conclusion: ACCC has a strong case on grounds of misleading or deceptive conduct against Crazy J’s.
B. Bait advertising
Issue: Is there any ‘bait advertising’ in this case?
Rules: Bait advertising encompasses advertising commodities at an attractive price when there is reason to believe that the goods do not exist or are in limited quantities (Logan, 2015). Businesses are prohibited, under s 35 of the ACL 2010, from advertising at ‘special prices’ if they cannot supply at this price (Latimer, 2012). If found liable for this offence, s 157 of the ACL 2010 provides that the individual or business be penalised. In Royal Diamonds v Buttle (2016), an attempt by a jeweller to appeal a decision against them on bait advertising charges was dismissed, the court upheld that advertising a sale for a diamond ring at a certain price and being unable to provide it after confirming receipt of payment by the respondent amounted to bait advertising.
Application: In the case study provided, Crazy J’s advertised that the handsets were free, however, it went ahead to sell them with increased call rates. This goes to show that they could not sell the handsets for free and supply them at the same price, they had to increase hidden costs to cover the offer. This, according to the rules discussed above, is evidence of bait advertising for which they can be penalised under the ACL 2010.
Conclusion: There was bait advertising in the case study by Crazy J’s as they were not able to supply the handsets at the promotional price.
C. False or misleading representations
Issue: Should the ACCC prosecute Crazy J’s for a criminal breach under s 29 of the ACL 2010?
Rules: Section 29 of the ACL 2010 prohibits any false or misleading representations as to the values, grade, use, composition and quality (among other criteria) of any good or service (ACCC, 2014). Breach of this provision carries punitive measure as per s 151 of the ACL 2010. This position was illustrated in ACCC v Audi Australia Pty Ltd (2007), where the car manufacturer had advertised a ‘drive away’ price to attract customers when in fact buyers would face additional fees which were not mentioned or included. The court found this to be false or misleading representation.
Application: One of the issues mentioned under section 29 which would constitute breach is a false or misleading representation as to price. As illustrated in the case law provided, hidden fees constitute a false and misleading representation as to price. Crazy J’s was not honest with the high call rate in their promotion as they advertised ‘free’ handsets. As such, citing the cost as ‘free’ despite the hidden costs amounts to a false representation for which they should be held liable.
Conclusion: ACCC should prosecute Crazy J’s for criminal breach under s 29 as their conduct falls under the confines of a false or misleading representation.
D. The difference between Section 29 and Section 18 of the ACL 2010
Issue: What makes s 29 so different from s 18?
Rules: Section 18 of the ACL 2010 prohibits misleading or deceptive conduct while section 29 prohibits false or misleading representations on goods or services. In Rea Group Ltd v Fairfax Media Ltd (2017), an application was brought before Judge Murphy for relief on grounds of misleading or deceptive conduct as well as false or misleading representations in advertisements issued by the respondent. The court in its deliberations opted to treat the terms interchangeably citing cases where other judges had done the same (Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd, 2014). Most times when an applicant brings a claim under section 18, they cite section 29 as well (Logan, 2015). The glaring difference is that section 18 does not carry punitive measures; it merely sets out a norm for good practice. Section 29, on the other hand, carries with it a penalty and is considered an illegality.
Application: As such, having considered the provisions of the law, it is evident that courts have used the terms interchangeably. Research shows, that in most cases, where a claimant argues for section 18 they will claim breach under section 29 as well. However, it is important to note that section 18 is an exception as it is not subject to punitive measure like other protections under the ACL 2010.
Conclusion: The notable difference between s18 and s29 is that section 18 does not carry punitive measures; judges in most cases, however, use the provisions interchangeably.
ACCC, 2014. Advertising and selling guide. [Online] Available at: https://www.accc.gov.au/publications/advertising- elling/advertising-and-selling-guide/avoid-misleading-or-deceptive-claims-or-conduct/misleading-or-deceptive-conduct [Accessed 26 April 2017].
Australian Competition and Consumer Commission v Audi Australia Pty Ltd (2007) FCA 1990.
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2014) FCA 634.
Commonwealth of Australia, 2010. The Australian Consumer Law: A guide to provisions. s.l.:Australian Government.
Latimer, P., 2012. Australian Business Law. Sydney: CCH Australia Ltd.
Logan, C., 2015. Advertising and marketing series: Illegal conduct in advertising and marketing under the Australian Consumer Law. [Online] Available at: https://legalvision.com.au/advertising-and-marketing-series-illegal-conduct-in-advertising-and-marketing-under-the-australian-consumer-law/ [Accessed 26 April 2017].
REA Group Limited v Fairfax Media Limited (2017) FCA 19.
Royal Diamonds Pty Ltd v Buttle (2016) NSWCATAP 230.
Singtel Optus Pty Ltd v ACCC (2012) FCAFA 20.