Basic Knowledge of Australian Consumer Law - Case Study Example

Basic Knowledge of Australian Consumer Law Student’s Name: Course Code: Lecture’s Name: Date of Submission: Basic Knowledge of Australian Consumer Law 1.0 Introduction Advertising is an important aspect in the promotion of products or services through communication thereby leading to increased sales volume (Bruce, Peters & Naik (2012, p.797). Nevertheless, in certain circumstances various advertisements have been found to be unethical and misleading. For instance, firms such as GlaxoSmithKline have been fined in countries such as US, UK and China for engaging in unethical marketing and advertising (Cosgrave, 2013; Reuters, 2013). Within the Australian context, section 18 of Volume 3 of Australian Competition and Consumer Act 2010 (Cth) warns against engagement in deceptive and misleading conducts by business organisations. The focus of the discourse is to assess how consumers’ rights are guaranteed in Australia under Australia Consumer Law and Australian Competition and Consumer Act 2010 (Cth). By utilising the case example of Harvey Norman franchisees and Reebok Australia within the context of advertising and design, the paper discusses misleading of consumers by business organisations in regard to advertisements. 2.0 Section 18 of ACL, Nexus to Misleading & Deceptive Conducts and the Grey Areas In profit oriented existence of business as informed by consequentialism theory of utilitarianism, business existed to make profit irrespective of their impact on stakeholders such as consumer and the environment. Ethical behaviour by business organisations within the context of institutional accountability and corporate governance has gained prominence over the years anchored on the realisation that businesses not only exists to maximise profit and reward shareholders, but also to meet the expectation of other critical stakeholders such as consumers (ASX Corporate Governance Council, 2007, p.21). Based on such realisation, Australian Consumer Law aims at enhancing fair trading and consumer protection. For this paper, the important section is embedded in volume three Section 18 of Australian Competition and Consumer Act 2010 (Cth) entitled misleading or deceptive conduct. Section 18(1) of the Act states that “a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. The new Act came into operation in 2011 by replacing the Trade Practices Act of 1974. One of the rationales fronted for review of the predecessor Act was based on the fact that the earlier Act did not take into account individuals. This implies that the current Act takes cognisance of both individuals as well as corporations (Australian Government, 2010). In relation to misleading practices, in the older Act it was taken care of in section 52 of TPA, but currently it is taken care of in section 18 of volume three of Australian Consumer Law. However, this section is marked with grey areas as a result of inadequate definition of key terms, thereby leaving these key terms to be defined mostly under common law. For instance, section 4(1) only considers misleading and deceptive conduct in the context of future matters. The only point that that issue of deceptive conduct is categorically defined is within section 18 (1) (a) and (b) note that when the corporation relays information in the course of providing information, they are not liable to any charges. However, this leeway is subsequently limited in subsection 2 -4. Closely related to defining deceptive conduct is within the domain of contractual agreement. Section 23 of the Act describes issues such as unfair contractual terms and unfair practices. Additionally, section 29-38 describes is such misleading and false representations which are further expended on in section 22A. However, there is no single point in the definition of terms where principal terms such as ‘mislead’, ‘misleading’, ‘deceive’ and ‘deceptive’ have been defined? In response to such grey areas in section 18, Justice Deane and Fitzgerald while litigating in the case of Taco Company of Australia Inc. & Anor v Taco Bell developed parameters that could be used in determining whether an act by business can be categorised as misleading. The contention in the case was premised on the concern that the defendant which is a firm with origin in US opened a business in Sydney which traded with the name ‘Taco Bell’ yet the plaintiff had an existing business name known as Taco Bell Casa’. This entails the section of the public that the deception is directed to; analysis of conduct in relation to the group that deception is directed to; acceptance of erroneous conclusions as part of persuasion, but not a requisite and thus, courts are free to these by themselves objectively and finally, determination of misconception and if that misconception was as result of defendant’s misleading behaviour. 3.0 How Advertising and Design can mislead Consumers Advertising constitute an endeavour within promotional aspect of marketing which is geared towards convincing customer to purchase that product or the caveats involved while purchasing that product (Samuels, 1970, p.190). Advertising endeavours equally plays an important role in enhancing brand awareness and brand equity of a given produce. This enhances business sales and market share (Romaniuk and Sharp, 2004, p.327; Yoo, Donthu, & Lee 2000, p.195). It is this urge to promote a product and convince a customer so as to enhance sales volume and curtail competitors that a business organisation either knowingly or unknowingly can engage in misleading and deceptive advertising. The same can be said of design and advertising where a design professional or department can produce an ad that is misleading and therefore not attaining legal and ethical values of a society. For instance Nestle was accused of presenting misleading advertisement to mothers that their milk formula presented the better option as compared to breast milk yet scientifically the contrary is true (Lapland, 2010). Establishing an act which is misleading in Australian within the context of consumer law has been widely conceptualised. In this perspective section 18 is anchored on wider coverage as far as possible so as not to limit in regard to misleading conduct. This said wide application in establishing misleading acts such as advertising is catapulted in Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340, 348. The bench observed that ‘it does not adopt the language of any common law cause of action…. It establishes a norm of conduct’. Misleading conducts falls within the domain of bad faith and good faith discourse. According to Carsley and Shacter (1997, p.241) misleading conduct can be conceptualised as entailing ill will or deceit so as to gain unfair advantage over another entity/ individual. In this regard, a business is said to have engaged in misleading exercise by not adhering to good faith expectations in contractual and social contract expectations. Business organisations are expected to adhere to principles that do not lead to dishonesty, imbalance of power, coercion and limited choices that can cause unlevelled grounds (Blum, 2007, p.11). Therefore, any business relationship should be anchored on fairness where both individuals mutually gain (Nussbaum, 2004, p.6). In a nutshell, misleading and deceptive conduct in advertising can be seen as a an act of offering incorrect information that is likely to distort the understanding/ behaviour of the consumer in relation to product they have purchased or might have wished to purchase. These include bait & switch advertising, deceptive form contracts, failure to disclose, wrong comparative advertising, representations & testimonials not anchored on facts, misleading guarantees & warrantees, inaccurate labels and misleading fine print & qualifications (Australian Competition & Consumer Protection Commission, 2014; Competition Bureau, 2012). For instance, in the case of Crocodile Marketing v Griffiths Vinters, the applicant had placed an order for de-alcoholised wine from respondent for resale purposes. The labelling in the product was that it had less than 0.5% alcoholic and calorific content of 1.3%. This later turned to be contrary and anchored on section 52 of TPA, the Supreme Court of New South Wales established that the defendant was guilty as charged. The case example of Harvey Norman Franchisees highlights how advertising can mislead consumers. The franchisees included Launceston Superstores Pty Ltd, Moonah Superstores Pty Ltd, HP Superstores Pty Ltd and Salecomp Pty Ltd. There advertisements as misleading advertisement mainly fall within the concern of misleading guarantees and warrantees that compromises on consumers rights. For instance, Australian Competition & Consumer Protection Commission (2013) notes that the franchisees had declared in their advertisements that they have no obligations to offer remedies for damaged goods unless this is brought to their attention in shortest time possible, they had no obligation to provide an exchange or refund for faulty goods bought and not having obligations to rectify any damages independently. The behaviour depicted above by Harvey Norman Franchisees shows that the firm has no mutual trust with consumers yet honesty and integrity is an important aspect in developing relationship in any contractual engagement (Kaasa and Parts, 2013, p.38). where trust exist it is easier to achieve intended goals of relationship, but in this context, Harvey Norman Franchisees fronts a behaviour that does not inculcate mutual trust as they are not dealing with their customers with honesty and integrity as they seek to establish a relationship that is geared towards favouring them irrespective of the problem that afflict products they sell yet it is a known reality that products in certain circumstances can develop functional faults and thus guarantees should be processed. The other case example is of Reebok Australia. Australian Competition & Consumer Protection Commission (2013) observes that Reebok Australia had contravened section 18 of the Consumer and Competition Act by engaging in misleading act by placing a false claim which has not been scientifically proven. In the case example, the commission established that the firm advertised to the consumers that ‘Easy Tone shoes would increase the strength and muscle tone of their calves, thighs and buttocks more than if they were wearing a traditional walking shoe’. This trend exhibits a case example of bait & switch advertising where the firms ultimate aim is to utilise false or misleading advertisement to drive their sales with wrong information that are not anchored on facts. The behaviour by Reebok by Australia is more geared towards having a utilitarian relationship with consumers only as informed by teleology as opposed to belief that they have social contract with consumers and thus should embrace non-consequantialist approach that creates a balance between commercial gains and addresses stakeholders’ requirements (Farrell, Fraedrich & Farrell, 2011). The rationale for the above description is anchored on the fact that they exist to serve their interest as opposed to making the whole process a mutual engagement. This is because the firm advertises a product with false claims that they cannot substantiate and has not been proven scientifically. 4.0 Conclusion The aim of the aim of this paper was to determine how consumers’ right are protected in Australia within the frame of Australian Competition & Consumer Law. By utilising the case example of Harvey Norman franchisees and Reebok Australia within the context of advertising and design the discourse established that advertising can mislead consumers in two perspective. the first perspective is utilisation of misleading guarantee so as to restrict the obligation of the business organisation towards consumer. This is evident in the behaviour of Harvey Norman franchisees. Secondly, the paper established that advertising can mislead consumers by utilising bait advertising so as to increase their sales as exhibited by Reebok Australia who presents false information about their product yet the claim cannot be scientifically proven. References ASX Corporate Governance Council 2007, Corporate governance principles and recommendations, 2nd edn, Retrieved on 27 February 2014 from: http://asx.ice4.interactiveinvestor.com.au/ASX0701/Corporate%20Governance%20Princi ples/EN/body.aspx?z=1&p=-1&v=1&uid=#. 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