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Making claims that are false or misleading constitutes unfair business practices and, as we have seen in the case of Samsung Australia, attracts hefty penalties under the ACL.

In hot water – misleading claims in advertising attracts hefty penalty under the ACL

Author: Ersel Akpinar, Principal Lawyer

24 June 2022

Making claims that are false or misleading constitutes unfair business practices and, as we have seen in the case of Samsung Australia, attracts hefty penalties under the ACL.

The Federal Court ordered Samsung Australia to pay penalties of $14 million for admitting to false or misleading claims about the water resistance of various Samsung Galaxy mobile phones. This is a stark reminder for Australian businesses to substantiate all product claims.

It is also a reminder that the Australian Competition and Consumer Commission (ACCC) will take enforcement action against businesses that make false or misleading representations under the Australian Consumer Law (ACL). Learn more about some other organisations that have recently come under fire in our article ACCC cracks down on alleged misleading representations under the Australian Consumer Law.

This article will:

  • First, succinctly summarise the ACL;
  • Then, provide an overview of false and misleading representations;
  • Following this, it will consider Samsung Australia’s ACL breach; and
  • Finally, sum up with the key takeaways.

The ACL in a nutshell

The ACL is a national generic law that applies in the same way to all sectors and in all Australian jurisdictions. It provides consumers with the same protections and businesses have the same obligations Australia-wide. The ACL is set out in the Competition and Consumer Act 2010 (Cth) and:

  • Provides general standards of business conduct;
  • Prohibits unfair trading practices;
  • It also regulates particular types of business-to-consumer transactions;
  • Further, it comprises consumer guarantees for goods and services; and
  • It regulates the safety of consumer goods and services related to goods.

The ACL is administered and enforced by the ACCC and State and Territory consumer protection agencies such as NSW Fair Trading, Consumer Affairs Victoria, and Office of Fair Trading Queensland.

An overview of false or misleading representations under the ACL

One of the ACL’s key provisions disallows a business from making false or misleading representations. Making claims that are false or misleading constitutes unfair business practices and, as we have seen in the case of Samsung Australia, attracts hefty penalties under the ACL.

Under section 29 of the ACL, a business must not make false or misleading representations about goods or services when supplying, offering to supply, or promoting those goods or services.

A business must not make false or misleading representations about:

  • The standard, quality, value or grade of goods or services;
  • The composition, style, model, history or prior use of goods;
  • That goods are new;
  • That a particular person has agreed to acquire goods or services;
  • Testimonials by any person relating to goods or services;
  • The sponsorship, approval, performance characteristics, accessories, uses or benefits of goods or services;
  • The price of goods or services;
  • The availability of facilities for repair of goods or of spare parts for goods;
  • The place of origin of goods;
  • The consumer’s need for goods or services;
  • Any condition, warranty, guarantee, right or remedy on the goods or services; and
  • The requirement to pay for any condition, warranty or guarantee on the goods or services.

Samsung Australia’s ACL breach

In 2019, the ACCC initiated proceedings in the Federal Court against Samsung Australia alleging it’s advertisements misled consumers about the water resistance of numerous Galaxy phones.

Samsung Australia ran an expansive marketing campaign between March 2016 and October 2018 that depicted people using the Galaxy phones in swimming pools and ocean water. The nine ads in the campaign were published on its website, in-store, and across social media such as Instagram, Facebook, and Twitter.

In the Media Release on 23 June 2022, ACCC Chair Gina Cass-Gottlieb stated:

Samsung Australia’s water resistance claims promoted an important selling point for these Galaxy phones. Many consumers who purchased a Galaxy phone may have been exposed to the misleading ads before they made their decision to purchase a new phone.

Samsung Australia conceded it breached the ACL by promoting the phones as suitable to be used in pool or ocean water. The technology company acknowledged that by submerging the Galaxy phones in pool or ocean water, there was a significant chance the charging port would corrode and stop working if the device was charged while still wet.

Ms Cass-Gottlieb further said:

Samsung Australia’s ads promoting its Galaxy phones featured people using their phones in pools and sea water, despite the fact that this could ultimately result in significant damage to the phone.

The great majority of Samsung Australia’s breaches took place before the maximum penalties for ACL breaches increased. Similar conduct now could result in greater financial penalties.

Samsung Australia admitted it breached the ACL and made joint submissions with the ACCC on orders and penalties.

The key takeaways

To summarise, here are the key takeaways:

  • Under the ACL, businesses must not mislead consumers about product capabilities;
  • Australian businesses must substantiate all product claims;
  • The ACCC will take enforcement action against businesses that make false or misleading representations under the ACL; and
  • It is crucial that all Australian organisations understand their obligations and ensure compliance with the ACL, including when advertising and promoting goods and services.

For more information about the Australian Consumer Law and meeting your obligations, or if you have any questions, get in touch with the Lawthentic team.

About Lawthentic | Commercial Lawyers

Based in Sydney, Lawthentic provides high-level, specialist, commercial and corporate legal advice to business Australia-wide and across APAC. We deliver progressive end-to-end commercial law services that address the full spectrum of legal issues a business may encounter, driving “Real Progress for Enterprise”. Our legal services cover all areas of Commercial law, Corporate law, Intellectual Property law, Data and Technology law, Regulatory Compliance, and Dispute Resolution. We work with medium to large corporate businesses looking for friendlier and more cost-efficient legal services without compromising on expertise. We provide in-house, face-to-face, or remote support from our offices in Sydney.

About the Author

Ersel Akpinar, Principal Lawyer

Ersel is a Principal Lawyer, Founder and the Director of Lawthentic. He is a commercial lawyer with over 20 years’ experience working with a wide range of businesses in Australia and across the Asia Pacific region. Having started his career at top-tier US and Australian law firms, he is an accomplished, specialist and progressive legal advisor who is uncompromisingly dedicated to his clients. As a business enabler, a critical thinker and an interpreter of the law, Ersel believes in helping business to do business. Read more about Ersel >

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