Misleading or Deceptive Conduct under Section 18 of the Australian Consumer Law

Introduction

In the world of commerce, trust is the glue that holds transactions together. Consumers must be able to rely on the truthfulness of claims made about goods and services that they are considering purchasing. Likewise, businesses must be confident that their competitors are playing fairly and not gaining an unfair advantage. When false, inaccurate, or incomplete representations creep into the marketplace, that trust begins to erode.

Australian law takes this issue seriously. The Australian Consumer Law (ACL), contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth), enshrines one of the most important consumer protection mechanisms in the country: the prohibition on misleading or deceptive conduct. This prohibition sits at the heart of modern consumer law in Australia, and it has been described by courts as a “norm of conduct” that applies across the entire marketplace throughout Australia.

At the centre of this protection lies an extremely important section: section 18 of the ACL.

Section 18 prohibits anyone from engaging in misleading or deceptive conduct in trade or commerce. The section is drafted in remarkably simple terms, yet its application has been extensive, far-reaching, and highly litigated.

This article will explore:

• the scope and effect of section 18;
• what constitutes ‘conduct’ for the purposes of the ACL;
• the meaning of ‘misleading or deceptive’;
• the requirement of trade or commerce;
• common examples of contraventions;
• the line between puffery and conduct which is contrary to section 18;
• remedies and enforcement;
• practical guidance for businesses; and
• the interaction between section 18 and other laws.

By the end of this article, you should have a clear understanding of how this central consumer law principle works, and why compliance is so critical for anyone engaging in trade or commerce in Australia.

The statutory provision: Section 18

Section 18(1) of the ACL states, in plain language:

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Although the words are straightforward, they carry profound implications.

• no intention required – unlike fraud or deceit at common law, there is no need to prove that a person intended to mislead or deceive. The focus is on the effect of the conduct.
• no actual loss required – a contravention can occur even if no one has yet suffered damage. However, loss or damage is necessary if a party wants to seek compensation pursuant to section 236 of the ACL.
• wide scope – the provision applies to virtually all forms of trade or commerce, covering both consumer transactions and dealings between businesses.

What constitutes ‘conduct’?

The word “conduct” in section 18 is given a wide and flexible interpretation. It can include:

• spoken or written statements;
• online or print advertising;
• social media promotions;
• product packaging and labelling;
• omissions and failures to disclose; and
• even silence, in some circumstances.

In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (which considered the predecessor legislation, namely, section 52 of the Trade Practices Act 1974 (Cth) the Federal Court found that a vendor’s failure to disclose restrictions on restaurant seating capacity amounted to misleading conduct. The Court emphasised that silence can mislead if, in the circumstances, disclosure was expected.

The breadth of ‘conduct’ ensures that businesses cannot escape liability by claiming that their statements were casual, informal, or non-verbal, or that they ‘forgot’ or omitted to inform a potential consumer by accident. The law looks to substance over form.

What does ‘misleading or deceptive’ mean?

Courts have deliberately avoided giving a rigid definition to these terms. Instead, the guiding principle is whether the conduct has a real and not remote chance of leading someone into error.

In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, which again, considered section 52 of the Trade Practices Act 1974 (Cth) the High Court confirmed that the test is objective: would the conduct mislead or deceive a reasonable member of the relevant audience?

A few key points emerge from the case law:

• objective standard – it is irrelevant whether the person who made the statement believed it to be true.
• target audience matters – the relevant audience depends on the context. Advertising directed at sophisticated investors will be judged differently from advertising aimed at everyday consumers.
• not every mistake qualifies – the law is concerned with conduct likely to mislead ordinary, reasonable members of the class, not the unusually gullible or careless.

This flexible approach allows the law to adapt to changing circumstances and technologies.

The requirement of ‘in trade or commerce’

Section 18 is limited to conduct ‘in trade or commerce.’ This means the conduct must occur in the context of commercial or business dealings.

The High Court in Concrete Constructions (NSW) Pty Ltd v Nelson clarified that not every act by a business falls within the scope. In this particular case, a concrete worker, who, acting on instructions from his foreman, fell down an air-conditioning shaft, suffering serious injury. At first instance, the worker was successful. However, on appeal to the High Court, the High Court ruled that that the injuries were not sustained during the course of trade or commerce.Accordingly, the High Court allowed the appeal.

However, most dealings between businesses and consumers, and many dealings between businesses themselves, will fall within the scope. Examples include:

• sale of goods or services;
• advertising and marketing;
• real estate transactions;
• financial services;
• franchise arrangements.

The courts interpret ‘trade or commerce’ broadly, ensuring that most marketplace behaviour is captured.

Common examples of misleading conduct

Section 18 cases span industries from telecommunications to real estate, finance, retail, and beyond. Some common examples include:

• false product claims – e.g. claiming a product is ‘Made in Australia’ when it is not.
• price misrepresentations – e.g. advertising ‘sale’ prices where the product was never sold at the higher price.
• misleading advertising – e.g. fine print that contradicts the main message.
• false endorsements – using fake reviews or fabricated testimonials.
• real estate misrepresentations – e.g. overstating rental returns.
• silence about defects – failing to disclose known faults in goods or services.

The High Court’s decision in Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2019] FCA 1677 is particularly instructive. TPG heavily advertised broadband plans at $29.99 per month, but the fine print revealed that customers also had to pay additional charges. The Court held that the dominant message was misleading, despite the disclaimers, which appeared less prominently.

Funnily enough, the Australian Competition and Consumer Commission took TPG to court again several years later for engaging in misleading and deceptive conduct, in relation to prepaid phone services. Ultimately, the ACCC lost at first instance, and on appeal, the Federal Court of Australia finding that TPG did not contravene section 18 of the ACL.

Puffery vs misleading or deceptive conduct

Not all exaggerated claims cross the line. The law recognises ‘puffery’ – statements so vague or extravagant that no reasonable person would rely on them.

A well known example of puffery is the Leonard v Pepsico Inc case in the US – in that case, Pepsi advertised that if one collected 7 million Pepsi points, they could exchange it for a jet aircraft. Netflix has even made limited series about this particular case, called Pepsi, Where’s My Jet?.

Remedies and enforcement

Section 18 itself does not provide for penalties, but remedies are available under other parts of the ACL:

• damages – under section 236, where a person suffers loss because of misleading conduct.
• injunctions – under section 232, restraining future contraventions.
• declarations – clarifying the lawfulness of conduct.
• corrective advertising – requiring businesses to set the record straight.

In addition, other provisions of the ACL, such as section 29 (false or misleading representations about goods or services), can apply alongside section 18. These provisions do attract civil penalties, giving regulators like the ACCC stronger enforcement tools.

Practical guidance for businesses

To minimise risk under section 18, businesses should adopt robust compliance strategies:

• review all marketing and advertising for accuracy.
• train staff to avoid misleading statements.
• be transparent in contracts and negotiations.
• avoid overreliance on disclaimers.
• monitor representations made by agents, affiliates, and influencers.
• have proper contracts in place that protect the business against rogue influences or advertisers, etc.

With the growth of social media marketing, businesses must be especially vigilant and careful. The ACCC has made clear that businesses can be liable for misleading statements made by influencers or brand ambassadors acting on their behalf.

Interaction with other laws

Section 18 does not exist in isolation. It overlaps with:

• Contract law – misleading conduct can vitiate consent or lead to rescission.
• Corporations Act 2001 (Cth)
• Tort law – misleading conduct can overlap with common law contract and negligence.

For lawyers and business advisors, understanding these intersections is critical.

Conclusion

Section 18 of the Australian Consumer Law is deceptively simple in wording but enormously powerful in practice. It provides consumers with a shield against dishonesty and gives honest businesses a level playing field. At the same time, it imposes strict obligations on anyone engaging in trade or commerce.

The key takeaway is this: accuracy matters. What you say, how you say it, and even what you choose not to say can all have legal consequences.

At Allen Law, we regularly advise both consumers and businesses on misleading conduct claims. Whether you are considering bringing a claim, defending one, or simply want to reduce your legal risk, we can provide clear, practical guidance.

Contact us today

Got a question about Australian consumer law? Whether you’re a business needing advice, or an individual with questions about your rights – Allen law can help. Get in touch today.

Phone:               (03) 7020 6563
Email:                 enquiries@allenlawyers.com.au
Website:          www.allenlawyers.com.au

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Consult Allen Law for legal advice specific to your circumstances, as laws may change.