Misleading and Deceptive Conduct
Businesses must ensure the accuracy of statements posted on their social media sites, including those posted by third parties, just as they would for an advertising brochure, billboard or letter.
The Federal Court decisions of ACCC v Allergy Pathway Pty Ltd (No 2)  FCA 74 and Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd  FCA 960 illustrate how the use of social media can carry significant risks, including the risk that businesses may be held liable for comments posted by third parties on their Facebook and Twitter pages.
The First Case
In early 2009, the ACCC commenced legal proceedings against Allergy Pathway Pty Ltd. Allergy Pathway Pty Ltd operated a clinic for the diagnosis and treatment of allergies using a “muscle strength indicator technique”.
The ACCC alleged that Allergy Pathway and its sole director (Mr Keir) had engaged in misleading and deceptive conduct relating to its claims that it could treat allergies using the “muscle strength indicator technique”. The claims were made on Allergy Pathway’s website, its Facebook and Twitter pages, as well as in advertisements on radio, in newspapers and in brochures distributed to clients.
The Federal Court found that Allergy Pathway with the know of Mr Keir had engaged in misleading and deceptive conduct. In so finding the Federal court ordered Allergy Pathway and Mr Keir:
- publish corrective advertising to the effect that Allergy Pathway and Mr Kier not “make, publish or cause to be made or published” statements that represent that either of them could test for and cure allergies using the technique, or that it would be safe to have contact with the allergen after treatment by Allergy Pathway;
- pay fines; and
- commit to ongoing compliance training (Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd  FCA 960).
The Later Case
After the first case, the ACCC took further action against Allergy Pathway and Mr Keir, alleging that they had breached the undertakings given to the Court on 35 separate occasions. As a result, the ACCC alleged, both Allergy Pathway and Mr Keir were in contempt of court.
The alleged breaches involved statements and testimonials on Allergy Pathway’s website as well as its Facebook and Twitter pages. The Court grouped the alleged breaches into four categories:
- statements and links to statements published by Allergy Pathway on its website and Facebook and Twitter pages, and in a YouTube video embedded on the Facebook and Twitter pages;
- testimonials written by clients and posted by Allergy Pathway on its website and Facebook and Twitter Pages;
- testimonials written by clients and posted by clients on Allergy Pathway’s Facebook “wall”; and
- Allergy Pathway’s response to queries posted by members of the public on its Facebook ”wall”.
Allergy Pathway conceded that most of the statements in categories 1, 2 and 4 breached the undertakings.
The category 3 statements were “controversial” as they were posted by Allergy Pathway’s clients and not by Allergy Pathway itself. In determining whether Allergy Pathway should be held responsible for statements made by others on its Facebook wall, the Court considered how Facebook and Twitter operate and whether Allergy Pathway had in fact “published” the statements written and posted by its clients on its Facebook wall.
The Court ultimately found that Allergy Pathway had become the “publisher” of the testimonials because it knew of the posts, knew they were statements which were not correct, and therefore misleading and or deceptive to readers of the posts, and decided not to remove them.
The Court said: ” ..(I)t is clear that it [Allergy Pathway] caused them [the posts] to continue to be published from the time it became aware of their existence, which is enough to put Allergy Pathway in breach”.
The Court also inferred that “one reason Allergy Pathway did not remove the testimonials was that it wanted to take the benefit of the praise for its services” and that Allergy Pathway thought the testimonials “added legitimacy” to its services. Ultimately Allergy Pathway and Mr Keir were fined $7,500 each for contempt of court and injunctions were ordered preventing them from engaging in similar conduct in the future. In addition, Allergy Pathway and Mr Keir were ordered to undertake corrective advertising and pay all of the ACCC’s legal costs.
The decision is also a legal landmark because it is the first time that the ACCC has obtained court orders requiring someone to place corrective notices on channels of video streaming websites such as YouTube (albeit these orders were made by consent).
Take Away Checklist
The decisions clearly establish:
- that businesses must ensure:
- the accuracy of content they themselves publish on their websites and social media sites (such as Facebook, Twitter and blog sites); and
- they remove any misleading or deceptive material posted by third parties as soon as they become aware of it;
- that the medium for corrective advertising is or should be the same medium that published he misleading and deceptive material; and
- that businesses that remain ignorant of the Competition and Consumer Act, 2010 do so at their peril; and
- to minimise the risks involved in using social media, businesses should monitor third party content on their sites.
As well as legal risks such as the publication of misleading third party content, there are other potential risks associated with social media, such as the posting of offensive material and the reputational damage which that could cause.
The extent of the legal compliance procedures necessary will depend on the particular circumstances of each business and their particular operations. The appropriate compliance procedures is an matter for businesses to obtain legal advice.