In the world of intensified online advertising and ecommerce businesses grappling for market share, consumers and businesses alike should be aware of the common pitfalls of online shopping that could damn them both.
A recent decision by the Federal Court has shed light on how seriously the courts take businesses to task for alleged misleading or deceptive conduct. In July this year, the court handed down a hefty $10 million penalty along with other orders to nationwide auction business Grays eCommerce Group Limited after consumer watchdog ACCC commenced proceedings seeking declarations and a pecuniary penalty.
Grays admitted to multiple Australian Consumer Law (ACL) contraventions between July 2020 and June 2022, these were primarily centred around making false, misleading or deceptive representations in their listing descriptions of at least 753 used cars that were for sale on their website. It is important to note that some of the representations were likely to mislead – which also constitutes a contravention of consumer law. This includes conduct that, when viewed in context, is capable of leading someone into error.
Nicholas J detailed at [4] to [15] of his judgment Grays’ conduct during the Relevant Period. For example, incorrect information in listing descriptions ranged from making a series of ‘Identifying Characteristics Representations’ (ie. representations as to the year of manufacture, model or make of the vehicle etc which were in fact misrepresentations) to publishing listings without disclosing ‘Identifiable Issues’, being certain issues that buyers would reasonably expect a listing to disclose, such as the fact that there was ‘identifiable corrosion, soke, oil leaks, engine noise or hail damage’.
His Honour then noted at [30] that matters of particular relevance to his determination of an appropriate penalty in this case included, for instance, the presence of serious inadequacies in Grays’ customer service team’s practices. By way of example, customer service staff were trained to respond to customer complaints about misrepresentations by advising they could resell the car through Grays. This would occasionally constitute a repeat ACL contravention, in cases where a vehicle was relisted but its listing description remained the same.
Amongst other factors that were relevant to the court’s determination, Nicholas J was drawn to the size and financial position of the contravening company and the resulting financial benefit, as well as the role of corporate culture and senior management, noting in particular at [34] that Grays did not possess a corporate culture that was conducive to compliance with the ACL. For example, his Honour pointed out at [30] that Grays’ senior management during the Relevant Period (including then CEO and COO) were evidently aware of the litany of consumer complaints in relation to the misdescriptions.
More than ever, businesses are under increased scrutiny to review their practices and improve compliance with the ACL to ensure that consumers are able to trust the information they find online.
This decision proves a definitive wake-up call for businesses, showing that the ACCC and courts do not take false or misleading representations lightly.