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Fake Reviews & the Australian Consumer Law

28 February 2019

The Internet provides a unique platform for modern businesses. Potential customers have much greater access to information about a business, and a wider selection of businesses to compare, than ever before.

Many businesses rely upon online reviews, including those on search engines, social media, and dedicated review platforms, to generate leads and provide social proof of their business’ reputation.

However, online reviews can be subject to abuse, to artificially inflate or unfairly decrease a business’ online reputation. Fake reviews can create unfair competition in the marketplace, and cause significant damage to the reputation and livelihood of a business.

In Australia, the Australian Consumer Law provides some legal protections against unfair conduct regarding online reviews.

The Australian Consumer Law

The Australian Consumer Law (ACL) is a schedule of the Competition and Consumer Act 2010 (Cth). The ACL is administered by the Australian Competition and Consumer Commission (ACCC).

If a business contravenes the ACL’s requirements, it can be exposed to:

  • prosecution by the ACCC - which can result in fines, adverse publicity orders and other orders;
  • civil litigation - for example, a lawsuit brought by a competitor or another business that claims to have been adversely affected by the first business’ contravention.

Directors and other individuals can also be held personally liable if they are knowingly concerned in a contravention of the ACL.

Misleading & Deceptive Conduct

The ACL broadly prohibits businesses from engaging in “misleading and deceptive conduct”:

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

In addition to the general provision above, there are prohibitions that relate specifically to “testimonials” (including online reviews):

29 False or misleading representations about goods or services
(1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

(d) make a false or misleading representation that a particular person has agreed to acquire goods or services; or
(e) make a false or misleading representation that purports to be a testimonial by any person relating to goods or services; or
(f) make a false or misleading representation concerning:
(i) a testimonial by any person; or
(ii) a representation that purports to be such a testimonial;
relating to goods or services; or

What can be caught out?

The case examples below are by no means exhaustive, but highlight the types of conduct that can contravene the ACL.

Posting Fake Reviews

Where a business engages in the practice of posting fake reviews (whether in relation to their own business, or in relation to another business - such as a competitor), this conduct may amount to a false or misleading testimonial, and thus breach the ACL.

In ASIC v Malouf Group Enterprises, the Australian financial services industry regulator was successful in proceedings against MGE (which traded under the business names Credit Clean Australia, Credit Wash, Credit Fix Australia and Clean Your Credit). ASIC alleged that MGE had engaged in misleading and deceptive conduct by posting false customer testimonials on its websites in relation to its credit repair businesses.

The Federal Court of Australia (FCA) held that the testimonials "were not testimonials from persons who had used the services of [MGE]", and thus MGE had contravened the provisions of the ACL. ASIC obtained a pecuniary penalty of $400,000 against MGE and an additional penalty of $100,000 against MGE’s director.

Systematically Avoiding Negative Reviews

In late 2017, the ACCC was successful in proceedings against the Meriton chain. Meriton operates hotels and services apartments, and it was alleged that staff had engaged in a practice known as ‘masking’ to avoid negative reviews on popular travel review site, TripAdvisor.

Meriton used TripAdvisor’s service to routinely send automatic invitations to guests inviting them to leave a review of their experience. The ACCC alleged that where Meriton staff anticipated a negative review, they would intentionally falsify the guest’s email address to prevent the automatic TripAdvisor review invitation being delivered to the guest’s email account.

The FCA held the practice of ‘masking’ amounted to misleading and deceptive conduct, and Meriton was ultimately fined a $3 million penalty.

In its media statement, the ACCC’s Commissioner, Sarah Connor, commented:

Meriton’s management directed staff to engage in β€˜masking’ to stop potentially negative reviews from appearing on TripAdvisor. This gave the impression Meriton accommodation was of a higher standard than otherwise may have been the case.
People often make purchasing decisions for accommodation based on the rankings and reviews they read on third party sites like TripAdvisor. Manipulating these reviews is misleading to potential customers, who deserve the full picture when making a booking decision.
This case sends a strong message that businesses can expect ACCC enforcement action if they’re caught manipulating feedback on third party review websites.

Conclusion

In light of the above, it is prudent for a business to ensure that any testimonials or reviews published are truthful and accurate, and are given by genuine customers of the business. Care must be taken when sourcing reviews and businesses should avoid attempting to artificially influence their own reputations or those of competitors.

Harsh penalties may apply where businesses engage in the practice of generating fake reviews.

This post is intended for general information only and is not intended to constitute legal advice. You should obtain appropriate professional advice for your circumstances or contact us for further assistance.

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