In the decision of ACCC v Employsure Pty Ltd  FCAFC 142, the Full Federal Court held that Employsure Pty Ltd (Employsure) had engaged in misleading and deceptive conduct and made false or misleading representations in conveying ‘government affiliations’ through its advertising. Employsure was fined $1 million in relation to seven Google Ads, published over the period of August 2016 to August 2018, which were found to convey the false representations in contravention of sections 18, 29(1)(b) and 29(1)(h) of the Australian Consumer Law (ACL). The decision highlights the high level of vulnerability that Courts’ are prepared to attribute to the digital consumer and the fine line between leveraging strategic ad positioning and making false representations or affiliations in digital marketing strategies.
The relevant provisions
Section 18 of the ACL prohibits misleading and deceptive conduct in trade or commerce. Conduct is held to be misleading or deceptive, or likely to mislead or deceive, where, when viewed as a whole and in context, it has a sufficient tendency to lead a person into error, beyond mere confusion. The test is objective, meaning the conduct need not have actually misled anyone; the mere capacity to mislead being sufficient to base a claim. Further an intention to mislead need not be proven.
Section 29 of the ACL specifically prohibits false or misleading representations made in trade or commerce in connection with the supply or possible supply of goods and services. Sub-section 29(1)(b) prohibits the making of false or misleading representations about the particular standard, quality, value or grade of services. Sub-section 29(1)(h) prohibits the making of false or misleading representation that the maker of the representation has a sponsorship, approval or affiliation. Section 29 provisions require the applicant to prove that the representations were actually false or misleading. However, an intention to make a false or misleading representation need not be proved.
Breaches of section 18 are subject to actions for damages, court compensation orders and/or injunctive relief. Breaches of section 29 are subject to pecuniary penalties of up to $500,000, in the case of individuals, and the greater of: $10,000,000, 10% of the annual turnover in the preceding 12 months or 3 times the value of any benefit “reasonably attributable” to the conduct, in the case of a corporation.
The impugned conduct related to seven paid Google Ads that were created by, or at the direction of, Employsure to promote its employment-related services. As part of its search engine marketing strategy, Employsure had selected the keywords “fair work commission”, “fair work Australia”, “fair work”, “fwc” and “fair work ombudsman” to direct its advertising to its prospective customers, being business owners with employment-related issues. The keyword selection enabled Employsure to have its advertisements displayed whenever uses entered the relevant keywords in the Google search engine.
Each of the seven impugned Google Ads were generated following an internet search using the search terms: “fair work ombudsman”, “fair work Australia”, “fair work commission”, “Australia government fair work” or “Australia fair play”. A few of the Google Ads also displayed a phone number which allowed the consumers to call directly from the Google Ad, including by clicking on the link if using a smartphone.
The Federal Court initially dismissed the Australian Competition and Consumer Commission’s (ACCC’s) case against Employsure. However, the Full Federal Court upheld ACCC’s appeal and remitted the matter to the trial judge to consider the appropriate relief for breaches of section 29.
In order to assess whether conduct is misleading or deceptive, the Court must assess how the conduct would be perceived by ‘an ordinary or reasonable member of the target audience of the advertisements’. The trial judge relevantly identified the target audience of Employsure’s advertisement as “business owners who are employers and who search for employment-related advice on the internet”; a finding which was not disputed on appeal.
His Honour went on to dismiss the case against Employsure, citing a number of grounds which primarily included:
- The presence of the word “Ad” on the advertisements. The trial judge found that an ‘ordinary reasonable business owner, to whom should be attributed some knowledge of the basic features of the internet and google search engine and its operations’ would realise that the Google Ads were paid advertisements.
- The “.com” domain on Employsure’s Google Ad. The trial judge held that a reasonable business owner would distinguish this from the “.gov” domain appearing in both the Fair Work Ombudsman (FWO) and Fair Work Commission (FWC) websites.
- The terminology in the Google Ads specifically directed to employers: “The Free Advice Service for Employers”, “The Advice Service Line for Employers”, “Free 24/7 Employer Advice”, “Business Owner HR Advice” and “Pay Rates to Your Staff”
- The broad meaning of the words “fair work”, beyond just the FWO/FWC government agencies, to include places where advice may be obtained regarding employment legislation and employment-related matters.
- The trial judge’s finding that a ‘reasonable business owner’ would take reasonable steps in ‘verifying that they are calling the correct number’ when attempting to contact the FWO or FWC or other government agencies, citing that the legislation’s object is not to protect consumers ‘who do not take reasonable steps in their own self-interest’.
The Full Federal Court opened its judgement with two critical observations that largely substantiated the majority of its reasons.
Primarily, the Court imposed a lower standard on the ‘ordinary and reasonable member’ of the target audience. The Court identified that when assessing advertisements published to a broad cross-section of the community, like Employsure’s, the characteristics attributed to the ‘ordinary and reasonable person’ of that target audience or class must reflect the diversity of the people in that class. For example, the Court reasoned that Employsure’s Google Ads would be perceived by a broad range of business owners ‘including those who are intelligent or shrewd and those who are gullible; the wary and the unwary; those who are well educated and those who are not; those who have a good facility in English and those who do not; those who are experienced in running business and those who have less or no prior experience; and those who are digitally competent or commercially sophisticated and those who are not’.
Secondly, the Court, citing a well-established line of case law authority, reiterated that in relation to misleading representations in advertisements, readers will generally not study an advertisement closely but instead will read it fleetingly, giving it ‘perfunctory attention’ and only absorb the ‘general thrust’. It will often be the first impression that will be determinative of the representation conveyed. Each of the impugned Google Ads appeared as the first result on the page of search results and there was expert evidence given at trial that “the higher a website features in the search result, the more likely it is that it will be selected”. The Court accepted this evidence as a relevant consideration.
Amongst other reasons, on the basis of the two observations outlined above, the Court rejected the majority of the primary judges’ findings centered around the assumption that the ‘reasonable ordinary business owner’ would pay attention to the details (i.e. domain names, ad formatting and textual details) and distinguish any government affiliations.
The Full Federal Court upheld ACCC’s appeal finding that Employsure had engaged in misleading and deceptive conduct (s 18) and made false and misleading representations in relation to the ‘standard or quality’ of its services being that of a government agency as opposed to a private company (s 29(1)(b)), and making ‘government affiliation’ representations (s 29(1)(h)).
What this means for your business
The decision highlights the extent of protection that Courts are willing to afford the new-age digital consumer against aggressive digital marketing strategies. The reluctance to impute a higher level of technological competence to the average consumer reflects the Courts’ continued commitment in protecting a broad range of consumers under the ACL.
Businesses must ensure that representations made in advertising accurately reflect the nature of the goods or services provided and that care be taken in using Google Ads. Particularly in digital marketing, businesses need to be aware of contextual factors that may create implicit misrepresentations through, for example, ad positioning capable of creating inferences of affiliations.
At Bryks Lawyers, we are experienced in advising on Australian Consumer Law and misleading and deceptive conduct matters. Contact us today to see how we can assist you!