Competition and Trade Practices Alert: Federal Court decision a lesson for online advertisers to avoid misleading and deceptive conduct - 28 Feb 2012

A recent Federal Court decision shows that it's not just the ACCC who uses the Competition and Consumer Act 2010 (the Australian Consumer Law) to fight misleading or deceptive advertising. Companies with a "bricks and mortar" presence can also get in on the act against competitors who only have an online presence.

Here, special counsel Brett Bolton and solicitor Peter Travers review the facts of Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd and Anor, and outline what companies that advertise online can learn from this case.

Key lessons for advertisers

Specsavers v Coastal Contacts (Aus) provides a number of key lessons for businesses that advertise online:

  • The Australian Consumer Law applies to online advertising just as much as it applies to more conventional forms of advertising.
  • Advertisers should avoid using strong attractive words like "free" or "guarantee" in their advertising unless they can back their claims up, or unless any qualifications or restrictions to those promises are equally prominent. Advertisers should not assume that all visitors to their website are "net savvy" and capable of navigating their way by a series of mouse clicks or similar instructions to the information they need to fully understand the offer.
  • An interlocutory injunction may be available if an applicant can show a sufficiently strong case, and that damages would be an inadequate remedy if the injunction was not granted.

Specsavers v Coastal Contacts

In Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd [2012] FCA 102, the Court granted Specsavers interim injunctive relief, which restrains Coastal Contacts from engaging in advertising that is alleged to be misleading or deceptive conduct, or in breach of the Australian Consumer Law.

The matter involved an application by Specsavers for an interlocutory (ie temporary until a final hearing) injunction preventing Coastal Contacts from engaging in advertising that may be in breach of the Australian Consumer Law. Specsavers, which operates from "bricks and mortar" stores throughout Australia, alleged that Coastal Contacts, which operates exclusively through the internet, engaged in advertising that was misleading or deceptive, or in breach of the single price provisions of the Australian Consumer Law. The Court had to consider the following representations that Coastal Contacts made on the internet:

  • "Buy online and save up to 70%"
  • "Save 70% on Focus Daily"
  • "Superfast, Free Shipping"
  • "Focus Daily lenses only $18.99"
  • "Lowest Price Guarantee"

The Court found that Specsavers had a sufficiently strong case to justify a temporary injunction on the basis that:

  • the advertisements could give the misleading impression that the 70 percent saving related to Specsavers' prices (when in fact it did not);
  • the Focus Daily lenses were only $18.99 when ordered in quantities of eight or more boxes, and the price did not include shipping, handling and insurance;
  • shipping was only free on orders over $99 and was restricted to a particular method of shipment which was not the fastest mode of transport available; and
  • the conditions of the lowest price guarantee, which were buried in the online "fine print", meant that it could be misleading.

As a result, Coastal Contacts is prevented from engaging in advertising until a full hearing, which might be several months away.

This case demonstrates how effective a temporary injunction can be for a company with a sufficiently strong claim of misleading advertising against one of its competitors.

For more information about the Australian Consumer Law, please contact HopgoodGanim's Competition and Trade Practices team.