The dangers of utilising social media

Many businesses now use social media sites such as Facebook, LinkedIn, Twitter, Google+ and YouTube to advertise and market their products and services. Many are unaware of the significant risks that social media carries. This includes the risk that businesses may be held liable for comments posted by third parties on their social media pages.

The Australian Consumer Law (“ACL”) (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) applies to social media in the same way that it applies to any other marketing or sales channel. Section 18 prohibits misleading or deceptive advertising claims and is designed to protect consumers. Section 29 prohibits making false representations about goods or services. The Australian Competition and Consumer Commission (“ACCC”), of its own volition or upon the complaint of a competitor, or a competitor themselves, could allege that by leaving misleading, deceptive or false posts on your page, you are in breach of the ACL.

The ACCC has warned businesses that they are responsible for making sure that the content of their social media pages is accurate and that it expects well-resourced companies to take down misleading comments within 24 hours of publication, with more flexibility given to smaller businesses depending on when they become aware of the comments. Here are two example cases involving the ACCC:

Case Study 1

ACCC v Allergy Pathway Pty Ltd (2011) FCA 74

Allergy Pathway Pty Ltd (“Allergy Pathway”) was found guilty of misleading and deceptive conduct in relation to statements made by third parties on its Facebook and Twitter pages regarding the properties of its treatment for allergenic conditions, which statements were established to be false.  The company and its director provided undertakings that they would not publish statements as to the properties of the treatment, but were found to have breached those undertakings.  A number of clients of Allergy Pathway who were users of the treatment had posted testimonials as to the beneficial nature of the treatment.  Allergy Pathway was aware of the testimonials and took no steps to remove them from its social media pages.

The Court had to consider whether Allergy Pathway was accountable for material, posted to its Facebook page by users, as statements “published” by the company in support of its products.  In essence the Court found that:

while it cannot be said that Allergy Pathway was responsible for the initial publication of the testimonials…it is appropriate to conclude that Allergy Pathway accepted responsibility for the publications when it knew of the publications and decided not to remove then.  Hence it became the publisher of the testimonials”.

The risk is greater in industries where regulators are active and those who have been the subject of previous regulatory attention need to be particularly cautious.

Case Study 2

ACCC v P & N Pty Ltd [2014] FCA 6

In a recent Federal Court case, the ACCC commenced proceedings against P & N Pty Ltd and P & N NSW Pty Ltd trading as Euro Solar (“Euro Solar”) and Worldwide Energy and Manufacturing Pty Ltd trading as Australian Solar Panel (“Australian Solar Panel”) alleging false or misleading claims about the country of origin of the solar panels they supply (“the Solar Panels”) and concerns regarding the veracity of testimonials appearing on the respondents’ websites and on YouTube. The ACCC also took action against a director of both companies for being knowingly concerned in, or a party to, the alleged conduct.

The Court found that Euro Solar and Australian Solar Panel had contravened sections 18 and 29(1)(k) of the ACL by making representations to consumers that the Solar Panels being promoted by them were made in Australia, when in fact they were made in China. The Court also found that Euro Solar and Australian Solar Panel had contravened sections 18 and 29(1)(e) of the ACL by making representations to consumers that videos appearing on YouTube were testimonials by customers of Euro Solar and that written statements appearing on the Australian Solar Panel website were testimonials by customers, when they were not.

The Court ordered that Euro Solar and Australian Solar Panel pay combined penalties of $125,000, for publishing fake testimonials and making false or misleading representations about the country of origin of the solar panels. The common director was ordered to personally pay a penalty of $20,000 for his involvement in the conduct.

This was the ACCC’s first litigated outcome in relation to the specific prohibition against fake testimonials under the ACL.

What should I do?

If your business utilises social media platforms that allow you to monitor and delete content posted to those platforms by your customers or members of the public, those platforms should be monitored by people with the necessary skills to recognise the kinds of statements that are likely to attract negative attention from regulators, competitors or customers.

It is worth noting that if you are held to be vicariously liable for the representations contained within the unsolicited testimonials from third parties which you do not remove from your social media pages, it would need to be proven by someone that those statements are in fact misleading and/or deceptive or false or likely to mislead or deceive. If the third parties who have posted the testimonials have actually made truthful statements, it may be difficult to prove that there is anything false or misleading or deceptive about those statements. In other words, if you are found to be responsible for the statements, you will not be liable unless and until someone proves that the statements are false, misleading or deceptive.

When publishing testimonials, ask yourself:

  1. Are the testimonials from genuine consumers?
  2. Can the statements made, in respect of goods or services, be proved?
  3. Does the testimonial reflect the customer’s actual opinion or experience of the product or service?
  4. Is the testimonial false or likely to mislead or deceive consumers?

Please contact us if you have any questions regarding the issues covered in this article.

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