March 2011

Social media marketing: ACCC prosecution for misleading statements on Facebook & Twitter

Case In Focus: Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd (No 2) [2011] FCA 74

The use by business of social media websites for marketing purposes has recently come under the spotlight. The Federal Court has held a company, and its sole director, liable for statements made by third parties on the company's Facebook and Twitter pages.

Allergy Pathway operates clinics for the diagnosis and treatment of allergies.

In the previous proceedings, the Federal Court had found that Allergy Pathway (and the director Mr Keir) had made the following representations in its marketing of its clinics:

  • It could test for allergens.

  • It could cure or eliminate virtually all allergies or allergic reactions.

  • It could successfully treat allergies.

  • Its treatments were safe or low risk.

The ACCC alleged that the representations were false and tendered expert medical evidence. Neither Allergy Pathway nor Mr Keir challenged the ACCC's allegations that the representations were false.

The Federal Court found that in breach of the Trade Practices Act 1974 (Cth), Allergy Pathway had engaged in misleading or deceptive conduct and that Mr Keir had been knowingly involved in the contraventions by Allergy Pathway. Both Allergy Pathway and Mr Keir provided the Court with undertakings to the effect that they would not make the representations (or similar representations regarding their clinics) for a period of three years.

Subsequently, the ACCC alleged that Allergy Pathway and Mr Keir had breached their undertakings and commenced contempt proceedings. The ACCC relied on:

  • Statements and links to statements posted by Allergy Pathway on its website, Facebook and Twitter pages, and a video posted on YouTube and on its Facebook and Twitter pages;

  • Testimonials written by Allergy Pathway's clients and posted by Allergy Pathway on its website and Facebook and Twitter pages;

  • Allergy Pathway's responses to queries posted by members of the public on its Facebook "wall"; and

  • Testimonials written and posted by Allergy Pathway's clients on its Facebook "wall".

Allergy Pathway and Mr Keir did not dispute that the representations which fell within the first 3 categories breached their undertakings.

However, Allergy Pathway and Mr Keir challenged their liability in respect of the representations which were posted by third parties on the wall of its Facebook and on its Twitter pages. The ACCC submitted that Allergy Pathway should be held to be in contempt for these representations as Allergy Pathway was aware that the statements had been posted on its Facebook wall and Twitter pages but did not remove the statements.

Justice Finkelstein agreed with the ACCC and held that Allergy Pathway was in contempt for the representations which were posted by third parties on the wall of its Facebook and Twitter pages.

The Court accepted that the publication of the statements on Allergy Pathway's Facebook and Twitter pages was done without the knowledge of either Allergy Pathway or Mr Keir. However, by failing to remove the statements, the Court held that Allergy Pathway had in effect accepted responsibility for them.

The Court ordered that:

  • Allergy Pathway and Mr Keir pay a fine of $7,500 each.

  • Allergy Pathway and Mr Keir be restrained from making the same or similar representations for a period of 3 years.

  • Allergy Pathway issue corrective advertising, at its own cost, including on its Facebook and Twitter pages.

  • Allergy Pathway and Mr Keir pay the ACCC's legal costs on an indemnity basis.

This decision serves as an ominous warning to businesses which are more readily turning to online social networking sites as a cost effective alternative to the marketing of their goods and services. A business should take steps to monitor the use of its Facebook or Twitter pages to ensure that customers and other third parties have not published false, misleading or deceptive comments about its goods and services. If such comments are not removed, the business may be held liable for engaging in conduct in contravention of the new Australian Consumer Law (which replaces the Trade Practices Act from 1 January 2011).

Author - Elias Yamine