Federal Court finds Domain lead consumers up the garden path

Published On 10/04/2017 | By Ben Wighton | Consumer protection, Litigation

A recent dispute between fierce digital and media rivals highlights the importance of making accurate claims when advertising and when broad claims become more than just ‘puff’

On 13 February, the Federal Court of Australia slammed the front door on Domain, finding that it engaged in misleading or deceptive conduct and made false or misleading representations in breach of sections 18 and 29 of the Australian Consumer Law (ACL).

Of particular interest was the Court’s approach to identifying Domain’s target audience and the imputation of knowledge to them. Justice Murphy’s treatment of the advertising claims as they related to ‘puffery’ is also relevant for broad advertising claims generally.

Background

In 2016 REA Group Limited (REA) brought proceedings in the Federal Court of Australia against Fairfax Media Limited (Fairfax). REA alleged that Fairfax contravened the ACL by publishing advertisements promoting an ‘app’ operated by Domain (a wholly owned subsidiary of Fairfax).

REA and Domain are both fierce trade rivals who each operate their own property listing websites and equivalent mobile apps. They are the two major players in the property listings market and compete directly for listing fees from real estate agents.

REA’s complaint

REA took issue with six advertisements that Fairfax published in its newspapers, on billboards and on Facebook.

Broadly, REA’s complaint related to claims made by Domain that its app:

  • was the #1 property app in Australia (#1 Claim);
  • had the most property listings in Sydney (Most Listings Claim);
  • had the best property listings in Melbourne (Best Listings Claim); and
  • was Australia’s highest rated property app (Highest Rated Claim).

Court’s decision

While the conduct as alleged was articulated in different forms and conveyed a number of concurrent and alternative representations, this article only deals with the essence of the case.

The contravening conduct

Justice Murphy found that one of the two advertisements that made the Most Listings Claim conveyed the representation to the target audience that the ‘Domain app and website [had] more property listings in Sydney than any other comparable app or website’.

The other advertisement conveyed the additional representation that Domain’s app was ‘the #1 app in Australia because it [allowed] the user to view the most property listings in Sydney’.

The evidence showed that these representations were not true. The Domain app and website did not have more overall property listings in Sydney when compared to the REA app and website.

Thus, his Honour held that Domain engaged in misleading or deceptive conduct in contravention of section 18 by publishing these two advertisements. In addition, Domain was found to have made a false or misleading representation in relation to its service in breach of s 29(1)(b) of the ACL.

The balance of REA’s claims

The Court dismissed the remainder of REA’s complaints.

#1 Claim

The advertisements which made the #1 Claim would be understood by the ordinary or reasonable viewer as advertising puffery. In Justice Murphy’s view the #1 Claim makes a claim of superiority but has little content. According to his Honour, the claim ‘merely invites the question “No. 1 in what way?”’ Further, his Honour did not consider that making such a claim would convey a representation that Domain’s app was ranked number 1 by an independent, objective and reliable source.

Best Listings Claim

One of the advertisements conveyed the representation that Domain’s app was the ‘#1 property app in Australia because it [allowed] the user to view the best property listings in Melbourne’. Again, his Honour found this would be understood as advertising puff because the claims did not convey a definite representation as to the superiority of Domain’s app upon which the ordinary member of the target audience could rely.

Whether a property listing is the best depends on a range of both objective and subjective factors. For example, would the claim mean Domain’s property listings were of a higher standard, located in higher socio-economic areas, better presented or easier to access?

Rather, the claims would be understood as ‘just Domain’s self-serving commendation of its own app over those of its competitors.’

Highest Rated Claim

Domain had a legitimate basis for making this claim. At the relevant time Domain’s app was the highest rated property app of its kind by reference to consumer ratings on the App Store and the Google Play Store across its entire version history.

More than just ‘puff’

The Court’s treatment of the contravening conduct can be contrasted with the remainder of REA’s claims when it came to advertising puffery. The #1 Claim on its own was held to be ‘just puffery’.

However, when the #1 Claim was featured in the same advertisement as the Most Listings Claim, the specificity of the combined claim made it such that that the ordinary or reasonable member of the target audience ‘would understand it as a representation upon which he or she could reasonably rely.’ It was this representation that needed to be accurate and true.

The same logic holds true for other broad or ‘puffing’ claims such as ‘the best’ or ‘the greatest’. However, whether a particular puffing claim conveys a definite representation capable of reliance will depend upon the context and setting in which the claims appear. Justice Murphy commented that these cases usually turn on their own facts.

The target audience

Interestingly, Justice Murphy considered it appropriate to break the target audience into two classes (a first class made up of members of the public with varying interests in the property market and a second class comprising real estate agents) and impute certain knowledge about mobile apps to them.

That apps were ‘ubiquitous in modern life’ meant that members of the target audience knew that apps carry a star-based consumer rating and can sometimes be accompanied by a review.

Given that Domain’s app was free to download and use, the ordinary or reasonable member of the target audience would not give careful attention to the advertising claims as he or she would suffer no detriment if the app as advertised was not as good as represented.

Real estate agents will have a particular interest in the ins and outs of the competing apps, especially in how important they are to agents in generating income. Justice Murphy observed that real estate agents would form their own assessment of Domain’s app independent of any advertising (given that the apps are free and agents were likely to use both).

Implications

Businesses need to be careful when making broad advertising claims (like the #1 Claim or the Best Listings Claim) where they are also featured with more specific, quantifiable or measurable representations. These more specific claims will be taken by the Court to be more than mere advertising puff and may amount to misleading or deceptive conduct in contravention of the ACL.

Picture: Courtesy pixabay.com / moerschy

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About The Author

is a Law Graduate in the Melbourne office at King & Wood Mallesons.

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