Simpson Grierson - Winging it: a warning from Australian watchdog on misleading selling practices

10/05/2024·2 mins to read

Winging it: a warning from Australian watchdog on misleading selling practices

The Australian Competition and Consumer Commission (ACCC) and Qantas have recently reached an agreement over Qantas' marketing for thousands of ‘ghost tickets’ for flights it had already decided to cancel.^[1] They will now ask the Federal Court to impose a penalty of A$100 million on Qantas for breaching the Australian Consumer Law. The case is an important reminder about the possible risks associated with misleading advertising.

Key takeaways

As is the case in Australia, misleading consumers is unlawful in New Zealand under the Fair Trading Act 1986.
Consumers who feel they have been subjected to misleading practices can complain to the Commerce Commission in New Zealand.
Businesses should seek advice on how they approach major advertising campaigns to ensure they do not mislead consumers.

What led to this agreement?

In August 2023, the ACCC initiated proceedings in the Federal Court of Australia against Qantas for engaging in false, misleading or deceptive conduct by advertising tickets for more than 8,000 flights that it had already cancelled, but not removed from sale between May and July 2022.

Customers who bought these tickets had less time to make alternative arrangements and may have had to pay higher prices to fly at particular times, not knowing that their flight had already been cancelled.

For corporations in Australia, the maximum penalties for each breach of the Australian Consumer Law at that time was the greater of:

A$10 million;
three times the total benefits that Qantas had obtained and were reasonably attributable; or
if the total value of the benefits could not be determined, 10% of the Qantas' annual turnover.

What did the ACCC and Qantas agree?

The proceeding has now been resolved on the basis that Qantas will:

admit it made misleading representations to consumers;
make payments of approximately A$20 million to the affected customers;
not engage in this type of conduct in the future; and
agree to jointly recommend a $100 million penalty to the Federal Court of Australia.

Does this sort of practice occur in New Zealand?

Yes. The Commerce Commission - the New Zealand equivalent of the ACCC - took Qantas to Court in 2007 over misleading newspaper advertisements between October 2001 and July 2002.^[2] In that case, Qantas represented prices for airfares that did not include fuel surcharges, insurance charges or Civil Aviation charges - meaning it was not possible for consumers to obtain airfares at the prices advertised in the newspaper. Qantas was convicted of 122 charges and fined NZ$380,000.

Similarly, the Commerce Commission brought successful proceedings against Air New Zealand for misleading consumers in its 2006 newspaper advertisements for airfares. Air New Zealand was fined NZ$600,000 and resolved to have ‘all-inclusive’ pricing for its airfare advertisements in the future.^[3]

Conclusion

The case is a timely reminder that before taking off with their advertisement campaigns, businesses must ensure they're not flying into turbulence by misleading consumers, whether in New Zealand or across the Tasman.

Special thanks to Amarind Eng (Solicitor) for his assistance preparing this article.

^[1] ACCC "Qantas agrees to $20m payments to customers and, subject to court approval, a $100m penalty for misleading consumers" (6 May 2024) see here.

^[2] Commerce Commission v Qantas Airways [2007] DCR 735.

^[3] Commerce Commission v Air New Zealand Ltd [2006] DCR 709. See also the Commerce Commission's write up about it - Commerce Commission "Air New Zealand fined $600,000 for misleading customers, agrees move to all-inclusive advertising" (16 June 2006) see here.