The risks of claiming you are “No 1” in the industry

On 13 February 2017 the Federal Court delivered its decision in relation to whether claims made by Domain Group (‘Domain’) that it had the “#1 property app in Australia” were misleading or deceptive and constituted false or misleading representations in breach of sections 18 and 29 of the Australian Consumer Law (‘ACL’).

The case was commenced by Domain’s rival, REA Group Limited (‘REA’) which operates realestate.com.au

What you need to know

• Representations will always be considered in all relevant circumstances including with other representations that may be taken to be part of the same advertising campaign
• Ensure you have an objective basis for claiming you are “No 1” in the industry, which should be historic and not just based on the most recent study
• If you do not have objective evidence to support your claim, use language that cannot be measured or substantiated so that the advertisement is considered mere puffery
• In highly competitive markets, you can expect your rivals to take action seeking injunctions and damages
• Disclaimers do not work if they are not as prominent as the headline representations

The facts

Domain published various advertisements about its property listings and app across reputable newspapers, billboards and Facebook in February 2016 in two phases.

In the first phase, REA’s complaints concerned claims made by Domain that Domain has the “#1 property app in Australia”, “the most property listings in Sydney” and “the best property listings in Melbourne” when these claims were not true.  REA’s complaints regarding the second phase related to claims by Domain that Domain’s app was “Australia’s highest rated property app” when this was not true.

Domain denied the advertisements conveyed any of the alleged representations and that the appropriate target audience would approach the advertisements with scepticism. At worst, Domain argued the ordinary reader would have been led into uncertainty, which isn’t serious enough for a finding of misleading and deceptive conduct.

Decision

In evaluating the interpretations contended by REA, Justice Murphy identified the target audience as real estate agents familiar with the companies and members of the public with a general interest in the property market and a general knowledge about apps.

Justice Murphy found Domain’s conduct in publishing the representations that it had the most property listings in the second and fifth advertisements constituted misleading or deceptive conduct, in breach of section 18 of the ACL. Further in representing the Domain app as the “#1 property app” in Australia because it allowed users to view the most listings in Sydney, Domain made a false or misleading representation in contravention of s29(1)(b) of the ACL.

The court rejected Domain’s arguments concerning the presence of a qualifying footnote as its stylistic presentation would not lead the ordinary reader to recognise it so as to have its desired effect.   

The third advertisement, in which Domain claimed “the best property listings in Melbourne are on Domain” and conveyed the related claim that their app is the “#1 property app in Australia” because it allowed users access to “the best property listings in Melbourne”, were found to be “indefinite claims of superiority” that the reasonable member of the target audience would consider as puffery.

It was found that the fourth, sixth and seventh advertisements, where Domain claimed their app is “Australia’s highest rated property app”, had a legitimate basis. Justice Murphy preferred Domain’s contention that the advertisements referred to historical ratings of the app, and not just those of the most recent update as REA submitted.  In dismissing this claim, Justice Murphy also dismissed the argument these advertisements conveyed any representation that the app had been rated by an independent source as the target audience, being familiar with the ‘ubiquitous’ app market, would know such a body does not exist.