Australian Competition and Consumer Commission v Electrodry

On 1 July 2014, the Australian Competition and Consumer Commission (“ACCC”) filed an Application and Statement of Claim against A Whistle & Co (1970) Pty Limited, the owner of Electrodry (“Electrodry”), in the Federal Court of Australia. The Application sought declarations, penalties, injunctions and corrective notices arising from Electrodry’s alleged:

  • false or misleading representations by a contractor, acting as its agent or at its direction, by way of fake testimonials relating to Electrodry Carpet Cleaning on the internet; and
  • inducement or attempted inducement of its franchisees to make false or misleading representation by posting fake testimonials on the internet.

The ACCC alleges that Electrodry’s conduct resulted in fake testimonials that appeared on a number of review sites, including Google and True Local and that the testimonials were written and posted by associates of, or contractors to, Electrodry, and not by its genuine customers.

Online review of goods and services is now a commonplace tool for consumers and the potential for businesses to be made or broken by online reviews is apparent.  As a result, the ACCC has directed its focus to the use of online review platforms, seeking to protect the interests of the platforms, the businesses reviewed, and the consumers using the reviews for guidance.

In December 2013, The ACCC published a guide for online review platforms and businesses, and it has taken enforcement action in relation to misleading testimonials well prior to its action against Electrodry.

The ACCC’s guiding principles for the online review platforms and businesses using them are as follows:

  • Principle 1 – be transparent about commercial relationships – it is recommended that review platforms, reviewed businesses and reviewers be open and transparent to consumers using review platforms about commercial relationships that impact on, or could impact on, consumer reviews
  • Principle 2 – do not post or publish misleading reviews
  • Principle 3 – the omission or editing of reviews may be misleading – here the ACCC guides that the overall impression created by a body of reviews may be misleading if it does not reflect the opinions of reviewers.  The selective removal or editing of reviews for commercial or promotional reasons may be misleading.

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