Seafolly’s response to competitor’s misleading and deceptive Facebook posts were also misleading and

Seafolly’s response to competitor’s misleading and deceptive Facebook posts were also misleading and

Seafolly’s response to competitor’s misleading and deceptive Facebook posts were also misleading and

In November 2012, the Federal Court held that comments posted by an individual (Madden) on her personal and business Facebook pages and in emails to media outlets about her competitor (Seafolly) were misleading and deceptive and constituted false representations in contravention of the (then applicable) Trade Practices Act 1974 (Cth). The decision at first instance.  Shortly after the comments were posted, Seafolly responded by issuing two press releases.  Despite the press releases largely consisting of a description of Madden’s Facebook posts, Seafolly’s denial of Madden’s allegations made in the posts, and an explanation as to why Madden’s posts were false, on 24 March 2014 the Full Federal Court found on appeal that Seafolly’s press releases were also misleading and deceptive.

This Full Federal Court decision highlights that when a competitor publishes something which is misleading, deceptive or defamatory and which requires a ‘retaliation’, great care needs to be taken that the response is measured and does not give the competitor rights against the retaliator.

Madden’s misleading and deceptive Facebook posts about Seafolly

Madden posted comments on her personal and business Facebook pages to the effect that Seafolly had copied some of her swimwear designs.  In fact, most of the Seafolly garments predated Madden’s relevant swimwear and there were varying degrees of design difference between the garments. 

The primary judge found that Madden’s posts were misleading and deceptive.  This was upheld by the Full Federal Court on appeal.

Some things to consider when posting comments about competitors via social media platforms

Some things to note about what does and does not constitute misleading or deceptive conduct in social media which can be drawn from the Full Federal Court’s decision are: 

  • a person reading postings would not just read the latest posting, rather would also read the earlier ones on the topic in order to familiarise him or herself with what was being discussed.  However, that person would unlikely read Facebook postings in a careful and analytical way.  Accordingly, just because there has been a string of postings does not preclude an earlier posting being misleading or deceptive.
  • each publication (in this instance Facebook postings and the email to media outlets) will be considered separately in order to determine if each instance of conduct was misleading or deceptive.
  • if someone’s ‘friends’ on their personal Facebook page are in their industry, statements made on the personal Facebook page may be in trade or commerce and hence liability may arise under the Trade Practices Act (if the conduct occurred prior to 1 January 2011) or under the Australian Consumer Law (if the conduct occurred after 1 January 2011).
  • a statement is not an expression of opinion (and therefore exempt from being misleading and deceptive) if the statement is about a fact which is wrong.  Madden got the dates of Seafolly’s designs going onto the market wrong.  Accordingly, Madden was not successful with her argument that the postings asserting copying were expressions of opinion, and therefore not misleading and deceptive. 

Seafolly’s misleading and deceptive press releases

In response to Madden’s Facebook posts, Seafolly issued two press releases.  The press releases both stated that Madden had made allegations on Facebook and in emails to media outlets that Seafolly had copied her swimwear designs, that Seafolly denied the claims, that Seafolly was taking action against Madden, and that many of the Seafolly swimwear designs alleged to be copied were in fact released before Madden’s relevant swimwear.  Importantly, the press releases also said Seafolly ‘says that the claims have been made maliciously to injure Seafolly’.

Madden cross claimed against Seafolly that the press releases were defamatory and misleading and deceptive. 

Was Madden malicious in her allegations?

If Madden was in fact malicious, Seafolly would be able to successfully defend Madden’s defamation action on the ground that what Seafolly had said was substantially true (that is, the ground of justification).  If what Seafolly said was substantially true, Seafolly would also be able to establish that the press releases were not misleading and deceptive.

Whether or not Madden had been malicious had to be decided according to the ordinary and natural meaning of “malicious” as used in the press releases, that is, that Madden set out deliberately to injure or damage Seafolly by what Madden published.

Primary Judge held Madden malicious

The primary judge found that Madden was malicious (and hence Seafolly was not liable for defamation or misleading or deceptive conduct).  The primary judge concluded this because:

  • Madden was convinced that copying had occurred and was determined to expose Seafolly for that ‘copying’.
  • her allegations had the potential to damage Seafolly’s reputation.
  • despite Seafolly warning her that her allegations were false, Madden solicited questions from friends on Facebook so that she would have the opportunity to repeat the allegations.
  • Madden did not pause to make inquiries as to the truth of the allegations.
  • Madden did not care if her statements were true or false.

Full Federal Court held Madden not malicious

Unlike the primary judge, the Full Federal Court found that Madden was not malicious.  The reason for this was that, regardless of Madden’s lack of inquiries, at the time Madden made the allegations, she was convinced that they were true.  Accordingly, she cannot have been malicious, because she did not deliberately set out to injure or damage Seafolly.  The Full Federal Court said being reckless is not the same as being malicious. 

Because Madden believed what she published, it was misleading and deceptive for Seafolly to issue a press release which said that Madden had knowingly made a false claim.  Seafolly was also not able to establish it was justified in doing so in defence to Madden’s defamation action.  Accordingly, on appeal Madden succeeded with her misleading and deceptive conduct case.

Defamation – qualified privilege

Whilst Seafolly’s defence to defamation of justification failed, its defence of qualified privilege was successful.

The question to be decided in relation to qualified privilege was whether Seafolly’s responses went beyond what was commensurate with Seafolly’s right to defend itself from Madden’s Facebook posts.  Seafolly argued that it was entitled to retaliate in a way that impugned Madden’s reliability, veracity and motives.  Madden argued that because Seafolly speculated about Madden’s motives, Seafolly had gone too far.  However, the Full Federal Court upheld the primary judge’s decision that Seafolly had made good its defence of qualified privilege.  This is because Madden’s attacks were damaging to Seafolly’s reputation and Seafolly published the press releases to prevent that damage by impugning the truth of Madden’s attacks and her general veracity.

Three key things to remember before responding to a misleading, deceptive or defamatory publication

  1. Avoid describing what you think your competitor’s state of mind was at the time they made the publication (such as ‘malicious’, ‘reckless’ or ‘deceitful’).
  2. When in doubt, keep your response to a factual account only of what has transpired between the parties. 
  3. Obtain legal advice before publishing your response.