Seafolly sues competitor over misleading and deceptive Facebook posts

Seafolly sues competitor over misleading and deceptive Facebook posts

Seafolly sues competitor over misleading and deceptive Facebook posts

Seafolly Pty Ltd v Madden [2012] FCA 1346

On 29 November 2012, the Federal Court held that comments posted by an individual on her personal Facebook page, and the page of her business, were misleading and deceptive and constituted false representations in contravention of the (then applicable) Trade Practices Act 1974 (Cth).1 Despite the statements only being posted for a short time, the comments made by Leah Madden were found to have been erroneous and made recklessly.

This case highlights the importance of exercising caution and ensuring that you are fully informed of all the relevant facts before posting statements on social media sites such as Facebook, especially where those statements could be construed as allegations that another party has infringed your rights. This is particularly so in relation to competitors. It also serves as a reminder that individuals may be liable for misleading and deceptive conduct for comments posted on social media sites, where such comments are in fact made “in trade or commerce”.

Statements about Seafolly published on Facebook and sent to media outlets

In September 2010, Leah Madden, the principal of White Sands, an Australian swimwear label, posted statements and comments on her personal Facebook page implying that Seafolly Pty Ltd, a competitor of White Sands, had copied some of her swimwear designs. Specifically, Ms Madden:

  • posted 7 photos of Seafolly garments on her personal Facebook page under the heading “The most sincere form of flattery?”, with the name of one of her product designs and a question mark under each photo;
  • later updated her personal Facebook photo album, adding photos of White Sands garments next to each of the Seafolly garments and including the words “White Sands as seen at RAFW in May – Seafolly September 2010” or “White Sands 2009 – Seafolly 2010” under the photographs. She also posted the comment “Why allowing ‘buyers’ to photograph your collection at RAFW can be a bad idea”; and
  • sent an email to various media outlets with the subject line “The most sincere form of flattery?” followed by the words “Is it just us, or has Seafolly taken a little to (sic) much ‘inspiration’ from White Sands?” and the photos of both the Seafolly garments and the White Sands garments that had been posted on her personal Facebook page.

Ms Madden argued that she had made her statements as a result of a buying appointment that occurred on 6 May 2010 in which a buyer for Sunburn (a company 68% owned by Seafolly) had taken photographs of samples of White Sands swimwear.

Seafolly’s argument

As a result of Ms Madden’s conduct, Seafolly sued Ms Madden, arguing that she had:

  • made statements that were misleading and deceptive;
  • infringed Seafolly’s copyright by reproducing and communicating the photographs of Seafolly garments; and
  • committed the tort of injurious falsehood.

Madden’s statements amounted to representation of copying and were misleading and deceptive against Seafolly

Justice Tracey held that the statements and content posted by Ms Madden, and further comments posted on her personal page and the White Sands Facebook page, constituted representations that, among other things;

  • Seafolly had copied Ms Madden’s designs and;
  • used underhanded means to do so.2

In his Honour’s opinion, this representation was reinforced by the comments posted by users of the Facebook pages which indicated they had interpreted Ms Madden’s comments as allegations of copyright infringement.

Justice Tracey held that none of these representations were true. He found that in fact, most of the Seafolly garments were already on the market before the buying appointment took place.3

Ms Madden’s defence of genuinely held opinion

Ms Madden, in defending the claims by Seafolly of misleading and deceptive conduct, argued that her comments could not be understood as allegations that Seafolly had copied garments which she had created. Justice Tracey held that in publishing her statements, Ms Madden’s “choice of language was intended to and did convey to her readers that such copying had, as a matter of fact, occurred”.4

She further contended that her statements amounted to no more than an expression of her genuinely held opinion as distinct from statements of fact, submitting that a statement of opinion could not be held to be misleading or deceptive if it were honestly held by her. According to Justice Tracey, “the statements would not have been understood by the class of persons to whom they were directed as mere expressions of Ms Madden’s opinions”.5 Further, if Ms Madden had done some further research, she would have realised that:6

  • most of the Seafolly designs had been on the market prior to May 2010 and the other designs were in the later stages of design and were released in July 2010;
  • the dates placed under the various photos were wrong; and
  • a comparison of the actual garments would have disclosed varying degrees of design difference.

Lack of preliminary research led Madden to be misleading and deceptive

By posting the comments without doing preliminary research, Justice Tracey concluded that Ms Madden’s resolve was to make the statements not caring if they were true or false, she was “reckless in giving public expression [to her statements] and there was no adequate foundation for any of them”.Consequently, her statements were misleading and deceptive.

Seafolly entitled to an injunction

Despite the comments on Ms Madden’s Facebook page being posted in late 2010, and removed shortly after, Justice Tracey nevertheless held that Seafolly was entitled to an injunction to protect itself from Ms Madden reproducing Seafolly’s photographs or making further statements alleging that Seafolly had copied Ms Madden’s garment designs.

Seafolly unable to establish claim of injurious falsehood and copyright infringement allegations

In addition to its allegations of contraventions of the Trade Practices Act, Seafolly also claimed that Ms Madden had infringed its copyright (by reproducing and communicating its photos) and committed the tort of injurious falsehood.

Though Justice Tracey held that Ms Madden had falsely stated that Seafolly had copied her designs, published the statements to a number of third parties, and acted maliciously, Seafolly was unable to establish its claim of injurious falsehood on the basis that it could not adduce evidence which established that its business had sustained actual damage as a result of Ms Madden’s statements.

In relation to the copyright claim, his Honour found that although the right to sue for past infringement had been assigned to Seafolly by the photographer who took the photos (an assignment which took place after Ms Madden posted her comments); this right did not entitle Seafolly to pursue a damages claim by it.

3 key things to remember before posting statements on Facebook or other social media platforms

  1. Do your research before you think about making comments about someone else on Facebook or any other social media site, especially a competitor, because they may turn out to be unfounded or incorrect.
  2. Obtain legal advice before posting comments of possible claims of copyright infringement (or infringement of other rights) on Facebook or other social media sites or before sending comments to media outlets, even if you think that your opinion is correctly and justly held.
  3. Be aware that even if statements and related comments are posted on personal Facebook accounts, this can be considered to be “in trade or commerce” where the statements have a connection with your own business or the business of others, so individuals may also be liable under the Australian Consumer Law.

Endnotes

  1. New sections 19 and 29 of the Australian Consumer Law.
  2. Seafolly Pty Ltd v Madden [2012] FCA 1346, [1], [34].
  3. Ibid [69].
  4. Ibid [60].
  5. Ibid [67].
  6. Ibid [69].
  7. Ibid [69] – [73].