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Tuesday, April 21, 2015

Court to feuding franchisor: Take down that blog post!

By Adrian Chang, Lawyer

The recent Madden v Seafolly appeal sent a very clear warning to business owners about spruiking their own businesses or taking down the competition through their personal social media accounts: that sort of thing can get you in trouble under the Australian Consumer Law's section 18 prohibition against misleading and deceptive conduct.

Even though Ms Madden was speaking her mind to friends on Facebook, the circumstances linked her comments to her business interests in a Seafolly competitor. So that case was quite clearly 'in trade or commerce'.

In Fletcher v Nextra Australia Pty Ltd [2015] FCAFC 52, the Full Federal Court considered a less clear cut case. This time, the court considered a blog post commenting on an advertising flyer by Nextra, a newsagency franchisor. The post was written by the director and shareholder of a rival newsagency franchisor on a blog controlled by that director and that was widely read by persons in the trade.

I've reproduced the flyer and the offending blog post below.

The comment that got the blog post author, Mr Fletcher, in trouble was item 5 of his blog post. In essence the court held that Mr Fletcher had falsely asserted that the flyer did not adequately distinguish between people who had signed up for the full service 'Nextra' franchise and the cheaper, but more limited, 'News Extra' franchise.

According to Mr Fletcher, his post was designed to stimulate debate in relation to Nextra's offerings, and though he acknowledged that he had an interest in a Nextra competitor, when publishing his post he was speaking from the point of view of an authoritative trade commentator, not from the point of view of an interested party.

While acknowledging that Mr Fletcher did in fact have a reputation as an authoritative trade commentator, the trial judge identified the following factors that indicated that Mr Fletcher was not speaking as a mere commentator:
  • Mr Fletcher was a 50 per cent owner of, and a director of newsXpress, a trade rival of Nextra;
  • Mr Fletcher appreciated that his blog was well read by trade participants and appreciated the status and authority it gave him in the industry; and
  • Mr Fletcher had, in the past, used the blog to promote his own commercial interests.
The trial judge therefore held that Mr Fletcher's purpose in publishing the article was to promote the interests of his company by defending it from what he saw as a potential poaching of franchisees by Nextra. The Full Court upheld that finding, and the consequential finding that the blog post was 'in trade or commerce' and therefore subject to section 18 of the Australian Consumer Law.

This case once again demonstrates that what a business owner says through personal channels, when broadcast to the world, can be treated as promotional statements by the court.

That's news worth paying attention to.

The flyer

The blog post

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