The Australian Competition and Consumer Commission is taking the franchisor of the Electrodry Carpet Cleaning business to court, alleging it posted fake online testimonials.
Electrodry is a franchised business that provides carpet, drapery, grout, upholstery and mattress cleaning services with over 100 franchises in Australia.
The competition watchdog has commenced proceedings in the Federal Court against the franchisor, A Whistle (1979), alleging it made false or misleading representations through a contractor posting fake testimonials relating to Electrodry Carpet Cleaning on the internet.
The ACCC also claims the franchisor got Electrodry franchisees to post fake testimonials on sites including Google, True Local and Word of Mouth.
It alleges the testimonials were written and posted by people associated with, or contracted to, Electrodry, and not by its genuine clients as the testimonials implied.
The case follows the ACCC initiating proceedings against online deals site Spreets yesterday for similarly misleading statements.
“Consumer issues in the online marketplace continue to be an ACCC priority,” ACCC deputy chair Michael Schaper said in a statement.
“While online testimonials can be a useful and genuine marketing tool, it is important that online businesses understand that making or inducing false or misleading representations about testimonials breaches the Australian Consumer Law.”
Legal experts warn the law of misleading conduct applies to the internet in the same way that it applies to any other conduct by a business.
Sally Scott, partner at Hall & Wilcox, told SmartCompany the use of online testimonials is increasing, whether it’s on a business’s own website or on an independent review site.
She says she can understand some businesses might be tempted to post fake testimonials online but in doing so they are “falling foul of the misleading conduct law and exposing themselves to action by the ACCC.”
Scott says there tends to be a less formal approach to the internet, particularly social media.
“This can result in less care and a heightened risk,” she says.
“The law of misleading conduct does not discriminate between a business’s conduct online and conduct away from the internet.”
Melissa Monks, special counsel at King & Wood Mallesons, says the case reinforces the importance of businesses ensuring that any customer testimonial used is from someone who is actually a real customer that has actually used your product or service and that the view or opinion given is their own, based on their experience.
“In addition, the content of the testimonial itself must be correct – the fact that the customer believes it does not prevent it from being misleading if it is wrong or provide a defence to the business using the incorrect testimonial,” she says.
The ACCC is seeking declarations, penalties, injunctions and corrective notices.
SmartCompany contacted Electrodry for comment but did not receive a response prior to publication.
Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times’ website and worked for The Sunday Times in London.
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