In 2013, we reported on the outcome of the Federal Court decision of Madden v Seafolly Pty Ltd, where Ms Leah Madden, principal and designer of the swimwear label White Sands, had created a Facebook album on her personal page titled “The most sincere form of flattery?” containing a series of composite photographs of White Sands swimwear and similar swimwear from Seafolly’s collection. 

In addition to the images, Ms Madden posted various comments including:

  • “Why allowing ‘buyers’ to photograph your collection at RAFW can be a bad idea.”
  • “Ripping off is always going to happen, but sending in a dummy ‘buyer’ to get photos is super sneaky!”
  • “Seriously, almost an entire line-line rip- off of my Shipwreck collection.”

In response to Ms Madden’s Facebook posts, Seafolly issued two press releases which denied such copying and alleged that Ms Madden’s claims had been made maliciously.

The Federal Court held that Ms Madden’s conduct was misleading and deceptive and constituted false representations in contravention of the Trade Practices Act 1974 (Cth) (TPA). Madden was ordered to pay Seafolly $25,000 in damages. Madden appealed the decision.

On appeal, the Full Federal Court, affirmed that Ms Madden’s conduct was misleading and deceptive and constituted false representations in contravention of the TPA (as applicable at the time), but revised the damages award of $25,000 to $20,000 on the grounds that media articles that proceeded the Facebook posts got much wider readership than her Facebook pages and did not have the “underhanded” allegation. The Full Federal Court reversed the Federal Court’s initial decision in relation to Seafolly’s conduct and held that, as Ms Madden had believed in the truth of what she had published and did not knowingly make a false claim, Ms Madden’s conduct was not malicious and that Seafolly’s press releases alleging that Ms Madden’s claims had been made maliciously were misleading and deceptive under the TPA.

On 12 September 2014, the Federal Court awarded $40,000 in damages (double the amount of damages payable by Ms Madden to Seafolly) on the grounds that the allegations were:

  • serious misrepresentations and went beyond that which was necessary to defend Seafolly against Ms Madden’s claims
  • disseminated to the publishing and fashion industry
  • published and remained published on Seafolly’s website until trial and were read by potentially thousands of viewers.

Although the Full Federal Court gave an indication of the potential costs distribution, a seventh judgment is expected to determine final costs of the appeal, unless of course the parties can otherwise agree.

Lesson: the saga serves as costly reminder that businesses need to be careful to ensure that statements made on social media are correct and can be substantiated and that any response to third party statements are also correct. Businesses should be particularly aware of risks relating to social media: the ease by which comments can be hastily typed without proper reflection and the consequent speed by which these statements can spread.