Franchisees and franchisors have a commercial interest in maintaining their franchise’s online reputation as this is part of the branding or image of the franchise system. The recent case of Nextra Australia Pty Limited v Fletcher [2014] FCA 399 serves as a cautionary tale to those who are considering posting potentially misleading or deceptive comments online and highlights some tools available to protect a franchise’s online reputation.

Facts

The case concerned a dispute between Nextra Australia Pty Ltd (Nextra), the franchisor of a newsagency franchise system in Australia, and Mr Fletcher, a 50% shareholder in NewsXpress Pty Ltd (NewsXpress), a direct competitor of Nextra.

On 27 April 2011, Mr Fletcher posted an article on the Australian Newsagency Blog (Blog), a blog operated by Mr Fletcher. The article entitled “Nasty campaign from Nextra misleads newsagents”, referred to a flyer previously distributed by Nextra.

Section 18 of the Australian Consumer Law (ACL) prohibits individuals from engaging in misleading or deceptive conduct ‘in trade or commerce’. While often, the issue to be considered is whether the conduct is in fact misleading or deceptive, or likely to mislead or deceive, it is equally important to satisfy the court that the conduct occurred ‘in trade or commerce’.

Nextra sought injunctions pursuant to section 232 of the ACL requiring Mr Fletcher, among other things, to remove the article from the Blog and to publish on the Blog a retraction of the article and an apology to Nextra.

In making its application, Nextra claimed that the article stated, or implied, that Nextra had promoted its franchise in a manner which distributed false information, relied upon false innuendo and was intended to or had the effect of creating a sense of fear. It claimed that these allegations by Mr  Fletcher were misleading or deceptive in contravention of s 18 of the ACL.

In response, Mr Fletcher argued that writing and posting the article was not conduct ‘in trade or commerce’ and thus not captured by section 18 of the ACL because his authoring of the Blog was for the purpose of information and discussion by participants in the newsagency industry.

Was writing the Blog ‘in trade or commerce’?

In determining this issue Justice Collier noted that where a person works in a particular industry, it would not always be ‘in trade or commerce’ for such a person to engage in an activity relating to that industry.

To illustrate this point, her Honour gave the example of a person who worked in a particular industry, and who wrote an informative article dealing with an aspect of that industry where that article was subsequently published in a trade magazine.

In such an example, the individual would not be engaging in conduct ‘in trade or commerce’. The simple act of publication, for example, in a monthly magazine, does not constitute conduct ‘in trade or commerce’ within the meaning of s 18 ACL.

While Mr Fletcher claimed that he published the Blog for altruistic reasons, namely the benefit of the newsagent community, the Court ultimately found Mr Fletcher did not hesitate to use the Blog to promote his own commercial interests.

Moreover, the  Court was satisfied that the article  published  was one  which promoted newsXpress  and  Mr Fletcher’s other business interests.

Although Mr Fletcher did not purport to post the Blog on behalf of NewsXpress or the newsXpress franchise, it was clear from the article that he did so to defend newsXpress from what he saw as potential poaching of franchisees by Nextra.

The commercial motives behind the article gave the conduct in publishing it a commercial character. Accordingly, the posting of the article on the Blog was conduct ‘in trade or commerce’ within the meaning of section 18 of the ACL.

Relief granted

The decision found that while the publication of articles relevant to a particular industry on an online blog does not necessarily constitute conduct ‘in trade or commerce’, however where the purposes of the blog are also to promote one’s own commercial interests then that conduct of posting on the blog will be ‘in trade or commerce’ and may fall foul of section 18 of the ACL.

The conduct in the case was found to be misleading or deceptive in breach of section 18 of the ACL and accordingly, Nextra was entitled to orders pursuant to s 232 of the ACL which required Mr Fletcher to remove the article from the blog.

The Court was not satisfied, however, that Mr Fletcher should be ordered to publish either an apology or corrective advertising. Justice Collier was of the opinion that to do so would only draw attention to the article and thus be counterproductive.

Steps to protect your online reputation

Become the source

In Nextra Australia Pty Ltd v Fletcher it was admitted by both parties that Mr Fletcher’s blog was read widely by newsagents and other persons associated with the newsagency industry throughout Australia. One of the key reasons Mr Fletcher’s blog was able to cause such an issue for Nextra was due to its wide readership.

Although it is not necessary for franchisees and franchisors to actively maintain their own blog or other form of online presence, business owners can foster relationships with writers of such blogs, much the same as they would with traditional media and contact them whenever a story arises that is directly relevant to their audience. Not only will this maintain a positive relationship with the authors, it will also increase brand awareness in the target market.

Be cluey – Monitor online

More importantly, franchisees and franchisors should always monitor popular social networking and blogging websites for content which may relate to their business. This will enable any potentially damaging content to be identified early and dealt with as considered appropriate.

Know your legal rights

It is equally important for franchisees and franchisors to seek advice when discovering content they believe may be defamatory, misleading or deceptive, slanderous, or otherwise damaging to their business reputation.

Seeking advice early can ensure that steps are taken to protect the brand/ online reputation.

For example, most internet service providers, webpage hosts or site administrators will have policies and procedures for requesting removal of offensive, or legally actionable content posted on their sites. A well written letter addressing the existing policy can result in the voluntary removal of objectionable content. This can alleviate the time and cost of obtaining other available relief.

When posting online

While the decision in Nextra Australia Pty Ltd v Fletcher is a ‘win’ in terms of protecting online reputation, it also is a cautionary tale to individuals that self-publish articles or thought leadership pieces relevant to a particular industry.

The decision affirms that the publishing of a blog which permits ventilation of a person’s opinion by the publisher on certain topics relevant to an industry will not necessarily constitute conduct ‘in trade or commerce’, this does not mean however that other laws may not be broken on publication.

But as also noted by her Honour, where the blog is used to promote the commercial interests of the author it may have the requisite commercial character to be considered ‘in trade or commerce’. In such a case, the author may be liable under section 18 of the ACL in addition to any applicable legal causes of action.

Content