Last year we published an update on some of the key issues arising from the use of social media and how the Advertising Standards Authority has proposed to deal with it - it will be interesting to see how closely businesses choose to follow the Advertising Standards Authority's Guidance Note on Social Media.

The courts are also still coming to terms with social media and the (potentially) new issues that are arising as a result of this growing medium.  While case law in this area in New Zealand is still to develop, the Australian courts continue to deal with a number of issues arising from the use of social media.

Most recently, the Australian Federal Court, in Seafolly Pty Ltd v Madden,1 has considered whether a Facebook user's posts constituted misleading or deceptive conduct.  The Court found that a Facebook "opinion" post is capable of being an actionable representation under trade practices legislation.  This is something of which any Facebook user should be aware.  And of which anyone who is responsible for a business' Facebook page should be wary. 

As businesses ease into the New Year, this decision is a timely reminder that communicating through social media must be approached with the same (if not greater) care and caution as other forms of commercial messaging. 

When does your bikini get ripped off?

Leah Madden, the defendant, is the designer and principal for the swimwear label "White Sands".  In mid-2010 Ms Madden came to believe that Seafolly, a large international swimwear brand and competitor of White Sands, copied a number of her swimwear designs.  Ms Madden developed this belief after a person, she later discovered was a Seafolly employee, photographed her designs during a buying appointment in May 2010.  Apparently due to budget constraints, no garments were purchased by the Seafolly employee during the buying session.

On 1 and 2 September 2010, Ms Madden posted an album of photographs called "The most sincere form of flattery?" on her personal Facebook page. The caption below the album read "Why allowing 'buyers' to photograph your collection at RAFW can be a bad idea".  This album included eight photographs of garments from White Sands' range beside garments from Seafolly's range that Ms Madden considered to be copies of her designs.  The captions under each of the photos read "White Sands as seen at RAFW in May - Seafolly September 2010" or "White Sands 2009 - Seafolly 2010".  Ms Madden also posted a number of comments beneath the album including:

Seriously, almost an entire line-line ripoff of my Shipwrecked collection

Ripping off is always going to happen, but sending in a dummy 'buyer' to get photos is super sneaky!

Ms Madden also sent an email to a number of media outlets, with the subject heading "The most sincere form of flattery?" and enclosed the eight images featured on her Facebook page.  Seafolly responded by issuing a press release, contacting involved media agencies and filing a copyright infringement complaint with Facebook. 

Ms Madden subsequently posted the following on her personal Facebook page:

Thank you for your kind support, FYI, it wasn't US that said Plagiarist!

White Sands Australia says: "bullies be gone and take your bully tactics with you! We tiny little fledgling designers will not be taken advantage of!"

Seafolly reacted by launching proceedings against Ms Madden for:

  • Misleading and deceptive conduct (under the Australian equivalent of New Zealand's s 9 of the Fair Trading Act 1986);
  • Injurious falsehood; and
  • Copyright infringement.

Notably, Seafolly did not claim defamation against Ms Madden as Australian law precludes an action in defamation by a company with 10 or more employees.  However, this could be available in New Zealand.  Ms Madden unsuccessfully counterclaimed against Seafolly for misleading or deceptive conduct and defamation.

Of particular interest are the issues raised by Seafolly's misleading and deceptive conduct claim, which included:

  • Whether such representations had been made in trade or commerce, given that they were published by Ms Madden on her personal Facebook profile page. The Federal Court found that the representations occurred in trade because Ms Madden was the principal of a company that was a trade competitor of Seafolly and because her comments about Seafolly related to the manner in which it conducted its business.
  • Whether Ms Madden's comments amounted to no more than statements of opinion, as opposed to fact, and were therefore not actionable representations.  The Court determined that Ms Madden could not claim that her comments were mere expressions of opinion when, read in context, they would have been taken as statements of fact.  In addition, Ms Madden's opinions could not be said to be honestly held in circumstances where she was recklessly indifferent to the true position.  Had she made enquiries, Ms Madden would have learnt that six of the eight Seafolly designs had been on the market before May 2010 and the other two were in final design stages and were released in July 2010.

The Court noted that, although it was undisputed that the comments, if treated as statements of fact, were misleading and deceptive, Ms Madden's Facebook page was only accessible to her 518 friends for less than two days.  Given that Seafolly was unable to show evidence of actual financial loss as a result of Ms Madden's conduct, the Court awarded only $25,000 in damages for misleading conduct (the failure to show actual loss meant that the claim for injurious falsehood could not succeed).  The Court also granted an injunction restraining Ms Madden from further publicising the comparison photos and making claims that Seafolly replicated White Sands' designs. 

Observations

Seafolly Pty Ltd v Madden is a noteworthy decision in that it provides a good example of the circumstances in which online social media posts, even on personal pages or accounts, will attract liability under trade practices legislation. 

The unique facts of this case meant that the Count found an individual personally liable for statements that were arguably said on behalf of her company, despite being made on a personal page.  A number of questions, however, remain unanswered, including:

  • Whether employees and/or their employers can be liable for posts by an employee (rather than a principal as in the Seafolly Pty Ltd v Madden case) on a social media platform;
  • To what extent can a person be liable for posts on his/her personal social media profile, which are clearly of a commercial nature and/or on behalf of a business; and
  • Whether business can be liable for third party posts by users of the business' social media profile (eg, the business' Facebook page) about that particular business or its competitors.

It is surely just a matter of time before the New Zealand courts have to deal with these issues.