Legal Consequences of a ‘Tweet’ On 7 August 2018, Elon Musk published two (2) twitter posts which led to an avalanche of repercussions. The first tweet stated, “taking Tesla private at $420 million, funding secured” followed by “only reason why this is not certain is that its contingent on shareholder vote”. Shortly after these publications, Tesla’s share price initially jumped as a result of Mr Musk’s assurance, however, then took an immediate nosedive after the proposal fell apart in less than three weeks. The US Securities and Exchange Commission (SEC) accused Musk of securities fraud, which under their SEC rule 10b-5 is “to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of circumstances under which they are made, not misleading… in connection with the purchase of sale of any security”. In a non-legislative manner this translates to, saying something fictitious or retaining important information in secrecy, which could affect an investors decision. This led to SEC to pursue legal action against Musk and Tesla with regard to the tweet to make Tesla private, asserting that a series of materially false and misleading statements caused the company stock price to jump and then flounder. The proceeding was ultimately settled, resulting in Musk and Tesla paying an amount of $40 million USD, with half of this amount to be payable to the investors through the SEC deal. Fast forward to the beginning of 2023, a Federal civil trial ensued in San Francisco lasting 3 weeks. Investors sued Musk and the company’s board for losses (damages) suffered from his August 2018 tweets. The Investors submitted that Musk’s statement about his embryonic plan to take the electric car company private had devasting financial consequences for them. On 3 February 2023, a jury decided within an hour that Musk was not liable for losses suffered by the investors from the 2018 tweets. Lawyers representing Musk and Tesla, argued that due to Mr Musk’s inherent success and wealth, he could easily have obtained financing to take Tesla private irrespective of any perception of shareholders. Although the Federal civil trial was a win for Musk and assists in vindicating him, it still raises issues regarding the use of social media to relay information, with regard to a corporation, without being vetted first. Charles Whitehead a professor of Law at Cornell Law School addresses the perilous situation of securities law and social media platforms, stating that the “in the old world of paper you had to undertake some real effort to get the information out there, now you can type something into your iPhone and out it goes”. In Australia we have the Australian Securities Investment Commission (ASIC) which regulates corporate markets, financial services and consumer credit. ASIC is governed by the Australian Securities and Investments Commission Act 2001 (ASIC Act) and carries out most of their work under the Corporations Act 2001 (Cth). In the event of misconduct [...]

ACCC to Sweep Social Media to Find Deceitful “Finfluencers” A recent decision by the Federal Court in Australian Securities and Investments Commission (ASIC) v Scholz (No 2) (2022) FCA 1542 has put financial service providers over social media, or “finfluencers”, on notice, with the Australian Competition and Consumer Commission (ACCC) announcing a sweep of social media to crack down on deceitful influencer marketing. Finfluencers A finfluencer is essentially someone on social media who discusses finance and investing, with the concept proving to be extremely popular.  For example, the TikTok hashtag Moneytok, has amassed almost 20 BILLION views. Finfluencers fill a gap in the financial service market; often providing an entertaining, cheap, and fast alternative to traditional financial advisors, who for many are too costly, time consuming and often irrelevant to their personal circumstances.  Such rapidly changing way that financial advice is being delivered presents a challenge for legislators and courts to protect consumer interests, something the ACCC is known to be proactive about ACCC’s Crackdown The ACCC crackdown is concurrent to ASIC requirements from finfluencers to remain legislatively compliant.  Both bodies have regulations to prevent consumers from making an impartial decision which could lead to significant financial harm.  The ACCC focuses on the deceitful marketing aspect, where finfluencers receive undisclosed payments from a product they are promoting, while being unlicenced.  Cryptocurrency is a prime example of how deceitful marketing and financial advice can be combined to manipulate consumers for the finfluencer’s benefit.  The volatility of cryptocurrencies can lead to ‘pump and dump’ scams, where finfluencers will spruik a cryptocurrency to increase trading and then sell their own shares at an inflated price (similarly, ‘wash trading’ can also occur whereby cryptocurrencies is simultaneously sold and bought by the same investor to create misleading, artificial activity). Each year, the ACCC announce a list of areas of compliance they wish to prioritise, and this year the priority is to prevent consumers from being misled or deceived by advertising and marketing practices in the digital economy.  The crackdown is focusing on finfluencer marketing saturated industries such as skincare, parenting, health and fitness, travel, fashion and gaming. The ACCC will probe all forms of popular social media platforms, including Instagram, TikTok, Snapchat, YouTube and Facebook. Several of these social media platforms already have their own rules surrounding payment for advertising, with TikTok for example, requiring all content creators to disclose branded content and taking action when unlabelled sponsored content is shown.  Although social media platforms are advocating for payment disclosure and the eradication of deceitful marketing ploys, government intervention will always be necessary. The Corporations Act 2001 (Cth) (Act) which traditionally governs the practices of businesses and service providers across many industries is now has been used to monitor social media business. Under the Act, financial product advice can be a recommendation, statement of opinion or reporting on either of those things intended to influence a person to make a decision about a financial product.  The key word is “influence”; most of us are [...]

The Australian Competition and Consumer Commission (ACCC), Australia’s competition and consumer watchdog, has instituted proceedings against Airbnb, Inc. and Airbnb Ireland (Airbnb) in the Federal Court of Australia claiming that Airbnb falsely, and misleadingly, represented to Australian consumers about Australian accommodation prices. ACCC accusations is that Airbnb led consumers to believe that the prices were in Australian dollars (AUD), when in many cases they were priced under the US dollar (USD). What is Deceptive and Misleading Conduct? Misleading or deceptive conduct is a legal concept enshrined under section 18 of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Law 2010 (Cth)) (the Act). In its most basic definition, the misleading or deceptive provisions under the Act prohibits businesses, in trade or commerce, to engage in conduct that misleads or deceives, or is likely to mislead or deceive, consumers or other businesses. For example, misleading or deceptive conduct can occur when a business makes claims or representations that are likely to create a false impression in consumers regarding the price, value or quality of goods or services on offer. How the events transpired The ACCC alleges that Airbnb guests had booked accommodation under misleading pricing between January 2018 and August 2021. Significantly, thousands of these customers booked the accommodation assuming that they were paying with AUD but were ultimately paying in USD instead. With an average conversion rate of 0.72 US cents to AUD over the last three years, Australians were paying a far higher price for accommodation than what was advertised. For instance, customers who booked a $500 rental paid $200 more than planned after being charged in USD. In some cases, the ACCC alleged that Airbnb clarified that the price was in USD in a small font, but only after the customer had reserved the accommodation. A series of complaints to the ACCC ensued, resulting in the ACCC initiating proceedings against Airbnb to compensate the affected customers. Misleading or deceptive conduct at a glance – Representations made to the public In the context of advertising, the question is when will conduct that is directed to the public at large be considered as misleading or deceptive? Some of the following principles, established by Australian courts, may assist in answering that question: the relevant section of the public must be identified; the matter must be considered in reference to all people who come within that section of the public (i.e. demographic and socioeconomic status). However, the conduct must be tested against ordinary and reasonable members of a class; it is necessary to query why the misconception occurred through evidence by those who have been led into error, in order to determine whether they were confused by the misleading conduct; and the conduct that is claimed to mislead or deceive must be consider within the context of its occurrence. Of important note, no one actually needs to be misled in order for misleading or deceptive conduct to occur. The conduct just needs to be "likely" to mislead or [...]

Google’s misleading and deceptive conduct on Australian consumers leads to a $60 million penalty Recently, the Federal Court of Australia ruled in favour of the Australian Competition & Consumer Commission (ACCC) in their case against Google for breaching Australian Consumer Law (ACL) by misleading Android phone users into believing Google was not collecting personal location data of its users through the Android operating system.  In August 2022, the Court handed down their judgment ordering Google to pay $60 million in penalties over misleading Android users on the collection of their personal location data. Facts on the ACCC -v- Google Case –  This case began in 2019 when the ACCC brought a case against Google alleging that the tech giant had engaged in misleading and deceptive conduct with Android phone users. Google was allegedly making false and misleading representations to Android phone users regarding the collection, storage and use of customers' personal location data. The false and misleading representation revolved around two settings within the Android operating system - the 'Web & App Activity' and 'Location History'.  The ACCC’s main argument was that users who saw the ‘Location History’ setting turned off, would believe that Google would not be able to collect their personal location data. However, the ‘Web & App Activity’ setting also allowed Google to collect personal location data even after the ‘Location History’ setting was turned off.  The ACCC argued that users were misled by Google into believing that ‘Location History’ was the only setting that influenced the collection of personal data. In addition to this, users were misled by Google’s lack of representation regarding the collection of personal location data through the ‘Web & App’ setting.  The Court held that the information represented by Google to Android phone users was insufficient to properly notify them of the collection of their personal location data. Therefore, Google’s conduct amounted to misleading and deceptive conduct in relation to these main groups:  Users with heightened concerns about their data security that were misled by Google's 'Privacy and Terms' policy;  Users who turned off their ‘Location History’ were misled into believing that this was the only setting that allowed for the collection of personal location data; and  Users who were misled by Google's 'Privacy and Terms' policies representation of the 'Web & App' setting regarding the collection of personal location data. Importance of the Court’s Decision –  After the judgment in the Google case, the ACCC Chair, Gina Cass-Gottlied, made the following statement:  “This significant penalty imposed by the Court today sends a strong message to digital platforms and other businesses, large and small, that they must not mislead consumers about how their data is being collected and used.” It is clear that the Court’s decision provides guidance on what information needs to be presented by companies on data collection to ensure that consumers are not misled and shows that there needs to be a level of transparency between companies and consumers regarding data collection. The Court determined that [...]

Whilst we may have seen the worst of the COVID-19 pandemic coupled with the slowing of protectional measures, the Australian Taxation Office (ATO) have increased their recovery efforts with respect to outstanding tax liabilities and collecting the debt. The ATO have confirmed that as at 30 June 2021, an outstanding debt of $55 billion was owing by fellow taxpayers. In recovering the outstanding debt, it is anticipated that a wave of Director Penalty Notices (DPN) are to be issued by the ATO. What is a DPN? A Director Penalty Notice (DPN) is a formal notice issued by the ATO upon company directors to recover a company’s unpaid Pay As You Go (PAYG) Tax, GST and Superannuation Guarantee Charge (SGC). The DPN regime was introduced to give the ATO the power to make company directors personably liable for certain unpaid company tax debts. DPN’s compel a company directors to comply with the notice, failing which a penalty will be imposed upon directors personally. Therefore, it is important that directors understand the operation of the regime so that steps can be taken to avoid personal liability. Types of DPN’s Upon the ATO issuing DPN’s, there are two (2) types of DPN’s of which the ATO may typically seek to impose upon company directors, namely: Non-lockdown DPN: issued to a company director for PAYG, GST or SGC which is not paid by the due date but where the company has lodged its Business Activity Statement (BAS) and Instalment Activity Statements (IAS) within 3 months of the due date and SGC within one month and 28 days after the relevant quarter. Lockdown DPN: issued for unpaid PAYG, GST and SGC where a company is late lodging its BAS and IAS, being longer than 3 months after the due date and SGC longer than one month and 28 days after the end of the quarter during which the contribution relates to. For a director to avoid personal liability, the director will have to undertake one of the following steps within 21 days of receiving the DPN: Non-lockdown DPN: 3.1 pay the outstanding debt owed; 3.2 appoint a Small Business Restructuring Practitioner (SBRP); or 3.3 arrange for the company to enter into a form of administration (such as voluntary administration, liquidation, or another form of external administration). Lockdown DPN: the only way for this type of DPN to be remitted or cancelled is by paying the debt in full. Defences There are limited defences available to company directors in failing to comply with a DPN, namely: Illness/Incapacity: where a company director was not undertaking an active part in the company during the relevant time; All reasonable steps: where the company director has complied and taken all reasonable steps to ensure compliance with the DPN; and SGC: where a company director has adopted the reasonable due care and skill in relation to the SGC payable under the Superannuation Guarantee (Administration) Act 1992. Key Takeaways Ensure all lodgements (eg: BAS, IAS, SGC) are submitted within 3 months [...]