Can affixing mandatory product labels lead to misleading and deceptive conduct? The High Court is currently determining the matter

Can you be liable for misleading and deceptive conduct simply by affixing a mandatory product label to your product? The answer is – potentially yes. A consumer complaint against Mitsubishi Motors over a fuel consumption label has gone all the way from the Victorian Civil and Administrative Tribunal (VCAT) to the Victorian Court of Appeal and now the High Court.

The outcome of the High Court decision will have significant and widespread implications across the consumer goods industry. Manufacturers and suppliers that are required to comply with product-specific legislation which prescribe labelling requirements (such as nutrient content labelling and energy efficiency labelling) should closely watch this space and, in the meantime, assess their risk levels and review their practices.

The facts in Mitsubishi Motors v Begovic

In early 2017, Mr Begovic purchased a new 2016 Mitsubishi Triton vehicle from a Mitsubishi Motors dealer, Northpark. In 2019, he commenced proceedings in VCAT seeking a refund of the purchase price, claiming that the vehicle consumed significantly more fuel than the figures displayed in the fuel consumption label affixed to its front windscreen.

The fuel consumption label was required by a vehicle standard made under the Motor Vehicle Standards Act 1989 (Cth) (Standard). The Standard prescribed the form and content of the label, including requiring the label to prominently display figures representing certain laboratory tests for the relevant vehicle type. The Standard also prescribed the procedures and protocols for the tests. Mitsubishi Motors had conducted the requisite testing of a 2016 Mitsubishi Triton of the relevant type and caused the required label, which accurately displayed the test results, to be affixed to the vehicle before it was sold to Mr Begovic.

In the VCAT proceeding, Mr Begovic relied on expert evidence from an engineer who tested his vehicle using the prescribed laboratory test and concluded the discrepancy between the label and the test results were “unusual and excessive”. At the time of the test, Mr Begovic’s vehicle was over two years old and had travelled nearly 50,000km.1

The claim – from VCAT to the High Court

VCAT, accepting Mr Begovic’s expert evidence, found that the figures displayed on the label were misleading and had “misled Mr Begovic to believe the vehicle had certain fuel consumption characteristic it did not have”. Mitsubishi Motors and Northpark were found to have breached section 18 (misleading and deceptive conduct) as well as sections 54 and 56 (consumer guarantees) of the Australian Consumer Law (ACL). The dealer was ordered to refund the purchase price and accept a return of the vehicle.

The VCAT decision was appealed to the Supreme Court of Victoria. While Mitsubishi Motors and Northpark were successful in overturning VCAT’s findings of consumer guarantee breaches, the Supreme Court upheld VCAT’s finding of misleading and deceptive conduct. The Supreme Court found that the label on Mr Begovic’s vehicle represented that the fuel consumption figures displayed on it could be substantially replicated if his vehicle were subject to the prescribed laboratory test. As expert evidence showed this not to be the case, the Supreme Court concluded that the representation was misleading and deceptive.

Mitsubishi Motors and Northpark appealed further to the Victorian Court of Appeal, arguing that:

  • affixing a label which complied with and is required by the Standard cannot constitute misleading or deceptive conduct;
  • in any event, the label was not misleading or deceptive because it only represented the results of past testing of a test vehicle, which it represented accurately; and
  • the label conveyed no representation that past testing results could be substantially replicated in the vehicle purchased.

The Court of Appeal unanimously dismissed the appeal. It held that an ordinary and reasonable consumer reading the label, affixed to a vehicle offered for sale, would not consider the fuel consumption figures to be confined to a test vehicle and irrelevant to the specific vehicle for sale. They would instead understand that the information was provided to them because it would bear on the cost of running the specific vehicle if they were to purchase it. The Court of Appeal observed that “[the] consumer would take the label to be saying how the vehicle offered for sale would have performed under the standardised testing regime already conducted in respect of a representative vehicle of the same make, model and class. That understanding is a function of mass production of consumer goods intended to be reasonably identical.” The Court of Appeal concluded that the label reasonably conveyed that the fuel consumption figures in it could be substantially replicated if the prescribed laboratory test was conducted.

In response to the argument that Mitsubishi Motors and Northpark were doing no more or less than what the law required, the Court of Appeal commented that “a manufacturer and dealer are not under a legal obligation to offer any given vehicle for sale. While they would be required to ensure the label was affixed if offering the vehicle for sale, nothing in the Act or the standard was said to oblige them to offer such a vehicle for sale in the first place. Still less do the Act or the Standard require that a vehicle be offered for sale in circumstances where the representation in the label is misleading or deceptive in respect of that vehicle. Instead, the Act and the Standard presuppose that testing of a representative vehicle will produce figures that are substantially those which would be obtained under testing in accordance with the Standard of any and every vehicle of the type in question”.

Mitsubishi Motors and Northpark were granted special leave by the High Court to appeal against the Court of Appeal decision. The case is currently before the High Court. We will keep you updated on the outcome of the High Court decision.

Implications for suppliers

The High Court decision will have significant implications for manufacturers and suppliers across the consumers goods industry, who are subject to mandatory labelling requirements under product-specific legislation (for example, nutrient content labels for food products, TGA labels for therapeutic goods, energy efficiency labels for electronic goods, dangerous goods labels for hazardous materials). Manufacturers and suppliers should consider reviewing their labelling and testing practices, including what representations are actually made about their products, to ensure such representations (even if mandated by legislation) are accurate and not misleading or deceptive.

For more information contact the Addisons Competition, Consumer & Antitrust team.

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1 It is worth noting that Mitsubishi Motors and Northpark were neither legally represented nor called any expert evidence. When the case proceeded to the Supreme Court of Victoria, the Court was only entitled to take into account the evidence heard by VCAT. This meant Mitsubishi Motors and Northpark could not serve new evidence to counter the factual findings that the fuel consumption figures could not be replicated for Mr Begovic’s vehicle with the prescribed laboratory test.

Liability limited by a scheme approved under Professional Standards Legislation.
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