A private island in the Bahamas, an ‘immersive’ music festival experience, return flights on a private jet, luxury eco-friendly villas, world-class gourmet food and partying with supermodels…
These were just a few of the representations that organisers made to entice approximately 5,000 ticket holders to attend the Fyre Festival in 2017.
This high profile (and extreme!) example of a product or service not matching the marketing hype is a perfect case study for a hypothetical analysis of how the Australian Consumer Law (ACL) would apply if such an event was to occur in Australia.
Australian Consumer Law
False, Misleading and Deceptive Representations
The ACL prohibits organisations from engaging in conduct that is misleading or deceptive, or is likely to be misleading and deceptive (s 18), or making false or misleading representations that services are of a particular standard, quality, value or grade (s 29(b)). That said, courts have recognised that there is room for some exaggeration or “puffery” – within reason – when marketing or promoting goods or services. There have to be hundreds, if not thousands, of bakeries laying claim to being the home of “Australia’s best pie / vanilla slice / insert other delicious baked good”, but that isn’t a breach of the ACL.
However, representations like those made by the organisers of the Fyre Festival, and through marketing of the festival experience, its packages and the standard of service go far behind “puffery” and would amount to breaches of the ACL:
- Location – the venue was promoted by organisers as a ‘remote and private island’ that was ‘once owned by Pablo Escobar’, and promotional videos made explicit representations about the luxurious facilities at the festival – in fact the final location was the site of an unfinished housing estate and the festival goers were provided with US Federal Emergency Management Agency (FEMA) tents. These representations were never corrected and the conduct became deceptive when the organisers used a deliberately edited site map on the festival’s website to conceal its relocation; and
- Social Media – the promoters engaged social media ‘influencers’ and ‘celebrities’ to post the now infamous orange tile with the hashtag ‘#fyrefestival’ and in some instances, a short message encouraging people to attend. These endorsements appeared to be unsolicited and ‘organic’, when in fact the influencers were paid by the promoters to lend their credibility and support to the event. In Australia, all advertisements or sponsored content must be clearly marked as such – the Australian National Advertising Association Code of Ethics is also clear on this point. See our earlier post for further discussion of organisations’ obligations when promoting a brand, goods and services through social media.
The maximum financial penalties for breaches of the ‘misleading and deceptive’ conduct and representation provisions of the ACL are, for individuals, $500,000 and, for corporations, the greater of $10,000,000, three times the value of the benefit received, or 10% of annual turnover in the preceding 12 months (if the value of the benefit cannot be calculated).
The ACL also prescribes a number of minimum guarantees that apply to goods and services that have a value less than $40,000 and which are supplied for personal use. Businesses cannot exclude or contract out of these guarantees through terms and conditions.
In particular, services must be provided with acceptable care and skill or technical knowledge and taking all reasonable steps to avoid damage and loss (s 60), and be fit for the purpose or provide the results that the consumer and business had agreed (s 61).
Here, there was a significant discrepancy between the ‘luxury music festival’ services that were purchased by consumers and what was ultimately delivered. The services, and the results, certainly didn’t correspond with the representations made by the promoters:
- ‘luxury tent accommodation’ was promised, yet guests were given FEMA tents;
- well-known musical acts were billed to perform, yet Disclosure never took the stage to play the apt “When a Fyre Starts to Burn”; and
- guests were promised meals cooked by celebrity chefs, but were in fact served cold cheese sandwiches.
The event would likely amount to a ‘major failure’ under the ACL because a reasonable customer would not have acquired the services if they were aware of the nature and extent of the problems, and either (or both) the services were substantially unfit for their normal purposes and couldn’t be made fit for that purpose easily and within a reasonable time, or the supply of the services created an unsafe situation. A ‘major failure’ entitles consumers to a full refund and compensation for reasonably foreseeable loss or damage associated with the services.
The failure of the #fyrefestival provides a number of lessons for businesses operating in Australia:
- descriptions of goods and services in marketing should be true, accurate and correspond with what consumers will actually receive;
- any misinformation in marketing should be corrected as soon as it becomes known to be inaccurate or untrue;
- social media influencers and businesses should ensure they use the hashtags #ad, #spon or #sponsored for sponsored posts or advertisements to ensure that they do not create a false impression that the post is ‘organic’; and
- businesses cannot contract out of the ACL’s consumer guarantees, and need to ensure that their goods and services comply with the statutory guarantees. Similarly, if the goods and services fall so short of the standards required by the statutory guarantees to be a ‘major failure’ then the remedies available to consumers include a full refund (not just the repair, replacement or resupply) and potentially compensatory damages.
This blog was co-authored by Matthew Rozario (Seasonal Clerk), Valiant Warzecha, Nicholas Boyle (Senior Associate) and Melinda Upton.