A Federal Court judgment, handed down on 10 February 2011, has profound implications for the many businesses now using Facebook and other social media for promotion.

The judgment, against a company marketing allergy treatments on Facebook and Twitter, shows that businesses that use social networking sites can be viewed as publishers who are liable for what other people say on those sites.

“The court judgment closes a potential loophole which allowed unscrupulous traders to take all of the benefit from, but none of the responsibility for, false, misleading or deceptive comments that third parties post on their social networking pages,” Corrs Chambers Westgarth partner, Daniel Marquet, says.

“Businesses that promote themselves on Facebook and other social networking sites must take care in monitoring the content of their sites, especially material posted by third parties.

"Interestingly," Marquet says, "the Australian judgment contrasts with legislation in the United States that can, in certain circumstances, protect Facebook users from liability for failing to monitor material posted on their Facebook walls.”

The judgment will be reinforced by the recent introduction of new Federal consumer laws on 1 January 2011 that prohibit misleading testimonials.

The Australian Consumer and Competition Commission (ACCC) took action against Allergy Pathways and its sole director, Paul Keir, because of claims they could test for, safely treat, and cure or eliminate virtually all allergies – claims that were not medically validated.

Corrs acted for the ACCC in the recent contempt proceedings and in an earlier action when the court found Allergy Pathway and Keir had contravened the Trade Practices Act with misleading or deceptive conduct.

Allergy Pathway and Keir gave the court undertakings that they would not make the same or similar representations for a period of three years.

But the ACCC issued contempt proceedings after Allergy Pathway and Kerr breached those undertakings with statements on Facebook, Twitter, YouTube and its website.

Allergy Pathways and Keir admitted to the breaches but argued that they were not responsible for testimonials written and posted by allergy Pathway’s clients on its Facebook “wall”.

However, on 10 February, Justice Finkelstein rejected this argument and found in favour of the ACCC. He ruled the company took no steps to remove the misleading testimonials it knew were posted on Facebook and its Twitter pages and should be held responsible for them.

Allergy Pathway and Kerr were restrained from making similar representations and were each ordered to pay fines of $7,500, issue corrective advertising and pay the ACCC’s costs.

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