HP pays for non-disclosure – when do you need to speak up?

On 3 May 2018, the ACCC accepted a court enforceable undertaking from HP PPS Australia Pty Ltd (HP) for failing to disclose that certain HP inkjet printers were installed with technology which rendered them incompatible with non-HP ink cartridges. By providing the undertaking, HP admitted it was likely to have contravened the Australian Consumer Law (ACL).

This raises an interesting point about “silence” being misleading and deceptive conduct under the ACL.

Background

HP sold inkjet printers, which functioned with both HP (genuine) and non-HP (generic) ink cartridges. In order to combat the rise in the use of non-HP ink cartridges, HP developed a technology referred to as the Dynamic Security Feature (DSF). The DSF, once installed, prevented the printers from printing whilst a non-HP ink cartridge was in use. The DSF was installed either during the manufacture of the printers or, by way of a firmware update made available to customers for download.

HP did not disclose to its customers that some of the printers were installed with the DSF and that this would render the printers incompatible with non-HP ink cartridges.

Following investigation by the ACCC, HP provided an Undertaking to compensate $50 to the affected customers, improve its communication about DSF on its printer packaging, and make available a firmware update to disable the DSF.

So when can silence be misleading?

Section 18 of the ACL provides a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. “Engaging in conduct” is given a broad meaning to include doing or refusing to do an act, including silence (or not disclosing certain information).

In the case of Demagogue v Ramensky, the Judge pointed out that there is no such thing as ‘mere silence’, because the silence is always considered in the context in which it occurs.

Accordingly, where a person remains silent on a particular matter, that silence is considered by the courts in the context of the person’s entire conduct to determine if the conduct (or lack thereof) as a whole is misleading or deceptive.

In Demagogue, a failure by the seller to disclose to the buyer of an off-the-plan unit that it was in the process of obtaining a licence to build a road over public land, to allow vehicular access to the land, was found to be misleading and deceptive. The relevant considerations included the unusual nature of the licence, the lack of expectation by the purchaser, and the likelihood the purchaser would not have proceeded with the sale had they known the true state of affairs.

What you need to do

HP’s undertaking is an important reminder to businesses that misleading conduct does not always have to be a positive act. Silence and non-disclosure of certain product/service-related information, particularly where there may be a reasonable expectation to be told of such things, may attract regulatory scrutiny.

All important information about products, including any restrictions placed on the use of non-genuine parts or after-market components, should be disclosed to your customers. Information that has the potential to influence a customer’s purchasing decisions (even if not favourable to you) should be disclosed.

If you have any queries regarding your compliance with the ACL, or to discuss your advertising and promotional material, please contact us.

This article was written by Jason Han, Lawyer – Litigation and Dispute Resolution.