Truth in Advertising

Everyone knows that advertising involves hyperbole. When you are promoting your goods or services, you want to get people’s attention and persuade them (as quickly as possible) that what you are selling is exactly what they need. It is natural to focus on how amazing your thing is – to convince them that it is the thneed that everyone needs! Today’s question is, when does enthusiastic exaggeration in marketing cross the line and become problematic?

What does the law say?

Under Australian Consumer Law (ACL), businesses are prohibited from engaging in misleading and deceptive conduct, unconscionable conduct, or false and misleading representations. How do we know what that means in relation to advertising our business?

It does not matter whether you intended to mislead people or not – what matters is the impression that you leave on the consumer. Also, it is not just your words that are important. People can be misled by images, by what isn’t said, and by opinions expressed as testimonials. It is very important when creating your sales page, promotional posts for social media or other more traditional advertising, that you stop and think about the totality of the message you are sending.

What results are you promising people that you can achieve for them? Can you really deliver on that promise?

Is there something you are not saying that people really should know about your offer? We sometimes think that having a disclaimer in our Terms & Conditions is sufficient to disclose all the behind the scenes issues that people need to know, but best practice is to tell us upfront if, for example, what you are selling is not suitable in some situations, or if there is a real chance that people might be misled into making a purchase based on an incorrect assumption conveyed by your marketing.

According to the ACCC, some of the most common areas that businesses misrepresent include:

  • the quality, style, model or history of a product or service
  • whether the goods are new
  • the sponsorship, performance characteristics, accessories, benefits or use of products and services
  • the availability of repair facilities or spare parts
  • the need for the goods or services, and
  • any exclusions on the goods and services.

In a recent speech, ACCC Chair Rod Sims said:

It is often said that companies succeed by looking after the needs of their customers. I have been surprised over very many years, however, at the way in which many businesses often do precisely the opposite.

Companies appear to put immediate profit ahead of their customers either by engaging in misleading or unfair conduct, or even unconscionable conduct towards their customers, or they engage in cartel or other anti-competitive activity that raises prices for their customers.

Examples of False & Misleading Representation

It is important to look at how the behaviour of the business affects the consumer’s impression of a good or service. When deciding if conduct is misleading or deceptive, or likely to mislead or deceive, the most important question that the ACCC will ask is whether the overall impression created by the conduct is false or inaccurate. Even if a consumer discovers the true position before the conclusion of the transaction, the business will have contravened the ACL if the consumer has been enticed into ‘the marketing web’ by the misleading conduct.

How often have you scrolled past an ad on Facebook or the internet claiming to be able to transform your life that says “scientifically proven” but when you read further you find that the science is actually just more marketing hype rather than published, peer reviewed evidence?

You might have heard the publicity around big name brands being given massive fines by the ACCC for misleading and deceptive advertising. Some examples include:

  • Coles claiming to sell bread that was “baked today” or “baked fresh in store
  • Heinz was found to be misleading consumers by claiming its Shredz products were healthy for children aged 1-3 when they contained 60% sugar (Heinz is appealing the decision)
  • Action was taken against iiNet, Internode, Dodo, Primus and M2 for false claims about the speed of their NBN networks
  • Nurofen was ordered to pay over $6m for advertising that suggested its different products were designed to specifically treat different types of pain, when in fact each product contained exactly the same active ingredients

You might think that these are all big companies and that small businesses are immune. That is not the case – the ACCC investigates and takes action on complaints made by consumers. Although claims against sole traders and small business are less likely to make the news, they can still be very disruptive and damaging.

Here is one high profile example of a case where the ACCC brought action against an online entrepreneur for misleading and deceptive conduct:

In 2017, Belle Gibson, a wellness blogger who claimed to have cured her cancer through nutrition, was fined $410,000 for misleading her readers and those to who she tried to sell her recipe book and app. The Federal Court found that she had never suffered from brain cancer, and had been inducing consumers to buy from her by claiming to be giving a generous proportion of her proceeds to charity, when in fact she was not. The judge said:

Although the virtual nature of social media may tend to place a distance between those who communicate and those who receive the communications, it does not affect the character of those communications if they are false or misleading. It is important that those considering making claims through social media for commercial purposes understand that they will be held to account if those claims, and their conduct, are to be found to be unconscionable.

Mortimer J, Director of Consumer Affairs Victoria v Gibson (No 3) [2017] FCA 1148

What about exaggeration?

One common advertising tactic is known as “puffery”. Puffery is not considered misleading or deceptive conduct because it refers to wildly exaggerated, fanciful or vague claims that no reasonable person could possibly treat seriously or find misleading.

Say you advertise your coaching program by stating you “are the best coach in the world” that would be puffery. If you claim your two week course can teach someone to “earn sixteen gazillion dollars in just 45 minutes a day” this also would be puffery, because no-one is going to believe you – but remember it depends on the impression created in the consumer’s mind, so if someone did believe you meant it, and you failed to deliver, they might have a case against you under the consumer law – so if you are being facetious in your marketing, make sure it is absolutely obvious that is what you are doing!

Puffery should therefore be used with great care. Not only are you walking a fine line close to misrepresentation, but you if you go too far you may start damaging your potential clients’ trust in you. You don’t want to give them the impression that everything you say is a joke! Cleverness is good, but simplicity and clarity is important. You want your clients to know exactly what to expect from you, not to be disappointed when you fail to meet the expectations that your marketing has generated.

One common area that is borderline between misleading advertising and puffery is when someone claims to be an expert. Unsubstantiated claims of expertise in a topic can be dangerous, particularly in sensitive areas relating to health and trauma.

What else can be misleading?

It is not just the claims you make that can be misleading! Silence can be misleading or deceptive when you know facts that are relevant to the other person’s decision making and you fail to tell them. Say a coach offered to sell you a 7 day course in Facebook marketing, and they knew that the algorithm was going to change 2 months’ time, making their course obsolete, but they did not tell you. That would be misleading and deceptive. What if they didn’t know when you purchased the course, but found out 2 days before the course was due to start? It would still be misleading if they didn’t tell you!

As with all of these terms, whether silence is actually misleading or deceptive will depend on the circumstances of each case.

Images can also be misleading, depending on the circumstances. Are you old enough to remember the Nivea TV ads? They filmed them using a blue filter, and my husband and I used to joke that using Nivea moisturiser would turn your skin blue. The blue tinge was a form of puffery… creating an emotional feel around the advertisement, which is something we often use images to try to do… but it needs to be done carefully with an eye for the truth. What if you saw an advertisement for a retreat with amazing pictures of a Manly beachfront, and images of women relaxing with cocktails by an infinity pool… and then you discovered that the retreat was actually held in a back-street motel without a pool? That would be misleading!

A representation can be misleading even if it is true or partly true, depending on the impression it causes in the minds of consumers.

Is there a penalty?

As we have seen, whether a representation is considered false or misleading will depend on the circumstances of each case, and the penalty will also generally be based on the specific circumstances, including the number of  people involved, the amount of money and the severity of the offence. The contrition of the offender is also relevant, and penalties may be reduced if someone has apologised and made sincere efforts to change the business culture to comply with the ACL in future.

Penalties may include:

  • Fines
  • Requirements for a public apology / retraction / other advertising designed to correct the deception, and
  • Undertakings to the ACCC to engage in conduct such as education and training, policy change, and compensating consumers.

The ACCC is currently lobbying Parliament to increase the penalties that can be awarded from $1.1 million to $10 million, and to bring in penalties tied to the turnover of a business in an effort to increase the deterrent effect of their activities for large corporations. While they are more protective in their attitude to small business, it is still important to understand your obligations and not engage in conduct which could bring you to the ACCC’s attention.

How I can help…

If you have questions about your Consumer Law obligations or would like to discuss whether a particular advertising campaign crosses the line into misleading and deceptive conduct, you might like to book an Australian Consumer Law consultation, where we can discuss your concerns.