Misleading advertising practices in Australia

Misleading advertising

How is editorial content differentiated from advertising?

Failure to adequately distinguish advertising content from editorial content may amount to false, misleading or deceptive conduct in contravention of the ACL. The ACCC has issued a guide relating to online reviews that outlines principles of relevance to native advertising (see question 23 for further detail).

In addition, the AANA Code of Ethics requires advertising content (both broadcast and non-broadcast) to be clearly distinguishable as such to the relevant audience. The AANA has issued a Best Practice Guideline for Clearly Distinguishable Advertising to assist advertisers to understand their disclosure obligations. The guidelines do not require all advertisements to be identified, nor do they mandate the format in which disclosure must be made. As such, advertisers in Australia still have a degree of flexibility as to how they communicate that advertising content is commercial in nature. In each case, the overall appearance of the content must be considered, taking into account the similarity with any non-advertising or editorial content that may appear in combination with the advertising communication.

How does your law distinguish between ‘puffery’ and advertising claims that require support?

The term ‘puffery’ is not defined in any statute in Australia, but is commonly understood as referring to claims that are so exaggerated or fanciful that no reasonable consumer could possibly be expected to rely on them when making a purchasing decision. In that sense, a claim that is a ‘mere puffery’ is not required to be substantiated. Examples of puffery provided by the ACCC include ‘best steaks on earth’ and ‘tastiest food in town’.

What are the general rules regarding misleading advertising? Must all material information be disclosed? Are disclaimers and footnotes permissible?

Advertising must not be misleading or deceptive, or likely to mislead or deceive, when viewed from the perspective of the ordinary, reasonable consumer. When assessing whether advertising is likely to mislead or deceive, consideration must be given to the advertising content as a whole. Advertising must include sufficient information to ensure the reasonable consumer is not led into error. While disclaimers and footnotes are permissible, their use can be problematic and is often the subject of dispute. Disclaimers and footnotes can be used to qualify or explain a headline claim, but must not be inconsistent with a headline claim.

Particular care should be taken when using disclaimers and footnotes in advertising that is displayed transiently, such as in television commercials.

Must an advertiser have proof of the claims it makes in advertising before publishing? Are there recognised standards for the type of proof necessary to substantiate claims?

There is no prescribed requirement that an advertiser hold proof of the claims it makes in advertising before publishing; however, an advertiser must be in a position to substantiate all claims that are made and the ACCC has the power to issue a substantiation notice requiring an advertiser to substantiate its claims within 21 days. Failure to comply with a substantiation notice is an offence.

Are there specific requirements for advertising claims based on the results of surveys?

No. Claims based on the results of surveys are not subject to any specific laws or regulations but such claims will be subject to the principles outlined above. Where a survey is required to substantiate a claim, it will usually be prudent to involve an expert market research agency to help design and conduct the survey. This can help ensure that the survey questions actually support the desired claim, and that the survey results are statistically significant.

What are the rules for comparisons with competitors? Is it permissible to identify a competitor by name?

Comparative advertising is subject to the same laws and regulations as all other advertising; namely, it must not mislead or deceive or be likely to mislead or deceive (or constitute the making of a false representation). While the rules are the same, comparative advertising typically provokes close scrutiny by competitors and regulators so there is usually a high burden to ensure that comparative claims are not misleading for the life of the campaign.

It is permissible to identify a competitor by name; however, reproduction of a competitor logo or other artistic work may give rise to liability for copyright infringement. Any reference to a competitor should ordinarily be limited to a factual, descriptive use of the competitor’s name for the purpose of making the comparison.

Do claims suggesting tests and studies prove a product’s superiority require higher or special degrees or types of proof?

No. Claims that refer to tests or studies are not subject to any specific regulation in Australia beyond the general requirement to be truthful, accurate and capable of substantiation so as not to mislead or deceive. Claims relating to superiority, however, are likely to be the subject of close scrutiny by competitors and regulators.

Are there special rules for advertising depicting or demonstrating product performance?

Claims that depict or demonstrate product performance must be truthful, accurate and capable of substantiation so as not to mislead or deceive. In addition, representations about performance features may amount to an express warranty that goods will perform as described. If the claim does not hold true, consumers may be able to assert rights and obtain a remedy under the consumer guarantee provisions of the ACL. When making performance claims, particular care must be taken not to mislead consumers about their consumer guarantee rights under the ACL. It must be clear that any express warranty is additional to, and does not limit or modify, the consumer guarantees under the ACL.

Are there special rules for endorsements or testimonials by third parties, including statements of opinions, belief or experience?

The ACL prohibits representations relating to fictitious testimonials. It also prohibits genuine testimonials where the testimonial is misrepresented or misquoted. There is a rebuttable presumption that representations concerning testimonials are misleading.

The ACCC has published a guide on its website regarding online reviews and testimonials. It provides three guiding principles:

• be transparent about commercial relationships;
• do not post or publish misleading reviews; and
• the omission or editing of reviews may be misleading.

Generally speaking, reproducing or publishing a review will require consent from the author of the review. Given that there is a rebuttable presumption that testimonials are misleading, advertisers should retain evidence of any endorsement or testimonial.

Are there special rules for advertising guarantees?

Yes. Warranties against defects must be presented to consumers in accordance with specific requirements set out in the ACL. In particular, they must be in writing and:

• expressed in a transparent way (ie, using plain language, legible and presented clearly);
• contain the warrantor’s name, business address, phone number and email address (if any);
• include details of relevant claim periods and procedures; and
• include a statement that the rights under the warranty are additional to the consumer guarantees.

In addition, a document evidencing a warranty against defects must include certain mandatory text to ensure consumers are aware that any warranty against defects operates in addition to consumers’ rights under the ACL. The mandatory text differs depending on whether the warranty against defects relates to goods or services or both, and is set out in Regulation 90 of the Competition and Consumer Regulations 2010.

Particular care must be taken not to incorrectly suggest that consumers are required to pay for rights that are automatically conferred under the ACL or that any warranty is in place of their statutory rights under the ACL.

Are there special rules for claims about a product’s impact on the environment?

Environmental claims must be truthful, accurate and capable of substantiation so as not to mislead or deceive. Particular care should be taken when using broad terms that are capable of many different meanings including, for example, ‘green’, ‘environmentally safe’ and ‘environmentally friendly’. Environmental claims such as ‘carbon neutral’ are often scrutinised by the ACCC, consumers, consumer interest groups and competitors so there is a high burden to ensure that such claims are accurate and capable of substantiation.

The ACCC has released a number of guidelines regarding environmental claims including a guide to Green Marketing and the ACL. In addition, the AANA administers the AANA Environmental Claims Code, which provides a set of broad principles in relation to environmental claims.

Are there special rules for describing something as free or a free trial or for special price or savings claims?

No, however these types of claims are subject to the general requirement that advertising must not be false or misleading. It would likely be misleading if, for example, a product is advertised as ‘buy one, get one free’ where the price of the first product is increased to cover all or part of the cost of the second (free) item.

This principle similarly applies in respect of pricing and saving claims. For example, it is likely misleading to describe a product as being on ‘sale’ when it has never been sold at the original listed price.

The ACL also prohibits the offering of goods or services at a specified price if the person reasonably believes they will not be able to offer the good or service for a reasonable period and in reasonable quantities (bait advertising). Businesses should specifically state whether any ‘free’ or ‘sale’ products are limited in time or quantity.

Are there special rules for claiming a product is new or improved?

There are no special rules regarding the advertisement of goods as ‘new’ or ‘improved’; however, businesses should consider whether such claims are likely to mislead or deceive consumers as to the qualities or characteristics of the products, or that they are of a particular standard, quality, style or model.

Are there special rules for claiming where a product is made (such as country of origin)?

Packaged food products imported and sold in Australia must comply with the Country of Origin Food Labelling Information Standard 2016, which requires that prescribed marks be displayed on packaging depending on whether the product is grown or made in Australia. These ‘standard marks’ include text and graphic labels that indicate whether the food is a product of Australia or made or packed in Australia from a percentage of Australian ingredients.