Twenty years ago, if you asked an advertising guru who they believed most hindered the creative process of developing an advertising campaign (of any sort), nine times out of ten the answer would have been the lawyers. It was not uncommon to hear descriptions such as destructive, unreasonable, uncommercial (or even worse) being used to describe the contributions by the lawyers to the creative process.

Lawyers, for their part, were known to refer to the advertising industry as the land of lies and half truths. The effects of the consumer protection provisions of the Trade Practices Act 1974 and their successor, the Australian Consumer Law (which forms Schedule 2 to the Competition and Consumer Act 2010)(ACL) meant that advertising agencies and lawyers needed, like it or not, to work together closely to ensure that their client did not fall foul of the law in marketing its products and services. That relationship was not always as close or as beneficial as it should have been.

Tensions between lawyers and the advertising industry stem from the differing aims each holds. The aim of the agency is to increase the public’s awareness of their client’s name, brand, goods or services. The aim of the lawyer is to minimise or eliminate any risks taken by their client in maximising that awareness. Unfortunately, these two aims may often not see eye to eye.

From a marketing perspective, advertising agencies find themselves faced with a highly competitive environment – where in effect you are only as good as your last marketing campaign. In such an environment, the pressures on advertising agencies to deliver can be extreme. In addition, it is not uncommon for people (both at an agency and client level) to become personally attached to the marketing campaign.

A lawyer is expected to provide legal advice in relation to the issues arising from the campaign in question. There are times when this advice includes recommendations that substantially alter the nature of an advertisement (or the whole campaign) in question. After the time and effort the marketing people put into developing the campaign, it’s little wonder that sometimes quite strong debates arise on the nature of the advice given and its ramifications.

The problems that lawyers face with advertising are twofold. First they need to ensure that advertisements are truthful – not partially or almost truthful, not using disclaimers or asterisks to help disguise the truth, but actually truthful. And, second, they have to try and ensure that advertisements fall within the ambit of what society has deemed acceptable. To do otherwise is to leave a client open to breaches of a relatively small but nonetheless quite significant array of laws and codes that govern advertising in Australia.

Over the years advertising agencies – and clients – have come to appreciate that there are statutory limits placed on creative genius and that there is a need to work (with lawyers) within those limits.

The result is that clients, agencies and lawyers have a far greater understanding of the laws and codes affecting advertising, together with the need to develop a process of vetting ads so that they do not infringe those laws and codes.

What are the relevant laws and codes?

The most commonly referenced legislation in this area is the ACL and in particular, sections 18 and 29.

Section 18(1) of the ACL provides that: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Section 18 of the ACL goes on to prohibit various forms of false or misleading representations including those wrongly claiming that:

  • goods are of a particular standard, quality, value, grade, composition, style or model
  • goods are new
  • goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits
  • goods or services are of a particular price
  • goods have a particular place of origin.

The Advertising Standards Bureau (ASB) was established in 1998 by the advertising industry to regulate complaints about advertising in Australia. Its initial role was to consider complaints under the Australian Association of National Advertisers (AANA) Code of Ethics. That responsibility has since grown such that the ASB now administers a range of Codes and Initiatives. Those Codes include:

  • AANA Code of Ethics
  • AANA Code for Advertising and Marketing Communications to Children
  • AANA Food & Beverages Advertising and Marketing Communications Code
  • AANA Environmental Claims in Advertising & Marketing Code
  • AANA Wagering Advertising & Marketing Communications Code
  • FCAI Motor Vehicle Code

So what do advertising agencies and lawyers need to take account of when trying to ensure that an advertisement doesn’t breach the ACL or offend against a Code of Practice?

For codes, it’s relatively simple. You have to know if a code or codes apply to the ad in question and, if yes, check to ensure that the ad complies with those codes.

For the ACL, here’s a non-exhaustive list of things to look for to ensure that consumers viewing the ad are not mislead and deceived:

1. Who is the target audience? 2. What will the target audience understand the advertisement to mean? You can’t presume that the audience has any special knowledge or understanding of jargon or industry terms.

Merely because an industry group uses a particular phrase in a certain way, doesn’t mean that the consumer will know or understand that meaning. Where words or phrases can have more than one meaning in a given context, you should make sure that each of those meanings satisfy the requirements and none of them render the advertisement to be misleading or deceptive.

3. Do the pictures and images used in the advertisement accord with the message?

Example: A print advertisement for clothing picturing sheep in the background likely gives rise to an inference that the clothing in question is made from wool. If this is not the case, then the advertisement will be in breach of sections 18 and 29 of the ACL.

4. What impression(s) could the advertisement leave with the consumer? As before, where more than one impression is possible, check to ensure that none of the possible impressions are misleading or deceptive.

5. Pricing and discounts are normally one of the most contentious and difficult areas to deal with. Some of the trickier issues include:

Free – when can something be said to be free of charge? Realistically, no retailer gives anything away, and anything given to consumers is normally factored into the price. Discounts – what is a discount? It is common to see discounts being advertised as being measured as a reduction in price from the Recommended Retail Price (or RRP). However, this approach can be misleading if the retailer was not selling the items in question at the RRP prior to offering the discount. Sales – when is a retailer holding a sale? This raises similar issues to those faced when examining discounts. If there are no genuine reductions in prices, it would be misleading and deceptive to refer to the event as a sale.

6. At times there can be a tendency for agencies to over-extol the virtues of the goods or services being advertised. The practice of using self-evident exaggeration is referred to as puffery such that agencies were wont to respond to legal criticism of an ad with: “What’s your problem? – it’s only puffery.”

The problem is that a claim made in an ad must be justifiable by supporting facts, otherwise the making of the claim can be misleading and deceptive.

Some particularly difficult words and phrases to deal with include:

Best – is stating that a product is the ‘best’ a claim or mere puffery? A general claim that ‘our product is the best ever’ is likely to be seen as a claim rather than mere puffery, and require factual support. Number 1 – is a similar claim to ‘best’, and it’s been held by the courts that referring to a product as being ‘number one’ is a claim that must be supportable by the facts. Cheapest – can be a very dangerous word to use. The cost of a retailer’s goods or services as measured against its competitors is something that can be directly measured, and a retailer’s control over remaining the ‘cheapest’ can often be quite difficult.

7. What about the use of an asterisk (*) or some other device to refer the consumer to “additional” information regarding the subject matter of an advertisement?

The Australian Competition and Consumer Commission (ACCC) notes in its Advertising and Selling Guide as follows: “It is common to see advertisements with limitations or disclaimers using an asterisk (*), ‘conditions apply’ or other requirements to limit the audience’s expectations. Fine print is often used in advertisements, contracts, labelling and signs. These qualifications usually appear close to the lead selling point. If an asterisk appears near the word ‘free’, for example, a business may be trying to trade on positive reactions to the selling point, while trying to keep within the law by putting the conditions in the fine print. This may not protect that business from breaching the ACL.

The main selling point used for a product or service may make such a strong impression that no disclaimer can dispel it. An advertiser must not make the real terms and conditions of the offer unclear or unreadable by:

  • placing text in obscure locations
  • using text that is too small
  • flashing disclaimers on screen for only a moment
  • using voice overs that are too quick or too quiet.

The type and context of the advertisement is relevant as well. For example, it will be harder to ensure that small print conveys the real terms of the offer on a billboard on a highway that cars pass at 100 kilometres per hour, as compared to small print in a newspaper advertisement.”

8. Comparative advertising can, if used properly, be a very effective form of advertising but it’s also one of the forms of advertising most likely to give rise to potential breaches of the law or a code of practice.

Comparative advertising generally extols the virtues of one product or service over one or more competing products but particular care has to be taken in ensuring that the comparative statements made are correct.

So, it’s advisable to compare like with like and while this will often be the safest approach to construct a comparative advertisement, the courts have also held that it’s possible to compare different products provided that the two products are in competition with each other and that the assertions made in regard to the comparison are themselves true.

What are the consequences of failing to comply with the law in relation to advertising? Briefly, failing to comply may leave you liable to any one or more of the following:

  • Prosecution by the ACCC
  • Private litigation by a competitor or consumer
  • Monetary penalties – under the ACL, this can be up to $1.1 million for a company and $220,000 for an individual
  • Court orders or a court enforceable undertaking that can cover the following:
    • An injunction
    • Damages, compensation or refunds. Damages can be sought up to 6 years after the offending conduct occurs
    • Rescission of contracts
    • Corrective advertising that fully and adequately dispels the effects of any wrong or misleading information previously given to the public
    • Compulsory implementation of a compliance program
    • Adverse publicity orders.

Some final thoughts

Clear and honest communication between a client’s marketing staff, its advertising agency and its legal advisers is critical in ensuring that everyone is fully aware of the intended aims of the advertisement or marketing campaign. Legal advice cannot be effectively given in a vacuum.

Meaningful discussions help lawyers and marketers and agencies develop a better understanding of their respective roles in the advertising process leading to an enhanced relationship. And one more thing – nearly all problems associated with misleading and deceptive advertising can be avoided by compliance with a simple maxim – “Tell the truth”.