July 2008
Comparative Advertising under the spotlight : July 2008
Comparative Advertising
Recent decisions in the Federal Court [1] suggest that advertisers should be cautious when employing comparative advertising techniques. Courts have previously indicated that comparative advertising does not place a higher burden on the advertiser. However, as 'inaccurate comparisons are inherently likely to mislead the public' [2] , errors have an increased tendency to mislead consumers, than "puff-like" statements in ordinary advertisements. In response to the 2006 Federal Court Johnson & Johnson decision [3] , the ACCC released a Comparative Advertising Fact Sheet [4] on 1 August 2007, which recommends the advisable approach to various types of comparative advertising.
Model and Feature Comparisons
The ACCC has noted that a comparison of two products should only be made if the two products being compared are reasonably similar. This issue has formed the basis of the current proceedings in the Unilever v PZ Cussons [5] case and the decision in Energizer v Remington [6] . In Energizer, the Federal Court found that an advertisement claiming that "Varta High Energy" batteries lasted as long as Energizer batteries was 'plainly misleading' [7] under s 52 of the Trade Practices Act 1974 (Cth) ( TPA), as it failed to make an obvious distinction between various grades of Energizer batteries. Moore J held that although details of the batteries being compared were available on the back of the "Varta High Energy" battery packaging, that 'it is improbable that a consumer would have noticed those observations' [8] . This suggests that the ACCC and the courts will continue to carefully examine comparative advertising made between products with different features. The court ordered the respondent to cease the supply of "Varta High Energy" batteries in their existing packaging and to oversee the removal of promotional billboards or material in retail stores containing the representation "Varta High Energy Batteries last as long as Energizer or Duracell" [9]
Two-Price Advertising
Businesses are able to compare current prices with previous prices, provided the price stipulated is genuine. Commonly referred to as "was-now" pricing, the ACCC has advised that 'products or services advertised with a "was" price should accurately reflect a comparison between the actual previous price and the price offered "now"' [10] . These practices have been scrutinised by the Federal Court in the Prouds Jewellers decision [11] . Justice Moores held that the practice of identifying a "was" price which did not represent the price at which items were offered immediately before a promotion, constituted a contravention of both s 52 (misleading and deceptive conduct) and s 53(e) (false representations concerning the price of goods) [12] of the TPA. Moores J further indicated that the sale of products for a period of two months is a sufficient period to substantiate a "was" price claim [13] . Moore J made declaratory orders to articulate that Prouds' conduct had contravened the TPA, to the disapproval of the court [14] . No injunction was ordered, however Prouds was required to place corrective advertisements in newspapers and Prouds' stores for 3 months [15] .
Summary
The Federal Court decisions indicate that advertisers should ensure the adoption of a 'like with like' approach when comparing a competitor's product.
If a comparison is made, an advertiser should be confident that the comparison is likely to be accurate for the life of the advertisement. Previous price comparisons must have applied to the relevant goods for a reasonable period before the start of the discount offer. Businesses that do not have adequate processes in place that review and scrutinise advertisement for Trade Practices compliance face the risk of contravening s 52 and 53 of the TPA. This could result in court action being taken by the ACCC and the possibility of penalties.
Stephens Lawyers & Consultants have a high level of expertise in trade practices law. Our lawyers represent leading companies in both litigious and commercial matters, and have significant experience in writing submissions to government on behalf of clients.
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Disclaimer: This newsletter is not intended to be a substitute for obtaining legal advice. © Stephens Lawyers & Consultants. July 2008 Researched and written by Colette Downie, edited by Katarina Klaric
[9]Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd [2008] FCA 58, [21]; Moore J considered an order to require the respondent to over-stick the stickers on the packs of Varta Higher Energy batteries in retail outlets impracticable in the week before Christmas. However, he noted that 'in other circumstances it would have been an appropriate order'.
[11]Australian Competition and Consumer Commissions v Prouds Jewellers Pty Ltd (No 2) [2008] FCA 476.
[12]Australian Competition and Consumer Commissions v Prouds Jewellers Pty Ltd (No 2) [2008] FCA 476, [3].
[13]Australian Competition and Consumer Commissions v Prouds Jewellers Pty Ltd (No 2) [2008] FCA 476, [10].
[14]Australian Competition and Consumer Commissions v Prouds Jewellers Pty Ltd (No 2) [2008] FCA 476, [5].
[15]Australian Competition and Consumer Commissions v Prouds Jewellers Pty Ltd (No 2) [2008] FCA 476, [13].