February 2005
MISLEADING AND DECEPTIVE ADVERTISING
Section 52 Trade Practices Act 1974 (Cth)
Companies must ensure that their advertising slogans and claims are not misleading and deceptive, in breach of section 52 of the Trade Practices Act 1974 (Cth). [1.]
Recent court decisions and actions taken by the Australian Competition and Consumer Commission ("the ACCC") illustrate the consequences of non-compliant advertisements.
IN THIS ISSUE - A SYNOPSIS:
Butcher v Lachlan Elder Realty Pty Limited (2 December 2004)
The High Court of Australia found that real estate agents who published inaccurate information from a surveyor's technical diagram in their brochure did not breach section 52. The Court considered that readers would not have been misled or deceived by the brochure, and attached significance to a clear disclaimer contained therein. [2.]
Nevertheless, the vendors of the property were found by the Federal Court to have breached section 52 in relation to the same information.
Ray White (Real Estate) Pty Ltd provides undertakings to ACCC (2 December 2004)
Butcher's case may be contrasted with recent undertakings provided by real estate agents to the Australian Competition and Consumer Commission ("the ACCC") pursuant to section 87B of the Trade Practices Act 1974 (Cth) ("section 87B"). The ACCC requested undertakings from the agents to cease using so-called "bait pricing" in their advertising, due to concerns of gross underestimates of actual auction results.
Flight Centre Limited provides undertakings to ACCC (27 January 2005)
The ACCC has also accepted section 87B undertakings from Flight Centre Limited (Flight Centre) to cease using two of its advertising slogans "Lowest Airfares Guaranteed" and "Global Buying Power", and to publish extensive corrective advertising in relation to these slogans.
Foxtel Management Pty Ltd v Australian Video Retailers Association Limited (8 December 2004)
This Federal Court case illustrates the risks associated with using comparative advertising. The Court found that statements made in advertising campaigns comparing the services and prices of competitors were misleading and deceptive under section 52, and made orders prohibiting the publication of the offending material and proposing corrective advertising, damages and costs.
The case highlights the importance of providing accurate and complete information when comparing your products or services to those of competitors.
DETAILED REPORTS:
Butcher v Lachlan Elder Realty Pty Limited (2004) ATPR ¶42-033
The majority of the High Court dismissed an action brought under section 52 against Lachlan Elder Realty Pty Limited (Lachlan Elder), which alleged that their brochure for a property was misleading and deceptive by reason of its inclusion of incorrect information from a surveyor's diagram.
The majority of the Court found that a reasonable reader would have seen the agent as only a messenger, rather than an endorser, of the information contained in the diagram, which was clearly not produced by the agent. The majority also considered that the inclusion of a clear disclaimer in the brochure was sufficient to warn readers not to rely on it alone as a reliable and verified source of technical information.
The disclaimer read as follows:
"Lachlan Elder Realty Pty Ltd ACN 002 332 247. All information contained herein is gathered from sources we believe to be reliable. However we cannot guarantee it's [sic] accuracy and interested persons should rely on their own enquiries."
Ray White (Real Estate) Pty Ltd provides undertakings to ACCC
Ray White (Real Estate) Pty Ltd ("Ray White") and one of its agents has given undertakings to the ACCC to desist from publishing indicative property prices that fall significantly below the auction results, and as a result could potentially be misleading and deceptive under section 52.
The ACCC relied on its statutory powers to demand the undertakings from Ray White following several complaints about this practice (commonly called "bait pricing") in Queensland.
As part of the undertakings, Ray White and its agent agreed to:
· Refrain from engaging in the conduct in question, including "bait pricing"
· Inform its Queensland-based franchisees of the details of the conduct and the concerns of the ACCC
· Adopt a prescribed trade practices compliance program, including training sessions, company material updates and formal policy updates
ACCC Chairman, Mr Graeme Samuel, said " the undertakings are particularly beneficial as they seek to ensure compliance by the entire Queensland Ray White network".
Flight Centre Limited provides undertakings to ACCC
Flight Centre Limited (Flight Centre) has provided undertakings to the ACCC in relation to its 'Lowest Airfares Guaranteed' and 'Global Buying Power' slogans, following investigation of the representations by the ACCC.
In relation to the 'Lowest Airfares Guaranteed' slogan, the Commission found that because the airfares provided by the agency are not always the lowest available, the slogan could potentially have misled consumers into thinking that Flight Centre's fares were always the lowest around, when this is not in fact the case.
In relation to the 'Global Buying Power' slogan, the Commission believed this was an implication that Flight Centre could obtain better deals for customers than other agencies. This, the ACCC found, had the potential to mislead consumers, because Flight Centre does not in fact have any such advantage.
The undertakings provided are extensive, including the withdrawal by Flight Centre of advertising published in newspapers, on television, in storefronts and online, and the four-week publication of corrective notices in 11 major newspapers and on display in its 500 plus retail outlets.
Giving effect to these undertakings will no doubt cost Flight Center a great deal, not only in upfront costs, but also in lost goodwill.
Mr Samuel commented on this situation:
"[c]ompanies must ensure that their advertising slogans and other claims are accurate and not liable to be misunderstood by their customers. A claim that a trader guarantees to offer the lowest price in a market for a particular good or service is a very powerful device. However with such claims comes a heavy responsibility as traders must ensure that they can honour their guarantee in every case." [3.]
Foxtel Management Pty Ltd v Australian Video Retailers Association Limited [2004] FCA 1613 (8 December 2004)
In this case, the Federal Court found that certain promotional materials published by the Australian Video Retailers Association Limited ("AVRA") was misleading and deceptive under section 52.
The offending material included incorrect or misleading statements comparing video and DVD rentals with digital Pay TV services, such as those provided by Foxtel Management Pty Ltd ("Foxtel"). The advertising made reference to, among other things, waiting periods for movie releases and prices charged. The Court found the representations to be in breach of section 52 for reasons such as errors in fact and omission of important qualifying information.
The Court also held that the use of the term 'correct at the time of printing' as a disclaimer in AVRA's promotional material was ineffective to dispel the primary misleading representations for several reasons:
- The advertising material included no date of printing
- The qualification was very disproportionate in size, position and emphasis
- The campaign continued after its contents became incorrect
The Court ordered AVRA to stop publishing the offending material and deliver up any such material remaining in circulation. The court also proposed draft corrective advertising, damages and costs.
[1.] Section 52 of the Trade Practices Act ('Misleading and Deceptive Conduct') follows:
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).
[2.] Statement published at: http://www.accc.gov.au/content/index.phtml/itemId/576455
[3.] Statement published at: http://www.accc.gov.au/content/index.phtml/itemId/576713
Stephens Lawyers and Consultants is able to advise its clients on the appropriateness of advertising claims that you may be considering, and is able to represent our clients in presenting potential advertising claims to the ACCC for determination as to acceptability. This is done in the strictest confidence to ensure that your advertising campaign is not compromised prior to launch. This course of action will ensure that you do not unwittingly breach the Trade Practices Act.
For further information on testing your advertising campaign before you breach the Trade Practices Act, please speak to Katarina Klaric.
Stephens Lawyers and Consultants is also able to assist its clients to implement a company-wide Trade Practices Compliance Program to ensure staff are aware of the Trade Practices Act and are empowered to assist management in minimising the potential for breaches of the Act.
For further information on our Trade Practices Compliance Programs, please speak to Julian Stephens.
Stephens Lawyers and Consultants advises in all aspects of Trade Practices law.
© Stephens Lawyers & Consultants, February 2005