False or misleading claims in advertising and marketing can cost the unwary
Consumer watchdogs are cracking down on companies that make false or misleading claims in their marketing or give a false impression of their business.
High fine for claiming cancer cured through nutrition
Fake wellness blogger Belle Gibson was ordered to pay a fine of $410,000 by the Federal Court, which found that she had misled readers by claiming her brain cancer was cured through nutrition, when in fact she had never had the disease. (See Director of Consumer Affairs Victoria v Gibson (No 3)  FCA 1148.)
That case was taken to court by Consumer Affairs Victoria, but the Australian Competition and Consumer Commission is also chasing down small businesses for misleading marketing.
Declaring bankruptcy does not provide escape from penalties
A fine of $50,000 was imposed in 2013 on a small business owner who knowingly made false claims for printer cartridges for which he had tried to bill other firms.
He declared bankruptcy, but as soon as he was discharged from bankruptcy in 2017, the ACCC sought a garnishee order to enforce the penalty. (See ACCC takes action to enforce $50,000 penalty.)
Intention to mislead not necessary to attract fines
Managers should be aware that even firms that don’t deliberately set out to deceive in making misleading claims about their business can be caught up in the ACCC crackdown.
It can be very costly to fall foul of the ACCC actions on misleading marketing, not just in court action and fines, but also in damage to the firm’s reputation and lost income from clients turning away.
Under the law it makes no difference whether the business intended to mislead customers. If the overall impression left by an advertisement, promotion, quotation, statement or representation creates a misleading impression such as to the price, value or quality of goods and services, it can breach the law. (For more information please see Retailer fined $3.5 million for breaching truth in advertising laws.)
What sorts of claims can be seen as “misleading”?
The ACCC gives some examples – a real estate agent describes a property as “beachfront” when it is not on the beach. A watch is advertised as reduced from $200 to $100 when it was never priced at $200. Pills are promoted as having health benefits when there is no evidence. A mobile phone provider signs you up to a contract without telling you there is no coverage in your region. A transport company uses a picture of a plane in its advertising when they only go by road.
However, the law does recognise that outlandish plugs such as “best burger on earth” are clearly over the top and are not considered misleading.
Exercise caution in relying on the “obvious exaggeration” exemption
It might not always be clear whether claims for a product or service fall into the exemption of obvious exaggeration, and it would be wise to seek expert legal advice to ensure the ACCC doesn’t come knocking.
And if the ACCC does send a “please explain”, it would pay to have someone expert in commercial law on your side to answer their questions.
Some of the marketing pitfalls occur in the fine print of advertising – comparing your product to another, so-called bait advertising such as sale specials and exaggerated claims for environmentally friendly elements.
False claims that businesses should avoid
Businesses cannot make false claims about:
- the quality, style, model or history of a product or service
- age of the goods
- 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
- any exclusions on the goods and services