Misleading and deceptive conduct in advertising and marketing is prohibited by law. Advertising must be fair and truthful and not misleading and deceptive. This is because advertising attempts to convey and reinforce a potential buyer’s perception of products or services.
Misleading and deceptive conduct is both a legal and ethical issue. This behaviour distorts competition and consumer choice by leading people into error.
Brands are required to follow strict guidelines when advertising and marketing their products and services. Advertising collateral must communicate to potential buyers in a way that is accurate and truthful.
Speak to an eCommerce legal team to review new marketing or advertising.
Misleading and deceptive conduct means conduct that misleads or deceives or is likely to mislead or deceive a person. The conduct includes doing or refusing to do something, entering into or performing a contract or agreement, or refusing to do or refraining from doing something.
‘Conduct’ has a wide meaning and includes spoken words and written communication. For example:
Determining whether something is misleading or deceptive depends on the circumstances surrounding the conduct. It does not matter whether the conduct actually misled or deceived anyone, but it is sufficient that the conduct was capable of doing so.
Therefore, it is crucial to take a step back and consider whether the overall impression can mislead the customer or audience.
The correct test is whether ordinary and reasonable members of the class of persons to whom the conduct was directed would or would be likely to be misled or deceived.
In addition, companies should be careful about the impression that the visual representations they use may convey. For example, suppose a company uses visual representations that give the impression that its animals are “free to roam or “raised outdoors,” when that is not the case. In this case, the visual representation may be misleading.
You can follow these guiding principles to identify misleading and deceptive conduct. The conduct:
Businesses cannot make false and misleading advertising about:
Puffery is a term used to describe highly exaggerated, fanciful, or vague claims about a good or service that no one could take seriously or find misleading. Therefore, these statements are not considered misleading or deceptive at law.
For example, a restaurant claims it has the ‘best steaks in the world’. These claims are called ‘puffery’ and are not considered false and misleading advertising.
Free offers are the act of giving products or services to consumers free of charge. These offers appeal to consumers’ values, guide purchase decisions, and entice them with the prospect of getting something for nothing. Therefore, the notion of receiving goods or services for free can generate a lot of interest among customers.
It is reasonable for consumers to understand “free” to mean absolutely free and without cost to them. Therefore, businesses should be careful when using the word “free” and should not make free claims unless those claims are accurate.
This means not inflating the cost of another item to cover the expense of the free item and not including hidden charges in relation to the free item.
Comparative advertising includes all marketing tactics that compare two or more products or services.
Some companies may use comparative advertising to promote their products’ superiority over others directly. The comparison may be based on factors such as price, quality, range, or quantity. In addition, some advertisements or sales materials compare products or services to others on the market.
Comparative advertising challenges competitors, and before using it, consider the following:
The use of comparative advertising is misleading if it is inaccurate or not adequately compared to products.
If your business publishes a promotion that compares your products with that of a competitor, the competitor may move quickly to change the characteristics of their product or service. If this happens, your promotion will immediately become misleading and deceptive.
Promotional games offer brands an engaging way to drive user attention and traffic to their company. Promotional games allow brands to take an innovative approach to drive more sales and increase brand awareness.
We have written extensively on promotional terms and conditions.
Discount coupon schemes offer discounts as an incentive to buy, reducing the price of a product or service. However, these discounts can only be claimed if the conditions associated with the scheme are met.
% or $ off promotions must be truthful. This means that the original price to which the discount is applied must be the price the customer would usually expect to pay. The business must be able to show that the product or service was sold in reasonable quantities for a reasonable time before the discount promotion.
If a product or service is frequently discounted and rarely sold for the original or ‘retail’ price, the claim that the customer is receiving a discount is likely to be misleading and deceptive.
Cashback promotions operate like a loyalty and reward program. Customers are rewarded by getting back a percentage or a fixed amount off the amount they paid. These offers are usually time-limited and have specific requirements that customers must meet in order to receive the cashback.
This marketing approach is not inherently problematic, but you should use it carefully. Before purchasing, any conditions, restrictions, or limitations should be made clear to the consumer.
Online advertising must not create a misleading impression or contain false claims. The prohibition of misleading and deceptive conduct applies to statements or claims about products or services in the online environment as well as other traditional forms of advertising.
To avoid a claim for misleading and deceptive conduct, you must:
The ACCC prosecuted a duck meat producer for falsely claiming that its duck meat products were raised in the open air, when in fact the ducks were raised in enclosed sheds. In addition, the manufacturer was found to have misrepresented its packaging, website, delivery trucks, signage and merchandise through written and pictorial representations.
As a result, the ACCC ordered the manufacturer to pay costs and penalties of $375,000.
Read the full case here.
GlaxoSmithKline and Norvatis were involved in the marketing and sale of ‘Osteo Gel’ and ‘Emulgel’ as different products. A higher price was charged for Osteo Gel, and it was portrayed as being more effective than Emulgel.
However, both products were the same product as they contained the same active ingredients and were equally effective in treating local pain and inflammation.
The ACCC initiated proceedings for:
The concern was that consumers might have been misled into paying more for an identical product because they believed it was more effective.
As a result, GlaxoSmithKline was ordered to pay $1.5 million, and Norvatis was ordered to pay $3 million.
Read the full case here.
The ACCC initiated proceedings against a glasses company Oscar Wylee, which had run a “buy a pair, give a pair” promotion. The company planned to donate a pair of glasses to someone in need for every pair purchased. However, out of 328,010 pairs of glasses sold, the company donated only 3,181 frames without lenses to charity.
The court found Oscar Wylee engaged in unlawful conduct that exploited customers’ charity and goodwill to induce them to purchase products.
As a result, Oscar Wylee was ordered to pay a $3.5 million fine. In addition, publish corrective notices and contribute to the ACCC’s costs.
Kogan, a well-known online shopping platform in Australia, had misled consumers by advertising that customers could use the code ‘TAXTIME’ to reduce prices by 10% at checkout. However, the court found that the price of 621 products had been increased by 10% immediately prior to the promotion. As a result, Kogan was ordered to pay a fine of $350,000.
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