Comparative Advertising – Using your Competitors as a Marketing Tool!

In this edition of From the Bench, Senior Associate Amy Cowper from law firm Bird & Bird highlights the power of comparative advertising, what the pitfalls are and how best to comply with both the AANA Code of Ethics and the Australian Consumer Law.

Comparative advertising can be a powerful and persuasive marketing tool.  It can draw attention to the benefits of your brand over another, highlight superior aspects of your products or services, assist consumers by explaining and comparing complex products and services in simple terms and can enable consumers to make more informed decisions.

However, if not done correctly, comparative advertising can fall foul of the law.  Here we look at some of the key legal and regulatory obligations on companies when undertaking comparative advertising campaigns and offer some tips which may assist businesses in complying with these obligations.

What is Comparative Advertising?

Comparative advertising is any form of advertising in which comparisons are made between the goods or services being advertised or promoted and those of other parties.

Comparisons can be:

  • direct or express e.g. “product A has more features than product B” or “product A is cheaper than product B”; or
  • indirect or implied e.g. product A is “number 1”, or “the best” or “the cheapest” or “the fastest” or the “most efficient”.

What legal obligations do you need to be aware of when engaging in comparative advertising?

There is no specific prohibition against comparative advertising under Australian law but such advertising will be subject to the general prohibition on misleading and deceptive conduct and false and misleading representations contained in the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)).  There are also provisions under the AANA Code of Ethics which provide that certain advertising must not be misleading or deceptive (or likely to mislead or deceive) or contain a misrepresentation, which is likely to cause damage to the business or goodwill of a competitor.

The consequences of getting a comparative advertising campaign wrong can be severe.   There are substantial penalties for breaches of the Australian Consumer Law (of up to $1.1 million) as well as other orders which can be made including expensive corrective advertising, and of course, bad publicity.

When can it go wrong?

There are a number of ways in which a comparative advertising campaign can go wrong.

This can include, not using genuine competing products, using incorrect pricing, including inaccurate information in your advertisement, using half-truths, staging or exaggerating comparisons, failing to disclose the full story, and using inaccurate test results or out of date information.

A finding of breach of the AANA Code of Ethics can also lead to the need to remove the offending advertising.

A recent example of an advertisement containing misrepresentations which were likely to cause damage to the business or goodwill of a competitor is the Advertising Claims Board Decision (ACB) in Uber Australia Pty Ltd and The NSW Taxi Council 15 ACB 1.  In the Uber decision, the ACB determined that certain advertisements by the NSW Taxi Council contained misrepresentations which were likely to cause damage to the business or goodwill of Uber.  In making its determination, the ACB adopted the approach of the High Court in ACCC v TPG Internet Pty Ltd [2013] HCA 54, in considering the advertisements as a whole.  In that case, the High Court held that the dominant message test is central to the assessment of whether particular advertisements are misleading or deceptive.  In that case, the High Court also held that use of any qualifying statements need to be clear and prominent, to be relied upon to counter an argument that a representation may be misleading or deceptive.

Tips to help you comply

  • Check the accuracy of all campaigns, including regularly over the life of the campaign;
  • If making price comparisons, check competitor’s prices and all other elements of the comparison regularly – competitors can change their prices, launch a sale or change another aspect of their product so as to deem your comparative advertisement misleading;
  • Check that the overall impression of the comparative advertisement could not be ambiguous or misleading from the view of an unsophisticated customer with no knowledge of the subject;
  • Campaigns developed for overseas markets rolled out in Australia may not translate by way of cultural understanding and different laws – check facts in respect of each comparative product carefully;
  • Ensure your comparisons are with actual competitors and competing products (the safest is apples with apples, not oranges with apples);
  • Clearly identify and accurately describe the relevant products and call out any different features; and
  • If using market research or test results as the basis of your claims, ensure that it is current, is appropriately designed and provides a proper foundation for the claims.

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You can find more information about the AANA codes of conduct for advertising along with an overview of advertising regulation here http://aana.com.au/advertising-regulatory-guide/