Guide to Advertising Compliance
If you are a business owner, it is absolutely critical that you adhere to all advertising compliance laws and regulations. This guide will shed light on various areas of the law when it comes to marketing and advertising your business – to ensure that you don’t stumble on a ‘legal landmine’.
It is important to understand that in Australia, there are several laws and regulations that guide, oversee and ensure that businesses conduct their commercial activities transparently and in accordance with the relevant laws.
The conduct of digital advertisements in Australia is governed by federal legislation, state agencies, and self-regulation. The Australian Competition and Consumer Commission (‘ACCC’) regulates the content of digital advertisements and disclosures at the national level and enforces the Australian Consumer Law (‘ACL’).
The ACL requires businesses to ensure that their customers are appropriately and accurately informed about the products and services they buy. The law also prohibits misleading or deceptive advertisements, inaccurate or misleading statements, and the imposition of unfair contract terms. As a relevant and commonly used area of advertising, email and other commercial electronic marketing is regulated by the Spam Act 2003 (‘Spam Act’).
The rule of thumb is advertisers need to obtain consent from a customer or a prospective customer before sending a commercial electronic message. It requires a business to describe the company accurately and ensure that the consumer can unsubscribe from your messages – easily.
Another critical piece of legislation is the Privacy Act 1988 (‘Privacy Act’), which mandates that businesses will be accessible and clear about their data handling activities. It also regulates and prescribes the content of privacy policies and many other legal requirements and data protection obligations. Some states enforce the ACL’s legal obligations but have additional provisions for competitions and lotteries. However, merely abiding by the law is not enough as a business owner. It is critical to set and follow in-house and self-regulating compliance frameworks and practices to ensure that your business goes above and beyond in protecting your customers best interests.
Amidst our faced-paced and technologically advanced society, self-regulation (in the form of policies and procedures) can fill in gaps or grey areas where the law may not be clear or does not provide clear-cut rules. It also makes it easier to resolve conflicts and give a great customer experience all-round.
Basic rules that businesses must follow regarding advertising.
There are various regulations that govern the making of advertisements by a company or a commercial entity. The applicability of these laws can vary depending on the size of the business and the specific pieces of legislation that come into play.
The Competition and Consumer Act 2010 is an essential piece of legislation to be aware of. It aims to promote fair competition by prohibiting market power abuse, uncompetitive behaviour, fostering fair trade, and providing consumer protection. Section 18 of the ACL prohibits a person in trade or commerce from engaging in misleading or deceptive conduct. This section establishes a code of conduct that covers consumer rights and all aspects of “trade or commerce.”
If an advertiser makes a representation about a future matter without having fairgrounds for making that representation, the representation would be considered misleading. The ACCC has published a guideline to assist businesses in complying with these standards: ACCC – Advertising and Selling Guide. Regardless of the type of technology, system, or media distribution, this guide applies to all digital advertisement conduct.
What kind of claims should you make or avoid while advertising?
- False or misleading statements: False or misleading information in advertisements is obviously prohibited. It is illegal for a company to make claims that are inaccurate or likely to mislead the public. Advertisements or marketing messages in any media (print, radio, television, social media, and online) or on product packaging, as well as any comment made by an individual representing your company, fall under this category. By way of example, your company cannot make false or misleading statements about the quality, value, price, age, or benefits of products or services, as well as any accompanying guarantee or warranty. False testimonials and impersonating another company is also prohibited. It is important that you always consider and reflect on whether your business’s advertisement’s have an overall perception that may be misleading or inaccurate to prospective customers/clients.
- Fine prints and qualifications: Small print and disclaimers cannot be used as an ‘excuse’ for the overall message of an advertisement. If an advertisement claims that its product is “free to use” but the disclaimer indicates that payment is required to access the product, this would yield your advertisement to be misleading or deceptive. Of course, there are many cases in which the topic of contention is significantly complex and potentially more requires more investigation to prove a misleading or deceptive claim. If you want to fully ensure that your advertising is compliant, a commercial lawyer can help you achieve that.
- Comparative advertising: Comparing your business or product to a competitor can be an effective way to advertise and sell. However, it can potentially get you in trouble. As long as the information is correct and accurate, comparative ads are allowed and can be used by you to support the superiority of your goods or services over your competitors. The comparison could be based on price, quality, range, or volume.
- Bait advertising: Bait advertising entails offering your products for sale at low prices to attract consumers to a business. Often businesses mention specific prices (usually special “sale” prices) on products that are not available or are only available in small quantities (where this limit is not clearly and specifically disclosed). Unless you mention explicitly that the item is in short supply or on sale for a limited time, you can only sell goods or services at a “special price” if they are available in fair quantities for a reasonable period.
- Premium claims: Premium statements are allowed, and you can use them to imply that your product is better, or that it provides a moral or social advantage, or that it provides nutritional benefits. Businesses that make premium claims often make them in an attempt to obtain a selling advantage. The advantage maybe “green,” “environmental,” or “therapeutic.” A premium claim may also be utilised to support the perceived quality of your product. Claims that give the impression that a product, or one of its characteristics, have some added advantage compared to similar goods and services are permissible as long as they are not deceptive and can be substantiated.
- Prize and Giveaways: If your company offers free products or rewards as a promotional activity, it is critical that you do not deceive your customers about the items available or the chances of winning them. If there is a catch (for example, if people must meet specific criteria to receive a prize), you must disclose it right away. Check with the local consumer protection department to see if there are any state/territory legal provisions.
- Exaggerated Claims: A term used to describe exaggerated claims is “puffery”, which refers to wildly inflated or ambiguous statements about a product or service that no reasonable person can take seriously. For instance, a restaurant that claims to serve the “best pizza on the planet”. Whilst this is clearly an exaggerated claim, it is, however not considered deceptive.
Are there data regulations regarding advertisements?
Yes, indeed. The Privacy Act is the primary legislation that regulates privacy in many industries. Protecting privacy is essential in the field of advertising because most interactive advertising requires processing and using data to generate, calculate, and profile.
The Privacy Act sets out the legal requirements for gathering, storing, using, and disclosing personal information, such as health information, credit information, tax file numbers, and credit information. Importantly, digital advertising entails data aggregation and customer profiling, all of which can contribute to consumer recognition in some instances.
The concept of personal information includes information about an individual that has the ability to identify the individual when combined with other data (which may or may not be managed by the same entity). Multiple records or databases, which various agencies may operate, may be included in deciding if a person is reasonably identifiable under the Privacy Act. Consequently, advertisers may face a critical problem in how and when to determine if the “reasonably identifiable threshold” has been reached. Consider the practicality, expense, complexity, and probability that the information will be related in a way that reasonably identifies the individual when determining whether you have or are likely to have personal knowledge.
What if you disregard or do not fully comply with the laws that regulate advertising?
It is time to get on top of them immediately! Harsh consequences can be imposed if your company does not comply with the various advertising laws and regulations and you may be approached by a regulating agency that has decided or been assigned to further investigate the practices of your business. If this happens, you must answer within the specified time frame and provide formal explanations.
A regulatory agency may become aware of a problem resulting from a customer complaint or even without one. If this occurs, the regulatory authorities will expect to hear from you. You may be asked to refrain from taking specific courses of action moving forward.
However, if the violation is deemed to be more severe, you might be issued an infringement warning or even a court-ordered fine. In all cases, your business practices should be adjusted immediately.
An essential checklist of what you should and should not do when you advertise
- Provide accurate and up-to-date details about your products.
- Check that the overall perception of your ads is not deceptive and is as accurate as possible.
- Wherever possible, back up assertions with proof and written evidence.
- Make a note of any crucial restrictions or exceptions.
- Be ready to back up your claims.
- Don’t make vague or contradictory claims or use unnecessary jargon.
- Don’t omit any relevant details.
- Don’t make commitments you cannot hold or make predictions that are not backed up with evidence.
- Don’t offer products or services without an estimation of whether you will be able to supply them in case there is a rise in demand.
If you are unsure as to what your legal obligations are in regard to marketing regulations, it is important to engage a lawyer to assist you in ensuring that your business is legal-proof and meets all necessary advertising requirements. At Lazarus Legal, our team specialises in data protection and meeting commercial obligations under the Privacy Act, the ACCC and the ACL.
Get in touch, and one of our expert lawyers will be there to assist you and discuss your legal position and options.