Impact of new Australian Consumer Law on advertising

Riordans Lawyers’ March 2011 Newsletter noted that the new federal Competition and Consumer Act (CCA) and the Australian Consumer Law (ACL) replaced the Trade Practices Act (TPA) and introduced a number of important changes.  Some of the changes have particular relevance to advertisers and their advertising agencies.  This Information Brief deals with several of those provisions.

The CCA retains much of the law that was contained in the TPA, including component pricing and the general prohibition on false or misleading representations.

However, several new consumer protections with particular relevance to advertisers and their agencies have been introduced, and the strengthened enforcement and penalty provisions have aspects which are of particular relevance to them.

Testimonials

The TPA did not previously deal specifically with testimonials, but a new provision in the CCA expressly prohibits false or misleading representations in testimonials or about testimonials.

This prohibition applies to representations whether the testimonial was genuine or not, eg if a genuine testimonial is misrepresented or misquoted or where a fictitious testimonial was published.

Importantly, the new federal law has a presumption that a representation concerning such a testimonial is false or misleading.  This presumption is rebuttable, but failure to adduce evidence to the contrary when it is alleged that a person has made a false or misleading representation concerning a testimonial will result in the representation being found to be misleading.

Advertisers and their agents will need to ensure that their advertising does not suggest that there is a testimonial, if there has not been a testimonial, and where a testimonial is used, they will need to ensure that the testimonial is not false or misleading and that adequate enquiries are made and records kept.  The extent of these will depend on the nature of the testimonial.

You will also need to be aware that testimonials can include postings by customers and others on your website, and your Twitter and Facebook pages.  Recently the Federal Court dealt with favourable product comments posted on a company’s Twitter and Facebook pages by users of the product. The Court decided that once the company became aware of the testimonials and decided not to remove them, it became the publisher of the testimonials – it follows that the company would then be liable to penalties if they were false or misleading.

Whilst Victoria previously had similar provisions relating to testimonials, these new provisions are now National and the enforcement and penalty provisions of the new laws give the new national testimonial provisions much greater teeth.  (see following para & below).

A breach of the new testimonial provision is a criminal offence with a maximum fine of $1.1M for a company and $220,000 for an individual.  Defences to this criminal charge include an honest and reasonable mistake of fact or where a person took reasonable precautions and exercised due diligence to avoid the contravention—again this is a reason for advertisers and their agents to make proper enquiries to ensure the testimonial is not false or misleading and to keep good records.

See comments below for other possible enforcement and penalties.

Action Required

You need to:

  • Avoid presenting advertising/marketing that might deliberately or inadvertently look like a testimonial if it is not a testimonial (eg from a customer or celebrity);
  • If a testimonial is used, you must be rigorous in ensuring the testimonial is not false or misleading and that it is accurately presented eg do not misquote a celebrity’s endorsement.
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