Is it worth it? Comparative advertising do’s and don’ts

By Robert Toth | 28 Apr 2021 View comments

More and more social media and online sales are dictating the way businesses market and advertise their products and services to consumers.

Businesses use comparative advertising promoting how superior their product or services are to another competitor and there have been some recent well known cases and brands who some would think have taken the comparative advertising to the limit.

In Australia over the years we have had for example companies such as Duracell v Eveready 2002, Optus v Telstra 2007 , and Nurofen v Panadol 2018,  to name a few who fight there comparative advertising battles.

Was it worth it ? Very difficult to tell and the companies  would each say they got good exposure from their competitor’s marketing.

The comparisons relate to the price, quality, range or volume of products.

Is it legal? 

The answer is yes but companies need to be careful that they are not engaging in any misleading and deceptive conduct and they are comparing like for like, whether it is relating to the services or products they refer to of their competitor.

The two fundamental rules to avoid risk of litigation from your competitor are:

  1.  Do not engage in conduct that is likely to mislead or deceive;
  2.  Do not make false or misleading claims or statements.

In practice there is an overlap between the above two rules and a particular statement in an advert could breach both.

It is illegal for a business to engage in conduct that misleads or deceives or is likely to mislead or deceive consumers or other businesses under the Australian Consumer Laws (ACL). This applies even if you did not intend to mislead or deceive anyone and even if no one has suffered any loss or damage as a result of your conduct.

In addition to that prohibition against misleading or deceptive conduct, it is unlawful for a business to make false or misleading claims about their (and or a competitors) goods or services.

A misrepresentation is a claim or statement that is false or misleading made by one party to another. 

This includes claims or statements that you make in television or radio advertisements, in catalogues, on labels, on websites, in contracts (or during contract negotiations), over the telephone, in correspondence (such as letters or emails) or in person.

Whether a claim or statement is false or misleading will depend on the circumstances, for example, whether the goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use.

Hungry Jacks went head to head with McDonald's l Inside Franchise Business Executive

Hungry Jacks went head to head with McDonald’s l Inside Franchise Business Executive

How to limit any risk 

Before your marketing department or agency gets carried away with its enthusiasm, have your lawyers review your marketing to provide a risk assessment before the campaign goes live.

Ask these questions:

  • Is the comparison on price or value or benefits of the services or products accurate?
  • Are the products or services being compared reasonably similar?
  • Will the comparison be valid for the life of the promotion?

What to do next

  • Ensure all comparative advertisements provide an accurate description of the competitor product or service not only when first released but also, for the life of the advertisement. This may mean you need to update the ad if the competitor changes their product or service;
  • Comparisons should be between like-for-like products and services of real life competitors – unless it is explicitly clear that the products and services are different; 
  • Take a step back from the ad and ensure its overall impression is not ambiguous, false, misleading or deceptive

Your competitors will keep an eye on your advertising and if they move quickly and change their product or service your campaign may then become misleading.

What your competitors should not do

  1. Wrongly compare your products in a way that misleads consumers
  2. Post negative reviews which are not based on a genuine opinion about your business or product on online product review sites.
  3. Make inaccurate premium or claims to your disadvantage.
  4. Exaggerate comparisons;
  5. Use inaccurate information to describe a competitor product or service;
  6. Include half-truths or compare to a non existent competitor product or service.

Business need to be particularly careful of the use of the word ‘free’ as that can create  keen demand by  consumer so free needs to be just that. If conditions apply these must be clear and transparent to avoid the risk of engaging in misleading conduct.

Fine print, contradictory statements and images that obscure or alter written statements are all matters that can be taken into account.

Your competitors should display the total price of the goods or services and indicate what warranties if any are offered.

Where a business is considered to be in breach a competitor or the consumer can make a complaint to the regulator in Australia, the Australian Competition and Consumer Commission (the ACCC).

Enticing a competitor’s customers and staff 

Australian restaurant chain Grill’d announced the launch of its new Healthy Fried Chicken (HFC) Bites by  advertising directly in the face of KFC to KFC employees offering them free HFC Bites if they visited a Grill’d store in their KFC uniform.

Grill'd taps into KFC space | Inside Franchise Business Executive

Grill’d taps into KFC space | Inside Franchise Business Executive

Grilled  went all out with media trucks outside KFC stores in Sydney and Melbourne with the words, “Dear KFC employees, you get free HFC”  and street posters surrounding KFC store sites nationwide with the words, “Everyone deserves Healthy Fried Chicken”, “Don’t eat the dirty bird”, and “We use RSPCA approved 100% chicken breast”.

This is marketing taking it to the limit, however we are yet to see how KFC responds.

Competitors can also gain traction from comparative advertising so beware you are not doing your competitor a favour as was the case some years back when Audi ran a campaign with the tagline ‘Your pawn is no match for our King’  and ‘Your move, BMW’, only for BMW to respond with a campaign ‘Checkmate’!

Penalties 

Penalties for misleading or deceptive conduct in breach of the Australian Consumer Law have been increased. Now companies in breach face penalties of up to $10 million or three times the value of the benefit of the conduct received; or if the benefit cannot be calculated, 10 per cent of the annual turnover of the company for the preceding 12 months with individuals facing a penalty of $500,000 per breach.