Car advertising backfires

Highlighting the superiority of your product or service compared to a competitor’s equivalent can be a very effective form of advertising, particularly if done in a clever or humorous way – Apple’s campaign aimed at Microsoft is a good example: Apple campaign on Youtube. Also comparative advertising, if done properly, can enable consumers to make better informed decisions.

However, comparative advertising is risky: often it annoys the competitor and motivates them to shut down the campaign. Any inaccuracy or exaggeration can be pounced upon as means to do so, on the basis that the advertisement is misleading or deceptive and therefore contravenes the Australian Consumer Law. The risk is magnified because courts tend to examine such advertisements especially critically, given they are likely to be perceived by consumers as providing fair and precise comparisons.

These risks were illustrated in a recent decision of the Supreme Court of Victoria, involving two well-known websites for buying and selling vehicles. [1] The defendant, who operates http://www.carsguide.com.au/, ran a campaign on TV, radio, newspapers and billboards that sought compare the way it and one of its major competitors, http://www.carsales.com.au/, deal with a buyer’s contact details.

Courts use a two-step analysis to decide cases of this sort: the meanings and representations conveyed by the advertisement are determined first, and then they are compared against the evidence to ascertain whether or not they are accurate and justified. In this case, the court found that

• the overwhelming impression conveyed by the campaign was “that the plaintiff is engaged in the unauthorised trafficking of buyers’ confidential information to multiple car dealers for profit”;
• however, the defendant conceded that in fact the plaintiff did not give customer information to a dealer other than the dealer to whose advertisement the customer responded;
• the defendant’s own business model operated in a very similar way, with the slight difference that the defendant did not charge a separate fee for the supply of customer information; and
• indeed, data collection through the websites, and the supply of buyer contact details to dealer clients, was “a crucial ingredient of each business model”.

Accordingly the advertisements were found to convey false representations and to constitute misleading and deceptive conduct:

“the defendant’s advertising campaign … represented that the plaintiff was engaged in the unauthorised trafficking of confidential information to client dealers without the knowledge or consent of potential buyers. That was false… [t]he defendant conveyed that it was not in the business of providing contact details. That was misleading.”

The defendant’s advertising exaggerated a trivial difference between its business model and that of the plaintiff and used it to make sweeping and unjustified representations about the plaintiff. Ultimately its own business model was scrutinised and found to include the very same element as its campaign had impugned.

Exaggerations and inaccuracies like this have landed many businesses in trouble before, including:

• Optus – for advertisements that compared the coverage of its network against the Telstra network;
• Remington Products – for advertisements that compared the durability of its Varta brand of batteries against Energizer batteries;
• Black & Decker – for advertisements comparing its drills to those of Makita; and
• Pfizer – for advertisements that compared the efficacy of its worm medication against that of a competitor.

The message from these cases is that it is critical to ensure that comparative advertising does not convey any false information. The comparisons should involve actual competitors and competing products or services, and they should be appropriate, accurate and based on valid evidence.

If you have any doubts or concerns about your new advertising campaign, seek our advice before you launch.