Businesses constantly search for the competitive edge that will see them outlast and outcompete their competition. Comparative advertising is a technique often used to highlight that competitive edge and to promote the superiority of a product or service.
However, if your comparative advertisement depicts inaccurate, false or misleading information, you may be found to be in breach of the Australian Consumer Law.
What is it?
A comparative advertisement is a direct challenge to a competitor's product or service. Businesses will often make comparisons between their own product or service and a competitor product or service on the basis of:
- size or volume;
- price; or
Comparative advertising can assist consumers to make informed choices when faced with lots of similar products or services.
There have been plenty of examples of comparative advertising over the years that come to mind. Some have been successful and others, more recently, have been found to infringe the Australian Consumer Law:
|2002||Duracell v Eveready||
Gillette compared its 'Duracell Alkaline' battery with Energizer's 'Eveready Super Heavy Duty' battery, and claimed that the Duracell Alkaline battery lasted up to three times longer than the Eveready Super Heavy Duty battery. The batteries were based on different technologies and so were not 'like for like'. Despite this, the Court found it wasn't misleading, because it was a truthful comparison between two clearly identified products.
|2007||Optus v Telstra||
Optus' print and television campaigns compared its '$49 Cap Plan' with Telstra's '$40 Phone Plan'. The advertisements listed some key features of each plan, such as call rates, the value of calls included, and the type and value of phone included. All the information was factually correct.
|2015||Optus V NBN||
Optus claimed that it's cable broadband service and plans had 'NBN-like speeds'. This statement represented to consumers that Optus' broadband services and plans provided speeds comparable to those available on the National Broadband Network plans. The reality was that Optus' broadband speeds were not comparable to the NBN at all. Optus paid $51,000 in penalties
|2018||Nurofen v Panadol||
Reckitt Benckiser got into trouble over the following Nurofen advertisement:
The advertisement not only represented that Nurofen was faster and better for treatment of common headaches, but also, implied that there was suitable scientific knowledge supporting those representations. Ultimately the Federal Court held that the body of scientific evidence relied on by Reckitt Benckiser did not adequately support its representations. Reckitt Benckiser was penalised $6 million dollars.
Consequences of getting it wrong
Penalties for misleading or deceptive conduct in breach of the Australian Consumer Law were increased at the end of last year. For more information on why they changed, see our article New ACL Penalties: no longer just the cost of doing business.
Companies face the greater of:
- $10 million;
- three times the value of the benefit of the conduct received; or
- whether the benefit of the conduct cannot be calculated, 10% of the annual turnover of the company for the preceding 12 months.
Individuals face a maximum of $500,000 per breach.
What not to do
- exaggerate comparisons;
- use inaccurate information to describe a competitor product or service;
- include half-truths; or
- compare to a nonexistent competitor product or service.
What you should do
- Accuracy: 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 advertisement if the competitor changes their product or service;
- Actual Competitors: all 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; and
- Overall Impression: take a step back from the advertisement and ensure its overall impression is not ambiguous, false, misleading or deceptive.
On a positive note, you are free to engage in comparative advertising, so long as you are very careful about how you do it. Any comparison must be truthful and not misleading in other ways.
The flip side is your competitor is not likely to lay down. In many cases, the competitor will claim there has been some misleading conduct or other breach of the Australian Consumer Law. Or they might just run a comparative ad straight back at you – which happened several years ago now when Audi ran a campaign with the taglines 'Your pawn is no match for our King' and 'Your move, BMW', only for BMW to respond with a campaign 'Checkmate'.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.