According to Australia’s consumer and competition laws, businesses are prohibited from engaging in any conduct that could be construed as misleading or deceptive or likely to do so.
The devil is always in the details. When does marketing hype become illegal behavior?
The current case in the courts is a good illustration of these issues. The Australian Competition and Consumer Commission is pursuing legal action in relation to a number poultry companies.
The term “free to wander” is at the core of the issue. The poultry producers have claimed that their chickens are raised in barns with “free to roam” space, despite the fact that each chicken has just about 500 square centimetres.
Experts in animal welfare have responded to this case with a range of opinions. Two examples include (here) and (here).
These experts, however, miss the point. The law doesn’t just highlight claims that are wrong from a science perspective. The law instead looks at whether the claims made by the producer are likely deceive or mislead consumers.
It is possible to argue that 500 square centimetres of space per chicken in a large shed are enough to allow the chickens to “roam”. The court must ask if, from the consumer’s perspective, a small physical space would be consistent with the claim made by the producers that the chickens were bred under conditions where they “freely roam”. Has the producer engaged in behavior that is likely to deceive or mislead consumers, regardless of any possible scientific argument?
Imagine a busy city train station. Commuters are packed in, but they can still move around on the platform – despite some pushing and shoving. Most consumers would not describe this as a situation where they can “roam” around the platform. The word “roam”, which is used to describe open space, evokes a sense of freedom and therefore was probably chosen for the marketing campaign by the chicken producers. It is not because of scientific concerns about animal welfare, but rather this that has led to the producers being in court.
In the ACCC press statement, it is made clear what the issue is. The ACCC claims that Federation engaged in misleading and misleading conduct, and that it made false representations about meat chickens being raised in barns where they have ample space to move around.
Other marketing claims have been scrutinized in recent years. The ACCC offers guidance about the claims made by producers that their produce is “organic”. This document states that “[a] blanket statement that a product contains organic ingredients is likely to confuse consumers” if only a small portion of the product is made from organic ingredients.
The scope of misleading claims about ingredients is much broader. When a manufacturer claims that an ingredient is the main or only ingredient of a product when it’s actually a minor one, this can be illegally misleading to consumers.
Nudie Foods found out at the Federal Court. The court found that the juice was sold as cranberry, but was actually 80% apple. It was not legal to make claims that the juice was pure, undiluted, and unsweetened.
There are many misleading and deceptive statements that can be made, whether they relate to other products or the way in which products are sold. Retailers have advertised a price that “was” high, but now is lower, despite the fact that the product was never sold at this price or not recently.
Courts have found that such conduct is misleading. The courts have clarified that the most important aspect of the case is the impression that the advertising creates on a reasonable consumer. See, for instance, in this.
The juxtaposition of the words “was/now”, even if the product has been sold at a higher price before, can give the impression that it was a higher price a short time ago. Advertising can be illegal if this isn’t true.
Courts have recognized that consumers are able to distinguish between “puffery”, or inflated claims, and serious claims. When a product is advertised by having the user fly backwards or sprout wings, it is unlikely that this is illegal. It may be stupid, but it is not illegal.
To avoid misleading or deceptive behavior, firms must consider the impression created by a reasonable consumer. If the impression created by the company is not consistent with the facts then it may be a violation of our consumer protection laws.