How to: Compliance with Marketing and Advertising Law

Any business will need to consider the way in which they do marketing, advertise and promote their services or products. There are a number of Federal laws that regulate the behaviour of businesses to ensure that their services or goods are advertised or promoted in a fair manner.

How is advertising regulated?

The key role of advertising is to provide information to consumers about a service or a product so that they are better equipped to make a decision on a purchase. The Australian Consumer Law (ACL) (found in Schedule 2 of the Competition and Consumer Act 2010 (Cth)) provides the rules with respect to advertising. It should be noted that there are additional regulations for restricted product types such as alcohol, tobacco, financial services, and therapeutic goods.

How is the display and advertising of prices regulated?

The ACL prohibits a number of factors with respect to pricing. These are:

• Multiple pricing: where goods or services must not be sold at a price higher than the lowest displayed price

• Component pricing: where the price at which a good or service is promoted must reflect the total price

• Drip pricing: where adding charges during the buying process after the customer has invested time or psychologically committed to the transaction may be prohibited where the final price doesn’t reflect the displayed price

• Price comparisons: where the price is compared to a previous price, a competitor’s price or another price and it must not be misleading

• Excessive surcharges: there must not be any excessive charges for payments made using a credit, debit or prepaid card

What considerations are there for intellectual property?

Businesses should ensure that existing intellectual property is being used properly. Where there is new intellectual property arising out of a creative process, it must be protected for the future.

When engaging an advertising agency or consultant, the business has to ensure that all the rights in the intellectual property work have been obtained. In addition, with respect to any third party intellectual property such as trade marks and copyright in advertising materials, the appropriate permissions have to be obtained.

How is the self-regulation of advertising conducted?

The main regulatory body for advertising is the Australian Association of National Advertisers (AANA). There are codes of practice such as the Code of Ethics, the Code for Advertising and Marketing Communications to Children, Food and Beverage Advertising Communications Code, the Environmental Claims in Advertising and Marketing Code, and the Wagering Advertising and Marketing Communication Code.

These are enforced by the Advertising Standards Bureau. There are other standards and codes of practice with respect to television, radio, internet advertising and sector and subject matter specific codes such as tobacco, motor vehicles and therapeutic goods. These have their own regulators and codes of practice.

What considerations are there with respect to Privacy?

Businesses need to consider how the Privacy Act 1988 (Cth) applies to any advertising they do. In particular the Privacy Act will apply where the customer information is collected, used, stored or disclosed, where advertising is targeted via email or text, where online behavioural advertising is used and where there is any activity which involves the use of personal information (as defined by the Privacy Act).

Check out our cheatsheet on data protection here

What happens if a business does not comply with advertising laws and regulations?

If a business does not comply with the advertising laws and regulations, they risk bad publicity, loss of reputation and brand damage as an initial consequence. More deeply if provisions of the ACL or the codes of practice are breached, then businesses face referral to the ACCC and possible court action and censure from regulatory bodies respectively. In addition to being reprimanded by the governing bodies, businesses can also face legal action by competitors or consumers which can result in an award of damages.

A business’ reputation may suffer as a result in the long term and they may have difficulty in securing advertising space when allowed to advertise again. In addition, they may incur costs as a result of product recalls and advertising material recalls. Finally, the business will lose both customers and a customer’s confidence in the business as a result of this behaviour.

How are other marketing activities regulated?

Marketing involves a wider spectrum of activities, not just advertising. In particular many businesses will collect information about the market and about individual customers to create an outlook on how the business will profit and attract customers. When doing this, the collection and use of personal information from customers attracts obligations towards the Privacy Act.

In addition, the use of new technologies in marketing results in new legal issues arising or the application of existing legal principles to a new area. Therefore other areas of the law such as technology may need to be considered in such situations.

Finally, businesses may also rely on other promotional strategies such as sponsorship arrangements, ambush marketing, trade promotion and celebrity endorsement. These topics will be discussed later on in this blog.

What is misleading advertising?

The ACL provides the key provisions on misleading advertising. In particular, section 18(1) provides that advertising must not mislead or deceive, and section 29 provides that advertising must not contain false or misleading representations.

With respect to these provisions, you should consider the following key terms: Trade or commerce

"dealings in the course of those activities or transactions which of their nature bear a trading or commercial character”

As per Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604 per Mason CJ, Deane, Dawson and Gaudron JJ, the general rule is that when a business makes any representation (direct or implied), the business must ensure that the representation is not untrue or false and it is not likely to mislead the type of consumers at which the advertisement is targeted.

Under the ACL the key issues with respect to advertising are addressed: comparative advertising, false or misleading claims, bait advertising, disclaimers, defences, remedies and corrective advertising and adverse publicity orders.

How is digital online marketing regulated?

SPAM Act 2003 (Cth) regulates commercial electronic messages. Amongst other things these messages must not be sent without the recipient’s consent, it must identify the sender and it must include a functional unsubscribe facility.

The “Do Not Call Register” was created by the Do Not Call Register Act 2003 (Cth) and prohibits marketers from calling the telephone numbers on the Register except:

• Where the recipients have expressly consented to receive calls;
• Where consent can be reasonably inferred from the existing business relationship between the marketer and the recipient;
• Where the call is of a public interest nature such as a government body or charity. In addition, businesses must comply with the industry standards on the times calls are made;
• Where internet browsing behaviour is tracked, this is called behavioural advertising and it may attract issues under the Privacy Act.

The AANA provides the best practice principles for native advertising, apps and transparency in digital communications.

Search marketing involves strategies to strengthen the online profile of a business by increasing the visibility of its websites in search engine results. These strategies include:

• Search engine marketing which is usually associated with a business paying a search engine operator to display its advertisements when particular keywords are used;
• Search engine optimisation which involves adapting the content and underlying code of a website;
• to boost its ranking in search results;
• Search marketing seeks to tailor advertising to an internet user’s perceived interests based on a range of information building. Here the user’s internet browsing history, searches and content is viewed. The information which a user provides about themselves on a particular website is viewed.
• The user’s use of email, social media and content sharing sites is also considered.
• It should be noted that where this involves the collection, use, storage and disclosure of personal information the marketers must comply with the Privacy Principles unless the business turnover is $3 million or less.

How is social media marketing regulated?

The following legal principles are applied to regulate social media marketing: ACL, Privacy Act, unlawful disclosure, advertising industry codes and practice, defamation and intellectual property. The strategies for dealing with risks or problems associated with social media marketing include moderation policies, managing tone, resourcing, moving off social media, editing or removing content and protecting against technical issues such as hackers.

Under the AANA Code of Ethics, advertising on social media must be clearly distinguishable to the relevant audience. The marketer must have a reasonable degree of control over the material and the material should draw the attention of the public in a manner intended to promote a product.

With respect to social media platforms, these are privately owned and impose their own terms of use with respect to advertising materials. These include:

• Advertising policies: requirements in relation to the type and content of advertisements that can be displayed on the platform.
• User liability: requirements that the platform’s users comply with key policies of the platform operator, including its advertising and privacy policies.
• Intellectual property: requirements that the platform’s users confirm that they have not infringed any third party rights.
• Privacy: the platform’s operator policies address how user information may be collected, stored and disclosed to third parties.

How is sponsorship and celebrity endorsement regulated?

Sponsorship refers to a commercial arrangement by which a sponsor makes a payment or provides goods or services to a sponsored party. Sponsorship arrangements can range from minor and informal to complex, high value and heavily negotiated commercial agreements.

Since there is a sponsorship agreement, there is a contractual relationship between the parties and their rights and responsibilities derive from this agreement.

Sponsorship agreements may create legal issues relating to intellectual property, competition and warranties and obligations.

Celebrity endorsement is an agreement with a celebrity in which a company pays the celebrity fees or a royalty in return for it being able to use a celebrity’s image to promote the company’s products or services. A celebrity endorsement may create issues with respect to the use of the celebrity’s ownership rights, licensing, warranties and obligations, the exclusivity of the arrangement and social media guidelines.

What is ambush marketing and how is it regulated?

This is a strategy that has been adopted by advertisers who seek to associate themselves with an event without being an official sponsor. For example an ambush advertiser tries to benefit from the goodwill created by the event without having to pay the sponsorship fees to the event organiser.

This raises the following issues:

• Major events legislation: The legislation regulates the use of marks, images and representations in sponsorship and affiliation for some major sporting and cultural events such as the Olympic Games.
• Misleading conduct: Governed by sections 18 and 29 of the ACL, ambush marketing has the potential to breach these provisions.
• Passing off: Occurs where ambush marketers use similar names or marks of official sponsors or event organisers.
• Copyright, trademarks and designs: Ambush marketing may raise potential infringements of the intellectual property of the official sponsors and event organisers.
• Contractual protections: The measures in sponsorship and other contractual arrangements between official sponsors and event organisers can manage ambush marketing risks.

How can a business use national icons and landmarks in their advertising?

• National Anthem: Must obtain permission from the Australian government before use.
• Flag: May be used in advertising without permission. The advertiser needs to obtain permission from the Australian government when importing products, applying trademarks and registering designs. The advertiser must comply with the Australian government guidelines for use of the flag such as using it in a dignified manner and not cover the flag with other words or illustrations.
• Aboriginal flag: Can be reproduced in accordance with the Copyright Act 1968 (Cth) and with the permission of the flag’s designer Harold Thomas.
• Commonwealth coat of arms: May only be used and displayed in a manner set out in the Australian government’s Commonwealth Coat of Arms Information and Guidelines.
• Landmarks: Permission may be required depending on the landmark, for example Uluru and the Sydney Opera House are subject to restriction.

How are promotions regulated?

These are either games of skill or games of chance. Games of skill are where the outcome is determined mainly by the participants’ mental or physical skill. Games of chance involve a winner being selected at random (eg a competition).

A permit is required to run games of chance in some Australian states and territories. Trade promotions are usually run according to published terms and conditions. These comply with state or territory requirements and help manage consumer expectation about the way in which the promotion or draw will be run. Including limit or exclude the organisation’s liability to participants, and allow for ancillary purposes such as to secure the customer’s consent to use their details in future marketing activities.

The common statutory restrictions and requirements on trade promotions concern the conditions of entry, the chances of winning, the terms and conditions (which must display the permit number for promotion, promoter’s name and ABN or ACN), the distribution of prizes and the restrictions on participation.

Given the ease with which a business is able to advertise today, especially in social media, it is important for businesses to consider the above mentioned factors and issues when engaging in advertising, marketing and promotion.

Final Note

You want your business to be seen in a positive light by potential customers, employees and investors. You also want to build a positive brand image. Media interviews and publications are definitely a way in which to do this. Remember to never say anything to a journalist that you don’t want to see in print, and just assume that anything you say will be published and traced back to you!

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