A five second on-screen explanation didn’t get advertiser or agency off the hook in an Australian ad prosecution.
Topic: Misleading Advertising
Who: ACCC –v- Medical Benefits Fund of Australia Limited and its ad agency
Where: The Federal Court of Australia
When: September 2002
Our thanks are due to Jonathon West of Clayton Utz in Sydney for the report below. The case relates to a prosecution brought under the Australian Securities and Investment Commission Act, which outlaws misleading and deceptive advertising for financial products. Similar controls for non-financial products are contained in the Trade Practices Act. The nearest equivalent legislation we have here in the UK takes two forms, the Control of Misleading Advertisements Regulations 1988 and the Trade Descriptions Act 1986. The 1988 Regulations are only used sparingly by the enforcement authorities since they are intended as a legal "backstop" to be activated if the self regulatory systems for controlling advertising (such as the CAP print code) are unable to deal with the problem. They have not in any reported case to date led to any fines or other financial penalties (other than costs) being levied against the defendants.
The Trade Descriptions Act 1968 criminalises materially false statements as to goods or services, although there will be no liability so far as descriptions of services are concerned unless intention or recklessness on the part of the defendant can be shown. Advertising agencies responsible for advertising caught by the legislation may be prosecuted although there are few, if any, reported cases of this occurring.
The requirement in the equivalent Australian legislation that to be liable the defendant must be "knowingly concerned" in the relevant conduct appears to be slightly less difficult to establish for the prosecution than the Trade Descriptions Act mental element. The difference may not be that great, however, so this case serves as a reminder to UK agencies that the penalties for disseminating misleading advertising could be far greater than a "complaint upheld" finding by the Advertising Standards Authority.
Equally relevant to UK advertisers is the other "disclaimer" strand of the case. Here one can easily see a UK tribunal taking a very similar view to that of the Australian Federal Court on similar facts.
For further information on the subject matter of this article or any issues related to media and marketing within Australia, contact Jonathon West, Senior Associate, Clayton Utz on +61 29 353 4534 or jwest@claytonutz.com
Deception and Disclaimers – the MBF Case [1]
Jonathon West
Clayton Utz, Sydney
A recent Federal Court decision provides guidance to advertisers in relation to the use of disclaimers in television, print and billboard advertisements, and sounds a clear bell of warning for advertising agencies.
Background
In 2000, the Federal Government, through the "Lifetime Health Cover" initiative, encouraged Australians to take out private hospital cover by 30 June 2000. In response, many private health funds, including Medical Benefits Fund of Australia Limited ("MBF"), embarked on aggressive advertising campaigns to attract new customers. MBF's campaign included television, print and billboard advertisements containing pregnancy related images.
The television advertisements (one of which depicted a couple in hospital the day their baby was born) contained voiceovers and text which stated that, if you joined MBF before 30 June 2000, MBF would waive its 2 and 6 month waiting periods. For less than 5 seconds at the end of the advertisement, text appeared at the bottom of the screen which stated "12 month waiting periods such as pre-existing conditions and obstetrics still apply".
The newspaper advertisements and billboard advertisements (which were displayed at railway stations) featured amongst other things a pregnant woman with the question "Are you sure your health cover is going to deliver?". The advertisements contained a qualification that there was a waiting period and an additional asterisked fine print disclaimer which stated that, in the case of pregnancy, the waiting period was 12 months.
Action by the ACCC
The ACCC [2] (via its CEO, Brian Cassidy) instituted proceedings against MBF in the Federal Court, alleging that the television, print and billboard advertisements were false, misleading and deceptive. In particular, the ACCC alleged that the advertisements contained false representations that pregnant women joining or transferring to MBF would be immediately covered for medical and hospital expenses arising from the pregnancy. The ACCC further alleged that the disclaimers were inadequate and unlikely to come to the attention of consumers, which meant that readers and viewers of the advertisements were unlikely to appreciate that a 12 month waiting period applied to pregnancy related medical and hospital expenses.
The ACCC also joined the advertisement agency involved in formulating MBF's campaign, which it argued was knowingly concerned in the contraventions.
What did the Court find?
The Court held that MBF's television advertisements were misleading and deceptive, as a consumer casually viewing the commercials between televisions programs would be left with the impression that MBF was waiving waiting periods for pregnancy related expenses, and that a person could make a claim on their insurance the day after joining MBF. Notwithstanding the fine print disclaimer, the first and overall impression given by the television advertisements was false.
On the other hand, the newspaper advertisements were found not to be misleading and deceptive. Consumers had more time to study their content, as compared to television commercials, in order to absorb any relevant qualifications. The statement that waiting periods had to be served appeared in sufficiently large text, and the further asterisked explanation (which explained that the waiting period was 12 months) was only intended to add to that earlier correct statement.
The billboard advertisements, like the television advertisements, were held to be misleading and deceptive. The Court found that, although the billboards may have been scrutinised by some train passengers, other passengers were likely to merely peruse or notice them – overlooking the waiting period qualification. Accordingly, the qualification did not detract from the message that MBF was waiving its waiting periods for pregnancy related expenses.
A clear message for advertising agencies
The advertising agency was also held to be liable, on the basis that it was "knowingly concerned" in MBF's misleading and deceptive conduct. Although the agency did not subjectively appreciate that the advertisements were misleading and deceptive (and did not intend to mislead or deceive the public), it was sufficient that it:
· knew what text and other content had been published in the advertisements; and
· knew the features of the advertisements and the circumstances of publication that gave rise to the published matter conveying the representations complained of; and
· knew the facts that the ACCC alleged led to the advertisements being misleading and deceptive (that is, it knew that waiting periods applied in the case of pregnancy).
The fact that the agency made a mistake in assuming that the advertisements did not contravene the law was no defence. The judge quoted with approval the following statement:
"In the advertising industry, advertising agencies are 'gatekeepers' who have a responsibility to consider whether advertising material prepared by them for their clients, complies with consumer protection legislation"
and went on to say
"I should add that advertising agents can not rely upon compliance with CAD (Commercials Advice Pty Ltd) guidelines or scrutiny of advertisements by the legal advisors of their clients as a defence to accessorial liability when they are involved in the creating and publication of advertising directed at the public. They are the gatekeepers. No doubt the fact that they relied upon others may operate to mitigate penalty, but it is no defence to a conclusion that they were knowingly concerned in a contravention of the Act."
What is the message for advertisers and advertising agencies?
· Each disclaimer needs to be carefully considered in the context of the marketing material in which is appears, to assess whether it is sufficient to overcome any misleading or deceptive impression that may otherwise be given.
· It is critical to consider the context in which the advertisement will be published – as the MBF case illustrates, a disclaimer that might be sufficient in one context will not necessarily be sufficient in another.
· Advertising agencies must assess the content of advertisements for themselves – it is not enough to rely on the clearance of advertisements by the client's legal advisors.
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[1] Cassidy & Anor v Medical Benefits Fund of Australia & Anor (No 2) [2002] FCA 1097 (decision handed down 9 September 2002)
[2] Australian Competition and Consumer Commission which acts as a consumer watchdog and monopolies commission
