Truth in advertising and labelling: The regulator’s perspective on what you can and can’t say
NEED TO KNOW
The Australian Competition and Consumer Commission (ACCC) has released two new guides, the Advertising and selling guide and Country of origin claims and the Australian Consumer Law. The guides aim to educate businesses about their legal rights and obligations when selling and promoting their products and services.
Both guides reflect a common sense interpretation of the Australian Consumer Law (ACL). They include detailed information and practical examples that provide guidance as to how the ACCC will likely assess whether advertising and promotional techniques are false or misleading. This guidance provides businesses with greater certainty when making claims in the online marketplace, including via social media, and on packaging and labelling, especially given the ACCC’s recent focus on enforcement in these areas.
UPDATED GUIDANCE ON ADVERTISING AND SELLING
On 17 April 2014, the ACCC released a revised Advertising and selling guide (Advertising Guide), which provides an overview of the rights and obligations that apply to businesses when promoting and selling their products and services. The revised Advertising Guide contains more detailed and practical guidance on conduct that is likely to contravene the ACL, along with tips for businesses when advertising and selling.
The following aspects of the Advertising Guide are worth noting:
- the clarification that online operations (including advertising and selling through email, social media, apps, online shopping sites, price comparison sites, review platforms and search engines) are subject to the same rights and obligations under the ACL as traditional bricks and mortar stores;
- the ACCC’s recommendation that businesses using social media should include a clear and prominent moderation policy on their homepage, which provides contributors with expectations around when their posts may be moderated;
- the clarification that businesses can be held responsible for posts or public comments made by others on their social media websites. Businesses should monitor their social media pages and remove posts that are false, misleading or deceptive as soon as they become aware of them, keeping in mind that social media operates 24 hours a day, 7 days a week, and many consumers use social media outside normal business hours and on weekends;
- in relation to online reviews and testimonials, the clarification that businesses may (and likely will) be engaging in misleading and deceptive conduct if:
- their online reviews and testimonials are fake;
- they use tactics to influence a consumer to provide a positive review or refrain from a negative review; or
- they selectively remove or edit negative reviews;
- the identification of ‘premium’ and credence claims (such as organic, environmental and ‘free range’ claims) as marketing claims that require extra care; and
- the inclusion of numerous practical examples and real case studies that provide useful guidance in relation to each of the issues identified above.
NEW GUIDANCE ON COUNTRY OF ORIGIN LABELLING
On 15 April 2014, the ACCC released a new guide that aims to give businesses greater certainty in making country of origin claims, titled Country of origin claims and the Australian Consumer Law (Country of Origin Guide).
The ACL prohibits false or misleading country of origin claims, but provides a ‘safe harbour’ defence for country of origin claims in respect of goods that were both ‘substantially transformed’ in the claimed country of origin and for which at least 50% of the costs of manufacturing were incurred in that country. Although the Country of Origin Guide largely reflects a common sense interpretation of the ACL, it includes greater detail than the ACCC has previously provided regarding how it will assess whether a country of origin claim is false or misleading.
The following aspects of the Country of Origin Guide are worth noting:
- the provision of practical examples of how the ACCC will apply the substantial transformation test and the 50% of production / manufacturing costs threshold in deciding whether a claim that a product is produced or manufactured in a particular country qualifies for the safe harbour defence;
- the ACCC’s view that to satisfy the substantial transformation criteria, an imported product must undergo a fundamental change in form, appearance or nature;
- the ACCC’s recommendation that a business should calculate the costs that can be reasonably allocated to materials, labour and overheads before goods are manufactured, so that it can have certainty in making a country of origin claim;
- the clarification that a business cannot rely on the country of origin safe harbour defences for a region or place of origin claim;
- in relation to labelling, the ACCC’s view that the overall impression conveyed by the label should be considered, including representations (or lack thereof), pictures and logos, and the fact that it is usually possible to convey more information on a label than in a television or radio advertisement;
- the recommendation for businesses to maintain records of the basis for their country of origin claims (for examples, facts and figures, as opposed to guesses or unsupported opinions) to assist with responding to competitor complaints or substantiation notices; and
- the recommendation for businesses to implement compliance training and clear procedures for complaints handling and signing-off on representational materials to assist early detection and avoid ACCC investigation.
Interestingly, this guidance follows the House of Representatives Agriculture and Industry Committee’s recent announcement in March 2014 of an inquiry into country of origin labelling for food (Inquiry), for which submissions are due by 2 May 2014. The Terms of Reference for the Inquiry involve a consideration of:
- whether the current country of origin labelling system provides consumers with enough information to make informed purchasing decisions;
- whether Australia’s country of origin labelling laws are being complied with and the practical limitations of compliance (if any);
- whether improvements could be made, including to simplify the current laws and/or reduce the compliance burden;
- whether Australia’s country of origin labelling laws are being circumvented by staging imports through third countries; and
- the impact of any proposed changes to the country of origin labelling laws on Australia’s international trade obligations.
While we have seen a number of investigations and attempted reform to country of origin labelling for food over the last few years, including in 2011, 2012 and 2013, none of the recommendations stemming from these past inquiries have been adopted or implemented.
THE WAY FORWARD
Although both the Advertising Guide and the Country of Origin Guide provide businesses with greater certainty and guidance when selling and promoting their products and services, particular care should be taken when making claims in the online marketplace, via social media, and on packaging and labelling, given the ACCC’s recent focus on enforcement in these areas.
The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.