Don't damage your business by illegal advertising

Published on Sunday 19 April 2009 22:01

YOU may remember Mel Gibson's gift in the movie What Women Want – with the power to hear everything women were thinking, he came up with a killer advertising campaign. Perhaps businesses which advertise could do with this kind of foresight when it comes to complying with what the regulators want.

In recent months, financial institutions and a variety of other businesses have received lots of bad press. Yet, particularly in recessionary times, good publicity is paramount for businesses, and advertising can assist a great deal in balancing the public face of a business.

However, in a recession, businesses can find themselves in a catch 22 situation: they don't have cash to advertise but advertising brings in business and cash. The temptation to keep it simple (are you old enough to remember the halcyon days of "Guinness is Good for You"?) is almost overwhelming.

Tread carefully, though. Advertising involves a minefield of regulation and falling foul of the law can result in the campaign having the opposite effect to what was intended.

Advertising is governed in two ways. Firstly, legally, primarily through the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) – these impose an obligation on businesses not to trade unfairly. Using an advert which makes misleading claims about what a product does would be one example of a breach.

Secondly, voluntarily, by means of self regulation and codes enforced by the Advertising Standards Agency (ASA) – to comply, very generally speaking, adverts must be legal, truthful, accurate, unexaggerated, prepared with a sense of responsibility to consumers and society and respect generally accepted principles of fair competition.

Getting an advert wrong in terms of the codes can also have legal significance as the ASA can make referrals which could lead to court action or criminal prosecution.

In any event, it does not make good business sense to contravene either form of regulation, as this could result in, among other things, adverse publicity, loss of reputation and brand damage. This is particularly so as the ASA publishes weekly reports of its rulings on its website and often these are reported by the media. In addition, the ASA can impose sanctions such as asking publishers and media owners to refuse advertising space.

Sales promotions are a commercial practice covered by the CPRs and include, for example, buy one get one free offers (BOGOFs).

The CPRs list certain practices which will always be unfair, one of which is describing a product as "free" if the consumer has to pay anything other than the unavoidable cost of responding to the promotion and collecting or paying for the delivery of the item.

The introduction of this requirement has led some to take the view that BOGOFs are now unlawful. However, the Department for Business, Enterprise and Regulatory Reform believes that this is not the case, as the cost of buying the one item is the "unavoidable cost" referred to.

Businesses should therefore bear in mind that, while such promotions appear to be legal in the UK at present, the law may yet be interpreted differently and may not be the same in other jurisdictions in which they trade.

The environment is another hot topic companies are keen to shout about. With the new duty on company directors to consider the impact of their firm's operations on the environment, many are keen to stress their green credentials.

This is known as greenwashing. Even higher standards have to be complied with when it comes to greenwashing. These include requirements that any "green "claims be explained clearly and qualified where necessary, and where there is a significant difference in informed opinion or something is inconclusive, that must be stated. In one year the number of complaints received by the ASA in this area has increased fivefold.

The fact the ASA adjudicates around 26,000 cases a year tells you that a watchful eye is cast over advertising practices, and businesses can find themselves the subject of complaint by not only consumers, but their competitors. Because of the potential negative effects of non-compliant adverts, this is an area of regulation that should be taken seriously by all businesses which advertise.

If in doubt, seek advice before advertising.

&#149 Pamela Abbott is a solicitor with CCW Business Lawyers