Bait advertising and special offers
Bait advertising is the practice of offering items for sale at low prices to attract consumers to a business.
Bait advertising can be a legitimate form of advertising. However, it is illegal to engage in this conduct where goods or services are advertised for sale at a discounted price, and they are not available in reasonable quantities and for a reasonable period at that price.
Legislation: Australian Consumer Law section 35
You must state clearly if the good is in short supply or on sale for a limited time. For example, if your advertisement makes it very clear that goods are available at the discount price for ‘today only’, this will limit your obligations to that day.
If there is not a reasonable chance the offer will be available at the advertised price, you may be in breach of the ACL unless you promptly offer a 'rain check', an acceptable substitute product or take other corrective action.
Example: An electronics retailer runs a campaign advertising 50-inch televisions at a price of $799 for a week-long sale. The retailer usually sells about 30 televisions of this type every week. The retailer only stocks two televisions at the advertised price and refuses to take customer orders.
When customers attempt to buy the television at the advertised price, they are told it is out of stock and offered a more expensive unit for $999. This is likely to be bait advertising as the retailer does not have a reasonable supply of the advertised television.
Offering rebates, gifts or redemptions
When supplying or promoting goods or services, it is unlawful to offer rebates, gifts, prizes or other free items without intending to provide them. It is also unlawful to fail to provide them as promised. A rebate or gift must be provided within the specified time or, if no time was specified, within a reasonable time.
Legislation: Australian Consumer Law section 32
If you use this promotional method, you should pay special attention to the detail of the offer to ensure your consumers are not misled.
Example: A retailer offers customers the chance to enter into a draw to win a prize when they spend over $50 in one transaction. However, the business adds a fictitious name to the draw. The retailer publicises that the fictitious person won the draw. The result is that the prize offered is not actually given to any of its customers. This practice is prohibited by law.
Cash back offers
Cash back offers are a form of discounting. Instead of marking down product prices, manufacturers and retailers maintain the price but offer to return some of the consumer’s money after purchase. There are no problems with this marketing approach, but care should be taken in using it. Any conditions, limitations or restrictions should be made clear to the consumer before the purchase.
Example: Certain cans of deodorant have a shrink-wrap packaging carrying the words ‘$3 Cash Back’. After returning home and opening the packaging, a consumer finds that the offer is limited to one can per customer, and that in any event the offer expired a week earlier. The consumer has been misled and may not otherwise have made the purchase.
In this situation the packaging is misleading because the bold representation of the cash back offer was made without equally prominent mention of the limitations. As a result the consumer believed the offer applied to each product purchased. This kind of packaging prevents consumers from seeing the limitations on the offer.
Example: An electrical retailer is selling a television with a cash back offer. The price of the television is $3000 and consumers that purchase it can claim $500 cash back after the sale.
When advertising the television, the retailer should advertise the price of the television as $3000 (not $2500), as this is the price a consumer must pay to acquire the television.
Businesses may use comparative advertising to directly promote the superiority of their products over another. The comparison may relate to factors such as price, quality, range or volume.
Comparative advertising is a direct challenge to competitors and before using comparative advertising, you should consider:
- Is the comparison accurate?
- Are the products or services being compared reasonably similar?
- Will the comparison be valid for the life of the promotion?
Example: A battery manufacturer packages its batteries in a pack with a red sticker that claims the batteries will last longer than two other high-profile brands of batteries. The claim is supported by independent tests but only against some of the other brand's batteries. The sticker does not identify that the claim does not apply to all of the other brands' batteries. While there is a more precise reference to the comparison on the back of the pack, the sticker on the front still makes the packaging misleading.
You should consider the duration of advertisements planned and the likely reaction of competitors. If a competitor is aware of a comparative campaign they may move quickly to change their product or service, and this could render your campaign misleading.
Advertising through search engines and other online ads
There is a range of online advertising channels that businesses can use through mechanisms such as ‘AdSense’, ‘AdWords’ banner ads, pop-up ads and other types of advertisements. Technology may be changing but the requirements of the ACL remain applicable. For example, all businesses involved in placing advertisements on search engines must take care not to mislead or deceive consumers.
Real case study: In the late 2000s, the Google search engine displayed two types of search results: ‘organic search results’ and ‘sponsored links’. Organic search results were ranked in order of relevance to the search terms entered by the user. A sponsored link was a form of advertisement, created by or at the direction of an advertiser, who typically paid Google each time a user clicked on the sponsored link.
An advertising agency operated an advertising account with Google on behalf of a classified advertising business and for that account the agency’s staff member included a ‘keyword’ of a magazine that was a competitor to its client. A Google search for the competitor magazine generated a sponsored link that listed the name of the competitor magazine with the website address of the classified ads business below it.
The Federal Court found that the classified ads business made false or misleading claims and engaged in misleading or deceptive conduct.
Media release: Court decision on Google clarifies misleading advertisements
After appeals on the question of Google’s involvement, the High Court held that Google did not contravene the prohibition on misleading and deceptive conduct (now section 18 of the ACL). It held that Google did not author the sponsored links; it merely published or displayed, without adoption or endorsement, misleading claims made by advertisers.