Misleading and deceptive conduct in advertising

The price may be less than 1/2 but is the quality the same?

On 23 December 2011, the Federal Court of Australia handed down its orders in the case of Nick Scali Limited and Super A-Mart Pty Ltd.

Nick Scali claimed that Super A-Mart had engaged in misleading and deceptive conduct in a TV commercial and in other advertising material.

Super A-Mart’s commercial had the following features:​

• it used terms ‘DON’T PAY MORE ELSEWHERE’ and ‘Compare the product…Compare the price’;
• a voice then said ‘Don’t pay more elsewhere for this leather recliner lounge’;
• Nick Scali’s Rajah suite was then shown with the words ‘NICK SCALI $7030’;
• Super A-Mart’s Excellence suite was then showed with a price of $2999.95; and
• a voice then stated “At Nick Scali you’ll pay over $7000” and “Super A-Mart price, less than half that, under $3,000”.

On 6 July 2011, the Court held that the commercial was misleading as it suggested that the Nick Scali Rajah suite and the Super A-Mart Excellence suite were materially the same apart from the price, when in fact the Nick Scali Rajah suite was superior in quality.

The Court held that Nick Scali was not entitled to damages given that it could not prove that it had suffered loss from the misleading conduct.

On 23 December 2011, the Court made the following orders:

• Super A-Mart be restrained from broadcasting or otherwise showing the particular commercial;
• Super A-Mart be restrained from representing that:
  • the Nick Scali Rajah suite and the Super A-Mart Excellence suite were of the same quality or composition;
  • the price of the Nick Scali Rajah suite is more than double the price of the Super A-Mart Excellence suite; and
  • Nick Scali offers to sell its Rajah suite at a retail price which is excessive given the retail price at which Super A-Mart offers its Excellence Suite given that the 2 products are of the same quality or composition.
  • Super A-Mart pay 80% of Nick Scali’s costs of the proceeding.

Observations regarding advertisements

Overall impression

It is important to note that when considering whether an advertisement is misleading, it is necessary to assess the overall impression of the advertisement (from the perspective of consumers), rather than just particular words or phrases in isolation. When looking at overall impression, factors such as context and implication should be taken into account.

In this case, although Super A-Mart claimed that the slogan ‘compare the product…’ merely invited consumers to compare the difference between the quality of the lounge suites, the Court held that, in the context of the advertisement, it was not an invitation to compare the quality but an assertive statement that the lounge suites were the same. Particular reference was made to the voiceover ‘don’t pay more elsewhere for this leather recliner lounge’.

Consumers’ perspective

When considering overall impression, it is overall impression from the perspective of consumers.

The Court made reference to a previous judgment which noted the importance of considering the setting in which consumers view TV advertisements. This is relevant when considering consumers’ overall impression of TV advertisements.

Consumers watching TV advertisements do not analyse every component of a TV advertisement in detail. Viewing is often one-off. Consumers are often distracted, watch TV advertisements after and before viewing other things, do not watch with the intention of noting and memorising features of the advertisement and they do not know in advance that the commercial is about to commence.

Key messages

• Whilst advertising involving a comparison of a competitor’s product is permissible, care must be taken to ensure that the comparison and advertisement do not mislead consumers.
• If there is a price comparison, consider if there is a representation (whether implied or express) that the quality is the same and if so, consider if the quality is in fact the same.
• Consideration needs to be given to the overall impression (from the perspective of consumers), not just particular words or phrases in isolation.
• In relation to TV advertisements, it is important to consider the advertisement from the perspective of a consumer watching a TV advertisement (one-off viewing, distracted, not analysing the detail).