Optus decision a warning for advertisers making headline claims

Paul McLachlan
Monday, 19 September 2011 10:16

IT Policy - Regulation

Optus is appealing the record fine of $5.26 million imposed by the Federal Court in July for misleading customers through 'headline' advertising.  Whatever the outcome of the appeal, the original decision and fine serve as a timely warning of the risks of headline advertising.

 

Cross-platform advertising campaigns are becoming more common as advertisers seek to drive traffic to their websites from complementary television, print and billboard advertisements.  Telecommunications giant, Optus learnt the hard way that there are dangers in taking this approach, running a headline campaign that was found to be misleading because the necessary disclaimers were deemed ineffective.

Optus was penalised for having a seemingly lax attitude - it had given the ACCC an undertaking not to engage in headline advertising, but then, according to the Court, didn't train its staff on this, and under-resourced its legal team tasked with approving large volumes of advertising.

It's not just the massive fine that has prompted Optus to appeal, the harsh criticism from Justice Perram of the Federal Court could cost the company more through damage and loss of reputation.

The decision

Optus was fined $5.26 million for 11 advertisements that misled customers as to the download quotas of its 'Think Bigger' and 'Supersonic' broadband internet plans.  The advertisements included factually accurate disclaimers, but the disclaimers were held to be ineffective to properly inform customers of the offer, because they were too small and too subtle in their wording.

In determining the penalty, aggravating factors included findings that Optus had:

·    failed to include all relevant materials in its internal compliance programs, and
·    not properly resourced its advertising approval teams.

The issue the Court attacked was 'headline advertising' - using fine print disclaimers to fill in missing details that detract from the body of your ad or headline grab.  Internet advertising came in for particular scrutiny.  The 'Think Bigger' online commercial was found to be the centrepiece of a broad campaign. Justice Perram explained why online advertising is unique, and may attract heightened scrutiny from the courts.

The key points were:

'¢    internet advertising is more targeted and more likely to be noticed than television or newsprint commercials
'¢    the relationship between a user and the computer means any advertisement is more likely to be watched once it is noticed (especially where the advertisement is interactive)
'¢    if the online commercial is linked to online sales functionality, it can be seen as the ultimate 'conduit' of the campaign, deserving of particularly close judicial scrutiny, and
'¢    if viewers of misleading online commercials have been 'prepped' or driven to the online commercial by complementary advertisements in other media, this may aggravate the seriousness of the misleading online commercial.
'¢    
The advertisements

The advertisements were part of a cross-platform campaign, with print, television, billboard and online variants. Although each advertisement in each medium was slightly different, each shared essentially the same main failing: they indicated in 'headline' claims that the plans had an overall cap or quota, made up of distinct peak and off-peak quotas. For instance, the 120GB plan appeared to comprise a 50GB peak quota, and a 70GB off-peak quota.

However, once the 50GB peak quota was used up, all subsequent usage (whether in peak or off-peak times) was throttled to 64kbps, even if there was still off-peak quota available. In effect, this meant that the off-peak quota and the overall quota were only theoretical caps, available if the plan was utilised in the optimum way. The Court found this to be misleading.

The disclaimers

The details of the quotas and throttling were disclosed in disclaimers. However, His Honour found that the disclaimers were ineffective. In relation to the television commercials, the disclaimer was described as 'essentially invisible', because of the time it was shown and the colour of the text against the background.

By contrast, the print commercials included a factually accurate disclaimer. However, His Honour saw no difference in effect between the print disclaimers and the 'essentially invisible' television disclaimer. They were too small and their meaning too subtle to be effective.

Lessons

There are some hard lessons to be learned from this decision and anyone using online and cross-platform advertising campaigns should pay particular attention to Justice Perram's comments regarding internet advertising.

Importantly, the practice of 'headline advertising' is particularly risky.  Relying on disclaimers to give the important detail and context to understand a headline claim is also risky, and more effective ways of informing customers of the true nature of offers need to be employed.  The ACCC has headline advertising in its sights, and had Telstra, Optus and Vodafone each give an undertaking about their advertising practices that included a promise not to use headline advertising.

All advertising should be carefully reviewed to ensure that it is both factually accurate and that the overall impression is not misleading.  Any 'centrepiece' online commercial will be the subject of particular judicial scrutiny.

The courts are watching internal processes and compliance carefully.  Being able to demonstrate that your organisation has appropriate training for advertising staff, as well as adequate resources to properly review all advertising materials, can bolster arguments to a Court that particular breaches are more a matter of a 'wrong call', rather than a systemic failure to take compliance seriously.

Paul McLachlan is a Partner at McCullough Robertson law firm