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Small Business Focus: Comparative Advertising – Avoid the mistakes

Comparative advertising

Comparative advertising, particularly price comparisons, can be a very effective way to advertise goods. However, companies must be careful, as their advertisements will most likely be scrutinised by at least the company in comparison and sometimes the ACCC. In comparative advertising, companies must provide consumers with accurate, hard, facts to make sure they are not misleading consumers, whilst also taking into account the issues discussed below.

Price Comparative Advertising 

In price comparative advertisements, companies must be careful the information they are providing is accurate. A recent case has shown that understating a price difference can be just as misleading to consumers as overstating the price difference.
The aim of the ACCC is to protect consumers and ensure they are not misled, and as such, a company was successfully prosecuted for understating a price difference. Companies should therefore be sure that there is no error in the price comparison, and keep in mind that being conservative about price savings is not necessarily the risk-free approach.

Advertisement Term

In comparative advertising, companies must ensure comparisons are correct for the duration of the campaign. This can be difficult to manage with price comparisons, as competitors are able to quickly respond to the advertisement by changing the price of the relevant product, making the price comparison incorrect. One way to mitigate this risk is to state that the price calculation was correct at a certain date. This will reduce, but not necessarily eliminate, risk, particularly if it will be a long campaign.
Another option is for companies to purchase short, intensive, media coverage. This will reduce the risk that a competitor will change prices while the advertisement is being published and means there is a higher chance the advertisement is accurate for the entire duration of the campaign.
Companies should be aware that an “innocent mistake” in this area is not an excuse.

Quality of the Product

Companies do not have to compare products with identical features as long as the advertisement, when considered as a whole, is not misleading. In saying that, however, companies should be careful with any suggestion that one product is ‘better value’ than another. If a company is providing a price comparison and gives no further details about the features of the product, it may appear to consumers that the quality of the products are the same. In this situation, advertisers should ensure the quality of the products is the same.
In a recent case, a company ran an advertisement suggesting two lounges were materially the same apart from the price, where in fact one lounge was of superior quality. The court found that this advertisement was misleading.

The takeaway from this is that it is important to consider from the point of the consumer the overall impression given by the advertisement and not just words or phrases in isolation.

Further, it is no defence that people in the trade would understand something one way if consumers, without their knowledge and experience, would be likely to take a different view and thus be misled.

Medium of Advertisement

In advertising, companies should keep in mind the medium of the advertisement, as this may affect consumers’ impressions. What may be perfect in one medium  may be considered misleading in another. For example, in a TV advertisement, consumers do not have the opportunity to analyse each component of the products and the advertisement as they can with a journal advertisement or a brochure.
Another example is billboards. It has been found that companies should exercise caution when using billboard advertising, as consumers often quickly pass billboards and therefore cannot read and examine the products or any disclaimer.

Australia-wide Advertising Campaigns

If a company is running a campaign in the whole of the country, it should be sure the comparisons are accurate in all of Australia, or the parts of Australia where the campaign is running.

These tips will help companies when engaging in comparative advertising.

However, should you require further information in regards to your proposed advertisement, contact our Business Law Team. How can we help?


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