Crackdown on comparison websites serves wake-up call for all advertisers

Senior solicitor with specialist marketing compliance insight discusses the recent Trivago case and the need for brands to view advertising through the consumer's eyes

The ACCC’s case against Trivago for making misleading claims to consumers, coupled with tougher penalties for brands found breaching Australian Consumer Law, should be stern reminders of the importance of auditing advertising through the consumer’s eyes.

That’s the view of Plexus senior solicitor, Sharmila Pamamull, who caught up with CMO following last week’s judgment against travel comparisons website, Trivago, for breaching Australian Consumer Law. The website was found to have made misleading representations to consumers about hotels featured on its website and television advertising for nearly three years by favouring those that paid the highest cost-per-click.

Plexus specialises in marketing compliance with legal expertise around advertising and trade promotion law. 

It advises companies such as Coca-Cola and LÓreal on marketing and advertising collateral, trade promotions, permits and intellectual property. Commenting on the Trivago case, Pamamull said a key issue was the brand advertising a pricing discount that didn’t actually exist.

“Brands need to be careful in the way they advertise to consumers so they aren’t implying consumers are obtaining better deals than what is on offer,” Pamamull said. “One issue was Trivago was promoting these offers as the top offer on its website. When you’re doing that, you’re implying consumers are obtaining a better offer through one of those deals. In fact, that deal positioning was due to how much money Trivago was obtaining from other companies.

“If someone is ranking offers on a website based on money they are obtaining, it should be made clear to consumers. Whether or not it’s a sponsored ad, or advertised post, it’s very important to communicate that. You can’t just have a top offer without outlining the conditions behind it.”

Pamamull said the Australian Competition and Consumer Commission’s action against Trivago also represented increased scrutiny of comparisons websites, and noted the current case against fellow comparisons player, iSelect. Again, the ACCC is alleging misleading representations in relation to iSelect’s energy plan comparisons.

“The ACCC has come out with statements saying it will take action against other industries which compare the rates of services,” Pamamull continued. “The ACCC has already targeted travel with Trivago, intends to target energy comparisons with iSelect, and if it’s successful again, is likely to target further industries.”

But it’s not just comparisons sites that should take heed. The lesson for all brands is to make sure any percentage discount represented in advertising – or claim for that matter – is actually backed up by proof.

To highlight the point, Pamamull noted the ACCC’s current case against online retailer, Kogan, alleging false or misleading representations relating to a 10 per cent discount promotion advertised between 27 and 30 June 2018 it sees as in breach of Australian Consumer Law.  She also cited rising numbers of businesses imposing discounts and percentage discounts more readily, along with sales offers.

“It is questionable whether or not the consumer is obtaining the savings being advertised if these offers are running every week or month,” Pamamull said.  

With more marketplaces operating in Australia, Pamamull agreed it’s not surprising to see more cropping up in the regulatory watchdog’s radar, as well as more digital offers. Historically, what’s often been in the spotlight is mainstream advertising, such as print media and TV commercials.  

“Websites have been seemingly getting away with being able to mislead consumers for quite a while, and the ACCC has recognised consumers are using these online sites and purchasing online more regularly now. So it is moving towards taking more action against those companies operating online,” Pamamull said.

In response, she advised brands to look at their advertising from a consumer’s perspective and ask whether or not it’s misleading for them. To do this, she stressed having processes in place to review advertising and giving marketing teams more indication of what to look out for when they’re creating campaigns and collateral.  

“Take a step back, and analyse whether consumers might think they’re getting a better deal than what is on offer and be misled,” she advised. “In addition, make sure you’re clearly conveying any terms that might apply to an offer.

“There was a recent issue with Flight Centre where it didn’t specify the terms applying to the offer clearly, and was asked to pay $250,000 in fines. You have to be very careful in conveying conditions. Burying those in the fine print might not be sufficient.”  

The rising tide

And with more and more consumer aware of their rights, it’s clear they’re taking to social media to voice their concerns, Pamamull said.

“These consumers are using technical language too and terms such as ‘misleading’. They know the laws and their rights, and they’re increasingly voicing these concerns via social media by contacting companies directly,” she said. “They do expect action and if they don’t see it, it has an impact on companies and can affect their revenue.”  

What’s more, increased penalty rates show the growing appetite for punishing brands that don’t put consumer rights front and centre. In late 2018, new laws were put in place increasing the maximum penalty rate for breaching Australian Consumer Law from $1.1 million to $10 million.

“In the last year, we’ve seen the Federal Court enforcing higher penalties to enforce change. Often, we’ve been finding businesses taking those penalties and accepting them as part-and-parcel of running a business, rather than using that to make sure their advertising wasn’t misleading to consumers upfront,” Pamamull said.

“Imposing the higher penalty rates will impact the way advertisers address how they construct their advertising. The ACCC did say after the Trivago decision that it wants to ensure businesses face the highest penalty rates. If they’re not preventing their advertising from being misleading, at least it makes consumers aware of these misleading practices and may mean consumers won’t use these websites anymore and will go elsewhere or at least compare the market rather than relying on one site to find the best deal.”  

Pamamull suggested there’s still a commonly held belief that if a brand puts something online, they can take a bigger risk because it’s easier to take an offer or ad down or adjust it.

“In comparison, the costs of pulling or updating TV advertising are a lot higher. You do see with the AANA code of ethics compliance, some companies choosing to take a riskier approach to digital advertising because of that lower cost and ease of being able to change it,” she said.  

“But marketers need to make sure that as they run riskier campaigns, they understand the ramifications for those actions. With the ACCC clearly enforcing rights under the Australian Consumer Law, businesses can’t be complacent with how they choose to advertise. They need to review messaging and make sure it clear, and if they’re discounting, to have the evidence in place in the event it’s ever investigated.

“What might seem quite obvious to a marketer, might not be to consumers.”

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, follow our regular updates via CMO Australia's Linkedin company page, or join us on Facebook: https://www.facebook.com/CMOAustralia. 

 

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