What are the various statutory means of consumer protection in advertising and how effective are these means?

Part A: Research Proposal on Consumers

Question: What are the various statutory means of consumer protection in advertising and how effective are these means?

Rationale: Adverting is a very powerful tool. It is able to influence potential consumers in a short amount of time with a lot of information. The law becomes involved when the bargaining position is unbalanced, this means that when the seller is using unfair or untrue advertising in order to persuade the consumer. The law seeks to protect the consumer.

Also because of increasing technologies advertising has become much more common eg present in television, radio, billboards, buses and more recently the Internet, e-mail and SMS. Because it has become so much more common, advertising affecting almost everyone through constant bombardment and has the ability to use unfair tactics on the consumer, the consumer needs protection by the law, and this protection must be efficient, that is why I intend to evaluate consumer protection in relation to advertising.

Methodology: I intend to first find out all the statutory means of protection through research of a variety of sources and to them evaluate them myself. Firstly there are textbooks, these are very good at getting the initial concepts, but lack the depth required for this task. I intend to get books that specialise in consumer protection so that I will get more detailed information such as cases and legislation. Also specialised books can give me a direct insight into the legislation, so I can evaluate provisions. Media reports will also be required as they can back up points and also can give specific information about advertising laws and how effective the law is so they can be very useful to look at. Also media reports on advertising should be very accessible as advertising is often publicised because it is well known by most people. I also intent to get information from website's of statutory bodies, as I want to include a section of statutory bodies on advertising, these websites will give me information on there aims, powers and jurisdiction so I can evaluate them.

Literature Review:

I have looked at a variety of text books, not just my school ones (see bibliography). Most of them are very brief on the subject of advertising but are useful for my research as a starting off point as they outline the two main pieces of legislation the Trade Practise Act 1974 (Cth) and Fair Trading Act 1987 (NSW), and their provisions. There provisions are very comprehensive (containing areas such as Bait and Tackle, puffing, misleading and deceptive conduct, unfair trade practice or tactics, advertising likely to deceive is still unlawful and false descriptions). These comprehensive provisions are effective in defining various types of practice in legislation and are easier to prove (rather than proving advertising was unconscionable or unfair), saving the courts resources and being more likely to succeed in prosecution, effecting the enforcability of the law. Also worth noting is the effectiveness of these acts in actually protecting consumers, as it is very common that these actions (generally section 52 of TPA) is used to sue/damage other companies for deception of their customers, but this can really be an attempt to “eliminate” their competition eg Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (1999)

The variety of pamphlets that I have looked at are mainly from the Office of Fair Trading and address the effectiveness of this body. It is useful for my research as I intend to make a section in my essay on the effectiveness of statutory bodies such as this one. It is good for my research as it gives me first hand knowledge of the body. It is published by the OOFT and is trying to educate the consumer on what is unlawful in terms of advertising and what isn’t. This is effective as it not only prevents consumers from being put in the situation where they need to take a body to court to seek damages (as they are aware of common unlawful tactics), also saving money due to the expense of court proceedings but also makes it easier for consumers to recognise misleading or deception advertising and file a complaint to a body that can deal with this matter eg ACCC. The Office of Fair Trading also encourages alternative mechanisms for disputes as it is cheaper and can be just as effective, by giving advice to consumers on such matters.

Another statutory body whose website I visited was the ACCC (Australian Competition and Consumer Commission). Here I got information that is useful for my research as it told me about the type of cases that they tend to prosecute. Generally they are ones that are very deceptive, and severely disadvantage either a lot of consumers or another company. This is effective as it takes cases that are more important (ie effective with resource efficiency) and reflects a wide range of society views (by taking cases that many consumers have been disadvantages) and being able to seek reform (by removing ...

This is a preview of the whole essay

I have also got some books that deal specifically with consumer law. The first one “Consumer Protection Law” by Eileen Webb comprises only of cases (which is useful for my research as a wide range of cases are required) and can be useful for pointing out the effectiveness of the legislation (and even statutory bodies) eg in the case ACCC v Nissan Motor Co (1998) where Nissan’s advertisement displayed the wrong model car, price and calling it an “end of year” price, even though this price was offered a while ago. The company was sued only for $130,000. Which is a lot of money, but not considering the fact that this is a successful company (multi-national) and has breached the Trade Practicing Act 1974 (Cth) in 3 instances. This case demonstrates a lack of effectiveness of both the TPA and the ACCC, if the remedy was only a fine, a small one at that, (and not a corrective advertisement with an apology). Another book specialising on it is called “Consumer Protection Law”, by Goldring (more authors see bibliography). This book is useful for my research as it has an entire section of advertising, and specifies many of the section numbers of the TPA and what they contain (and legislation numbers are required). It also contains sections on common law and points out how it is ineffective, compared to legislation – ie it is slow to change, and cant combat new forms of adverting as quick as legislation can eg the recent Spam Act 2003 (Cth).

Draft Introduction:

A consumer is anyone person who acquires goods and services for personal or domestic uses. Advertising is a very powerful tool used to inform consumers of various goods or services and there benefits. However there is a line between information and deception, some advertisements misuse their powerful influence in order to deceive consumers in a hope to sell goods. An example of this deception is the myth of subliminal messages in advertising, limiting the consumers ability to make independent choices by influencing the unaware consumer’s subconscious. Because of this unequal bargaining power, the government has to intervene in order to protect the consumer. Although there is common law to protect consumers this is inadequate compared to the capabilities of statute law. The main pieces of legislature that protect consumers from unfair advertising are Trade Practise Act 1974 (Cth) and Fair Trading Act 1987 (NSW), with there many provisions. The provisions of these acts try to limit the practice of businesses that deceive, mislead or exploit consumers. These pieces of legislation also seek to remedy the matter either through compensation or corrective advertising. The legislation is also assisted in the campaign against the misuse of advertising with statutory bodies such as the Office of Fair Trading NSW and the Australian Competition and Consumer Commission (ACCC) as well as small claims tribunal and courts. The ability of the legislation to reform is demonstrated in the banning of tobacco advertising as well as many recent reforms to accompany new technologies that allow advertising, such as SPAM and video games. All of these statutory means are generally very effective and are able to protect the consumer as well as prove to be efficient laws, but some need more reform in order to protect consumers from advertising to the best possible degree.

Point form outline

Intro: defining consumer and its relation to advertising, and the power of advertising, also the need for consumer protection.

The inadequacy of common law, explaining why my essay focuses only on statutory means of protection (common law is slow changing, advertising is new, and new technology adverting eg SPAM, advertising video games, SMS make common law unable to combat because I is so slow, compared to statue law)

Main pieces of statue being Trade Practise Act 1974 (Cth) and Fair Trading Act 1987 (NSW). Point out the compressive provisions make it effective (ie more laws = more protection for consumer, who has unequal bargaining power, therefor reflects community values)

Point out the provisions of the act, and evaluate the effectiveness of each

Bait and Tackle – effective for resource and time as it takes less time for courts to establish as bait and tackle as illegal under section 56 of TPA, as opposed to trying to prove it deceptive.
Also seciton 51 (a) contians “unconsociabilty”, which is usually in common law (really equity), and is now in statutroy, making it more accessible and easy for judges to use.
Traders can exceed allowable puffing (relevant case Lyndon v Coventry Motors Retailers Pty Ltd (1975)). Effective as it reflects community values but is not necessarily effective as “allowable puffing” is hard to define and different in each circumstance.
No Jail penalty for these crimes – reflects community values and is more cost effective.
Outlaw of misleading deceptive practices – relevant case the Homer Simpson Case (1996) AKA Twentieth Century Fox Film Corp v South Australian Brewing Co Ltd (1996) – basically where the brewery made a drink that they called Duff, (from the plaintiff’s TV series ‘The Simpson’s’) arguing that the series would be advertising the drink and making a false association between the company and the drink, therefor being deceptive practice. Deception is used by many companies to prosecute competitors if they have used untrue facts (relevant cases Colgate Palmolive Pty v Rexona (1981) and Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (1999)). Also they is the Big Mac Case and the Taco Bell Case, that demonstrate the importance of a target audience being established before it can be ruled that an advertisement was misleading or deceptive.
Unlawful not if it deceives but likely to deceive (relevant case Leo v Brambles Holdings Pty Ltd (1982)), also this makes it much easier to prove in courts and so saves time and money.
Omissions in advertising is unlawful as this is deceptive (relevant case Leo v Brambles Holdings Pty Ltd (1982)). Very effective as this is a fundamental provision, omissions being unlawful prevents the individual being disadvantaged and saves time and money for court, as an omission is unlawful and doesn’t need to be proven to be unconscionable or unfair to the consumer.
Unfair trade practices or tactics eg using infancies such as psychological pressure (relevant case Luffram v Australia and New Zealand Banking Group Ltd (1986))

Also in s53 of TPA

False description of origin, price, quality, value, grade, sponsorship, approval or need

Effectiveness of s53 is that it provides a large amount of descriptions so that they is very little chance of a seller lying about something that should be of concern to the consumer therefor reflecting community values, and protecting the consumer, as well as not disadvantaging the seller as there are reasonable qualities of a work that need to be truthful.

Sponsorship – Apple Computer v Computer Edge Pty Ltd (1984)

Approval – Honey v Australian Airlines Ltd (1989)

Price – Sully v Darwin Bakery (1981)

Need – Given v Quinn (1978)

Also these provision makes court cases more efficient, as they are very specific and so any deception, of these kind (which is easy to define) is unlawful (and efficient court cases saves time and money).

Other legislation that is pretty much covered in TPA and FTA is the Sale of Goods and Services Act (1923), but still contains consumer protection in advertising.

Statutory bodies

Office of Fair Trading (NSW)

Uses education which is very effective. Firstly they educate the consumer, preventing them from even being disadvantaged in the first place, as well as making them aware of what is unlawful, so that they can lodge a complaint and the community is having a role in the justice system. Also they even educate sellers by giving advice on their advertisements, telling them what is unlawful in advertising, this is effective for two reasons. Firstly due to whether or not deception is intentional, so prevents accidental deception, making it harder for someone innocent to be disadvantaged. Also it is effective as it prevents the whole ordeal of lodging a complaint, investigating and prosecuting (costing money and time).

Australian Competition and Consumer Commission (ACCC)

doesn’t act locally, or give free advice, instead it chooses to combat matters that are unconscionable conduct or effect a large amount of consumers (generally across Australia) – this is conserving resources for matters that need to be seen by an effective prosecution. Eg ACCC v Nissan Motors Company (1998).
Has statutory powers allowing it to demand for any information it needs, making it time and resource efficient as it is able to obtain evidence easily.
The ACCC not only brings matters to be trialed, but also makes sure that the courts sanctions are being applied. By monitoring the sanctions it is effective as it is able to enforce the law handed down by the courts.

Small Claims Tribunal and Courts

Small Claims tribunals and small claims Courts have been established via legislation in order to increase resource efficiency ie it is much more effective to send small matter to smaller, cheaper courts than expensive ones. Another bonus is that justice is demonstrated as small matters are still dealt with, making small claims tribunals and courts more effective.
The amount of money involved (in NSW) to be sent to a SCT/C is being less than $25,000.
Also orders from these courts (unlike alternative mechanisms for achieving justice) are legally binding so are effective as enforcement is achieved.
SCT/C don’t have the strict evidence rules that most courts have and so court cases are more efficient (cheaper and less time consuming).

Remedies

possible remedies (set out in legislation) that are available for consumers and advertising include…

Fines or damages

If an individual is responsible this can be up to $220,000 and if a company is responsible $1.1 million dollars. This is ineffective as it does not demonstrate an equality of outcomes between companies (as a more successful one wont be too disadvantaged from this fine).
Damages are effective though as disadvantaged party members can be reimbursed and the company is punished thereby demonstrating justice to the individual and company as one is punished the other is remedied. Also to get damages the plaintiff must pass a damage test, this provision is very effective at resource efficiency as it makes sure that those who receive damages will actually need/deserve them.

Injunction – can be used to correct ads eg 2001, Target company had to make a formal apology on television, shown through out a period of time. Demonstrating justice to consumer public and punishing company for misleading as paying for prime-time airing is expensive.

Reform – reform reflects effectiveness and consumer protection in advertising has had a lot of reform, (lots of reform due to new technologies for advertising)

Eg Tobacco Advertising Prohibition Act 1992 (Cth) – protects young consumers from being influenced.

Also there is the Spam Act 2003 (Cth) – containing SMS ads and pop-ups in the Internet

And there is the Classifications (publication, Films and Computer Games) Act 1995 (Cth) regulating the recent area due to new technologies of video games advertising.

Case and Legislation Table:

Legislation

Trade Practise Act 1974 (Cth) – one of the main pieces of legislation that protects consumers in general but also in advertising.

Fair Trading Act 1987 (NSW) – one of the main pieces of legislation that protects consumers in general but also in advertising.

Sale of Goods and Services Act (1923) – doesn’t feature advertising to much other then preventing advertisements that don’t match description with product, but in general protects consumers with goods and services.

Tobacco Advertising Prohibition Act 1992 (Cth)– prohibits the advertising of tobacco, demonstrating law reform to changing community values ie tobacco found to cause disease and influencing young smokers was seen as morally wrong by society.

Spam Act 2003 (Cth) – prevents “unsolicited commercial electronic messages” (this includes SMS) from being sent to an address that has not allowed them to. Is an example of law reform in response to new forms of advertising due to technology advances.

Classifications (publication, Films and Computer Games) Act 1995 (Cth) – controls advertising in video games, is an example of reform to legislation in response to new technologies and there advertising capacities.

Cases

Lyndon v Coventry Motors Retailers Pty Ltd (1975) – sellers exceeding the “allowable” puffing limit. The notion of mere puffing can also be seen in the case

Homer Simpson Case (1996) - brewery made a drink that they called Duff, (from the plaintiff’s TV series ‘The Simpson’s’) arguing that the series would be advertising the drink and making a false association between the company and the drink, therefore being deceptive practice.

Coca Cola Company v All-Fect Distributors (1999) – where lolly company made cola lollies in bottles resembling that of coca cola ones, Coca Cola company argued that they was a deception to consumers that they where related.

Colgate Palmolive Pty v Rexona (1981) – Colgate toothpaste add made claims using scientific data, where research was never made and so was ruled as having misleading information.

Leo v Brambles Holdings Pty Ltd (1982) – cases demonstrating the lack of importance in either or not the advertisement actually deceived, but was likely to deceive.

Luffram v Australia and New Zealand Banking Group Ltd (1986) – advertising using unfair influences on consumers.

Apple Computer v Computer Edge Pty Ltd (1984) – Computer Edge Pty Ltd left Apple Computer manuals with their computers, deceiving consumers into thinking that there was a connection between the two companies.

Honey v Australian Airlines Ltd (1989) – case where Mr Honey (an athlete) did not approve of his picture being used in the advertisement of Australian Airlines Ltd.

Sully v Darwin Bakery (1981) – a case where the price of bread was not lowered as advertised.

Given v Quinn (1978) – a case on false description of need, a pamphlet claimed that “you must have an extinguisher fitted adjacent to each exit on your van”. Also the fire extinguisher company claimed to have approval of the Yachting Association of Australia (not true).

ACCC v Nissan Motors Company (1998) – a case where the ACCC prosecutes due to misleading advertising.

Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (1999) – case where Gillete (manufactures of Duracell) advertisement made false claims deceiving the consumer.

Bibliography:

Consumer Protection Law, E. Webb (2000)

Consumer Protection Law, J. Goldring, L. Maher, J. McKeough, G. Pearson (1998)

Commerce in Action, R. Gyles, D. Owen, K. Pearce, B. Shade (2000)

Legal Studies HSC, B. Derwnet, A. Draper, D. Hamper (2002)

Excel HSC: Legal Studies, B. Brassil, D. Brassil (2002)