Truth Marketing

By The Drum | Administrator

February 15, 2002 | 6 min read

Photography: Ann Cutting, Photonica

Most businesses recognise that advertising is important for the promotion of their products and services in the marketplace. Traditional word-of-mouth has always been a tried and trusted way of promotion. Peer group endorsement or the opinions of those we respect, or at least believe have some expertise, also increases consumer confidence in a product or service. Consequently there is a current trend for a widespread use of testimonials in advertising whereby third parties (often customers of a business) sing the praises of the products and/or services of the business in question.

This practice is particularly common in the US, but it has been making headlines on both sides of the Atlantic for all the wrong reasons. Hollywood studios are currently being sued by moviegoers claiming they were induced to see the movies in question by false endorsements from critics. The studios stand accused of offering bribes including free hotel rooms and expensive meals to film critics for exaggerated endorsements whilst omitting to tell the public about these "gifts". Two studios in particular have also admitted to using fake critiques and to having staff pose as reviewers. If the moviegoers win, the major studios run the risk of having to compensate moviegoers who leave the cinema disappointed, but saying they went to the cinema in the first place because of those glowing reviews. In one state alone this could amount to as much as $25,000 per disappointed viewer.

Whilst no-one denies that Americans are more litigious than the British and that their financial penalties for wrong-doing are usually heftier than in the UK, the legal position about honesty in marketing or truth marketing is fairly well defined in this country. Generally speaking, the UK government supports self-regulatory control. Self-regulatory bodies can be divided into two types - those created by statute, such as the broadcast media including the ITC, the Radio Authority and the Cable Authority on the one hand, and voluntary bodies such as the Advertising Standards Authority and the Committee for Advertising Practice on the other, all of whom predominantly exercise control through Codes of Practice which provide that all advertisements should be legal, decent, truthful and honest. The current DTI White Paper "Modern Markets: Confident Consumers" points out that this approach has gained worldwide recognition as a good example of how self-regulation can work to effectively address consumer problems. The Codes of Practice are, however, also backed up by some statutory and quasi-statutory measures including the Trade Descriptions Act 1968 (the TDA) and the Control of Misleading Advertisements Regulations 1988 (the CMA Regulations).

Under the TDA anyone who applies a false trade description to goods or the supply of services, either in writing or orally, is guilty of a criminal offence punishable by a fine of up to £5,000 and/or conviction of up to two years. With regard to goods the trade description needs to be "applied in the course of a trade or business about products which are actually supplied". With regard to the supply of services the advertiser must know the description to be false. With regard to approvals it is sufficient to establish criminal liability by showing that the false statement had been made recklessly rather than knowingly. In the case of goods and services the statement must be false to a material degree and therefore the complainant must demonstrate a high degree of reliance on it prior to purchase of the product or service. Prosecutions under the TDA are normally initiated by the Trading Standards Office.

The scope of the TDA is fairly strict. In areas not covered by the TDA, the CMA Regulations give commercial broadcasting authorities (like the ITC and the Radio Authority) and the Director General of Fair Trading authority to take action to prevent dissemination of misleading advertising. The Director General is required to consider complaints (other than frivolous or vexatious ones) about misleading advertisements. Before considering them, however, he may require that the complainant demonstrate that other means of dealing with the complaint have been tried and that, despite being given a reasonable opportunity to do so, the complaint has not been dealt with adequately - this might mean the complainant has demonstrated he has gone to a selfregulatory body such as the Advertising Standards Authority first. Whilst the Director General has a discretion as to what action he considers appropriate in any case, he has to bear in mind all the interests involved, including the public interest and the desirability of encouraging control by self-regulatory bodies. The courts in turn are given power by the CMA Regulations to grant the Director General interdicts to prevent the publication of misleading ads. They may also require that factual claims about products and services are substantiated and can grant interdicts without proof of loss or damage. Last June a new weapon was added to the consumer\'s armoury. The Stop Now Orders (EC Directive) Regulations 2001 provided an additional civil enforcement mechanism. The Stop Now Order is aimed at cracking down on rogue traders and gives the Director General and certain consumer bodies the right to apply to the Court to stop misleading advertising where it harms the collective interests of consumers. The powers go beyond the CMA Regulations in that traders can be ordered to publish corrective statements. Failure to do so can result in fines or imprisonment for contempt of court. The orders are designed to work alongside the criminal sanctions but can only be used if there is no other way the infringement could have been stopped.

Criminal proceedings potentially result in convictions and almost certainly result in damage to the reputation of the advertiser. Also prosecutions are more difficult to settle out of court so additional bad publicity following a conviction may be hard to avoid. Prudent advertisers should therefore keep within the law if they want to avoid criminal liability. With civil remedies the controls can lead to damages and interdicts. However, the advertising industry earns its bread and butter by promoting others\' reputations. Good advertisers should know the law and always try to work within it. The EU\'s present mission is to empower the consumer. Consumers are also now more educated and more willing to show their teeth by calling in the enforcers. It\'s no longer a case of "Buyer Beware" but more one of "Seller Beware". So, tell the truth, not necessarily the whole truth, and nothing but the truth.


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