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16 October 2012
In crowded competitive markets, it becomes increasingly difficult to distinguish a particular product or service from its array of rival suppliers. In this environment, and especially in hard economic times, a sharply focused comparative advertisement can make a real impact with viewers, particularly where it highlights lower pricing.
However, comparative advertising carries risks if not done well and provides a fertile source of disputes. Emphasis on one factor and omission of others can make the comparison appear unfair – and simply taking a direct shot at a rival brand is always bound to antagonise. A recent case in the New Zealand High Court and Court of Appeal shows the courts grappling with how robust an approach to take to advertising, and is a reminder that advertisers must take a high degree of care.
The combatants in this case were OPSM, part of the Luxottica group of companies, and Specsavers. Both operate in retail optometry, selling prescription glasses. Specsavers entered the New Zealand market in late 2008, and not long thereafter competition with OPSM began to heat up.
In 2010 Specsavers ran two similar comparative advertising campaigns. The first consisted of a television commercial and print advertisement, while the second, three months later, involved only a television commercial. The advertisements directly compared the price of two pairs of Specsavers progressive glasses with two pairs of progressive glasses purchased at OPSM stores.
The advertisements expressly said (in small print) that OPSM's prices were obtained through two mystery shopping campaigns that were conducted before each advertising campaign. Specsavers had instructed an independent research agency to seek out individuals who were sent to make 14 purchases at OPSM in the first campaign and 16 purchases in the second campaign. The mystery shoppers were told to visit a sample of OPSM stores and specifically insist on being shown (and then purchase) two pairs of the cheapest frames with the cheapest progressive lenses available for their optometry prescriptions.
Specsavers used the results of the first mystery shopping exercise to claim that its prices were cheaper, saying that:
"At Specsavers you can get two pairs of our lowest priced progressive glasses and pay no more than $399 in any store you visit. But at OPSM we found that two pairs of their cheapest progressives varied by over $200 from store to store, anywhere up to $976 for two pairs."
The prices were shown onscreen in large bold font, but the "up to" appearing above "$976" was in half-size font. A subscript noted that it was "Based on 14 mystery shoppers' purchases nationally between 16/3/10 and 26/4/10". The print advertisement was essentially identical.
In the second television commercial, Specsavers stated that:
"At Specsavers you can get two pairs of progressive glasses for as little as $399. But at OPSM stores visited mystery shoppers found the price of two pairs of the cheapest progressives varied by over $300, paying as much as $892 for two pairs."
Again, the prices onscreen were in large bold font, but the words "as little as" and "as much as" were in half-size font. A subscript said that it was "Based on 16 mystery shoppers nationally between 19/7/10 and 27/7/10".
OPSM sought an injunction to stop the advertising. That became unnecessary, because the television commercial campaign was about to end, but in response Specsavers applied to the court as defendant for summary judgment and to have the claim struck out. In the High Court Specsavers succeeded in obtaining an order for summary judgment at that interim stage.
OPSM claimed that the advertising campaigns breached Sections 9, 13(a) and 13(g) of the Fair Trading Act 1986, which state:
"9 Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
13 False or misleading representations
No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services, -
(a) Make a false or misleading representation that goods are of a particular kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use…
(g) Make a false or misleading representation with respect to the price of any goods or services."
In allowing summary judgment against OPSM,(1) Associate Judge Faire noted that the act is aimed primarily at protection of the consumer, and that a business competitor is entitled to take action where an infringement has occurred, both for its own benefit and in the wider interests of the public. In determining whether a television commercial is false, misleading or deceptive, the court should take a robust approach, because the public is accustomed to marketing exaggeration and puffery of products, and there is nothing wrong in principle with comparative advertising.
After considering OPSM's argument, the judge felt that allowing the matter to go to full trial would not put the court in a better position to analyse the allegations or representations made. The factual content of the advertisements was found to be accurate and qualified; therefore, it could not seriously be argued that the advertisements were misleading or deceptive.
In concluding, the judge reminded both parties of the advice given by the Court of Appeal in an earlier case(2) that comparative advertising might simply be part of the rough and tumble of business competition:
"The commercial law of New Zealand is "based on the premise that society's resources are best allocated in a competitive market where rivalry between firms ensures maximum efficiency in the use of resources" ... The normal response to a trade rival's allegedly innovative product or service should be a trade or marketing response, not a rush to the court door with "some arguable item in the competitor's promotional material which might be labelled misleading or deceptive"."
The Court of Appeal disagreed and set aside the order for summary judgment.(3) In the interlocutory context of summary judgment, Specsavers bore the burden of demonstrating that none of OPSM's claims could succeed. The court emphasised the constrained nature of summary judgment: it is inappropriate to dispose of a case where there are disputed material facts or where facts cannot be confidently ascertained and concluded from mere affidavit evidence.
In the context of the Fair Trading Act, a court considering advertising will:
The court held that it would be relatively unusual to find at the outset that a plaintiff's claims cannot succeed where issues of careful assessment and judgement are involved and where the evidence is incomplete and witnesses have not yet been tested at trial.
Certain aspects of the television commercial troubled the court. There were potential factual inaccuracies in the advertisements that could not be confirmed. There were nuances around the quoting of the price range, where a customer's specific optical prescription or desire for a different type of lens complicated the figures quoted. Specsavers did not provide complete evidence or documents to support the findings of their mystery shoppers.
Additionally, OPSM had provided a marketing expert's affidavit that was not contested, including opining on the concept of 'anchoring'. The expert's point was that despite quoting a range of prices and making the "up to" comparisons, prominent reference to the top price of OPSM glasses in the advertisement would have meant that the top price was the amount anchored in viewers' minds – being the figure they took away from the television commercial – causing them to overlook references to the lower end of the range. The 'take home' message in a brief television commercial therefore might differ from a true comparison of lowest prices.
OPSM had only to establish an arguable case to keep its claim alive and the Court of Appeal found that it had done so. While agreeing that a robust and realistic approach is required in assessing comparative advertising claims, the court concluded that such an approach should be taken once all the evidence and different arguments have been heard properly. It emphasised that an impression conveyed to television commercial viewers in their living rooms is different from that of a judge who has the opportunity to consider carefully all the detail in a courtroom dissection of the commercial.
There is no question that comparative advertising is risky and the dangers of not properly and fairly comparing "apples with apples" mean that any television commercial can expect close scrutiny. Factual details must be strictly accurate and omit no details, so that what is presented is not a half-truth. The safest approach to price comparisons (including reliance on qualifiers and footnotes in the text) and to determining whether the overall look and feel of the advertisement is misleading is to test it rigorously in advance with a mix of viewers and to obtain marketing, consumer and legal input ahead of the print or screen launch.
However, in the pragmatic context of short-run advertising campaigns and frequent injunction or litigation threats, few cases will be worth pursuing a full trial with an array of expert and other witnesses. The television commercial campaign has usually long since ceased and judges can still come to differing views on the essential question of what is misleading to a hypothetical viewer and what they should conclude when trying to put themselves in the position of the class of ordinary consumers targeted by the advertisement. Most cases of this type never get as far as a trial and are usually resolved at an interlocutory stage.
There are policy reasons for why the robust approach taken by the High Court might be preferable in determining comparative advertising disputes. The judge at first instance affirmed that he did not think that further detailed consideration of the evidence, and hearing from live witnesses at a costly trial, would have advanced his views much further. And if the impression given to television commercial viewers in a short space of time is what the court should be trying to replicate, a drawn-out consideration of expert evidence may add little value.
For further information on this topic please contact Gary Hughes or Sarah Lawrence at Wilson Harle by telephone (+64 9 915 5700), fax (+64 9 915 5701) or email (email@example.com or firstname.lastname@example.org).
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