26 February 2004
"The judgment means that agencies will only be liable under consumer protection laws for misleading statements if they do more than merely prepare the ad," said Clayton Utz litigation partner Mary Still, who represented Saatchi & Saatchi in the proceedings.
The ACCC sued the NRMA and Saatchi & Saatchi over an advertising campaign for a type of health insurance. The ads were found to have contravened the ASIC Act's ban on misleading or deceptive conduct in relation to financial products.
"In other cases advertising agencies have been sued as an alleged 'accessory' to the contravention," said Ms Still. "Here, however, the ACCC said the agency was liable for these ads as a 'principal': that is, that it actually made the misleading or deceptive representations.
"This distinction is important. An ad agency can only be liable as an accessory if it knows of the matters that allow the representations in the ad to be characterised as misleading. On the other hand, if the ad agency is found to be a principal, its knowledge won't matter: it made the representations, they were misleading, and that's enough for a principal to be liable."
Saatchi & Saatchi was found by the Federal Court not to have made the representations. First, said the court, the advertisements did not convey to the relevant section of the public that the representations were made by the agency. Anyone reading the ads would think they were NRMA ads, not Saatchi & Saatchi ads.
Secondly, Saatchi & Saatchi did not make the representations just because it prepared the ads, or because it provided them to NRMA expecting that NRMA would publish them, or knowing that it was the natural and probable consequence of their preparation that they would be published.
"This is a welcome - and sensible - decision," said Ms Still. "An agency's day-to-day work will not turn it into a principal under either the ASIC Act or the Trade Practices Act, and hence liable for misleading or deceptive statements in its ads, unless it does more than merely prepare the ads.
"From this decision it's clear that an agency's liability - either as a principal or accessory - for misleading statements will depend upon all the circumstances."
"The message to agencies is simple: you could be liable for the misleading statements in ads so ensure that your processes are legally watertight."
