20 September 2007
Key Points:
Even if a statement is literally true, it may nevertheless be misleading depending on the meaning conveyed.
Advertisers frequently engage market researchers to test consumer reactions to their product. The results of such testing can also become the basis for an advertising campaign. If an advertiser is not careful, however, such claims may be misleading and deceptive. Even the use of a colour can give rise to allegations of a breach of section 52 of the Trade Practices Act.
Some advertising campaigns are high risk, which can be either legal (comparative campaigns are likely to be particularly sensitive for competitors) or practical (the more effective a campaign is, the more likely a competitor will want to challenge it). Depending upon whether an advertising claim is high risk, you need to consider whether the research provides a proper foundation for the claims. Even if a statement is literally true, it may nevertheless be misleading depending on the meaning conveyed.
These issues have recently been considered in two Federal Court decisions involving the advertising of body lotion and chocolate.
Johnson & Johnson Pacific Pty Ltd v Unilever Australia Ltd (No 2) (2006) 70 IPR 574
This case demonstrates that advertisers who rely on market research as the basis of their claims need to ensure that it is appropriately designed and provides a proper foundation for the claims.
Johnson & Johnson commenced proceedings against Unilever alleging that advertising for Unilever's Dove Summer Glow product was misleading and deceptive. The Unilever product was launched in direct competition with Johnson & Johnson's Holiday Skin Body Lotion.
The advertisements in question made claims to the effect that "7 put of 10 Johnson's Holiday Skin users preferred new Dove Summer Glow". The following footnote appeared in the advertisements "In use test of 105 women conducted in Australia by a leading research company in March 2006".
Johnson & Johnson argued that the study referred to did not adequately support the claims made on the basis that:
Unilever argued that the preference claim needed to be construed in light of the footnote. That is, the claim should be interpreted as meaning that, of the 105 women surveyed, 7 out of 10 preferred the Summer Glow product. The Court rejected this argument, saying that although "taken in isolation and construed carefully" the representation may be limited to the 105 women surveyed, that this was not the "totality of the representation in these advertisements". The Court noted that a statement that is literally true may nevertheless be misleading and deceptive depending on the meaning conveyed by the representation. In the context of the advertisement, it held that the footnote:
"is used to validate an assertion that the "7 out of 10" preference relates to Holiday Skin users generally, not to restrict it."
The Court held that the television advertisement (although not the print advertisement) emphasised the tanning properties of the Dove Summer Glow product. As such, the "ordinary and reasonable woman interested in a product in this market" would understand the advertisement to mean that Johnson's Holiday Skin users preferred the Dove product because of its tanning properties. This claim was misleading, as the "7 out of 10" preference finding related to the overall preference to the product, and only 65 percent of survey participants nominated the Dove product as the product best described by the statement "leaves skin naturally tanned". That is, the study did not support that 7 our of 10 users preferred the Dove product because of its tanning attributes.
Both variants were available at the time the advertisements were broadcast/published. No attempt was made in the advertisement to confine the "7 out of 10" statement to the variant used in the study. As such, the Court found that the reasonable consumer would understand the advertisements to mean that the preference statement encompassed all available variants. Such a claim was misleading as the study only considered one of the available variants, with the Court characterising the representation as a "half truth". The Court rejected Unilever's argument that Johnson & Johnson should be required to prove that a different preference would have been expressed had all the variants been tested.
Johnson & Johnson had a number of bases of criticism for the study methodology, including:
The Court held that the "7 out of 10" preference claim was misleading on the basis that women under the age of 25 were excluded from the study, but that the evidence in relation to the other criticisms was inconclusive.
The reason why the Court attached significance to the age of the study participants was that the advertisements, "considered, in their totality" were directed to women of all ages. Also significant to the Court's reasoning was that at least one of the advertisements included pictures of women who appeared to be under the age of 25, and because a significant part of Johnson's market (that is, "users" of Holiday skin) was under 25 years.
Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [2007] FCAFC 70
The litigation concerns the use of the colour purple in respect of chocolate products. Cadbury Schweppes commenced proceedings against Darrell Lea alleging that Darrell Lea use of the colour purple in the packaging and marketing of its chocolate products might lead consumers to mistakenly believe that the Darrell Lea products were Cadbury products, or that there was a connection between the two businesses. Cadbury argued that in using the colour purple in this manner, Darrell Lea had engaged in misleading and deceptive conduct, as well as the tort of passing off.
At first instance, the trial judge dismissed Cadbury's claims (Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) (2006) 229 ALR 136). On appeal, the Full Federal Court of Australia overturned the trial judge's decision
Central to the appeal was the admissibility of expert marketing evidence which the trial judge had refused to admit. The disputed evidence consisted of three affidavits, from an Associate Professor of Marketing and Behavioural Science, a Senior Lecturer in the School of Economics, Finance and Marketing, and the Managing Director of a branding and design consulting firm. The primary judge held that the subject of the evidence (which related to the making of consumer decisions to purchase chocolate) were within the knowledge and experience of ordinary persons, and were therefore inadmissible. It was never in dispute in the case that marketing is an area of specialist knowledge.
The Full Federal Court held that the trial judge erred in respect of the admissibility of the expert evidence, and ordered a new trial.
The case is significant in that it its acceptance of the admissibility of expert marketing evidence. The case turned upon the interpretation of sections 79 and 80 of the Evidence Act 1995 (Cth). The Full Federal Court held that the old common law rule that excluded expert evidence on matters of common knowledge did not apply to the issue of admissibility under the Evidence Act.
The Full Federal Court did not give any consideration to the issue of whether the issues addressed by the marketing evidence were matters of common knowledge. This is significant, as although the evidence is admissible, the weight that will ultimately be given to the evidence is unclear. If the Court finds that the evidence deals with matters of common knowledge, it is unlikely to be given much weight.
For further information, please contact Jocelyn Kellam.
