Advertising and Marketing Series: Disclaimers and Fine Print

Arguably the most troubling areas in advertising are disclaimers and fine print. Commonly, advertisements mark disclaimers or fine print with the use of an asterisk (*) or the words, “conditions apply”. Television, print media, the internet, contracts, labelling and signage typically use disclaimers and usually appear close to the lead selling point, or even possibly the headline.

The idea is to lure customers into the store and secure the sale while hiding the real terms and conditions in the fine print. The ACCC’s actions in the cases it pursues strongly suggest that this type of advertising will breach the Australian Consumer Law (ACL).

The ACCC’s Scrutiny of Disclaimers and Fine Print

The ACCC continues to scrutinise advertisements that use fine print and disclaimers to qualify the overall message. One of the emerging themes in this area is that size does matter, as well as the length of screen time for television ads. As a disclaimer’s effectiveness is assessed in the context of the advertisement as a whole, you should consider the following:

• Where is the disclaimer displayed? This is harder in radio and television mediums than it is in print advertising.
• How is the disclaimer worded? The wording of the disclaimer cannot be such that it completely overrides the main statement. For example, you could not advertise that certain goods have a guarantee if you then qualify that statement by an asterisk leading to a disclaimer that says, “not a guarantee”. Although this seems relatively straightforward, some behaviour in this area has not been dissimilar.
• When will the disclaimer be made? Ideally, the advertisement should make the disclaimer and the main statement at the same time. You can’t, for example, make a disclaimer at the point of sale when you have enticed the consumer into your premises by a misleading advertisement or conduct.

Target’s Disclaimer Misuse

Target is a well-known example of a brand embroiled in a misleading and deceptive conduct breach by misusing disclaimers. In June 2001, the Federal Court ordered Target to broadcast corrective ads on television for breaching the Trade Practices Act (TPA) as it was then. The Court held that Target had misled the public by advertising substantial price reductions for particular goods, but failing to point out that the offer did not include certain goods. The Court ordered 88 television stations to play the corrective advertisements during prime time, and 30 newspapers country-wide to publish the correction.

Facts of the Case

Between May and August 2000, Target broadcasted television advertisements and printed newspaper ads in all Australian states and territories. The ads offered substantial price reductions for clothing and home goods. The offers were limited and Target used small print to exclude several items from the discount.  Target’s ad said that:

“We are dropping the price of all men’s, ladies’ and kids’ clothing by a massive 25% and that’s right 25% off every stitch of clothing.”

The advertisement displayed a written disclaimer for approximately 1.5 seconds at the end, saying that the offer didn’t extend to “accessories” including ties, scarves, gloves, underwear, socks or hosiery.

The ACCC contacted Target in July 2000, alleging that the advertisements might constitute misleading and deceptive conduct and seeking to have Target offer an undertaking to cease their conduct.

Target refused and continued with their advertising campaign. In August 2000, the ACCC sent Target a letter of demand with no result and eventually commenced proceedings against them in the Federal Court alleging breach of sections 52 and 53(e) of the TPA.

The Court’s Decision

In June 2001, Justice Lee decided that Target had engaged in misleading and deceptive conduct and consequently, breached sections 52 and 53(e) of the TPA. The Court ordered a range of injunctions against Target including the orders for corrective advertisements. This was the first time that the Court ordered corrective advertisements on television for a business breaching the TPA.

Target would have incurred significant costs, and suffered embarrassment, through the continuous replay of corrective advertisements. The case is a necessary reminder of the ACCC’s dislike and intolerance of disclaimers and fine print in advertising. Of note, there are some words in advertising that often create an impression that fine print or disclaimers cannot cure, not matter how prominent.

There’s No Such Thing As a Free Lunch

In the ACCC’s Guide to Advertising and Selling, the Regulator provides examples on these types of words including:

• free,
• cost-price,
• cost-price plus $5,
• new,
• cheapest,
• sale, and
• discount.

If you are using these words or phrases, you should ask yourself what does the word or phrase mean – not for your business, but for the part of the community that will hear or see the advertisement? Is it being used with exactly that same meaning, or does it have a different or limited meaning?

Mobile Phone Carriers and Disclaimers

Mobile phone companies are especially notorious for using the word “free”. In June 2002, Optus represented to their customers through their “Free 2 aiR” marketing that their internet access was free after a one-off payment. There was an excess download charge referred to, but Optus did not mention some terms and conditions applying to subscribers including a quarterly fee.

The Court held that Optus had engaged in misleading and deceptive conduct in not making these terms and conditions apparent to potential customers before they subscribed to their service.

The Court also held to have made false or misleading representations and engaged in unconscionable conduct in its dealings with its customers. Apparently it also fell foul of the harassment and coercion prohibitions by threatening to disconnect customers who had failed to pay administration fees. The Court further found that sole director, Mr Young knowingly aided, abetted or procured each breach.

So what happens if you get it wrong? In our final article in the advertising and marketing series, we look at penalties.

Questions? Get in touch with LegalVision’s specialist advertising and marketing lawyers on 1300 544 755.