When Advertising Becomes a Reputation Risk

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    [Editor’s note: We asked to reprint this article from Tony Jaques’ “Managing Outcomes” newsletter because it addresses an issue we constantly see major organizations ignore – the fact that advertising can, and often does, create unnecessary reputation threats.]

    Two of Australia’s largest corporations are under fire because of their advertising. The Victorian Supreme Court recently ruled that claims by Singtel Optus about the coverage of its telephone network would have misled the ordinary or reasonable person. And supermarket chain Coles has just been before the Federal Court to defend a charge that bread which has been part-cooked and frozen should not be promoted as “fresh baked.”

    Cases of dubious advertising are all too common. However, for major corporations and high profile brands it’s not just about dollars and cents. Corporate reputation can also be at risk.

    It hasn’t been a great time for honesty in big-brand advertising. Late last year the Australian Competition and Consumer Commission (ACCC) announced legal action against Reebok for claiming that walking in a pair of EasyTone shoes would increase the strength and muscle tone of the calves, thighs and buttocks more than with a traditional walking shoe. ACCC also announced action against energy company AGL South Australia for making false or misleading representations to homeowners about the level of discounts off electricity usage charges they could be obtain.

    Around the same time came news that the Federal Court upheld the $250,000 fine against high-street jeweller Zamel’s for misuse of “was/now” pricing. The court found the apparent “savings” were false or misleading because Zamel’s had either not sold the item or made only a few sales, at or near the “was” price.

    In its original defence, the company claimed it was “widespread industry practice.” In its failed appeal, their lawyers argued that the “was” price should be considered an “offer to treat” rather than the actual price. Got that? Now try to explain it to the ordinary or reasonable consumer.

    A few days later, the court handed down a $1 million fine to the group buying website Scoupon, for misleading consumers about their refund rights and the price of goods advertised. Also for telling businesses that there was no cost or risk involved and that 30% of vouchers would not be redeemed, which was not true.

    Of course, dodgy advertising has been around since Eve told Adam how good the apple would taste. Yet for corporations, the risk to reputation can easily be under-rated.

    Every experienced communicator knows you can try to win in the court of law and risk a terrible loss in the court of public opinion. Let’s not forget when Pringles in the UK appealed to the highest court in the land to try and prove their famous potato chips are not actually a potato product, in order to save a substantial amount of sales tax. They eventually lost, but not before their own lawyers argued that Pringles “don’t look like a chip, don’t feel like a chip and don’t taste like a chip.” That must have really pleased their PR and Marketing people.

    In these and so many other examples, the question is: Where were the issue and crisis professionals who should have been asking – “Excuse me boss, but does this really seem like a good idea?” Maybe the Australian cases are not quite so egregious, but they are a blunt reminder that reputation is far too important to be left to over-enthusiastic marketers and over-legalistic lawyers.

    Tony Jaques manages Australian-based issue and crisis management consultancy Issue}Outcomes and authors its newsletter Managing Outcomes