False and Misleading Advertising | The Case LawyerMisleading Advertising & Deceptive Marketing Lawyer in Pakistan

Deceptive Marketing Practices

Advertisement is deceptive if it contains false or misleading statements or omits information that is likely to mislead consumers in ordinary circumstances and is material in that it is important to a consumer’s decision to buy or use the product.

Examples of material information may include representations about a product’s character, performance, features, safety, price, or effectiveness and one must recognize that advertisement having claims about health care product or safety and/or having a semblance of being viewed as such products will require a higher degree of disclaimer and disclosure.

False and Misleading Advertising

Competition Commission, being a quasi-judicial forum, is mandated under S. 10 of Competition Act, 2010 to protect consumers from anti-competitive practices prohibited. One of such practices is deceptive marketing practices, which are aimed at consumers to make a transactional decision.

Dissemination of misleading information is likely to cause eventual dilution of brand identity and goodwill of the aggrieved party as well as other competing undertakings, which might have been built over the years. Such deceptive claims are capable of influencing consumer purchasing decisions.

Important to determine “consumer” for the purpose of assessment under S. 10 of Competition Act, 2010. Consumer for the purposes of S. 10 of Competition Act, 2010, is an ‘ordinary consumer’ in contrast to a ‘reasonable’ or ‘prudent’ consumer.

Under section 30 of the Act, the Commission or the Adjudicating Members are entrusted with the responsibility to give an independent analysis of the evidence available on the record and the submissions made by the parties and give an impartial assessment. The commission has to analyze certain aspects in order to give findings on the main issue, these are:

(i) The concept of Consumer vis-a-vis section 10 of the Act:
(ii) The concept of False or Misleading information in the process of advertising/marketing;
(iii) Net general impression of the Advertisement:
(iv) Material information.

In Pakistan, a compliance-oriented approach vis a vis section 10 of the Ordinance, the concerned authorities must place a higher onus on the Undertakings in relation to the marketing practices.

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Read More About Deceptive Marketing Practice

Concept of Consumer

From OFT’s perspective, the consumer to whom such information is disseminated has to be the “ordinary consumer” who is the usual, common, or foreseeable user or buyer of the product. Such a consumer need not necessarily be restricted to the end-user. It may be relevant to point out that the “ordinary consumer” is not the same as the “ordinary prudent man” concept evolved under contract law.

Unlike the “ordinary prudent man,” the thrust on ordinary diligence, caution/duty of care, and ability to mitigate (possible inquiries) on the part of the consumer would not be considered relevant factors.

It must be borne in mind that one of the objectives of the Ordinance is to protect consumers from anti-competitive practices hence, the beneficiary of the law is the consumer.

Therefore, in order to implement the last in its true letter and spirit, the scope of the term “consumer” must be construed most liberally and in its widest amplitude. Restricting its interpretation with the use of the words “average”, “reasonable” or “prudent” will not only narrow down and put constraints in the effective implementation of the provision it would, rather, be contrary to the intent of the law.

It would result in shifting the onus from the Undertaking to the consumer and is likely to result in providing an easy exit for Undertakings from the application of section 10 of the Ordinance.

Accordingly, the term “consumer” under section 10 of the Ordinance is to be construed as an “ordinary consumer” but need not necessarily be restricted to the end consumer of the goods or services.

False or Misleading information

The concept of False or Misleading information in the process of advertising/marketing is subsequent to understanding and clarifying the concept of Consumer and it must be understood that what constitutes ‘false’ or ‘misleading’ information in the process of advertising/marketing which evokes a violation of section 10 of the Act. The concepts of ‘false’ or `misleading’ can be considered in the following terms:

False information: Oral or written statements or representations that are:

(a) contrary to the truth or fact and not in accordance with reality or actuality;
(b) usually implied either conscious wrong or culpable negligence,
(c) has a stricter and stronger connotation, and
(d) is not readily open to interpretation

Misleading information: May essentially include oral or written statements or representations that are:

(a) capable of giving wrong impression or idea,
(b) likely to lead into the error of conduct, thought, or judgment,
(c) tends to misinform or misguide owing to vagueness or any omission,
(d) may or may not be deliberate or conscious, and
(e) in contrast to false information, it has less erroneous connotation and is somewhat open to interpretation as the circumstances and conduct of a party may be treated as relevant to a certain extent.

Net General Impression of Advertisement

The third and most important aspect and the violation of the prohibition contained in section 10 of the Act, is to gather the impression of the advertisement/marketing campaign.

The Competition Commission of Pakistan has held that:

“evaluate complete advertisements and make an opinion regarding deception on
the basis of net general impression conveyed by them and not an isolated script”.

It is clear that for the purposes of determination on Section 10 of the Act, it is important what net general impression the advertisement conveys. No excerpt in isolation can be taken into account rather the entire scheme of advertisement or marketing campaign is to be looked into.

Material Information

With reference to the materiality of the representation, reference can be made to the FTC Policy Statement on Deception dated 14.10.1983 appended to Cliffdale Associates, Inc., 103 F.T.C. 110, 174 (1984), wherein it is provided that the commission, omission, or practice must be a ‘material’ one which is likely to affect the consumer’s conduct or decision with regard to a product or service.

Marketers traditionally focus on designing advertising campaigns and other promotional strategies to promote a brand name. However, with evolving consumer preferences and laws, presentation; trade dress has become just as essential for making products and services distinctive and for building brand recall.

The cultural diversity of the Pakistan market makes a compelling case for the importance of product identification by packaging and visual impression. This has resulted in third parties creating lookalikes of popular products with similar packaging or offering services through similar logos in order to grab consumers’ attention and generate demand for their own products/services in the market.

Disclaimer and Disclosure

While evaluating the effectiveness of disclaimer/disclosure, the Competition Commission of Pakistan considers factors such as prominence, presentation, placement, and proximity between the advertising claim and the associated disclaimer/disclosure. The principle regarding disclaimer/disclosure is that they must be ‘clear and conspicuous and placed ‘as close as possible to the advertising claim.

While explaining ‘clear and conspicuous disclosures, the FTC in the matter of Epand, Inc. And Ayman A. Difrawi 2016, Case No. 6:16-cv-714-Orl-41TBS has made it clear that:

(i) In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication that includes a representation requiring disclosure and is made through both visual and audible means, such as a television advertisement, the disclosure must be made through the same means through which the representation is made;

(ii) A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics must stand out from accompanying text or other visual elements so that it is easily noticed, read, and understood;

(iii) An audible disclosure, including the telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it;

(iv) In any communication using an interactive electronic medium such as the Internet or software, the disclosure must be unavoidable.

(v) The disclosure must use the diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears;

(vi) the disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications;

(vii) The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication; and

(viii) When representation or sales practices target a specific audience, such as children or elderly or the terminally ill, “ordinary consumer” includes reasonable members of that group.’

Enquiry and Studies

Mere filing of a formal complaint will not trigger initiation of formal enquiry in terms of S. 37(2) of Competition Act, 2010. For initiation of the enquiry the complainant, in any formal complaint filed with the Commission, must satisfy the criteria laid down in the express provision of law, i.e. complaint must be filed by an ‘undertaking’ or ‘a registered association of consumers and must be substantiated with prima facie evidence, failing which no enquiry can be conducted thereon.

In cases of deceptive marketing practices, the burden of proof is on the undertaking concerned i.e. the manufacturer/seller of goods or provider of services that the claims made by them in the process of marketing about their products and/or services are appropriately substantiated.

Complainant in such like matters is considered an informer as Competition Commission is entrusted with the responsibility of looking after the interest of the general public and anti-competitive conduct and to create a level playing field in order to enhance economic efficiency in all spheres of commercial and economic activity and that too in the public interest.

Liability of Advertiser

While evaluating the net general impression or dominant message, the Competition Commission of Pakistan delineates and examines express and implied claims contained in an advertisement or promotional campaign while holding the advertiser liable for both. Advertisers are liable for all such claims if they are false and/or misleading or lack a reasonable basis. Neither proof of intent to disseminate a deceptive claim nor evidence that consumers have actually been misled is required for an act or omission to constitute violations under S. 10 of Competition Act, 2010.

Scope of Harm Caused

The consequences of the distribution of false or misleading information is such that it is always capable of harming the business interests of and resulting in fatal consequences for the competitors of the Respondent concerned. As observed by the Commission on numerous occasions before, it is reiterated that no strict proof of actual harm caused to a competitor is required for a determination of a contravention of section 10(2)(a) of the Act as long as it can be shown that such potential harm is capable or possible of being caused or foreseeable.

Section 10(2)(a) of the Act provides that ‘the distribution of false or misleading information that it is capable of harming the business interests of another undertaking’ shall be deemed to constitute a deceptive marketing practice.

To prove conduct under section 10(2)(a) of the Act, it is not necessary to show actual harm to competitors. It is sufficient to show the existence of a deceptive marketing practice that has the potential to harm the business interests of the competitors.

Functions and Powers of the Commission

The Legislature has entrusted the Competition Commission with the exclusive mandate to provide for free competition in all spheres of commercial and economic activity, to enhance economic efficiency, and to protect consumers from anti-competitive practices. The commission is mandated under S. 28(1)(a) of the Competition Act, 2010 to initiate proceedings in accordance with the provisions of the Act and to make Orders in cases of contraventions thereof. Non-obstante clause of S. 59 of Competition Act, 2010 made it abundantly clear that the provisions and applicability of the Competition Act, 2010 are
given an overriding effect over all other conflicting laws in force.

It must be made clear that exercising any legal right available to a person through the Commission, does not amount to business rivalry. The purpose of section 10 of the Act is to provide a remedy to an aggrieved person whose rights have been infringed by another by resorting to deceptive marketing practices being an unfair means of distorting competition. Even otherwise, if there happens to be a wrong complaint then the Act provides a mechanism, such as an enquiry process under section 37 of the Act, to scrutinize the complaint and check its veracity. This is not all, the Act even further provides a due opportunity to the person against whom a complaint is filed to appear and produce his defense. In the presence of such an extensive process, it is not correct to suggest that mere exercise of a legal right amounts to personal vendetta.

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