We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
On 13 July 2012 Energy Watch was ordered to pay $1.95 million in
penalties for making misleading comparisons in breach of the
Australian Consumer Law1. The former CEO of the company
was also fined $65,000 for his role in misleading radio
advertisements. In imposing the penalties, the Federal Court found
that Energy Watch had "deceived the Australian public in a
very serious way." Energy Watch is now in liquidation.
This very recent case reminds us that ensuring the accuracy of
the "overall impression" conveyed by advertisements is
paramount. In particular, it is essential to:
be clear about what products or services are being compared and
the limitations of those comparisons; and
avoid making false or misleading headline claims: disclaimers
at the foot of an advertisement probably will not negative their
false or misleading impact.
Facts
Energy Watch provided a brokering service for the retail
purchase of electricity and natural gas. It had agreements with
five "preferred retailers" of electricity and natural
gas. It would introduce customers to those preferred retailers in
return for a commission.
During 2011, Energy Watch launched an extensive advertising
campaign using an array of media including television, print,
billboards, radio and even a football scoreboard at the Melbourne
Cricket Ground. The advertisements included references to Energy
Watch being the "electricity umpire" which "compares
energy providers" for consumers.
Findings
The Court found that the advertisements represented that Energy
Watch comprehensively examined rates available to get the best
available deal for the consumer. In fact, the only energy providers
compared by Energy Watch were its five preferred retailers. The
advertisements were also found to have misled consumers by
overstating the savings they would make by switching retailers
using Energy Watch.
Energy Watch attempted to negative the misleading impression
conveyed by its advertisements by including "disclaimers"
in some advertisements. With the exception of one
advertisement2, the Court found that the disclaimers did
not have their desired effect. The Court's finding reinforces
the message that only in some circumstances can reliance be placed
on disclaimers, and rarely in television advertisements. The Court
described the television disclaimers, which contained the
all-important phrase "we do not compare all energy
providers" as "fleeting and microscopic" and
"only capable of being read by pausing the advertisement and
using a magnifying glass." In this case, print disclaimers
read only "refer to website" or similar, in tiny print at
the bottom of the page. The Court found that these disclaimers were
powerless to counteract the misleading representations contained in
the body of the advertisements.
Observations
Encouraging comparison between energy retailers (and indeed in
any sector) is important in order to encourage switching and
maintain a high level of contestability, which potentially benefits
consumers. The facility offered by Energy Watch had the potential
to do this if it truly did allow customers to make fully informed
decisions about who to buy their energy from. This was held not to
be the case and customers were led to make decisions based on
incorrect and incomplete information. Price comparator services
must be clear about the extent of the products or services they
compare, especially in a market where purchasing decisions are
based almost solely on price. Otherwise, what could be a
competition-enhancing device may unlawfully manipulate market
outcomes.
Although short term benefits of higher sales may accrue to those
who do not tell their customers the whole story, the penalties
imposed on Energy Watch remind us that the Courts will harshly
penalise such "sharp business practices".
1Sections 18, 29 and 34. 2One advertisement which appeared in the Women's
Day magazine was found to not be misleading or deceptive as it
contained a disclaimer which contained all of the relevant
information and was of sufficient size to attract the reader's
attention and be sufficiently legible.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
