Australia: Faster than a speeding bullet! Puffery and performance characteristics of advertising in the 21st century

Clayton Utz Insights
Last Updated: 5 November 2014
Article by Deborah Polites

Most Read Contributor in Australia, November 2016

Key Points:

Hyperbole will always be part of advertising, but advertisers should remember that an objective representation linked specifically to a characteristic of a product's performance is unlikely to constitute acceptable puffery and any substantiating data needs to be able to withstand scrutiny.

In 1891, the manufacturer of the "Carbolic Smoke Ball" published an advertisement to the effect that if anyone who used the smoke ball according to the instructions for two weeks "contracts the increasing epidemic influenza, colds, or any disease caused by taking cold", it would pay 100 pounds to that person. When a customer claimed this reward and the company attempted to renege, three Judges in the UK Court of Appeal, apparently oblivious to puns, considered whether the offer by the smoke ball company was a "mere puff". They held that it was not.1 But the concept of a "puff" had arrived, and has remained in advertising and marketing law ever since.

Fast forward to 2014. International soft drink company Red Bull GmbH has agreed to pay US$13 million towards consumer compensation to settle a class action in the United States, after extensive advertising the "performance enhancing" qualities of its product over many years.

Red Bull's wings get clipped

The well-known advertising slogan Red Bull Gives You Wings might well be considered the epitome of a puff. It is difficult to envisage any consumer believing the statement literally. The advertisements often combined it with imagery of outrageous stunts or cartoons of impossible scenarios, all apparently being achieved through the use of Red Bull.

However, the class action complainant alleged that "by promising that, among other things, "Red Bull gives you wings" the company was preying upon consumers. He argued that the advertising campaign as a whole represented, incorrectly, that the "unique combination of ingredients" in Red Bull made it "a superior source of energy worthy of a premium price over a cup of coffee", when, in fact, scientific evidence did not support a benefit superior to that from caffeine. Criticism of the data relied upon by Red Bull to substantiate the representations included that one study involved comparison of Red Bull with placebo, rather than comparison of Red Bull with coffee or caffeine tablets.

As Red Bull has decided to settle the matter, those allegations, including the extent to which the alleged misrepresentation was conveyed by the advertising and the parties' competing positions concerning the scientific evidence, are unlikely ever to be tested by any Court. And, unfortunately, the simplistic and incorrect notion that Red Bull consumers sued successfully based on their failure to grow wings may turn out to be a popular myth.

The Australian position on performance characteristics vs puffery

Whether the Red Bull consumer class action would have been successful under Australian law can never be known. However, Australian advertisers need to be mindful when using advertising that focuses on the performance characteristics of a product, and developments in overseas jurisdictions in relation to the same or similar products cannot be ignored.

In addition to the well-known general prohibition on misleading or deceptive conduct in trade or commerce, in section 18, two other sections of the Australian Consumer Law specifically address statements made in relation to product performance. Section 29(g) provides that a person must not make a false or misleading representation in connection with the supply of goods or services that the that goods or services have certain "performance characteristics...uses or benefits". Section 33 provides that a person must not engage in conduct that is liable to mislead the public about goods' "nature", "characteristics" or "suitability for their purpose".

In order to contravene these provisions there must first be an objective representation susceptible to proof; this is where the question as to "puffery" inevitably arises. Then, assuming the statement is objective, the quality of any substantiating data and its adequacy as a basis for the representation will be taken into account when determining whether a statement is misleading.

Reebok's EasyTone shoes: objective representations vs puffery

The Australian Competition and Consumer Commission has recently obtained declarations from the Federal Court of Australia that Reebok Australia contravened all three of these provisions in its advertising of "EasyTone" shoes between 2011 and 2013. The ACCC alleged that promotional material provided on labelling and in-store contained representations that walking in EasyTone shoes would provide greater benefit than ordinary walking shoes in toning the wearer's calves, thighs and buttocks. In contrast to the tone and style of much of Red Bull's advertising, the statements in those materials were specific and presented in a factual and scientific manner. For example, they referred to "balance ball inspired" moving particles of air inside the sole of the shoe creating "micro-instability" which was stated to assist in muscle toning. They also included percentage figures, said to represent the increased muscle activation when wearing EasyTone shoes based on a comparative test with a "typical walking shoe".

Such objective representations are qualitatively different from the type of representation associated with "puffing" in advertising, and are unlikely to be regarded as "puffery" by a court. However, the Court declarations were obtained as a resolution of the proceedings, without the Court having issued judgment. As a result, the declarations establish that the representations were misleading and made with no adequate basis, but there is no judicial analysis available, either of the extent of the representations or the quality of the substantiating information Reebok relied upon.

Reebok had agreed in 2011 to settle a Federal Trade Commission Complaint in the United States (District Court for the Northern District of Ohio) regarding the same representations and products. That settlement involved Reebok making $25 million in funds available for consumer compensation. The continued sale of the shoes in Australia with the same packaging, inserts and in-store material for 18 months after the US settlement was of particular concern to the ACCC.

However, as with the Red Bull class action, the FTC complaint in the United States was settled by consent, without a court having considered and adjudicated on either the content of the representations or the adequacy of any substantiating evidence relied upon. The ACCC's desire for companies not to make representations in Australia where they have agreed with overseas regulator not to do so is understandable. However, as the Red Bull example suggests, a settlement in one jurisdiction need not lead to an automatic inference that the representation would involve contravention of the law in another.

Lessons to advertiser: Puff carefully

In 1981, Justice Lockhart in the Federal Court held that a robust approach is needed when determining whether (television) advertisements are misleading or deceptive, because "the public is accustomed to the puffing of products in advertising".2 Despite the apparent message of the Red Bull settlement, that statement is likely to remain true; it is unlikely that the concept of the "mere puff" will disappear from Australian jurisprudence.

However, advertisers should remain conscious that an objective representation linked specifically to a characteristic of a product's performance is unlikely to constitute puffery. The quality of any substantiating data is also likely to be the subject of increasing scrutiny, as the ACCC's focus on advertising, particularly by prominent brands, continues.

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Footnotes

1Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256.
2Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 37 ALR 161.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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