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New rules to protect business from misleading adverts take effect

New rules have been introduced to protect business owners from misleading advertising.

The regulations, which took effect at the end of May, create a criminal offence for promoters of misleading advertising.

The Office of Fair Trading (OFT), which is responsible for policing the rules, says it will prosecute any business or trade body responsible for misleading advertising.

Charlie Eve, a partner in Spofforths Chartered Accountants, says: ‘Advertising is misleading where it deceives or is likely to deceive businesses, and potentially affect their economic behaviour.

Advertisers should ensure than they comply with the new rules.’

Comparative advertising, directly or indirectly, identifies a competitor or a competitor's product.

If a business uses comparative advertising, it has to meet certain conditions.

For example, it must not:

 

  • compare products or materials not designed for the same purpose
  • confuse traders as to the advertiser and the competitor
  • present imitations or replicas of products bearing a protected trade mark or trade name
  • take unfair advantage of the reputation of competitors' trade marks, trade names, other distinguishing marks, or country of origin information
  • mislead traders or consumers.

    Businesses or trade bodies are called code owners in the new arrangement.

    Code owners will not be permitted to promote misleading advertising or comparative advertising that does not meet the prescribed conditions.

    Companies and their employees should therefore take all reasonable steps and carry out due diligence to make sure that the advertisements used to promote goods or services will not - in any way - mislead customers or potential customers.

    From the same date, new rules will forbid certain unfair business practices.

    Businesses will breach the rules for unfair commercial practice if:

     

  • an activity goes against the requirements of professional diligence - ie honest marketing practices or good faith - and is likely to alter the economic behaviour of the average consumer with regard to the product;

     

  • consumers are misled - eg by providing false or deceptive information;

     

  • consumers are misled by failing to give them relevant information or by giving information in an unclear way in order to encourage them to buy;

     

  • aggressive sales tactics are used to harass, coerce or unduly influence a consumer to make a decision they would not otherwise have made.

    Thirty-one practices listed in the regulations will be banned.

    This means, for example, that a business must not:

     

  • make false claims about being a signatory to a code of conduct
  • display an unauthorised trust mark, quality mark or equivalent
  • claim endorsements or approvals from a public or private body when this is untrue or before complying with its terms
  • use bait advertising - ie offer goods for sale at a price which a business knows it will not be able to honour
  • use bait and switch tactics - ie offer goods for sale at a specified price with a view to selling a different product at a higher price
  • ignore a consumer's request to leave their home or not return
  • create the false impression of a prize or benefit that the consumer has already won, will win, or will win on taking some action, where none exist, or where they would have to pay money
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