Anyone responsible for advertising financial products and services or price promotions should be aware of developments this week. The Advertising Standards Authority (ASA) has adopted the new Financial Advertising Code; while the Commerce Commission has issued another reminder to all retailers that any price promotions must offer consumers genuine savings.
Price Promotions
Ahead of Black Friday and the holiday season, the Commerce Commission has published a reminder that price promotions must provide genuine savings off the usual selling price of goods and services. Further, the Commission has warned retailers against increasing prices prior to a promotion so that they can claim a bigger discount has been given.
Under the Fair Trading Acct 1986 (FTA), retailers are required to make accurate representations and not to mislead consumers. The Commission has noted that pricing is consistently one of the most complained about areas – amounting to more than 15% of FTA complaints received each year.
The Commission has also highlighted the risk of retailers making representations about delivery timeframes that they may be unable to meet at this time of the year – ie retailers that promise that goods will be delivered "within 10 working days" or "before Christmas" must be able to meet these promises.
The Commission has included a number of tips for retailers to ensure they are compliant with the FTA. While these should be obvious, they serve as a useful reminder:
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don't use fine print to hide important information (as fine print cannot "correct" an overall misleading headline representation);
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ensure discounts are taken off the usual selling price rather than any original price;
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price comparisons must involve "like-for-like" products or services;
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"clearance" sales can only be used for clearing goods, and products on clearance should not return to full price; and
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"special offer" or "special" means something unusual (for example, Strandbags has recently been the subject of charges filed by the Commission for, amongst other things, advertising and selling goods at a discount or sale price for so long that the prices could no longer be said to be special).
The full guidance from the Commission can be found here.
Financial Advertising Code
The ASA has implemented the new Financial Advertising Code (Code), which is in line with other consumer financial guidance (eg the Financial Markets Authority's guidance on the advertising of Financial Products) and legislation that has been recently amended, including the Financial Markets Conduct Act 2013 (FMCA) and the upcoming amendments to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) (amendments to which come into force on 1 December 2021).
The new Code substantially expands the definition of an advertisement for a financial product or service. As well as including any product defined as a Financial Product or Service under the FMCA or the CCCFA, the new definition explicitly includes all:
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insurance products, services and advice;
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banking, debt or credit products and services and advice;
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investments products, services and advice;
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peer-to-peer investment;
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payment products, services and advice;
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financial or risk-trading or management products, services and advice; and
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financial training or courses directed to consumers.
Other key aspects of the new Code include:
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Advertisers and other agents, including influencers or other content creators publishing financial advertising, will be primarily responsible for ensuring any user-generated comments, reviews, testimonials and endorsements comply with the Code when they are part of the advertisement.
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Obvious untruths, exaggeration, puffery or deliberate hyperbole must not be used in relation to financial claims. This is different for the general rules for all advertisements under the Advertising Standards Code, which may contain obvious hyperbole.
In its report on the new Code, the ASA noted that some submitters argued that an ASA Financial Advertising Code was no longer required, as the finance sector is already highly regulated. However, unsurprisingly, the ASA considered the Code is necessary because it covers issues relating to social responsibility, including decency, offensiveness and safety, which are not covered by other financial regulatory bodies.
The new Code will be effective from 1 March 2022 for new financial advertising, and 1 June 2022 for all financial advertising. The new Code is available in full here.
This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.