Two questions every marketer should ask – and never stop answering!

Last year five Australian marketing professionals went to work, promoted their brands, released new campaigns and arranged tactical pieces – in short did exactly what they thought they were getting paid to do.

And got themselves prosecuted and convicted for doing so.

That’s right: they were found personally guilty of an offence, fined and hit with hefty cost orders.

Announcing: Huge hike in marketing penalties

And just last week Australia’s consumer regulator announced it wants to up penalties for non-compliant marketing by almost 1,000% – from $1.1M to $10M, or 10% of company turnover.

Achieving this is the ACCC’s highest strategic priority this year, according to Rod Sims, ACCC chairman.

“For larger companies, we really need penalties of well above $100 million for those companies to get the message that this is behaviour that they should not be engaged in.”

Australia’s marketers might have views about this … at least those who grasp their current daily compliance burden.

Many marketers don’t.  But those who have been caught in the headlights of the law generally do.

What the …?

Online Dealz marketer Janet Lucas added the words ‘Certified to Australian Standard’ and ‘Meeting Australian and New Zealand Standards AS/NZS 2172’ to ads for cots and strollers.

She herself was fined $20,000 – in addition to the penalty imposed on her company.

How could this happen?  And how can I avoid it?    These are two questions every marketer should be asking and making sure they answer and keep answering.

Every day marketers suffer personally for the marketing choices they make professionally.

It’s serious – and few other business roles in the corporate world involve such high legal stakes for those who hold them.  It’s worth looking at how it plays out.

Criminal minds

Last year, more than one in three of the ACCC prosecutions against companies for misleading marketing involved prosecutions against individual directors and managers as well.

Let’s just get clear what this means.  It means those marketers are prosecuted for an offence.  The company can’t defend them – they are on their own.  They have to pay for their own legal representation.  It’s their career and their families that carry the cost.  A previous chairman of the Australian consumer law regulator the ACCC once famously warned “[You] probably won’t be able to get off aeroplanes, certainly not in the US.”

“Hang on!” you might be thinking.   “Marketing is a creative effort!”  Of course it is.  And you’re not a criminal!

Yet every year, tucked away in appendix 9 of the ACCC’s annual report is the list of prosecutions, and there, every year, are the names of hapless marketing managers, small time directors and big time brands.

In January 2018 one long time marketer who failed to pay his penalty and costs was bankrupted by the ACCC – and thrown out of business.

The law’s long arm can reach you personally and won’t care that you say you are just doing your job.  The law says you will be personally liable if you are knowingly involved in misleading conduct.

It’s true that to be guilty of an offence requires intentionality.   But it can be a moot point – when does a bit of embellishment become an intention knowingly to deceive?

Falling on your sword

There is an even longer list in appendix 8 of the ACCC report.  These are the companies and individuals who have thrown their chips in and voluntarily surrendered to the regulator without court action, accepting the burden of undertakings that will restrict their marketing options and potentially damage their brands for years.

Legal enforcement has become brutally efficient.  Lawmakers know marketers want to avoid an association with the publicity of major court action just as much as their employers want to avoid the cost.  So they offer a smart little alternative:  a public confession and an undertaking not to contravene again.  The undertaking has the automatic effect of a court order.  Breach it, and the company is up on a contempt charge.

Gotcha

And in this regulatory armory let’s not forget the newest form.  Infringement notices and substantiation notices work like court orders made by the regulator – without the need for court action.  They require the corporate brand to withdraw or correct advertising and pay a fine, or at least to substantiate a product claim.  The key point is that these notices have a similar effect as on the spot traffic fines, and enable the regulator to intervene much more extensively by generating dozens of notices.

So, the number and range of ‘gotchas’ is really quite extraordinary.  Individuals can be prosecuted personally.  Companies can surrender to regulator demand and offer up formal undertakings to avoid going to court.  Regulators can extend their reach (and revenue) by issuing infringement notices and substantiation.

This leaves the two most familiar and consequential outcomes of all:  a Federal Court lawsuit against your company by a competitor (or other third party) and a Federal Court prosecution by the regulator.

Open court career fail

In career terms, having your beloved brand or costly campaign targeted by a well-aimed legal claim or complaint is … unhelpful to say the least.  No marketer has ever thought it was fun to be grilled in the glare of a court room under cross-examination.

If it has never happened to you, you might think it won’t or that it can’t.  And if you work with one of the major brands, you might also think there’s safety in size.

Well, there isn’t.  And it can (happen to you).

In fact big brands are a particularly attractive target.  Consumer law allows commercial rivals to use legal intervention as a competitive tactic and the case books are chockablock full of market leaders slinging it out in the Federal Court – think Panadol v Nurofen, Carefree v Libra, Kleenex v Sorbent.

But it’s not just rivals.  Regulators also like to line up the big fellas in their sights.

Just look at the ACCC’s recent prosecution hit list which included Dulux, TPG, Reckitt Benckiser, AGL, Coles.

Tellingly, each of these cases turned the spotlight on the marketer.  Despite the scale of these organisations and the ample resources including legal expertise, it’s the marketer who so often holds the keys to success or failure.

And in this regard, the cases reveal something quite unexpected.

Unknown knowns

Dulux’s marketing manager, Ian Schultz, organized marketing collateral for a new ‘InfraCOOL’ roof paint that claimed to reduce the interior house temperatures by up to 10 degrees.  Similar claims for Heat Reflect paint boasted of reductions in surface temperature of exterior walls by 15 degrees.

Schultz had obtained multiple tests and some academic material pointing to possible reductions in temperature and discussed these extensively with his team (but not Legal).

It turned out the tests applied the wrong standard and did not apply to the specific temperature claims.  Dulux ended up admitting that.

Dulux had a legal compliance process in place.  Trouble was, it didn’t work.  It failed to identify these particular claims and this project as requiring legal sign-off.

Dulux copped a $400,000 penalty, paid the ACCC $150,000 in costs and was required by the court to undertake a program of corrective advertising, and annual monitoring.

What was the underlying problem?  The relevant players and in particular Schultz knew generally about the legal context and the need for testing.  But they were not sensitized to and did not know the precise standards required by the law.  Near enough was not good enough.  Dulux needed to have specific, defensible evidence of the claims being made or not make them.  It was under a ‘strict liability’ to get it right.

AGL sent letters to a large group of customers notifying them of electricity rate increases.  Those customers were on discount plans and were told the increases would not affect their discounts. In fact, the increases meant some of these customers would end up paying more than non-discount customers.  The net effect of the increase was to make the letters misleading.

The problem here?  Perhaps AGL overlooked the implications of the rate increase on the original ‘discount’ offer.  Its spokesperson said:

“AGL Energy did not intend to mislead consumers but we accept that we could have done a better job of explaining to our customers the impact of changes to their energy plan rates …”

Whatever, AGL was required to provide refunds exceeding $30 to more than 23,000 customers – a bill exceeding $780,000.  It also had to pay $300,000 of ACCC costs.  And it was required to issue corrective ads and accept orders regarding compliance monitoring.

Recognizing the claim, and recognizing the question mark as to its accuracy, is the most difficult aspect and most common cause of failure in addressing legal compliance.

Sure, individuals may set out in individual cases to mislead.

Certainly, brands sometimes decide to ‘test the waters’ and see what they can get away with.  (Nothing aggravates Marketing Team A more than to see Competitor Team B apparently getting away with  product claims which they have been told are too risky for Team A’s product.)

But don’t underestimate a much simpler explanation:  the marketer just missed it.  Missed it altogether, or did not ‘get’ the lengths they needed to go to get it right.

The legal compliance team, quality control and technical management cannot be everywhere they need to be to anticipate the fail.  They cannot hope to second guess what the marketer thinks or knows or does not know.

You would imagine the apparatus of the law could not be more comprehensively set up to trigger significant change here.  Marketers need to be brought in from the cold and empowered to cover off compliance quickly – before the long arm of the law reaches them.

And yes, certainly before that long arm gets even longer.