Where is the truth in advertising?

If I tell you that I TV-shopped for tablets that make people whiter, and pills that magically make people taller, you would probably ask me, “What were you thinking?” But if you knew my skin tone and my height in centimeters, you would probably be more forgiving. What can I do? The ad was so compelling. And if I ordered that “now,” they would take 50 percent off from that exorbitant price, and even throw in a free DVD.

This Sunday though is not about the gullible, but more so about the exercise of this commercial freedom of expression. So much public interest is vested in this freedom that it is equally an obligation. The freedom to entice carries with it the obligation to inform.

Let’s face it. If an advertisement tells you nothing but information about a product in a plain manner, no product will be differentiated, no recall will be instant, market penetration will be slow and painful, and growth for anyone will need to rely on nothing more but word of mouth. The economy simply suffers. As gardens need flowers, advertisements need creative appeal. Otherwise, why bother? But when is it acceptable creativity, and when is it misrepresentation? When is it an acceptable exaggeration, and when does it become a lie?

The case of a leading global pizza chain is enlightening. A worthy competitor came out with the ad: Better ingredients, better pizza. This slogan was attacked as deceptive and misleading because there is no evidence that the competitor’s ingredients make their pizzas tastier. The US court said this is acceptable “puffery”. “Puffing” is the seller’s privilege to boast or exaggerate so long as no reasonable buyer would be justified in relying on such brag. (In this case, the court must have thought a pizza is a dough with tomato sauce and toppings, so who really has the better ingredients anyway?) This pizza slogan can also be compared to slogans like “The best beer in America” or “probably the best beer in the world”. These slogans had the word “best” in them so he who claims just “better” is probably also in a safe place.

The court, in the “Better ingredient, better pizza” case laid the test that in order to be misleading, the advertisement must be capable of deceiving a substantial segment of the consuming public to which it was directed. Applying this test, let us see how the reportedly out-of-court settled case involving an energy drink plays out.

The energy drink advertised that he who drinks it will have wings. There was a group of athletes that sued the energy company for false claims because it did not really dramatically improve their performance in sports. The energy company settled to make the issue go away. Really, would the general public rely on that statement and really expect to have wings after drinking a bottle? No. But if the ad was directed to a specific audience like athletes, would that be deceiving to this group then? Is it fair for the athletes to expect that the energy drink to be a performance-enhancing antidote?

One familiar example of a product sold in Philippine shores that had misrepresentation problems is this sneaker with a sole shaped like an inverted “C” endorsed by an international celebrity. The ad claimed that this shoe is special and that by simply wearing it, you will burn calories. The ad company was sued in the US for that ad being a lie. You do not see that ad anymore, and I am not sure if you can still see that shoe.

In a case decided by the Philippine Supreme Court, the seller advertised that its roofing materials are structurally safe and strong, and resistant to wind and storm pressure due to the strong hook action on its overlaps. After the complainants installed them in their new house, the first storm blew portions of the roof away. The seller was found to have violated Republic Act 3740, the law on fraudulent advertising. This case is an example of an advertisement that is equivalent to a warranty on the product because it made specific representations about the product. If I may share the Civil Code provision on this matter, it says any affirmation of fact or promise by the seller relating to the thing is an express warranty, if the buyer was induced to buy because of that promise.

Thus, when it is a specific claim about the product, sellers must be careful of their representations because they are their product’s experts. If it is an exaggeration of how people feel about the product, this is where creative license lies because no one has a monopoly of the knowledge on how people should react. This is why our shampoo commercials on TV are fun and compliant. When they say it’s like your hair was done in a salon after using the shampoo, this is acceptable boasting. When those ladies in their teens suddenly break out in dance and song after using the shampoo, who can argue about how teenagers feel? We know they sometimes make sense, sometimes they are irrational.

There are a number of advertisements though that are worthy of being tested, where complaints by the public abound with less than desired government action. We are not bereft of consumer protection laws, but it seems the public would most often need to fend for themselves. The real penalty for misleading and false claims is criminal in nature – jail time for the officers and persons who perpetrated them. Justice using that route is long and tedious.

Justice through social media though is swifter. The penalties imposed through social media are a deteriorated commercial image, sudden drop in sales, and losses. To be fair, responsible companies have strong social media teams that manage customer complaints, and these companies improve from these feedback. What is lacking though is a government social media site with a strong action team behind it (wishful thinking); or an independent private entity like the Advertising Standard Authority of the UK that is dedicated to protecting the public from misleading ads. Perhaps a low-hanging approach is for a mother social media site to be run by individuals passionate about consumer protection from false advertisements. This site can earn revenue from advertisements as well, ironically.

It seems good practice to research for feedback prior to purchasing a new product as part of buyer due diligence. I paraphrase a quote, which provides apt advice to the consuming public vs. compelling, but possibly false ads. It says: Fools believe they can learn from their own mistakes. The wise says he learns from the mistakes of others.

Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He also chairs the tax committee of the Management Association of the Philippines (MAP). Email your comments and questions to aseasyasABC@ph.pwc.com. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.