MISLEADING OR DECEPTIVE CONDUCT IS BAD FOR BUSINESS

Misleading or deceptive conduct is bad for business An Assignment Submitted by Name of Student Name of Establishment Class XXXX, Section XXXX 2012

MISLEADING OR DECEPTIVE CONDUCT IS BAD FOR BUSINESS

Misleading or deceptive conduct is bad for business Misleading or deceptive conduct is an important part of the Australian Consumer Law field which the businesses should use to their own advantage. It requires the companies to not to mislead the customers in any way, to not influence their thoughts and believes by marketing. The law is very broad and can be viewed and judged from different approaches. For instance, misleading might be positioning, pricing and advertising of the product or service. Fundamentally the conduct states that businesses may not make false claims about the product or service, neither can they exaggerate the value of the goods. Businesses have to present the products real value and quality by setting an according price. (Misleading & deceptive, n.d.) In order to judge the misleading information, the courts set the criteria for evaluation: proof of intent to deceive is not required; it is not necessary to establish actual deception; the crucial factor is the capacity or tendency to deceive. (Misleading or deceptive, 2011) The business might also be accused of the misleading or deceitful conduct when not just representing the false information or exaggerating the existing features of a product or a service, but also when it hides or does not tell the full information to the customer(s). In addition, depending on the situation, the company might be judged by the way the information is presented to the customer(s): it has to be clearly stated, in visible and clear font, etc. However, the cases differ and some businesses get away with stating some additional information in, how it may seem like, unacceptable way. Nonetheless, if the violation happens the criminal sanctions do not apply, however, the consequences are assigned by the court individually. (Misleading or deceptive, 2012) The above information indicates that these laws are mostly developed to protect the customer and not to support the business. Therefore, the policies might be bad for businesses in

MISLEADING OR DECEPTIVE CONDUCT IS BAD FOR BUSINESS

terms of being too restrictive and even somehow limit their creativity and development of new ideas and products. Often times it is not only the presentation that matters and can be judged but also how one perceives the message and the presentation of the product or service. Surely, it is the actions which have to be judged and not intentions, but a lot of the argument might arise around the vague actions where the argument or a message might bring different responses from different people. A vivid example of violation of this law would be the case when Google was sued by the Australian court. It happened due to Google having four misleading advertisements on its search engine page. They were misleading because ones one clicked on an ad, it would lead him or her to the competitors website. Even though Google was not the one representing the ads, it was only responsible for placing them, it still lost the appeal against Australian Competition and Consumer Commission (ACCC). (ACCC wins appeal, n.d.) As one can see, the businesses have to be aware and careful in what activities they get involved in order to avoid the negative consequences for the misleading conduct. Even if one is not directly connected to the misleading information or is not creating it him or herself, the businesses have to know what and who they are working with in terms of reliable suppliers, partners, supporting companies, etc. Surely, the bigger the company is, as in case of Google, the more people know about the misleading actions one gets involved into and the more careful the company has to be with choosing the information they provide to the consumers. However, it is important for the small businesses to not to deceive the customer as well, but to work on gaining trust and loyalty of the customer. Moreover, these advertisements can be seen every day sponsored by small and big companies in various industries of business. The most recent and famous examples may be found

MISLEADING OR DECEPTIVE CONDUCT IS BAD FOR BUSINESS

on the web page of the Inc. Magazine (Busted: Worst Cases, n.d.). For instance, Hondas ad said that the cars are using a lot less gas per mile than they do; Taco Bell, instead of using the promoted seasoned beef, has been using the oat-based filler; Dannons yogurts are not clinically proven to improve the digestion system, as it was claimed in the ads; etc. I believe that according to these laws and policies, in order for the businesses to stay out of trouble, they need to realistically and objectively portray their product or service and reveal all of the details, instructions, and descriptions of the goods provided to the customers. Some may say that this will make it harder for the businesses to create the need for the product or service. However, to my mind, the businesses might use these laws and requirements to their own benefits. Since it puts everyone in the same conditions and the competitors have to satisfy the same requirements, each company will have to find a different competitive advantage that will be true and attract more customers. Consequently, the businesses are better off by not exceeding the expectations of the customers since its main concern is to keep the customers and attract the new ones which would increase the businesses profitability. The Harvard Business Review article Stop trying to delight your customers (Dixon, Toman & Freeman, 2010) states that companies cannot delight everyone, thus they have to think of a way to gain loyal customers which would support the business. One way to do this is to build realistic expectations, so that when the customer gets to try the product or test the service, they will be satisfied with what they have. On the other hand, if you try to advertise the product in a more attractive way the customer will be disappointed since the expectations were set higher than what was offered. The article states that if the expectations of the unknown product are exceeded, then the customer experiences disappointment. As the

MISLEADING OR DECEPTIVE CONDUCT IS BAD FOR BUSINESS

result of their disappointment, people give bad reviews to their friends and acquaintances about their negative experience, thus using one of the most powerful advertising tools word of mouth. And, as the research shows, people tend to talk more about their dissatisfactions rather than about their positive experiences (Dixon, Toman & Freeman, 2010). Therefore, it is important to try to gain loyal customers by realistically presenting the product and, what is most important, by reducing the customers effort and solving their problems with the help of the product or service the company is presenting. Under these circumstances, the business in order to be profitable and attract new and keep the loyal customers will have to objectively present its own product or service. To my opinion, the misleading or deceptive conduct laws are important to be reinforced and followed. From the consumer perspective, one can see the real picture of a product or service, and will be able to make better choices more suitable for him or her. Also, one will be provided with all the needed information which may help to make a decision as well. Thus, the customer has an opportunity to objectively evaluate the product or service and get the most out of it, based on his or her own personal preference. On the other hand, if the companies are not guided by these laws, the customer is deceived. Pushpa Girimai claims that misleading or deceptive advertisement violates human rights, such as the right to information, the right to choice, and the right to be protected against unsafe goods and services as well as unfair trade practices (Girimaji, 2006). As the result, it is impossible to disagree that the misleading and deceptive conduct laws are only beneficial for the customer. Also, misleading advertisement can be seen as an unfair competition. Good advertisement still does not mean a good product or service, however a lot of people are

MISLEADING OR DECEPTIVE CONDUCT IS BAD FOR BUSINESS

influenced by the ads on the emotional level and give the priority to the goods which promise more. Nevertheless, it does not necessarily mean that the other companys product is worse if it is not promoted the same way. So, when the laws are enforced, the businesses seem to be on the same level portraying their product or service in an objective way. It may be concluded then that these laws are also beneficial for the businesses since it makes them equal in a competition. Out of the previous paragraph we may see that through the healthy competition the companies will be doing more to improve their offerings and will think of more creative ways to beat their competitors rather than just mislead the consumers. In this way, the businesses will gain their loyal customers who like the products or services of a specific company, and the consumer will have better choices to choose from. In such a way the businesses may build a strong and reliable foundation where they will have their number of loyal customers and supporters which might even help the business to grow. Today loyal customers do not only value the companys trust and products that they like but they also create communities around those products to show their loyalty. This takes us to the concept of branding and to be able to create a brand which would be associated with positive emotions and reliability. Therefore, the companies have these responsibilities to support their loyal customers and to satisfy their needs by providing better products or services. And the misleading actions and deceiving the customer in this case might turn the loyal consumers away from the company and its products. Nevertheless, there are some drawbacks of the implementation of the laws. For example, the misleading and deceptive conduct creates additional expenses for the government since the countries have to have independent organizations which would watch the content of the media and differentiate the misleading information from the rest. In Australia such an organization is

MISLEADING OR DECEPTIVE CONDUCT IS BAD FOR BUSINESS

called Broadcasting Regulation which regulates the broadcasting content on radio and television (ACMA Broadcasting, 2012). In conclusion, I am convinced that the misleading or deceptive conduct is bad for businesses. Thus, the companies have to be guided and controlled by the independent organizations which would differentiate between the standard behavior or actions and the activities which try to mislead for or without a purpose. Indeed, such actions might bring more profit and are still used by some of the companies on the regular basis. The higher profitability may be reached by lying to the consumers (e.g. portraying the perfect condition of the hair after using certain type of shampoo) or hiding some of the relevant information (e.g. negative consequences from consuming some of the pharmaceutical medications). However, this profitability will not last long. It might be beneficial in a short run but not on a larger scale. Hence, it is important to attract and gather the community of the loyal customers for the business. This may be done through being honest with the consumers, portraying the reality of the products and services offered, revealing all of the information. Thus, when the customer is pleased with what one has to offer, he or she will be willing to go back and use ones product or service again, as well as spread the word to her friends. In addition, as it was mentioned above, there are a number of boundaries which help to determine which conduct is considered to be misleading. However, I believe that more countries have to work on improving their policies and restrictions in this field since it is important to respect the human rights. Nowadays, every person is a consumer and everyone deserve the right to make the rational choices and be aware of what they are consuming and how what changes a certain product or service might bring into their lives.

MISLEADING OR DECEPTIVE CONDUCT IS BAD FOR BUSINESS

References ACCC wins appeal against Google. (n.d.). ACCC Home. Retrieved October 1, 2012, from http://www.accc.gov.au/content/index.phtml/itemId/1043701/fromItemId/142 ACMA - Broadcasting regulation. (2012, July 25). ACMA - Home page. Retrieved October 1, 2012, from http://www.acma.gov.au/WEB/STANDARD..PC/pc=BRD_PUB_REG_OVIEW Busted: Worst Cases of Misleading Ads. (n.d.). Inc. Advertisement. Retrieved September 30, 2012, from www.inc.com/ss/busted-worst-cases-misleading-ads#6 Dixon, M., Toman, N., & Freeman, K. (2010). Stop trying to delight your customers. Harvard Business Review. Retrieved September 30, 2012, from www.iccsisac.org/en/tempdoc/docs/Stop%20trying%20to%20delight%2 GIRIMAJI, P. (2006). Misleading advertisements and consumers. Consumer Education. Retrieved September 29, 2012, from consumereducation.in/misleadingeng.pdf Misleading & deceptive conduct. (n.d.). ACCC Home. Retrieved October 1, 2012, from http://www.accc.gov.au/content/index.phtml/itemId/815335 Misleading or deceptive conduct - Consumer Protection - Department of Commerce. (2012, September 26). Department of Commerce. Retrieved October 1, 2012, from http://www.commerce.wa.gov.au/consumerprotection/content/business/selling_goods_ser vices/Unfair_business_practices/Misleading_or_deceptive_conduc.html Misleading or deceptive conduct. (2011, March 24). Law Handbook - Legal Services Commission of South Australia - Handbook Home. Retrieved October 1, 2012, from http://www.lawhandbook.sa.gov.au/ch08s03s03s01.php