"Dishonesty in advertising has proved very unprofitable."
Leo Burnett, an American advertising executive
Several Uzbek companies were fined for advertisements that allegedly mislead consumers, violating the law on advertising in July 2024, according to the Committee for the Development of Competition and Protection of Consumer Rights of Uzbekistan. The list includes major names such as retail chain Anglesey Food (known as Korzinka), banks such as Ipoteka, AVO, and Orient Finans, and the clothing boutique Kingsman. What consequences could companies face for engaging in trade puff by misleadingly promoting their products? Before delving into the potential repercussions for these businesses, it is crucial to distinguish between an outright deceptive advertisement and one that clouds judgment through its contextual presentation.
While the terms "false" and "deceptive" are often used interchangeably in consumer protection cases, there is a difference between them. False advertising occurs when a company makes a statement about its products or services that is outright false, whether in an advertisement or on a label.
In contrast, deceptive advertising involves statements that may be technically accurate but are presented in a way that could create a false impression for a reasonable consumer. Therefore, context is everything, as these ads can convey messages that, though not entirely false, can still lead consumers to incorrect conclusions.
A recent example involves Anglesey Food (Korzinka), a well-known retail chain in Uzbekistan. On July 15, the Committee's investigation found that Korzinka's advertising used phrases such as "The cheapest price for daily purchases," "The cheapest price is in Korzinka," and "Come to the most productive one!" These claims, though seemingly straightforward, had the potential to mislead consumers about the actual pricing of products at Korzinka.
The investigation revealed that the campaign featured a catalogue of daily necessities, with prices compared to similar products in other supermarkets and farmers' markets. However, this comparison was made using the total price of the basket rather than individual product prices. The analysis revealed that the advertised prices were not consistently lower compared to those in other supermarkets and farmers' markets. The Committee determined that the use of "cheapest" was misleading, as it suggested a level of pricing advantage that was not present.
The case was initiated due to violations of Article 16 of the law on advertising and Article 6 of the law on protection of consumer rights. Despite having the right to appeal this decision, Anglesey Food has yet to take action.
In contrast, the case involving Rubikon Wireless Communication (well-known as Perfectum) dealt with the use of the term "first" in their "First Network" tariff plan advertisement. The Committee initially flagged the term as potentially misleading, suggesting it implied Rubikon was the leading mobile operator. However, the Economic Court of Tashkent and the Higher Economic Court ruled that "first" referred specifically to the tariff plan rather than the company’s overall position in the market. The courts concluded that the term did not falsely elevate the company above its competitors.
These cases highlight the Committee’s meticulous approach to regulating advertising practices. Korzinka's use of "cheapest" was found to be misleading because it implied a pricing advantage that was not substantiated by actual comparisons. Conversely, Rubikon’s use of "first" was deemed acceptable as it pertained to the specific service offered rather than suggesting overall superiority. These examples demonstrate the importance of context in advertising claims and the need for precise language to avoid misleading consumers.
Unfortunately, in these cases, the financial penalty is not the sole repercussion for the companies involved. Here are the potential consequences that the involved parties might face:
1. Legal penalties: Companies that engage in false or deceptive advertising can face legal repercussions. Regulatory bodies may impose fines for violating advertising laws. These fines can be substantial and impact a company’s financial health.
2. Reputational damage: Misleading advertisements erode consumer trust. When consumers discover that a company’s claims are false or deceptive, it harms the company’s reputation. Negative publicity can lead to decreased sales and long-term damage to the brand image.
73% of consumers say that they feel unfavourably toward brands that have been associated with misinformation
3. Consumer backlash: Consumers are increasingly vocal on social media platforms. Brands associated with misinformation or misleading ads may face backlash from consumers. This negative sentiment can affect the company’s online presence and customer loyalty.
4. Loss of sales and revenue: Misleading claims can deter potential customers from purchasing products or services. Reduced sales directly impact a company’s revenue. If consumers feel deceived, they may choose competitors’ offerings instead.
65% of consumers report that they are unlikely to purchase a product or service from a brand that advertises near misinformation
5. Legal proceedings and lawsuits: Aggrieved consumers or competitors may take legal action against the company. Lawsuits related to false advertising can be costly and time-consuming. Legal battles divert resources and create additional challenges for the company.
6. Corrective measures: Companies found guilty of misleading advertising may be required to issue public corrections or retractions. Corrective advertising campaigns can be expensive and may not fully repair the damage caused by the initial misleading claims.
The implications of these regulatory changes became evident in recent cases involving several major financial institutions in Uzbekistan. Ipoteka Bank, for instance, found itself under scrutiny for an Instagram advertisement promoting its "Super" deposit. The ad highlighted an attractive interest rate of 26% for the first three months but failed to disclose that this rate would drop to 14% for cash desk deposits in the subsequent three months. Additionally, the ad neglected to clarify that the rate for online deposits would be calculated as an average of 26.09% and 14%. This omission was deemed misleading, as it could easily misinform consumers about the true terms of the deposit. After a thorough investigation, a special committee ruled the advertisement to be false, resulting in an undisclosed fine for Ipoteka Bank. The bank retains the right to appeal the decision, either through the appeals council or by seeking legal redress.
Similarly, AVO Bank faced legal repercussions for misleading advertising related to its bonus program. The bank's advertisement promised "UZS 250,000 ($20) for every new client," but in reality, this amount was offered as bonus points within the AVO Bank app, not as direct cash. This misrepresentation led to confusion among consumers, who had to meet certain conditions to receive the bonus points. Additionally, the bank's promotion of a "zero rate" on AVO Platinum credit cards lacked transparency, with the actual terms not being clearly explained. Both cases underscore the importance of transparency and accuracy in advertising, particularly within the financial sector, where consumer trust is paramount.
Follow Daryo's official Instagram and Twitter pages to keep current on world news.
Comments (0)