Updated as at 5/2/2002.

ADVERTISING AND MARKETING

1. Introduction

The internet may be used for marketing and advertising by corporations or individuals using:

(a) a website to promote products or services; or
(b) private email communications.

2. Advertising on the internet – legal issues

Generally there is no distinction between Australian laws which apply to advertising over the Internet and advertising through any other medium such as television, magazines and newspapers.

However, certain practical differences exist between the way a person reads advertising material on a website compared to hard copy such as books or magazines. Practical differences include:

* a general expectation by web users that a website is updated regularly;

* a web user may access a site indirectly and not through the home page (which may contain important disclaimers about the site);

* a website often provides an interactive interface with the consumer, with functionality ranging from facilitating end user inquiries about a product or service, to order placement or fulfilment facilities; and

* the website interface will utilise internal and external links, frames, meta tags, the location and prominence of disclaimers and content generally.

Legal issues arising from the above practical differences that internet advertisers should specifically consider include:

(a) Jurisdictional issues (section 3 below);

(b) Identifying the organisation conducting the advertising activity (section 4);

(c) Trade marks, domain names and passing off (section 5);

(d) Misleading or deceptive conduct (section 6);

(e) Infringing the intellectual property rights of a third party (section 7);

(f) Defamation (section 8);

(g) Compliance with general and industry specific laws (section 9);

(h) Compliance with industry Codes of Practice (section 10); and

(i) Compliance with privacy laws (section 11).

Procedures to help a person or company minimise the above legal risks are set out in section 12 below.

3. Jurisdiction and territory

Unlike other forms of media where the distribution territory is defined by the mode of distribution (eg physically), the Internet’s territory is basically the world. Generally, access to a site cannot be controlled by geographical location of the accessor, the location of parties accessing a web site often cannot be determined by the operator of the website and it is often not clear if material disseminated over the Internet is directed for use in a particular jurisdiction. The following examples illustrate the jurisdictional issues that may arise:

(a) Operating an on-line gaming service - signs should be placed on the website to indicate the markets from which consumers will be permitted to play in order to minimise the risk of breaching local gaming laws of the countries that the site is accessible from;

(b) Registration numbers required by law – the laws of certain countries may require advertisements for certain goods to carry registration numbers or other indications as to suitability for use. Where applicable, these numbers must be displayed on the website for the markets targeted;

(c) Identify which laws of which country may apply – different laws of different countries may apply to promotional material and advertising of products over the internet. Litigation over which law applies has been a key element in early United States litigation in relation to Internet services. Different courts come to different conclusions on the issue of which laws and jurisdiction will apply. Some non-Australian courts have held an ISP of a remote website liable under the law of the state where a person accessed the web site. Other courts require more than merely offering or accessing a web site to establish jurisdiction. The issue has not been conclusively decided.

Although to date there is no Australian case law dealing with foreign advertising via the internet in Australia, it is generally thought that a passive non-interactive website will not attract jurisdiction in Australia just because it is accessible from Australia. However, the more a website is targeted towards persons in an Australian jurisdiction, the more likely that jurisdiction of an Australian court may be asserted and invoked.

But even if jurisdiction is shown to exist, an Australian court may still chose not to hear the case if it deems that another court system is the more appropriate forum. This problem can occur not only among international traders, but even between jurisdictions within Australia. (See Fact Sheet on Jurisdiction).

4. Identification of organisation conducting marketing and advertising activities

The Corporations Act (Cth) requires the Australian Business Number (ABN) or Australian Registered Body Number (ARBN) of an Australian corporation be displayed on all public documents. A website is likely to constitute a public document for these purposes.

Businesses must also comply with State and Territory business name legislation requirements relating to the manner in which they identify themselves. E-commerce ventures often overlook their obligations under business name legislation and the Corporations Act in relation to the public use of their names when promoting their businesses.
The above disclosure rules provide a mechanism for consumers to readily identify the company they are dealing with. If consumers want to complain about certain marketing activities of the relevant company, they can identify the company by referring to an on-line database. They can then pursue one or more of the following options:

* make a complaint to the company itself and invoke its dispute resolution policy;
* make a complaint to a government authority such as the Australian Competition and Consumer Commission (ACCC) or the State Office of Fair Trading; or
* commence legal proceedings.

5. Trade marks, domain names and passing off

(a) Domain name disputes - a website is commonly used to promote products or services. If a third party is using a corporate name as their Australian website address to which you claim a better right, you may make a complaint to Internet Names Worldwide (INW) (www.ina.com.au) in relation to the .com.au domain space in Australia, the most popular domain in Australia for commercial enterprises. (See Fact Sheet on Domain Names and Fact Sheet on Trademarks, Domain Names and Passing Off ).

(b) Domain names, web sites and trade marks – a third party promoting products and services from a website may infringe the rights of a trade mark owner where:

* the domain name is similar or substantially similar to the trade mark name, or

* the trade mark is otherwise used on the website in a way that implies an association between the goods sold on the website and the owner of the trade mark.

The law of trade marks allows a person to identify their goods and services by physically applying a mark to them and prevents other people from using that mark in relation to similar goods to imply an association between those goods and the owner of the mark.

An action is likely to be successful if the trade mark owner can establish that the trade mark is used in relation to goods or services they are selling. The use of the trade mark (above) must indicate a connection between the provider of the service and the owner of the mark. Where a trade mark is used in some other manner, such as in “You can find more information at “fgh.com” (where “fgh” is the trade mark), it is unlikely to be an infringement of the trade mark.
The Fact Sheet on Trademarks, Domain Names and Passing Off sets out other situations where the use of trade marks in relation to website content or functionality may constitute trade mark infringement.

(c) Minimising legal risk – a person or organisation involved in marketing and advertising can minimise the risk of breaching trade mark and consumer protection laws (section 6 below) by regularly conducting an audit of its commercial strategy and use of trade marks, domain names, metatags, framing and image links. The audit should to determine whether the organisation is infringing a third party’s trade mark rights and consequently misleading a consumer about the origins or ownership of a particular good or service. See Fact Sheets on Consumer Protection; Misleading and Deceptive Conduct.

6. Misleading and deceptive conduct

Provided a business complies with laws governing how a business brands itself and its goods and services (section 4 and 5 above), it must then comply with laws regulating how the business promotes and markets those goods and services.

(a) Misleading and deceptive conduct generally – misleading or deceptive advertising and marketing conduct may breach the Trade Practices Act 1974 (Cth) or equivalent laws in a State or Territory (Trade Practices Laws). Such conduct may be unintentional, arise through silence or a gratuitous expression of opinion. The Trade Practices Laws apply to all corporations and to sole traders, partnerships and individuals where those individuals use telecommunications facilities, such as the Internet, in trade or commerce. In relation to a breach of the Trade Practices Laws, a court may order an advertisement to be barred, order corrective advertising and award damages to those who have suffered loss or damage.

Generally Trade Practices Laws prohibit conduct that is misleading, unfair or dishonest including:

* conduct that is misleading or deceptive or is likely to mislead or deceive;

* misrepresentations about the standard, quality, value or grade of services;

* false representations about the agreement of a particular person to acquire services;

* false representations about the sponsorship, approval, performance characteristics, accessories, uses or benefits of goods or services;

* false representations about the sponsorship, approval or affiliation of a corporation;

* false or misleading representations about the price of goods or services or the need for goods or services;

* conduct that is likely to mislead the public about the nature, characteristics, suitability or quantity of any services;

* anti-competitive conduct by traders;

* unconscionable conduct.

Subject to the exception in relation to exaggerated claims (see below), the promotional activities of e-commerce traders are likely to breach Trade Practices Laws if a representation is made to a consumer that causes, or is likely to cause, the consumer to do something that he or she would not do if the representation was not misleading. Internet advertisers are allowed a certain degree of ’puffing’ or exaggeration (or poetic licence) when promoting their products in the ordinary stuff of commerce. A representation on a website to attract the attention of a consumer is unlikely to be misleading or deceptive if the subsequent provision of further detailed information clearly renders the “attract” representation irrelevant. Exaggeration or hyperbole taken too far is likely to constitute misleading and deceptive conduct.

Promotional or marketing information accurate at the date of uploading to the Internet does not prevent it becoming misleading or deceptive as time passes. Changing circumstances may render that same information misleading and deceptive. Promotional or marketing information on the internet must be current and accurate.

See Fact Sheet on Misleading and Deceptive Conduct; Consumer Protection.

(b) Website content and functionality – the use on websites of internal and external links, frames, metatags, location and prominence of disclaimers and content generally may breach Trade Practices Laws where the website content or functionality creates a misleading and deceptive representation that a particular relationship, arrangement or approval exists between the website provider and the linked or framed third party website and the user relies on that representation to their detriment.

The Fact Sheet on Trademarks, Domain Names and Passing Off sets out situations where:

* the use of a domain name; or

* embedding metatags (including metatags using trade marks) in a website to attract search queries,

may constitute misleading and deceptive conduct.

See also Fact Sheets on Consumer Protection; Misleading and Deceptive Conduct.

(c) Bait advertising - an e-commerce business must not in trade or commerce advertise goods or services at a specified price if there are reasonable grounds for believing that the business will not be able to supply those goods or services for a reasonable period. This takes on crucial significance in the online world. Unlike sales and distribution channels in the offline world, it is extremely difficult to estimate demand for a good or service over the Internet given the global market potentially one click away from the trader.

(d) Pyramid schemes - Promoting or participating in pyramid schemes over the Internet may expose a business to criminal and civil penalties under the Trade Practices Laws. Pyramid schemes involve inducing people to make a payment to the promoter in exchange for the promise that they will receive payments for introducing further participants to the scheme either directly or through others. Saturation point is generally reached quickly and later recruits have little chance of recovering their money. Pyramid schemes may be run in conjunction with a product or service. For example, an Internet service provider may offer discounts on your Internet access fee for every member you recruit and every member that they, in turn, recruit. Pyramid schemes may appear on websites but are more commonly circulated via e-mail.

(e) Health products – promotional and marketing information in relation to health products may breach Trade Practices Laws where the information is misleading or deceptive or makes false representations in relation to:

* exaggerated or unsubstantiated claims;

* advertising requiring or suggesting self-diagnosis;

* titles and qualifications;

* certification and approval claims;

* testimonials;

* use of photographs;

* claims about price and/or cost;

* claims about time;

* disclosure of conflicts of interest.

(f) Rogue sites, misleading and deceptive conduct and passing-off – a website operator can generate revenue from allowing advertisements to be placed on a site. The decision to place advertising on a site often depends on the number of “hits” the site receives. In some cases, a rogue website operator may be able to draw consumers through a third party site on their way to a target site, increasing hits to their site and possibly decreasing the number of people reaching the target site (ultimately decreasing advertising revenue to the target site owner).

Provided the website operator of the target site is competing for the same advertising revenue in the same jurisdiction and suffers damage as a result of the rogue’s activities, the target site operator may be able to argue that the rogue site implies that it has some association or authorisation with the target site when there is none. The common law tort of passing off may be used by the target site operator to prevent the rogue from misusing the target site’s goodwill or reputation by misrepresenting that the rogue’s goods or services are those of, or related to, the target site’s goods or services.

Most passing off actions are brought in conjunction with an action for breach of the misleading and deceptive conduct provisions of the Trade Practices Laws. Where the “rogue” site makes it completely clear there is no association, no passing off or trade practices liability will arise.

See Fact Sheet on Trademarks, Domain Names and Passing Off.

(g) Minimising trade practices legal risk – a person or organisation can minimise the risk of breaching the Trade Practices Laws as follows:

(i) implementing procedures to ensure information on a website (for example, as to pricing for goods and services) is up to date and contains sufficient disclaimers and other legal warnings. Any disclaimers should be appropriately placed on the website where the attention of users is assured, including users accessing the web site at levels below the home page;

(ii) ’expiry’ metatags can be used in the code of the website in relation to time-sensitive data to warn the website operator or public of outdated information on the website; and

(iii) prices for goods and services should state the total price of products inclusive of delivery and handling charges and draw customer’s attention to any import duties or other charges that may be payable by the customer in addition to charges quoted for the product.

7. Infringing the intellectual property rights of a third party

(a) Legal risks - advertisers may use hyperlinks for selling or cross-selling and may use third party content in promoting and marketing its goods and services on the internet. The following legal risks arise:

* whether permission from the third party site is required to set up a link to that site;
* whether permission is required to use third party content on a website; and
* to what extent will a website operator be held liable as an accessory in the dissemination of “illegal” content located at the third party linked site.

(b) Linking to third party websites without permission - There is no Australia caselaw or legislation on this issue. However, decisions in the United Kingdom and the United States may prove persuasive to Australian courts.

A third party website is probably best viewed as property. As a matter of general contract law principles, a website provider should, prior to linking to a third party website, review that third party website to determine whether the third party website provider expressly prohibits linking. Where a third party website allows linking or allows linking on conditions, a website provider may link and should adhere to any relevant conditions.

(c) Using third party content on a website without consent - Generally (and particularly in the commercial context), a website provider will need the permission of the third party content provider in order to be able to include that third party’s content on its website. Most content which a website provider will likely desire to include in their website will be protected by copyright. For example, text, graphics, photographs, computer programs, music or moving images. Creatively produced material will generally be protected under the Copyright Act 1968 (Cth) upon creation, whether created in Australia or one of the many countries whose nationals are entitled to copyright protection in Australia. There is no need to register such material and, consequently, no register to search to ascertain whether the material is protected. It should be assumed that all creatively produced material is copyright protected.

The Copyright Ac does contain some exceptions to infringement of copyright, such as for fair dealing and educational licences. However, these are narrowly interpreted and generally apply only to use of copyright materials for the purpose of education, research or news reporting.

See Fact Sheets on Copyright and article on Copyright Protection of Content.

(d) Illegal content at a linked third party site – in the course of marketing or advertising activities, a website operator may link to a third party website which includes content that infringes intellectual property rights, is defamatory or otherwise illegal (obscene or offending public decency). The website operator may be liable for illegal content located at a third party linked site by virtue of the link being construed as an endorsement or republication of the third party website.

To minimise potential liability for being complicit in the dissemination of illegal material found at a linked third party site, a website operator (provided it is truly non-complicit) should create and include in the terms of use for the website an appropriate disclaimer.

8. Defamation

(a) Defamation law - generally provides redress for any statement or publication that is published and that tends to injure the reputation of another person. You can be liable for defamation even though your statement was true, not intended to cause harm, or made to only a few people (such as in a Board meeting). You do not need to have made the statement yourself to be liable – a distributor, such as the newsagent that sells a defamatory publication can also be sued. The purpose behind this is to allow the person defamed to prevent any further distribution of the defamatory statement. To be liable, a third party distributor such as a newsagent must have the requisite degree of knowledge of the defamatory statement.

(b) Defamation over the internet - the Internet provides fertile ground for the dissemination of defamatory material – which can be generated, searched, and even linked to the web site of the party being defamed. Transmission on the Internet is undoubtedly “publication”, although it is arguable that publication could be in issue if there was no actual evidence that no-one had accessed the communication.

Jurisdictional issues are also raised in Internet defamation cases. If a New Zealander is defamed in an Australian based web site, accessed in New Zealand, where is the publication? If the publication is in virtually every country in the world, then it may be possible to sue in the jurisdiction with the most favourable laws.

Under Australian law, where defamatory material is part of a web site, the position of the content provider and the service provider need to be separately analysed. The party responsible for the web site would almost certainly be seen as publishing the defamation and as having knowledge of it. For the service provider, the defence of innocent dissemination may be available if it did not know and had no grounds of knowing (acting reasonably) about the defamatory material. See Fact Sheet on Defamation and article on ISP Liability.

9. Compliance with general and industry specific laws

Certain industries are subject to specific advertising restrictions. Generally these restrictions will apply to internet advertising. Advertising of tobacco products, pharmaceuticals, alcohol, gambling and lotteries, certain professional services and a variety of other goods and services attract similar prohibitions and restrictions over the Internet as they do in the offline world.

Due to the Federal nature of the Australian legal system and the often contradictory nature of the legislation, it may not be possible for advertisers in some industries to advertise at all because compliance with one State’s requirements necessarily places the advertiser in breach of another State’s requirements. An online business advertising for sale, or supply, of products subject to regulation will need to qualify the places in which the offer to supply products may be accepted to avoid breaching the law of a jurisdiction where that advertising or supply is prohibited.

While it is beyond the scope of this article to comprehensively list all such restrictions, the following are included by way of example:

(a) Securities dealing or investment advice business - generally the Corporations Act prohibits the carrying out of such businesses without the appropriate licence. Such licences are currently granted by the Australian Securities and Investment Commission (ASIC), which is charged with monitoring compliance with and enforcing the Corporations Act. Laws govern putting securities information on the Internet including in relation to issuing a prospectus and giving investment advice. See Fact Sheet on Corporations and Securities Law;

(b) Advertisement and sale of financial services - over the Internet is regulated in Australia as it is for any advertisement and sale of financial services by means of other medium. Misleading and deceptive conduct in relation to ’financial services’ (which includes securities) is prohibited under the Australian Securities and Investments Commission Act 1989 (Cth);

(c) Pharmaceuticals - an e-business supplying prescription medicines directly to the Australian public will need to be licensed and if the supply is made without a prescription, it will be in breach of the laws that prohibit such sales; and

(d) Consumer credit - the national scheme of Consumer Credit Codes regulates the advertising of deals involving credit arrangements. Under these Codes, it is an offence to publish an advertisement that does not comply with Code advertising rules. These rules touch on matters such as advertising referring to the cost of credit containing annual percentage rates and, if any fees are payable, a statement to that effect. Penalties and damages apply for breach of the Codes. See Fact Sheet on Consumer Protection.

10. Compliance with industry Codes of Practice

Many industry bodies (such as the Internet Industries Association (IIA) and the Australian Direct Marketing Association (ADMA)) have moved to implement codes to regulate the behaviour of their members, including advertising and marketing conduct. Generally, these codes do not have the force of law. Examples include:

* Banking Industry Codes of Practice;
* ADMA Code of Practice and ADMA Online Marketing Guidelines;
* IIA Codes of Practice and Code of Conduct;
* Electricity Marketing Code of Conduct;
* Gas Marketing Code of Conduct;
* Electronic Funds Transfer Code of Conduct (http://www.asic.gov.au) - a non-legislative code supported by industry and government. Originally applied to transactions by user via plastic card and PIN but recently expanded to cover Internet banking, smart cards and telephone banking; and
* Smart Card Industry Code of Conduct - prepared by the Asia Pacific Smart Card Forum.

A code may obtain the force of law by being prescribed by statute as applying to certain organisations or industries. For example, the IIA Codes of Practice apply to ISPs and content hosts. The Codes are not mandatory, but once the Australian Broadcasting Authority directs an ISP or content host to comply with a registered code, they must do so by law. See Fact Sheet on Online Content Regulation.

Certain codes can obtain the force of law is by being prescribed as mandatory under the Trade Practices Laws. Currently, no codes focusing on consumer protection in e-commerce have been prescribed under this law.

A code may have the force of law if a business represents to a consumer that it abides by a code or certain provisions of a code and that representation turns out to be false after the consumer relies on it to their detriment. Such conduct is likely to breach the Trade Practices Laws.

The Commonwealth Treasury has attempted to address some deficiencies in commercial conduct over the Internet by releasing Building Consumer Sovereignty in Electronic Commerce: A best practice model for business.

The Best Practice Model covers issues such as marketing, identification of the business, provision of clear contractual terms, privacy, authentication and dispute resolution. The Commonwealth Government intended the model to be adopted by industry associations as part of existing codes of conduct and by individual businesses. See article on Best Practice Model.

11. Compliance with privacy laws protecting personal information

Australian privacy law significantly impacts on the ability of certain corporations and public sector organisations to collect, store and use personal information of individuals. Personal information is any information from which an individual’s identity is apparent or reasonably ascertainable.

Australian privacy laws will impact on the advertising and marketing activities of a website if those activities are connected with the collection, storage and use of personal information.

See Fact Sheet on Privacy.

Overseas privacy laws may also apply. Several of the codes mentioned above include privacy protection provisions in relation to code subscribers who provide goods and services marketed over the net (eg ADMA Code).

The sale of personal information about website users, such as their viewing profiles is subject to greater restrictions under the privacy laws. If a sale is contrary to representations made to customers by the operator, breaches of trade practices laws or customer contracts may arise. Profiling customers in order to target advertising on a website is restricted by privacy laws. Genera

Other relevant Fact Sheets:
Advertising and Marketing

Sources of Law

End Notes