Liability appeal will have echoes in NZ

By IRENE CHAPPLE

An appeal court case being taken by Australia's consumer watchdog against a ruling favouring Saatchi & Saatchi Australia could have repercussions for the New Zealand advertising industry.

The Australian Competition and Consumer Commission is contesting a Federal Court ruling that cleared Saatchi & Saatchi from responsibility in the development of a misleading advertisement.

The court found that Saatchi & Saatchi was not primarily liable for misleading and deceptive advertising done for client NRMA Health.

The advertising suggested it would cost a pregnant woman nothing to have her baby if she were insured with NRMA Health.

Saatchi & Saatchi argued it was not liable because it had followed its client's advice that the advertising was acceptable.

The Federal Court found the agency had "prepared the bullet" but it was NRMA that fired it.

Saatchi & Saatchi structured its role so that, at each stage, it went back to its client and left NRMA to make the final decision of going ahead with publication.

Commissioner Sitesh Bhojani said the appeal was based on an allegation that the advertising agency was liable as a principal, as it had social responsibilities beyond what its client told it to do.

The commission has twice succeeded in prosecuting agencies for being "knowingly concerned" with misleading advertising.

Bhojani said the NRMA appeal, if successful, would give the commission another arm to challenge an agency's role in advertising.

It would broaden potential liability and mean agencies could be found to be a primary contravener of the law, as well as accessories to contravention.

"If there is an advertisement out there that says the product will save you from cancer," said Bhojani, "why shouldn't [the advertising agency] be directly responsible?"

Advertising and media lawyer John Swan of Wellington firm Gilbert Swan said the decision would set a precedent for New Zealand because the two countries operated under similar legislation.

In New Zealand, cases are taken against an agency either by the Commerce Commission or by a member of the public.

Commerce Commission spokeswoman Jackie Maitland said it was interested in the case but the implications were unknown because of the different jurisdictions.

However, Swan said the case would be very significant if the appeal was successful.

He said he advised his agency clients to get sign-off and approval on the content of advertising, and he believed Saatchi & Saatchi's actions in this case were responsible.

However, if the appeal succeeded, having advertising that was signed off by a client would not be enough to escape primary liability.

The appeal will be heard by Australia's full Federal Court between February 10 and March 7.