On advertisements and the truth

Kudos to kitchen tigress for teaching local bank, OCBC, a lesson on misleading advertisements!

Briefly: OCBC had been advertising that it surprises its customers with birthday cakes on their birthdays. On her birthday, kitchen tigress went to OCBC to claim her birthday cake, but was told by staff that it was just an advertisement and they don’t give birthday cakes to customers. This didn’t faze kitchen tigress one bit, and after sticking to her guns, an OCBC supervisor eventually relented and bought her a cake.

For too long, advertisers in Singapore have gotten away with feeding misleading advertisements and outright lies to consumers. This should stop. Here, OCBC advertised and gave the expectation that its customers would be surprised with birthday cakes – this didn’t happen for kitchen tigress. As for other misleading and possibly even false advertisements, these include weight loss services by slimming centres, hair growth products and services, and of course, financial products that are supposed to be “safe” (we all know the recent famous example which needs no introduction).

Companies should learn to tell the truth when advertising their products and services. If you can’t be truthful, then you shouldn’t be allowed to peddle your wares.

Do we have laws in Singapore regarding false and misleading advertisements? To some extent, we do. For example:

• There is the Misrepresentation Act, where if a person enters into a contract under a misrepresentation, then that person is entitled to cancel the contract, and possibly claim for losses suffered.



• There is the Consumer Protection (Fair Trading) Act, where it is prohibited for a supplier to (a) cause a consumer to be deceived or misled, (b) make a false claim, or (c) take advantage of a consumer.
  
  Examples of such behaviour include (i) representing that goods or services have performance characteristics or benefits that they do not have (weight loss or hair growth products and services may fall into these category), and (ii) offering gifts, prizes or other free items in connection with the supply of goods or services if the supplier knows that these items will not be provided (OCBC’s free birthday cake may fall into this category).



• There is also an interesting concept in law, where if someone advertises that he would do something in return for your action (say for example, give you a surprise birthday cake if you sign up as a bank customer), and you actually do it, then it is a binding contract in law and that someone has to fulfil his promise!
  
  A famous case which happened in England in 1892 was the “Carlill vs. Carbolic Smoke Ball Company” case, where a certain Carbolic Smoke Ball Company advertised that its “smoke ball” would cure flu, and if it did not, buyers would receive £100. Ms Carlill tried the smoke ball, which failed to cure her flu. When Carbolic denied giving her the £100, saying that it was only an advertisement gimmick and not to be taken seriously, Ms Carlill sued Carbolic and successfully got her £100.

Now, the abovementioned laws are not very effective, because they do not make it an offence for companies to advertise in a false or misleading manner. These laws only help consumers who are willing to go to court to seek redress. However, hardly anyone would bother going to court to seek redress – it’s troublesome and usually not worth the while because most people would not have spent very much anyway on the actual good or service.

So what can the government do to properly protect consumers in Singapore? Easy, pass a law that bans and makes it an offence to have false or misleading advertisements. This way, the onus is on companies and advertisers to be mindful of their responsibility to the public.

For completeness, it should be mentioned that a few items, such as medicines, have statutory regulations making it an offence for persons or companies to advertise them in a false or misleading manner in Singapore. But for most products and services in general, there are no such laws, and it’s about time something is done.

The objective here is not stifle creativity in advertising. For example, a tagline such as “Red Bull gives you wings”, while it is a cute tagline, the Red Bull beverage of course doesn’t give its drinkers any wings, and no reasonable person would expect it to do so, so there’s no harm (just a note here: in the opinion of this author, companies can come up with great taglines which are genuine, such as “HSBC – the world’s local bank”. Now that’s something which HSBC can try to deliver to its customers). But if a company advertises something that is humanly possible (such as a birthday cake surprise for its customers), then it should jolly well carry out its promise.

On the closure of hotel spas

Two spa businesses suffered sudden closures in Singapore recently, leaving their customers stranded with useless packages that have already been expensively paid for. These two businesses, Wellness Village Spa and Simply Spa International, operated outlets in good, well-known hotels, being the Pan Pacific Hotel and the Parkroyal Hotel respectively.

The aggrieved customers are now fighting to get their money back through the aid of the Consumers Association of Singapore and the Small Claims Tribunal, although it is not certain that these spa businesses even have any money left to refund their customers.

What can be done to prevent such incidents from happening again in future?

One suggestion has been made regarding chargeback schemes for credit card users, where consumers can reverse a credit card transaction if they do not receive goods or services that have been purchased from merchants.

But it seems to this author, that hotels should also play an important role in preventing such incidents. After all, any business (including spa businesses) which sets up shop in a good hotel will be relying on the name, goodwill and reputation of the hotel to attract customers. Most customers do not associate shady, fly-by-night businesses with shops that are found in a good hotel. Moreover, hotels have a vested interest in preventing such incidents from happening, because if hotel shops falter and leave customers in the lurch, they will also tarnish the name of the hotel.

There is, in fact, something that the hotels can do. And that is to require the businesses which set up shop in the hotels to maintain a certain minimum capital in their companies. In a way, the capital can serve as an assurance that the company will be able to meet its debts and obligations as and when they fall due. If this had been done in the case of Wellness Village Spa and Simply Spa International, the affected customers may have some assurance that there is money in the companies from which to get their refunds.

Now this is not a new idea, and there are some shopping malls in Singapore that require their shop tenants to maintain adequate capital, so as to protect the mall landlords as well as the customers.

If a business cannot afford to maintain an adequate capital, then the hotel should not bother with allowing such business to run in the hotel. As seen from the case of the two failed spa businesses, there is just too much risk in allowing one dollar companies to operate one day and disappear the next, leaving hundreds of customers stranded.

On EPL and fair competitive practices

Earlier this month, SingTel snatched from StarHub the exclusive right to broadcast the English Premier League (“EPL”) matches in Singapore for the next three years. It did this by significantly outbidding the incumbent StarHub for the right.

EPL fans in Singapore quickly raised concerns as to whether the costs of watching EPL match telecasts would increase (such as, whether there will be additional costs in subscribing to a new provider, whether there will be additional costs in obtaining a new set-top box, and whether the pay-tv costs of subscribing for an EPL channel would go up in order for SingTel to recoup its bid cost). Several opinions were ventured on whether the government should step in to control pay-tv prices in this respect, and not a few expressed scepticism regarding SingTel’s assurances that the prices would not go higher than what subscribers are currently paying for EPL match telecasts via StarHub.

Objectively, EPL match telecasts are considered a luxury good rather than an essential need. Matters concerning the supply of such non-essential goods should generally be left to a free market to determine, and the government should not be unnecessarily concerned.

However, where an issue of unfair competition or abuse of monopoly power arises, the government should intervene to protect consumer interests (even for non-essential goods) as a matter of public policy. In this regard, the Competition Commission of Singapore (“CSS”) has been charged to ensure fair competitive practices in the Singapore markets and to safeguard consumer interests, in accordance with the Competition Act.

In the present EPL case, some competition issues which may merit consideration are:

• If there are no meaningful substitute products for EPL matches, is it fair to allow multiple companies to bid for a single, exclusive distribution right to broadcast EPL matches?


• If a person places an extraordinary bid to win exclusive EPL broadcast rights, and then subsequently uses its monopoly position to increase subscription prices in order to recoup its high bid cost and make profits, would such conduct amount to anti-competitive practices and an abuse of its monopoly power?

Incredibly, the government has prohibited the CCS from reviewing competition issues in the media sector, and hence the CCS cannot investigate any potential anti-competitive practices or monopoly abuses involving SingTel’s bid for the EPL match telecasts.

Why is there such a blanket prohibition, and is it justified? It may be conjectured that the original purpose behind the prohibition was to allow telcos, which are entrusted with the operation of services of general economic interest (i.e. services which are different from ordinary services in that public authorities consider they should be provided in all cases, whether or not there is sufficient economic incentive for the private sector to do so), to perform the task entrusted to them in economically unacceptable conditions.

However, can pay-tv (a luxury good) genuinely be considered as a service of general economic interest? Moreover, do pay-tv service providers indeed operate in economically unacceptable conditions in Singapore? The answers to these questions are likely, no. Given that the telcos in Singapore have long since been successfully privatised and ceased to be statutory boards, there does not seem to be any good reason as to why the CCS should not be given jurisdiction over the telcos (just as with any other company in Singapore) to prevent unfair competition and the abuse of dominant power. Conversely, it would likely be for the greater good of Singapore if the government were to rectify the laws to allow the CCS to look into competition issues in the media sector.