October 2019

Star Power: does your product really have ‘star quality’ or is it just misleading or deceptive?

The saying ‘customer is king’ is even more relevant today than it has ever been. Consumers are demanding better products, be it healthier, organic, natural, preservative free, sugar free, vegan, recyclable, child friendly, pet friendly, energy saving, water saving, not tested on animals, premium quality … and the list goes on!

Particularly, in the world of fast moving consumer goods (FMCG) where products are often inter-changeable, consumers are demanding that the information provided to them on the packaging, labelling and in the advertising of products or services be presented in a more uniform way - to make the comparison and buying decision easier.

While the use of star ratings or review rankings may not be expressly legislated by the Australian Consumer Law, using these inaccurately can amount to misleading or deceptive conduct landing manufacturers and distributors in hot water with the Australian Competition and Consumer Commission (ACCC) and even their consumers. 

The what, why and how – Star Ratings and Rankings

The use of star ratings and other ranking systems is a common way to graphically represent the quality of a product or service. Studies on consumer buying behaviour show that the higher the star rating, the more likely a consumer is to buy that product. 

In some industries, providing stars on packaging and labelling of products can have a particular meaning, including:

  • Health stars on food products help consumers to quickly and easily compare the nutritional value of similar products.

  • Star ratings on white goods and appliances refer to energy efficiency of the appliance or its water consumption.

  • Star ratings in relation to accommodation are an internationally recognised symbol for quality and condition of the accommodation as well as the amenities to be expected.

  • ANCAP and other similar car safety rating tools assist consumers to determine the safety of motor vehicles.

  • When used online and on mobile Apps, star ratings can indicate aggregate rating by users of a product or service based on reviews. 

The use of star ratings on packaging or advertising can therefore be a quick and easy way for manufacturers and distributors to help consumers with comparing products and deciding which products to buy. It also means that star ratings and imagery are powerful and have the ability to influence consumer decision-making. Manufacturers and distributors may find themselves in hot water if they incorrectly use star ratings or rankings where there is no basis for including those star ratings. 

The Australian Consumer Law

Under the Australian Consumer Law, it is an offence to make representations to consumers that are either false, misleading or deceptive or that are likely to mislead or deceive[1]. Including star imagery on product packaging, labelling or in advertising could mislead or deceive consumers into thinking that the product:

  • Meets a certain standard, as determined by a governmental or an industry body.

  • Has been reviewed and vetted by consumers.

  • Is of a higher quality than its competitors.

Where this is not the case, not only may significant penalties apply, but significant reputational damage may follow. Some recent examples where the use of star imagery could be considered false, misleading or deceptive include:

  • In 2018, Nestle found itself in hot milk when it fudged a health star rating on its well loved Milo product. Nestle based its health star rating on consumers drinking Milo with a glass of skim milk. This took the product from a nutrition star rating of 1.5 when used with full cream milk to a 4.5, out of 5. Misleading much? Public outcry from consumers and health groups forced Nestle to ultimately withdraw their star rating.

  • In 2017, a well known property services provider attempted to influence its star ratings when it engaged in a star rating masking scheme. It would deliberately manipulate ratings in order to receive a higher ranking as compared to its competitors. It did this by masking email addresses, preventing guests it suspected would give negative reviews from receiving TripAdvisor’s ‘Review Express’ prompt email. The property services provider was ordered to pay penalties of $3 million for manipulating these reviews in breach of the Australian Consumer Law.

The penalties which apply for misleading or deceptive conduct in breach of the Australian Consumer Law were increased at the end of last year. To better understand the penalties that will apply for such conduct, see our article New ACL Penalties: no longer just the cost of doing business. 

What not to do

  • Don’t advertise your product or service as meeting a specific industry standard or measure if it doesn’t.

  • Don’t promote or rely only on positive or fake consumer feedback.

  • Don’t offer incentives for consumers who leave good ratings.

  • Don’t use stars in your advertising or promotional materials unless there is a industry benchmark to refer to.

What you should do

  • If you offer incentives for consumers to leave reviews:

    • Make it clear that the incentive will be provided whether the review is positive or negative.

    • Make it clear to consumers who read the reviews that an incentive was provided.

  • If star ratings are given – let the consumer know how many reviews or ratings have been posted (eg 4 stars, 6 reviews).

  • Make sure any star quality claims you make can be substantiated if the Australian Competition and Consumer Commission comes knocking.

This article is part one of a three part series focusing on the packaging, labelling and advertising of Fast Moving Consumer Goods. The series will look at practices that are not expressly prohibited by the Australian Consumer Law but commonly found to be in breach of the law by the courts.

If you are concerned your products may be misleading or you require some further guidance in this complex area, please give our Corporate & Commercial team a call.

[1] See Sections 18 and 29 of Schedule 2 to the Competition and Consumer Act 2010 (Cth)

 

Authors: Michael Cossetto and Sam Harmer