In deception we trust

Cutthroat corporate competition has put a high premium on aggressive marketing for selling goods and services. While an enterprise is entitled to persuade potential customers that its products offers the best value for their money, that persuasion should be based on facts rather than deception, information rather than disinformation. In short, the businesses should desist from taking the customer for a ride through deceptive marketing practices.

In Pakistan, deceptive marketing practices are prohibited by the Competition Ordinance, 2009. Section 10 of the ordinance states: “No undertaking shall enter into deceptive marketing practices.” Such practices are defined in a comprehensive way to cover either of the following: (a) false or misleading information, which may harm the business interest of another enterprise; (b) false or misleading information to consumers, including information that lacks reasonable basis, relating to price, character, method, place of production, properties, suitability for use, or quality of goods; (c) false or misleading comparison of goods in advertising; and (d) fraudulent use of another business’s trademark, firm name, product labelling or packaging.

Such provisions are aimed at ensuring that the consumer’s decision to buy a product is based on sufficient information regarding its actual price and benefits. The Competition Commission of Pakistan (CCP) is entrusted with enforcing competition among businesses as well as fair trading practices, which includes curbing deceptive marketing practices.

Legal remedies notwithstanding, deceptive marketing practices – particularly misleading advertising – are a common phenomenon in Pakistan. Businesses resort to aggressive marketing in order to jack up their sales and lure customers away from their competitors. All else equal, the more aggressive the marketing in an industry, the greater are the chances that the firms will resort to deceptive marketing that distorts, misrepresents, or conceals facts. The purpose is to entice potential customers into buying or subscribing to a product, or doing so in such quantity, number or frequency, which they will not do otherwise. Here are some examples:

Every media house claims that in terms of credibility it surpasses its competitors. This gives rise to the question: on which basis is such a claim made? Is there an organisation in Pakistan that awards a certificate of credibility regarding this? Does the claim in question rest on a survey of readers or viewers? If such a survey was conducted, who was the surveyor and how was the sample selected? Questions such as these are seldom answered but businesses still persist in presenting themselves as the most credible in the industry.

In the past, evening newspapers would resort to creating hype and sensationalism in order to increase the size of their readership. For instance, a newspaper would carry the headline, ‘The stock market crashed’ in very large fonts – followed by a question mark in extremely small print. Such a misleading display was enough to lure a curious commuter at a traffic signal, where such newspapers were generally sold, into buying a copy of the paper.

The rise of 24/7 news channels has sounded the death knell of eveningers. These channels indulge in sensationalism on a level that newspapers could only dream of. ‘Breaking News’, which in the good old times was used to report an extraordinary event, has been used with so much frequency that we are left wondering whether there is any news item that does not fall into that category. In this way, the very notion of ‘breaking news’ has been turned on its head by news channels. 

The last one decade has seen tremendous growth in the number of mobile-phone subscribers. To tap the growth, many cellular service providers entered the market. Faced with stiff price competition, these cellular service providers have come up with various ‘inexpensive’ packages and are using aggressive advertising to sell them. However, in many cases, the advertisements do not clearly inform the customers about the caveats attached with these packages. For instance, one cellular service provider claimed to offer the world’s cheapest call. While the accuracy of the claim itself is questionable, it is not clear whether the call is the world’s cheapest in terms of being local, national, or international, from network-to-network or to all networks.

Cellular service providers have also come up with ‘cheap’ minute per call rates. However, the advertisements either do not mention at all, or mention in small print, that the next minute starts after every 30 or 45 seconds. Besides, hidden charges, such as call connecting charges and taxes are not clearly specified. In the past, the CCP had reprimanded cellular companies for indulging in deceptive marketing. One company’s package lacked a reasonable basis as to both price and character of the offer. It was not clearly mentioned whether call rates were inclusive or exclusive of taxes. The duration of the call was not specified either.

Banks and other financial institutions, while encouraging consumers to open savings accounts, do not adequately disclose certain crucial facts – such as whether the promised interest is simple or compound, whether the interest rate varies with payment period (monthly, six-monthly or annual) and whether there are any compulsory deductions, such as wealth tax, from the promised payment. Even where important information is provided, it is carried in small print.

Marketing of products related to beauty and health/fitness industries is in many cases based on false or misleading information. Potential customers are made to believe that the product being offered, and endorsed by some celebrity, can do wonders in reducing weight, accelerating hair growth or getting a fair complexion. In many cases, consumers are not warned against the possible harmful effects of using a product.

Sometimes, a product claims to provide a cure for a number of health and beauty related problems. The manufacturers of one cream, for instance, claimed that it had multiple uses or advantages ranging from fair complexion to healing of wounds and burns to even treatment of cancer. The basis on which they make such a bold claim remains shrouded in mystery.

In several industries, producers claim their brand to be No 1 without specifying what research leads to such claim. Obviously, a brand is No 1 if it has the largest share in the market. But the word ‘market’ is vague. For it can be a local, regional, national or international market. A brand can be No 1 regionally but not nationally.

Deceptive marketing practices are partly a question of business ethics and partly a question of government regulation of the commercial activity. Do the businesses owe any responsibility to society in general and their customers in particular? Or are they responsible only to their shareholders and concerned primarily with maximising profits by any means?

One view is that businesses’ responsibility is only to themselves and that corporate social responsibility is a meaningless term. If this view is accepted, then ‘deceptive’ marketing practices become legitimate though they main remain illegal depending upon the legal framework. However, such a view is not widely accepted because businesses, being part of society, owe responsibility to it. At least they owe responsibility to their customers – both potential and existing.

Corporate social responsibility has to be supplemented with government regulation. Since the onset of the 2007-08 global financial turmoil, few economists now believe in a laissez faire economy, where the government keeps its hands off business activity. Instead, it is almost universally believed that the government has to play an important role in ensuring competition and fair business practices. Economic liberalisation does not mean simply giving carte blanche to businesses.

The writer is a freelance countributor.

Email: hussainhzaidi@gmail.com