High Court coy about overruling ASA’s expertise

‍In a claim for judicial review, the High Court has upheld a decision by the Advertising Standards Authority that an advert claiming a long and continuous trading history was misleading.  The court found that to claim a continuous trading history in adverts denoted financial stability and was misleading on the facts, since the history of the business included several liquidations and numerous name changes.  According to the court, the ASA had made a reasonable decision in light of reasonable Committee of Advertising Practice guidelines.  The judgment is a reminder of the supervisory role of the court in this context and the court’s continuing reluctance to interfere with decisions of specialist bodies like the ASA.     

Background

The claimant, Coys of Kensington, bought and sold classic motorcars.  The ASA received a complaint from a Mr Edwards that two adverts placed by Coys in a magazine breached the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (known as the CAP Code).  Mr Edwards had been involved unsuccessfully in litigation against Coys.  Coys had placed an advert in Classic & Sports Car Magazine, which contained the words “The Showrooms – Since 1919” and “Coys founded 1919”.  The advert continued: “Coys showrooms have been synonymous with fine and elegant motor cars since the company first opened in 1919.”  A second advert in the same magazine was for an auction event.  It was headed “Coys Auction Spring Classics” and stated in the bottom right-hand corner “Coys – Founded 1919 London”.  Mr Edwards complained that the adverts were misleading because he believed that Coys had only been incorporated in January 2003 and had not begun trading until 2004.

The ASA investigated the complaint and upheld it in a final adjudication communicated to Coys on 14 September 2010.  The ASA found that the words “since 1919” and “Founded 1919” were “likely to be read as providing assurance to potential clients and customers that Coys had a long trading history, denoting financial stability and inherited goodwill and expertise”.  It noted that a business founded by William Coy had started in 1919, but that the classic car sales business had not started until the 1940s.  It also noted that the history of the business included several liquidations and numerous name changes.  The adverts therefore breached CAP Code rules 3.1 (Substantiation) and 7.1 (Truthfulness). 

Coys sought a judicial review of the ASA’s adjudication, as it was out of time to appeal the ASA decision.  While accepting that the ASA had followed CAP guidance and that the adverts could denote inherited goodwill and expertise, Coys argued that the ASA had made an irrational decision.  In particular, Coys challenged the ASA’s use of the words “denoting financial stability” in its adjudication, arguing that no reasonable authority could reasonably conclude that the words “Since 1919” and “Founded 1919” could bear that meaning.  The ASA argued that its decision was within the range of reasonable responses open to a reasonable advertising standards authority.

Decision

Mrs Justice Thirlwall referred to the relevant CAP guidance on adverts claiming business establishment since a certain date (Types of claims: “Established since …”, 30 July 2010), which reflects the Consumer Protection from Unfair Trading Regulations 2008.   In doing so, she found that there was “nothing irrational about this guidance at all”, since the guidance came from the industry, which well understood the purpose and the effect of such adverts.  The court accepted that some people would read the words “Since 1919” and “Founded 1919” as meaning that a business was started then, and that a business (but not necessarily the same one) had continued using the same name ever since.  It could not, however, sensibly be asserted that no reasonable consumer could read it as meaning that here was a long-established, financially stable business.  Further, the ASA was a specialist body whose “experience and expertise should not be underestimated”, and the court’s role was merely supervisory. 

The court was referred to R v ASA ex parte The International Fund for Animal Welfare[2], in which Dyson J had considered the content of an advert where comments were directed at the chairman of Tesco’s supermarkets.  Dyson J said that specialist skills of the ASA should not be underestimated, and that applicants must satisfy the court that: “… the decisions that are challenged were unreasonable in the sense that they were beyond the range of responses open to a reasonable decision-maker.  This remains a high hurdle to surmount, even where the subject matter of the decision is not remote from ordinary judicial experience.”      

Effectively, the issue for Thirlwall J was whether no reasonable authority could have concluded that the words “Since 1919” and “Founded in 1919” were in their proper context likely to provide reassurance to potential customers that Coys had a long trading history which denoted financial stability.  In other words, the court had to decide whether the ASA had acted in a way that was irrational when considering the complaint.

The judge ruled that, taking the ASA’s experience and expertise into account, it was plainly open to it to conclude that, in the context of classic car adverts, the words “Since 1919” and “Founded 1919” were likely to mislead potential customers by suggesting that Coys had a long trading history, which itself suggested financial stability.  Accordingly, the claim for judicial review failed. 

CAP guidance

The CAP Code specifically states at rule 3.7 that: “Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.”  The combination of the ASA’s adjudication in Coys and the decision in the judicial review indicate a strict application of this guidance.  The Coys ruling follows the ASA’s adjudication against another advertiser that could not demonstrate an uninterrupted and stable trading history (Barry Allsuch and Co LLP, 21 May 2008) and, when read with related CAP guidance, sets high standards for this type of claim. 

The relevant CAP guidance specifically cites the ASA adjudication in Minster Windows Ltd (16 January 2008), in which two complainants had questioned the claim “10,000 satisfied customers can’t be wrong” because they believed the company had been trading only for a year or so and could not have had so many satisfied customers.  The ASA had found that, because it was unable to show it had taken on the debts and liabilities of the previous company (whose customer numbers it had taken into account), the advertiser was unfairly trading on the reputation and trading history of an earlier incarnation of the same company.  These were the CAP guidelines that the judge in Coys found to be rational, and that helped to persuade the judge that the ASA was wholly entitled to make the findings that it did.

Practical implications for traders

If, therefore, a business wishes to claim a long trading history, it must be able to substantiate that its business has been financially stable or, at the very least, has not undergone a series of liquidations – especially in industries or sectors where there may be a reputation for frequent business failures.

If the business can demonstrate a period of continuing trade, it should be acceptable for a business to refer to that heritage, even if its trading name has changed or the business has moved premises during that period (Radford (Bavarian) Ltd, 16 March 2005).

Finally, if a company buys an existing or liquidated company and wishes to adopt the brand heritage of the liquidated company by continuing to advertise the business name as a trading style and referring to its trading history, such approach will probably be acceptable as long as the purchasing business can demonstrate that it has assumed the liabilities of the liquidated company by paying its debts, for example, and honouring its guarantees. 

Gillie Abbotts

Associate, Michael Simkins LLP

Article written for Entertainment Law Review.

[1] [2012] EWHC 902 (Admin) (24 February 2012).

[2] Unreported, CO/1307/96.