Stealth Marketing THE LEGAL PERSPECTIVE OF AN EMERGING TACTIC FOR BRAND BUILDING

Les Chaiet*

CMA’s 9th Annual Branding Conference: Branding in a Sea of ChangeToronto, Ontario

June 21st, 2007

* The research assistance of Puja Varma, Student-at-Law, is acknowledged.

AGENDA

• Stealth Marketing• Canadian Legal Framework in a Nutshell• “Stealth Marketing” - WOMM• “Stealth Marketing” - Product Placements• Next Steps• Questions

STEALTH MARKETING

• Commonly referred to as “Buzz Marketing” or “Guerilla Marketing”

• Involves a marketer engaging with customers without disclosing that they are in fact compensated by the business for which they are marketing a product or service.

• “Surreptitious” brand awareness development can be effective

• Industry insiders are concerned about the legal risk related to the lack of disclosure of the direct marketing connection.

CANADIAN LEGAL FRAMEWORK IN A NUTSHELL

• Competition Act• Consumer Protection Act• Canadian Marketing Association

– Code of Ethics and Standards of Practise• Advertising Standards Council

– Canadian Code of Advertising Standards• Word of Mouth Marketing Association (WOMM)

– The WOMM Code of Ethics

COMPETITION ACT (Canada)

• False or Misleading Misrepresentations: – s. 52(1) No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.

• Misrepresentations to the Public: s. 74.01(1) A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose ofpromoting, directly or indirectly, any business interest, by any means whatever,

(a) makes a representation to the public that is false or misleading in a material respect…;

Discussions with the Competition Bureau

• Whether non-disclosure of identity in WOMM campaigns is contrary to to Canadian law will have to wait for judicial review in Canada.

• However, the Competition Bureau stated that non-disclosure of identity during a stealth marketing campaign would likely be deceptive and misleading and thus would be contrary to the Act.

Do Criminal and Civil Prohibitions Apply?

• There are civil and criminal sanctions against false or misleading advertising in any medium.

• Where marketers are making false or misleading representations about the product or service, the prohibitions against false or misleading advertising would certainly apply.

• What if the representations about the products are accurate?– Could still be deceiving consumers by not disclosing their

identity

CONSUMER PROTECTION ACT (Ontario)

False, Misleading or Deceptive Representation:• Section 14 (1) – It is an unfair practice for a person to make a false,

misleading or deceptive representation.• Section 14 (15) – A representation that misrepresents the purpose or

intent of any solicitation of or any communication with a consumer.• Section 14 (17) – A representation that misrepresents or exaggerates the

benefits that are likely to flow to a consumer if the consumer helps a person obtain new or potential customers.

Unfair Practices Prohibited:• Section 17 – Makes it an offence to engage in an unfair practice.

Rescinding Agreement:• Section 18 – Permits the consumer to rescind any agreement and allows

for an action for damages where rescission is not possible.

The combined effect of these provisions could have very serious The combined effect of these provisions could have very serious consequences when an unfair practice has occurred.consequences when an unfair practice has occurred.

CMA – Code of Ethics & Standards of Practise

Accuracy of Representation: • 1.1 Marketers must not misrepresent a product, service or marketing

program and must not mislead by statement or manner of demonstration or comparison.

• 1.3 Marketers must ensure that the general impression of the communication does not deceive by omission or communication.

Disguise:• 5.4 Marketers should avoid undercover or word-of-mouth marketing

initiatives that encourage a consumer or business to believe that the marketer’s agents are acting independently and without compensation when they are not.

ASC – Canadian Code of Advertising Standards

Accuracy and Clarity: • 1 (a) Advertisements must not contain inaccurate or deceptive claims,

statements, illustrations or representations, either direct or implied, with regard to a product or service. In assessing the truthfulness and accuracy of a message, the concern is not with the intent of the sender or precise legality of the presentation. Rather, the focus is on the message as received or perceived.

(b) Advertisements must not omit relevant information in a manner that, in the result, is deceptive.

Is Stealth Marketing Perceived as deceptive?• Directly targets consumers and does not openly appear as a marketing

drive.

• “A line is crossed, I think, when you go outside of those normal boundaries and start to deceive people in ways that they are, where they are totally unwitting to what's going on.”

- Malcolm Gladwell

• “We don’t take these sorts of risks with our advertisements. We regard ourselves as honest and respectable”

- Spokesperson for Volkswagen

• “Fraud is fraud, and a harmless-sounding name such as “buzz marketing”doesn’t change that. - Gary Ruskin, Executive Director

Commercial Alert

YouTube Bride Video & Sunsilk Canada

• Since its January 18th release, the You Tube video “Bride Has Massive Hair Wig Out” was seen over 2.8 million times.

• Sunsilk Canada revealed that they were behind the “initiative”

Opinions from the press:• Ads posing as blogs create a generation of skeptics• “by exploiting our tendency to trust in the veracity of such

online videos, it is only a matter of time, before we will dismiss even real events or sincere emotional outpourings as just another buzz-building strategy”.

Fake Blogs & Sony Play Station Portable

• Sony hired marketing company Zipatoni to set up a viral marketing scheme by registering the domain alliwantforxmasisapsp.com

• This website is set up as a PSP fansite where the marketers with Sony’s approval pretend to be kids that want a PSP and posted a rap video titled “All I Want for X-mas Is A PSP”.

• The Sony fake blog (referred to as “flogs”) marketing the Play Station Portable was exposed by bloggers who traced the site’s URL to the marketing company behind the flog.

Burger King & Subservientchicken.com

• Visitors to the site will find a person in a chicken suit, standing in the middle of a room. Beneath the chicken is a box to type in your request for the chicken, along with the slogan “Get chicken the way you want it. Type in your command here.”

• The chicken had some obvious links to BurgerKing including: – Display of BK logo while loading, including a link to BK.com– Eventually, mention of subservient chicken website started appearing on BK

television commercials– Domain name was registered to BK’s advertising agency, Crispin Porter &

Bogusky

Fake Tourist & Ericsson Mobile Phone

• Marketing campaign by Sony Ericsson Mobile for its T68i mobile phone and digital camera.

• The initiative, called "Fake Tourist," involved placing 60 actors posing as tourists at attractions in New York and Seattle to demonstrate the camera phone.

• The actors asked passersby to take their photo, which demonstrated the camera phone's capabilities, but the actors did not identify themselves as representatives for Sony Ericsson.

• "Excuse me, you mind taking a picture of us?” asks one fake tourist. “Thanks a lot, man. It's cool, right?"

PRODUCT PLACEMENTS

• Subset of Stealth Marketing• Popular brand development tactic for movies and television shows in

light of trigger happy remote control users • Video games, board games, live theatre and novels• Regulated in Europe• There are no explicit legal restrictions on product placements in Canada,

however marketers must still be cautious to ensure that the placements do not contravene advertising and marketing laws:– False and misleading advertising– Industry specific restrictions (i.e. alcohol and tobacco placements)– Marketing to children and young teenagers

Ford Mondeo: • The 'Mondeo' is seen in a Bahamas-based chase scene specially created for

the car company.• 2007 Ford Mondeo in Casino Royale Ad (23 seconds)

http://www.youtube.com/watch?v=P7WleXpzmZA

Omega Watches:• Is that a Rolex?" enquires Bond's main love interest. “No," replies our Bond, "it's

Omega". "Very nice," she purrs …

Sony:• Every laptop is a Vaio, digital cameras are CyberShots, mobile phones are

SonyEricssons, cd players are Sony, and CDRs are even Sony brand discs.

Heineken: • Heineken International partnered with EON Productions and Sony

Pictures Entertainment to launch a world-wide promotional campaign http://www.alphajunkie.com/2006/10/new_heineken_bo.html

Smirnoff Vodka:• Partnership between Smirnoff Vodka and James Bond, which began with 1962's "Dr.

No," is being renewed in "Casino Royale," to be released Nov. 17.

CASINO ROYALE: Watches, Cars & Electronics

NEXT STEPS:Disclosure of Word of Mouth Marketing Campaigns

1. Media Release of Campaign2. Website listing terms & conditions of Campaign3. All advocates identify themselves

CONCLUSION

• Prudent to have “surreptitious branding campaigns”reviewed by legal counsel during the initial creative planning stage of the campaign to avoid a situation where the campaign is compromised at the last minute because of legal compliance issues

• Novel tools to improve brand equity must be used within legal parameters – be aware of new legal developments that might affect your campaign

• Opportunity to challenge the actions of competitors in the event their stealth marketing practices are damaging your organizations’ brand equity

QUESTIONS?QUESTIONS?