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Companies have always drawn a thin line between what it claims in its advertising and what the company can deliver. Sometimes companies go overboard with their false claims and later have to pay for their price. All around the world, various laws have come up that govern what the companies can advertise to the public. In countries like India, advertising of alcohol and other tobacco-based products are completely banned, while in other countries like the US and Europe, there are strict limitations for the same.
All said and done, companies have to be extremely careful with the message in their advertising, because if proven false, it can cost them a fortune to deal with the legal obligations. Here is a list of companies that paid heavy fines for false advertising.
1. Volkswagen – Clean Diesel
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In an effort to sell more diesel cars in the US, Volkswagen claimed to offer to cars that were low-emissions and environment friendly. In 2015, it became public knowledge that Volkswagen was cheating on its emission tests in the US. Famously referred to as the “diesel dupe,” the scandal came to light when it was determined that Volkswagen was using a sophisticated device in their cars called “defeat device”. Allegedly, the device could detect when it was being tested and alter performances accordingly to improve the test results.
Federal Trade Commission (FTC) filed a lawsuit against Volkswagen for violating the Clean Air Act and also for false advertising. Volkswagen had to pay $61 billion as fines. The fines were nowhere as costly as the loss of trust among existing and potential future customers.
2. Redbull – It gives you wings!
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This is one of the most bizarre and yet important lawsuits in the history of advertising. Redbull has been using the tagline “Redbull gives you wings” since its inception, and it is one of the heavily advertised energy drink brands around the world. Redbull claims in its advertisement that the use of this particular caffeinated drink can increase the concentration and reaction speed of its customers.
It worked well for the brand until a customer filed a lawsuit in the court of law. He stated that he had been using Redbull for ten years, and he still did not have wings or any improved signs of intellectual or physical abilities. The company settled the dispute by paying a sum of $13 million, including $10 to every customer who had bought the drink in the US since 2002.
3. Tesco – The Burger Fiasco
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Crisis management is an imperative part of advertising and the PR team of any company strives hard to resolve any ongoing issue quickly. The most important factor in crisis management is honesty and transparency. Considered to be the biggest food fraud in 2013, the UK-based supermarket was found guilty of using horse meat in their burgers. Tesco was using horse meat instead of beef in their burgers and ready-made meals.
In an attempt to recover from this disaster, Tesco’s PR team came up with a strategy to downplay the entire issue and make a joke out of the whole scandal. Well, it backfired. The company ran a two-page spread on newspapers with the headline, “What burgers have taught us”. The other companies in the industry felt that Tesco was trying to include the entire food industry in its scandal, and this led to the UK advertising regulator ASA banning the campaign. Tesco had to deal with costs of at least $432 million, according to the Guardian.
4. Kellogg’s – Smarter and Better by eating cereal?
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Kellogg’s has been in trouble for misleading advertising not once, but twice. In 2010, the company was heavily advertising that their Rice Krispies cereal improved children’s immunity. It claimed that the product had 25% daily value of antioxidants and nutrients. The Federal Trade Commission (FTC) stated that these claims were dubious and asked the company to halt all advertising. In 2011, the case was settled and Kellog’s paid $2.5 million to affected consumers and donated $2.5 million worth products to charity.
Not more than two years later, in 2013, Kellog’s was in trouble again for false advertising of their product called Frosted Mini Wheat’s. The company claimed that kids who breakfasted on Frosted Mini Wheat’s improved their attention spans by 20%. After thorough clinical study to test these claims, it was found that Kellog’s was once again overstating its findings. The company had to pay a penalty of $4 million for its false advertising.
5. Hyundai – The Horsepower Dilemma
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Hyundai has been one of the most trustworthy car brands, it dug a grave for its reputation when it claimed that certain models had more horsepower than was true. The company put up a weak defense by claiming that people did not really buy Hyundai for its horsepower. But the consumers felt that the company was trying to cover up its mistake. The brand had knowingly overstated the horsepower of certain cars’ models to upscale the company’s sales. Hyundai did lose some of its credibility, especially in the US market after this class action lawsuit.
In 2001, it came to light that Hyundai was overstating its horsepower for some models by at least 10%. It was a clear case of false advertising, so a class action litigation was filed on behalf of 840,000 people who had bought certain models of the brand between 1996 to 2002. The settlement concluded in the year 2004, and Hyundai settled by offering prepaid debit cards worth up to $225 to aggrieved owners.
Advertising is a means to reach out to customers and inform them about the brand and the product. It can be tweaked to a certain extent for creative purposes, but misleading messages that lead to profits for a particular company must never be encouraged. The purpose of advertising is to be transparent with potential customers and build up credibility, not to sabotage it.
