BACKGROUND:

CCP took suo moto notice of the advertisements published in the print media, against MyBank Limited, United Bank Limited, Askari Bank Limited, and Habib Bank Limited (the ‘undertakings’) for advertising term/time deposits accounts giving exaggerated and incorrect profit rates, and conducted detailed enquiry under Section 37 (2) of the Competition Ordinance, 2007 (‘the Ordinance’) which was concluded vide Enquiry Report dated 2009, and issued show cause notices under Section 30 of the Ordinance for deceptive marketing practices in terms of Section 10 of the Ordinance to these Undertakings.

In its analysis, the Commission was, inter alia, faced with the issue of the applicability of Section 10 to services as opposed to goods. On this question, the Commission held that section 10(1) was broadly worded and not limited and that in Section 10(2) the list was neither exhaustive and the term ‘goods’ was to be read disjunctively from what was appearing before it.

Relying on the Zong Order, the Commission also found that it is important that “the focus is not on how much diligence or caution a consumer should exercise but rather the efforts made by the undertaking to ensure that its advertisement is clear, unambiguous and truthful” thereby placing a greater burden on undertakings than the test followed by the FTC. Additionally, it was reiterated that actual deception need not be proved and it is sufficient to establish that the advertisement has the tendency to deceive and capacity to mislead.

In light thereof, the Commission found the advertisements to be deceptive and misleading such that the character of the product i.e. the rate of returns offered by the banks, the consequences of early withdrawal were not duly disclosed rendering them mislead a lacking a reasonable basis and also capable of harming business interests of others.

ORDER:

The matter was disposed of vide Order dated 14-01-2010 by the CCP. Since the Undertakings stopped the subject advertisements upon initiation of proceedings and expressed their willingness to comply with the provisions of section 10, as evidenced by the written commitments made by them, a lenient view was taken and no penalty was imposed on them. This leniency has been shown because of the earnest desire of the Undertakings to seek compliance of the Ordinance which is at its nascent stage. The parties were; however, warned that in future, if, similar violations are found to be committed it may give rise to serious consequences under the Competition Ordinance.

Relying on a precedent from the US, the bench referred to the Truth in Savings Act of the US, which lists different requirements to be followed when advertising financial goods or services.

The banks also submitted undertakings before the Commission that “henceforth, our advertisements, promotional material or instructional manuals, in print or communicated through the electronic medium or otherwise in relation to the product, shall clearly specify the rate of profit or rate of return offered to the customers in clear legible font in a manner comprehendible by an ordinary/average consumer disclosing (i) that the return being offered is calculated on simple interest rate or as the case may be; (ii) that the rate of profit varies depending on maturity tenure and/or payout periods; (iii) that the terms and conditions apply, which will be reasonably accessible to a potential customer; and (iv) disclaimers (if any) therein shall also be stated in clear terms which are understandable, readable and/or audible, as the case may be, for an ordinary consumer.

CURRENT STATUS:

Compliance by the Undertakings