Summary of Council decision:
Two issues were investigated, both of which were Upheld.
A direct mailing for a consultancy service seen on 21 September 2016 was received in a white windowed envelope with a ‘”Return Address” and the company’s logo.
Inside the envelope was a letter addressed to a specific employee of another organisation and featured text that stated “Dear … Re ‘Tulley Solutions Ltd’ Tulley Solutions, an engineering company, based in Henlow was formed in 1991 as a family owned business that manufactures, supplies and fits replacement parts for failed components on CNC equipment … They employ a team of 14 and have a turnover of £2.5million. John Tulley Snr, Manager Director wants, along with his wife, to start taking a back seat, passing the business over to their two sons … As neither of his sons have an understanding of the business financially, he has asked his accountants for assistance but they seem uninterested or are too busy. We have booked an appointment for you to meet with John Snr, his wife Ann and their two sons … to discuss the possibility of [you] working with them to help their business going forward. They wish to discuss the business development assistance you can provide as well as your compliance service …”.
On the second page was further text that stated “The opportunity overleaf is actually based on work we have carried out for clients in other areas. If this example caught your eye and you would enjoy discussing the possibility of working with such a company, then why not complete the enclosed fax response form, return it to us and we will be happy to contact you by return to arrange a brief meeting to discuss how we can provide up to 30 opportunities like this for you, each year … we do not currently work with a professional firm in the … postcode area and would like to talk to [you] about the possibility of working together in 2016, to help your practice further …”.
The letter also featured a stamp with text that stated “Providing Solutions for Professionals SINCE 1991”.
The complainant challenged whether:
1. the direct mailing was obviously identifiable as a marketing communication; and
2. the claim “Providing Solutions for Professionals SINCE 1991” was misleading and could be substantiated.
1. Healden Grove Ltd believed that when read as a whole, the direct mailing was clearly a marketing communication seeking to procure work from the recipient.
2. Healden Grove stated that they were incorporated as a limited company in November 1997. However, they stated that the claim “Providing Solutions for Professionals SINCE 1991” was based on the business having previously traded as a partnership under the name “Healden Grove” and that upon its incorporation as a limited company the goodwill and business name was transferred to them. The claim was therefore a reference to Healden Grove as a trading name that had been used throughout the whole period from 1991.
Healden Grove was unable to provide documentation dating back to when the business was incorporated as a limited company in 1997, but provided abbreviated accounts for the first and second years of trading up to 31 December 1999. They stated that the accounts for the first year made reference to “Goodwill” in the business and for the latter, showed that it came at a cost as an intangible asset purchased for £11,000.
Healden Grove stated that upon its incorporation as a limited company, they ensured that there were no outstanding creditors associated with the partnership and therefore, they did not have to assume any liabilities.
The ASA noted that only by the second page of the letter would it become apparent to the recipient that they had been sent marketing material from a consultancy firm that wanted to do business with them.
We considered that in the context of a direct mailing, an envelope formed part of the marketing communication. Therefore, the recipient needed to be made aware prior to opening it that it contained marketing material.
The CAP Code required advertisers to ensure that their marketing communications were obviously identifiable as such. They should be designed and presented in a way that made it clear they were advertising material.
Whilst we noted that the envelope featured Healden Grove’s company name and return address, we considered that this was insufficient to make clear to the recipient that the direct mailing was a marketing communication prior to opening it. We therefore concluded that the ad breached the Code.
On this point the ad breached CAP Code (Edition 12) rule 2.1 2.1 Marketing communications must be obviously identifiable as such. (Recognition of marketing communications).
We considered that consumers would interpret that the claim “Providing Solutions for Professionals SINCE 1991” would mean that Healden Grove had been trading continuously since 1991.
We understood that the claim was based on Healden Grove inheriting the reputation and trading history of an earlier incarnation of the same company and continued to use the same brand name (Healden Grove), which was initially created as a partnership in 1991. We considered that this was acceptable provided it could be supported with robust documentary evidence.
We noted that Healden Grove provided their accounts for the first and second years of trading, but was unable to provide documentation dating back to 1997 when the limited company was incorporated and inherited the brand history of its predecessor. The accounts for 1998 stated that the “directors [did] not expect the value of goodwill to diminish in value, therefore no amortisation ha[d] been provided”. However, we considered that this did not demonstrate that Healden Grove had inherited the reputation and trading history of the former partnership upon its incorporation as a limited company in 1997. The accounts for 1999 showed that ‘Goodwill’ came at a cost as an intangible asset, but did not indicate whether that was inherited from the company’s predecessor. Furthermore, Healden Grove did not provide evidence showing that the brand name had an uninterrupted and stable trading history from 1991.
Therefore, because Healden Grove did not provide adequate evidence to support the claim “Providing Solutions for Professionals SINCE 1991” we concluded that it had not been substantiated and was misleading.
On this point the ad breached CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. and 3.7 3.7 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. (Substantiation).
The ad must not appear again in its current form. We told Healden Grove Ltd that their future direct mailings should make clear, before being opened, that they were marketing communications. Furthermore, they must ensure that their ‘established since’ claims were supported with robust documentary evidence.