ASA Ruling: Solal Technologies vs SASA

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Posted 3 August 2011

On 5 May 2011, the ASA Directorate held that the following claims made by Solal Technologies in an advertisement for its “Naturally Sweet” and “Stevia Sweet” products were, inter alia, unsubstantiated and in breach of Clause 4.1 of Section II:

“For a long time it has been known that a diet high in sugar can cause weight-gain, diabetes and sugar-shock (tiredness about 1 hour after eating or drinking something sweet)”

“More recently, research conducted in 2008 and 2009 has shown that sugar excess can suppress your immune system and increase the risk of developing cancer”.

“Healthy alternative to sugar …”

Solal appealed this ruling and submitted new substantiation.

The ASA dismissed the appeal, and noted a number of times, "The respondent’s . . . argument is . . . nonsensical."

Solal Technologies / SASA / 17484
Ruling of the : ASA Directorate
In the matter between:
South Africa Sugar Association Complainant(s)/Appellant(s)
Solal Technologies (Pty) Ltd Respondent

27 Jul 2011

http://www.asasa.org.za/ResultDetail.aspx?Ruling=5648

BACKGROUND
On 5 May 2011, the ASA Directorate held that the following claims made by the respondent in an advertisement for its “Naturally Sweet” and “Stevia Sweet” products were, inter alia, unsubstantiated and in breach of Clause 4.1 of Section II:

“For a long time it has been known that a diet high in sugar can cause weight-gain, diabetes and sugar-shock (tiredness about 1 hour after eating or drinking something sweet)”

“More recently, research conducted in 2008 and 2009 has shown that sugar excess can suppress your immune system and increase the risk of developing cancer”.

“Healthy alternative to sugar …”

SUBSEQUENT TO THE RULING
Attorneys Fluxmans Inc, on behalf of the respondent, submitted a letter dated 28 June 2011 with annexures to the ASA for consideration in terms of Clause 4.1.7 of Section II. The annexures to the letter included two letters from Mr Rael Koping, a Registered Dietician, as well as a bundle of documents collectively referred to as Annexure “E”. The respondent submitted that Annexure “E” is confidential “inter alia, in that it contains elements of our client’s trade secrets”, and objected to the documentary evidence being furnished to the complainant.

RELEVANT CLAUSE OF THE CODE OF ADVERTISING PRACTICE
In light of the previous Directorate ruling and the respondent’s new substantiation, Clause 4.1 of Section II (Substantiation) is relevant.

COMPLAINANT’S COMMENTS ON NEW SUBSTANTIATION
The complainant was not afforded an opportunity to comment on the respondent’s new substantiation. The reasons for this will be explained in the Directorate’s ruling below.

ASA DIRECTORATE RULING
The ASA Directorate considered the relevant documentation submitted by the respective parties.

Clause 5 of the Procedural Guide deals with documentation submitted to the ASA. Clauses 5.2 and 5.3 specifically deal with confidential documentation submitted to the ASA.

Clause 5.2 of the Procedural Guide states: “Should any part of the documentation submitted to the ASA be confidential, as defined in Clause 5 of Section I, it should be clearly identified and marked as such and annexed separately to the documentation.”

Clause 5.3 of the Procedural Guide states:

“The Directorate will evaluate, at its absolute discretion, whether or not documentation marked confidential qualifies as confidential in terms of Clause 5 of Section I, and shall inform the party that submitted the documentation accordingly.

5.3.1 Should the Directorate find that the documentation is not confidential in terms of Clause 5 of Section I, the party that submitted such documentation will be given an opportunity to withdraw such documentation.

5.3.2 Should the Directorate find that the documentation submitted as confidential qualifies as confidential in terms of Clause 5 of Section I, the Directorate may request a non-confidential summary of the documents in question.”

Clause 5 of Section I sets out the criteria in terms of which documents qualify as “confidential”. It reads as follows:

“The ASA will make available to any person requesting same all records, documents and other information in its possession, subject to what is set out below:
5.1 The ASA will refuse to disclose any record, document or other information, whether in respect of its own proceedings or otherwise in its possession, where such record, document or information contains:
5.1.1 trade secrets of a third party;
5.1.2 financial, commercial, scientific or technical information, other than trade secrets, of a third party, the disclosure of which would be likely to cause harm to the commercial or financial interests of that third party; or
5.1.3 information supplied in confidence by a third party, the disclosure of which could reasonably be expected –
(a) to put that third party at a disadvantage in contractual or other negotiations; or
(b) to prejudice that third party in commercial competition”.

In the present matter, the Directorate informed the respondent that it was evaluating, in terms of Clause 5.3 of the Procedural Guide, whether Annexure “E” qualifies as confidential in terms of Clause 5 of Section I. The Directorate requested the respondent to clarify its reasons for claiming confidentiality over Annexure “E”, given that Annexure “E” contained extracts from published articles and/or published documents.

The respondent replied that, as there was no request for access to Annexure “E” from the complainant in terms of Clause 5.1 of Section I, there is no need or basis for the Directorate to evaluate, in terms of Clause 5.3 of the Procedural Guide, whether Annexure “E” qualifies as confidential. The respondent submitted further that a non-confidential summary of Annexure “E” can be provided should the Directorate need to refer to Annexure “E” in its ruling.

The Directorate then explained to the respondent that before it can consider whether the evidence attached to the letter of 28 June 2011 substantiates the relevant claims that were held to be unsubstantiated, it must first send the evidence to the complainant for comment. The Directorate noted that this procedure is always followed when an advertiser submits new evidence in terms of Clause 4.1.7 of Section II. The Directorate elaborated further, explaining that in the event that the Directorate decides, in terms of Clause 5.3 of the Procedural Guide, that new evidence submitted by an advertiser is confidential, the Directorate will not send the confidential documents to the complainant, but will instead send the complainant a non-confidential summary of the confidential documents (the non-confidential summary contemplated in Clause 5.3.2 of the Procedural Guide).

The respondent replied that there is no provision in the Procedural Guide or the Code which says that the Directorate “must send” to the complainant documentary evidence submitted in terms of Clause 4.1.7 of Section II. It attacked the Directorate’s procedure as an “invented” procedure, and submitted that the fact that the Directorate has “invented” a procedure and “always” followed that “invented” procedure does not “magically” create a new term of the Procedural Guide or Code.

To summarise, despite the fact that the Directorate repeatedly tried to explain to the respondent why it needs to evaluate whether Annexure “E” to the respondent’s letter of 28 June 2011 qualifies as confidential, the respondent kept arguing:

i. that the Directorate cannot evaluate whether Annexure “E” qualifies as confidential because there was no request for access to Annexure “E” from the complainant;
ii. that the Directorate should request a non-confidential summary of Annexure “E” should it wish to refer to the latter in its ruling; and
iii. that the Directorate may not send the documentary evidence submitted in terms of Clause 4.1.7 of Section II to the complainant.

Argument i
Looking at the wording of Clause 5.3 of the Procedural Guide, it is patently clear that the Directorate has absolute discretion in evaluating whether documents qualify as confidential, and the clause expressly requires the Directorate to make a finding on the issue of confidentiality (“The Directorate will evaluate” – our emphasis).

The respondent’s first argument is a nonsensical argument. In terms of the Procedural Guide, there is no requirement or rather restriction on the Directorate that only enables it to consider the issue of confidentiality subsequent to receipt of a request for such documentation. There is accordingly no reason why the Directorate would be prevented from considering issues of confidentiality upon receipt of alleged confidential material. The criteria established in Clause 5 of Section I explain what type of information will generally be regarded as confidential. However, the fact that it refers to “…any person requesting …” copies of such correspondence cannot reasonably be seen as restricting the Directorate to only considering issues of confidentiality if and when such request are made.

In addition to this, parties to a dispute are entitled to a ruling giving adequate reasons for the decision made. This effectively prevents the Directorate from issuing a ruling stating only that “some confidential information was submitted by some confidential party and ultimately accepted (or for that matter rejected)”. Doing so would prevent the aggrieved party from lodging a proper appeal, either because it would not know who submitted what (in the case of a complainant), or it would not know why the Directorate rejected the information (in the case of an advertiser). Alternatively if the Directorate were to issue a ruling without having considered whether or not to grant confidentiality to certain documents, it could result in a situation where confidential information is relayed in a publicly available ruling because the Directorate had no reason to regard it as confidential in terms of the procedures of the Code.

This argument is therefore rejected.

Argument ii
The respondent’s second argument (point ii above) is also nonsensical. Clause 5.3.2 of the Procedural Guide states that the Directorate may request a non-confidential summary of documents should the Directorate find that the documentation submitted as confidential qualifies as confidential. In other words, the Directorate must first decide whether Annexure “E” qualifies as confidential, and only if it finds that Annexure “E” is confidential can it request a non-confidential summary of Annexure “E”.

This argument is therefore rejected.

Argument iii
Clause 4.1.7 of Section II states, inter alia, that “the Directorate may consider new substantiation submitted after a ruling has been made by the ASA rejecting substantiation or upholding a complaint based on substantiation.”

The procedure that the Directorate follows in a situation where new substantiation is submitted in terms of this clause is to first send the new evidence, i.e. all the evidence that do not qualify as confidential in terms of Clause 5 of Section I, to the complainant so that the complainant can comment on the independence, credibility and expertise of the person or entity from whom the new evidence emanates. This procedure has recently been followed in, inter alia, Lifebuoy / Colgate-Palmolive / 17826 (22 July 2011), Cell C “blue/red” / Vodacom / 17778 (21 April 2011), and Blossom Canola Range / Unilever / 16529 (3 February 2011).

The fact that the Code may not specifically provide for such a procedure does not mean that the Directorate cannot follow it. Clause 8.14 of the Procedural Guide states:

“The Directorate may perform all such acts and do all such things as are reasonable and necessary for or ancillary, incidental, or supplementary to the performance of any of its functions but will not extend to the suspension of rulings. Should circumstances arise where good and valid reasons justify a departure from usual procedure, these will be taken into account, but always at the discretion of the Directorate.”

By giving the complainant an opportunity to comment on new evidence submitted by a respondent, the Directorate gives effect to and complies with the audi alteram partem rule. On the other hand, the respondent has not given any reasons or evidence to show that it will be unfair or inequitable or damaging to the respondent if the complainant were given a copy of the respondent’s evidence for comment (subject to the provisions of Clause 5 of Section I and Clause 5.3 of the Procedural Guide) before ruling on the matter.

The Directorate is therefore satisfied that the procedure it follows before ruling on new evidence submitted in terms of Clause 4.1.7 of Section II is acceptable and in line with the Code and the principles of natural justice.

The respondent’s argument is therefore rejected.

The new substantiation
In light of the above, before the Directorate can consider and decide whether the respondent’s evidence substantiates the claims previously ruled to be unsubstantiated (on 5 May 2011), it must first send all the evidence (i.e. the letter of 28 July 2011, Mr Koping’s two letters and Annexure “E”) to the complainant for comment, subject to the provisions of Clause 5 of Section I and Clause 5.3 of the Procedural Guide. This means that before the Directorate can send the evidence to the complainant for comment, the Directorate must first deal with the respondent’s evidence in terms of Clause 5.3 of the Procedural Guide.

The respondent initially submitted that Annexure “E” is confidential “inter alia, in that it contains elements of our client’s trade secrets.” No further explanation was given. The respondent did submit a subsequent letter on 20 July 2011 in which it gives reasons as to why it believes Annexure “E” qualifies as confidential. However, the respondent submitted that this letter itself is confidential. Although the respondent submitted that the letter explains why it should also be treated as confidential, the reasoning in the letter only deals with the confidentiality of Annexure “E”. The Directorate does not agree with the respondent that this letter should be treated as confidential.

Accordingly, the Directorate finds that the respondent’s letter dated 20 July 2011, which gives reasons for a confidentiality request on Annexure “E” and is marked “CONFIDENTIAL”, does not qualify as confidential in terms of Clause 5 of Section I.

In terms of Clause 5.3.1 of the Procedural Guide, the respondent will be given an opportunity to withdraw this letter.

Subsequent to the letter of 20 July 2011, the respondent submitted a letter (on 25 July 2011) in which it refers to two of the reasons given for confidentiality of Annexure “E” in its allegedly confidential letter of 20 July 2011. The reasons advanced are:

the compilation of published articles is confidential in its compiled form, essentially because the compilation has a commercial value in the context of the respondent’s research and development of its products and advertising campaigns; and
the respondent is required to pay subscription fees to some of the journals which invokes Clause 5.1.3 of Section I.

The Directorate does not agree that the respondent’s reasons are adequate for the Directorate to find that Annexure “E” to its letter of 28 June 2011 is confidential. The fact remains that Annexure “E” consists of extracts of published articles or published documents dealing with sugar. The mere fact that the respondent has compiled them into one document cannot suddenly make it confidential. These published articles do not contain information about any of the respondent’s products; they deal with sugar. There can therefore be no prejudice to the respondent if the complainant were to have sight of Annexure “E”.

As for the argument that the respondent “is required to pay subscription fees to some of the journals”, the Directorate has no idea which of the many articles in Annexure “E” are allegedly subject to this. The respondent has also not provided any evidence that it actually has to pay the alleged subscription fees. Accordingly, this argument is rejected.

The Directorate therefore finds that Annexure “E” to the respondent’s letter of 28 June 2011 does not qualify as confidential in terms of Clause 5 of Section I.

In terms of Clause 5.3.1 of the Procedural Guide, the respondent will be given an opportunity to withdraw Annexure “E”.

The rest of the new substantiation
In its letter of 25 June 2011, the respondent appears to change its tune about giving the complainant sight of its new evidence. It argued that there was and is nothing preventing the Directorate from furnishing the complainant with a copy of the respondent’s letter of 28 June 2011 and the annexures not marked confidential, including Mr Koping’s two letters.

The Directorate firstly notes that this ruling is being made now due in part to the respondent’s repeated insistence that the Directorate rule on the new evidence without delay. The respondent cannot now all of a sudden change its approach because it finally realised that it has been delaying the process with ill-informed and/or ill-advised arguments, queries and disputes.

Secondly, the Directorate notes that there is no point in furnishing the complainant with just some of the evidence submitted by the respondent. It would be unreasonable for the Directorate to consider and make a ruling on new evidence which the respondent has not seen nor commented on (unless that evidence is actually found to be confidential, in which case the complainant will be given a non-confidential summary to comment on).

Another reason why it would not suffice to only give the complainant the documents that the respondent believes is not confidential is the Advertising Industry Tribunal ruling in Lifebuoy / Dettol / 14813 (27 August 2010). In fact, the Directorate referred to this ruling in its previous decision of 5 May 2011 in the present matter:

“…the Advertising Industry Tribunal (the AIT) ruled that the Directorate is required to apply its mind to a matter and any substantiation submitted to satisfy itself that there was sufficient, credible evidence supporting the claims. In the previous matter, Mr Koping’s letter was accepted as substantiation without demur. In keeping with the precedent established in the Lifebuoy ruling, this can no longer suffice. In the event that the respondent again attempts to rely merely on Mr Koping’s letter, the ASA should reject it on the basis of the principles laid down by the AIT.”

The respondent has not appealed the Directorate ruling of 5 May 2011, and the Directorate’s decision is therefore still binding. The respondent can accordingly not only rely on Mr Koping’s two letters, and it would similarly not suffice to just give the complainant sight of Mr Koping’s two letters.

The respondent’s argument is therefore rejected.

In light of all of the above, the Directorate is not in a position to consider the respondent’s new substantiation submitted on 28 June 2011 at this time.

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