Picture the scene: You are an advertising agency and your brief is to make a TV Commercial for a shampoo which restores thinning hair. Let's call the brand évolis.
Your creative team comes up with this script for a "Hers" commercial: The camera focuses on a woman standing at the cliff’s edge on a “wild looking coastline during a windstorm … Her beautiful, long thick mane is flying all over the place in the wind”. (see image)
You call the campaign "Long Live Hair".
Your advertising budget is $2,000,000 over 12 months. It covers TV commercials, digital partnerships, influencers and social media. After just 2 months, the client cancels because product sales have not increased. The client blames the advertising agency for the campaign being a complete flop and refuses to pay.
This scenario is taken from a NSW Supreme Court decision last week in which the agency (Ikon) sued and recovered from the client (Advangen) $939,055.65 in unpaid invoices.
This is a summary:
If an advertising agency makes predictions based on reasonable grounds and if they conduct the advertising campaign as promised in the Media Plan and the Services Agreement, then they are not liable for misleading conduct or for breach of contract.
If an advertising agency has the creative work (the TV commercials, etc.) signed off by the client, then it is not responsible if sales targets are not met. The client assumes the risk of failure.
The agency is not to blame for the failure of an advertising campaign, and is entitled to receive full payment for the work done.