Advertisers may sue platforms that falsify circulation figures, say lawyers in wake of SPH case
But the cost of legal action may outweigh the amount recovered, according to legal experts.
SINGAPORE: Companies who find that the platforms they advertise with have falsely stated their circulation numbers or reach may take the company to court under civil law, lawyers told CNA.
Advertisers that enter contracts with the advertising platform based on inflated circulation numbers have civil remedies on the basis of misrepresentation or breach of contract, the lawyers said.
On Monday, The Straits Times reported that daily circulation figures of SPH Media titles were found to have been inflated by between 85,000 and 95,000, or about 10 to 12 per cent of the reported daily average circulation. The Straits Times is one of several publications, including The Business Times, Lianhe Zaobao, Shin Min Daily News, Berita Harian and Tamil Murasu, under SPH Media.
A review of internal processes in March last year showed that copies were printed, counted for circulation then destroyed, or subscriptions doubled-counted. The period of review was from September 2020 to March 2022.
An SPH Media spokesperson indicated other inconsistencies with circulation numbers, including lapsed contracts which continued to be counted in data, with a project account injected with additional funding to purchase fictitious circulation.
TAKING THE MATTER TO COURT
CNA spoke to lawyers who said that advertisers could take civil action depending on the contract between the company and the advertising platform.
"The contract between the advertiser and the platform would contain the obligations of the platform, and if the platform has failed to fulfil its contractual obligations the advertiser would typically be able to pursue the matter via the courts," said lawyer Samuel Seow An from Yong, Seow & Lim (YSL) Legal.
Obligations may be set out in the "terms and conditions" that advertisers acknowledge and agree to as part of the signing up process with the platform. Some examples include: If a platform agrees to boost a post for a number of days but fails to, or if it agrees to an exclusive arrangement but does not adhere to it, said Mr Seow.
"Depending on the terms of the contract, parties may also pursue civil litigation to terminate or void a contract," he added.
Invictus Law's director Darren Tan said that to bring a civil suit against the platform for misrepresentation, the case would have to satisfy three elements.
First, the platform would have had to make a false statement of fact to the client. Second, the client was induced by the statement to enter the contract. Third, the client suffered loss and damage as a result.
The first element is satisfied if the platform had represented the false circulation numbers to the client.
The second element is trickier, said Mr Tan, as the client would have to prove that it would not have entered into the contract if not for false circulation figures. There might not have been an inducement if the client signed the contract based on other factors and attributes of the company, such as its brand name.
"People could have signed on (even) if you told them the circulation numbers are 50,000, 60,000 or 70,000. If let's say the circulation numbers wasn't something that the client actually relied on, that means they would have gone anyway, then there's no reliance," said Mr Tan.
Loss and damages for such misrepresentation may just be the additional amount that the client had paid for the inflated circulation figures, said Mr Tan, adding that actual loss and damages are hard to prove or quantify even in a case of a breach of contract.
"What kind of actual loss is the customer talking about? Maybe he could have reached an additional 10,000 people, and then maybe 1 per cent of them would be converted into potential sales, for example. So we're looking at that kind of number and it's very hard to prove this type of loss and damage in the court of law," he said.
If the matter proceeds to court, both the claimant and defendant may call their respective experts to do up models to quantify losses or damages. However, these would still be speculative, said the lawyer.
The typical remedy for misrepresentation cases is to allow the client to rescind the contract or be awarded damages, said Mr Tan. But not all advertisers would want to cancel the contract simply because a part of it was inaccurate.
The lawyer added that the legal fees involved in the litigation process might outweigh the amount advertisers may recover, making it impractical to take the matter to court.
Different advertisers may consider the option of consolidating their resources in representative proceedings - also known as a class-action lawsuit - in which at least two parties come together to bring a legal action against a defendant.
Such a proceeding may lower the costs borne by each party, said Mr Tan.
In such proceedings, proving all the claimants have the same interest and that they suffered a similar kind of loss and damage may be a barrier preventing the suit from going ahead.
To begin the process of civil litigation, lawyers would have to issue an originating claim under the new Rules of Court 2021, said lawyer Wilson Foo from law firm Lexcompass.
"Before that, lawyers customarily send a letter of demand to the other party to give them notice of the claim and seek their response. Parties can also explore the option of an amicable settlement before the matter goes to court," he added.
If there was a valid arbitration clause in the contract between the advertiser and the platform, and the requirements for going to arbitration were met, the advertiser could consider initiating arbitration, Mr Foo said.
Arbitration is an alternative dispute resolution mechanism where parties submit their dispute to a neutral tribunal for a resolution. The process takes place outside of court.
ADVERTISERS MAY CONSIDER CRIMINAL ACTION
Advertisers may also consider filing a police report in cases of criminal wrongdoing such as fraud or cheating by the platform, added Mr Seow, who is a managing partner at YSL Legal. However, this course of action does not generally lead to financial compensation, according to the lawyer.
"There may be criminal liability for platforms and their agents who fraudulently inflate their subscription or circulation numbers with the intention of deceiving advertisers and inducing them to advertise on their platforms," Mr Seow said.
Whether the particular case is criminal depends on the intention of the parties, as well as the law that applies, he noted.
In addition to the individuals involved, a company may be held criminally responsible depending on the facts of the case.
"Generally, an entity can be criminally responsible for an individual's actions where the individual effectively controls what the entity does, and can be said to be 'directing the mind and will' of the entity," said Mr Seow.
He gave the example of a board of directors that directs or knows about a lower-level employee committing a crime to benefit the company. However, this will be determined by judges based on the facts of the case.