Background
Summary of Council decision:
Four issues were investigated, all of which were Upheld.
Ad description
An online display ad, a website and two paid-for Facebook posts for Whisky Investment Partners, a whisky cask investment company:
a. The online display ad, seen on 24 May 2022, included text that stated, “Cask Investment Get Returns upto [sic] 12% Per Annum”. The ad linked to a page on the Whisky Investment Partners’ website.
b. The webpage that linked from ad (a), seen on 24 May 2022, included the heading “WHAT IS THE BEST PERFORMING ASSET CLASS OF 2020? WHISKY”. Smaller text underneath stated, “We help investors get involved in a billion-pound market that has shown average returns of 8-12%* over the last couple of decades” with a button to “DOWNLOAD YOUR FREE GUIDE”. Next to this were two boxes: the first included text that stated, “WHISKY CASK MARKET RETURNS 8-12% Average return per annum over the last 10 years”, and the second included text that stated, “CAPITAL GAINS TAX EXEMPT 0% TAX Unlike other investments, all returns are tax free”.
Further text on the page stated “Whisky casks have achieved great returns for decades […] WHY INVEST IN WHISKY? Simple – It couldn’t be easier, Scotch Whisky simply appreciates with time Secure – You own a physical item, insured and stored in a secure warehouse. Strong – Protect against inflation with a medium to long-term investment. As Seen In The Telegraph, The Mirror and more […] We are specialist whisky stockists that hold casks from various distilleries, helping you build your perfect, bespoke portfolio. See our recent case study on Roger Parfitt to see the real benefits of Whisky Investment. CASE STUDY: ROGER PARFITT Our client Roger retired early after his Scotch Whisky investment earned him £225,000. Despite not being an expert in whisky, Mr Parfitt invested £3,200 on a cask of single malt Macallan and another £1,500 on a cask of Tobermory back in 1994. We might not all get a cask of Macallan that skyrockets to earn an annualised 16.5% per year, but even the lower-cost Tobermory cask saw a great return of 11% per year over the time held.
Under the heading “A GROWING MARKET” text included, “Historically, Scotch Whisky has delivered average returns of between 8-12% a year. As Roger’s case has shown, it can be considerably more! While individual distilleries vary, the major deciding factor in the size of your return is time. As Whisky matures, it becomes more desirable and therefore more valuable”.
The asterisk linked to small text in the footer that stated, “*As Seen In https://www.mirror.co.uk/money/dad-retires-after-scotch-whisky-24479975”.
c. The first paid-for Facebook post seen in July 2022, stated, “Enjoy an early retirement with your returns from Whisky Investment. Earn between 8-12% returns per annum after making a purchase with us. Download your free guide to get started”. Below that was an image with superimposed text that stated, “FANCY A TASTE OF THE BEST PERFORMING ASSET CLASSES OUT THERE? DOWNLOAD YOUR FREE GUIDE 8-12% AVERAGE ANNUAL RETURNS 0% CAPITAL GAINS TAX £4.51BN ANNUAL EXPORT VALUE”.
d. The second paid-for Facebook post seen in July 2022, stated, “Invest your savings into a tangible asset that offers more financial security than stocks and shares. Start your cask journey by filling in your details”. The post included the same invitation to download a free guide and the same image with superimposed text as ad (c).
Issue
The ASA received one complaint in relation to ads (a) and (b).
The complainant, in relation to ads (a) and (b), and the ASA, in relation to ads (c) and (d), challenged whether the:
1. investment return claims were misleading and could be substantiated; and
2. ads were misleading because they did not make clear the risks involved in whisky investment.
The ASA also challenged whether the:
3. ads were misleading because they did not make clear that fees applied or that there were terms and conditions to the service; and
4. ads (c) and (d) were irresponsible because they took advantage of consumers’ inexperience and credulity by suggesting that whisky investment was a suitable choice for retirement funds or for investment of savings.
Response
1. Blackford Casks Ltd t/a Whisky Investment Partners said they had a total of 3,990 customers, 63 of whom had sold their casks back to Whisky Investment Partners. They provided a spreadsheet with information about those 63 customers, including the dates and prices they had bought and sold their whisky casks and the returns they had made. They said that whisky was not matured until it was three years old and so a lot of the casks they had bought back were at the initial purchase price. They paid different costs for each cask depending on the age, litres of alcohol and storage duration. They also provided a spreadsheet with information about the purchase and buy back prices of six whisky casks, and the return that had been made on each.
They also provided a copy of the headline from a Mirror article and a copy of their contract with Roger Parfitt that they believed demonstrated the returns referenced in the ads about his whisky cask investments. They said that while Roget Parfitt originally purchased his whisky casks from another company, the purpose of the case study was to demonstrate the potential returns that could be achieved through purchasing whisky casks such as those supplied by the Whisky Investment Partners, and not specifically the whisky casks purchased and sold by Roger Parfitt.
The ads invited prospective customers to download a free guide to whisky investment and Whisky Investment Partners, where further full information was made available. Full terms and conditions and required disclaimers were made available to potential customers prior to contractually engaging. Full information could not be included meaningfully in ads (a), (c) and (d) because of their small size. Ad (b) was a webpage on the Whisky Investment Partners website which included the required information on other webpages, and which was presented to potential customers prior to contractual engagement.
2. Consumers were not always purchasing whisky casks as an investment; they could bottle the whisky for personal consumption. As such, they did not believe that it was a financial product and their ads did not need to include the information that was required for such products, such as that the value of investments could go down as well as up. Notwithstanding that, their ads referred consumers to a free downloadable guide for purchasing whisky casks, including how to resell in the future if they wanted to do so for investment purposes. They also included statements and warnings and terms of business before and at the point of sale. Therefore, such a statement was not required in the ads themselves.
They reiterated the points referenced at point 1; that the ads invited consumers to download their free guide and that consumers were provided with the necessary information before entering a contract.
3. They said their sales price also included storage and insurance for either five or 10 years, depending on the age of the cask. There were no ongoing costs until the cask storage duration was reached, at which point the consumer was responsible for the storage charges which varied between warehouses.
They reiterated the points referenced at point 1; that the ads invited consumers to download their free guide and that consumers were provided with the necessary information before entering a contract.
4. Ad (c) did not claim that early retirement could be achieved through purchasing whisky casks from Whisky Investment Partners, but that individuals had been able to retire early due to substantial increases in the value of the casks they had purchased. They reiterated the points referenced at point 1; that the ads invited consumers to download their free guide and that consumers were provided with the necessary information before entering a contract.
They did not believe that either ads (c) or (d) took advantage of consumers’ inexperience or credulity. They acted as links to a whisky investment guide which provided further details of purchase options (including costs, storage, uses and potential future sales) which were outlined in full. Consumers could then make a reasoned decision on whether or not to engage with Whisky Investment Partners.
Assessment
1. Upheld
The CAP Code stated that marketing communications must not materially mislead or be likely to do so. It also stated that marketing communications should make clear that past performance or experience did not necessarily give a guide for the future; if they were used in marketing communications, examples of past performance or experience should not be unrepresentative.Ad (a) stated “Cask Investment Get Returns upto [sic] 12% Per Annum”. Ad (b) stated “[…] a billion-pound market that has shown average returns of 8-12%* over the last couple of decades”, “WHISKY CASK MARKET RETURNS 8-12% Average return per annum over the last 10 years” and “Historically, Scotch Whisky has delivered average returns of between 8-12% a year”. Ad (c) stated “Earn between 8-12% returns per annum after making a purchase with us” and “8-12% AVERAGE ANNUAL RETURNS”. Ad (d) stated “8-12% AVERAGE ANNUAL RETURNS”. Ad (b) also included a case study from one of their customers and stated “[…] his Scotch Whisky investment earned him £225,000 […] Mr Parfitt invested £3,200 on a cask of single malt Macallan and another £1,500 on a cask of Tobermory back in 1994. We might not all get a cask of Macallan that skyrockets to earn an annualised 16.5% per year, but even the lower-cost Tobermory cask saw a great return of 11% per year over the time held”.
The ASA considered that consumers would understand the investment return claims to mean that they could expect to achieve a return of up to 12% in ad (a), and between 8% and 12% in ads (b), (c) and (d), each year on whisky casks bought through Whisky Investment Partners. We considered the references to earning up to 12% per annum in ad (a) and earning between 8% and 12% per annum in ads (b), (c) and (d) were different statistics; the first referred to a maximum return, whereas the second would be understood as being the average range and therefore there was potential for some investments to have returns greater than 12%. However, because ad (a) linked through to ad (b), we considered they were ambiguous as to the yearly return. Also, because ad (b) referred to the average annual returns of 8-12% being historic and having been at that rate for the past 10 years, we considered consumers would understand that whisky cask investments were stable. We also considered that consumers would understand the case study in ad (b) to mean that Mr Parfitt had sold two casks of whisky for £225,000 which he originally bought for £4,700 in 1994, and that equated to annual returns of 16.5% and 11% for each cask. Whisky cask investments were therefore lucrative and if a consumer purchased a cask of whisky and held their investment for a number of years, then they could expect to make returns of those scales.
We first considered the evidence that related to all of the customers who had bought and sold whisky casks through Whisky Investment Partners. There were 63 customers and they had bought and sold a total of 214 whisky casks. The spreadsheet included information on the investment return for each whisky cask which ranged from 0% to 115%, as well as the average return which was 10%. We understood that of the 122 casks that had made a return, only one had made a return of 115%. After this, the next largest return was 51%. We therefore considered the return made on that cask was an outlier and it was uncommon for casks sold by Whisky Investment Partners to make returns of that scale. Although they did not reference the investment return range in the ads, we nonetheless considered that the average return could be distorted if outliers were included in such calculations. We also understood that the rate of return was calculated for the whole investment period, and not the yearly return. The length of time customers had owned their whisky casks before selling it back ranged from a number of months to a small number of years. We therefore considered that because the evidence only reported on the average rate of return for the entire investment, it was insufficient to substantiate the average annual return claims.
We next considered the evidence that related to the purchase and buy back prices of six whisky casks. Whisky Investment Partners had not provided information about how they had selected this subset of customers. We therefore considered that they had not demonstrated that they were representative of all customers who had invested in their whisky casks. Notwithstanding that, the average return for these whisky casks was 15% and ranged from 6% to 37%. There was no information about when the casks had been bought and sold. The return stated for each purchase related to the whole investment period and was not the yearly return. We therefore considered that because it was not clear that these six customers were representative of all of Whisky Investment Partners’ customers, and we had not seen evidence for the yearly return, it was insufficient to substantiate the average annual return claims.
Notwithstanding the above, the evidence related to the purchase and buy back prices of 214 whisky casks and six customers. We considered that this was a relatively small number to base average return claims on, particularly as many of them had sold their cask back to Whisky Investment Partners for the same price they had bought it for. Whilst we acknowledged that some customers would hold their investment for longer, in anticipation that they would get a greater return, we nonetheless considered that the evidence to substantiate the claim was based only on a relatively small number of investments which had only been held for a relatively short period of time. Additionally, we had not seen evidence from the wider whisky cask investment market to demonstrate the investment return claims referenced in the ads were consistent with the rest of the market. We therefore considered that the evidence was insufficient to substantiate the average return claims in this regard.
Ad (b) referred to the average annual returns of 8-12% being historic and having been at that rate for the past 10 years. However, we understood that Whisky Investment Partners was established in 2019 and, from the evidence they provided, the earliest cask they had sold which they subsequently bought back, was in May 2020. Therefore, because their sales history only covered the previous three years, we considered this was insufficient to substantiate claims about historic average annual returns and average annual returns from the previous 10-year period.
We next considered the evidence in relation to the case study return claims. Whisky Investment Partners provided a copy of a headline from The Mirror that stated that Mr Parfitt had bought a cask of single malt Macallan for £3,400 and Tobermory for £1,500 in 1994, and subsequently sold them for £225,000. They also provided a copy of the purchase agreement which showed that they had bought the two casks of whisky from Mr Parfitt for £225,000 in 2021. Although Mr Parfitt had sold the casks to Whisky Investment Partners, he had originally bought them elsewhere. There were terms and conditions as part of the agreement between Mr Parfitt and Whisky Investment Partners, including that in the 12 months after the purchase, they could promote the story and Mr Parfitt had to reinvest some of the money to purchase two new casks from them, although these were at a discounted rate. We therefore considered that because there were terms and conditions to the purchase of the cask, and that Whisky Investment Partners had anticipated using the case study in their advertising and promotional activities, the price they paid for the two casks may not have reflected what they were actually worth at the time. We had not seen evidence of the wider whisky cask market at the time Whisky Investment Partners bought the casks demonstrating that the price they paid was consistent with the value of other casks of similar quality at that time. For those reasons, we considered that the evidence was insufficient to substantiate the investment return claims stated in the case study.
Furthermore, with regards to the up to, average, and case study return claims, we considered that Whisky Investment Partners had used the past performance to encourage consumers to invest in their whisky casks. None of the ads included information to make clear to consumers that past performance was not necessarily a guide for the future.Therefore, because consumers would understand the returns claims to be achievable on whisky casks bought from Whisky Investment Partners, and we had not seen sufficient evidence that this was the case, and because they had not made clear that past performance was not necessarily a guide for future performance, we concluded the investment returns claims were misleading.
On this point, ads (a), (b), (c) and (d) breached CAP Code (Edition 12) rules 3.1 (Misleading advertising), 3.7 (Substantiation), 3.9 (Qualification), 14.3 and 14.5 (Financial products).
2. & 3. Upheld
The CAP Code required that offers of financial products must be set out in a way that allowed them to be understood easily by the audience being addressed. It also required that marketers ensure that they did not take advantage of consumers' inexperience or credulity, and that marketing communications state the nature of the contract being offered, any limitation, expense, penalty or charge, and the terms of withdrawal. The CAP Code also required that marketing communications for investments made clear that the value of investments was variable and, unless guaranteed, could go down as well as up, and also that significant limitations and qualifications were stated and presented clearly. Marketing communications must not mislead the consumer by omitting material information, or by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
We noted Whisky Investment Partner’s comment that consumers were not always purchasing whisky casks as an investment and that they could bottle the whisky for personal consumption. However, we considered that the purpose of the ads and the name “Whisky Investment Partners” was clearly focused on purchasing a whisky cask as a means of investment.
Material information was that which the consumer needed to make informed decisions in relation to a product. We understood that the value of whisky cask investments was not guaranteed, and the whisky cask investment market was not regulated within the UK nor was it subject to the protections afforded by the Financial Services Compensation Scheme or the Financial Ombudsman Service. We considered the fact that whisky cask investments were unregulated, and also that there were fees associated with the purchase, ongoing ownership and exiting of the investment, as well as that there were terms and conditions to the purchase of a whisky cask, to be material information that consumers required in order to make informed decisions about Whisky Investment Partners’ services.
None of the ads included information that returns were not guaranteed and could go down as well as up, or that the investments were unregulated in the UK. We acknowledged that where an ad was constrained by time or space, the measures that the marketer took to make that information available to the consumer by other means were relevant when considering whether it was misleading. We did not consider that ads (c) and (d) were constrained by space in the way that Whisky Investment Partners described. Notwithstanding that, they linked through to ad (b). Ad (a) also linked through to ad (b). However, as referenced above, there was no information in ad (b) in this regard. We therefore considered that the ads had omitted material information that cask whisky investments were not guaranteed, could go down as well as up, and that they were unregulated in the UK.
We understood that when purchasing a whisky cask from Whisky Investment Partners, the purchase price also included the cost to store and insure the cask for either five or 10 years. Because the initial purchase agreement only included storage and insurance for either five or 10 years, regardless of what consumers chose to do with their whisky cask at the end of that period, they would incur further costs. If they chose to continue the maturation of the whisky, they needed to arrange and pay for further storage and insurance of the cask. If consumers chose to exit their investment, they could do so either through one of Whisky Investment Partners’ exit strategies, or by bottling the whisky. The exit strategies included selling the cask to one of Whisky Investment Partners’ private investors, to a whisky brand or at auction. Whisky Investment Partners took a 5% fee from the profits made. While whisky casks were in bonded warehouses, they were not subject to VAT and duty. When cask whisky was bottled, the consumer would be responsible for paying VAT on the purchase price of the cask, paying duty on the cask, the cost of transporting the cask from the bonded warehouse to a bottling plant, as well as the costs to actually bottle the whisky. Therefore, in addition to the cost for the cask of whisky, there were other upfront costs and ongoing costs throughout the ownership of a cask of whisky. We also understood that when purchasing a whisky cask from Whisky Investment Partners, there were terms and conditions to the service. These included, but were not limited to, acknowledging that the volume of spirit in the cask would reduce over time due to the evaporation of liquid (known as the Angels’ Share), and that Whisky Investment Partners were not responsible for those losses. There were also other terms and conditions including around both parties’ rights to end the contract, and the price and payment. We considered that there being fees and terms and conditions to using the service was material information that was likely to influence a consumer’s transactional decision and should have been made sufficiently clear from the outset. None of the ads included information that fees applied or that there were terms and conditions to the service. We acknowledged that where an ad was constrained by time or space, the measures that the marketer took to make that information available to the consumer by other means were relevant when considering whether it was misleading. We did not consider that ads (c) and (d) were constrained by space in the way that Whisky Investment Partners described. Notwithstanding that, they linked through to ad (b). Ad (a) also linked through to ad (b). However, as referenced above, there was no information in ad (b) to make clear to consumers that fees and terms and conditions applied. Therefore, because none of the ads, nor the landing page the ad immediately linked to in the case of ad (a), included information about fees and terms and conditions relating to investing in whisky casks, we considered the ads had omitted material information.
We acknowledged Whisky Investment Partners’ comments that consumers were presented with the required information prior to entering a contractual agreement, nonetheless, in the absence of information to the contrary, we considered that consumers would not have been aware that investing in cask whisky could not achieve guaranteed returns, that returns could go down as well as up, the investment was unregulated, and that there were terms and conditions and fees to the service. We therefore concluded that the ads had failed to set out an offer for a financial product in a way that allowed it to be easily understood by the audience being addressed.
On this point, ads (a), (b), (c) and (d) breached CAP Code (Edition 12) rules 3.1, 3.3 (Misleading advertising), 3.9 (Qualification), 14.1, 14.2 and 14.4 (Financial products).
4. Upheld
Ad (c) stated, “Enjoy an early retirement with your returns from Whisky Investment”. Ad (d) stated, “Invest your savings into a tangible asset that offers more financial security than stocks and shares”.
With regards to ad (c), we considered it suggested that whisky cask investment was straightforward and accessible, and that the returns would be substantial enough to fund retiring early. As discussed at points 2 and 3 above, investments in cask whisky were not guaranteed, and therefore could expose investors to losses. Furthermore, we understood that the initial purchase price of a cask of whisky was usually in excess of £1,000 but, depending on the size of the cask and the type of whisky, it could be significantly more. For those reasons, we considered this stood in contrast to the impression given by the ad, that investment was simple and accessible. We therefore concluded that ad (c) irresponsibly suggested that purchasing a whisky cask through Whisky Investment Partners was a suitable means to fund an early retirement.
With regards to ad (d), we considered it gave the impression that funds invested in whisky casks were safe and would not reduce in value. Furthermore, they were a safer investment than investing in stocks and shares. We considered that funds in savings accounts were commonly understood not to diminish in value. However, as referenced above, investments in cask whisky were not guaranteed, and therefore could expose investors to losses. We therefore concluded that ad (d) irresponsibly suggested that purchasing a cask of whisky through Whisky Investment Partners was a secure way to invest one’s savings.
For those reasons, and particularly given that the audiences the ads addressed, the general public, were likely to be inexperienced in their understanding of whisky cask investment, we concluded that the ads breached the Code.
On this point, ads (c) and (d) breached CAP Code (Edition 12) rules 1.3 (Social responsibility) and 14.1 (Financial products).
Action
The ads must not appear again in the form complained about. We told Blackford Casks Ltd t/a Whisky Investment Partners to ensure that their future ads did not quote average returns unless they held adequate evidence to substantiate the claims. We also told them to set out offers for financial products in a way that allowed them to be easily understood by the audience being addressed, including by making sufficiently clear that the value of investments in cask whisky was variable and could go down as well as up, that past performance was not necessarily a guide for future performance, that cask whisky investments were unregulated, and by not omitting material information about the fees and terms and conditions to use the service. We also told them to ensure their ads did not irresponsibly take advantage of consumers’ lack of experience or credulity by implying that whisky cask investment was a suitable means to fund early retirement or to invest their savings.
CAP Code (Edition 12)
1.3 3.1 3.3 3.7 14.1 14.2 14.3 14.4 14.5 3.9
