Introduction To Advertising Law

Transcript

Welcome to the Gowling WLG ad law team podcast.

I'm Jason Stephens and, in this first podcast, I'll be taking you through the basics of advertising regulation in the UK.

Advertising is ever present in our lives. Unless you're living out in the wilderness with no access to technology, it is near impossible to spend a day without seeing an advert. Without advertising, the media as we know it could not exist - newspapers, magazines, commercial broadcasting and vast swathes of the internet all depend on the revenues raised through the sale of advertising space.

While advertising exists to raise awareness of brands and, ultimately, to induce us to spend money on products or services, it can also help to inform, assist in making choices and inspire with great creativity. In the UK, it's one of our most important creative industries, responsible for billions of pounds of revenue and some of the world's most memorable and innovative campaigns.

But barely a week goes by without advertising also making the news for the wrong reasons. It's blamed for many of society's ills, from the targeting of vulnerable people by irresponsible lenders, to childhood obesity. There are frequent calls for stricter controls or bans on gambling or alcohol advertising. The desire to present a product in the best possible light can lead to boundaries being pushed too far, resulting in claims which may mislead. And a multitude of other issues can arise, from questionable health claims to price offers which are not as attractive as they first seem.

So how is advertising regulated in the UK?

Advertising regulation in the UK takes various different forms, including an established and well-respected self-regulatory system of advertising standards, which exists alongside laws including the Consumer Protection from Unfair Trading Regulations and the Business Protection from Misleading Marketing Regulations. Various regulators play a role including the Advertising Standards Authority - the ASA - which administers the self-regulatory system, local authority Trading Standards offices, and the Competition and Markets Authority - the CMA. While advertisers may have reasonably regular dealings with the ASA and Trading Standards, the CMA concentrates on issues which have the potential to distort markets as a whole - for example, it has taken recent action on the disclosure of paid-for endorsements (to enable consumers to identify advertising and distinguish it from editorial content) and on misleading price offers.

A multitude of other laws and issues can impact advertising in the UK, including intellectual property laws - perhaps where advertising infringes copyright, 'passes off' an authorised connection with a celebrity or event or makes use of a trade mark in connection with a comparative ad that doesn't comply with the rules. Data protection and privacy laws govern the collection and use of personal data for direct marketing and have the potential to impact analytics, retargeting and other kinds of online behavioural advertising. The advent of the General Data Protection Regulation in May 2018 (which is beyond the scope of this podcast) has major implications for advertisers and agencies and all businesses which have not already done so should be looking at auditing their compliance. You don't want to be on the receiving end of a fine of 4% of global turnover...

Defamation and malicious falsehood can be an issue in advertising and more so now, in the era of the ill thought out social media post. And there are any number of sector or product-specific requirements from those governing health and nutrition claims made on foods, through to cosmetics regulation and laws on gambling, which can impact on prize promotions and contests.

So there are a lot of issues to consider and enforcement and sanctions also vary. The ASA is typically reliant on the bad publicity which flows from its published rulings, while Trading Standards and the CMA have a much wider range of sanctions available, from seeking undertakings from a business, through to criminal prosecution of both companies and individuals to whose neglect an offence is attributable. In practice, Trading Standards prosecutions come up less regularly than they used to - local authority cuts in the UK have left Trading Standards departments with significant resource constraints - but the risk of prosecution still tends to help focus advertisers' minds. Reputational impact and brand damage can also be severe - stories about supermarkets misleading on price or car brands misleading on emissions are likely to be picked up by the press.

In terms of who can bring an action before the courts, there are some private rights of action in the UK for consumers misled in breach of the Consumer Protection from Unfair Trading Regulations. However, the UK does not have the history of enormously expensive class action lawsuits which are a feature of advertising law in the United States. It can also be difficult (compared to jurisdictions such as Germany and the United States) for companies to bring a claim before the UK courts in relation to their competitors' misleading advertising, unless a trade mark is used in a comparative ad or there is an actionable malicious falsehood or defamatory comment. In many cases, businesses will be reliant on complaints to the regulators and the ASA, in particular, rules on large numbers of competitor complaints each year - broadband speed and reliability and supermarket price advertising are two particularly contentious areas.

Let's take a quick look at the sources of UK advertising law and the potential impact of Brexit...

Much of the UK's modern advertising regulation comes out of Europe. For the most part, key EU legislation affecting advertising has taken the form of Directives, which have already been incorporated into law in the form of domestic legislation. These measures are unlikely to change in the short term, on the UK's exit from the EU.

Where EU measures have taken the form of Regulations (which, on adoption, are directly effective in Member States, rather than requiring implementation via domestic legislation), the situation is less straightforward. The UK Government's current intention is to implement these measures wholesale into local law, via the misleadingly titled 'Repeal Bill'. They would therefore also continue to apply unless and until they can be individually reviewed and replaced by updated UK domestic legislation. An example of an EU Regulation having an impact on advertising is the Regulation governing nutrition and health claims made on foods.

Even in the longer term it's unlikely that there will be a fundamental change in approach - the UK has obviously participated in the creation of many of the underlying EU measures. But, it will be interesting to see, if, for example, the case-law on comparative advertising starts to diverge post-Brexit.

Turning to the legislation itself, the key regulations which every advertiser needs to be aware of are the Consumer Protection from Unfair Trading Regulations - the CPRs and the Business Protection from Misleading Marketing Regulations.

The CPRs implemented the Unfair Commercial Practices Directive into UK law and govern a variety of unfair trading practices directed at consumers. They include a 'blacklist' of practices, in Schedule 1, which are always unfair. When reviewing ads and marketing activities, it's a good idea to flick through Schedule 1, which includes, for example, restrictions on describing a product as "free" if the consumer has to pay anything other than unavoidable costs to receive the product and restrictions on using an editorial to promote a product where the promotion is paid for and this is not made clear to a consumer.

The CPRs also prohibit certain misleading acts and omissions - making deceptive statements in advertising or omitting material information can, where it causes or is likely to cause the average consumer to take a transactional decision they would not have taken otherwise, amount to an offence under the CPRs. What is misleading is typically judged from the perspective of the average consumer but, where an ad is targeted at a particular or vulnerable group - for example, a household security product targeted at elderly people - then the average consumer will be the average member of that group. Practically, when reviewing an ad for compliance ahead of publication, it is always worth taking a step back and seeking to look at it through the eyes of an average consumer, who does not have detailed background knowledge of the product or any awareness of the creative development process.

The Business Protection from Misleading Marketing Regulations - the BPRs - are relevant to trade and comparative advertising. Although, in practice, trade customers are typically less likely to complain to the regulators about misleading advertising and can often be assumed to have more background knowledge than consumers, it's important to note that advertising which deceives traders and, for that reason, is likely to affect their economic behaviour or to injure a competitor, is an offence under the BPRs.

The BPRs also set out the rules on comparative advertising, implementing the Misleading and Comparative Advertising Directive. Comparative advertising, which explicitly or implicitly identifies a competitor, or a competing product, is permitted so long as it, among other things:

does not mislead;
compares products meeting the same needs or intended for the same purpose;
objectively compares material, relevant, verifiable and representative features, which may include price;
does not create confusion with the competitor or take unfair advantage of the competitor's trade mark; and
does not discredit or denigrate the competitor.

Where a competitor trade mark is used in a comparison - cleans whiter than Ariel, for example, or lower price than Boots - then compliance with the rules on comparative advertising will, in effect, form a complete defence to any claim of trade mark infringement. That said, there will often be room for argument over whether a comparison misleads or not or whether compared features are representative. That could be based on flaws or bias in the supporting evidence or on marketing teams making a claim which is broader than the supporting evidence allows. Retailer price comparisons - encompassing a range or basket of goods - can be notoriously difficult to put together and skewed by the inclusion of just one atypical item in the basket. And comparisons will inevitably be scrutinised by the competition and their legal teams. As a result, the threat of trade mark infringement claims linked to comparative advertising is very much a live risk in the UK and some of the EU's biggest comparative advertising cases have come out of this jurisdiction - for example Telefonica O2's action against Hutchison 3G over the use of its 'bubbles' mark in a mobile phone network price comparison. Advertisers contemplating comparative campaigns would be wise to get specialist advice early, at concept stage and before settling on the methodology for any testing or research.

Both the CPRs and the BPRs state that enforcement authorities should have regard to the desirability of encouraging control of advertising by 'established means', which brings us to one of those 'established means' - the UK's self-regulatory system, the ASA and the non-broadcast and broadcast codes of advertising standards - the CAP and BCAP Codes.

The self-regulatory system is administered by the Advertising Standards Authority - the ASA - who apply codes drawn up by the advertising industry through the Committee of Advertising Practice, known as CAP and the Broadcast Committee of Advertising Practice, known as BCAP.

The UK Code of Advertising, Sales Promotion and Direct Marketing - the CAP Code - covers non-broadcast advertising, while the UK Code of Broadcast Advertising - the BCAP Code - covers traditional broadcast advertising. Most forms of advertising are covered by one of the codes including print ads; radio and TV ads; online and mobile advertising; commercial emails and text messages; posters and billboards; leaflets and brochures; ads in the cinema, video on demand advertising and direct mail. One notable exception is product packaging and point-of-sale (except where it includes a sales promotion). So a claim to be the best, on-pack, would not fall within the ASA's remit but if the same claim were repeated in a TV ad, or simply made visible as part of a pack-shot in the TV ad, then the ASA could consider a complaint.

The foundation of the codes is that advertising in the UK should be legal, decent, honest and truthful. They cover a range of areas including misleading advertising, comparative advertising, promotional marketing and harm and offence. There are also numerous specific rules relating to particular products or issues - medicinal products and health, environmental claims, food and drink, children, alcohol, motoring and e-cigarettes to name but a few.

The majority of issues considered by the ASA relate to misleading advertising. These account for roughly 70% of all complaints received. Misleading ads include not just those which make deceptive claims but also those which misleadingly omit material information and ads which, through a combination of copy and imagery give a misleading overall impression.

So, the ASA will consider what you say - for example, it will look at claims you make about a product's features, efficacy or performance.

It will consider what you don't say - the material information you may have omitted. For example, the ASA has ruled against an ad for a mobile phone ringtone which omitted to inform the consumer that they were signing up to an ongoing subscription, with a monthly payment.

It will look at what you implyand the overall impression that you give in an ad through the combination of copy, imagery etc. For example, the ASA has ruled against ads which made truthful environmental claims but implied a greater benefit by using visuals of flowers emerging from chimneys or exhaust pipes.

The ASA will also look beyond the copy in your ad, at the underlying evidence you have to support the claims that you make. It is a principle of the CAP and BCAP Codes that, before making a claim, advertisers should hold documentary evidence to prove that claim, if consumers are likely to regard it as objective and it is capable of objective substantiation. So, if for example, you want to claim that consumers prefer your food product, then you would be expected to have robust taste preference test data to prove that claim.

But what about small print? "Just send the ad to legal and they can add some terms and conditions in tiny font at the bottom" says an all too typical marketing team... While qualifying wording can be used to clarify a claim, it needs to be clearly legible, linked to the claim with an asterisk or similar (unless it appears immediately underneath) and cannot include wording which contradicts the headline. The ASA regularly rules on small print which is inadequate to prevent the headline claim misleading - perhaps because it is included a click away in digital media or because it is contradictory, as, for example, when a "50% off everything" sales claim has exclusions in the small print.

Other claims which regularly give rise to ASA complaints about misleading advertising include:

'superlative claims' - claims to be the best, the highest quality or the cheapest are scrutinised by competitors and regularly give rise to upheld complaints. They are therefore high risk, if the advertiser does not hold robust supporting evidence. While some far-fetched or vague claims can be defended as advertising 'puffery', which consumers would not take seriously, the danger is that, placed in the context of a longer ad, such claims are invested with an objective meaning which the advertiser is unable to substantiate;
'number 1' and 'nation's favourite' claims are particular types of superlative claim - the ASA generally treats these claims as analogous to 'best selling' claims and requires advertisers to substantiate them on the basis of robust sales data;
comparative claims - as I mentioned earlier, comparative claims regularly trigger hard fought complaints, both before the ASA and, potentially, where a trade mark is used or there is an actionable malicious falsehood, in the courts;
price claims and price offers - barely a week goes by without the ASA ruling that a price offer is misleading because the higher, slashed out price was not the 'normal price' for the sale product;
British and local claims - from the London Olympics in 2012, through to Brexit, there has been a temptation to advertise the Britishness of products or their components or ingredients - these claims can easily mislead in the context of complex, multinational sourcing and manufacture;

Despite the vast majority of complaints being about misleadingness, the most well publicised ads subject to ASA complaints usually resolve around harm and offence. Guy Parker, the Chief Executive of the ASA, when talking about the top 10 complained about ads in 2016, stated, "Our action leads to thousands of ads being amended or withdrawn each year, mostly for being misleading, but there wasn't one misleading ad in the top 10".

The code rules state that advertising should not cause serious or widespread offence. There are also rules to prevent harm - for example, advertising should not condone or encourage unsafe practices. Adjudications on these grounds regularly make headlines. The UK's most complained about ad ever, for example, which was banned for causing serious and widespread offence and bringing advertising into disrepute was Paddy Power's 'Your money back if he walks' Oscar Pistorius ad, an ad which simultaneously made light of the former Paralympic athlete's murder trial (and the violent death of his partner) and mocked his disability. The rules on offence have also been used to address issues of objectification of women or potentially harmful thinness in advertising. Most recently, the ASA has announced an intention to look at additional rules to address harmful gender stereotypes in advertising.

Specific social responsibility rules exist in relation to everything from the depiction of speed in automotive advertising to links with daring or toughness in alcohol advertising. A number of rules relate to placement, as well as content - for example, alcohol, gambling and e-cigarette ads cannot be placed in non-broadcast media if more than 25% of the audience is under 18.

The codes are also regularly updated to reflect new or increased societal concerns. For example new rules have recently been implemented regulating the advertising of foods high in fat, sugar and salt to children.

ASA Complaints Procedure

Members of the public, as well as those working for a competitor of an advertiser, can submit a complaint to the ASA. This can be done by letter, by telephone, or online through the ASA's website. Where the complainant is a competitor, they must comply with the ASA's competitor complaints procedure, whereby they must raise their concerns directly with the advertiser first and attempt to resolve the issue. If they are unable to resolve matters, they may then, after five working days, make a complaint to the ASA.

Once a complaint is received it is assessed to see whether it falls within the scope of the Codes.

If there is a potential breach, the ASA will take up the complaint. In some circumstances the potential breach might not warrant a full investigation and the ASA may resolve the complaint informally where the advertiser agrees to amend or stop using an ad and provides assurances about its future use of similar advertising. Where a complaint is resolved informally, all that will be published on the ASA website is the name of the advertiser and words to the effect that they have worked with the ASA to resolve a complaint. No details of the actual complaint will be listed.

The informal resolution is therefore a quick and relatively private way to resolve a dispute, where an advertiser is happy to make an amendment to their advertising. However, it is the investigations executive that decides whether a complaint may be resolved informally or not. I used to work as an investigations executive and the executive will judge whether a complaint may be resolved informally depending on the seriousness of the breach also depending on if the advertiser had resolved complaints informally previously. The more serious the breach, the more likely a formal investigation will be conducted and if an advertiser has previously resolved investigations informally, the more likely a formal investigation will be carried out subsequently, particularly if the current investigation is on similar grounds to the previous informal resolutions.

In a formal investigation, the advertiser is invited to defend their ad in writing and provide supporting evidence to support or substantiate their position where necessary. An advertiser is expected to hold substantiation for its claims before they are made within its advertising. If for example an advertiser, who sells and markets a drink, is notified of a complaint against it to the ASA challenging whether their claim to have "all natural ingredients" in one of their products, they will be expected to have full evidence substantiating this claim. The investigations executive at the ASA will draft a recommendation, outlining whether they believe the complaint should be upheld or not. The advertiser will then have an opportunity to comment on the draft recommendation. Ultimately, the recommendation will go to the ASA Council who either agree or disagree with the recommendation and ultimately decide upon whether there has been a breach of the advertising codes. Where members of the ASA Council do not reach a sufficient consensus, the investigations executive will present the facts of the complaint to the ASA Council in person, who will discuss the complaint and reach a decision. There are no oral hearings and the complainant and advertiser are not permitted to attend or give evidence in person.

In certain circumstances, an advertiser subject to an upheld ruling can request that an independent review is carried out to reassess a decision. Independent reviews are, at the time of speaking, conducted by Sir Hayden Phillips. In the past the independent review process has perhaps appeared to be rather less independent than is ideal and it remains the case that only a minority of ASA Council adjudications are overturned. ASA decisions are also subject to judicial review, though relatively high barriers to judicial review claims mean that they do not come up regularly.

Sanctions

Enforcement of the codes is on the most part light-touch and the most common sanction employed by the ASA is to 'name and shame' non-compliant advertisers through published rulings. Published rulings are released every Wednesday on the ASA's website but released to the press in advance of this each week under embargo. National newspapers and the trade press do report on ASA rulings and the impact on brand and reputation should not be underestimated.

Television adverts are required to be pre-cleared against the BCAP Code by Clearcast, a body set up by the broadcasters. If the ASA rules against a TV ad, then it will not be permitted back on air.

The ASA will also ask advertisers not to repeat non-broadcast advertising, which has been the subject of an adverse ruling. For the most part, advertisers comply with these requests. Where they do not, CAP can issue alerts to its media owner members, asking them to withhold advertising space from the advertiser. Other potential remedies include requiring an advertiser to go through pre-clearance with the CAP Copy Advice team or, in the case of non-compliant digital advertisers, inclusion on a further 'name and shame' list of problem advertisers or ask internet search websites to remove a marketer's paid-for search advertisements when those advertisements link to a page on the marketer's website that contains material that breaks the rules.

Where an advertiser persists in misleading advertising or certain other breaches, then the ASA may refer the matter to Camden Trading Standards, who have a much wider range of potential sanctions available under legislation.

For the most part though, and with the exception of brands such as Ryanair and Brewdog who, in the past, have made a virtue of defying the ASA, the system works well and brands are anxious to comply to avoid further reputational damage.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

UK: Introduction To Advertising Law