Are Your Advertisements Compliant?

First published in The In-House Lawyer, November 2007

Advertising and marketing are essential tools for any business in today’s crowded marketplace.  The shifting habits of consumers, the advent of new technologies and developments in the law are changing the advertising landscape at an unprecedented rate.  Public interest in the impact that advertising has on children and issues surrounding the appropriateness of promoting alcohol and gambling have brought the spotlight firmly on how these areas are regulated.  It is therefore more important than ever to ensure that advertising is legally compliant.

The Legislation

Although considered by many to be a relatively liberal regime, the UK still has a vast array of legislation that impacts upon advertising and promotions.  In addition to the general law on such areas as contract, negligence, libel and consumer protection, there are statutes specifically designed to protect consumers, and which regulate advertising practice.  The legislation includes the Control of Misleading Advertisements Regulations 1998, the Trade Descriptions Act 1968, the Consumer Protection Act 1987, the Consumer Credit Act 1974, the Comparative Advertising Directive, the Gambling Act 2005 and the Unfair Commercial Practices Directive which although adopted in May 2005 is not due to be implemented in the UK until April 2008.  

The Regulatory Regime

Advertising and promotions in the UK are controlled through established voluntary Codes of Practice, all of which are related to the protection of consumers. 

The British Code of Advertising, Sales Promotion and Direct Marketing regulates non-broadcast advertisements, sales promotions and direct marketing communications (marketing communications).   Although editorial content is specifically excluded from the Code, it might be a factor in determining the context in which marketing communications are judged.  The BCAP Television Advertising Standards Code and the BCAP Radio Advertising Standards Code respectively govern advertisements on any television channel and radio station licensed by Ofcom.

The Advertising Standards Authority (the ASA) is the independent body set up by the advertising industry to ensure compliance with the codes referred to above (the Codes).

The ASA’s Remit

The principle aim of the Codes is to ensure that advertising is legal, decent and honest and that it is not misleading, harmful or offensive.  The ASA has the power to investigate complaints made about advertisements, sales promotions and direct marketing and they publish their findings on a weekly basis on their website.  These adjudications are available to the public at large and can, to some extent, generate negative publicity for the advertiser.  The ASA also has the power to require advertisers to amend or withdraw advertising if it is non-compliant. 

Core Principles of the Codes

The Codes impose the following general core principles with which all advertisements must comply:

• Substantiation: All claims must be capable of substantiation before they are aired or published and therefore an advertiser should hold evidence to support its claims.  
• Honesty/Truthfulness: An advertiser should not take advantage of the lack of experience or knowledge of consumers and marketing communications should not be misleading, ambiguous or exaggerated.  
• Decency: Marketing communications should not contain anything that is likely to be distasteful or cause harm or serious or widespread offence, particularly in relation to race, religion, sex, sexual orientation or disability. 
• Legal: Finally, marketing communications should comply with all other relevant laws as well as the Codes. 

In addition to these core principles there are additional rules dealing with specific issues such as endorsements, guarantees, price indications, safety and protection of privacy.  There are also a number of sections dealing with sensitive areas such as tobacco, alcohol, medicines, financial services, direct mail, mail order, comparative advertising, charities and advertisements aimed at children.

Advertising Compliance - Practical Advice

Clearance

To ensure compliance, any artwork should be legally cleared wherever possible at concept stage and at all significant change stages as it evolves to final copy.    Primary responsibility for ensuring an advertisement is legal rests with the company placing the advertisement, not its agencies. 

Where applicable, a file should be maintained for written consents and source references for opinions and facts stated in the advertisement.  This will be essential to respond to any ASA complaint.

Intellectual Property

Third party copyright works, trade marks and registered designs are all commonly used in advertising.

(a) Copyright

Be aware that where agencies create material, such as photographs, they will own the copyright, subject to agreement to the contrary with the client.

Where third party music is used in TV or radio advertisements the consent of the copyright owner (usually the publisher) is required, as well as the consent of the owner of the recording which is used (usually the issuing record company).

(b) Trade Marks/Designs

Use of third party products in an advertisement without consent may infringe the third parties’ trade marks or registered designs.  It may also imply an endorsement or a business connection between these products and the advertised product which, if not authorised, may be misleading and damaging to the goodwill and reputation of the third party product.

Distinctive new brand names, advertising slogans and packaging shapes should be considered for trade mark registration.  It is also worth remembering that new and original advertising jingles can now be registered as trade marks.

(c) Comparative Advertising

Comparative advertising (and use of a third party’s trade mark in this context) is permissible in the UK provided that:

(i) the compared product is not denigrated.  Pointing out a shortcoming in a fair and accurate manner is acceptable, but stating or implying that the product is inferior as a result is not acceptable;

(ii) the comparison is fair and on a like for like basis and is not misleading.  Whether the comparison is of a technical, physical or performance feature, the basis of the comparison must be similar;

(iii) there is no unfair exploitation of the goodwill attached to the trade mark of the compared product. 

Personality Rights

In the UK, there are no proprietary rights (such as a right of privacy) in a person’s image or personality, although such rights do exist in certain other countries.  However, the use of a person’s image may imply an endorsement where one does not exist, so consent should always be obtained from the person.  This is also necessary to comply with the Codes.

Agency Contracts

Contracts with advertising agencies should, as a minimum, address the following issues:

(a) Who owns the copyright and other intellectual property rights in material created by the agency?  If the client wishes to own such rights the agency agreement must contain an assignment to that effect.

(b) Is the client granted a licence for limited use or an assignment of all rights in the advertising material created by the agency?  In the absence of any agreement, only a non-exclusive licence to use the material for the specific purpose for which it was provided will be implied.

(c) In which territories will the material be required?  In most cases it will be the UK.  If the company want to use the same material, with suitable adaptations, in the rest of Europe or elsewhere, any licence for use granted by the agency must extend accordingly.

(d) For what period of time will the material be used?  If the material is intended to be for a long term campaign, the agreement should deal with fees if the campaign lasts longer than the period of the agency contract.

(e) What are the approval procedures through to final copy?  These need to be practical, as commonly speed of turn-around is a major factor.

(f) Is the agency prohibited from working for a competing company while retained by the client?

(g) Who is responsible for ensuring compliance of the advertisement as a whole with applicable laws and regulations?  Warranties of legal compliance and indemnities against liability should be obtained from the agency as a matter of good practice.  But remember that if the agency gets it wrong the advertiser will be ultimately responsible so it must satisfy itself as to the quality and accuracy of any legal advice received by the agency.

(h) Who is responsible for getting all necessary consents from rights owners?  It will normally be the party who is providing the material, such as photographs or quotes from copyright publications. 

(i) How is the agency fee to be structured?  On a project by project basis, an agreed fee or on a retainer?  There are no set fee structures.  It depends on what the agency is doing for the client, the main concern of the client being to get value for money.

(j) What are the termination provisions?  The client may use more than one agency, or it may use one agency exclusively.  An agency will want some comfort of continuity, particularly if its fee structure is based on a regular monthly retainer. 

(k) What are the obligations of confidentiality on the agency both during and after termination of the agency contract?  The company will not want its promotional concepts or confidential business information published without its consent.

(l) Does the client require a “key man” clause?  If the company appoints an agency solely on the strength of its relationship with one executive, the company will want to be able to follow that executive if he moves from one agency to another.

Current Topics of Concern

In recent months advertising and promotions have rarely been out of the press with concerns over the advertising of alcohol, gambling and unhealthy foods to children as well as irregularities over phone-in competition promotions.

Advertising to Children

It has long been recognised that children form a vulnerable category of consumer when it comes to advertising and greater protection is required.  As a result the Codes impose specific restrictions on advertising aimed towards children.  Certain products cannot be targeted at children at all whilst others may not be scheduled around children’s programming.  These include alcoholic drinks containing 1.2 percent alcohol or more by volume; lower alcohol levels or non-alcoholic versions of alcoholic drinks; lotteries; medicines, vitamins, dietary supplements; and sliming products and, treatments.

Growing concerns over childhood obesity caused the UK Government to take action and the advertising industry represented a relatively easy target.  The focus has been on how advertisements of products high in fat, salt and sugar (HFSS products) should be controlled to minimise the adverse affect they have on children.  As a first step in this process the Government requested that Ofcom, the ASA’s co-regulatory partner for broadcast advertising, take steps to tighten the television advertising rules for HFSS products.  The result is that new content and scheduling rules are now in place.

Advertisements of HFSS products targeted at children (under the age of sixteen) should, amongst other restrictions, not encourage poor nutritional habits or an unhealthy lifestyle; not encourage excessive consumption; and not use celebrities or other characters (e.g. cartoon) popular with children.

The new restrictions were scheduled to come into effect in stages to allow the industry time to adapt to the new restrictions.  The new content rules came into effect on 22 February 2007 for any new advertising campaigns for HFSS products.  As of 1 April 2007, advertisements for HFSS products were no longer allowed in or around programmes for children (including pre-school children), or in or around programmes that are likely to be of particular appeal to children aged 4-9.

Two future milestones in the regulation of HFSS products are 1 January 2008 when advertisements for HFSS products will no longer be allowed in or around programmes that are likely to be of particular appeal to children aged 4-15 and 1 January 2009 when the scheduling restriction exemption for dedicated children’s channels will cease and thereafter full implementation will be required

Gambling

In response to public concerns new rules have been developed to ensure that all gambling advertisements are socially responsible and do not harm or exploit children, young people or vulnerable adults.  In summary, the new rules provide that advertisements for gambling must not:

• portray, condone or encourage gambling behaviour that is socially irresponsible or which might lead to financial, social or emotional harm;
• exploit the inexperience or lack of knowledge of children, young persons or other vulnerable persons;
• suggest that gambling can be a solution to financial problems;
• link gambling to sexual success or enhanced attractiveness;
• be of particular appeal to children or young persons, especially by reflecting or being associated with youth culture.

Advertising Platforms and the Future

Within the ever changing world of technology new forms of media are constantly being developed and with them, new and improved opportunities for advertisers.  Gone are the days when new media was merely a reference to the internet and emails.  New media today includes a vast range of communication technology including mobile phones (via SMS text messages which can now, by means of 3G technology, incorporate graphics), handheld computers (PDAs), electronic bill boards (on the sides of buildings and in buses and trains), broadband internet (allowing advertisers to broadcast quality picture and sound), interactive television (whereby adverts and competitions can be accessed by remote control) and computer games (advertising can be incorporate into billboards etc.).

Although the Codes are robust and flexible enough to be applied to most new media that emerges on the market it is inevitable that with new technologies will come new legislative controls.  Advertisers will be monitoring innovations not only for the opportunities they provide for new advertising platforms but also for the potential restraints that subsequent legislation will impose.

For further information, please contact David Bond or Sonal Patel.