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Best Practice Advertising Regulation Checklist

We would like your assistance and input. The ‘APEC Action Agenda on Advertising Standards and Practice Development’ lists four challenging tasks for completion in 2015. One of the tasks is:

Develop an advertising regulatory checklist in 2015 that details key elements of a regulatory framework that facilitates trade and investment and protects consumers.’

Best practice advertising regulation has been a main objective of the Foundation for Advertising Research (FAR) since its inception 10 years ago. Our work included checklists for the audit of SROs. This was motivated by the interest the founders of FAR had in best practice advertising regulation over the past 25 years.

Over the past few weeks we have developed a Working Paper of a Draft Checklist that we believe will be suitable for the APEC region. We seek your feedback. The Working Paper is on this link

https://gallery.mailchimp.com/99d4e2d2adefab4f203e8c2d4/files/Working_Paper_Draft_Checklist_Consultation.pdf?mc_cid=b904d91a29&mc_eid=%5BUNIQID%5D

If you could let us have your comments by 29 May we would be most appreciative. Once the Draft is finalised we intend to submit it to the APEC Advertising Standards Steering Committee for its consideration.

Glen Wiggs

Director

Foundation for Advertising Research

South Africa ASA on Verge of Collapse

Trade media in South Africa report that the self-regulatory Advertising Standards Authority (ASA) is in a ‘perilous’ financial position and will cease to operate within 45 days unless the funding is found. The collapse of the ASA would set a dangerous precedent internationally and fuel argument for Government regulation.

Background

The ASA has a proud 47-year history being founded in 1968. It was an early international member of the European Advertising Standards Alliance (EASA) having joined in 1982. Its codes are based on the ICC Code of Advertising Practice and it has a complaints system where consumers can complain about breaches of the codes and have their complaints dealt with by an independent adjudication body.

On the face of it the ASA complied with the EASA 10 Principles of Best Practice Advertising Standards. However it appears that it has failed to comply with the Second Principle – Sustained and Effective Funding.

There has been discussion in the South African trade media about the ASA over the past few years. In 2012 there was considerable discussion with discord between the ASA and various industry members. Allegations included:

– Lack of transparency by the ASA regarding its budget and financial position

– In 2011 there was criticism of the funding model and a warning of a ‘pending crisis’

– The withdrawal of some key funders

– A ballooning ASA budget

– Slow turnaround of complaints

– The refusal of the ASA to process complaints about Government advertisements

– The ASA was becoming the ‘Mugabe of Marketing, with idiotic rules, iron fists and no money’

– ‘Lobbyists brazenly manipulating the ASA ‘by lodging multiple complaints to further their campaigns’.

– The codes were outdated

These issues will be familiar to self-regulatory organisations (SROs) especially when they are under stress. Successful SROs deal with the issues swiftly and remedy any perceived problems.

Urgent negotiations are now underway to resolve the funding crisis and no doubt the other issues will need to be resolved at the same time.

BBB Amends Code

The US Better Business Bureau (BBB) has announced changes to its Code of Advertising. The main changes relate to price promotions, testimonials, endorsements and environmental claims. Further information including a link to the new Code is available on this link

http://www.bbb.org/council/news-events/news-releases/2015/02/new-bbb-advertising-standards-reflect-21st-century-advertising-in-traditional-and-new-media/

Why Self-Regulation Works

Almost all developed countries have a sophisticated network of advertising Self-Regulatory structures. Many query how Self-Regulation can be effective when there is no punishment such as a fine. This is based on the assumption that a fine is required to ensure compliance and is a common factor in a Command and Control regulatory regime.

Creatives make ads and the role of a successful creative is to push boundaries. Creatives have done this since the beginning of time. The right to advertise is not an absolute right but is subject to fetters such as advertising codes which are much stricter that the law. This contrasts with other types of creatives such as visual artists and writers who are not subject to codes and therefore enjoy a greater freedom of expression. Even when they breach a law the Government regulator is often reluctant to act because of potential public backlash – so entrenched is the artists right of freedom of expression.

Advertising Self-Regulation works because it is in the self-interest of the advertising industry for it to do so.

– There is an economic imperative to operate a successful Self-Regulatory regime. The media rely on income from advertising to sustain their businesses. If consumers are misled or offended by a particular medium or consider it is publishing or broadcasting advertisements which are socially irresponsible then they will no longer support that medium. Circulation, viewership or listenership will fall as consumers lose trust in the medium. The inevitable consequence is a loss of advertising revenue as advertisers place their advertisements elsewhere. In order to sustain revenue in the longer term the media rely on a high level of trust by consumers.

It is therefore in their self-interest to have codes and a complaints system that genuinely protects consumers and reflects prevailing community standards. It is also why media, on a daily basis, will not accept advertisements that do not meet the standards set out in the self-regulatory codes.

– The same arguments apply to advertisers and advertising agencies for they also will lose revenue in the longer term if they mislead or offend consumers or act in a socially irresponsible manner.

– Advertising Self-Regulatory organizations and the wider Self-Regulatory systems make extensive use of persuasion. It is a key reason why they have very high compliance to its requests to withdraw advertisements found in breach of the Codes.

– Instead of a culture of resistance and regulatory cat-and-mouse the Self-Regulatory organizations and the wider Self-Regulatory regimes have established a culture of respect for not only the provisions of the Codes but also the spirit and intent of the Codes.

– If there were a Government Command and Control regulatory regime with a punishment system such as fines then it is likely to lose the goodwill of the industry players, foster a sub-culture of resistance and encourage regulatory cat and mouse. Exploitation of loopholes and vastly increased expenditure would develop. It would be self-defeating.

APEC Beijing Advertising Standards Forum Report

The report on the Beijing Advertising Standards Forum last August is now available. The report gives a full count of the discussions at the Forum including how the Action Agenda on Advertising Standards and Practice Development evolved.

The report may be accessed on the following link http://bit.ly/Beijingreport2014

ICC Initiative in China

The International Chamber of Commerce (ICC) has established ICC China Commission on Marketing and Advertising. It is anticipated that the establishment of the Commission will greatly assist the development of advertising self-regulation in China.

The ICC state, “The establishment of ICC China’s Commission on Marketing and Advertising arises at a pivotal moment with the recent endorsement by APEC economic leaders of the APEC Action Agenda on Advertising Standards and Practice Development to promote the alignment of advertising standards and reduce the cost of doing business across the region. The ICC China committee will play an integral role in building on this initiative, particularly at a time when the China Advertising Law is being revised.”

 Full details of this new initiative can be found on the following link –

http://www.iccwbo.org/News/Articles/2015/ICC-applauds-the-launch-of-ICC-China-s-Commission-on-Marketing-and-Advertising/

2015 Budgets: Impact of APEC Action Agenda

Unexpected costs due to the new obligations under the APEC Action Agenda will impact on budgets in 2015. Not only will advertising Self-Regulatory Organizations (SROs) have additional expenditure but also trade organizations such as advertiser groups, agency groups and media groups. Multi-national companies have particular responsibilities that will be an additional budgetary expenditure item.

Industry has been a strong advocate for reform of advertising regulation in the Asia-Pacific region. APEC has delivered with a comprehensive reform package. 2015 has been designated as the time for industry to implement the reform package – but that will cost money and resources.

Action Agenda

As discussed previously the Action Agenda endorsed by the APEC Leaders’ Declaration is an outstanding document that sets the timetable for introducing best practice self-regulatory standards throughout the region. For those countries where there is little or no self-regulation there is a lot of work to be done. For those that are developing their self-regulatory regimes the same applies. Those countries that already have high standards of advertising regulation will be primarily responsible for resourcing and funding those who need assistance. This will be an unexpected budget item in 2015.

The reason the Leaders gave for endorsing the Action Agenda was “to promote alignment of advertising standards and reduce the cost of doing business across the region”.

Three days before the Leaders’ Declaration the Ministerial Statement of APEC Trade Ministers said their support in part was to “promote advertising”. The relevant paragraph said,

We support efforts to foster more effective advertising regulation and standards to promote advertising, and endorse the APEC Action Agenda on Advertising Standards and encourage economies to undertake efforts to implement its recommendations in 2015.”

Clearly if the objectives of promoting advertising, alignment of advertising standards and reduction of the cost of doing business are achieved then the advertising industry will benefit considerably and the investment handsomely rewarded.

Although the Action Agenda allocates various tasks to different sectors as discussed below, there is no APEC or Government funding. The entire plan is to be self-funded.

SROs

 A key task for developed SRO’s is training for developing and aspiring SROs. This is a continuation of the work so far at the Hanoi Dialogue and the Beijing Forum. A priority is mentoring which is best done on site on a one-to-one basis. If this is followed by a buddy system then developing SRO’s can progress very quickly. To achieve this then the developed SROs would need to fund and resource the initiative.

The Action Agenda states – “Develop and deliver mentoring and capacity building programs in 2015”. Thus developed SROs should budget in 2015 for staff being overseas assisting in the mentoring and capacity building program.

Industry Associations

The Action Agenda spells out what is expected of industry associations –

to actively participate in advertising self-regulatory practice. While raising awareness and capacity of self-regulation, they should play their role in guiding and rectifying their members’ advertising practice.”

 A feature of countries with developed SROs is a supporting network of industry associations. Usually the associations do actively raise awareness of self-regulation and build up capacity and knowledge within their membership of the requirements of responsible advertising. But in countries with developing SROs or no SROs there are usually few or no industry associations. Sometimes there is an advertiser group but agency groups and media groups are less common.

Thus industry associations in countries with developed SROs could become outward looking and assist in the development of sister organizations in countries where there is no association or there is an emergent association. This would be challenging, as it requires an outward looking focus and the willingness to allocate resources and funds in 2015 for the regional good.

Multi-National Advertisers

The Action Agenda specifically mentions advertisers – “As the initiator, investor and drivers of brand advertising campaigns, advertisers should practice corporate social responsibility and actively promote responsible advertising. Brand owners and their representative organisations should, therefore, assume primary responsibility for advertising communications and industry self-regulatory practice.”

 Multi-national advertisers almost without exception do practice responsible advertising and ethical corporate social responsibility. The key words in the statement are “actively promote responsible advertising”. We do not read this to mean actively promote within the company but generally. In other words to become involved in supporting SROs and “assume primary responsibility for advertising communications and industry self-regulatory practice.”

This is a common occurrence in sophisticated markets but being involved in developing markets as found in many APEC countries is more challenging. For instance emerging and new SROs require startup-funding, expertise and general industry support. A group of multinational advertisers have extraordinary influence to get multi-national agency groups and media involved. It is this sort of support that would satisfy the Action Agenda ‘request’.

Once more this requires action with an allocation of funds and resources in 2015.

Discussion

Adam Brandenburger of Harvard University and Barry Nalebuff of Yale developed the concept of co-opetition. Various competitors combine in a common purpose with the goal of increasing the size of the business pie while still competing to carve it up. What the Action Agenda proposes is a co-opetition model.

The diverse industry players combine to ensure that countries in the Asia-Pacific region all have best practice advertising self-regulation. That requires effort, resources and funds. The reward is petty restrictions would be removed, advertising would be encouraged and the cost of business throughout the region would reduce. The advertising pie would subsequently increase with the opportunity for all players to have a larger slice.

The big BUT is that action is required in 2015.

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