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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– The codes were outdated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.

APEC ENDORSES SELF-REGULATION – THE BEGINNING OF A NEW ERA

Management Digest

The just released APEC Leaders Declaration contains the following –

“We endorse the APEC Action Agenda on Advertising Standards and Practice Development to promote alignment of advertising standards and reduce the cost of doing business across the region”

The APEC Action Agenda on Advertising Standards and Practice Development is an outstanding document that extols the benefits of best practice advertising self-regulation and has a timetable for future action. This will affect all 21 countries/economies in APEC. 2015 will be a busy year for industry if it is to take full advantage of the opportunity granted by the APEC.

This UPDATE examines the Action Agenda.

APEC Meeting

The APEC Leaders meeting has just concluded in Beijing. It was a gathering of the Heads of State of the 21 APEC economies. The main outcome of the meeting is the announcement of a start of the negotiations of a free trade agreement – called the Free Trade Area of the Asia-Pacific (FTAAP).

It is also recognized in the Declaration that there is a need “to accelerate “at the border” trade liberalization and facilitation efforts, improve the business environment “behind the border”, and enhance regional connectivity “across the border” to accumulate more building blocks for the realization of the FTAAP.”

Among the actions that needed to happen is the implementation of the Action Agenda on Advertising Standards and Practice Development.

Action Agenda

The opening paragraph of the Action Agenda recognizes the economic importance of advertising and of best practice advertising regulation –

“As an important driving force in guiding consumption, expanding domestic demand and stimulating economic growth, advertising is a critical way of helping companies and industries across the APEC economies grow. Advertising enhances brand recognition, fosters competition, increases cross-border trade and provides for information and educational exchanges that build modern industrial economies. Regulatory and self-regulatory frameworks for advertising help achieve innovation, productivity and growth in all goods and services sold across and within APEC economies. The APEC Policy Support Unit (PSU) study of 2014 recognised the significant benefits of advertising.”

In the following paragraph is an endorsement of self-regulation –

“Advertising standards refer to codes of practice – set out by the advertising industry on the basis of international experience and adapted to locally and culturally specific realities. As such, these standards provide guidance on how best to protect and inform consumers and prevent anti-competitive practices and complement a sound regulatory system. A self-regulation system that applies advertising standards is an implementation of self-discipline and self-management under industry auspices and is an important complement to government regulation and enforcement”

The Action Agenda recommends to APEC members that advertising regulatory regimes reflect the following principles –

“1. Be legal, decent, honest and truthful.

2. Conform to the principles of fair competition, as generally accepted in business. Advertisers should respect intellectual property rights, and the legitimate rights of brand holders and advertising agencies.

3. Respect the cultural, legal, and economic context of each individual APEC economy.

4. Give special care in advertising practice directed towards or featuring children or young people. Advertisements targeting, or portraying, children shall not contain anything that will lead to physical and mental harm to them and shall not take advantage of their potential vulnerability or credulity.

5. Advertising should not undermine healthy and active lifestyles or healthy balanced diets.

6. Advertising should take particular care to ensure truthfulness and integrity in relation to environmental claims.

7. Respect and protect personal privacy consistent with the APEC Privacy Framework and Cross Border Privacy Rules.

8. Comply closely with regional laws and regulations, industry standards and ethics.

9. Facilitate, rather than impede, trade and investment in the region.”

Recommended Actions

The Action Agenda has a number of recommended specific actions.

– Governments are urged to “increase their support for efforts of advertising self-regulation” and to “actively explore specific ways to realize advertising self-regulation, should enhance communication and cooperation in terms of organizational structure, process design and performance management, and should endeavor to realize the significant industry role in self-regulation and extensive social influence of advertising self-regulatory practice.”

– Industry associations “are expected 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.”

– Advertisers are to play a leading role – “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.”

Timetable

2015 will be a busy year with four different very large tasks.

“- Develop principles in 2015 for APEC economies to use in developing their advertising and self-regulatory regimes;

- Develop and deliver mentoring and capacity building programs in 2015 that aim to help economies adopt these principles;

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

- Build public awareness programs of available consumer policy tools, including self-regulatory organizations (SROs) for roll out in 2015-2017.”

Discussion

Such an endorsement for best practice advertising self-regulation is unprecedented. The endorsement is even more remarkable when the nature of some of the political systems of APEC members is taken into account.

The opportunity offered to industry is immense but quick action is needed. This will require planning, programs and funding. It is an opportunity that must be grasped.

Glen Wiggs

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