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Monthly Archives: January 2013

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Hanoi Dialogue

A most successful Dialogue on Advertising Standards- Principles and Practice was held in Hanoi on 7/8 November 2012. It signaled the beginning of a new era in advertising regulation in the Asia-Pacific Region.

The Dialogue was organized by the Australian Advertising Standards Bureau (ASB) and was sponsored by APEC. It was held under APEC’s Regulatory Cooperation Assistance Mechanism (ARCAM).

Over 50 delegates involved in the regulation of advertising from 17 of the 21 APEC countries participated in the Dialogue.

In a summary of the Dialogue the ASB said,

Themes covered during the two-day event included the importance of advertising to the free flow of goods and services, effective advertising regulation, good regulatory governance in advertising, and best practices for regulatory as well as self-regulatory practices covering advertising content and complaint resolution.  

The Dialogue agreed there are several key elements that both foster and characterise the effective self-regulation of advertising, including:

  • An effective regulatory framework that acknowledges and promotes the role of industry-led advertising standards in helping to achieve agreed policy objectives.
  • The establishment of an impartial, accountable, accessible and transparent self–regulatory system that is compliant with the law and follows an internationally accepted best practice model. 
  • Regardless of the regulatory model adopted by each APEC member economy, there are existing international best practices with respect to advertising self-regulation from which the region could draw.
  • Effective advertising regulation does not require the simultaneous implementation of all best practice components, particularly when the SRO is in its formative stages. 

 The Dialogue discussed the European Advertising Standards Alliance (EASA) Best Practice Self-Regulatory Model of April 2004 which identifies best practices identified following extensive consultation with regulators, non-governmental organisations (NGOs) and public interest groups.

It was noted that these best practices have already been adopted to varying degrees by self-regulatory organisations (SROs) in 13 APEC economies and might be suitable for adoption within APEC.

The Dialogue agreed adoption of a universal and effective code which draws on the International Chamber of Commerce’s Consolidated Code of Advertising and Marketing Practice would also be a useful first step for APEC economies starting out onto consider.

A report on the Dialogue outcomes will be presented to APEC with a view to encouraging further progress on the initiative. The Advertising Standards Bureau will encourage APEC support for the alignment of regulatory frameworks in acknowledgement of advertising’s role in economic growth and the role that self-regulation plays in building consumer trust in the market.  The report recommendations also reflect the importance of reducing and preventing barriers to trade through the development of SROs on the basis of international best practice.

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Dialogue Recommendations to APEC

The Report to the APEC Committee on Trade and Investment arising from the Hanoi Dialogue contained five recommendations.

1. Regulatory Convergence of Standards – The adoption of international best practice regulation that includes industry-led advertising standards and complaints resolution.

2. Further Study – APEC undertake a stocktake of advertising standards and regulation practice. 

3. Information Sharing – There should be a sharing of information including a centralized repository of resources related to self-regulation for access by member economies.

4. Capacity Building – There is a need for capacity building to promote effective self-regulation and help economies develop appropriate systems. Two initiatives are suggested:

  • Regulatory Mentorship Program – A mentoring program on such issues as advertising standards legislation, regulations and development of regulatory codes
  • Self-Regulatory Organisation Workshop – A technical workshop held in 2013 for economies seeking to build capacity for the effective establishment and/or   improved operation of a self-regulatory regime.

5. Utilization of Existing Resources – Use existing resources to build capacity such as the OECD consumer policy toolkit developed to guide economies develop regulatory policy.

Comment: The recommendations are ambitious but also achievable. Industry can play a vital role to assist speedy implementation.

This website can assist in the in the fulfilment of the recommendations especially by being a vehicle for information sharing, a repository for resources and building capacity.

Advertising is a Driver of Economic Growth

Advertising is a driver of the economy. In March 2012 McKinsey & Company released a report “Advertising as an Economic Growth Engine” that found that advertising expenditure (adspend) could increase the rate of economic growth of a country by 15%. On the basis of the McKinsey research the greater the adspend as a proportion of GDP the greater the rate of growth. This has been confirmed by other research. It is a well-known truism that companies that spend a significant proportion of their total income on advertising will grow faster than those who don’t. The same is true for individual countries – hence the need for Governments to encourage rather than restrict advertising.

Significantly the report also found that adspend has a multiplier effect –“advertising contributes significantly more to economic growth than its share of spending.”

The Regulatory Pyramid

 

Legal academics Ian Ayres and John Braithwaite developed the regulatory pyramid, which has been adopted, copied and amended by academics and policymakers.

At the peak of the pyramid is ‘Command Regulation with Nondiscretionary Punishment’. Governments use it for serious crime such as murder where minimum punishments such as life imprisonment are mandated.

Most law for crime and general offences is contained within the second tier – ‘Command Regulation with Discretionary Punishment’. Criminal law sets out various offences such as forgery or assault and then mandates maximum sentences. The judge has discretion as to what sentence will be imposed and whether it is jail, fine or other punishment. This tier can also contain legislation regarding advertising. Misleading advertising is an offence in most countries and the advertiser upon conviction can be fined and/or have the court order corrective advertising at the offender’s cost. However Regulators have found that there is huge cost in administering a prosecution system for advertising. Therefore it is used only for serious cases.

The Self-Regulation tier is the most common model for advertising globally. The advertising industry set codes by which all advertisers should abide. In short the codes require advertisements to be legal, decent, honest, truthful and socially responsible. However compliance also extends to advertising agencies that create the advertisements and the media who publish or broadcast them. There is also a complaints system where members of the public can complain to an independent complaints adjudication board or jury about breaches of the codes. If a complaint is upheld then the advertiser is required to withdraw the offending advertisement. There is usually near 100% compliance. As industry funds the regime there is no cost to Government.

The tier of ‘Enforced Self-Regulation’ requires close cooperation between the Regulator and the Self-Regulatory regime. Industry operates the Self-Regulation model but the State will assist with enforcement. In the UK the Self-Regulatory Advertising Standards Authority (ASA) has a formal arrangement with the Fair Trading Regulator to provide a legal ‘backstop’. If a maverick advertiser refuses to withdraw an offending advertisement the Regulator will enforce the Decision of the ASA. In practice this is rarely used because compliance is near 100%, but the threat remains. This model provides benefit to the Government, as the costs are minimal.

There are variations of Enforced Self-Regulation that are termed Co-Regulation. The Government and industry combine to form and administer a joint system of regulation. Co-Regulatory systems take many forms depending on the responsibilities taken by each of the partners. For instance it may be a Self-Regulatory system with the Government having a formal monitoring role. In such regimes it is common for the Government to be represented on the governing body.

There are certain features relating to every level of the pyramid.

–       Those regulatory options higher up the pyramid incur greater costs. Also the punishments are greater.

–       The regulatory options higher up the pyramid are slower than Self-Regulation. Advertising Self-Regulatory systems usually take about 6 weeks to resolve a complaint but Command Regulation takes months or years.

–       At the lower end of the pyramid the required burden of proof is the civil standard of the ‘balance of probabilities’, which is much stricter than the criminal standard of ’beyond reasonable doubt’ used in the Command Regulation model.

–       A consequence of the problems of cost, slowness and higher burden of proof is that under a Command Regulation regime the number of complaints that result in prosecution is substantially less than those considered under Self-Regulation.