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APEC Best Practice Regulation Guidelines

It is not well known but many countries have guidelines that should be followed before any legislation or regulation is enacted. When advertising regulation is proposed the procedures that should be followed are often overlooked.

he USA has the 12 Principles of Regulation that are issued by the White House and have been renewed with minor modifications by successive Presidents. Australia has 8 Principles of Best Practice Regulation promulgated by the Council of Australian Governments (COAG). New Zealand has the New Zealand Code of Good Regulatory Practice issued by the Ministry of Business Development & Employment. There is a remarkable similarity of all three documents with emphasis on efficiency, effectiveness, transparency and equity.

There are also APEC best practice guidelines – the APEC Guidelines for the Preparation, Adoption and Review of Technical Regulations that apply to the 21 APEC member countries/economies.

Key Guidelines for Advertising Regulation

Barrier to trade

The underlying objective of the APEC Guidelines is the elimination of barriers to trade. Design of the regulation is therefore important, as it should minimize “the constraints on the ability of firms to enter and exit the market”.

The right to advertise is not absolute but is subject to fetters. The objective of the fetters is to ensure there is fair competition and that consumers are properly protected. As an example a key fetter is that advertising must be truthful and not mislead. This fulfills both purposes of enhancing fair competition and protecting consumers. However fetters improperly used can be a blunt instrument and become a barrier to trade – such as selective ad bans on particular products or for certain media.

Problem Identification and Policy Objectives

The APEC Guidelines list this issue as a basic starting point –

“The first step in the development process should be to clearly identify the problem that needs to be addressed. … legitimate reasons for imposing technical regulations are:

  • national security requirements;
  • the prevention of deceptive practices; and
  • protection of human health or safety, animal or plant life or health, or the environment.”

Care therefore needs to be taken that any proposed advertising regulation meets at least one of these policy objectives. Also the proposed regulation should not be an ad hoc good idea but supported by evidence rather than personal viewpoint. Care also needs to be taken that the evidence is clear after taking into account all sides of the debate. On many of the current ‘hot’ advertising issues the evidence is contestable and at best equivocal.

Assessing Regulatory Options

This is a crucial consideration. A range of regulatory and non-regulatory options is available for Governments.

The APEC Guidelines are detailed and specific – “In order to ensure that any government intervention brings the greatest possible net benefits, it is important to ensure that all the feasible options are identified and assessed. In addition to the imposition of technical regulations, there are a number of policy instruments available which should be considered.

 Such alternatives could include:

  • status quo
  • reliance on general law
  • educational programmes
  • voluntary standards
  • economic instruments (taxes, tradeable property rights)
  • insurance and liability laws
  • codes of conduct/practice
  • industry self regulation and co-regulation”

The options of self-regulation, codes and other non-regulatory options are also mandated in other Guidelines.

– The Second Principle of the Australian COAG 8 Principles of Best Practice states, “A range of feasible policy options must be considered, including self-regulatory, co-regulatory and non-regulatory approaches, and their benefits and costs assessed.”

– The New Zealand Code for Good Regulatory Practice states, “Consideration of alternatives to regulation: Regulatory design should identify and assess the most feasible regulatory and non-regulatory alternative(s) to address the problem.”

 – The Third Principle of the US Principles of Regulation states, Each agency shall identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.”

Cost-Effective

The chosen regulatory or non-regulatory action should be cost-effective and every option should be measured to assess its impact. The APEC Guidelines state, “In deciding whether to impose a technical regulation, consideration must be given to the various alternative mechanisms available to overcome the problem. When assessing the alternatives, any constraints (ie. legal or fiscal constraints) should be clearly identified. Each option should then be considered carefully in terms of costs and benefits. The option chosen should be the option which either provides the maximum net benefit or the least net cost to society.”

From a Government perspective best practice advertising self-regulatory systems are generally considered to be the most cost-effective as there is nil cost. If there is a cost it is ensuring that the system adheres to best practice. Additionally around the globe advertising self-regulatory regimes have consistently demonstrated that they effectively regulate advertising providing they follow best practice principles.

 International Standards

The APEC Guidelines state “that members should adopt international standards or the relevant parts of them, as the basis for the technical regulation”. This is most relevant for advertising regulation. The base standard for advertising codes is the ICC Code of Advertising and Marketing that has been in existence since 1937. Self-regulatory systems with rules based on the ICC Code are operating in over 35 countries, across 6 continents. The Code and the best practice self-regulatory systems in existence constitute the world standard.

 Other Guidelines

There are further guidelines on other matters including consultation, compliance, monitoring, review and performance standards but this discussion focuses on those relevant to advertising. If best practice regulation procedures are followed there should be a Regulatory Impact Assessment that would cover the matters covered by the Guidelines. In particular it should analyze various impacts including economic costs, reduced competition, reduced innovation, reduced consumer choice and the impact on jobs.

In summary, the APEC Best Practice Regulation Guidelines provide a legal pathway that should be followed when regulation of advertising is proposed.

APEC Presentation by Fiona Jolly

There was a follow-up by APEC to the November Dialogue in Hanoi on Advertising Standards – Principles and Practice. Fiona Jolly, who was the organiser of the Dialogue, was asked to report to the APEC Conference on Good Regulatory Practices held at Medan, Indonesia at the end of June. Her presentation was comprehensive and summarised the discussion at the Dialogue and the recommendations for the future.

Proceedings at the Conference are now available. A copy of the text of Fiona’s presentation and the accompanying PowerPoint may be viewed at http://www.ffar.org  Click on ‘Reports’ and then ‘Fiona’s Presentation’.

Vietnam Has Largest Internet Audience in Southeast Asia

New research by Comscore finds that Vietnam has the largest Internet audience in Southeast Asia. Furthermore the audience is grew 14% in the past year and added another two million Internet users. The growth rate in Philippines was greater with 22% in the past year. There was little or no growth in Malaysia and Singapore as shown on the Comscore table (Click on table to enlarge)

Screen Shot 2013-08-05 at 10.56.46 AM

In terms of market share of media adspend on the Internet all six countries are below the Asia-Pacific average of 17.8%.  ZenithOptimedia records that the Internet share of media adspend in 2012  was 7.5% in Singapore, 3.2% in Philippines, 3% in Malaysia,  1.2% in Vietnam, 0.5% in Thailand and 0.03% in Indonesia.

With the increase in the Internet audience it is logical that Internet adspend will follow. As previously mentioned this will be a regulatory challenge as the Internet is cross-border.

The Comscore report can be downloaded from http://www.comscore.com/Insights/Presentations_and_Whitepapers/2013/2013_Southeast_Asia_Digital_Future_in_Focus

 

The Need for Capacity for Best Practice Advertising Regulation

In late July the United Nations resolved to establish an Interagency Task Force on the Prevention and Control of Noncommunicable Diseases. The Task Force will be led by WHO. Its main objective is to coordinate all UN organisations to implement the WHO Global Action Plan for the Prevention and Control of NCDs 2013-2020. The Global Action Plan has various strategies to deal with NCDs arising from tobacco, harmful use of alcohol, unhealthy diet and lack of physical activity. See WHO press release http://www.who.int/mediacentre/news/notes/2013/ncds_ecosoc_20130722/en/index.html

The Global Action Plan makes several references to the need for advertising and marketing regulation. However one of the issues identified in the WHO press release is the need for UN organisations to increase their capacity to so they can implement the strategies.

The capacity problem was also identified at the November 2012 APEC Dialogue in Hanoi. Five recommendations were made – see post below of 30 January. One of the recommendations was,

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.”

 This and the other recommendations are currently under consideration by APEC.

 Comment

WHO and the UN have identified that increased capacity is required by UN agencies in several areas. One of those areas is the assistance in the development of best practice advertising regulation. The Hanoi Dialogue concluded that industry and Governments need increased capacity so that economies can develop best practice systems.

The problem of lack of capacity has been clearly identified but there is no need to wait for the UN agencies, WHO or APEC to start the process. Consumers need to be properly protected and empowered by best practice advertising regulation. It is also in the self-interest of industry to satisfy consumer interests by protecting and empowering them. Industry therefore has a key role in building capacity and working with Governments, UN agencies, WHO and NGOs in developing best practice advertising regulatory systems.

Internet Advertising as Share of Adspend

The adspend market share of the Internet medium varies greatly from country to country. In South Korea Internet the adspend share is 30.1% but in Indonesia it is only 0.03%. The top three countries are South Korea with 30.1%, Canada with 26.9% and Australia with 25.8%.

Availability of the Internet to consumers is an important factor. This has been measured by Internet World Stats by determining the penetration of the Internet – the percentage of the population that can access it. These figures vary widely also. The country with the highest penetration in 2012 in the APAC/APEC region is Australia with 88.8% followed by New Zealand with 88%. The countries with the lowest penetration are Papua New Guinea with 2.1% and India with 11.4%. The world penetration total is 34.3% with 2.4 billion users.

There is a general correlation between penetration and adspend market share but there are significant exceptions. For example Singapore has a high penetration rate of 75% but a low rate of Internet adspend – only 7.5% of market share. Also Thailand has 30% penetration but Internet has only 0.5% of market share.

The economies with the highest predicted growth rates are Philippines and Hong Kong. The Philippines is predicted to grow 122%% from 3.2% in 2012 to 7.1% in 2015. Hong Kong is predicted to grow 125% from 2.4% to 5.4% over the same period.

There are two strong trends in virtually all countries:

– The Internet share of adspend is growing rapidly

– The number of Internet users is increasing as Internet penetration grows. In some countries they are nearing saturation.

As mentioned in other posts the challenge for regulators and industry is to establish best practice advertising regulatory regimes to ensure advertising on the Internet is legal, decent, honest, truthful and socially responsible.

 Analysis

The analysis that follows combines adspend Internet market share data taken from ZenithOptimedia and penetration data taken from Internet World Stats. The 2012 adspend share is actual, the 2015 adspend share is projected, the penetration data (% of population with access to Internet) is actual for 2012.

 Country             Adspend  2012         Adspend 2015          Penetration 2012

South Korea             30.1%                      31.9%                           82.5%

Canada                      26.9%                      35.3%                           83.0%

Australia                    25.8%                      35.1%                           88.8%

Japan                          21.1%                      23.5%                           79.5%

Taiwan                       19.9%                      24.4%                           75.4%

Russia                        19.7%                      28.9%                           47.7%

USA                            19.0%                      27.8%                           78.1%

China                         17.8%                      26.6%                           40.1%

New Zealand            17.7%                      23.9%                          88.0%

Singapore                  7.5%                       11.6%                           75.0%

Chile                             7.3%                      11.3%                           58.6%

Peru                              4.4%                        7.2%                           36.5%

India                             3.5%                        6.0%                           11.4%

Philippines                  3.2%                        7.1%                           32.4%

Malaysia                       3.0%                        4.3%                           60.7%

Hong Kong                 2.4%                        5.4%                           74.5%

Vietnam                        1.2%                        1.8%                           33.9%

Pakistan                        0.9%                        1.4%                           15.3%

Thailand                        0.5%                        0.7%                           30.0%

Indonesia                     0.03%                     0.03%                         22.1%

Brunei                              NA                          NA                             78.0%

Mexico                             NA                          NA                             36.5%

Sri Lanka                         NA                          NA                             15.0%

PNG                                  NA                          NA                               2.1%

The Challenge of Regulating Internet Advertising

The Internet share of advertising expenditure (adspend) is growing every year. ZenithOptimedia reports that in 2012 Internet advertising in Asia-Pacific had 17.8% share of total adspend. The Internet was the third largest medium with television being the largest and newspapers second. But adspend is growing at about 13% pa so by 2014 it is predicted that Internet adspend will overtake newspapers and be firmly in second place behind television.

In the APEC/APAC countries of South Korea, Canada, Japan, Taiwan and Russia the Internet is already in second place. It is predicted that in Canada and Australia the Internet will be the largest media in terms of adspend in 2014.

Internet ads are effective according to recently released Ipsos research on online users. In the Asia-Pacific region;

– 48% had looked at/read an ad for a brand or product

– 43% had watched a commercial for a brand or product

– 29% had clicked on a banner/pop-up for a brand or product

All three figures are slightly higher than the world average.

This quite dramatic change in market share has been challenging to regulators. It was quickly addressed by advertising self-regulatory organisations (SROs) in many countries that merely applied their advertising codes to the new medium. The thrust of SROs is to self-regulate all advertising regardless of medium. As a result self-regulation tends to have strengthened in countries where SROs follow best practice self-regulation. This has been strengthened with the online industry in individual countries forming an Interactive Advertising Bureau (IAB) who in turn have developed Codes of Conduct.

Government regulation often tends to be media specific. Broadcast media are Government regulated in most countries, particularly television which has advertising caps and quite strict requirements about children’s programs and advertising. Because the Internet has no country borders such Government regulation for the Internet is impractical. However the Government does have an important role in setting the regulatory framework and the SROs have the role of implementation by way of codes and a complaints system. This is an example of best practice regulation.

 

Adspend Grows in APAC

Advertising expenditure (adspend) in the APAC region grew 5.8% in the first quarter of 2013 compared with the same quarter in 2012. This compared with global growth of only 1.9% but was second to Latin America with an outstanding 11.9% growth. Adspend in Europe declined 4.4% and North America was flat.

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The data comes from Nielsen’s quarterly Global AdView Pulse report. Nielsen reports, “The best performers in the region were China, Indonesia and Philippines, which all saw roughly 20 percent growth. Japan was the only country where ad spend decreased (down 1.1%).”

As adpsend is a driver of economic growth the future is positive for the APAC region.

Action On New Type of Global Pledge Program

The Consumer Goods Forum (CGF) launched its self-regulatory Health and Wellness Initiative in June 2011 but it has been very much under the radar for the past two years. The Initiative is in the form of resolutions regarding the marketing of food with the objective of supporting healthier diets and lifestyles. It complements existing Pledge programs. Significant resolutions are:

–  Continuing to develop / improve affordability and availability of existing products and  services that support the goal of healthier diets and lifestyles

–  Reducing the overall energy, salt/sodium, sugars, saturated and trans-fat content of our 
foods and beverages to help address public health priorities

 –  Developing product sizes for a range of consumer needs

 –  Promoting consumption of fruits and vegetables.

– Committing to voluntary, company-specific measures to ensure that any advertising to children under the age of 12 years is only for products which fulfil specific nutrition criteria based on scientific evidence and /or applicable national and international dietary guidelines or that we do not advertise at all on media directed to children under the age of 12 years.

 A few days ago CGF launched its Action Plan with the main message to industry being “Now its Time to Act”

 A full copy of the Initiative with all resolutions can be accessed on this link http://healthandwellness.mycgforum.com/resolutions.html

 A video message from a variety of food business leaders can be accessed on this link

http://www.youtube.com/watch?v=m2-fOIRc63U

ICC Developing Guidelines for Alcohol Advertising

Earlier this month a group of experts met in New York to discuss and develop a draft guide that identifies the Principles in the ICC Code that apply to alcohol advertising and marketing communications.

 The ICC Code is not product specific but contains provisions that apply to all forms of advertising and marketing communications. Having a Framework that identifies the relevant provisions that apply to alcohol will be most useful.

 Further information may be found on the following link http://www.iccwbo.org/News/Articles/2013/Experts-developing-framework-for-responsible-marketing-of-alcohol/

 

Regulating Internet Advertising – An Innovative Initiative

Online Behavioural Advertising (OBA) is a type of Internet advertising that is ever increasingly being used to target consumers in the Asia-Pacific region. OBA is also enjoying extraordinary growth throughout the Asia-Pacific region. However it is unlikely that consumers are aware that they are being targeted. Furthermore OBA is cross-border therefore is generally unregulated.

OBA works like this. You go into Google or some other search engine site to look up hotel accommodation in Singapore. A cookie is then sent on your computer that indicates you are interested in travel. When you next use your computer ads will appear for special flight and hotel deals in Asia-Pacific destinations. The more times you search the more cookies you attract and the ads you see on websites become more and more relevant to you.

In various Asia-Pacific countries there are codes that prescribe the expected behaviour of advertisers. The local Interactive Advertising Bureau (IAB) usually develops the codes. Additionally the local advertising self-regulatory organisation sets advertising standards will deal with complaints.

The European Interactive Digital Advertising Alliance (EDAA) has recently launched a new initiative to educate consumers about OBA and to inform them of their rights to complain. There is also the facility to turn advertisers off or on. The EDAA is an organisation with membership from the IABs, advertising self-regulatory organisations, media and advertisers.

The website is http://www.youronlinechoices.eu It is well worth a visit.

Could the initiative be replicated in Asia-Pacific? The short answer is yes. The most practical way is to have the various industry groups coordinate in in a self-regulatory manner as they have in Europe. Government regulation is a possibility but it would be most difficult involving international treaties and agreements. However Governments would have a key role in encouraging and supporting industry organisations to organise and operate such an initiative.