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There is a very useful and comprehensive checklist on best practice regulation. It is the APEC-OECD Integrated Checklist on Regulatory Reform. It is a general overview of the best practice requirements of best practice regulation in general – not just advertising regulation.
The checklist is available at this link http://www.oecd.org/regreform/34989455.pdf
The checklist is similar to other best practice regulation documents. For instance Paragraph A2 states “Consider alternatives to regulation where appropriate and possible, including self-regulation, that give greater scope to citizens and firms; when analysing such alternatives consideration must take account of their costs, benefits, distributional effects, impact on competition and market openness, and administrative requirements.”
Building capacity, training and development in best practice advertising regulation was identified as being of priority by the Hanoi Dialogue, which has now been endorsed by APEC. This is welcome news as a robust best practice advertising regulatory regime provides the right environment for a flourishing advertising industry. As advertising is a driver of economic growth everyone benefits. Now begins the task of actioning the recommendations.
Capacity building, training and development is needed in three areas
– Advertising regulators
– Industry including advertisers, ad agencies and media
Industry does not always recognise it has a key role and needs to be a driver of the capacity building, training and development program. In a general sense this is counter-intuitive for industry as it leaves regulation to Governments. Conversely it is counter-intuitive of many Governments to encourage industry to be involved in the development of a regulatory regime. Best practice advertising regulation is a partnership between Government and industry – That is the challenge
The APEC Ministerial Meeting held in Bali on 4/5 October agreed to the “progression of advertising standards in the region.” This is a huge step forward and will enable the recommendations from the November 2012 Hanoi Dialogue on ‘Advertising Standards – Principles and Practice’ to be implemented.
A key issue identified at the Dialogue was the need to build capacity. This also was recognised by the Ministerial Meeting generally. Paragraph 46 of the Ministerial Statement states –
“We encouraged interested economies to explore the possibility of using additional tools to strengthen their implementation of good regulatory practices, including single on-line locations for regulatory information, prospective regulatory planning, including regulatory agendas, and retrospective reviews of existing regulations. We instructed officials to develop capacity-building programs to assist APEC economies in improving their understanding on these tools.”
Also important was that the Ministers recognized that best practice regulation reduces barriers to trade thus fostering economic growth and that advertising regulation is a vital component. Paragraph 50 of the Statement states –
“We recognized the work on regulatory approaches on reducing technical barriers to trade and fostering greater regulatory cooperation in the region including through the revised APEC Regulatory Cooperation Advancement Mechanism (ARCAM) on Trade-Related Standards and Technical Regulations and we welcomed discussions on electric vehicles as the topic for the 2014 ARCAM Dialogue. We look forward to the progression of work on advertising standards in the region.”
The Advertising Standards Bureau Australia (ASBA), which has been leading the project on behalf of advertising regulatory organizations, has been liaising with APEC. It announced that it and international partners are now planning the way ahead and assisting APEC. It is anticipated that there will be substantial progress in 2014. In a just released statement ASBA said –
“APEC will soon finalise a project on identifying gaps in the advertising system and standards in the region. From there APEC members will take action to use the resources of existing systems, such as those in Australia, New Zealand, Malaysia, Canada and others, to provide capacity building training and development to bring the systems and standards in all APEC economies to a level that will best benefit all communities.”
The Ministerial Statement may be found on this link
The ASBA statement may be found on this link
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.”
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.
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.
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.
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’.
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)
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 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.