Advertising Standards Canada (“ASC”), the advertising industry’s self-regulatory body, has made changes to The Canadian Code of Advertising Standards (“Code”). Effective as of October 3, 2016, these significant amendments include new guidelines that require the disclosure of any material connection between an organization and a person making a representation about the organization or a good or service offered by that organization. This may affect what is disclosed, and how, by charities and not-for-profit organizations who use quotes from brand ambassadors, board members or beneficiaries of their programs to speak about their organizations.
The Code sets out criteria for what is acceptable in advertising in Canada. It applies to virtually all advertising in Canada, regardless of media or membership in ASC, and covers issues ranging from truth in advertising, to depictions of safe behaviour, to standards of decency. The Code defines “advertising” and “advertisement(s)”, in part, as a message directed to Canadians with the intent to influence their choice, opinion or behaviour. “Advertiser” means an entity that has, or shares with another entity, final authority over the content of an advertisement. Not-for-profit organizations and charities that promote their services to Canadians are “advertisers” within the scope of the Code.
ASC administers the Code and adjudicates complaints it receives about advertising from the general public, as well as other advertisers or special interest groups. Notably, consumer complaints about non-commercial advertising are on the rise. In ASC’s 2015 Annual Complaint Report, 273 consumer complaints were received about advertising by non-commercial organizations, the highest number of complaints received by category of advertiser. ASC’s Standards Council (the “Council”) adjudicates such complaints under the Code. If an advertiser is found to have offended the Code, the offending advertising will be removed from the Canadian market and the offending advertiser may be named in the ACS’s quarterly complaints report.
The recent amendments to the Code include a new Interpretation Guideline to Clause 7 of the Code which governs testimonials. Testimonials must not be deceptive, and the Interpretation Guideline explains that failure to disclose a material connection between the advertiser and the person providing the testimonial could be deceptive. For example, a charity might print a testimonial to say: “Thanks to [your organization], I was able to provide a happy holiday season for my children.” The reader would likely assume that this quote came from a beneficiary of the charity’s programs. It would be misleading, however, if the testimonial was written by the charity’s employee and the employment relationship was not disclosed. Similarly, it could make a difference to the audience of an ad if they knew that someone was paid to provide a positive quote for advertising, or if the organization had paid someone to write about its services in a blog. The concern is that consumers need to know if someone has been compensated in any way for writing about a service in order for them to distinguish that perspective from unsolicited or grassroots reviews or endorsements.
The scope of material connection is newly defined in the Code and includes: benefits, monetary compensation, free products, gifts, discounts and any employment relationship. The Interpretation Guideline excludes from this disclosure requirement situations where consumers would reasonably expect a material connection to exist, such as celebrity endorsements. For examples of how to make adequate disclosure, ASC points to guidance developed by the U.S. regulator (The FTC’s Guide to Testimonials & Endorsements), and the Word of Mouth Marketing Association (Ethical Word of Mouth Marketing Disclosure Best Practices in Today’s Regulatory Environment).
In addition to an offending ad’s removal from market, the new Code allows ASC to notify the Competition Bureau or other regulatory authority of the advertiser’s failure to follow the procedure, or comply with the Council’s decision where an advertisement or claim contravenes the Code. This could possibly trigger an investigation by the Bureau or other regulator.
For all of these reasons, it is important for non-commercial organizations (such as charities and non-profits) to be familiar with ASC’s role, its new Code and the consequences that may arise from not following the procedure or Council’s decision.