Introduction
Facts
Decision
Changes and improvements
Growth in algorithm-based advertising
Algorithm-based advertising uses consumer information collected from digital media. Once interests are identified (such as online search patterns), customised advertising is then directed at a given target audience, increasing the likelihood of engagement with the offered product or service. It is not by chance that this advertising model has become increasingly popular with consumers' growing online presence in Brazil, while also spurring discussions across several areas of law. The Brazilian Advertising Self-Regulation Council (Conar) recently analysed a groundbreaking case involving advertising based on algorithms and artificial intelligence.
Motivated by a consumer complaint, Representation No. 203/2021 concerned an ad for a video streaming platform. The consumer alleged the ad had misled them about the content on the platform, as the film shown in the ad was not available in its streaming catalogue.
As such, the consumer alleged a violation of the Brazilian Advertising Self-Regulation Code, in particular:
- article 1 – all ads shall be respectful, comply with the laws of the country and be honest and truthful;
- article 3 – the advertiser, advertising agency and media shall be liable towards consumers for all ads;
- article 23 – the ad shall not exploit the consumer's credulity, lack of knowledge or inexperience; and
- article 27 – the ad shall contain a truthful presentation of the product being offered.
In its defence, the streaming platform clarified that its ads are created automatically through algorithms, which, after having already identified the consumer's interest in the film, would have then used the film to increase the consumer's engagement with the ad. The defendant further argued that, although the film was not available on video-on-demand, it was listed in its catalogue for streaming on other media.
In evaluating the two parties' arguments, Conar found that the ad did not convey incorrect information because "it did not specify in what form the film was available" and "this additional information can be accessed when contracting the service, upon installing the application". According to the rapporteur's vote, it was the consumer's duty to examine the conditions of the contract, and the case was unanimously dismissed on this rationale.
In any case, Conar emphasised that advertisers should be cautious when using algorithm-based advertising. In particular, the Council pointed out that:
it is important to improve these mechanisms in a balanced manner because the precision required for coming up with a successful digital solution can also narrow the field of available possibilities. This can often result in blocking consumers from the solutions they seek.
Moreover, Conar concluded that "understanding and keeping up with transformations, changes and improvements to algorithms is key, so they generate correct and good-quality advertising in line with consumer choices".
Although the case was dismissed, Conar signalled that the advertising sector should be aware of transformations, changes and improvements concerning algorithms to ensure that the advertising they generate meets the requirements of the Brazilian Advertising Self-Regulation Code.
Growth in algorithm-based advertising
Conar's recent decision shows concern for balancing the need for ads to meet regulatory standards with the rising relevance of artificial intelligence and algorithms in the advertising industry in order to avoid hindering technological progression in this area. Considering the popularity of algorithm-based advertising, Conar's ruling under Representation No. 203/2021 is highly relevant and has the potential to influence future decisions.
For further information on this topic please contact Fabio Ferreira Kujawski or Paulo Marcos Rodrigues Brancher at Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados by telephone (+55 11 3147 7600) or email ([email protected] or [email protected]). The Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados website can be found at www.mattosfilho.com.br.
Lorena de Freitas Pereira assisted in the preparation of this article.
An earlier version of this article was first published on Único.