Overview

The UK’s Committee of Advertising Practice (CAP), a self-regulatory body composed of representatives of advertisers, agencies, media owners and other industry groups, regulates the industry through its UK Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing (the CAP Code). The latest 12th edition of the CAP Code was agreed on 1 September 2010 but does not enter into force until 1 March 2011 (the Twelfth CAP Code).

The Twelfth CAP Code reflects a significant extension of advertising’s regulatory framework and as such organisations have until 1 March 2011 to comply with its provisions. Until 1 March 2011 the previous 11th edition of the CAP Code remains applicable (the Eleventh CAP Code).

The UK’s system of self-regulation essentially provides that advertisers must comply with various advertisments codes drawn up by the CAP and other self-regulatory bodies or otherwise face having their advertisements withdrawn by media owners. The system is overseen by an independent agency funded by an industry levy, the Advertising Standards Authority (ASA). For serious cases of persistent offending, the ASA can refer violators to government agencies with a wider ranger of powers to sanction — in the case of non-broadcast advertising, this is the Office of Fair Trading (OFT).

In its paper introducing the Twelfth CAP Code, “Extending the Digital Remit of the CAP Code” (the CAP Paper), the CAP explained that the system of self-regulation of non-broadcast digital advertising enforced by the ASA would be significantly extended in terms of scope, sanctions and funding.

The Extension of the Scope of the CAP Code

The Eleventh CAP Code provided the ASA with a remit covering:

Advertisements in non-broadcast electronic media, including but not limited to: online advertisements in paid-for space (including banner or pop-up advertisements and online video advertisements); paid-for search listings; preferential listings on price comparison sites; viral advertisements …; in-game advertisements; commercial classified advertisements; advergames that feature in display advertisements; advertisements transmitted by Bluetooth; advertisements distributed through web widgets and online sales promotions and prize promotions”.

Although the ASA is able to regulate paid-for online advertising and marketing communications under the Eleventh CAP Code, it is unable to regulate non-paid-for materials.

According to the ASA, the limited scope of its remit pursuant to the Eleventh CAP Code was difficult to reconcile with the already widespread (and ever increasing) use of the Internet as a means of marketing. In particular the ASA noted, this limited scope hampered its ability to protect vulnerable users of online media, such as children. By way of example, in 2008 and 2009 the ASA had to reject approximately 3,500 complaints relating to the content of an organisation’s own website because of a lack of jurisdiction.

It is was because of this obvious lacuna in the ASA’s regulatory powers that the Twelfth CAP Code has been introduced so that from 1 March 2011 it will apply to:

Advertisements and other marketing communications by or from companies or organisations or sole traders on their own websites, or in other non-paid-for space online under their control, that are directly connected with the supply or transfer of goods, services, opportunities and gifts, or which consist of direct solicitations of donations as part of their own fund-raising activities.”

Although relatively innocuous on first glance, in fact this newly worded remit represents far-reaching changes to the scope of the ASA’s regulatory powers. Specifically, “other non-paid-for space online under their control” is a deliberate attempt to include the advertising and marketing communications on advertiser-controlled pages of social networking sites.

Further, the ASA is no longer limited to regulating those communications which are obvious marketing attempts: “directly connected with the supply or transfer of goods, services, opportunities and giftscovers anything which is written with the aim of selling regardless of whether it is overtly selling”, for example by including information as to price or referring to a financial transaction.

Finally, for those in the charitable sector, the inclusion of “direct solicitations of donations as part of their own fund-raising activities” in the new remit is something which must be taken seriously.

Additional Assessment Criteria

Although the ASA will determine which advertising material will fall within its extended remit on a case by case basis, the CAP has provided some initial general guidance as to some of the factors involved in this decision.

In the first instance, the CAP Paper makes it clear that advertising material is likely to constitute an advertisement or other marketing communication falling within the ASA’s wider remit if it is a commercial communication that has appeared in the same or very similar form as an advertisement in a paid-for third party space.

Second, the CAP Paper states that material which is a commercial communication and which includes an “invitation to purchase” (or makes such an invitation easily accessible), as defined by statute as meaning “a commercial communication which indicates characteristics of the product and the price in a way appropriate to the means of that commercial communication and thereby enables the consumer to make a purchase” is likely to constitute an advert.

As a practical matter, marketers will have to wait until ASA begins to enforce the extended CAP Code in order to get a clearer understanding of both how the ASA intends to interpret the provisions of it and also how it intends to approach such investigations generally.

Exclusions

As with previous editions of the CAP Code, there are limits to the remit of the ASA as set out in the Twelfth CAP Code.

In particular, the numerous exclusions that applied under the Eleventh CAP Code will continue to apply to the Twelfth edition and these include, but are not limited to: classified private advertisements, press releases and other public relations material, editorial content, political advertisements, corporate reports, natural listings on a search engine or price comparison site and claims in marketing communications in specialist media for medical, dental, veterinary or allied practitioners that relate to those practitioners’ expertise.

Furthermore, the Eleventh CAP Code’s jurisdictional limit on the ASA’s reach continues into the 12th edition so that it does not apply to “marketing communications in foreign media”. In addition, the Twelfth CAP Code continues to provide that“[d]irect marketing communications outside of the United Kingdom and sales promotions and advertisements in paid-for space that are published on non-UK registered websites, if targeted at UK consumers, are subject to the jurisdiction of the relevant authority in the country from which they originate if that authority operates a suitable cross-border complaint system. If it does not the Advertising Standards Authority (ASA) will take what action it can.”

In addition to the existing exclusions from the ASA’s remit, the CAP have added two further exclusions which will take effect from 1 March 2011.

Advertising and marketing communications relating to “investor relations” will be an exclusion applicable to any forum that the ASA regulates. “Investor relations” refers to “marketers’ communications about their own company … with the financial community, including shareholders and investors, as well as others who might be interested n their company’s stock or financial stability”.

Communications which are termed “heritage advertising” will also be excluded from the ASA’s remit. Heritage advertising is said to be “iconic material of value and relevance to the brand owners website”. Specifically, the exclusion will apply to companies, organisations or sole traders who include heritage advertising on their own websites, or in other non-paid-for space online under their control where that advertising is not part of their current promotional strategy and is placed in an appropriate context.

Sanctions

The ASA can impose sanctions for breaches of the CAP Code. Under the Eleventh CAP Code, the CAP Compliance team had various sanctions at its disposal including: adverse publicity of the breach; the issuance of Ad Alerts to CAP members which both highlight breaches of the CAP Code and advise members to withhold their services or advertising space from non-compliant marketers; revocation of trading privilege recognition; pre-publication vetting by the ASA and the CAP and referrals to the Office of Fair Trading and the Trading Standards Authorities for detailed investigation and possible legal action.

These sanctions remain in place under the Twelfth CAP Code and more have been added. The new sanctions apply to advertising or marketing communications on websites and in other non-paid-for-space that is online and under the advertiser’s control. First, details of a non-compliant advertiser and the non-compliant marketing communication may be detailed on an ASA microsite and the ASA may take steps to bring this site to the attention of the public. Second, paid-for search advertisements that link directly to the page hosting the non-compliant marketing communication may be removed (with the assistance of the search engine). Note that it is the page in its entirety that would be removed, not just the non-compliant marketing communication and organisations must therefore consider the potential ramifications of such a removal including possible breaches of third party agreements. Finally, advertisements paid for by the ASA may be placed on search engines. Such advertisements will highlight the continued non-compliance of an advertiser’s marketing communication and may link to the microsite referred to above. These new sanctions represent a significant increase in the measures that may be taken against those who breach the CAP Code. Their introduction demonstrates that the ASA wishes to send a signal to the market that it is serious about enforcing the CAP Code in an online context.

Funding

The funding mechanisms which were applicable under the Eleventh CAP Code have been extended so that the 0.1 per cent levy on paid-for advertisements will now also apply to advertisements appearing on Internet search engines. Significantly, Google has contributed seed capital in order to show its credentials as a responsible corporate citizen committed to regulation of the online marketplace.

Reactions

Although many organisations and commentators are pleased that with the extension of the ASA’s remit, there are some who consider that the Twelfth CAP Code is misjudged.

Specifically, concerns remain as to how the ASA will decide what constitutes a marketing communication which it may regulate and what is editorial content which it may not regulate; this is an even greater concern for social networking sites where the line between the two may be more blurred than in other types of content. The ASA has itself admitted that there are “grey areas” with the Twelfth CAP Code in this regard.

Conclusion

The extended remit of the ASA represents an acknowledgment of its need to modernise in line with the changing landscape of marketing.

Marketers have between now and 1 March 2011 to become comfortable with the Twelfth CAP Code and it is important that both those advertising campaigns that are currently in the pipeline as well as those that will be created from now on are done so with the Twelfth CAP Code in mind.