It’s review season…

Topic: Regulatory

Who: Advertising Standards Authority, Office of Fair Trading and Gambling Commission

Where: UK

When: August 2009

Law stated as at: 1 September 2009 

What happened: 

In a flurry of announcements, three UK regulatory bodies launched consultations in areas of direct interest to advertisers and marketers.

The Advertising Standards Authority, no doubt at the instigation of its new Chief Executive Guy Parker, disclosed that it was carrying out a "Process Review" starting in Autumn 2009.

The advertising regulator says that now is a good time to launch a review, five years on from the self regulatory big bang when the ASA took over handling complaints about broadcast ads as well as non broadcast.

The announcement stresses that the functions of the uber regulator are not going to change, only potentially the way they are delivered.

Particularly under the spotlight will be:

• "the handling of complaints and investigations from the public and competitors" though perhaps this might have read "The handling and investigating of complaints from the public and competitors";
• the ASA's "proactive monitoring of advertisements by the Executive" although we were not aware the Executive did its own advertising;
• the ASA's "compliance work to enforce ASA decisions" although maybe this should have read "enforcement of ASA decisions to ensure compliance"; and
• "the provision of pre-publication advice and guidance by the Copy Advice team" which perhaps should…no this one seems regulatory babble-free.

The work will apparently get underway in October 2009 and will be done by "external consultants" once they are appointed after a competitive tendering process.

In the meantime the ASA says it would welcome any comments or suggestions that might be relevant to the project, although it makes it clear that it expects the review process itself to include seeking out the views of interested parties.

Two omissions

There are two omissions from this announcement as follows:

1. no specific reference to any review of the process for "appealing" ASA decisions currently run by the Independent Reviewer Sir John Cains. The "Independent Review" procedure has long been the butt of unease and criticism not least because even if Sir John says "Yes" and feels the review request has legs, the case goes back to the same body that made the decision in the first place

2. no reference to a real or aspirational end date by which it is expected that the review process will be completed and any recommendations implemented.

OFT "market study"

Meanwhile, down the road the Office of Fair Trading was putting it about that it was seeking comments on the scope of a planned market study into current consumer law surrounding advertising and pricing, with a particular focus on the internet. Comments were invited by 18 September 2009. After that the scope of the study will be finalised and the study itself will kick off in the autumn.

The OFT says that it is "looking to clarify and update the understanding of consumer harm that arises from potentially misleading advertising and pricing."

Broadcast advertising is excluded as this is Ofcom's bailiwick, but examples of pricing practices that are within the OFT's sights are as follows:

• "drip" pricing tactics, where consumers see only an element of a price upfront after which additional charges "drip" through the buying process;
• the use of high reference prices in price promotions such as "was £50, now £20" reference prices-car insurance but price increments;
• "baiting" sales which entice consumers with promises of discounts but then have very few items on offer at the sale price; and
• complex pricing where it is a challenge to assess unit price, such as "three for two" offers.

The regulator also makes it clear that it will be focusing specifically on price comparison sites which may be "complicated" by the use of these practices.

Behavioural advertising "under the microscope"

Also under the microscope will be the use of personal information in advertising and pricing. In this context, the OFT may have a particular look at behavioural advertising where information on a consumer's online activity is used to target the internet advertising they see. A related practice likely to be under scrutiny is that of tailoring prices to individuals based on their personal data.

Finally the OFT is minded to take a look at the use of opt-in or opt-out boxes for annual renewals, add-on charges or agreements to pass on personal details to third parties.

In each case, the impact and relevance of existing regulation will be looked at and online/offline differences will be scrutinised. There may also be a focus on particular industries such as furniture, travel, electrical goods or entertainment, but before the review is finally scoped, the OFT wants to understand from consumer groups, businesses and other stakeholders what areas they think it should be focusing on.

Gambling Commission consults on prize competitions

Not wanting to be left out, the Gambling Commission ("GC") announced deep into August that it was itself seeking views on an initiative leading to the publication of updated advice on prize competitions and free draws.

Interested parties have until Friday 11 September to proffer their views and the plan is to publish the updated advice "later in the Autumn".

The catalyst for this development has been the curious case of the Wilshaws and the Devon farmhouse they offered in a prize competition.

Back in 2007 the Wilshaws thought they had GC clearance to run their "win a house" competition, but were later told, after they had collected over £1m in entry fees from over 30,000 entrants, that the competition might be an illegal lottery. Then, having left the Wilshaws little option but to put their competition on ice, the regulator performed what looked like yet another U turn and gave the event the all-clear.

Previous GC "win a house" advice criticised

All this prompted the GC to supplement its existing advice on prize competitions (published in June 2007 and expanded in November 2007) with "specific advice" on "win a house" competitions.

This additional advice was criticised by some commentators including marketinglaw.co.uk. The beef was that the advice was less than helpful when it came to the key question of how to ensure that a pay to enter/skill competition involves enough skill to avoid being (absent a licence) an illegal lottery.

Now, however, the GC is carving for itself a second chance to answer critics and come up with clear, workable guidance although it is already suggesting that legal advice will still be needed even once the new guidance is in place viz this from the GC Deputy Chief Executive:

"We advise anyone considering running a scheme to read our guidance and as appropriate to seek legal advice before proceeding."

Why this matters:

The emerging trend of regulators seeking views on how to conduct a review before conducting one is in one sense encouraging as it maximises stakeholders' opportunities to have their say at an early stage.

What is less encouraging is the likely delay and expense involved if this process is followed by a review which in turn leads to proposals for change which are then themselves put out for consultation.

But perhaps with a change of administration just around the corner, that's the whole idea!