Joint Committee on The Draft Communications Bill Appendices to the Minutes of Evidence


APPENDIX 2

Memorandum submitted by The Advertising Association (AA)

1.  THE ADVERTISING ASSOCIATION

  The Advertising Association (AA) is a federation of 24 trade bodies representing the advertising and promotional marketing industries including advertisers, agencies, media and support services in the UK. It is the only body that speaks for all sides of an industry worth over £16.5 billion in 2001. Further information about the AA, its membership and remit can be found at: www.adassoc.org.uk

  The AA's remit concerns the mutual interests of the business as a whole and can best be summarised as "to promote and protect the rights, responsibilities and role of advertising" in the UK.

  Since its formation in 1926, the AA has been pivotal in the development of standards and effective regulation. It was instrumental in setting up the Advertising Standards Authority (ASA) in 1962 and, in 1975, in enabling the foundation of the Advertising Standards Board of Finance (ASBOF) to provide secure and independent funding for the ASA at a time of severe legislative threat from Government. The AA is a board member of ASBOF and a member of the Committee of Advertising Practice (CAP), whose Advertising and Sales Promotion Codes are independently administered by the ASA.

  The AA is the only industry body, along with the Government, that has a right of consultation with the Chairman of ASBOF in the appointment of the independent Chairman of the ASA. The current Director-General of the AA is Chairman of CAP.

  At the outset, the AA would like to impress upon members of the Committee the importance of the advertising sector within the broadcasting ecology. Advertiser funding is critical to the current media landscape, without it, over 50 per cent of TV and radio would disappear as advertising provides the major revenue source for all commercial broadcasting. TV advertising provides over £4.6 billion in revenue to the TV broadcasting sector whilst radio advertising accounts for £595 million.

  The advertising industry, as represented by the AA, welcomes the opportunity to take part in the current debate about future regulatory structures. There are many aspects to this debate that affect the advertising sector. There are many other organisations with whom the AA has ties, not least its 24 member organisations, that will seek to make representations to the Committee. The AA represents the interests of all sectors within the advertising business; advertisers, agencies, the media and support services. The AA must therefore confine its comments to those issues on which there is unified agreement. Hence this submission concentrates on the debate about the possibility of a move towards greater self-regulation for the broadcast advertising sector. Commentary on a number of other issues is included in Appendix 1.

2.  ADVERTISING CONTENT REGULATION

2.1  The Rationale

  In introducing this draft legislation, the Government emphasised that the driving force behind the changes proposed was the unprecedented change that has taken place within the media environment over the past six years. The regulatory regime has struggled to keep pace and adapt with this change and this struggle will intensify as the pace of technological advances increases.

  The Government wishes to create a new system that is "light touch", streamlined, resilient and adaptable. It wants to create a "future-proof" system based on principles of deregulation and the avoidance of over-burdensome or disproportionate regulation.

  It is with the introduction of precisely these goals in mind that the advertising industry has consistently advocated a system of self-regulation for broadcast advertising content over the past three years. In its submission to the Government in advance of the publication of the White Paper, the AA put forward the following arguments in favour of self-regulation for broadcast advertising:

    —  simplification of regulatory structures is required/overlap should be removed;

    —  advertising content regulation can be separated from economic infrastructure regulation;

    —  advertising content regulation should no longer be an addendum to programme regulation;

    —  "convergence" (ie same advertising content via different delivery platforms) means regulatory structures can no longer treat media as discrete from each other;

    —  self-regulation of broadcast advertising content will offer the most flexible system made necessary by convergence; statutory systems are less flexible;

    —  the advertising business has established an effective self-regulatory system for non-broadcast media (which has been acknowledged by the Government) and could apply its lessons to broadcast advertising.

  Obviously the driving force behind change is convergence and not dissatisfaction with the way in which the current system operates. Whilst progress towards convergence is not as advanced as many media commentators would have us believe, it will continue to develop and to create anomalies that the present system is ill-equipped to deal with.

  The essence of a self-regulatory system is not predicated on a desire to prevent the introduction of statutory control but to ensure consumer confidence in advertising. This confidence becomes ever more important in a converged world where the inflexibility of a statutory system can lead to loop-holes and outmoded regulation and thus consumer uncertainty and lack of confidence. What a self-regulatory system offers, if correctly established, is the maximum flexibility to deal with an ever-changing media environment. Such a system would help to ensure that outdated barriers to new advertising techniques are broken down as quickly as possible and new regulatory answers are swiftly found for the questions raised by technological progress.

  In developing a possible new system of self-regulation, it is imperative that the Government and industry work together to maximise this flexibility and ensure the proper protection of the freedom to advertise in a culturally and technologically converging world.

  A copy of the AA's submission to Government in advance of the White Paper, spelling out the AA's rationale for a move to self-regulation, can be found at:

    http://www.adassoc.org.uk/position/crwp.html

2.2  Co-Regulation or Self-Regulation?

  The policy narrative accompanying the draft Communications Bill refers to both co-regulation and self-regulation and often appears to use the terms inter-changeably. This has led to a great deal of confusion within the advertising sector as to what, precisely, is being proposed for advertising content.

  The system we are advocating is one within which a self-regulatory body works in a co-regulatory relationship with OFCOM—similar to the way in which the OFT and ASA/CAP system operates[1]. For the sake of clarity, the AA will use the term "self-regulation" throughout this paper.

  "Self-regulation" of advertising content in the UK is exemplified by the regulatory structures and systems already in place within the non-broadcast advertising sector. In order to clarify therefore what is meant by "self-regulation" Appendix 2 provides details of the current arrangements in non-broadcast advertising as administered by the ASA. For further information please refer to the ASA website at www.asa.org.uk

  The operation of the ASA has been widely praised within Government:

    "The Government strongly supports the self-regulatory controls on advertising in the United Kingdom run by the Advertising Standards Authority. These have gained world-wide recognition as a good example of how self-regulation can work effectively to address consumer problems." ("Modern Markets: Confident Consumers" White Paper)

    "The strengths and effectiveness of the Advertising Standards Authority (ASA) system for self-regulation of non-broadcast media, which is well-regarded both here and overseas, give us confidence that a more co-regulatory approach than at present could be effective." ("A New Future for Communications" White Paper)

    "We are keen to see further developments . . . drawing upon the experience of the Advertising Standards Authority in running a self-regulatory system." (Draft Communications Bill: Policy Narrative)

  It is our belief that a system for broadcast advertising content could and should be based on the successful model of the ASA. This tried and tested model has resulted in extremely high levels of compliance within the non-broadcast sector. It generates high levels of consumer and industry confidence and has the support of the Government. The system was also singled out by the Better Regulation Task Force as an exemplar of best practice in their report on alternatives to State regulation (July 2000).

  Given the extensive praise for the ASA system and the support it has earned amongst all stakeholders in this debate, it is therefore somewhat surprising that the model for broadcast advertising regulation envisaged by the Government ignores the core principles underlying the ASA/CAP model.

2.3  Core Principles

  In order for industry to accept the responsibility for a self-regulatory system within broadcast advertising content, such a system would have to be based on certain core principles as exemplified by the ASA model detailed in Appendix 2.

  These principles can be summarised as comprising a genuine transfer of authority from OFCOM to a new regulatory body which would be financed by industry and maintain operational responsibility for advertising content regulation with OFCOM retaining last resort statutory powers of sanction. Such a transfer of authority would need to be coupled with a transfer of responsibility for advertising content from the broadcaster to the advertiser as is the case in the ASA model.

  In practice this would require that a new self-regulatory body has total, independent responsibility in the following areas:

    —  Code writing and review: Code ownership must be transferred in toto. The right to review the codes and amend as necessary must be transferred from OFCOM—there can be no question of OFCOM imposing code amendments, although endorsement of the codes by OFCOM could be useful.

    —  Complaint Handling: Receipt, consideration and adjudication on all complaints relating to advertising content must be handled by the new self-regulatory body. Regulatory double-jeopardy and consumer confusion are best avoided by having one complaint handling mechanism and one system for adjudication.

    —  Enforcement of rules: The current system for non-broadcast advertising relies on enforcement via industry members of CAP. This system has produced compliance rates of over 95 per cent across nearly all sectors and has been widely praised by Government. In the sphere of enforcement a clear delineation must exist between the general enforcement powers of the self-regulatory body and the last resort back-stop powers of OFCOM in order to avoid merely creating an additional layer of regulation on broadcasters and advertisers. Responsibility for advertising content should reside with the advertiser with ultimate sanctions against broadcasters being applied only when broadcasters consistently refuse to abide by the decisions of the self-regulatory body.

    —  Copy clearance and advice: It is envisaged by both industry and Government that these would continue to be handled by existing self-regulatory structures such as the Broadcast Advertising Clearance Centre (BACC) and the Radio Advertising Clearance Centre (RACC).

    —  Appeals structure

  Such a system would genuinely "build on and draw upon the experience of the Advertising Standards Authority" as per the policy narrative issued with the draft legislation. Anything less than this is likely to be perceived by industry as merely constituting an additional layer of regulation and an attempt by Government to transfer regulatory costs without a corresponding transfer of authority. Unfortunately a system based on these core principles and functions as found within the ASA system, would not be possible under the policies outlined and reflected in the draft legislation.

3.  THE PROCESS

  The Government has implied criticism of the advertising industry for not putting forward detailed proposals for a co-regulatory structure for broadcast advertising. The advertising industry welcomes the opportunity to present proposals for a more co-regulatory structure for advertising content regulation. However, such proposals must be based on a mutually agreed framework of core principles and until such time as those principles can be agreed and are reflected within the Communications Bill, detailed proposals are unlikely to be forthcoming from the industry.

  The process, as we see it, should be as follows:

  1.  Agreement on the core principles and division of responsibilities as outlined in this paper.

  2.  Amendments to the draft Communications Bill to ensure that these core principles are reflected there and that no legislative barrier exists to the future establishment of a system based on these principles.

  3.  Agreement on proposals for such a system—such proposals to come from industry and be agreed by OFCOM and the Government.

  Prior to the publication of the draft Communications Bill, industry believed that agreement on these core principles had been reached and awaited publication of the Bill for confirmation. Unfortunately, whilst there is welcome reference to "co-regulation" and extensive praise for the ASA system within the policy narrative, the policy outlined by the Government and reflected in the Bill itself provides a number of serious obstacles to the creation of a system that would reflect these principles and thus be acceptable to industry.


4.  THE GOVERNMENT'S PROPOSALS

  The policy narrative accompanying the draft Bill has this to say on the issue of advertising regulation:

    "Following discussions with broadcasters and regulators, we have decided to retain provision that the regulator may directly consider complaints from the public about broadcast content ("standards complaints"), rather than, as proposed in the White Paper, have to address their complaint first to the broadcaster. While many comments or complaints are best addressed to the broadcaster, and the broadcaster should be directly accountable to its audience for maintaining standards, it is important that people should also feel able to complain to the regulator, especially about breaches of standards which appear serious and which might be detrimental to the public at large. It is equally important that the regulator is able to deal with the complaint promptly.

    OFCOM's ability to consider complaints directly extends not just to complaints about editorial programming but also to advertising complaints, which may require immediate action, for example in relation to misleading claims."

  And:

    "We expect standards to be applied to broadcast advertisements that are consistent with the standards for other forms of content and which ensure that audiences are effectively protected from serious detriment. We also need to be confident that commercial promotions do not in any way affect the integrity of programmes whether through product placement, inappropriate sponsorship or any kind of blurring of the boundaries between ads and editorial content.

    OFCOM will therefore be able to apply consistent over-arching content standards to all forms of broadcasting including advertising and it is to be given principal responsibility for regulating broadcast advertising. Within this context, there may nevertheless be the opportunity for a greater degree of industry co-regulation, based on the development of industry practices that conform to and contribute to the advertising standards that are laid down by OFCOM. Progress has been made with the standards application and pre-vetting work of the two industry run advertising clearance centres, BACC for TV and RACC for radio.

    We are keen to see further developments building on this and drawing upon the experience of the Advertising Standards Authority in running a self-regulatory system. The formal delegation of OFCOM's powers to set advertising standards is not envisaged partly because of limitations imposed under relevant EC directives, but this will not impede the further development of industry co-regulation. The White Paper set out a challenge to the advertising industry and to broadcasters to set out proposals for more effective co-regulatory arrangements. We have yet to see specific proposals. Although this eventuality is not covered expressly in the wording of the Bill, the draft legislation allows OFCOM wide flexibility in the methods it uses for meeting its stated objectives. These methods would include further industry co-regulation in the event that suitable proposals come forward."

  What this means in practice is that OFCOM would retain the right to consider complaints about advertising content even if a new self-regulatory structure was to be established. As explained above, the credibility and authority of any industry funded self-regulatory body would rely on its decisions being sovereign and the duty to consider complaints being delegated entirely to that body—as is currently the case with the ASA model. Not only this, but it is plain that within a system designed to reduce regulatory overlap and produce streamlined and effective regulation, it makes little sense to create from the outset a process by which regulatory double-jeopardy is entrenched in the structure. This would be precisely the outcome if a new self-regulatory body was not given sole authority to consider complaints.

  With regard to the codes, the advertising industry is unconvinced that European legislation requires OFCOM to retain control over code ownership and the setting of standards. The over-arching standards for regulation on advertising content are spelt out within the legislation itself. Within the confines of those standards, any new self-regulatory body must be given the authority to draw up detailed codes.

  One of the main arguments for the establishment of a self-regulatory body is the requirement for flexibility in a rapidly changing media environment. New forms and techniques of advertising are being created daily. A self-regulatory mechanism with sole authority over codes can be flexible enough to ensure that such codes both reflect the standards outlined in legislation and keep pace with rapid evolution in advertising techniques.

CONCLUSION

  The advertising industry's desire for a new structure for advertising content regulation is in no way based on dissatisfaction with the existing system. We believe that a self-regulatory body, working in a co-regulatory relationship with OFCOM as a back-stop regulator, is simply better equipped to deal with rapid change and technological advances. In our opinion, the future evolution of the broadcasting sector means that a statutory system for advertising content regulation will become increasingly unworkable. A self-regulatory system, correctly established and based on the lessons learnt within the non-broadcast system is "future-proof". Flexible and adaptable, such a system could ensure continued high levels of consumer protection. Regulatory uncertainty is avoided as a self-regulatory body can act quickly to amend codes and take the necessary action to reflect changes in advertising practice.

  The Government has praised the system in operation within the non-broadcast media time and again. It has stated that what it refers to as a "co-regulatory" system in broadcast should be based upon the ASA model and yet the system it appears to envisage bears little resemblance to the ASA/CAP model and ignores the fundamental principles underlying the ASA/CAP structures. Indeed, as far as industry is concerned, the only similarity between the ASA system and the system envisaged by Government for broadcast media appears to be that industry is required to pay for both.

  If agreement cannot be reached on the core principles and basic tenets of a new system for broadcast advertising content regulation then industry will not take up the "challenge" represented by the Bill to develop further proposals in this area. The opportunity to develop a flexible, efficient and "technology-neutral" system for regulating advertising content will have been lost to the detriment of all.

  The AA and the advertising industry would therefore be grateful for the support of the Joint Committee for the recommendations outlined in Appendix 3.

Annex 1

Additional Comments

1.  REGULATION OF THE BBC

  Whilst the BBC occupies a unique place within the broadcasting ecology of the UK, mainly as a result of it's funding arrangements, it is nonetheless a major competitive player within the sector. With this in mind, the AA is at a loss to understand why the Government appears so unwilling to ensure that the BBC is properly and transparently regulated in an equivalent way to those commercial broadcasters with whom it increasingly competes.

  The AA supports the recommendations of many of its member organisations, including ISBA, that the regulation of the BBC be brought entirely within the remit of OFCOM to create a level playing field within the broadcasting sector.

2.  THE CONSUMER PANEL

  The advertising industry is not opposed to arrangements necessary to ensure that the voice of the consumer and customer are heard within OFCOM—after all, in many ways advertisers are as much customers of the broadcasting sector as the viewers and listeners. The Advertising Association has however, from the outset, queried the necessity of such arrangements taking the form of a Consumer Panel as outlined in the legislation. Our concern in part arises from the propensity for such bodies to be hi-jacked for the purposes of pursuing the particular agendas of consumerist bodies rather than representing the views of real consumers.

  There has been little consideration thus far of the resource implications of a Consumer Panel, as currently outlined, with an almost limitless remit. OFCOM itself, which has the support of industry, will be an expensive undertaking and require enormous resource input from industry. To create a Panel with a remit covering every area of OFCOM's remit will not only require considerable additional resources but would dilute and diffuse the focus, and thus potentially the effectiveness, of the Panel.

  The advertising sector urges the Committee to support a return to the remit for the Panel envisaged in the White Paper covering issues relating to network and service provision and excluding content matters.

  The proposals for a Panel of this kind appear to take very little account of the existence of many tried and tested mechanisms currently in existence to ensure that the views of consumers, in particular in relation to content issues, are heard by those who actually provide services directly to them—the broadcasters themselves. The AA will be working with broadcasters over the coming months to ensure that these arrangements are better understood within Government.

  Finally, the draft Communications Bill will allow the Consumer Panel to decide whom else (in addition to OFCOM) it can advise (Clause 96 (2)). The current phraseology of this clause could enable the Panel to decide to advise, for example, the Advertising Standards Authority. This would appear to be extending the remit of the Panel beyond the remit of OFCOM and as such is unacceptable.

Annex 2

Advertising Regulation in the Non-Broadcast Sector

The Advertising Standards Authority (ASA)

Independent of both the advertising industry and the Government, the work of the ASA is funded by a small levy on display advertising and direct mail expenditure. A separate body—The Advertising Standards Board of Finance (ASBOF), collects this levy. The ASA's remit has been defined as being to protect the public by ensuring that the rules contained in the British Codes of Advertising and Sales Promotion are followed by everyone who prepares and publishes advertisements. The ASA receives and considers complaints about non-broadcast advertisements[2], judging them against the Codes, and carries out research into Code compliance. It can request that offending advertisements are withdrawn and has the ultimate sanction of making referrals to the Office of Fair Trading (OFT) or the Trading Standards Authority. The ASA Council, the ultimate decision making body of the ASA, is made up of a majority of lay people acting not as representatives of any organisation or sector but as experts in their fields and as consumers in their own right.

The Committee of Advertising Practice (CAP)

  The Committee of Advertising Practice (CAP) is the industry body responsible for writing, revising and enforcing the British Codes of Advertising and Sales Promotion. These Codes are regularly reviewed and all interested parties are invited to take part in consultation during the review process. Constituent members include representatives of all sectors of the advertising industry, ensuring the industry-wide support necessary for effective self-regulation. In addition to writing and reviewing the Codes, CAP members are responsible for enforcing the Codes' provisions amongst their own members. Finally, CAP provides a free and confidential guidance service for advertisers, their agencies, the media and others to ensure that advertisements are prepared in accordance with the Codes.

Annex 3

Recommendations

  The AA and the advertising industry seek the Committee's support for the following recommendations:

    —  Government should agree with industry on the core principles that would form the basis of any self-regulatory system for advertising content;

    —  These core principles should be based upon a genuine transfer of authority for advertising content regulation from OFCOM to a new self-regulatory body;

    —  The regulation of advertising content in broadcast media should take place within a system modelled on the ASA/CAP system within which:

    —  A self-regulatory body would have operational responsibility for:

    —  Code writing and review within the over-arching standards objectives set within the Communications Bill;

    —  Receipt, consideration and adjudication of all complaints;

    —  Enforcing rules and decisions NB: responsibility for advertising content rests with the advertiser against whom sanctions are applied;

    —  Copy advice and pre-clearance;

    —  Appeals;

    —  OFCOM retains back stop powers similar to those operated by the OFT in the non-broadcast sector whereby OFCOM steps in as a last resort and only when the established means—ie: the self-regulatory system—have been exhausted.

    —  The draft Communications Bill should be amended to enable a transfer of authority to a self-regulatory structure to take place at an appropriate time;

    —  In particular:

    —  Clauses 212-218 must be amended to enable OFCOM to delegate responsibility for setting detailed standards codes to a self-regulatory body within the confines of the standards objectives detailed in clause 212;

    —  Clauses 212-218 must be amended to enable OFCOM to transfer responsibility for consideration of, and adjudication on, complaints to a self-regulatory body;

    —  Further amendments may be necessary to ensure that licensees are not subjected to additional, as opposed to alternative, regulation for advertising content when and if a self-regulatory body was to be established.


1   Further details of the ASA/CAP system can be found in Appendix 2 and at www.asa.org.uk Back

2   The ASA's remit includes advertisements in newspapers, magazines, brochures, leaflets, circulars, mailings, fax transmissions, catalogues, follow-up literature and other electronic and printed material; posters and other promotional media in pubic places; cinema and video commercials; advertisements in non-broadcast electronic media; view-data services; marketing databases containing consumers' personal information; sales promotions; advertisement promotions; advertisements and promotions covered by the Cigarette Code. Back


 
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