Advertising and Marketing Regulations: Key Legal Considerations

Advertising and marketing: your legal obligations

Senior commercial lawyer Emma Carter led an interesting discussion on advertising and marketing regulations in the UK. Here, we note the key highlights from this session, which focused on the ways in which advertising claims are regulated in the UK, including endorsements and testimonials, social media and influencer promotion, native advertising, pricing promotions and sustainability-related claims.

How is advertising regulated in the UK?

In the UK, the Advertising Standards Agency (commonly referred to as the “ASA”) is responsible for communication and enforcement of advertising regulations.

The ASA maintains and enforces two distinct codes of conduct, both of which require all marketing to be legal, decent, honest and truthful, and set out various requirements that must be met in order to achieve this standard. The two codes are:

• The Broadcast Committee of Advertising Practice (or “BCAP”) Code: this applies to broadcast advertising, including teleshopping, interactive TV adverts, content on self-promotional TV channels, certain programme sponsorship credits, and so on; and
• The Committee of Advertising Practice (or “CAP”) Code: this applies to non-broadcast advertising, for example print advertising, online marketing, promotion in cinemas and other public places, advertising via marketing databases, and so on.

These codes set out a range of general principles that apply to company names, product names, taglines and a broad range of advertising and promotional claims, as well as specific requirements relating to specific categories of claims. For example, additional rules apply in respect of claims relating to health and nutrition, organic products, gambling, alcohol, and products and services targeted at children.

Note that other sector-specific codes exist, for example the Green Claims Code (governed by the Competition & Markets Authority), the Guide to Cosmetic Advertising Claims (governed by the Cosmetic, Toiletry and Perfumery Association), The Portman Group Codes (which apply to alcohol advertising), and the Financial Conduct Handbook (which covers the marketing of financial products).

There are also consumer regulations that may apply in certain contexts, for example the Consumer Protection from Unfair Trading Regulations; the Distance Selling, E-Commerce Regulation; the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, and the Unfair Contract Terms in Consumer Contracts Regulations. However, this article focuses primarily on the CAP Code.

The distinction between broadcast and other forms of advertising

Advertising in print or online

Print advertising in the UK is subject to a self-regulatory regime which is funded by advertisers through a levy imposed on advertising and direct marketing expenditure. The ASA meets on a weekly basis to review complaints raised by both consumers and businesses about specific marketing campaigns. It considers these complaints in line with the principles set out in the CAP Code, and publishes its adjudications on the ASA website.

Broadcast advertising

Ofcom was originally responsible for regulating broadcast (i.e. TV and radio) advertising, but now contracts out this responsibility to the ASA. Currently, all broadcast advertising must be cleared in advance by a non-governmental organisation called Clearcast, and to achieve clearance, advertisers are required to substantiate any claims they intend to make.

Which types of advertising statements are regulated?

Advertising claims vs. puffery

The distinction between “advertising claims” and “puffery” is important, as advertisers must substantiate the former, but not the latter. In this context, advertising claims are statements, implications or ideas which are based on fact (note they can be objective or subjective), and which someone can be expected to reasonably rely upon. In contrast, “puffery” is a promotional statement, implication or idea which no “reasonable person” would take literally.

Advertising claims

Objective advertising claims are statements which are capable of substantiation with objective evidence, and are not influenced by personal feelings or opinions. If a claim is likely to be interpreted as objective (i.e. factual), the relevant advertiser must hold evidence to support the claim.? For example the ASA upheld a complaint about an air spray which claimed to reduce household bacteria as the advertiser did not have sufficient evidence to support the claim.

Subjective advertising claims are based on or influenced by personal feelings, tastes or opinions, and are therefore not generally capable of being objectively substantiated or verifiable e.g. salmon tastes better than tuna. When using such claims, advertisers must not imply that such claims are objective or factual.

Puffery

Some claims are clearly so exaggerated that consumers are unlikely to interpret them literally.? This is known as puffery.? It refers to obvious exaggeration amounting to no more than praise for a product or service, and on which no reasonable consumer would rely. In general, these types of statements are allowed, provided they do not materially mislead consumers. For example, Esso had an advertising campaign “Put a Tiger in your tank” which is clearly puffery as no consumer would actually think they were putting a tiger in your petrol tank. Interestingly, the Red Bull “gives you wings” campaign was successfully challenged in the US where they lost $13 million for false advertising.? The company had made claims that their product improved concentration and reaction speeds which Redbull claimed was just puffery, however the court disagreed and said the claims were too specific and therefore moved the advertising from being subjective to objected.? It would have been interesting to see if the UK ASA would have taken the same approach.

For starters, an employer will need to demonstrate that their belief in the employee’s incompetence is reasonable, which can involve evidencing that there was an investigation into their performance. Employers must also demonstrate that they gave the employee the opportunity to improve, which might include setting reasonable targets and giving the employee a reasonable opportunity to meet those targets, as well as supporting the employee’s professional development (e.g. through arranging mentoring or external training). In practice, the actions required in this context will vary depending on the circumstances (e.g. the employee’s length of service, the nature of their role, any relevant business objectives, and so on)

If the employee fails to improve after receiving appropriate support, the employer could then consider alternatives to dismissal (for example, moving them into another role), which can help to demonstrate that the employer acted reasonably in all the circumstances. If this isn’t viable, and the employer wishes to continue with the dismissal, they must then arrange a hearing (presided over by an independent person in the business), consider any representations put forward by the employee, document any decision to proceed with the dismissal, and allow for an appeal hearing.

Which advertising words and phrases attract particular scrutiny?

The word “best” can be used in a subjective or objective way, so it’s not clear cut. When used with specific measurable criteria (for example “best-selling” or “best-value”), then an advertising claim centring on the word “best” is more likely to be objective. The same applies to phrases such as “premier”, “number 1”, “lowest fares”, “lowest emissions”, “market leading”, health-related claims, and so on. Given the objective nature of such phrases, they would likely need to be backed up by verifiable data (for example, a “best-selling” claim would likely need to be substantiated by formal records of unit sales).

Statements relating to subjective preferences and reactions (e.g. “best-tasting” or “best-looking”) should instead be backed up with other convincing evidence, for example the results of a comprehensive taste test study.

Greenwashing

There has been a big crackdown on “Greenwashing” over the past few years, which has resulted in the introduction of the Green Claims Code. In general, claims relating to the environment must be clear, accurate, and backed by up-to-date credible evidence. Comparative claims such as “greener” or “friendlier” can be justified, as long as the advertised product provides a greater total environmental benefit than the product against which it is being compared. Claims must also refrain from exaggerating a product’s environmental impact, taking into account the product’s entire life cycle.

Substantiating and qualifying advertising claims

When substantiating objective advertising claims, the evidence must be: clear (and should reference any applicable third party sources); current (so older data must be reviewed and updated); relevant (i.e. consist of sound data that is directly relevant to the claim); and robust (i.e. capable of withstanding scrutiny).

If an advertiser needs to include significant qualifications to a particular advertising claim, such qualifications should either be included directly beneath the relevant claim, or slightly further down if flagged with an asterisk next to the claim. Moreover, any footnotes must be clearly visible to a normal sighted person.

Endorsements and testimonials

Another key area of advertising law involves the regulation of endorsements and testimonials. Under the CAP/BCAP Code, advertisers must be able to demonstrate that any endorsements from individuals are genuine, relevant, that they have obtained with those individuals’ consent, and not incentivised – or if they are incentivised – for example a celebrity being paid to promote a product, that this is made clear e.g. #ad in a social media post. For example, the ASA ruled against testimonials in an ad where the advertiser had offered to refund an amount of money back to the consumer for leaving a “nice review”. Note that in this context, additional rules apply to certain “sensitive” categories of adverts. For example health professionals and celebrities are prohibited from endorsing medicines.

Social media and influencer advertising

The Cap Code also applies to paid advertising and the promotion of gifted products and services by influencers through social media (note that in this context, a social media user can constitute an “influencer” regardless of the number of followers they have).

Where a brand has made any form of payment (monetary or otherwise) and/or exercised editorial control over an influencer’s content, it must be made clear that the content constitutes an advert (e.g. by using a label or hashtag such as #ad, #advert or #sponsored etc.). In such circumstances, labels such as “supported by”, “funded by”, “gifted”, “in association with”, or “brand ambassador” are unlikely to be enough. Moreover, the measures that must be taken will differ between platforms; for example, video platforms such as YouTube need to make an influencer advertisement clear before someone clicks to watch a particular video.

The ASA has also stated that filters should not be used to exaggerate the effect of a product or service, even if the filter is disclosed.

Native advertising

Native advertising is advertising that has been specifically designed so that it doesn’t look out of place where it is viewed (i.e. where an advert is somewhat hidden in plain view, or it merges the concepts of editorial and advertising content – sometimes referred to as “advertorial” content). The CAP Code still requires that such content remains recognisable as adverts and as such, are distinguishable from editorial content (e.g. through the use of labels such as “paid-for” or “sponsored”). Affiliate adverts are also subject to the CAP Code.

Pricing promotions

If you are doing any price promotions you need to comply with the relevant ASA code and also consider the Guidance for Traders on Pricing Practices from the CTSI – Chartered Trading Standards Institute.? Certain pricing practices are considered to be unfair and unlawful in all circumstances, and are therefore banned. These include:

• Advertising products or services at a specific price, if there will not be reasonable quantities available at that price for a reasonable period (unless such limitation is made clear in the promotion).
• Advertising a product at an attractive price to encourage interest, then discouraging its purchase in order to persuade the consumer to purchase something different.
• Falsely stating that a product will only be available at a particular price or on particular terms for a very limited amount of time, in order to persuade the consumer to make an immediate decision.
• Claiming that you are about to cease trading or move premises where this is not the case.
• Describing a product as “free”, if the consumer has to pay any more than the unavoidable cost of responding to your offer, collecting the product or paying for delivery.

ASA Code of Practice

Discounts/Sale Pricing

If you are promoting discounted pricing, for example was ￡100 now ￡50 then you need to ensure the following:

• The length of time for which the product is listed as being on sale should not be longer than the period for which it was advertised at the (previously) higher price e.g. if you are looking to have a product on sale for 20 days then you need to ensure the period it hasn’t been on sale is longer, so 25 days
• How recently was it sold at that price e.g. you can’t compare to a price you sold at 2 months ago if you have had a number of different price points during that 2 month period
• The higher price should not have only applied in a small proportion of retail outlets, purely to establish the higher price as a reference point
• Prices shouldn’t be inflated purely so that the price can subsequently be listed as discounted (e.g. a retailer shouldn’t inflate the price of ski in August, when demand is low anyway, simply so that they can make price saving claims in November, when demand naturally increases).
• Sellers must have evidence that there were “significant sales” at the higher price point, although the phrase “significant sales” hasn’t been specifically defined.
• Sellers should not state that a price will rise in the future, unless they actually go ahead with the stated increase.
• If you are promoting a price as “new” or “introductory” you can only do this for up to 6 months.

What happens if you don’t comply with the codes?

Although the ASA lacks the ability to impose fines on advertisers that fail to comply with an applicable code, it has other potentially effective tools at its disposal. Firstly, simply publishing a finding that a particular advertising campaign was misleading or breached a code in some way can result in widespread negative press, which in turn can cause significant reputational damage for an advertiser. The ASA can also place restrictions on advertising and even – in extreme cases – result in pre-clearance.

Making a complaint about a competitor

The ASA expects industry complainants to seek to resolve complaints directly with the relevant competitors before turning to the ASA recourse system. Accordingly, a complainant should ideally first approach the other party directly (rather than via a legal team), and allow at least 5 days for a response. If this fails to work, then the complainant could consider escalating the matter with a letter from a lawyer, before – as a last resort – escalating the complaint to the ASA.

How can advertisers mitigate the risk of breaching advertising regulations and codes?

It’s key to remember that not everyone will interpret adverts the way that you expect them to. Advertisers should therefore test their advertising before publishing claims, to double check whether anything might be taken the wrong way. They should also ensure that messaging is as clear and transparent as possible and in no way misleading, and keep in mind the current landscape in terms of what society is likely to perceive as offensive or misleading.

Key takeaways

• Don’t mislead consumers.
• Don’t omit material information or exaggerate.
• Distinguish between objective claims, subjective claims and puffery.
• Ensure you can substantiate objective claims and that any qualifications are clear.
• Ensure objective comparative claims are fair and verifiable.
• Ensure price claims and savings claims are clear and accurate.
• Be careful of claims made within company or product names.
• Exercise caution before making any sustainability claims.
• Ensure any endorsement/testimonial requirements are met.
• Ensure the marketing is tailored to the platform it is being advertised on.
• Do not use or refer to third party logos without specific approval from the logo owners.

How can we help?

We can support you on a broad range of marketing, advertising and commercial matters. This includes: reviewing your advertising claims and any applicable substantiation requirements; advising on your competitors’ advertising claims and any possible complaints you could raise; supporting with the drafting of any relevant marketing agreements (e.g. advertising agency or influencer contracts); drafting T&Cs for promotions and competitions that comply with the CAP/BCAP codes; and helping to ensure your intellectual property is protected. We can also provide in-house training for your marketing teams.

Employers should then monitor employee performance on an ongoing basis and intervene when necessary, for example through providing regular appraisals, informal feedback, warnings where applicable, clear and reasonable targets, and training/coaching where necessary. Note that it’s key that any feedback is open, honest, actionable, and recorded in writing.

Emma Carter

Emma trained at Magic Circle law firm Freshfields Bruckhaus Deringer spending her last 6 months of her training contract in their Paris office and upon qualification moved to Norton Rose’s Paris office as part of the Project Finance team.

Emma subsequently returned to London went in-house to Sky advising on marketing and commercial matters for over 4 years. She then moved to Diageo where she was Legal Counsel for Western Europe for their Reserve brands, Customer Development and Wine business.

In recent years, she has held the position of Senior Legal Counsel at Selfridges and worked as a senior legal consultant at a number of global companies including Google, Facebook, Yahoo and Starbucks.

Emma advises on the full spectrum of commercial, marketing and data privacy related matters across all sectors with particular expertise in the FMCG and IT sectors. Emma has extensive experience advising on marketing campaigns, drafting terms and conditions and privacy policies as well as drafting and negotiating commercial agreements.

Emma is based in Melbourne Australia and is dual-qualified in both English and Australian law.

If you need advice on advertising and marketing law, or on any other commercial matters, please contact Emma Carter. If you would like to attend one of our future sessions, please contact [email protected] or sign up here.

If you missed the session or want to revisit the information, a full recording of the session is available here.