The past year has been eventful for online advertising regulation with important trends emerging that advertisers need to be on top of. The UK government also announced its intention to dramatically increase penalties of consumer protection law to 10% of worldwide turnover which we outlined in an insight here. The importance of compliance with advertising regulation is increasing as findings by regulators can result in considerable reputational damage for brands and cause consumers to lose trust in advertisers’ messages. 2023 is shaping up to be an important year for online advertising with regulatory reform on the agenda and a number of hot topics likely to dominate.
Overview of advertising regulation in the UK
Online advertising in the UK is subject to two regimes: the legal regime which is primarily governed under consumer protection law and principally enforced by the Competition and Markets Authority (CMA) and the self-regulatory framework which is enforced by the Advertising Standards Authority (ASA). The ASA enforces the Committee of Advertising Practice (CAP) Code (which governs online ads) and the Broadcasting (BCAP) Code which governs broadcast advertising (radio and television). Here, we consider what companies need to be aware of in the coming year.
Reform of the ASA
Last year, the UK government launched a consultation on its Online Advertising Programme which considered options for reform of the online advertising landscape in the UK. This was in response to the rapid growth of online advertising in recent years and difficulties with regulating it. In particular, concerns have been expressed that a large amount of online advertising content is not compliant with the CAP Code. The consultation suggested three options for reform:
- maintaining the ASA’s self-regulatory role and expanding its remit to cover platforms and intermediaries through its Online Platforms and Network Standards;
- introducing a statutory regulator as a backstop for repeat or serious offenders; and
- introducing a statutory regulator with a full remit, including fining and blocking powers.
While it remains to be seen what the final approach will be, a decision is likely in the next year. This could have a significant impact on advertisers and brands and may cause a re-evaluation of marketing strategy going forward, particularly when fines are on the table.
The ASA has adopted the use of artificial intelligence to monitor online advertising to ensure compliance with the CAP Code. This tool searches for potentially misleading text and helps to identify ads which are visually similar to ads which have been problematic before. To date, this has been targeted towards influencer marketing, environmental claims and crypto advertising, which are all priority areas for the ASA.
Intermediary and Platform Principles Pilot (IPPP)
The ASA and the Internet Advertising Bureau established a collaboration which sought to bring awareness to the requirements of the CAP Code. Large advertising intermediaries such as Google, Twitter, Meta and TikTok are participating in the IPPP.
The principles include requirements for intermediaries to:
- bring the requirements of the CAP Code to the attention of advertisers in a reasonably prominent way;
- ensure advertisers’ advertising policies and contractual terms require ads aimed at the UK to comply with the CAP Code;
- assist the ASA with promoting the awareness of the ASA system;
- remove non-compliant ads swiftly on receipt of a notice from the CAP Compliance team; and
- respond in a timely manner to requests for information from the ASA.
Hot topics in advertising regulation
There are a number of topics which we expect to be important in online advertising regulation in 2023, including:
- environmental claims;
- influencer marketing;
- gambling ads;
- crypto-assets ads; and
- dark patterns.
Nothing was as talked about in 2022 as misleading environmental claims (greenwashing) and this is likely to continue into 2023. “Greenwashing” is the practice of making misleading environmental claims in advertising or making environmental claims about products or services without being able to substantiate them. The CMA has published a “Green Claims Code” which contains the following requirements:
- claims must be truthful and accurate;
- claims must be clear and unambiguous;
- claims should not omit or hide important information;
- comparisons should be fair and meaningful;
- claims should be substantiated; and
- the full life cycle of a product should be considered in making claims.
During 2022, there were a large number of ASA decisions concerning environmental claims, including decisions against Tesco and Sainsbury’s. In July 2022, the CMA launched an investigation into the fashion industry, targeting ASOS, Boohoo and Asda in relation to eco-friendly and sustainability claims about their fashion products. Already, this year, the CMA launched an investigation into environmental claims in the fast-moving consumer goods sector (which covers essential goods such as food and drink, cleaning products and personal care products).
A particular noteworthy development was an ASA ruling against HSBC which demonstrates that the reach of the regulation of environmental claims by the ASA extends beyond products and into the financial services industry. The ruling concerned two bus stop posters which made claims that HSBC was intending to provide $1 trillion in financing and investment to help clients transition to net zero and that they were helping to plant 2 million trees in the UK to “lock in 1.25 million tonnes of carbon over their lifetime”. The ASA considered that these claims were misleading as consumers would understand HSBC was making a positive overall environmental contribution as a company and HSBC was undertaking to make a meaningful contribution towards the sequestration of greenhouse gases in the atmosphere. However, the ASA held that the fact that HSBC was financing carbon intensive businesses and industries was material information and HSBC’s failure to include this in its advertising constituted a failure to disclose material information.
Given the increased enforcement, all companies should take care when making any eco-claims and ensure they have sufficient evidence to substantiate any such claims. The decision against HSBC is significant as it is clear that the ASA is willing to pursue companies in the financial services industry so technology companies will need to take note to ensure that they do not make environmental claims which do not comply with the CAP Code and the CMA’s Green Claims Code.
Influencer marketing is an area that multiple regulators have targeted in recent times. As in previous years, the ASA was very active in 2022 against influencers. While an influencer’s marketing communications are subject to all the rules of the CAP Code, there is a particular focus on influencers’ failure to make it clear when their content is advertising.
When a brand gives payment (including commission, free loan of a product/service or a free product/service or any other incentive), an influencer’s relevant posts need to disclose that it is an ad. ASA guidance notes that a consumer should be able to recognise that content is an ad, without having to click or otherwise interact with it. The CMA also makes it clear that an ad must be “clearly identifiable” in order to comply with consumer law. The ASA and CMA advise that the following labels can be used, with or without a #:
- advertisement; and
- advertisement feature.
This should also be prominent and upfront as a consumer should not need to interact with the content before realising it is advertising.
There has been a large number of decisions from the ASA and action in other jurisdictions over the last few years against advertisers. A notable example from the US is an SEC fine of USD 1.26 million imposed on Kim Kardashian for failing to disclose that she was paid to promote the crypto-asset EthereumMax on her Instagram page. These developments demonstrate the importance of brands ensuring that they have sufficient oversight and control of influencers who promote their products and services. There are a number of protections which a brand can pursue in order to limit the risk of a decision against it from influencer marketing, including:
- contractual obligations to comply with the CAP Code and CMA requirements;
- prior approval of all influencer content;
- a right to require an influencer to remove infringing content; and
- a requirement for an influencer to comply with a brand’s own advertising guidelines which themselves build in the requirements of the CAP Code and CMA requirements.
New CAP Code rules came into effect in 2022 prohibiting gambling advertisements featuring individuals who are likely to have strong appeal to those under 18-years. These are subject to an exemption where minors are effectively removed from the audience, such as through age-verification on customer sign-up.
A recent decision against the bookmaker Ladbrokes shows the strict application of these new rules. The ad featured a number of Premier League footballers who, in the ASA’s view, would be likely to appeal to those under 18. Ladbrokes sought to defend the ad on the basis that it had used age-gating tools so that its Twitter feed could only be accessed by users Twitter had accepted as being over 18. As an additional mitigation, Ladbrokes had targeted their ads to reach over-25s. Ladbrokes produced data showing that 0% of their targeted audience was under 20 years of age. However, the ASA upheld the complaint against the advert owing to the absence of robust age verification as Twitter users self-verified their age. This decision suggests that the ASA will adopt a high standard for such ads requiring “the highest level of accuracy required for ads the content of which was likely to appeal strongly to under-18s”. Interestingly, recent decisions indicate that former footballers Peter Crouch and Micah Richards are not likely to appeal to under 18s owing to the fact they have not played football at the highest level in recent years.
Over the past 18 months, there has been considerable focus from the ASA on crypto-assets. These rulings have shown that the scope of the ASA’s remit is not limited to crypto-currencies and extends to non-fungible tokens (NFTs) and fan/utility tokens. For example, a recent ruling against FC Barcelona considered a Google ad for the sale of an NFT at Sotheby’s. The ASA rejected FC Barcelona’s defence that an NFT was a collectible and not a financial instrument, as consumers may wish to purchase one in the hope that it would hold or increase in value over time or may see it as an investment opportunity. The ASA considered that the lack of a risk warning that the NFT could go up as well as down in value was a breach of the CAP Code. The ASA also considered that fees associated with the auction and the fact that the intellectual property relating to the NFT did not transfer to the purchaser should have been disclosed in the ad. Interestingly, the ASA noted that as paid-for Google ads did not give sufficient space for the warnings, they were not the correct medium for promoting the NFT.
These decisions and guidance confirm that such assets should include warnings and disclaimers, including:
- crypto-assets are unregulated and not protected which should be disclosed in a clear and prominent way;
- the value of such assets can go up as well as down;
- ads should not take advantage of users’ credulity or inexperience;
- advertisements should not be misleading and all material information should be included;
- when using projections/forecasts (such as “Earn 10%”), the basis for their calculation should be disclosed; and
- make it clear that past performance or experience does not necessarily act as a guide for the performance in the future.
In 2022, the CMA published research into “Online Choice Architecture” which refers to the “environment in which people act, including the presentation and placement of choices and the design of interfaces”. Much of this can be harmful to consumers, as it causes them to make choices to their detriment which they would not otherwise make owing to deceptive online choice architecture (dark patterns). This research forms part of a growing body of work from around the world which is aimed at combatting dark patterns online.
In the US, the Federal Trade Commission fined Epic Games USD245 million for dark patterns, which the FTC alleged resulted in users being misled into making in-game purchases. The FTC alleged that Epic Games:
- tricked users into making purchases in games by deploying a variety of dark patterns;
- charges account holders without valid authorisation, by allowing children to purchase in-game currency on their parents’ credit cards without their consent; and
- blocked access to purchased content when consumers disputed charges and warned consumers they could be banned for life if they disputed future charges.
In the EU, the Digital Services Act (the majority of which is due to come into force in 2024) contains additional restrictions in respect of dark patterns.
Closer to home, the CMA recently launched an investigation into the Emma Group concerning the use of online urgency claims, like countdown clocks. Emma Mattress (part of the Group) was previously the subject of a ruling from the ASA which concerned the use of countdown timers. These timers suggested to consumers that a discounted price would only be valid for a certain period of time when the actual time limit was different and the countdown clock restarted after it had ended. It is important to note that a breach of the CAP Code does not necessarily mean that there has been a breach of consumer protection law but it will be interesting to see how this development progresses.
With the increased regulatory focus on these types of practices, organisations may be well advised to review their online interfaces to determine whether they could be vulnerable under applicable law and to make improvements if necessary.
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The content of this blog is provided for information purposes only and does not constitute legal or other advice. The blog is prepared for and intended to represent the current position as at 13 February 2023.