What's the issue?
Advertising compliance and enforcement is getting more complicated, and risky. In the UK, the main concern has traditionally been an Advertising Standards Authority (ASA) investigation into a particular advert, with the fear of bad publicity arising from an upheld adjudication and having to withdraw the advert in question.
Now the Competition and Markets Authority (CMA) has become much more focused on advertising claims made by companies and individuals, with investigations into influencers relating to transparency of the commercial arrangements and more recently green and sustainability claims, initially in the fashion sector and now in the fast moving consumer goods (FMCG) industry.
But what are the ASA's and CMA's remits, and which other regulators have a role to play in regulating advertising?
What's the ASA's remit?
The ASA states that it takes a "pragmatic" approach to what is in its remit, but included is all traditional advertising as well as 'paid for' ads and promoted social media posts, advertorials and claims on marketers' own websites and other non-paid for space online under their control.
Press releases and other PR material, communications with existing customers, labelling and packaging, point of sale material, corporate reports and customer charters all fall outside the ASA's remit.
What's the CMA's remit?
The CMA's remit in the advertising area is overlapping yet wider, and flows from its enforcement of the underlying legislation, particularly the Consumer Protection from Unfair Trading Regulations 2008 which covers any 'commercial practice'. This means any commercial communication (including advertising and marketing) by a trader which is "directly connected with the promotion, sale or supply" of goods or services to or from consumers.
The CMA follows its 'Prioritisation Principles' in deciding where to act, including "how substantial is the likely positive impact of CMA action?" and "Is the CMA best placed to act: is there an appropriate alternative to CMA action?".
The CMA's 2024/25 Annual Plan refers to its ongoing work in 'greenwashing' and states that future areas of focus include broadening its work on both green claims and protecting consumers form harmful online choice architecture and misleading pricing.
Unlike the ASA, the CMA has real teeth, with strong investigatory powers including the obtaining of information and documents, as well as potential civil or criminal enforcement measures.
Around the corner, under the Digital Markets, Competition and Consumers Bill, the CMA will obtain even stronger powers, which it has made clear it is keen to use, which will enable it (for the first time) to issue substantial fines (up to 10% of global annual turnover) directly, without the need for a court decision, for breaches of consumer legislation, as it can already do for competition law breaches.
What's the role of other regulators?
And it doesn’t stop there. Sector regulators have made clear that they will also get involved with advertising related issues, such as the Financial Conduct Authority (FCA) which has always been able to bring action against authorised persons responsible for misleading advertising and now has any greenwashing claims relating to financial products and services firmly in its sights (see proposed guidance on the anti-greenwashing rule) as well as the promotion of financial products by (f)influencers.
Ofcom still is responsible for sponsorship and product placement issues, the Charities Commission looks at claims and conduct of charities in their fund-raising efforts and there are also voluntary codes, such as the Portman Group’s Code of Practice for Alcoholic Drinks promotional practices. And that’s just the UK.
For all those advertisers that target any EU member state, there are new robust rules coming through on a range of consumer law issues, including far stricter restrictions on and requirements for any green or sustainability claims (including reliance on third party codes, awards etc) in the form of eg the Empco and Green Claims Directives.
There are also international best practice rules such as the OECD Guidelines for Multinational Enterprises with National Contact Points complaints procedure.
What does this mean for you?
Advertising should now be viewed by businesses as part of their wider ESG responsibilities, as regulators and NGOs are quick to challenge any statements made promoting a company’s green, social, diversity or community credentials, whether they are in traditional ads or in company reports, strategy statements or press releases.
There is increasing creativity in the types of challenges being made, including under company law as well as using ESG regulations (which impose requirements around supply chain, workforce, use of resources and carbon footprint) to pursue or lobby for the pursuit of human rights or environmental offences to bring against offenders with potential sanctions such as proceeds of crime orders along with serious reputational threats.
Competitors, such as challenger brands with strong ethical credentials, will always be on the look-out for dubious claims made by incumbent brands, especially comparative claims that carry the risk of civil (trade mark) infringements as well as breaches of the ASA Codes.
Whilst these are all risks that can be effectively managed and mitigated with the right processes and support, they do require a more holistic and rigorous regulatory compliance approach than has typically been the case in relation to ad clearance.
