Advertising law: a quick guide

Why must advertising copy comply with law and regulation?

Advertising is regulated by a combination of legislation and self-regulation. If you get your advertising wrong, negative consequences could follow:

• Bad publicity, loss of reputation and brand damage.
• Censure from regulatory bodies, such as the Advertising Standards Authority (ASA).
• Referral to the Office of Fair Trading (OFT), possible court action and criminal prosecution.
• Legal action by competitors or consumers.
• Inability to get advertising space.
• Costly recall of advertising material and reprinting of advertising.
• Wasted media space.
• Product recalls.
• Disappointed consumers and loss of consumer confidence in your organisation.

What is the regulatory framework for advertising?

The main legislation relating to advertising is the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277) (CPRs) (see Practice note, Consumer Protection from Unfair Trading Regulations 2008 (www.practicallaw.com/2-381-1492)).

The CPRs are enforced by trading standards authorities, by the OFT and, for television and radio advertising, Office of Communications (Ofcom).

Regulation 3 of the CPRs prohibits unfair commercial practices generally, including advertising.

A commercial practice is unfair if it contravenes the requirements of professional diligence and materially distorts the economic behaviour of the average consumer in relation to a product (or is likely to do so). An example would be making misleading claims about what a product does, to persuade a consumer to buy it.

Commercial practices are misleading if they give false information which deceives (or is likely to deceive) the average consumer and causes, or is likely to cause, him to take a transactional decision that he would not otherwise have taken (even if the information given is factually correct) about, among other things:

• The existence or nature of the product.
• The main characteristics of the product.
• The extent of the trader's commitments, their motives, sales process and any statements or symbols used for sponsorship or approval of the product.
• The price (including how it is set).
• The need for a service, part or repair.
• The nature of the trader, including their status and qualifications.
• The consumer's rights.

The CPRs list 31 practices in Schedule 1 to the CPRs which will always be considered to be unfair. An example would be claiming that you are a signatory to a code of conduct when you are not.

BIs (formerly BERR) issued a Pricing Practices Guide (www.practicallaw.com/1-382-0982) in 2008 which provides advice about price claims in advertising and sales material.

Self-regulation

There are various self-regulatory codes which regulate advertising, in particular, the UK Code of non-broadcast Advertising, Sales Promotion and Direct Marketing (CAP Code), which is administered by the Committee of Advertising Practice (CAP). CAP also drafts and administers the code on broadcast advertising (BCAP Code) on behalf of Ofcom.

The codes are enforced by the ASA, which can refer persistent offenders to the OFT or Ofcom (for an example of such a referral, see Legal update, ASA and Ryanair refer each other to the Office of Fair Trading (www.practicallaw.com/2-381-2627)).

The CAP Code states that:

• Advertising has to be legal, decent, honest and truthful. It is particularly important to avoid causing offence on the grounds of race, religion, sex, sexual orientation and disability.
• Advertising copy must be prepared with a sense of responsibility to consumers and society and must respect the principles of fair competition generally accepted in business.
• Advertisements should not mislead by inaccuracy, ambiguity, exaggeration or in any other way.
• Advertisers must hold documentary evidence to prove that they can objectively substantiate any claims they make before submitting an advertisement for publication.

The CAP Code is applied by the ASA in spirit as well as to the letter. An advertiser that complies with the CAP Code is unlikely to run into any legal difficulties in practice.

If you are advertising on television or on radio, you must seek pre-transmission clearance from Clearcast for each television advertisement and the Radio Advertising Clearance Centre (RACC) for each radio advertisement. For non-broadcast advertising, you can seek copy advice from CAP, but this is not obligatory.

A complaint about an advertisement may still be upheld even if you follow the advice provided by Clearcast, the RACC or CAP, as their advice is not binding on the ASA.

What other laws and regulations have an impact on advertising?

Comparative advertising

The law allows comparative advertising (which is advertising that identifies a competitor or its goods or services) in limited circumstances. If it is aimed at consumers it must comply with the CPRs (see above).

Comparative advertising must comply with regulation 4 of the Business Protection from Misleading Marketing Regulations 2008 (SI 2008/1276) (BPRs). One of the criminal offences set out in the BPRs is to produce misleading advertising or comparative advertising that does not comply with the requirements of this regulation.

Comparative advertising must also comply with the requirements of rules 3.33 to 3.44 of the CAP Code (see above). The ASA has adjudicated on several comparative advertising complaints, for example when Virgin Media used the headline "if you don't want to know the cheapest way to get Setanta Sports, look away now". The advertisement compared the cost of Setanta Sports from various providers such as BT Vision, Freeview and Sky. The ASA held that the advertisement was misleading because you had to subscribe to a Virgin Media television package to get Setanta Sports so the comparison was misleading. BT Vision, Freeview and satellite viewers could receive Setanta on a month-by-month basis whereas Virgin Media customers had to commit to a 12-month contract.

Online advertising

if you are advertising online, you may need to consider the Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/2013) and the Consumer Protection (Distance Selling) Regulations 2000 (SI 2000/2334). These impose information requirements on those trading online and via SMS and provide cancellation rights for orders made at a distance.

Other legal provisions

As well as content it is important to consider other areas of law such as the law relating to contract, passing off, trade mark and copyright infringement, defamation and malicious falsehood. For more details see Practice note, Advertising law and regulation: an overview (www.practicallaw.com/9-381-4171).

How can you comply?

• Consider taking copy advice.
• Ensure that your advertising proposition is based on what your product actually offers. Advertising personnel often devise campaign propositions and try to fit the product to that proposition, rather than the other way round.
• Ensure that your advertising is not misleading. Remember that you may be subject to an upheld ASA complaint, even if only one person complains.

Potential pitfalls

Avoid:

• Advertising which misleads potential customers about the true nature of the product or offer.
• Denigrating competitors unfairly - for example, criticising a competitor without good reason.
• Unfair comparisons - make sure you compare like with like.
• Pricing errors.
• Infringing other traders' intellectual property rights - for example, using a competitor's trade mark.
• Offending decency.
• Producing advertising which is inappropriate for children to see.

Current developments

Watch out for "greenwashing". Many advertisers are keen to promote their eco-friendly credentials, especially in the light of the new duty for directors to consider the impact of their company's operations on the community and the environment when promoting that company (section 172, Companies Act 2006). Many organisations are falling foul of the ASA because their claims to be environmentally friendly cannot be substantiated. The ASA has issued guidance for advertisers on eco-friendly claims. In addition, with effect from 1 September 2010, CAP introduced new rules on environmental advertising.

Note also that the remit of the CAP Code was extended with effect from 1 March 2011 to cover organisations' own website content and to marketing on social networking sites, see Legal update, CAP Code to apply to organisations' own website content and to marketing on social networking sites (www.practicallaw.com/0-503-2152).