Online advertising

This guide is based on UK law. It was last updated in October 2008.

Overview

The global reach of the internet makes it an attractive platform for any company wishing to advertise its products or services.

To obtain a complete picture of the regulation of online advertising, even in just one country, such as the UK, we have to take account of many different sources, which provide us with a range of rules to consider.  There is no one source that we can go to for all the rules.  As the online world deals with the dissemination and use of broad range of information, covering a wide range of matters and issues, any rules on the dissemination of information might potentially be applicable.

The rules that regulate the online world can, for instance, be pervasive, applying to any, or a variety, of activities.  The rules within the Data Protection Act 1998 or the Trade Descriptions Act 1968 would be a good example of this.  Alternatively, they might be focused on one particular area or issue – the rules within the Tobacco Advertising and Promotions Act 2002 would be a good example of this. 

Additionally, we can distinguish between rules that have the force of law and those that are voluntary.  The legislation mentioned above has the force of law, as does, for instance, the Consumer Credit (Advertisement) Regulations 2004 and the Financial Services (Distance Marketing) Regulations 2004.  On the other hand, there are rules that are effectively voluntary in nature, which are part of self-regulatory systems, such as those provided under the British Code of Advertising, Sales Promotion and Direct Marketing (otherwise known as the CAP Code). 

Again, the self-regulatory systems are a mixture of generic provisions and provisions aimed at particular sectors and products.  For example, as well as the overriding principles of the CAP Code which apply to all communications, there are separate sections of the CAP Code relating specifically to adverts for alcohol, tobacco products and pharmaceuticals, and separate provisions relating to claims as to the environmental impact of a product

Whilst it can be said that, for instance, the CAP Code does not have the force of law, its importance must not be overlooked as failure to comply can have adverse consequences for an organisation.

More often that not, the rules that affect the online world of advertising are the same as those that affect advertising in the 'real world', though there are exceptions, such as the E-Commerce Directive, which relate to the online world only.  For the most part, however, we need to apply rules which are couched in general terms or which were originally designed for the real world, to the realities and practicalities of the online world.
To this mix of rules, there is the overriding question of the effect of jurisdiction and this is where online advertising presents a particularly unique challenge.  All the rules that have so far been mentioned are ones applicable to the UK.   The great novelty and benefit – but also the challenge and potential pitfall – with the online world and advertising on it, is that information cuts across traditional borders, in particular those that are geographical and bound to a state.  When an online advert cuts across a jurisdiction and enters a new one it becomes subject to the rules of that new jurisdiction. 

Self-regulatory rules

We look at the CAP Code in more detail below but it is worth considering other self-regulatory systems.  Looking at a different voluntary regime, the International Chamber of Commerce (ICC) also publishes a set of guidelines in relation to marketing and advertising through electronic media. The scope of these guidelines is broad and covers email as well as internet advertising and any other form of marketing conducted through electronic media. The guidelines are designed to build on the ICC International Code of Advertising Practice and the ICC International Code of Direct Marketing.

Furthermore, the Interactive Advertising Bureau (an industry association based in the US dedicated to promotion of the online and electronic advertising industry) has also published a number of guidelines and standards in relation to interactive marketing designed to improve consumer confidence within the electronic advertising market.

Another example would be the code published by the Department of Trade and Industry under the Consumer Protection legislation; it has issued a Code of Practice for Traders on Price Indications which gives guidance on how to avoid giving misleading price indications.

Lastly, there may be a number of industry specific bodies that regulate marketing campaigns within their specific sector. For example, the advertisement of medical products is regulated by the Medicines and Healthcare Products Regulatory Agency and the Portman Group provides guidelines for the advertising of alcoholic beverages.

The CAP Code

The provisions of the CAP Code comprise the rule book for non-broadcast advertisements, sales promotions and direct marketing communications. They relate to, for example, advertisements in newspapers, leaflets, mailings, emails, text transmissions, fax transmissions, online adverts, other electronic and printed material and marketing databases containing consumers' personal information – essentially, any marketing communications.

The Cap Code is enforced and administered by an independent body called the Advertising Standards Authority (ASA).

When preparing an online advertisement you should refer to the rules set out in the CAP Code. The key principles that online marketers should always bear in mind is that all marketing communications on the web or elsewhere should:

• be "legal, decent, honest and truthful" – adverts should not include anything that is likely to cause offence. The questions at the forefront of the advertising campaign should be, for example, is the advert likely to cause offence on the grounds of race, religion, sex, sexual orientation or disability?
• not be misleading. You need to ensure that all claims in adverts are accurate and unambiguous and can be substantiated. Can you back up what you are saying? Do you have evidence for any claims?
• be prepared with a sense of responsibility to consumers and society; and
• respect the principles of fair competition generally accepted by business.
• No marketing communication should bring advertising into disrepute.
• Marketing communications must conform with the Code.
• The CAP Code is not a statutory code but it is not without teeth.

Adverts in the following areas are subject to additional rules in the CAP Code: gambling, alcoholic drinks, motoring, environmental claims, health and beauty products and therapies, children, weight control, betting and gaming, employment and business opportunities and tobacco.  Where relevant, there should also be adhered to.

Anyone can complain to the ASA about non-compliance, from which the ASA can adjudicate a decision – it is easy for a consumer to complain and the ASA receives tens of thousands of complaints a year.  One ad may provoke numerous complaints, so the ASA only publishes around 10 decisions every week over non-broadcast adverts, including online ads.

The ASA has carried out research in relation to consumers' perceptions of online advertising and found that there is a lack of trust in adverts that appear online.  It's rules and regulations, as well as its adjudications, in relation to online adverts are therefore clearly important in building trust in online advertising. 

The biggest incentive for businesses to comply with the CAP Code is that the publication of its decisions may lead to adverse publicity for the organisation involved. The ASA can also place a restriction on a company that all its adverts must be vetted in the future before publication.

Examples of online ad decisions

Here are a few examples of ASA adjudications which relate to online advertising in which the ASA found the advertisement to be in breach of the CAP Code.

Phones 4U Ltd (November 2007)

In this adjudication, complaints had been received in relation to a Phones 4U offer stating that a particular phone was free on a contract for only £17.50 per month.  In fact the contract was for £35 per month and there was a cashback offer which, if claimed over the (18 month) period of the contract, would mean that the contract price would come down to £17.50.  The ASA decided that this breached CAP Code clause 7.1 (Truthfulness) and that future adds must make clear what the actual contract price was.

British Airways plc t/a BA (September 2007)

Certain adverts in a particular an add campaign (and shown in the press and on posters) were deemed acceptable but another add as part of the same campaign though shown online and regarding flights to Prague, was deemed by the ASA to be in breach of CAP Code clauses 7.1 (Truthfulness) and 16.1 (Stock monitoring).  The internet add in question related to discounted seats but, whilst this offer was in relation to flight for approximately a year after the add was shown, for the first six months of the offer there was less than 10% of seats available at the offer price.  In fact, at times there was no availability.  This lack of availability distinguished the Prague offer to other offers.

Orange Personal Communications Services Ltd (September 2005)

This related to a complaint against Orange's "double talk, double text" airtime promotion. The promotion involved advertisements on the internet and in other media. The ASA found that the advertisements were misleading and in breach of the CAP Code. Orange agreed to amend the content of the advertisements. The ASA has since recommended further amendments to the content of the advertisements.

UK College of Life Coaching Limited (August 2005)

This related to an internet ad which was found to contain a statement (which related to the coaching bodies' membership numbers) that could not be substantiated by the UK College of Life Coaching Limited. In response to the ASA's ruling the College withdrew the statement.

Hertz (UK) Ltd (July 2005)

This complaint related to an online advert on an airline's website which was found to be in breach of the CAP Code because it misled consumers as to the cost of hiring a car under the promotional campaign. The ASA asked the promoters to ensure that in future similar promotions they quoted prices that included known, fixed and non-optional charges.

Legal rules

Key UK legislation affecting online ads

The Price of a product or service

Is a price included in your advert and is it accurate? Apart from the CAP Code, price indications are governed by the Consumer Protection Act 1987 and the Price Marking Order 2004. Under the Consumer Protection Act it is a criminal offence to give in the course of business any indication which is misleading as to the price of goods.

Data collected through advertising

The Data Protection Act 1988 may require consideration if information relating to individuals is being collected and processed. This is often an issue in viral marketing (see our guide to [Viral Marketing]).

Contracting after advertising

The Consumer Protection (Distance Selling) Regulations 2000 provide that if the advertising leads to contracts being concluded then certain "prior" information must be provided to the consumer and a cancellation period given, of at least seven working days.

As with any publication which is expected to reach a wide-ranging audience, care will have to be taken also to ensure that adverts do not contain libelous or defamatory material.

Comparative advertising

If an advert identifies a competitor or goods or services offered by a competitor, there are further issues to consider.

In 1997 the EU passed a Directive which sets out the conditions under which comparative advertising is permitted. This has been implemented into UK law by the Control of Misleading Advertisements (Comparative Advertisements) (Amendment) Regulations 2000.  This has recently been supplemented by the Unfair Commercial Practices Directive.  We explore these further in our [UCPD] and [Comparative Advertising] sections.  As a brief flavour, however, these Regulations state, for example that comparisons are allowed provided:

• They are not misleading;
• They compare goods or services meeting the same needs or intended for the same purpose;
• They objectively compare one or more material, relevant, verifiable and representative feature which may include price;

There are further rules which we explore in the separate sections mentioned just above.

The European Court of Justice ruling in Pippig Augenoptik GmbH & Co KG v Hartlauer Handelsgesellschaft mbH (2003) is an important case for clarifying the intent behind the Directive from which the 2000 Regulations were taken.

The case considered comparative advertising by a cut price retailer of spectacles and made some important clarifications of the Directive including that the "comparison" must involve examining the totality of the information available, namely the statements concerning the advertisers offer, statements concerning competitors offer and the relationship between those two offers. The "comparison" therefore did not apply solely to what is said regarding the relationship between the products.

EU and international regulation

The approach

The added complication in relation to online advertising is that the adverts may be accessible outside of the UK. Care should be taken when drafting adverts which could be accessed by customers in different countries. Advertising that infringes applicable laws and codes of conduct will be subject to certain complaints procedures and remedies in multiple jurisdictions.

This was illustrated by Yahoo!'s case in France when a Paris court required Yahoo! to ban French nationals from accessing any advertisements for Nazi memorabilia hosted on yahoo.com. Yahoo! then asked a US federal court to declare that the company was not obliged to obey the French ruling. A Californian court agreed with Yahoo! but in August 2004 a divided Court of Appeals reversed that decision, ruling that the lower court did not have jurisdiction to hear the case. In February 2005, the Ninth US Circuit Court of Appeals said it will rehear some of the arguments in the case.

An online marketing message is therefore potentially subject to the laws of every country in which it is received by consumers.

Following the lead of the US, regulators in the UK and elsewhere in Europe, are beginning to take a fairly aggressive approach in enforcing advertising laws and regulations against businesses which fail to comply when advertising on-line.

Some example rules

In the United States online advertising is governed and enforced by the Federal Trade Commission (FTC). The FTC has published guidelines in relation to online advertising, failure to comply with an FTC order to cease and desist for publishing an offending advert could result in a substantial fine.

In Europe the E-Commerce Directive attempts to simplify these jurisdictional issues by introducing the "country of origin principle." This means that a company in the UK only needs to comply with UK laws on advertising and can more or less ignore the laws of other EU Member States, even if selling to those Member States. However, there are important exceptions to the country of origin principle, notably the terms of any consumer contracts. It is possible that a court in another Member State will take a liberal interpretation of this exception to protect its own consumers wherever it can – so the "country of origin" principle is weakened significantly. Accordingly, traders take a risk if they choose to ignore other EU countries' laws. Also note that the E-Commerce Directive and EU legislation generally do not override any conflict of laws legislation. When trading beyond the EU, the country of origin principle has no effect. So a UK company selling to the US should also comply with the US rules on advertising

Each country in the EU has its own consumer protection legislation. It also has its own self-regulation system based on the International Chamber of Commerce's Code of Advertising Practice. In broad terms this states that all advertising should be legal, decent, honest and truthful and should respect the cultural differences of the relevant country.

In certain areas the regimes of the member states have been harmonised, for instance, in relation to Tobacco Advertising.

However, these attempts at harmonisation are restricted in their effect: the major part of each country's advertising regime remains nationally based and there are major differences between the regimes in force in various countries. For example, Germany bans certain forms of promotional activity (such as two-for-the price-of-one offers); Spain bans adverts for 'war' toys in certain media; Denmark is particularly strict in the rules as to adverts directed at children.

What practical steps can be taken?

Although the internet gives a trader the opportunity to sell to every country in the world, most traders have more restricted horizons. The first step for any on-line advertiser is to determine the markets that it is targeting and to investigate the laws which apply in those markets. You should then seek to comply with those laws.
Complying with the laws of targeted markets is not sufficient protection, however, if orders might be received from other countries as well. The prudent advertiser will also take steps to indicate that orders will not be accepted from non-targeted jurisdictions and incorporate some means of screening for orders which are nevertheless received from those jurisdictions. While it is the advert rather than the order which potentially causes the offence, an advertiser who can be seen to have taken steps to exclude residents of a particular country will clearly be in a better position to defend itself against any claim by the authorities of that country.
If the goods on the site fall within a particularly sensitive category the advertiser might even investigate barring access to the site to viewers from certain areas of the world (for example, barring access to alcohol adverts for viewers from certain Islamic countries).

Conclusion

In the context of advertisements, the internet is simply a new means of publication.  But this means of publication means that existing and well-established rules have to be applied in new ways, whilst new rules designed specifically for the online world must also be considered.

Just as importantly, because the internet is ubiquitous, the approach of the advertiser has to change. Previously the advertiser decided which markets he wished to target and placed adverts in media circulating in those markets. Now you need to decide which markets you wish to target, and then take steps to exclude the effects of passively advertising in other markets. In this context it is helpful to refer to our guide on Jurisdiction.

Contacts

Clare Francis
Biography
email Clare
+44 (0) 121 335 2927

Matthew Dowell
Biography
email Matthew
+44 (0) 121 625 3058