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Regulation of online adverts

This guide is based on UK law. It was last updated in October 2005.

While we do not have a single, comprehensive piece of advertising legislation in the UK, there are laws that impact on advertising. In fact, any rules on the dissemination of information are potentially relevant – from trade descriptions legislation to data protection.

There is also a self-regulatory system. In the UK, all marketing communications, whether electronic or printed, should comply with the British Code of Advertising, Sales Promotion and Direct Marketing (otherwise known as the CAP Code). The CAP Code is enforced and administered by an independent body called the Advertising Standards Authority (ASA). The Code does not have the force of law but its importance must not be overlooked as failure to comply can have adverse consequences for an organisation.

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.

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.

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.
The CAP Code is not a statutory code but it is not without teeth.

Anyone can complain to the ASA about non-compliance and the ASA can adjudicate a decision. The ASA says it is on course to receive 30,000 complaints this year. Clearly one ad may provoke numerous complaints – so the ASA only publishes around 10 decisions every week over non-broadcast adverts, including online ads.

It is easy for consumers to complain to the ASA – indeed it launched its own television ad campaign on 21st September 2005 to make its presence better known to the public, using ad space donated by the industry.

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.

The Committee of Advertising Practice has also launched a scheme called admark, intended as a "safe harbour" scheme to tell consumers that an advertiser has pledged to follow advertising's rules. Admark was intended to boost the credibility of online advertising; but uptake has been low.

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.

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.

Mars (August 2003)

The ASA upheld a complaint relating to a pop-up advertisement featuring a promotion by Mars. This described a promotion called "Chocallect" and contained the phrase "70 wrappers = Xbox". The ASA ruled this as misleading as consumers who collected 70 wrappers were not necessarily entitled to an Xbox. This reinforces the requirement to ensure that consumers are not misled even when the advertising space is small, as with most pop-up ads.

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.

Key legislation affecting online ads

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. According to the Act, a misleading price indication includes any indication which might reasonably be expected to lead consumers to infer from the indication or any omission from it, any of the following:

(a) the price is less than it in fact is;

< fact in does applicability its which on circumstances or facts depend not price the of that>

d) that a person who in fact has no such expectation

(i) expects the price to be increased or reduced (whether or not at a particular time or by a particular amount); or

(ii) expects the price, or the price as increased or reduced, to be maintained (whether or not for a particular period); or

(e) that the facts or circumstances by reference to which the consumers might reasonably be expected to judge the validity of any relevant comparison made or implied by the indication are not what in fact they are.

Under the Consumer Protection legislation the Department of Trade and Industry has issued a Code of Practice for Traders on Price Indications which gives guidance on how to avoid giving misleading price indications.

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).

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 libellous 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.

Under these Regulations, comparisons are allowed in adverts 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;
They do not create confusion in the market place between the advertiser and the competitor or between the advertiser's trade marks, trade names, other distinguishing marks, or his goods and services, and those of a competitor;
They do not discredit or denigrate the trade marks, trade names, other distinguishing marks, or the goods, services, activities or circumstances of a competitor;
They do not take unfair advantage of the reputation of a trade mark, trade name other distinguishing mark or a competitor or of the designation of competing products;
They do not present goods or services as imitations or replicas of goods or services bearing a protected trade name or trade mark; and
Where a comparison relates to a special offer it must indicate clearly the date on which the offer closes, or, if appropriate, that the offer is subject to availability. If the offer has not yet begun it must also indicate the commencement date of the period during which the offer is valid.

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.

International regulation

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.

For example, 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.

Courts in other jurisdictions are becoming more aggressive in enforcing their own laws against new media advertisers from other 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.

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.