Consumer Advertising Law Blog

GUEST POST: Spain Media Bill Provides Opportunities and Limits for Advertisers

A bill has been introduced in the Spanish Parliament containing an in-depth reform of media law. Amongst the many points subject to reform are the rules on television advertising. Some of the reforms have been expected for a long time; some are a relative surprise. 

Among the most relevant are: the Media bill recognizes the right to create channels devoted to commercial communications and self-promotional programs. Media operators are also entitled to broadcast advertising, teleshopping, TV promotion, programmes containing product placement and sponsored programmes. These options may be taken for granted in the US, but product placement, for instance, was until recently not regulated and posed legal issues in Spain as well as in other European jurisdictions.

There are some special limitations to advertising and promotion: (i) news programmes cannot be sponsored; (ii) only films, short films, documentaries, series, sports and entertainment programmes may contain product placement; (iii) product placement within children’s programmes is banned; and (iv) neither sponsorship nor product placement can affect the programme content or its timing.

Lapsed US-EU Safe Harbor Certification is No Safe Harbor

Earlier this month, the FTC announced that it had reached settlements with six US companies over allegations that the businesses misrepresented their participation in, and certifications under, the Safe Harbor Framework, a voluntary program under the aegis of the Department of Commerce and in conjunction with the European Commission. According to the FTC, the companies -- World Innovators, Inc., ExpatEdge Partners LLC, Onyx Graphics, Inc., Directors Desk LLC, Collectify LLC, and Progressive Gaitways LLC – represented to customers that their certifications under the Safe Harbor program were current, even though those certifications had been allowed to lapse. In each case, the accused company had, after a number of years of annually recertifying its compliance with Safe Harbor, allowed its status to lapse while still publicly representing on its website that it remained a participant in the Safe Harbor program.

The US-EU Safe Harbor Framework allows US businesses under the jurisdiction of the FTC and the Department of Transportation to receive personal data from entities located in the EU member nations subject to strict safeguards consistent with the EU Data Protection Directive (Directive) adopted in 1995. The Directive, as implemented by the individual 27 EU member nations through their respective legislative bodies, comprehensively regulates the security, integrity, and privacy of all “personal data.” The Directive specifically prohibits the transfer of personal data to nonmember nations that fail to provide data security and privacy measures deemed “adequate” by the European Commission (EC), and allows the EC to block transfers of personal data to countries whose data privacy enforcement and regulatory regimes are not “adequate.” Following adoption of the Directive, the European Commission determined that US data privacy and security measures were not “adequate” and, therefore that special protections would be required for any transfers of personal data from the EU to the United States. One such form of special protection is the “Safe Harbor Framework” agreed to by the EU with the United States, which allows US entities that commit to the Directive’s basic privacy protection obligations to receive personal data from EU member nations without undertaking special contractual obligations.

The FTC’s recent action to enforce its deception authority under Section 5 of the FTC Act against the companies named in the World Innovator et al. complaints may have a chilling effect on US businesses’ election of the Safe Harbor as a method of compliance with the Directive. Since Safe Harbor certification is not the only way to obtain personal data from EU member nations for commercial purposes, companies seeking to limit potential liability or enforcement action by the FTC may wish to consider alternative methods for complying with the Directive.

At a minimum, companies that have already committed to the Safe Harbor should be careful to confirm that their certifications are current (i.e., recertified annually). The FTC’s recent enforcement interest in this area more generally serves as a cautionary tale against allowing stale and/or misleading information to remain (and be republished) on company websites. 

- Nancy Perkins & Taja-Nia Henderson

Google AdWords Gets Cleared by European Advocate General from Keyword Trademark Infringement Claims

The Advocate General of the European Court of Justice today gave his opinion on three cases concerning Google’s AdWords system, which permits advertisers to purchase third-party trademarks as keywords to trigger sponsored links in search results. The opinion is not binding on the ECJ, but the court often follows the Advocate General's opinion in the majority of cases. The three cases encompassed by today’s opinion are: Google France v Louis Vuitton, Google v CNHRR and Google v Viaticum Luteceil, (Joined Cases C-236/08, C-237/08 and C-238/08).

These cases were brought to address on a large scale issues frequently confronted by brand owners in their efforts against counterfeiters. Specifically, counterfeiters frequently purchase keywords from Google that correspond to registered trademarks such as “Louis Vuitton. ” When an Internet user searches for “Louis Vuitton,” this triggers advertisements in Google’s search results that redirect consumers to websites where they can purchase counterfeit merchandise (e.g., “Louis Vuitton Replica” and “fake Louis Vuitton handbags”). The Advocate General’s resolution of the questions posed to the ECJ is bad news for trademark owners.

UK Advertising Rules Do Apply To Online Sponsored Links

Joint guidelines have been released by UK’s The Office of Fair Trading and the Financial Services Authority on the use of online sponsored links by UK advertisers of financial products and services. The regulators have made it clear that, in their view, the rules governing credit advertising and financial promotions apply equally to sponsored links as they do to other forms of paid for online advertising. In essence, consumers must be treated fairly and not be misled when they use keywords to search for information on financial products and services. Advertisers are also expressly advised not to sponsor the names of other firms/competitors if this could result in misleading the consumer or creating an expectation that their firm is the same as the one the consumer has searched for.

Examples of potential breaches of the rules are given in the guidelines. These include selecting search terms that don’t accurately reflect the business being advertised – for example, an advertiser sponsoring the term “independent financial advisers” when it is not independent – and consumers being misled by discrepancies between the impression given by the wording of the link and the consumer’s experience once the link has been followed. For example, a sponsored link claiming “Save up to £160 on your home insurance” could mislead the target audience if in fact only 10% of applicants are expected to qualify for the saving.

The full guidance is available here.

- Richard Dickinson and Jake Marshall

UK: Who Are the People in My Neighborhood?

Google has for some time provided a popular map feature which is accessible from its home page.  Recently in the UK, Google has augmented this service by using customized vehicles to photograph most public streets in the UK’s major towns and cities, to produce what they call “Google Street View”.  Street View allows one to see literally what any given place looks like as though one were standing on the street. 

Google’s camera cars have recorded streets adding up to a distance of more than 22,000 miles in this country alone.  With the release of Street View in this country, a few people have announced that they feel that the creation of such a permanent record is a infringement of people’s privacy.  Some have gone further and suggested that it constitutes a breach of the country’s data protection laws.  Indeed, the Information Commissioners’ office has now been called upon by one group, Privacy International, to take action against Google under the Data Protection Act.

In reality, Privacy International are almost a year late.  Google’s street view received the blessing of the Information Commission in July last year on the basis that it had in place adequate safeguards to protect people’s privacy.  The Information Commission referred to those safeguards as including “the blurring of vehicle registration marks and the faces of anyone included in the street view images”.  The idea being that those safeguards would make it very difficult to identify anyone that happens to have been captured by Google’s street view cars.  Google has also agreed that in circumstances where someone has been captured, a strict and expeditious take down procedure should be put in place so that such people are able to call for the removal of those particular images. 

The sets of rights in question would be those rights enshrined within either, the UK Data Protection Act, or the European Convention of Human Rights, which under Article 8 provides everybody with a right to enjoy a private life.  

The Data Protection Act concerns the collection and protection of personal data. The question is whether or not taking a photograph of a street, where the subject matter of the photo is the street itself, is something that should be protected by the Data Protection Act?   Google proceeded only after receiving the blessing of the Information Commission, who had confirmed that the safeguards that they had put in place were adequate.

With regards to Article 8 of the Human Rights Act, the right that is enshrined therein is that people should be provided with a right to lead a private life.  Recently there has been a move by the courts to interpret this Article of the Humans Right Act in a way that has expanded the popular expectation of privacy.  However, to infer from this Act that merely taking a photo of a public street, (where the subject matter is not the incidental persons upon that street but the street itself) constitutes an invasion of their privacy, would be to take that interpretation of the Act much further, and arguably an untenable step too far.

There is also another article enshrined within the Human Rights Act which is Article 10, which enshrines each person’s right to freedom of expression.  When balancing the interplay between these two articles, the courts will have in mind the relative harm and utility that any given act will have.   In this particular case, since Google’s street view is of such particular utility, not just to the people within the city that is photographed but to everyone, around the world, now able to see what any given city looks like in detail, it would not be surprising if they were to conclude that such utility is greater than any invasion of privacy.

- Richard Dickinson and Alex Watt

Consumer Protection Enforcement Takes Off in Europe

On 14 May, the European Commission published the results of an 18 month investigation into the sale of airline tickets online (found here and here).The Commission coordinated the pan-European exercise with 16 European national authorities, who together checked over 400 websites selling airline tickets for compliance with European consumer protection laws.

This is the first such “sweep” investigation to be carried out by the Commission which does not have direct enforcement powers in relation to consumer protection legislation. However, by coordinating the investigation with national enforcement authorities, and by threatening to “name and shame” defaulting airlines, the Commission has, for the first time, used its powers of persuasion to take indirect enforcement action on consumer protection issues. Judging by its success it likely will not be the last.

In September 2007, the Commission launched a “Sweep” or systemic checks of websites selling airline tickets by EU Member States.The Sweep focused on three key practices: clear pricing of tickets (i.e. any additional charges such as taxes should be displayed with the headline ticket price); availability of fare (i.e. any limitations to the availability of an offer should be clearly indicated); and fair contract terms. Of the 447 websites checked during the Sweep, over 50% were found to have “irregularities”. Following the Sweep, those websites that were found not to “fully respect” consumer protection laws were contacted by the relevant national authority and asked to provide clarification on their actions, or change their practices. The Commission issued a ‘mid-term’ report in April 2008 indicating that 50% of the websites that had been identified as having irregularities in September 2007 had corrected their practices. The final report explains that enforcement action - leading to the websites correcting their practices - has now been completed in 85% of cases, but there remains a hardcore group of about a dozen companies who are still giving the Commission “real cause for concern”.

This is undoubtedly an important step in European consumer protection. This investigation is the first time that the Commission has used the Sweep enforcement action to coordinate a consumer protection investigation. There are a number of European Regulations governing consumer protection for example, the Regulation on misleading advertising and the Regulation on unfair terms in consumer contracts. These pieces of European legislation are transposed into national laws and enforced at national level. It is therefore national authorities that impose sanctions against companies found to be in breach of consumer protection law, not the European Commission.

In June of this year, the Commission plans to publish an ‘Enforcement Communication’ aimed at strengthening pan-European enforcement of consumer protection laws. In addition, the Commission also hopes to put in place an industry wide agreement to uphold standards and conduct another Sweep later this year. It appears that the Commission is determined in its fight for consumer protection - and websites selling airline tickets are only the start of the Commission’s crusade.

- Sue Hinchliffe and Mark Gardner

"Phorm" over Substance in the UK

The European Commission has recently threatened to sanction Britain for the manner in which it has implemented the European Community Data Protection legislation. The European Telecommunications Commissioner said last week, “European privacy rules are crystal clear; a person’s information can only be used with their prior consent”. However, the on-line world to which those rules are applied has changed, and though the rules themselves may be simple, how they are applied is therefore not so straightforward.

The latest technological advance and cause of EC upset, is a targeted advertising system called “Phorm”. Phorm is a piece of software that may be implemented by ISPs in order to track what people are interested in. In the UK, Phorm’s partners include BT, TalkTalk and Virgin Media, which together represent approximately 70% of UK broadband ISP markets. Once people have had their interests tracked, the adverts that may be displayed on the pages that they view can be adapted so that there are adverts that people are more likely to find interesting.

Targeted advertising in this manner, is something that has already gone on for some time. Google, when it launched its email service, Google Mail, made it clear that when the emails on its systems were scanned (as all emails are, for spam and viruses) it would also scan those emails for users’ personal interests. The adverts that were then shown within Google Mail, could then be targeted to the users preferences.

BT admit that, for at least the years 2006 and 2007, no consent was ever requested of their users within their terms and conditions. However, Phorm argue that consent is not required. They contend that their system is such that no human ever reviews the information and nothing personally identifiable is ever permanently recorded, it assigns a randomly generated number to a user and then, after having reviewed the sites that that randomly generated number has visited, assigns codes that equate to areas of interest. The site’s history is then deleted so that what is left is a randomly generated number with particular interests, when that randomly generated number reaches a particular site, adverts will be shown that reflect those interests.

Whether it is ultimately deemed either an invasion of privacy, or a breach of the Data Protection act or not, if the technique is unpopular with consumers, then they will vote with their feet and ISPs that continue to implement unpopular policies will lose customers. This may not be enough to prevent the European Commission looking at the UK’s implementation of the Data Protection Act, which means we may yet see some significant changes to the way people’s data is dealt with in this country.

- Richard Dickinson and Alex Watt

Do Not Pass Go

At the ABA Spring Meeting last week, representatives from the U.S., U.K. and Canada came together to present “Cross-National Perspectives on Consumer Protection.” The program highlighted differences in enforcement across the various jurisdictions, as well as variations in standards of conduct and cooperation across various governmental agencies. One of the interesting trends is that of countries other than the U.S. increasingly using criminal law as a tool in consumer protection enforcement. Whether the FTC will move toward more frequently handing out striped shirts is something to keep an eye on.

Andrea Rosen from the Fair Practices Branch in Canada highlighted some of the sweeping new changes to the Canadian Competition Act. Ms. Rosen emphasized that Canada recognizes criminal enforcement for consumer protection claims, including jail time, restitution and injunctive relief. The new amendments to the Act allow for 14 years maximum prison sentence (up from the previous 5 year maximum sentences), and a $10 million fine for first orders against companies ($750,000 for first orders against individuals).

With regard to the U.K., a representative from the Office of Fair Trading noted that there is specific legislation aimed at consumer protection and that there are criminal fines available for violations in some heavily regulated areas (such as door-to-door selling). In addition, new legislation passed in 2008 criminalized deceptive advertising in the U.K. and allowed for a 2 year maximum prison sentence for offenders if the intent requirement is proven (recklessness suffices).

In the U.S., the speaker noted that the FTC concentrates on restraining potential bad behavior, rather than punishing such acts after the fact. While the U.S. does allow for criminal prosecution in the consumer protection context if such acts as fraud are at issue, the majority of enforcement takes place in the civil context. However, the FTC Consumer Protection Division does have a criminal liaison unit that has become more active since its inception in 2003.

How to protect consumers: self regulation and industry-led compliance

The UK’s consumer and competition authority, the Office of Fair Trading (OFT) has initiated a debate on the extent to which self regulation and industry-led compliance initiatives can assist in making markets work well for consumers.

The OFT has published a discussion paper and is seeking responses by 30 April 2009. The paper considers the role of self-regulation and industry-led compliance and whether there is potential for it to be used more often as an alternative to action by enforcement authorities. It considers the breadth and diversity of such initiatives and examines the OFT’s experience of working with such schemes. It considers how the OFT might extend the ways in which it works with industry to solve market problems.

Self regulatory schemes are initiatives by groups of businesses within an industry whereby the participants modify their behaviour to achieve compliance with consumer law or go beyond what the law requires, for example through a code of practice, or other voluntary standards. Industry-led consumer compliance initiatives are initiatives by groups of businesses to ensure compliance with consumer law and can include the provision of guidance material and actions to address particular compliance problems. Industry-led compliance is one type of self-regulation.

The report describes a range of different models for self-regulation and industry-led compliance that exist already in the UK. Some initiatives are used as a way of improving quality and tackling issues that are not defined by law. Particularly as new industries, technologies or trading practices develop a legal vacuum may exist and self regulation can be used to define standards. Self regulation can also be used to give definition to issues which cause concern for consumers, for example the Advertising Standards Authority (ASA) produces codes which supplement the law - for instance they ensure that advertisements are tasteful, decent and contain measures which display a social responsibility, such as imposing time limits on when advertisements can be aired. Finally, self regulation can also be used to achieve legal compliance or raise standards.

All forms of self regulation have an organisational structure which determines who in the industry is subject to the rules and how decisions are made. The report looks at the merits of different organisational bodies such as: working parties, industry bodies, self-regulatory bodies, complex governance arrangements and umbrella schemes. It then examines the coverage of such schemes which can be voluntary or mandatory throughout an entire sector.

The report outlines a toolkit for self-regulation schemes under which there are three categories of tools:

• The first category consists of qualitative measures such as codes of practice, standards, accreditation, certification or licensing and industry guidelines.
• The second category consists of tools designed to makes quality more observable, such as registration with a scheme, consumer signposting by using logos or other branding, public commitments and approval.
• The third category of tools are designed to resolve problems where rules on quality are not followed, such as advice and training given by a self-regulatory scheme, complaint handling and dispute resolution, redress schemes and monitoring and a range of sanctions.

Self regulatory schemes have different ways of achieving their aims. All create rules and some level of operational activity designed to encourage the modification of behaviour. Some bodies use a mixture of techniques. For example, ABTA, the trade association of the travel industry, works primarily through persuasion to encourage good practice but also has pre-entry checks which ensure the financial health of members to carry out certain activities. ABTA also takes enforcement action where there are problematic breaches of their code of practice. In contrast, the ASA focuses on complaint based enforcement and this is backed up by persuasion which builds on their enforcement activity and adjudication decisions.

Sometimes the government may decide that statutory underpinning is required to support a scheme and make it compulsory to join. In other circumstances, the success of a voluntary self regulatory body makes it a good candidate to take on a broader role and administer statutory regulation. For example, although the bulk of the self regulatory activity of the ASA evolved over time without legislative backing, its success in administering self regulation for printed advertising material led to it being contracted by the broadcast regulator in the UK, Ofcom, to write and enforce the codes of practice that govern TV and radio advertising.

The OFT encourages codes of practices. Businesses operating under an OFT approved code are licensed to use and display the OFT Approved code logo which provides consumers with a guarantee that the code has been rigorously checked and evaluated.

In the discussion paper the OFT acknowledges that some industry bodies have an important role in helping to enforce legislation. The ASA is recognised as the first point of call for resolving complaints about advertisements across all media and tackling non-compliance. The ASA refers only a handful of cases to the OFT annually for further action, having exhausted its own processes.

In certain circumstances, industry can assist the OFT in tackling a compliance issue and can be a quicker alternative to the OFT taking enforcement action. For example, following complaints regarding misleading airline ticket pricing in the holiday and travel industry, the OFT worked in partnership with ABTA, in a co-ordinated move to solve problems in this market. ABTA issued warnings to members and the OFT concentrated on pursuing the most persistent offenders.

In summary therefore, the OFT appears to support a case for considering greater use of self regulation to solve consumer protection issues. Industry often welcomes the opportunity to put its own house in order and, where possible, to avoid the need for statutory regulation and/or resource intensive enforcement action. A flexible approach is required and the OFT would like to hear from others about what works best and why.

- Sue Hinchliffe

Why are Cross Border Online Transactions Still the Exception Rather than the Rule in the EU?

As part of an ongoing review of the European retail sector, the Commission has published a report in which it looks at trends in e-commerce transactions and the reasons why cross-border transactions within the EU are still very limited.  E-commerce is taking off in most countries with as many as 33% of consumers having made an internet purchase in 2008.  However, cross-border e-commerce is still very limited with only 7% of consumers having made cross-border purchases.

Many of the barriers to cross-border online transactions relate to the difficulties that have always been an issue in cross-border trade, such as, language, demographics, and individual preferences - what people want will always to some extent be defined by where they are from.  However, there are other problems which are making cross-border trade less attractive than necessary.  Frequently, sellers simply refuse to sell or deliver goods or services outside their own country.  In fact, although 51% of European retailers sell via the internet, only 21% are currently conducting cross-border transactions.  Retailers identify the increased costs associated with offering cross-border transactions as being a barrier to trade.  Cost can be increased by the risk of fraud and non-payment in cross-border sales, compliance with different national fiscal regulations and laws regulating consumer transactions.  Additionally, costs of international delivery and the provision of after-sales services are higher cross-border and then of course the cost of running an internet site in a range of languages and currencies increases cost.  Other regulatory requirements may affect cross-border trade.  These would include technical product regulations, different national rules on electronic and electrical waste, different VAT rates and labelling laws.  Where the products are protected by intellectual property laws (e.g. music and films) managing those rights internationally can create significant issues.

The Commission recognises that such rules need to be examined in order to ensure that they do not have the unintended consequence of stifling cross-border trade and states that these issues will be considered in a forthcoming Communication on retail monitoring.  In the mean time, the Commission will continue to review every new regulatory proposals by a Member State which create or are likely to create barriers to cross-border trade online.  Where it finds restrictions which it considers to be contrary to the principles of free movement enshrined in the EC Treaty, it will open infringement proceedings.  Furthermore, the non-discrimination law provided by Article 20(2) of the Services Directive should substantially ease problems by consumers that are discriminated against on a geographic basis if they try to buy goods or services over the internet.

One of the biggest barriers, however, is trust.  One of the principal reasons that consumers don’t purchase products across borders is because of “perceptions rather than actual problems.”  In order to deal with this barrier, the Commission proposes setting up reliable systems of alternative dispute resolution and arbitration.  These should help to prevent consumers lacking any confidence in their shopping online elsewhere in the EU, and will give them the reassurance that, if they are to purchase goods abroad, they may do so with the same confidence as they do at home.  Recent legislation on a European small claims procedure adopted in 2007 and the recent White Paper on collective consumer redress are all part of a programme to boost consumer confidence and promote cross-border trade.

- Sue Hinchliffe

You Say Class Action We Say Collective Redress: EU Considers Changes

Collective redress, much like the concept of a class action in the United States, is used in the EU when multiple consumers are harmed by the same trader and wish to take collective action against him.

As the level of cross border trading to consumers increases in Europe, the EU Commission believes it is becoming increasingly important to provide consumers in one EU member state with the ability of seeking compensation from traders located in other EU member states.

However, although some EU member states do have provision for collective redress, many of them do not. Moreover the strength of such provisions and the ease with which they can be used by consumers located in the member state concerned or in other member states varies significantly.

On 27 November 2008, the Commission of the European Communities published a Green Paper on consumer collective redress. This is intended to stimulate debate about how best to protect the rights of consumers and to allow them to be compensated when they are harmed by illegal commercial practices.

The Green Paper sets out four options for debate:

1. The European Union takes no immediate action, but continues to monitor the national rules and the ability for consumers to seek compensation.
2. Encourage greater co-operation between Member States, so Member States extend national systems to consumers from other Member States.
3. A mixture of policy instruments to strengthen the current systems in place throughout the EU, including provisions on arbitration, small claims procedures and encouraging businesses to improve complaints handling.
4. An EU wide measure, so that a mechanism exists in all Member States.

The Commission has invited third parties to comment on the proposals in the Green Paper by 1 March 2009. The Commission will then decide how best to proceed, and if necessary publish draft legislation.

- Susan Hinchliffe