Marketing & Advertising - Dan Smith - Thinkhouse September 2016

Michael Luckman: We are talking today to Dan Smith, head of our Advertising and Marketing team about misleading advertising, particularly in the context of digital media and sales practices.

Dan, misleading advertising is quite a broad church. What types of misleading advertising are you seeing out there?

Dan Smith: Well, don't mislead, that seems quite simple at heart and that is the basis of advertising law, but different sales practices emerge over time, digital media presents new opportunities and marketers are quite sophisticated.

So what we're seeing is those sort of traditional concepts of what is and what is not misleading. The consumer or trader being able to identify advertising as advertising. Those principles are being applied in new circumstances and we've seen quite a lot of regulatory activity around things like was/now pricing offers, price promotions, multi-buys.

In digital media we've seen a lot of activity around native advertising, around influence and marketing, the adoption of user generated content. All of these fake reviews, all of these have been regulatory hot topics over the past year or so. 

Michael: As a consumer, obviously I see quite a lot of was X now Y pricing, what issues are coming up there?

Dan: Well, the reasons the regulators are concerned about was/now pricing is that works on consumers, they respond to it and also it's very easy to mislead in the context of was/now pricing.

So you artificially inflate the was price in order to make the now price seem like a better deal and the Office of Fair Trading, the Advertising Standards Authority, have been over the past few years very active on that now the Competition and Markets Authority has taken up the baton.

There was a super complaint from Which? about supermarket price promotional practices and that has led to an agreement between the CMA and Asda over was/now pricing, and a key part of that agreement is that the now pricing should not extend for longer than the was pricing was in place. So I should have my pot of yoghurt on sale for £2 for a month and then market it at 50%25 off £1 for no more than one month.

Michael: And what about multi-buy and offer sequencing? How are they affected by those kinds of decisions?

Dan: So, the CMA also agreed with Asda certain principles around those issues around multi-buy offers, not misleading on multi-buy offers.

So again, very easy to mislead if on day one I have a yoghurt on sale for £1, day two I push the individual unit price up to £1.50 but market it on multi-buy as two for £1. Is the consumer really getting a deal there? And again, the CMA has reached an agreement with Asda over that kind of practice and it's reached an agreement with Asda over the sequencing of offers.

So, it's confusing for the consumer if a supermarket or another retailer moves straight from a was/now into a multi-buy. It's very hard for them to identify whether they are getting a good deal or not. And you know that's Asda, but the Chartered Trading Standards Institute is looking at pricing practices guidance anyway and this really is an issue across the retail sector and it's really a question of where the regulator is going to look next. It could be anywhere from the High Street right through to car dealerships.

Michael: Turning to digital marketing now. Sometimes it's quite difficult to tell the difference between what's editorial and what's advertising. Does that matter?

Dan: Yes, that's absolutely the nub of a lot of the issues in connection with digital marketing and is something that the Competitions and Markets Authority in the UK, the Advertising Standards Authority, the FTC in the States, other regulators worldwide are wrestling with.

The issue is coming up in the context of things like native advertising. So native advertising is where a publication sells advertising space which mirrors the form and function and the design of editorial content on that website. So I seamlessly go from an article to an advert and I don't really notice the difference. You know it's to inspire consumers to pay attention to advertising.

Now there's a regulatory issue with that, obviously, because a core underlying principle of the regulation is that advertising should be identifiable as advertising. We've seen this come to a head in adjudication before the Advertising Standards Authority, for example against the Daily Telegraph and Michelin when they said an article which was in association with Michelin was not identified clearly enough as Michelin advertising.

Michael: You mentioned in your introduction influencer marketing, what's that and why is it important?

Dan: Influencer marketing is hugely popular. You've got a new breed of internet celebrities out there with vast audiences, look at, you know, people like the Kardashians, and advertisers and agencies are anxious to tap into those audiences to dispute their own promotional messages.

But again, the regulators are concerned that a lot of the resulting content is not clear, whether it's an advertising message or whether it's the independent non-commercial thought of that particular celebrity. We've seen a stream of Advertising Standards Authority adjudications on this against Mondelez, against Alpro, and the FTC has taken action and the CMA has also been stamping down.

They've secured undertakings from an agency called Social Chain to ensure that that agency will cease using influencers to promote their clients' brands in a way which is not clearly identified as advertising.

Michael: You're obviously a truly amazing presenter, are fake reviews are real concern?

Dan: Yeah, again absolutely a regulatory hot topic.

So if I took this video, put it on YouTube and then recruited a team of people in Bangladesh or Venezuela to write a load of fake reviews about what an awe-inspiring speaker I am, then in regulatory terms that's a problem.

So the regulators have been looking to ensure that platform owners and advertisers and agencies don't engage in practices which across a body of reviews give a misleading impression to a consumer about how a product is being received in the marketplace. So the lesson here for brands it that you need to look into this. You need not to think that this is just the preserve of rogue traders.

Do you know what your search engine optimisation agency is up to? Are you in any way moderating out or supressing negative reviews on your pages? Are you incentivising any kind of reviews, particularly positive reviews? If you are, then you may have an issue.

Michael: I see a lot about ad placements. What's happening there? 

Dan: So obviously there's the much spoken-about issues on ad fraud and viewability of advertising content online. A lot of great steps are being taken in the industry to address those issues, but advertisers need to be ensuring that these kind of topics are picked up in their contracts with media agencies and with digital agencies that they are complying with the correct standards and that they are measuring their return on investment in a way which is accurate and reflects real people viewing their adverts.

Elsewhere, the Advertising Standards Authority has been looking at ad placements from a different angle, it's been looking at it from the perspective of child protection. So, for example, it issued a ruling against a bookmaker who was distributing an email featuring Iron Man to its over 18 mailing list.

You might think what's the problem with that, the mailing list is all over 18, but the Advertising Standards Authority seems to have taken the very harsh view that irrespective of how you place your advertising and who you are targeting with it, it's possible that a child might be looking over your shoulder and be attracted to inappropriate content. 

Michael: Social media enables consumers to engage directly with advertisers these days. Do advertisers need to be concerned about that?

Dan: Absolutely, I mean that's one of the key benefits of social media and that's something which has driven the success of social media as a marketing platform, the ability to engage with users. But there are risks that are associated with that.

So if a user posts something defamatory or infringing on your Facebook page for example, could you be liable for that, or are you merely hosting that problematic content? Well, I'd say it's arguable that you are not merely hosting it, you're inviting it, you're engaging with it, you're building it into the overall promotion of your brand through that Facebook page.

So there's got to be a risk of liability there and the advertising regulators, the Advertising Standards Authority, has adopted certain principles around the idea that advertisers adopt user generated content by engaging with it.

So if they like it, they re-Tweet it, if they reply to it then potentially they become responsible for the contents of that user's Tweets and whether or not it complies with code rules.

There was an adjudication a couple of years ago against Fireball Whisky, who asked a fairly nondescript question, a fairly non-controversial question on their Facebook page. "What are you up to this weekend?" And got replies like, "well I will be drinking a bottle of Fireball Whisky, being sick and then falling asleep in a hedge" and the Advertising Standards Authority looked at that and said: Fireball Whisky, you are responsible for that content, it's on your Facebook page.

Essentially it fell on the brand to moderate that type of content off the page. 

Michael: Social Media, of course, is pretty immediate too. There's this growth of what's called real time marketing, that must be a concern too, isn't it?

Dan: Well yes, I mean there's tremendous benefits to be had and there are a lot of great examples of real time marketing, so you might remember, for example, the content of brands like Snickers or Specsavers put out around the Luis Suarez biting incident at the last World Cup.

So there's a lot of great content but there is associated risk. It's easy to trip over and defame someone, Kevin Pietersen, the cricketer, sued a high street retailer over some real time marketing content they put out which inadvertently alleged that he was a cheat, that was defamatory.

In the US, the drugstore Duane Reade was sued by the actress Katie Heigl after it took an image of her coming out one of their stores and built it into a tweet, which looked like an endorsement. She sued them for $6,000,000.

Yes, so there clearly are risks and that's before you even get to the PR disasters that resulted from the wrong type of content being put out at the wrong time. And the lesson here is that marketing teams and legal need to work together to come out with a clearance procedure which is fit for purpose, which allows a marketing team to respond to events in a real time fashion and not a 24 or 48 hours later fashion, but nevertheless means that that marketing team is not, you know, operating entirely unrestricted without knowledge of the law. That you know the legal risk is controlled insofar as that's possible.

Michael: Thank you Dan, that's really interesting. We are all consumers and affected by these things and, may I say, you are a truly awesome presenter and everyone should come to you for their advertising needs. Thank you very much Dan.

Dan: Thank you.