IP Basics: Introduction to advertising law

Welcome to the latest episode of Gowling WLG's global Intellectual Property podcast where we discuss a range of topics to help you protect your brands, creations and inventions.

Welcome to Gowling WLG's podcast on advertising law.

Kate Hawkins: I'm Kate Hawkins, a principal associate in the Intellectual Property team. I specialise in advertising and marketing law. I'll be talking through the basics of advertising regulation in the UK.

All marketing communications must comply with UK advertising laws, codes and regulations. If a brand produces advertising that is untrue or misleading or breaches the advertising rules, then it risks damaging its reputation and the valuable trust consumers have in the brand. Non-compliant advertising can also lead to serious financial and other legal consequences such as fines, wasted costs, lost sales and even injunctions or imprisonment. So it's important to get this right.

Advertising compliance can often be very subjective. What may be misleading or offensive to me, may not be for you. Some areas are highly regulated – for example, where you are advertising alcohol, financial products, dating services, gambling products, or where you are targeting children.

Now, advertising law is a very broad topic, so I'll be focusing on what we call the "golden rules of advertising" in this introductory podcast.

Before I do – let's set the scene and ask ourselves what is advertising and how is it regulated.

What do we mean by advertising?

Modern advertising is so much more than the traditional mediums, such as TV, radio and billboards. Digital advertising is prolific. So much so that, often, most complaints to the Advertising Standards Authority are about ads in online media.

So, 'advertising' now means: social media posts – both by a brand and by influencers and content creators where they have been engaged by the brand; video on demand advertising; banner ads; email communications and text messages; ads in cinema; advertorials in magazines; leaflets and brochures; claims made on webpages; point of sale advertising; and all promotions and offers, including those on pack and prize promotions. So it's very broad. All of these different kinds of advertising must comply with the advertising law framework.

How is advertising regulated in the UK?

Advertising regulation in the UK takes various different forms.

First, there is an established self-regulatory system of advertising standards. The Advertising Standards Authority (or ASA) administers this system. The ASA applies code rules that are drawn up by its sister agencies.

So we have the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing – known as the CAP Code. This is the rule book for non-broadcast ads, sales promotions and direct marketing communications.

There is also the UK Code of Broadcast Advertising, known as the BCAP Code. This applies to all broadcast ads (including radio and teleshopping). It also applies to programme sponsorship credits on radio and TV services licensed by Ofcom.

The foundation of the codes is that advertising in the UK should be legal, decent, honest and truthful.

The codes cover a range of areas, including misleading advertising, comparative advertising, promotional marketing, and harm and offence. There are also numerous specific rules relating to particular products or issues, such as medicinal products and health claims, environmental claims (which is relevant given the keen focus on greenwashing), food and drink, children, alcohol, motoring, and financial promotions to name a few.

The ASA typically relies on the bad publicity, which flows from its published rulings. While it doesn't have the authority to issue fines, reputational impact and brand damage can be severe. It's not unusual for stories about big brands misleading consumers or engaging in greenwashing to be picked up by the press. If a complaint is upheld, then you will also be prohibited from running the ad complained of in that form. So there may be wasted time and cost associated with amending your marketing materials, as well as lost opportunity.

I'll come back to the advertising code rules and the ASA later on in this podcast.

Advertising is also regulated by the Consumer Protection from Unfair Trading Regulations – the CPRs for short. These govern misleading marketing directed at consumers. We also have the Business Protection from Misleading Marketing Regulations, which apply to misleading marketing directed at a business audience.

To give you a flavour, the CPRs include a list of practices that will always be considered as unfair. For example, brands should not describe a product as "free" if a consumer has to pay anything other than the unavoidable costs to receive the product. It will also be seen as unfair to use an editorial piece to promote a product, service or brand, where that promotion is paid for and it's not made clear that the piece is advertising.

The CPRs also prohibit certain misleading acts or omissions. Making deceptive statements in advertising or omitting material information may cause a consumer to take a transactional decision they would not have otherwise taken. For that reason, this kind of conduct is an offence under the CPRs.

The BPRs become relevant in business-to-business advertising. While trade customers are typically less likely to complain to the regulators about misleading advertising and can be assumed to have more background knowledge to a claim than consumers, it's worth remembering that if advertising deceives traders and affects their economic behaviour or injures a competitor, the that will amount to an offence under the BPRs.

The BPRs should also be kept in mind when brands want to make comparative claims. The BPRs set out the rules on comparative advertising. Comparative advertising which, explicitly or implicitly, identifies a competitor, or a competing product, is permitted so long as it, among other things: does not mislead; compares products meeting the same needs or intended for the same purpose; objectively compares material, relevant, verifiable and representative features, which may include price; it does not create confusion with the competitor or take unfair advantage of the competitor's trademark; and it does not discredit or denigrate the competitor. If the comparative claim uses a competitor's trademark, then provided the claim is compliant, it will form a complete defence to claims of trademark infringement. For this reason alone, it's always worth making sure you get advice before running comparative claims.

So what happens if an advertiser makes a misleading claim under the CPRs or BPRs?

A couple of regulators can get involved, including Trading Standards. The Competition and Markets Authority, known as the CMA, can also enforce the regulations. Typically, the CMA will focus on issues that have the potential to impact consumers on a market-wide basis. For example, the CMA has published its Green Claims Code, which helps businesses understand and comply with their existing obligations when making environmental claims, and it has also said it will take the necessary enforcement action against brands getting it wrong.

Trading Standards and the CMA have a wide range of sanctions available to them, from seeking undertakings from a business, through to criminal prosecution. There are also private rights of action available to consumers who are misled in breach of the CPRs.

So that's the regulatory framework. Now for the "golden rules".

At its simplest, advertising should not mislead; it should be legal, decent, honest and truthful; it should be responsible, and should not cause serious or widespread harm or offence.

The majority of complaints considered by the ASA relate to misleading advertising. Ads will be seen as misleading where they make deceptive claims, but also where they omit material information or give an overall misleading impression.

It's important to remember that the ASA will look at what you say in your ad, so your headline claims, straplines and copy. It will also consider what you don't say - is there some material information that has been left out? Material information is information that a consumer needs to make an informed decision about a product or service. Omitting this information makes it difficult for consumers to make this informed decision and so, ads that do this are likely to breach the rules.

Recently, we have been seeing the ASA consider this in the context of environmental claims. The ASA has ruled on omissions like airlines not making clear the level of their environmental impact when talking about aspirational future claims. We've also seen a ruling on banks not being clear enough about the level of their investments in high-polluting industries and a water company omitting information about the negative impact of some of its work.

In a different context, the ASA will find it misleading to fail to inform consumers that when they sign up for a "free trial" with a then ongoing subscription, they will be liable to monthly payments.

This brings me to the use of small print and disclaimers. We are often asked by our clients' marketing teams whether they can run with their preferred straplines and copy, and include the details in the small print. I'm sure that sounds familiar to many of you.

Qualifying information, that is, additional pieces of information that, if omitted, would result in a primary claim misleading consumers – can be used to clarify or expand on the meaning of the primary claim, provide substantiation to support it, or explain important limitations or conditions.

The most common use of qualifications is to ensure consumers are made aware of conditions of an offer. For example, what does the consumer have to do in order to take advantage of an offer, and if there are time limits, geographical restrictions or exclusions from that offer.

Qualifying information must be included where it is material to a consumer's understanding of a claim being made or the ad as a whole.

It must not contradict the claim. There may be occasions where a qualification does not go far enough to correct the misleading impression given by a claim in an ad. For example, we have seen the ASA uphold a complaint against a luxury furniture company that claimed to deliver its products within one to seven days, when the small print "clarified" that delivery could take up to 25 days.

Disclaimers and small print must be presented clearly and prominently. They should appear in a way that captures a consumer's attention. Even if the information in a disclaimer is correct, it can still be seen as misleading if it is not presented clearly enough. You should make sure any qualifying information is either placed immediately underneath the primary claim or connected to it by way of an asterisk or footnote and is big enough to be read easily. When it comes to TV ads, you need to make sure the disclaimer is on screen for long enough to allow a consumer to read it. Clearcast has a duration of hold calculator, which you might find useful.

Where you are genuinely restricted in time and space, for example in sponsored search ads, then you may be able to include the most significant information in the ad itself, with the full details 'one click' away.

In addition to what you do and do not say in your ad, the ASA will also look at the entire ad and the overall impression given by the ad. This includes the imagery used and the impression that imagery gives. Imagery which gives an inaccurate impression about the product consumers will receive, for example, will be misleading. So if you use an image of the wrong product or if the image shows a car with optional extras that are payable in addition to the price shown, then that will be problematic.

It may be that the image exaggerates the quality or size of the product. We've seen the ASA uphold complaints that a chicken burger was not as plump or had as many fillings in real life as pictured in the ad. We've also seen it take issue with a teeth whitening company for using visuals that created the overriding impression that teeth could be whitened instantaneously, which was not the case.

The ASA will also look at the underlying evidence you have to support claims made in the advertising. The regulator is very clear that documentary evidence proving an objective claim should be to hand, before that claim is made. Remember, that you need evidence to support the claim as it is likely to be understood by the average consumer. Having substantiation for the claim as you intended it to be understood, is unlikely to be accepted by the regulator.

Obvious exaggerations, claims that are unlikely to be taken literally and clear statements of opinion are unlikely to need substantiation. For example, the ASA has previously said that the claim "the original and the best since 2004" in an ad for a pillowcase would be understood as a subjective expression of the brand's opinion of their product, and was not capable of objective substantiation. It also thought the claim "comfort redefined" made about contact lenses would be seen as puffery.

So with all of that in mind, here are some examples of claims that may be seen as misleading. Superlative claims are claims that something is superior to all others. It might be a broad claim such as 'the best' or it might be a specific claim such as 'lowest price', 'lowest emissions', 'the most customers', 'the highest rated'.

You need to take care with these claims. These are often scrutinised by competitors and will be considered by the ASA as comparative claims against all competing products. So they often lead to complaints being made and upheld.

They should be treated as high risk – unless you hold robust evidence in support. For example, the claim "best alarm technology on the market" would be understood to mean the advertiser's alarm systems were technologically superior to all other providers in the UK. When this came before the ASA, the advertiser only had evidence relating to three competitors and a relatively small number of features offered, which was not considered adequate to substantiate the claim.

While some far-fetched claims may be defended as advertising puffery, which wouldn't be taken literally by consumers, there is a risk a consumer will see it as an objective claim that needs to be substantiated.

'Number one' claims are a particular kind of superlative claim and the ASA generally treats these claims as analogous to 'best-selling' claims. That means that you would need to substantiate them on the basis of robust sales data.

While on the topic of comparative claims we often see brands making comparisons with both identifiable and unidentifiable competitors.

Sometimes competitors are named and sometimes they aren't. If the market is small, highly specialised or dominated by a few major players, the intended competitors are usually likely to be very clear despite not being named. So take care with that.

When making comparisons with identifiable competitors, then in addition to holding evidence to substantiate the claim, you must compare products meeting the same need or intended for the same purpose, and must objectively compare one or more material, relevant, verifiable and representative feature of those products, which may include price.

Marketers are also advised to include a signpost to where consumers and competitors can access information on the basis of objective comparative claims by, for example, providing a website address where verification information is provided.

As I mentioned earlier in this podcast, if a trademark is used in a comparative claim, then it will be a defence to infringement if that comparative claim is compliant. This can be a tricky area, and one that is hotly contested, so please do reach out for legal advice.

Comparisons with unidentifiable competitors have fewer requirements. Essentially, you just need to make sure you aren't misleading the consumer and the elements of the comparison have not been selected in order to give your brand an unrepresentative advantage. For example, the ASA ruled that a comparison between the prices of an online furniture retailer's products and similar high street products was misleading – the products were selected on the basis that they served the same function and were similar in terms of aesthetic, but might vary in terms of the quality of finish or the quality of the materials used.

If the claim is objective then it, of course, needs to be supported by evidence.

It's also worth flagging that we sometimes see claims prepared in a way to give a hanging comparison. For example, 'better', 'cheaper' or 'lower' without any explanation of what the comparison is against. The ASA will interpret that kind of claim broadly, that is, as an absolute claim against all competing products in the market, which you would need to substantiate. It's much safer to make sure your comparison is specific and meets the requirements above.

Price claims and price offers can also be tricky. The basis of a price comparison must always be made clear. You can use a reference price to show the savings a consumer will make, but this must be a genuine established selling price, and not a price that has been inflated to make the saving look better. This should also be the most recent price and the price charged for longer than the promotional price. The ASA is likely to take recent pricing history and sales data into account, so please make sure all of your ducks are in a row before making promotional price offers.

You can make 'free' or 'without charge' claims provided the consumer doesn't have to pay anything other than the unavoidable cost of responding and collecting or paying for delivery of the item. 'Free' can also be used if customers are required to buy other items, provided that the item described as 'free' is genuinely separate from and additional to the items the customer is required to pay for; the consumer's liability for all costs is made clear; the quality or composition of the paid-for item has not been reduced; and the price of the paid-for item has not been increased to recover the costs of supplying the 'free' item.

So that's a bit about misleading advertising. Turning back to our other "golden rules". Let's pick up with responsibility. All marketing communications should be prepared with a sense of responsibility to consumers and society. For example, the ASA has upheld complaints about ads that encourage unsafe, irresponsible or illegal acts, such as excessive speed in automotive ads or links between alcohol and confidence or increased popularity.

The Code rules also state that advertising should not cause serious or widespread offence. Particular care needs to be taken to avoid causing offence on the grounds of: age; disability; gender; gender reassignment; marriage and civil partnership; pregnancy and maternity; race; religion or belief; sex; and sexual orientation. Rulings on this topic will almost certainly make headlines.

In 2019, a new rule prohibiting gender stereotypes that are likely to cause harm or offence was introduced. This followed a review undertaken by the ASA, which indicated that certain kinds of gender stereotypes can negatively reinforce how people think they should look and behave, and how others think they should look and behave, due to their gender, which may have harmful consequences for individuals and for society.

So, what happens if you break the advertising code rules?

If a member of the public or a competitor thinks your advertising is misleading, irresponsible, harmful or offensive, or otherwise falls foul of the advertising code rules, then they can make a complaint to the ASA. Where the complaint is from a competitor, there is a specific competitor complaints procedure they must comply with. They must first raise their concerns with you directly and attempt to resolve the issue. If it cannot be resolved, then they may submit a complaint to the ASA after five working days.

Once a complaint is received by the ASA, it is assessed to check it falls within its remit.

If it is, and there is a potential breach, then the ASA will investigate the complaint. Sometimes, a breach doesn't warrant a full investigation, and the ASA may elect to resolve the complaint informally where the advertiser agrees to amend or stop using an ad, and provides assurances about its future use of similar advertising. Where a complaint is resolved informally, all that will be published on the ASA website is the name of the advertiser. No details of the actual complaint will be listed.

In other cases, the complaint is investigated formally. You would be invited to respond to the complaint.

If at the end of the procedure, the ASA is minded to uphold the complaint, it will publish its ruling on its website and conclude that the ad cannot remain in its current form.

As I mentioned earlier on in this podcast, the ASA relies on its ability to 'name and shame' non-compliant advertisers. Rulings are published every Wednesday and are often picked up in the press.

The ASA does have some other remedies but they are relatively unlikely to be deployed, unless you receive a string of adjudications for the same issue or defy the ASA.

So, to wrap up, here are some practical tips to stay on the right side of the advertising rules I've talked about today.

Take a step back and look at your advertising as a consumer would - could they be deceived?

Remember that something can be true but still give a misleading overall impression or misleadingly omit something important

Significant conditions should be placed as close to the relevant claims as possible

Be careful with your small print, does it contradict the headline claim? Is it too far away to effectively qualify your claim?

Be sure that the wording you use reflects the evidence you have to hand, avoid general, unprovable claims, particularly when it comes to environmental claims.

And take particular care with comparative ads, these are often picked up by competitors.

I hope you found this podcast helpful. If you have any questions about the claims being made in your advertising or require legal clearance of your ads, please do contact myself or a member of the Advertising Law team.