Welcome to the latest edition of our Digest, covering legal and regulatory developments from the last few weeks relevant to advertising, marketing and brand-owning businesses. As usual, for each item we provide a succinct summary accompanied by a link to the full text of the relevant official source or our own report.
Sit down to relax with our Digest and enjoy our discussion of various advertising and consumer law topics as well as an update on trade marks. In this edition, we consider new ASA guidance on podcasts, ASA research on greenwashing in the food sector, updated guidance on in-game purchases, FCA guidance on greenwashing and the FCA's separate guidance on financial promotions in social media, the fact the new ASA rules on alcohol alternatives are now in force, EU developments relating to greenwashing and to influencers, an EU case under the Digital Services Act and a Supreme Court case on a director's liability for trade mark infringements.
Advertising and marketing
ASA issues new guidance on signposting ads in podcasts
Podcasts often include ads. The ASA and CAP have carried out research which found that podcast listeners valued a clear, up-front label at the start of ads, with the most well-recognised terms being 'paid-for advertisement', and 'sponsored'.
In addition, consumers found it easier to recognise ads when labels were coupled with use of music or sound effects to mark out the ad from the surrounding content, and which were not excessively long. There were other findings on listeners' relationships with, and perceptions of, podcasts and advertising, for example that there is a close relationship with a podcast host, and podcasts are a "cottage industry".
Following the research, CAP has issued guidance. It strongly advises using terms like "sponsored", or "paid-for advertisements", alongside musical or sound effect cues, to help listeners differentiate paid ads from the rest of the surrounding content.
The guidance will take effect following a three-month grace period, on 16 August 2024. From then, the ASA will start enforcing the rules in the context of the new guidance.
For more information, see here.
ASA issues research on environmental claims in food advertising
The ASA has been investigating the advertising of meat, dairy and plant-based alternative food and drink products - both carrying out research with consumers and reviewing relevant adverts. This can be quite an emotive area, both for environmental and animal welfare reasons.
Its research shows that consumers generally took broad claims like 'good for the planet' at face value, but they also acknowledged that they were so general and/or absolute, that they were unlikely to be verifiable and that brands could use them to make strong implicit claims without providing any evidence.
Many participants in the research felt that ads comparing the environmental impact of plant-based products versus animal products effectively cancelled each other out. They said that some ads can feel overly 'preachy', with claims perceived to vilify a participant's lifestyle choice (such as the choice to eat meat; these types of claims risked total disengagement from some participants).
For more information, see here.
CAP issues review of guidance on in-game purchases
In 2021, CAP and BCAP published guidance on the advertising of in-game purchases. This set out what advertisers must do to advertise in-game purchases, and the games that feature them, responsibly and without misleading consumers.
The games industry is growing, and CAP has completed a review of the guidance, to ensure it remains helpful to the industry and continues to protect consumers. The review has confirmed that the guidance remains accurate and appropriate, and the ASA will continue to assess complaints against it. It has published updated guidance, with minor amendments to address feedback relating to clarity.
For more information, see here.
FCA issues guidance on financial promotions in social media
The FCA has published its finalised guidance on financial promotions on social media. Directed at businesses and influencers utilising digital channels to make financial promotions, the Guidance aims to increase regulatory awareness amidst rising use of social media to advertise financial products and services, and consumers' reliance on short-form content. Whilst the Guidance replaces its predecessor and does not create new rules, it indicates how businesses and influencers may approach complying with their existing requirements.
The FCA has been, and clearly continues to be, concerned about financial promotions on social media given that they reach mass audiences with increasing speed and frequency with the potential for significant consumer harm where those financial promotions are of poor quality i.e. non-compliant with the Guidance. The Guidance reflects the current state and use of social media, which has moved on since the FCA published its previous guidance on the use of social media. It also reflects the introduction of the Consumer Duty last year.
For more information, see here.
FCA issues guidance on anti-greenwashing rule
The FCA has also published its finalised non-handbook guidance on the anti-greenwashing rule, which both come into force on 31 May 2024.
The outcomes that the FCA is aiming to achieve through the rule and guidance include:
- Protection of consumers from greenwashing;
- Creation of a level playing field for firms in an evolving market; and
- Increase in trust in sustainability-related claims resulting in more capital flowing into these products.
- Any reference to the sustainability characteristics of a product or service must be consistent with the actual sustainability characteristics of the product or service and must be clear, fair and not misleading.
Firms should review their marketing and client communications for compliance with these regulatory expectations in anticipation of the greenwashing rule and guidance coming into force.
For more information, see here.
Alcohol alternatives – new rules and guidance are live
Following a consultation in 2022, the new CAP and BCAP Code rules on alcohol alternative product advertising that were announced at the end of last year have now come into force on 14 May. As many of the rules depend on the content of an ad and the context in which it appears, they are accompanied by formal guidance that explains how the rules should be interpreted and applied, including examples of approaches that would not be acceptable.
The new rules appear in Section 18 of the CAP Code, and Section 19 of the BCAP Code and relate to the promotion of beverages with an ABV at or below 0.5% which are marketed as alternatives to alcoholic drinks. The new rules cover the content of alcohol alternative product ads and how they should be appropriately targeted or scheduled.
For more information, see here.
Council of the EU wants to encourage positive impact by influencers
The Council has of the EU has made some recommendations about how to support influencers as online content creators in the EU.
The Council says that influencers' impact is often positive, thanks to the diversity of online communities and the sense of belonging that they generate. However, there can be harms to individuals' mental health and at a societal level in areas such as democracy.
It highlights that while influencers already make use of their technical and creative skills to produce and edit content, they also need media literacy skills to understand the potential negative impact of sharing mis- and disinformation, online hate speech, cyberbullying and other illegal or harmful content.
The recommendations include ensuring that influencers are involved in the development of those aspects of media policy that may affect them, including the increased use of AI.
For more information, see here.
EU accuses 20 airlines of misleading greenwashing practices
The European Commission, alongside a network of EU consumer protection authorities (CPC), has announced that is taking action against twenty airlines over potentially misleading green claims. The CPC is particularly concerned about claims made by airlines that CO² emissions caused by flights can be offset by consumers paying extra fees to support climate projects or by using sustainable fuels. Whilst the airlines remain unnamed for now, the EU consumer authorities include national regulators from Belgium, the Netherlands, Norway and Spain.
The investigation highlights the continued focus of regulators on environmental advertising and the aviation industry.
For more information, see here.
Amazon ordered to disclose advertising information in online archive
Amazon has found itself on the losing end of a legal tussle with the European Commission regarding its transparency obligations under the EU's Digital Services Act.
The Court of Justice of the EU overturned a decision by the General Court of the EU, which had temporarily halted the requirement for the tech behemoth to comply with its online advertising transparency obligations under the DSA.
The legal issues between Amazon and the Commission highlight the ongoing struggle to balance regulatory compliance with corporate interests, setting a precedent for how tech giants should navigate emerging transparency requirements in the ever-evolving regulatory landscape.
For more information, see here.
Viagogo commits to improving terms and consumer information
Viagogo, the online marketplace for the second-hand sale of event tickets, has committed to inform consumers in a better way about the terms on which tickets are resold and to stop using excessive countdown messages. The European Commission and various national consumer authorities (CPC network) had received multiple complaints concerning Viagogo's website, such as the lack of clear information on taxes and fees that must be paid by consumers, which Viagogo has now committed to address.
However, Viagogo has refused to agree to inform consumers about the amount of possible delivery fees at the start of the purchase process (where there are various options for ticket delivery), and their rights against the actual ticket seller or event organiser if an event is cancelled or postponed.
If Viagogo does not put into practice the commitments within the agreed timeframe or to address the issues where it has refused to give commitments, the CPC Network may decide to take enforcement action under consumer legislation.
For more information, see here.
Trade marks
Supreme Court issues important judgment on directors' liability for trade mark infringement
The Supreme Court has confirmed that company directors can be liable for torts such as infringement of IP rights when performing their director's duties: there is no principle of English law that protects a director from liability just because they are acting in their capacity as the director of a company. However, when it comes to accessory liability (i.e. joint liability for IP infringements by their company, where the director is found to have procured the infringements or participated in a common design with the company to infringe) the Supreme Court has ruled that the director will only be liable if they also have knowledge of the essential facts that make the acts done infringing (but ignorance of the law of IP is no defence).
So, although trade mark infringement itself is "strict liability" - it is no defence to say that you didn't realise you were infringing - when it comes to accessory liability for that infringement the court has ruled that an element of knowledge is necessary. For example, even if a company is found to be liable for infringing a registered trade mark, a director of that company would not personally be liable as an accessory if they were unaware that the company's branding was similar to the registered mark in question, or did not believe that it was likely to cause confusion with or damage to that mark.
The case involved a brother and sister, the Ahmeds, whose clothing company Hornby Street had used logos with the words "Santa Monica Polo Club" and pictures of polo players on horses which had been found to infringe registered trade marks belonging to Lifestyle Equities, including "Beverly Hills Polo Club" wording. In addition to the infringement by the Hornby Street company, the High Court and Court of Appeal had also found that the Ahmeds were personally liable as directors because they had procured the company's infringements or had had a common design with the company to infringe. Although they did not find that the Ahmeds knew or ought to have known that there was a likelihood or confusion or infringement, both lower courts held that such questions of knowledge were irrelevant to liability – i.e. if trade mark infringement was strict liability, so was the liability of those who procured or were in common design with such infringement. The Ahmeds appealed to the Supreme Court, arguing instead that an element of knowledge should be required for the Ahmeds to be found jointly liable with the company. (This would have important implications for the Claimants, as the Hornby Street company had been dissolved, and thus any financial compensation would have to come from the directors personally.)
In a very detailed survey of many aspects of directors' liability more generally, Lord Leggatt on behalf of the Supreme Court ruled that the lower courts had been incorrect, and that accessory liability for trade mark infringement did require an element of knowledge. Thus the Ahmeds should not be held personally liable for accessory infringement as there was no finding that they had the requisite knowledge of facts (i.e. that they knew or ought to have known that there was a likelihood of confusion between the Hornby Street branding and the Lifestyle Equities trade marks). In addition, the Ahmeds had not themselves directly infringed the Lifestyle Equities trade marks. Although as directors the Ahmeds had been involved in making the relevant decisions and handling the sales and marketing of the company's infringing products, all of the infringing acts were committed only by the company Hornby Street, as it was "in the course of trade" of the company (not the directors in their own right) that the infringements were made.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.