Webvertising - keeping on the right side of the law

As a general rule, the legal issues that affect advertising in traditional media are of equal application and relevance to webvertising. The problem for businesses is applying national frameworks of laws and regulations to adverts that are disseminated to the world at large. In theory a webvert is subject to the laws of every country in which it is accessed by an Internet user.

• advertising in on-line publications
• banner advertising
• web-site advertising incorporating the advertiser’s brand name
• linking a web-site with an e-mail address to facilitate to provision of data to the advertiser
• ‘spamming’ (sending unsolicited e-mails)

The Laws Regulating Advertising

Jurisdiction is the most troubling issue affecting webvertising.Whether a web site’s content be subject only to the law of the country of origin of the advertisement (which could be the place of business of the advertiser, or where its server is based), or subject to every foreign law where the advertisement is capable of being received. The strict legal position is the probably the latter, but this is recognised as impractical.

At present there is no international unanimity on the issue of jurisdiction, but the general approach illustrated by existing cases is that the laws of the countries of ‘publication’ will apply. This means the countries in which there is evidence of ‘directed’ activity. Simply placing information on a web-site will not, of itself, be treated as evidence of directed activity if there is something about that information which makes it clear that it is not targeted at consumers in a particular country. The language of the advertisement may be relevant, but not conclusive. The use of clear site disclaimers may help to clarify who is included in the target audience. Disclaimers, such as “This offer is only available for consumers in X country”, however, are likely to be construed narrowly and may be void in some countries.

UK webvertisers also have to comply with a whole raft of domestic legislation. This includes the Trade Descriptions Act 1968; the Consumer Protection Act 1987; the Control of Misleading Advertisements Regulations 1988; the Prices Act 1974; the Unsolicited Goods and Services Act 1971; the Trade Marks Act 1994 the Copyright, Designs and Patents Act 1988; the Data Protection Act 1984; the Defamation Acts 1952 and 1996; the Obscene Publications Acts 1959 and 1964, and the Lotteries and Amusements Act 1976.

Impact of the Single European Market

Businesses using electronic communications for marketing, face regulatory differences even within the EU itself. French laws, for example, require all advertisements to be in the French language. It is also impossible to run a sales promotion campaign that carries a premium, free gift or sweepstakes lawfully across the EU.

In theory, at least, the principles established by the Single European Market, whereby EU member states are meant to recognise, through the principle of mutual recognition, the laws and regulations of the other member states, should have avoided this problem. However, the right of freedom to provide services is subject to a number of exceptions and the advertising sector has particularly suffered from a lack of compliance with these rules.

In an attempt to solve these problems, the Single Market Directorate (DGXV) published a Green Paper in 1996. Having invited comments on proposals to improve the ability to disseminate marketing and advertising materials across borders without ensuring compliance with all the laws across the EU, it has issued a follow-up Communication in which it proposed criteria to clarify the laws on the fundamental EU principles of country of origin and proportionality. The Committee of Government Experts, established under the Green Paper, is focusing on national regulations on sales promotions and price discounts and will thereafter address premiums and other sales promotion issues.

Self-Regulation

Throughout the EU, self-regulation complements the legal frameworks on matters such as misleading advertising and unfair competition. Although the structures vary, each country’s self-regulatory system is based on the principles enshrined in the International Chamber of Commerce’s Code of Advertising Practice. The Code states that all advertising should be legal, decent, honest and truthful, and respect the cultural differences of the given country. Regulatory systems are generally founded on rules of best practice drawn up, supported and enforced voluntarily by the advertising industry itself.

In 1992 the European Advertising Standards Alliance (EASA) was formed to support and co-ordinate the roles of the self-regulatory bodies across Europe. Its members now include 24 bodies from 20 countries, including the whole of the EU, Switzerland, Turkey and the Czech, Russian, Slovak and Slovenian Republics. It also has corresponding members in New Zealand and South Africa. EASA’s role in handling cross-border complaints is now recognised in various EU directives and communications. The decisive factor in identifying a cross-border complaint is that the complaint comes from a different country from that of the media in which the advertisement appears. The country of origin of the advertiser or the advertisement is irrelevant.The Alliance is currently developing a procedure to enable cross-border complaints concerning webvertisements to be dealt with on country of origin basis.

Content Standards

It is impractical to obtain legal clearance in every jurisdiction throughout the world but electronic commerce businesses can, however, adhere to some general principles to minimise the risk of infringing against the advertising regulations of a particular country. Legal and trade mark clearance should be sought in target countries and countries in which the electronic commerce business has a presence or assets. Appropriate disclaimers should be used to exclude non-target countries from the invitation. Other practical considerations include how costly it would be to change an advertisement; whether a competitor would be likely to be able to prove actual damage; and whether the authorities in a given country are likely to take a “laissez-faire” approach.<

Contractual and Liability Issues

The risk that an electronic commerce merchant could incur liability for breach of a foreign advertising regulation makes it even more essential for contracts with advertising agencies to lay down clear lines of responsibility for ensuring legal compliance of advertising material. Third party rights will need to be licensed for both the territories of interest and the medium of the Internet, which is not a use for which consent would necessarily be implied.

The degree of control exercised by electronic commerce merchant over material posted on or linked to their web-site may in itself give rise to liability. Permitting third parties to post material onto a web site could leave the advertiser responsible for any such material that contains defamatory or otherwise illegal matter. Clear terms and conditions of access and use should be displayed. Open forum discussion areas pose particular risks of libel for the site owner and webvertisers should consider whether for this reason discussions via e-mail would be preferable.

The British Codes of Advertising and Sale Promotion

In the UK the Committee of Advertising Practice (CAP) is the body responsible for devising and enforcing the Codes. The scope of the Codes is broad, applying to advertisements and promotions in all non-broadcast media, wording introduced in 1995. The Advertising Standards Authority, the independent body responsible for investigating complaints of breaches of the Codes, has applied them to internet-related activities on a number of occasions, usually resulting in the advertiser agreeing to amend its web site to comply with the ASA’s recommendations and to consult the CAP copy advice team on future site content. The ASA regularly reviews web sites for breaches of the Codes and has established a working group to examine how the regulatory regime should apply to webvertisements.

Although the Codes lack the force of law, certain sanctions do apply. An electronic commerce business may be asked by the ASA to withdraw or amend the advertisement. The complaint, together with the names of the advertiser and its agency, will be published in the ASA’s Monthly Report. If an advertiser fails to comply with an ASA ruling, trade sanctions or a withdrawal of further advertising space may be invoked by CAP members. As an ultimate deterrent, the Director General of Fair Trading under the Control of Misleading Advertisements Regulations 1988 can subject flagrant and persistent abusers of the Codes to legal proceedings. The ASA may also ask the relevant Internet Service Provider to assist them in enforcing any adjudication.

Comparative Advertising

This is another area where webvertisers are at risk as different countries have traditionally applied disparate rules. Whist the US (and to a similar extent the UK) has encouraged comparative advertising on the basis that it is in the interest of consumers to be better informed, most EU countries have taken the opposite approach. The result has been that a lawful comparative webvertisement in one member states is likely to breach the rules in another.

• it is not misleading
• it compares like with like
• it objectively compares one or more material, relevant, verifiable and representative features of those goods or services
• it does not create confusion in the market place
• it does not discredit or denigrate a competitor
• for products with a designation of origin, it relates in each case to products with the same designation
• it does not take unfair advantage of the other mark or the designation of origin of the other product; and
• it does not present goods or services as imitations or replicas of goods or services bearing a protected trade name or trade mark.

The British Government’s current position is that it will not be necessary to amend existing laws, and that the intention is merely to adopt the Directive by means of an amendment to the current Misleading Advertising Regulations.

The DPA also prevents data being transferred to countries outside the EEA unless those countries have adequate data protection laws in place or the individual has consented. This will be extremely relevant for any company wishing to collect UK data and transfer it to, for example, the US whose data protection laws still operates on a self-regulatory basis. Steps would first need to be taken to obtain consent through contractual provisions or permission form the UK Data Protection Commissioner. To ensure that the consent satisfies all the requirements of the Act, the request would have to make it clear that the data is to be transferred to a non-EEA country whose data protection laws may be less stringent. The request should also name the country to which the data will be transferred and, if it is the case, that the transfer will be effected via the Internet.

Telemarketing on the Internet

The Internet is the perfect tool for sending advertising messages to and soliciting contracts with consumers and businesses through electronic mail. Targets can be reached anywhere in the world for very little cost. While direct mail is tolerated by most national legal systems, provided it does not constitute harassment, spamming raises new issues of cost and inconvenience for the recipient.

While spamming provides a cheap and efficient form of direct marketing for those seeking to promote their goods, services or views, it can be more than a major irritant for web users and ISPs. Not only do you have to pay to receive spam, it can cause networks to crash. There have been many court cases in the US on the legality of spamming. So far, the position under English law has yet to be tested. But that is set to change. Virgin Net has issued the first writ in England against a spammer. The ISP is suing a customer for breach of contract for having sent more than 250,000 junk e-mails in an attempt to sell a database of email addresses. The contract between Virgin Net and the customer did not allow the sending of material likely to cause annoyance, inconvenience or anxiety. The European Commission is alive to concerns about the practice of spamming. According to Novell it costs British and Irish businesses alone some £5 billion a year

The Distance Selling Directive will place some of the existing requirements of the voluntary and trade codes of practice on a statutory footing. It contains similar provisions to the Telecoms Data Protection Directive, although it also applies to mail and other forms of communication. The Directive requires member states to ensure that the express prior consent (i.e. an ‘opt-in’ system) of consumers is obtained for all uses of faxes or automated calling machines as a means of communications. All other means of distance marketing communications, unsolicited or not, including, electronic mails, traditional mail-shots and calls, will only be able to be used where there is no clear objection from the consumer. Consumers will have to be given the opportunity to register his/her objection to receiving such communications. Options include either an opt-in or an opt-out system in. Whichever form of communication is used, the identity of the supplier and the commercial aim of the communication will have to be stated at the outset.

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