UK Advertising in a Digital Age (Communications Committee Report)

Viscount Younger of Leckie Excerpts

Thursday 25th April 2019 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, I am pleased to respond to this debate, initiated by my noble friend Lord Gilbert, on the Communications Committee’s report into UK advertising. As the noble Lord, Lord Griffiths, said, it has taken its time to reach this Chamber and has had at least one false start—but we are here. It is a hugely important subject and one with global implications, as a few Peers have mentioned.

The broad context is the rise of digital advertising and the unprecedented opportunities and challenges that marketing delivered via online networks presents. The narrower context is change in public policy, with the Government providing global leadership in this field, including most recently considering a rare intervention into advertising regulation, specifically advertising of products high in fat, sugar or salt. I wish to say more about that later.

Against this backdrop, the committee’s report was a rigorous, helpful interrogation of the challenges and opportunities that the advertising industry faces, and I welcome many of its recommendations. Today’s debate has also been equally impressive in its thoughtful consideration of many of these issues. Before turning to those, let me add to the picture of the sector so elegantly painted by my noble friend Lord Gilbert.

I am pleased that a strong contribution was made today by the noble Lord, Lord Currie, because advertising in the UK is regulated by the Advertising Standards Authority. Its mission, as the industry’s independent regulator, is based on a set of foundational principles to which the Government subscribe, namely to ensure that advertising in all media is legal, decent, honest and truthful, to the benefit of consumers, business and society. Advertising cannot be discriminatory in content. It must afford particular protection to vulnerable groups, especially children and young people. I will say more about that later, particularly in response to the interesting speech from the noble Baroness, Lady Kidron. These principles remain vital to uphold, given the role that advertising plays in our lives. The noble Lord, Lord Currie, was reassuring in the actions that he and the ASA have taken and continue to take in this field.

Advertising’s direct purpose is commercial, but it also makes a major contribution to the public interest, not least in funding much of our media. A vibrant and pluralistic media at both local and national level is a cornerstone of our democracy. Advertising can also exert a significant influence on how we view ourselves and society. In many cases, the messages it delivers are socially beneficial, for example by encouraging us to eat more healthily. But, if not carefully managed, advertising can sometimes cause harm, for example by perpetuating harmful gender stereotypes. Effective regulation of advertising therefore needs to find a balance between ensuring that its influence upon society does not cause harm and allowing the industry the freedom to flourish economically and creatively.

Let my Lords be in no doubt that it is flourishing. The same research on the export of advertising services quoted at the beginning of this debate found that the industry’s export market has nearly tripled in size since 2009, and the sector has the largest trade surplus in Europe. Per capita, the UK has won more Cannes Lions—which are the Oscars of the advertising industry—than any other country. This all contributes to advertising’s central role in the UK economy, even in a landscape that is changing rapidly. The noble Lord, Lord Gordon, is right: London is a global centre of excellence for advertising and it must remain so.

I will focus on some detail. The committee’s report explored two key features of this changing landscape. Let me address the first, the rise of online advertising, which has been a game-changing development powering the internet. Just like the internet, it has the potential to lead to personal, societal and economic challenges, whether from market concentration, advertisements funding harmful content, misuse of personal data or children seeing advertisements they should not. The noble Lord, Lord McNally, gave a considered overview of such challenges, as did the noble Lord, Lord Vaux.

Fortunately, action is being taken across these issues. The many reviews or initiatives under way sometimes appear to be something of a spider’s web or duplicative work. However, I reassure the Chamber that there is strategy and structure to our approach. Aspects of the economic dimension of online advertising have been considered already by the Cairncross review into the sustainability of the press and the Furman review, which set out wider challenges around digital markets. The Government are also addressing online advertising in relation to both economic and social harms.

The right reverend Prelate the Bishop of Durham and the noble Baroness, Lady Kidron, spoke about damage to children and advertising products with a high fat, sugar or salt content. Our launch of a consultation on advertising these particular products online, as well as on TV, is just one example. Notwithstanding strict UK regulation, children still see a great many advertisements for products high in fat, salt or sugar, including through innovative techniques online, as touched on by the noble Baroness, Lady Kidron. I agree with the right reverend Prelate that it is right that we look again at the issue.

I point equally to a series of round tables convened by the Intellectual Property Office to explore the role of digital advertising in protecting the intellectual property of creative businesses. I also point to the fact-finding forum recently convened by the Information Commissioner’s Office to investigate the ad tech industry’s use of personal data. All this joined-up work across government and arm’s-length bodies reaffirms the UK’s position as the global thought leader on online regulation. Nowhere is this clearer than in our online harms White Paper, which I will talk about later and was referred to by the noble Lord, Lord Griffiths.

As highlighted by the noble Baroness, Lady Kidron, the impact of harmful content online can be particularly damaging for children and their mental health. The White Paper therefore sets out our plans for legislation, with clear responsibilities for technology companies to keep UK users safe on their platforms. I note, in this context, Mark Zuckerberg’s welcome call recently for Governments and regulators to play a more active role in internet regulation. As the noble Lord, Lord Griffiths, said, we will have ample opportunity to discuss online harms and the pitfalls or otherwise that he raised, which he or others might see as prevalent in this White Paper.

Although online advertising is not a principal focus of the White Paper, it is clear there is plenty of work already happening in this field, and a critical challenge is ensuring that the whole is greater than the sum of its parts. With this in mind, the DCMS Secretary of State Jeremy Wright recently announced a review of online advertising, which will look at the sector’s social and economic challenges in the round. This initiative is being considered against the backdrop of the continuing work of the Advertising Standards Agency, which aims to put the protection of consumers online at the heart of its work over the next five years. The noble Lord, Lord Currie, alluded to this, and there are other self-regulatory initiatives being undertaken by the industry.

As my noble friend Lord Gilbert noted from his committee’s report, the so-called JICWEBS is doing valuable work to improve the measurability of online advertising to help combat advertising fraud and misplacement. The noble Lord, Lord Bilimoria, also spoke about that point. I would like to say more about this area but, before I do, I note the comment made by the right reverend Prelate the Bishop of Durham about the comments of his son. A possible riposte is that he is perhaps feeding him fake news about his inability to grasp technology, but maybe we should put that to one side.

The noble Lords, Lord Vaux and Lord Bilimoria, raised concerns about fake news and reviews. I agree this is important, and we need to drill down on this area and look at it carefully. The Government are concerned about deliberate attempts to mislead UK audiences and manipulate political debate, including through advertising. We take this issue seriously. Whether through the online harms White Paper or the forthcoming Cabinet Office response to the Protecting the Debate: Intimidation, Influence and Information consultation, we are taking action to address this and there is much work to be done.

My noble friend Lord Gilbert asked what the Government would do to combat ad fraud. As I said earlier, the Government recognise the harm caused by advertisement fraud and misplacement, both to consumers and to an industry concerned by declining public trust in its work. Through our review, there could be scope to work with the ASA and the rest of the industry to better understand and address such challenges.

In response to the question asked by the noble Lord, Lord McNally, about the Government’s attitude to self-regulation of online advertising, I can say that our review will look at whether the current regulatory regime is equipped to tackle the unique challenges of online advertising. As he alluded to, proportionality is critical. We are very much alive to the need to ensure coherence between the different players in this space.

The noble Baroness, Lady Kidron, raised the question of putting children first, her speech focusing mainly on that area. I strongly agree with her that advertising needs particular attention. The ASA is already active in this field, in applying rules limiting children’s exposure to harmful or inappropriate products and governing the techniques used to advertise to children. I welcome the Information Commissioner’s consultation on an age-appropriate design code. We will of course have in mind the protection of all consumers, including children, during our online advertising review.

Let me touch briefly on the Competition and Markets Authority. As my noble friend Lord Gilbert and the noble Lords, Lord Currie and Lord Bilimoria, noted, there has been a veritable chorus of calls for the CMA to lead a market study on the digital advertising market. We are conducting a statutory review which will fulfil the requirement to review certain aspects of competition law by April 2019—that is, this month—as set out in the government response to this report. The Government are also reviewing the UK’s competition tools in the context of digital markets to make sure that the powers are effective in responding to current and emerging challenges, and we will consult on these matters in due course. The noble Lord, Lord Tyrie, who I do not believe is in his place, has written to the Secretary of State proposing changes to the competition regime. The noble Lord, Lord Bilimoria, asked when the Government would respond. We will consult on the proposals in the letter from the noble Lord, Lord Tyrie, and respond in due course.

In response to concerns about the CMA’s capacity to conduct such a review, it is important to note that the UK has always been a world leader on competition. We have a well-established competition regime and an independent enforcement authority that is regarded as one of the most effective globally, and we are confident in its readiness for EU exit. The Government have carried out a statutory review of certain aspects of competition law. This will complement work reviewing the UK’s competition tools in the context of digital markets. I take note, as will, I am sure, the noble Lord, Lord Tyrie, and the CMA, of the comments made by the noble Lords, Lord Gordon and Lord Bilimoria, about the actions that the CMA might wish to take.

All this activity takes place in the context of the second key feature of the landscape explored in the committee’s report: the UK’s departure from the European Union and the impact that this and other developments may have on the advertising sector’s workforce—I was quite surprised there was not too much focus on Brexit in the debate; perhaps it was something to do with the Easter holiday. Around 12% of employees working in the UK advertising industry were born outside the UK. Not surprisingly, our departure from the EU has given rise to concerns.

I want to be clear that the Government recognise that advertising is a people-based business which benefits from the most creative minds. Ensuring access to talent is critical to our competitive advantage. EU citizens currently working in advertising in the UK can stay. The EU settlement scheme is intended to be quick, easy to use and free. The scheme opened fully at the end of March and is, I understand, working smoothly. Our immigration White Paper, which the right reverent Prelate the Bishop of Durham alluded to, set out our vision for the future immigration system: a single, skills-based immigration system which will allow businesses to bring in the best talent from anywhere in the world. We are currently undertaking a year-long process of engagement with a wide range of stakeholders, including the creative sector, before finalising the detail.

Equally important is our ability to nurture domestic talent to give young people here in the UK the best opportunities. That is why we are carrying out the greatest reform to our technical and post-16 education system since A-levels were introduced 70 years ago; namely, T-levels. We are committed to ensuring that our children receive a broad and balanced education which takes into account the skills needed for the future economy.

The noble Lord, Lord McNally, raised some interesting points about the import of artificial intelligence. My brief tells me that, although it is never certain, up to 35% of jobs may disappear in the coming years as a result of AI. That is why we have introduced the national retraining scheme, with funding of £100 million, to look at how we can address this. As the noble Lord will know, this was never done in the 1980s, when there was enormous change. I hope that the so-called Titans from the 18th century to which he referred, Fox and Pitt, will be spinning in their graves knowing that we will be much better prepared this time.

The best schools in the country combine a high-quality cultural and digital education with excellence in core academic subjects. I assure noble Lords, particularly the noble Lord, Lord Bilimoria, that our students will continue to have access to all.

My noble friend Lord Gilbert mentioned apprenticeships standards. On developing these, employers in the creative and design and digital routes are firmly in the driving seat. Forty-one have now been approved for delivery in these sectors, including, for example, one for advertising and media executives. However, I hope that the Chamber will agree that the sector is more of a challenge, as it is more broadly based and varied, so we need to do more to redress the shortfalls. I saw earlier that the noble Baroness, Lady McIntosh, was in her place. If she were here, I think that she would be nodding at this.

We are also supporting the creative industries sector’s new creative careers programme, mentioned by the noble Lord, Lord Gordon. Our aim is to ensure that, by 2020, some 2 million young people will have better information about the range of careers on offer, opening up the creative industries far beyond their traditional sources of labour. Encouraging diversity and inclusion in this way is critical to making more of our domestic talent. We are committed to working with the business community to help our workforce thrive; for example, by supporting ambitious targets for gender and ethnicity in boardroom representation in the coming years.

But inclusion cannot stop there. We agree with the committee that encouraging social mobility is critical, which is why, in the service of that goal, we are working to stop illegal unpaid internships. I welcome the committee’s recognition that informal recruitment practices remain a problem for the advertising sector. Parts of the sector are showing leadership on this, but I share the view that it needs to do more. The law is clear that anyone performing work for an employer must be paid. HMRC has written to almost 13,000 employers in industries which often offer internships to draw their attention to the national minimum wage rules and help them to comply. We feel that the balance is right between bringing in legislation and using the “nudge effect” to make sure that employers uphold their responsibilities.

On a separate point, I know that the noble Lord, Lord Bilimoria, raised a question about Cambridge Analytica. The best thing to do is for me to write to him with some details on that somewhat complex area. I will do so and put a letter in the Library as well.

The UK advertising industry should be a source of great pride. Alongside the United States, we remain an advertising global superpower, a by-product perhaps of our diversity, tolerance and boundless capacity for creative enterprise. From Cadbury’s drumming gorilla to Sony’s colourful bouncing balls, we produce creative work with global impact. From Dove’s 15-year “Campaign for Real Beauty” to Channel 4’s “Superhumans” adverts for the 2012 and 2016 Paralympics, we produce work that drives social change. This is why the Government will help this industry to thrive through an unprecedented period of change.

Once again, I commend my noble friend Lord Gilbert and the committee for this report, which will help set the terms of the debate for the future of this vital sector.