Advertising Standards Authority

Lord Stevenson of Balmacara Excerpts

Thursday 29th October 2015 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, it has been a very good debate and we all owe a debt of gratitude to the noble Baroness, Lady Deech, for allowing us to expand on the issues that she has raised here. There is tremendous expertise around the Chamber. Who would have thought that we had a gold medallist in complaining sitting in our very midst? How wonderful to hear that. It is good to see the noble Lord, Lord Smith, in fine form, as combative as ever. He is too often absent from our discussions. I wish he would spend more time here. He must tell us some time what was going on in 1962 that led to the ASA being established. It must have been an interesting time, from all that we have heard tonight.

I did feel a little uncomfortable at times because we seem to be re-hearing a private discussion, one perhaps more restricted to the halls of the ASA, and it will be difficult for us to draw very much from some of the points made here because not all of us were involved in the process. I am sure the Minister will agree with me on that. However, in the interstices of that debate there are a number of points worthy of further reflection.

First, it is interesting, as was picked up by the noble Lord, Lord Smith, that most of the points that were raised for debate about what was happening in the field—apart from the political point raised by the noble Baroness—concerned the question of taste and decency. Of course, this is an area that politicians should keep well away from and we are wrong to even think about discussing it. But it makes the point, which I think was picked up by the noble Lord, Lord Clement-Jones, that whoever does this job has to have good connections to the wider world to understand the way that people are thinking about the issues being used by advertisers. They should be able to design a structure of receiving and dealing with complaints that engenders trust in their judgments. That point is so important that we should hold on to it as this goes forward.

I have no doubt that all the people involved in the current systems run by the ASA are doing their very best to make a good job of it and doing it as well as they can. I do not think that any imputation was being made about that. However, as the noble Lord, Lord Palmer of Childs Hill, asked, “Just because it is going well, does that make it right? Do we have to stick with the model we have or can we think of better ones?”. That is what the debate ought to be about. Can we do this better or fairer? There were, for example, questions about costs: “We are getting this for free, so should we not stay with these arrangements?”. However, other regulators, not least the FCA, raise their own funding. We should not be stuck on a particular model just because it happens to be cheaper than anything else.

Another matter that came out strongly in the debate is that the points raised in the Leveson inquiry seem extremely relevant to this debate. They should not be discarded simply because they do not point in the direction of advertising. The structures that were considered and the arrangements under which decisions would be taken—along with the appeals system, the role of Parliament and the role of other regulatory bodies—were all carefully mapped out by Sir Brian Leveson. There are issues here that would read across into the discussions we are having. For example, surely it is relevant that Leveson does not call for a statutory solution, at least not initially. He calls for the industry to self-regulate, but in a way which is perceived to be independent from and not attached to any interest groups, particularly those which fund the bodies that are currently operating.

Where does that leave us? Simply trying to defend the existing arrangements against any other model that might come up is not really where we want to get to. As the noble Baroness, Lady Deech, said, there are wider issues here about self-regulation, which might be helpful in trying to get to the right decision at a time of reconsideration within the wider community about how regulation operates.

I have a list of points which I suggest the Minister should respond to when he gets to the Dispatch Box. First, can we be absolutely certain that the current arrangements satisfy the EU directive in its full sense? Enough has been said to raise a question for me about whether their particularity is sufficient to do it. I am particularly struck by the points made about access to the courts should there be a problem in resolving disputes. Of course there is an independent adjudicator and judicial review, but I do not think that that is what the EU directive meant. I would be grateful if the Minister could respond on that point.

Secondly, it is not at all clear to me that the consumer interest is as well represented as has been argued in some of the discussions that should be taking place around the ASA. We in this Chamber have tried in a number of debates to find ways of improving the engagement of consumers on, for example, the FCA and the CMA. There is no perfect model, but the existing model, as far as it has been explained to us, is not the right one.

Thirdly, there are all sorts of things happening out there in the real world, as was touched on by a number of speakers, where there is currently no apparent regulatory function—good or bad. I think particularly of things such as the dark web but also of some social media. Are we confident that the existing agencies have the capacity and technical expertise to begin to think about those issues? There is no easy option.

In the modern world, given that most organisations which engage in advertising will be large companies based outside the UK—much the same as those which produce television and film materials; and even if they are in the UK, they will have a small presence here but will largely be run from elsewhere—do we have sufficient sanctions and ability to deal with penalties, should there be a need to do so, in time? The current sanctions are largely persuasive and largely reliant on the ability to shame those affected by the judgments into changing their behaviour. I am not saying we necessarily would wish to do this, but should there be need for financial penalties or custodial sentences, is it right for a body set up by industry to have that responsibility? If that is where we are going, do we not need to think more carefully about the statutory elements that might be involved in that? Ofcom obviously is a possibility, and it may be that that is an area we might want to look at.

[Lord Smith of Finsbury]

Perhaps I may just very briefly point out to the noble Lord that at the ASA we do, if there is a persistent, recalcitrant non-complier, refer them, in the case of a broadcast ad, to Ofcom, and in the case of any other ad, to trading standards. Statutory criminal action can then follow.

[Lord Stevenson of Balmacara]

I am grateful to the noble Lord for pointing that out. I had not picked that up in the voluminous material which has been circulating. I am grateful to him for reminding me about it, but he makes the point that I was always going to make: the ASA’s ability to operate in that way at the moment is largely based on coregulatory activity not a self-regulatory arrangement. That, again, is a complexity. I am not saying it is wrong; I am just saying that we need to tease out what we want from this and make sure that it aligns properly.

I end by referring to ATVOD, which the noble Lord, Lord Clement-Jones, mentioned, because there has been a change here which I think is significant. The coregulatory structure with Ofcom is to change from December 2015. As many noble Lords will be aware, ATVOD used to do coregulation with Ofcom for TV on demand. According to Ofcom, the change which has been put forward is based on the feeling that Ofcom should do this on its own in future,

“in light of the increasing convergence of linear services and on-demand programme services, the Single Digital Market Review in the EU, and the need for a comprehensive solution to the future of content regulation”.

That seemed to be a way into having a further discussion about whether or not it should go further than simply to ATVOD.

This has been a good debate and there are lots of things here to take forward. I do not think we should get stuck on the particularities of the specific issue raised by the noble Baroness, Lady Deech, but I do think that her experience has given her sufficient vigour and interest to take this to another stage. We should respect that and try to give her a good answer.

[The Earl of Courtown (Con)]

My Lords, I, too, thank the noble Baroness, Lady Deech, for securing this debate and for the contributions of all noble Lords. The impact of advertising and its regulation are clearly issues that attract strong interest and feeling from many in the House.

I will look at some background to the industry, as the noble Lord, Lord Clement-Jones, did. The UK’s advertising industry plays a key role in our economy and is a world leader. The sector was worth £10.2 billion in 2013—the second-highest contributor to our economy of any creative industry sector—and has grown by 67% since 2010. The core advertising and marketing sector employed 167,000 people in 2014, and nearly half a million if you include those employed in advertising and marketing jobs in the wider economy.

As well as being important in its own right, advertising plays a crucial role in helping secure the UK’s economic recovery. Without advertising, brands cannot make their mark on the marketplace and consumers cannot make informed purchasing decisions. Advertising helps to stimulate competition, innovation and expansion. Internationally, the UK’s advertising industry has a tremendously strong reputation—a disproportionately large number of global iconic advertising and marketing campaigns has involved UK creative talent, either in ad agencies themselves or in supporting sectors, for example film, music and graphic design. We have the most awarded ad agencies in the world as a proportion of GDP, exporting £2 billion a year in agency services, and London is an undisputed international advertising hub.

Nobody is arguing that this industry should not be regulated. The question is what form of regulation would be most appropriate and effective.

As a matter of principle, this Government prefer effective self-regulation over statutory regulation. We support the system of co-regulation and self-regulation for broadcast and non-broadcast advertising enforced by the Advertising Standards Authority. We believe that this regulatory system has worked well for both customers and advertisers, and we support the previous Government’s assessment, mentioned by the noble Lord, Lord Clement-Jones, in the 2013 policy paper Connectivity, Content and Consumers: Britain’s Digital Platform for Growth, that it is an exemplar of successful self-regulation.

The ASA provides an easy one-stop shop for both public and advertisers, and allows for flexibility to take on additional responsibilities, such as online advertising, relatively speedily in the light of technological changes compared with a statutory regulatory regime. The system is free to the taxpayer and is a cost-effective way to resolve grievances. It allows for harmonious decision-making for cross-media adjudication decisions and promotes corporate social responsibility by ensuring that industry has a strong stake in maintaining an effective, robust system to ensure a high level of consumer trust in its products.

A very good example of what self-regulation can do that the Government cannot is Clearcast. This is a commercial service which checks whether broadcasting ads are in breach of the BCAP Code before they are aired. It is used by Channel 4, Channel 5 and Sky, to name but a few. Some commercial broadcasters have made it mandatory for ads to undergo a Clearcast check—something that would be regarded as censorship if it came from the Government.

The noble Baroness, Lady Deech, and the noble Lord, Lord Palmer, mentioned the independence from industry of the ASA. As the noble Lord, Lord Smith, mentioned, the ASA council is the independent jury that decides whether ads have breached the advertising codes. The ASA chair is appointed by the chair of ASBOF for a renewable four-year term, but the post holder must be independent of the advertising and media industries. Two-thirds of council members on each panel are independent of the advertising and media industries, and members are appointed through an open recruitment process, with all positions advertised. Following a review of the appointments process, the chairman will in future appoint an independent person to participate in the recruitment of all council members.

The noble Baroness drew a comparison with the press regulator, which was also mentioned by the noble Lord, Lord Stevenson. The Government want the press to comply with the reforms recommended by Leveson and enshrined in the royal charter, and want to see a self-regulatory regime that is tough, independent, fully subscribed and commands confidence. The noble Baroness also mentioned ads likely to cause extreme offence. The ASA has a number of options enabling it to act quickly where there is risk of great harm or offence. In extreme cases, it has the power to order advertisers to remove ads from publication immediately on receipt of complaint and before investigation. Where it may not be necessary to use that extreme sanction, but where there is a need to rule quickly, the ASA’s procedures allow for timescales to be shortened according to need. The noble Baroness also mentioned various examples, including those of pornographic pictures. She questioned the decisions of the independent self-regulator. It is not for the Government to comment on decisions taken.

The noble Lord, Lord Palmer, raised the subject of funding. The ASA is funded by levies on advertising spend, but this is collected at arm’s length by both the Advertising Standards Board of Finance and the Broadcast Advertising Standards Board of Finance. This maintains the system of independence, ensuring that decisions are not influenced by those who may or may not be funding the system, while ensuring proper funding.

The noble Lord, Lord Stevenson, and the noble Baroness, Lady Deech, also mentioned the EU directive. The EU directive concerns misleading and comparative advertising. In the United Kingdom, this EU law is implemented through business and consumer protection regulations, enforced by trading standards. The CAP and BCAP codes administered by the ASA reflect the regulations as far as they apply to advertising covered by the codes, and the ASA has an agreement with trading standards that it will in most circumstances act in the first instance in alleged cases of misleading advertising. Judicial reviews of ASA rulings have repeatedly endorsed the ASA’s authority and processes in the area of misleading advertising.

The noble Lord, Lord Clement-Jones, mentioned consistency, which was also of concern to the noble Lord, Lord Palmer of Childs Hill. The noble Lord, Lord Clement-Jones, appeared to say that he felt that there was consistency in the decisions of the ASA.

The noble Lord, Lord Stevenson, also talked about consumer satisfaction. The ASA carries out a customer satisfaction survey. Latest data show customer satisfaction with complaint-handling at over 70%, despite the ASA upholding only a minority of complaints received. That figure compares very favourably with other government and industry regulators’ handling of complaints.

[Lord Stevenson of Balmacara]

I was not exactly commenting on that, although others did and it is useful to have that figure repeated. I said that the matters that cause the most difficulty for the ASA are taste and decency, and to some extent those that are political. That requires there to be good and enduring relationships with consumer engagement, which I do not see but may be there. It was that point I was probing.

[The Earl of Courtown]

I am glad that the noble Lord was able to clarify that. As with any regulatory regime, there is always room for improvement, and the ASA would welcome suggestions on how its procedures might be improved. I will also ensure that I bring the department’s attention to this debate and all that was said by noble Lords. Nevertheless, the Government believe that overall the ASA is an effective regulator.