shape the

agenda
Legal & Ethical Issues
in Marketing

The Chartered
A Cambridge Institute of Marketing
Marketing College
Alumni Reprint www.shapetheagenda.com
Introduction
Marketers today face an increasingly complex task – with global markets, new
technology and better informed customers. They also face an increasingly complex
array of legislation, regulations and codes of practice which they are expected to
follow – ignorance is no defence. The questions of ethical marketing, self-regulation
and statutory control are not new but as more and more restrictive legislation comes
into force each year they have become topical issues for debate within the profession.

Recently both the Chartered Institute of Marketing and Cambridge Marketing Colleges
published papers looking at these issues – one suggesting the need for a new role in
some organisations - The Marketing Compliance Officer – the other seeking to provide
a practical guide to the key legislation and codes of practice. These two papers are
published together here for the first time as a Cambridge Marketing College Alumni
Reprint. We hope you will find it useful.

Charles W Nixon, Chairman

Cambridge Marketing Colleges

St Johns Innovation Centre
Cowley Road, Cambridge, CB4 0WS
Tel: 01223 421903
Fax: 01223 421767
email: info@marketingcollege.com
 1

Legal & Ethical

Issues in Marketing

Legal & Ethical Issues in Marketing A resource for Marketers

Researched & Written by Ryan Storey

Contents page
Introduction 2
Background to the Regulation of Marketing 3
The Institutions, Bodies and Associations 4
The Data Protection Act 6
Marketing Financial Products & Services 8
Marketing Food & Drink Products 10
Marketing in Europe 13
Other Legal Areas of Note 14
Summary 15
References 17
Bibliography 17
Appendix 1 - The CAP Codes of Conduct Summaries 21
Appendix 2 - The DMA Code of Practice Summary 23
Appendix 3 - The PRCA Code of Conduct Summary 23
Appendix 4 - Data Protection Principles Summary 24
Appendix 5 – Solicitors Specialising in Marketing Law 25
Figures
Figure 1 – Hierarchy Representing Institutions, Bodies & Associations 5
Figure 2 – Data Protection Legislation 6

“Everyone has the right to freedom of expression. This right shall include freedom to hold
opinions and to receive and impart information and ideas without interference by public
authority and regardless of frontiers. The exercise of these freedoms…may be subject to
such formalities, conditions, restrictions or penalties as are prescribed by law and are
necessary in a democratic society…” Human Rights Act 1998 1

No marketer is an Island: Marketing and the Law

Contents
What is Hot Marketing 26
ONE Keeping Up Appearances 27
TWO Raising the Bar 29
THREE Seek – Locate – Legislate 31
FOUR Abide with Me 31
FIVE Who Governs the Governors 33
SIX From Red Tape to Blue Skies 36
2

Legal and Ethical Issues in Marketing

A Resource for Marketing
Introduction
Purpose:
The purpose of this report is to summarise some of the key legislation and codes of
practice for marketing, advertising and promotion. There are only a limited number of
texts which focus primarily on areas of law applicable to marketing and many of these
are out of date. Yet marketers face an increasingly complex set of laws and codes of
practice governing their work. The aim of this report is to provide an up-to-date guide
summarising key points and providing links to more detailed sources. It is not
intended to be exhaustive and does not constitute legal advice. In all cases
professional legal advice should be sought, in order to ensure compliance with the
law. The legal domain is a proverbial minefield with convoluted case law acting as a
further hindrance to clarity.

Research Methodology:
All information contained in this report is from secondary sources, structured around
existing text sources in order to provide a guide to wider reading. A large majority of the
texts constituted codes of practice and self-regulatory rules, provided by the various
associations and institutions which oversee the marketing and advertising industry.
These are then substantiated by a number of legislative acts in order to adequately
clarify the particular clauses which related specifically to the area of marketing.

Content:
The report is organised in order to concentrate on the following topics, which during
research, presented themselves as the most fundamental legal areas in terms of
marketing, advertising and promotion:

• Data Protection
• Financial Products & Services
• Food & Drink Products
• Legal Inconsistencies in Europe
The report also includes a final section covering other issues that are important, yet not
extensive enough to warrant their own specific section, such as Trade Mark law, and
the recent developments relating to sales promotion using coupons, vouchers or
tokens.
 3

Legal & Ethical

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Background to the Regulation of Marketing

The current marketing regulatory environment revolves around the concept and
process of self-regulation. Industry self-regulation generally involves the creation of an
independent body accompanied by a code of conduct, which outlines best and
accepted practice. The representative codes for each area of industry are developed
to ensure that the communications within the body’s jurisdiction are legal, decent,
honest and true, and reside to the best of their knowledge, within the law. However all
codes of conduct state that “…compliance with the Code does not necessarily
guarantee they are acting within the law…”2 as highlighted by the Committee of
Advertising Practice (CAP) Code of Conduct.

Although the code and self-regulation is not seen to represent all of the numerous
intricacies of the relevant legislation, it often removes the need to rely on such
statutory control and therefore further legal action. The process of updating and
amending existing legislation is particularly slow due to the bureaucratic processes
through which amendments must pass in order to be verified and agreed by the
parties concerned. This is an area where self-regulation is seen to have a greater and
more valuable application. The speed at which technology and the marketplace in
general are progressing further accentuates the need for rules and regulations that
can be easily and quickly updated to reflect the risk to the consumer. Self-regulation
can supplement and close loopholes in existing legislation.

Self-regulation is, as a result recognised as a feasible alternative to statutory control

by both the Department of Trade and Industry and the Office of Fair Trading, and also
various EC Directives (84/450 and 97/55 EC). The use of self-regulation helps to
create trusted communications of quality and integrity, due to general industry
compliance without any further need for legal instigation.

The marketing and advertising industry has used self-regulation since the 1880s, initially
within the poster industry, although the first code of advertising was not created until
1925 by the Association of Publicity Clubs. The following year saw the establishment of
the Advertising Association who operated an advertising investigation department in
order to “investigate abuses in advertising and to take remedial action” 2.

The main influence behind the systems of self-regulation and the benchmark for the
current codes of practice can be traced back to the International Chamber of
Commerce’s code of advertising practice, which was published in 1937. However the
direct descendent of today’s regulatory system did not come into existence until 1961
4

when the Committee of Advertising Practice was founded, consolidating the first
British Code of Advertising Practice. The first incarnation of the code covered all non-
broadcast advertising and was administered by the Advertising Standards Authority,
when it was established in 1962.

A significant improvement to the funding procedure for self-regulation was initiated in

1974 as a direct result of the formation of the Advertising Standards Board of Finance.
The board worked to initiate an automatic levy of 0.1% on all display advertising,
thereby raising the funding for the self-regulatory system.

Due to the success of the CAP Code of Conduct, a Code of Sales Promotion was
later introduced in 1974, in order to expand the coverage of the codes to include
promotional marketing. The growth of the British self-regulatory system has been
bolstered year on year, fuelled by support from the 1984 European Directive on
Misleading Advertising, naming the ASA as the principal regulator for misleading
advertising in non-broadcast media, as well as statutory reinforcement through the
Office of Fair Trading (OFT).

As a result self-regulation remains the most convenient and effective means by which
to regulate the marketing and advertising industry. It continues to advocate today its
original underlying purpose “…to maintain, in the best and most flexible way possible,
the integrity of marketing communications in the interests of both the consumer and
the trade.” 2

The Institutions, Bodies and Associations

The existence of a multitude of varied communication channels between organisations
and the consumer has resulted in the evolution of a great number of regulatory
bodies, institutions and general pressure groups that work to protect the consumer
and ensure that all communications are ‘legal, decent, honest and true.’

As illustrated in the previous section, British, European and International

governments, support the self-regulation of the advertising and communications
industry. The Communications Act 2003 instigated Ofcom as the UK regulator of
communications activities, while also recognising the ASA (Advertising Standards
Agency) as the UK’s independent body responsible for handling and resolving
complaints regarding broadcast and non-broadcast advertising, as laid down by the
existing CAP Codes of Conduct (See Appendix 1).

Supplementary to the main bodies of interest within the communications regulation

 5

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sphere, are many smaller specifically focussed associations that either cover areas
which are not covered in the more general codes to the degree required by the
related industry, or act as an assisting body to the larger institutions and associations.
For example bodies such as the FSA (Financial Services Authority), the MCA
(Medicines Control Agency), the Portman Group (Alcoholic beverage advertising), the
PRCA (Public Relations Consultants Association) and the DMA (Direct Mail
Association) each issue their own Codes of Conduct which act to provide additional
protection over and above the general rules outlined in the CAP Codes of Conduct.
Bodies such as the BACC (Broadcast Advertising Clearance Centre), and the RACC
(Radio Advertising Clearance Centre) provide assistance to the ASA in vetting all
broadcast communications before release to the public, helping to ensure all
communications comply with the relevant CAP Codes of Conduct. Additionally, the
advertising regulations community is crowded with various pressure groups and
institutions that lobby for the ‘freedom to advertise’ and seek to advocate ‘best
practice’ throughout the industry, increasing the legitimacy and trust associated with
communications.

Ofcom
Governmental

0.1% Levy
FSA ASA BASBOF

BACC RACC
Regulatory

Portman Group FSA CAP DMA MCA PRCA

Codes of Conduct/Best Practice

SMART ASH ISP ISBA

Best Practice/Pressure Groups

Figure 1 Hierarchy Representing Institutions, Bodies & Associations

The codes of conduct produced by the main associations can be found in

appendices 1-4. Above, figure 1 illustrates the hierarchical layout of each of these
associations depending upon their significance, scope and influence within the
communications discipline.
6

The Data Protection Act

The Data Protection Act 1998, and the restrictions it imposes, is of key significance
especially for direct marketers who rely on contact information in all lines of business.
The Data Protection Act itself, as amended from the previous 1986 Act must now be
read in conjunction with other legislation in order to reside within the law. Figure 2
illustrates the Act’s connection with such legislation.

EU Data Protection
Directive (95/94/EC)
Human Rights Information
Act 1998 Commissioner

Freedom of Data Protection

Information Act 1998 Ofcom
Act 2000

Investigatory Consumer Protection

Powers Act 2000 (Distance Selling) Regulations

Legislation

Marketer

Compliance

Data

Disclosure

Individual

Figure 2 Data Protection Legislation3 (Adapted from Kolah3 Figure 7.1)

In general terms the Data Protection Act requires the marketer to notify the
Information Commissioner of its intention to process personal data, subject to a yearly
notification fee. Exemptions of notification are available for select cases, for example
for some ‘not for profit’ organisations, for holding membership details for fundraising
and charitable donation purposes, and when the data is used solely for the
advertising, marketing and public relations activities of an organisation. However, note
must be taken that when data is used for the advertising, marketing and public
relations of an organisation, this activity must relate to the marketer’s own organisation
 7

Legal & Ethical

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and may not be conducted on behalf of a client’s business activities or result in

passing the information onto a third party. The nature of the complexities of business
and the multitude of data requirements and uses results in a legal ‘grey area’ as to the
eligibility of the organisation for exemption through the Data Protection Act. With this
in mind it is recommended that organisations first consult the self-assessment guide
for exemptions, available from the Information Commissioner’s website, and then seek
further legal advice regarding any ambiguous issues in order to ensure compliance
with the law.

The general principles of the Data Protection Act are well publicised and can be found
through the Information Commission website (www.informationcommissioner.gov.uk),
A summary of the Data Protection principles is included in Appendix 4.

A predominant use of an individual’s data within an organisation falls under the scope
of Direct Marketing. Marketers should be aware that the use of such information is
subject to two clauses in particular. In order for data to be processed fairly and
lawfully, all ‘data subjects’ must be informed of the use of, and the nature of the use
of their information, and in turn given the opportunity to ‘opt-out’, and therefore cease
to receive communications from a particular source. Based upon the amendment by
the Privacy and Electronic (EC Directive) Regulations 2003, all electronic
communications (I.e. telephone, fax, E-Mail or SMS, although postal communications
are not covered) are subject to additional conditions in that the recipient must have
previously consented to receiving such communications via an ‘opt-in’ box.

With this in mind, the use of a simple example helps to illustrate the significance of
these two clauses. Take for example a small business that uses postal addresses in
order to conduct direct marketing campaigns. The use of this postal information is
lawful as long as each communication includes an obvious option for the recipient to
‘opt-out’ from receiving communications in the future. Consider as an extension to
this that the business wishes to collect the telephone contact details for a small
number of these postal contacts in order to check that these recipients wish to
receive a larger mailing and also to collect some further information. This further
communication via telephone would in fact be unlawful if the recipient had not
previously consented to communications of this manner, in the form of the ‘opt-in’
clause.

In addition, marketers should be aware that since the instigation of the Privacy and
Electronic Regulations 2003, a ‘preference service’ for mail, telephone, facsimile and
8

e-mail has been established. These preference services refer to the consumer’s ability
to register their details as a preference not to receive direct marketing
communications via any of these media. Any organisation possessing data on data
subjects must ensure that they make regular checks in updating their databases in
order to remove those subjects who have registered with any one of these services.
The stipulation is that the data subject’s details must be removed within 28 days of
the subject registering their preference.

There are various other services that a data controller should be aware of, when the
data held is intended to be used for marketing purposes. These services mainly
constitute best and efficient business practice, however the use of the Bereavement
Register and/or Mortascreen will ensure compliance with the Data Protection Act
1998. Both the Bereavement Register and Mortascreen provide a list of the recently
deceased in order to ensure that no unnecessary grief is caused for relatives or close
friends of the intended late recipient. As a matter of good and efficient business
practice, the National Suppression File (NSF) and the Business Suppression File (BSF)
provide a list of companies that have moved, ceased trading, or have been renamed,
providing the marketer with up to date contact details, rather than those which may
yield no results.

Marketing Financial Products & Services

The financial services industry has been under considerable pressure of late, particularly
concerning the unfair and often misleading terms and conditions of credit offers and
agreements. Spiralling consumer debt, coupled with a tentative economic position has
driven financial authorities to investigate further legislative measures. Currently no
specific overhaul has been made, but it is only a matter of time.

Due to the nature of the products and services offered, and the possible detrimental
effect upon consumers lives if communications are misleading or unsuited to their
particular requirements, the active legislation and regulations are fairly plain in regards
to conduct. In terms of relevant legislation, the marketing of the financial industry is
regulated by four main statutes:

• Consumer Credit Act 1974

• Consumer Credit (Advertisements) Regulations 1989
• Financial Services & Markets Act 2000
• Financial Services Act 1986.
The CAP Codes of Conduct also include specific areas covering the marketing of
 9

Legal & Ethical

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financial products and services in relation to both non-broadcast and broadcast

media.

The Consumer Credit Act 1974 requires all businesses who intend to lend money, offer
hire purchase terms, credit cards, or sell on credit, to obtain a license in order to do
so. Also, further to the Control on Misleading Advertisements Regulations 1998, the
Credit Act outlines an offence for conveying information or material that could be seen
as false or misleading.

The Consumer Credit (Advertisements) Regulations 1989 illustrates more clearly the
specific requirements and stipulations within advertisements, and provides definitions
and details of the expected content of advertising copy. These regulations do not, by
definition, apply to credit offering between businesses. In general, advertising
concerning consumer credit must:

Ô Be clear and legible;

Ô contain the name, address and telephone number of the marketer offering credit;
Ô contain the logo of the marketer;
Ô clearly show the information about the credit together as a whole;
Ô only indicate ‘interest free’ if the credit price does not exceed the rate of inflation; and
Ô only indicate ‘no deposit’ when no advance payments are required.

The Financial Services and Markets Act 2000 and Financial Services Act 1986, further
develop the notion of misleading advertising in relation to the financial industry,
broadening the offence to include:

Ô Any statement, promise or forecast which they know to be misleading, false or

deceptive;
Ô dishonestly concealed material facts in connection with a statement, promise or forecast
made by the organisation or otherwise; or
Ô a recklessly made statement, promise or forecast, which is misleading, false or
deceptive.

The most recent area of development and discussion within the financial products
industry is that of mortgage regulation, where control has been transferred from the
Mortgage Code Compliance Board (MCCB) to the Financial Services Authority (FSA)
financial promotion and mortgage regulations, implemented August 2004.

The FSA provided firms with a transitional period which expired on the 31st January
2005, allowing them to bring all communications in line with the new regulations. The
10

most obvious example of the changes in regulation is the wealth warning found
accompanying any communication promoting mortgages and loans, “Your home is at
risk if you do not keep up repayments on your mortgage or any other loan secured on
it” 4. This wording has been replaced with the marginally updated statement, “Your
home may be repossessed if you do not keep up repayments on your mortgage.” 4

A recent survey (May 2005) conducted by Mortgages Plc indicated that one in four
advertisements were not compliant with the new regulations, primarily through using
the old wealth warning, rather than the FSA’s updated version.

Marketing Food & Drink Products

In a similar vein to medicinal products, the clear, informative and honest advertising of
food and drink products is imperative, due to the long-term negative effect an
incorrect communication may have on a consumer’s health. For example the omission
of the clear and legible labelling stating that the product, “May contain traces of nuts”
could result in a serious allergic reaction among a certain proportion of potential
consumers. Significant emphasis is placed on avoiding misleading consumers, in
particular, misleading vulnerable groups such as children and the elderly.

The principle control of the advertising of food is formed as a conjunction between

four main statutes, the Trade Descriptions Act 1968, the Food Act 1984, the Food
Labelling Regulations 1996 and the Food Safety Act 1990. Food in the context of this
area of control is defined to include:

Ô drink;
Ô articles and substances of no nutritional value which are used for human consumption;
Ô chewing gum and other products of a like nature and use; and
Ô articles and substances used as ingredients in the preparation of food.
The fundamental underlying offence revolves around advertising food that has been
rendered injurious to health, that is unfit for human consumption, that is contaminated,
or that cannot reasonably expected to be used for human consumption.

As with other specific product market sectors, there exist specific rules on the
production and resulting display of advertising that could be construed as misleading.
The Food Safety Act 1990 outlines misleading advertising in a similar manner to the
Control on Misleading Advertisements Regulations 1998, yet in addition, misleading
advertising in regards to food may also include information that the marketer has
chosen to omit, regardless of the truthful nature of all of the information included.
 11

Legal & Ethical

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A primary concern for marketers working within the food and drinks market is the
lawful labelling and packaging of the product, as this form of communication is likely
to constitute the majority of interaction between the consumer and the organisation.
The legislative publications which govern the labelling of food products are the Food
Labelling 2003/89/EC Legislation, and the Food Labelling (Amendment) Regulations
2004.

The forces of competition and differentiation in the highly competitive food market
have seen the proliferation of informative packaging and label additions by most, if not
all manufacturers of food products. Examples include nutritional information and a
customer care helpline. This additional information is considered voluntary as it is not
covered by any legislation relating to food labelling. However, the Food Standards
Agency (FSA) has devised a Code of Best Practice which outlines the items that
should be included on packaging and labels, and the orientation, presentation and
indication of such information.

One particular aspect of note within the food labelling legislation is the name of the
product. This area has given rise to much discussion, both within the British and
European manufacturing communities, resulting in both British and European
legislation outlining the ability of manufacturing organisations to register the names of
their products as either Protected Designation Origin (PDO), or Protected
Geographical Indication (PGI). A PDO refers to a product name in reference to the
region, area or specific place in which the product is manufactured, where the quality
or characteristics of the product make the product exclusive to that geographical
environment. Examples of PDOs registered in the UK are Cornish Clotted Cream,
Shetland Lamb and Jersey Royal Potatoes. A PGI refers to a product name similar in
definition to a PDO, although goes further to include the reputation of a particular
geographical area. For example, Newcastle Brown Ale, Dorset Blue Cheese and
Gloucestershire Cider are just a few of the PGIs registered in the UK.

The purpose behind both the PDO and PGI legislation is to ensure that a
manufacturer outside the ‘designated origin’ or ‘geographical indication’ does not use
the product name and in doing so, denigrate the perceived quality or customer
preference attributed to the product. With this in mind, a proposed PDO or PGI must
be submitted to the European Council for adjudication. Very few applications are
granted either PDO or PGI status, in order to retain the highly respected qualities of
the small number of products included on the current register.
12

Within the food ad drink sector there is also specific legislation and regulation which
governs the advertising of products which contain an alcoholic component (those with
an alcoholic content of greater than 1.2% volume). The advertising of alcohol is
principally governed by the Alcoholic Liquor Duties Act 1979, the Food Labelling
(Amendment) Regulations 2004, and the Licensing Act 2003. Where this legislation
provides very specific clauses, the relevant advertising codes of conduct outline in
more general terms what is, and what is not acceptable.

Two particular bodies which concentrate upon the regulation of alcohol advertising are
the CAP and the Portman Group through their respective Codes of Conduct. CAP has
recently released revised guidelines for the advertising of alcohol, which came into
force in October 2005 (see Appendix 1). The Portman Group is significantly more
prolific in their campaign against alcohol advertising, as their primary purpose revolves
around the enforcement of responsible alcohol advertising. The Portman Group is
recognised by the government for their contribution to this area, and the 100%
compliance to their Code of Practice which is observed within industry.

Marketing in Europe
When considering business originating within the UK, it would be naïve to analyse
trade in domestic isolation. The instigation of the European Union has unlocked free
trade in an already prolific trade environment. As a member of the European Union,
the UK as with every other member state must adhere to European Legislation.
Governmental powers within each member state will ensure that this legislation is in
action through either domestic legislation, or through the enactment of the European
regulations in their own right. However, many member states implement additional
and subsequent measures, over and above the European legislation in certain areas
of governmental policy. The examples below serve to illustrate the point but any
company marketing internationally should take professional advice in the country
concerned.

For many years Sweden’s ban on advertising to children has incited significant debate
in terms of marketing ethics. The International Chamber of Commerce (ICC) has
included guidelines regarding marketing to children since 1982, with “Advice
Regarding Advertising to Children”. The ICC Code of Conduct reads “Advertisements
should not exploit the inexperience or credulity of children and young people.”5 The
Swedish policy is somewhat more stringent, television adverts are not permitted to be
 13

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broadcast until after 9pm, after which time, particular care must also be taken not to
advertise directly before or after family programming. In addition, marketers must not
use actors, or characters from children’s television programmes. Sweden’s policy is
applicable to all forms of advertising communications, not just television.

Germany on the other hand, places particular emphasis on recycling, as enforced

through governmental policy. There is a requirement for manufacturers to collect,
subsequent to their use, the packaging for their products. They are required to
redeem up to 70% in weight of the packaging materials used for their products,
resulting in the eventual recycling of such material. Businesses in the UK which export
to Germany need to be aware of this requirement. The cost implications of
establishing a system within Germany in order to adhere with this regulation may be
detrimental to the point at which export could cease to be profitable. In response to
this regulation a not-for-profit organisation, Duales System Deutschland (DSD) assists
businesses both internally and externally using a system of license fees which permit
the use of the ‘Green Dot’ on the products packaging. The DSD will then collect this
packaging material and recycle it on the business’ behalf. The cost of this process is
variable based upon the materials used, for example, plastic is the most expensive
material license fee costing about £1 per kg. The license scheme offers percentage
reductions in the license fee, in response to the use of environmentally friendly
materials, and ultimately the specific combinations of materials used.

A particular topic which has received much attention in the UK and Europe,
culminating in the ban of advertising in all sponsorship including international sports
sponsorship as of July 2005, is that of tobacco related products. France has for many
years enforced a complete ban on the advertisement of tobacco and tobacco related
products, whether directly or indirectly, alongside a small number of other European
members. The UK has been slightly slower ‘off the mark’ with the creation of the
Tobacco Advertising and Promotion Act 2002, which came into effect in February
2003, with a period of phasing out for sponsorship which ended mid 2005. As other
European members have legislation pending, tobacco advertising seems to be
nearing extinction.
14

Other Legal Areas of Note

It is not possible to cover all of the areas of law that affect marketing within the
bounds of this report but three of note are the Trading Stamps Act 1964 Trademark
law and the International Financial Reporting Standards 2005.

The Trading Stamps Act 1964 is worthy of note here, as the act itself was repealed by
parliament on 6th April 2005. A ‘Trading Stamp’ in regards to the act is defined as “a
stamp which is, or is intended to be delivered to any person upon, or in connection with
a purchase by that person of any goods, and is, or is intended to be redeemable by that
or some other person.”6 The Act therefore refers to any sales promotion which involves
the issuing of vouchers, coupons, tokens, or material of a similar nature. Due to the
repeal of the act, sales promotions involving ‘trading stamps’, according to the definition
provided above, will now be governed by general consumer protection legislation, such
as the Supply of Goods and Services Act 1982 and the Sale of Goods Act 1979. As a
result, coupons, tokens and vouchers no longer need to display a nominal value or offer
cash redemption facilities.

For any business, trademark law is a very important area, especially in terms of
marketing, as it forms a basis for the consumer to distinguish one product or
company from another. The relevant legislation relating to trademarks is the
Trademarks Act 1994, the act defines a trademark as:

“Any sign capable of being represented graphically which is capable of

distinguishing goods or services of one undertaking from those of other
undertakings. A trademark may, in particular, consist of words (including personal
names), designs, letters, numerals, or the shape of goods or their services.” 7

The specific decisions that have been passed in terms of registering trademarks have
produced a vast quantity of intricate case law, and this therefore presents an area of
law which is best navigated by a legal professional. There are various exceptions
within trademark law that marketers should be aware of, words which are used to
describe a certain aspect of the product or service, such as descriptions of the
quality, purpose, price, geographical origin or time of service, which may not be
restricted so as to protect the public interest.

It is also important to mention the Trading Standards Office, as it relates specifically to

all of the legislation discussed in this report. The Trading Standards Office, a
government department acts in the interest of consumers, ensuring that they are
 15

Legal & Ethical

Issues in Marketing

adequately protected from unfair business conduct. This is facilitated through the
enforcement of the existing consumer legislation. It is an offence to hinder a Trading
Standards Officer in an investigation in support of the enforcement of legislation.

The International Financial Reporting Standards came into force last year. The new
IFRS rules mean that companies have to value their intangible assets on their balance
sheets when they are acquired. Placing a clearly specified value on intangible assets
such as brands will have a number of benefits for marketers and the business within
which they operate:

• The value of investment in marketing can be more clearly understood

and measured as brands become more financially visible
• Assigning a value to brands allows management to be evaluated more effectively
• The share price of a company will reflect the true value of its brands,
which can have the effect of increasing the worth of the company
• Knowing the value of brands can help companies to generate positive
PR, which can in turn boost share prices
• The process of valuing a brand can lead to useful insight into areas such
as its position relative to the competition, its strengths and weaknesses, and consumer
opinion
• Marketing will more readily be recognised as central to corporate decision making

Summary
This report has looked at some of the key legislation and codes of practice affecting
marketing. It provides an overview and summary of their intent.
The following provides a list of the codes and legislation that has been covered. Links
for the Institutions and Codes of Conduct are given below.
Further information on the legislation and EU Directive is available on www.opsi.gov.uk

Institutions and Codes of Conduct

Committee of Advertising Practice (CAP) Code of Conduct: www.cap.org.uk
Financial Services Authority (FSA) www.fsa.gov.uk
Portman Group www.portmangroup.org.uk
Public Relations Consultants Association (PRCA) www.prca.org.uk
Direct Mail Association (DMA) www.dma.org.uk
16

Financial Products and Services

Consumer Credit Act 1974
Consumer Credit (Advertisements) Regulations 1989
Financial services & Markets Act 2000
Financial Services Act 1986
FSA Financial Promotion and Mortgage Regulations 2004

Food and Drink Products

Trade Descriptions Act 1968
Food Act 1984
Food Labelling Regulations 1996
Food Labelling (Amendment) Regulations 2004
Food Safety Act 1990
Food Labelling 2003/89/EC Legislation
PDO Legislation
PGI Legislation
Alcoholic Liquor Duties Act 1979
Licensing Act 2003
Tobacco Advertising and Promotion Act 2002

Other Legislation and EC Directives

European Directive on Misleading Advertising 1984
The Communications Act 2003
Data Protection Act 1998
Privacy and Electronic Regulations 2003 (EC Directive)
Supply of Goods and Services Act 1982
Sale of Goods Act 1979
Trademarks Act 1994
International Financial Reporting Standards 2005
 17

Bibliography

References
1 Human Rights Act 1998. Article 10.
2 Committee of Advertising Practice (2003) The CAP Code – The British Code of Advertising,
Sales Promotion and Direct Marketing. 11th ed. London, Committee of Advertising Practice.
p. 3.
3 Kolah, A. (2002) Essential Law for Marketers. Oxford, Butterworth-Heinemann. p.136.
4 Financial Services Authority (2005) Financial Services Authority Handbook [Internet].
London, FSA.
Available from: <http://fsahandbook.info/FSA/handbook.jsp?null> [Accessed August
2005]
5 ICC Commission on Marketing, Advertising & Distribution (1997) Code of Advertising
Practice. Paris, ICC. Article 14a.
6 The Trading Stamps Act 1964
7 Trade Marks Act 1994. Part I, 1(1).

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18

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 19

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20

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<http://www.esomar.org>
 21

Appendix 1

Appendix 1 - The CAP Codes of Conduct Summaries

All communications must be:

Ô Legal
Marketing communications should comply with the law and should not incite anyone to
break it.
Ô Decent
Marketing communications should contain nothing that is likely to cause serious or
widespread offence. Particular care should be taken when concerning issues of race,
religion, sex, sexual orientation or disability.
Ô Honest
Marketers should not exploit the credulity, lack of knowledge or inexperience of
consumers.
Ô True
No marketing communication should mislead, or be likely to mislead, by inaccuracy,
ambiguity, exaggeration, omission or otherwise.

The Non-Broadcast CAP Code of Conduct Summary:

• All marketing communications should be prepared with a sense of responsibility to
consumers and to society
• All marketing communications should respect the principles of fair competition generally
accepted in business
• No marketing communication should bring advertising into disrepute
• Marketing communications must conform with the code. Primary responsibility for
observing the code falls on marketers
• Any unreasonable delay in responding to the ASA’s enquiries may be considered a
breach of the code
• The code is applied in the spirit as well as in the letter.

The Broadcast CAP Code of Conduct for Radio Summary:

• Advertising must be clearly distinguishable from programming
• All advertisements must not mislead the audience, and thus must comply with the
requirements of the Control of Misleading Advertising (Amendment) Regulations 2000
• Particular care must be taken with superlative claims, where such claims must be placed
alongside the proven factual evidence for such a claim
• Sound factual evidence must be supplied to support all environmental claims
• Advertisements must not attack or discredit other products or services, people,
advertisers or advertisements either directly or by implication.
• Advertisements must not harm listeners nor exploit, either personally or financially, their
vulnerability.
22

The Broadcast CAP Code of Conduct for Television Summary:

• There must be a clear distinction between programmes and advertisements
• Broadcasters must retain editorial independence and responsibility for the content and
scheduling of programmes
• No advertisement may directly or by implication mislead about any material fact or
characteristic of a product or service
• Advertisements must not cause serious or widespread offence against generally
accepted moral, social or cultural standards, or offend against public feeling

The CAP Alcohol Advertising Code of Practice :

• Alcoholic drinks are those that contain more than 1.2% alcohol by volume
• Marketing must not incite or encourage people to adopt styles of drinking that are
unwise
• Marketing communications should not suggest that drinking can overcome boredom,
loneliness or other problems.
• Marketing communications should not be directed at people under 18 through the
selection of media, style of presentation, content or context in which they appear.
• People seen drinking or playing a significant role should neither be nor look under 25
years of age, and should not be shown behaving in an adolescent or juvenile manner.
• Marketing communications should not feature or portray real or fictitious characters that
are likely to appeal particularly to people under 18 in a way that might encourage them
to drink.
• Marketing communications should not suggest that any alcoholic drink has therapeutic
qualities or can change moods or enhance confidence, mental or physical capabilities,
popularity or sporting achievements.
• Marketing communications must neither link alcohol with seduction, sexual activity or
success nor imply that alcohol can enhance attractiveness, masculinity or femininity.
• Marketing communications must not suggest that a drink may be preferred because of
its high alcohol content or intoxicating effect.
• Marketing communications should not suggest that drinking alcohol is a reason for
success of any personal relationship or social event.
• Drinking should not be portrayed as a challenge, especially to the young.
• Marketing communications should not depict activities or locations in which drinking
alcohol would be unwise or unsafe.
• Particular care should be taken to ensure that marketing communications for sales
promotions requiring multiple purchases do not encourage excessive consumption.
 23

Appendix 2 and 3

Appendix 2 - The DMA Code of Practice Summary

• Commercial communications must be clearly recognisable as marketing communications
• No commercial communication should bring direct marketing into disrepute
• No commercial communications should be likely to cause fear or distress to the recipient
without good reason
• Any claim made by a member regarding their products or services must be readily
substantiated with documentary evidence
• Members using formats which might be taken to have intrinsic value, such as cheques or
airline tickets, must make clear that such formats are examples only.

Appendix 3 - The PRCA Code of Conduct Summary

• A member has the responsibility at all times to deal fairly and honestly with all those
connected directly and indirectly with their day-today business operations, and most
importantly, the public.
• A member has the duty to conform to good practice as expressed in such guidance or
practice papers provided by the PRCA, remaining up-to-date with the contents and
guidance contained therein.
• A member firm shall not knowingly cause or permit a member of its staff to act in a
manner inconsistent with this code. Any member of staff of a member company, who
acts in a manner inconsistent with this code, must be disciplined by the employer.
• A member firm shall not engage in any practice, nor be seen to conduct itself in any
manner detrimental to the reputation of the Association or the reputation and interests of
the public relations profession.

Conduct towards the Public, the Media and other Professionals:

• A member shall conduct its professional activities with proper regard to the public
interest.
• A member shall have a positive duty at all times to respect the truth and shall not
disseminate false or misleading information knowingly or recklessly, and to use proper
care to avoid doing so inadvertently.
• A member shall when working in association with other professionals, identify and
respect the codes of these professions and shall not knowingly be party to any breach of
such codes.
• A member shall honour confidences received or given in the course of professional
activity.
24

Appendix 4 and 5

Conduct towards Clients:

• A member shall safeguard the confidences of both present and former clients.
• A member shall inform a client of any shareholding or financial interest held by that firm,
or any member of that firm in any company, form or person whose service it
recommends.
• A member shall not misuse information regarding its clients business for financial or other
gain.
• A member shall not represent conflicting or competing interests without the express
consent of the clients concerned.
• A member shall not guarantee the achievement of results which are beyond the
member’s direct capacity to achieve or prevent.

Conduct towards colleagues:

• A member shall adhere to the highest standards of accuracy and truth, avoiding
extravagant claims or unfair comparisons, and giving credit for ideas and words
borrowed from others.
• A member shall not injure the professional reputation or practice of another member.

Discriminatory conduct:
• A member is required to take all reasonable care that professional duties are conducted
without causing offence on the grounds of gender, race, religion, disability or any other
form of discrimination or unacceptable reference.

Appendix 4 - Data Protection Principles Summary

• Personal data shall be processed fairly and lawfully
• Personal data shall be obtained only for one or more specified lawful purposes
• Personal data shall be accurate, relevant and not excessive in relation to the purpose or
purposes for which they are processed
• Personal data shall be accurate and, where necessary, kept up to date
• Personal data processed for any purpose or purposes shall not be kept for longer than is
necessary for that purpose, or those purposes
• Personal data shall be processed in accordance with the rights of data subjects under
this act
• Appropriate technical and organisational measures shall be taken against unauthorised
or unlawful processing of personal data and against accidental loss or destruction of, or
damage to, personal data
• Personal data shall not be transferred to a country or territory outside the European
Economic Area, unless that country or territory ensures an adequate level of protection of
the rights and freedoms of data subjects in relation to the processing of personal data.
 25

Appendix 5

Appendix 5 – Solicitors Specialising in Marketing Law

Carpmaels & Ransford Reed Smith LLP
(Patent & Trademark Law) (Advertising & Marketing)
43-45 Bloomsbury Square Minerva House
London, WC1A 2RA 5 Montague Close
Tel: 020 7242 8692 London, SE1 9BB
Fax: 020 7405 4166 Tel: 020 7403 2900
E-Mail: email@carpmaels.com Fax:020 7403 4221
Website:www.carpmaels.com Website: www.reedsmith.com

Olswang (Media) Wragge & Co

90 High Holborn (Advertising & Marketing)
London, WC1V 6XX 3 Waterhouse Square
142 Holborn
Tel: 020 7067 3000
London, EC1N 2SW
Fax:020 7067 3999
E-Mail: london@olswang.com Tel: 0870 903 1000
Website: www.olswang.com Fax: 0870 904 1099
E-Mail: rafiazimkhan@wragge.com
Peter Carter-Ruck & Partners Website: www.wragge.com
(Advertising & Marketing)
International Press Centre The Simkins Partnership
76 Shoe Lane (Advertising & Marketing)
London, EC4A 3JB 45-51 Whitfield Street
London, W1T 4HB
Tel: 020 7353 5005
Fax: 020 7353 5553 Tel: 020 7907 3000
E-Mail: lawyers@carter-ruck.com Fax: 020 7907 3111
Website: www.carter-ruck.com E-Mail: martyn.bailey@simkins.com
Website: www.simkins.com

Osborne Clarke
(Advertising & Marketing)
Arthur Cox Solicitors
(Advertising & Marketing)
One London Wall
Earlsfort Centre
London, EC2Y 5EB
Earlsfort Terrace
Tel: 020 7105 7000
Dublin 2, Ireland
Fax: 020 7105 7005
Tel: +353 1 618 0000
E-Mail: tim.birt@osborneclarke.com
Fax: +353 1 618 0618
Website: www.osborneclark.com
E-Mail: colin.kavanagh@arthurcox.com
www.marketinglaw.co.uk
Website: www.arthurcox.com
 ‘‘
26

What’s hot in marketing?

Ignorance of the Law is no defence…
so burying your head in the sand is not an option.
Viewed a certain way it seems as though the practice of
marketing is under attack from legislators. A recent MORI poll
carried out for The Chartered Institute of Marketing reveals that
61% of marketers surveyed felt legal regulations had had a
negative impact on their business. They also think worse is yet to
come, with 94% expecting even more legislation with a marketing
impact to be introduced over the next five years.
David Thorp The good old days of laissez-faire marketing would appear to have
Head of Insights
gone forever. Like it or not, marketing is now a highly-regulated
part of business life. The question is not so much “What can we
do about it?” as “How do we live with it?” As I write there are
currently 10 new bills that will affect marketers before Parliament.
They won’t be the last.

Non-compliance with the Law - or with the multitude of rules and

regulations in force - can be a serious business both for you
personally and for your organisation. Entire campaigns may be
junked, share prices may drop billions, you might even find
yourself behind bars.

Ignorance of the Law is no defence, so burying your head in the

sand isn’t a realistic option either.

’’
Another survey carried out for the Institute in 2005 revealed that
87% of marketers believed it was their own responsibility to keep
abreast of legal changes. We no longer think that’s possible - the
average marketer is far too busy in their full-time job to contemplate
becoming a part-time law student. In this paper therefore we
propose the creation of a new role within organisations, that of the
Marketing Compliance Officer. It’s an issue many organisations will
have to confront sooner rather than later.
 27

No marketer is an island:
Marketing and the Law

No marketer is an island:
Marketing and the Law
Executive summary
Marketers are facing a climate of increasingly restrictive legislation. Heavy-handed Bills
are regularly placed before governments in the UK, the US and further afield.
Marketers face confusion over the number of laws, regulations and codes that they
have to be knowledgeable about. And increasingly, marketers even need to know
about laws that have been passed elsewhere in the world.

But such skills are not necessarily a marketer’s forte. How can the marketing
community respond to this ever more complex legal environment in order to continue
to do its job responsibly and effectively?

In the past, self-regulation has been the basis for marketing’s In the UK alone,
relationship with governments. But this self-regulatory framework is
21 new Acts,
being overwritten with legislation. Companies themselves need to
take a more proactive role in order to assist and reinforce self- regulations or
regulation, to avoid brand damage at best and costly legal amendments
proceedings at worst. affecting marketers

In fact, the raised bar of marketing legislation allows a real have been passed
opportunity to present marketing in a positive light - as a mature, in the last year.
responsible discipline. By recognising the role of Marketing
Compliance Officer, companies can show that they are willing to
identify and comply with their legal responsibilities, and communicate their actions to
the wider business community, governments and self-regulatory bodies.

ONE
KEEPING UP APPEARANCES
The current environment marketers face in their day-to-day work is one that is being
increasingly restricted by new laws. In the UK alone, 21 new Acts, regulations or
amendments affecting marketers have been passed in the last year, with another
10 Bills being put before Parliament in 2006. [Source: CIM Insights Team]
28

Globally, the problem is compounded by laws affecting marketers working via the
Internet - such as COPPA. This is a recent US law that forbids companies, whether in
the US itself or overseas, from collecting personal data about minors (defined as
children under 13), if that company is a commercial enterprise; whether or not the
data is eventually used for commercial purposes. Marketers need to be aware that
legislation from all corners of the globe can affect them, or they risk falling foul of a
legal suit at some point in the future.

In the UK, there is a climate of self-regulation that has served the marketing
community and the public well. But this culture of self-regulation is being gradually
and irretrievably diminished. The recent Olympic Bill is an example of how extreme
and constrictive legislation is becoming. The new bill makes it illegal to combine words
like ‘games’, ‘medals’, ‘gold’, ‘2012’, ‘sponsor’ or ‘summer’ in any form of
advertising. [Source:
http://www.publications.parliament.uk/pa/cm200506/cmbills/045/2006045.htm]

The bill is designed to stop businesses ‘cashing in’ on the Olympics, despite a
London 2012 spokesperson’s statement that “there is absolutely no intention of
stopping London businesses from becoming involved in the Games”.
[Source: Andrew Fraser, Olympics bill comes under attack,
http://news.bbc.co.uk/sport1/hi/other_sports/olympics_2012/4744983.stm, accessed 9.9.05]

However, as Marina Palomba, Legal Director at the IPA says, “You won’t even be able
to say, ‘Come to London in 2012’ because it will infringe the [proposed] Act.”
Palomba goes on to add that even witty advertising for suntan lotion saying
something like “Get bronze in London in 2012” would break the law. [Source: ibid.]

Understandably, the London 2012 committee wants to clamp down on ‘ambush

marketing’. This is where companies who have not paid to be the official sponsors of
an event associate their products with players or grounds, or where they advertise
nearby, in order to imply to consumers that the event they have ‘ambushed’ endorses
their product. But the ferocity of the provisions of the Bill, and the government’s
apparently willing complicity with its contents, should set alarm bells ringing amongst
the huge majority of responsible marketers, who are being punished because of a
minority who flout reasonable rules and regulations.

Similarly, the recent EU Comparative Advertising Directive makes it difficult for

companies to make claims about their products. According to Rafi Azim-Khan,
 29

No marketer is an island:
Marketing and the Law

Partner and Head of Marketing Law at law firm Wragge & Co (www.wragge.com), the
new directive “impacts not just obvious comparisons, but most things you want to say
about your product - benefits, price, even what it does.” [Source: Correspondence with
Insights, November 2005]

Without a competent working knowledge of how the Directive works, companies lay
themselves open to potential litigation. As it is the marketing department that is likely
to make product claims, it’s vital that marketers know the provisions of the Directive. If
they do not, Azim-Khan paints an alarming picture of what can happen: “Burger King
v. McDonalds, Compaq v. Dell, Colgate v. Listerine, Dyson v. Electrolux, RBS v.
Barclaycard - the examples of expensive battles go on and on.” As a result, marketers
need to be fully cognisant of what new laws, regulations and EU Directives are on the
horizon - as well as what is in place now.

The Olympic Bill may be revised before it becomes law. But it is an example of the
general trend of the UK government’s increasingly belligerent attitude towards
marketing. In an environment where the self-regulatory framework is becoming
relegated to history, what can marketers do to reassert some autonomy, in order to
operate responsibly and ethically, and stem the increasing flow of legislation?

TWO
RAISING THE BAR
Marketers are well aware of the legislation time bomb that they are facing. Some 94%
of marketers believe that in the next five years, the industry will face more legal
regulation. [Source: Legal Implications and their Impact, MORI/CIM, 2005]

Yet despite a separate survey which recently showed that 87% of marketing
professional respondents feel it is up to individual marketers to be aware of legal
constraints around marketing, [Source: Special Report for The Chartered Institute of Marketing,
Croner Reward, 2005] there is a great deal of doubt on the part of marketers about how
existing laws affect them.

For example, some 48% of marketers are unaware of the International Financial
Reporting Standards 2005. And 44% of marketers are unaware of the Privacy and
Electronic Communications Regulations (PECR) - which require, amongst other things,
that companies provide ‘opt-in’ boxes for unsolicited electronic mail, rather than the
‘opt-out’ boxes which are still prevalent. [Source: Legal Implications and their Impact,
MORI/CIM, 2005]
30

PECR does not cover direct postal mail. But many marketers are unaware that
unsolicited direct mail communications are required to offer the option for customers
to decline further unsolicited communications. Many otherwise reputable companies
do not provide such an option on their direct mail communications. The blame for this
lies squarely with the marketing department - as does the presence of ‘opt-out’
instead of ‘opt-in’ boxes in electronic communications.

The story is worryingly similar with other laws affecting marketers. A recent survey by
Mortgages Plc (May 2005) showed that one in four advertisements for private home
mortgages were not compliant with FSA (Financial Services Authority) regulations that
have been in place since 31 August 2004. The new regulations require advertisements
to carry the warning ‘Your home may be repossessed if you do not keep up
repayments on your mortgage’. This is considerably stronger wording than the old
Mortgage Code Compliance Board (MCCB) ‘wealth warning’, ‘Your home is at risk if
you do not keep up repayments on your mortgage or any other loan secured on it’.
[Source: Legal and Ethical Issues in Marketing, Ryan Storey, Cambridge Marketing Colleges, September
2005, p13]

Most of the 25% of advertisements that do not comply with the new rules are guilty of
using the old warning. Again, the responsibility to get this right rests with the
marketing department.

Nor are marketers any more certain about the industry’s self-regulatory codes.
According to Marina Palomba, “Many marketers I come across on a daily basis do not
even know what the CAP Code is.” [Source: Correspondence with Insights,
September 2005]

The situation is complicated by confusion over the number of codes, some of which
occasionally contradict each other (outlined in our paper The Long Arm of the Law),
and the hazy knowledge some marketers have about whether a particular regulation is
a voluntary code or a legal requirement.

We are all familiar with the problem of customers becoming frustrated with marketers
when they send repeated unsolicited mail. There are codes in place to monitor this
and marketers who know what they should and shouldn’t do follow these
suggestions. But, quite rightly, if marketers cannot even be trusted to implement their
own self-regulatory codes, the Government will have to intervene.
 31

No marketer is an island:
Marketing and the Law

THREE
SEEK - LOCATE - LEGISLATE
There are a number of legal areas of concern to marketers.

• Comparative advertising • Financial products and services

• Pricing claims • Food and drink
• Product descriptions • Mobile products and services
• Data protection • Medicines
• International laws • Marketing to children

The first two, comparative advertising and pricing claims, are the two areas that most
frequently get companies into legal hot water, according to Rafi Azim-Khan. [Source:
Correspondence with Insights, November 2005] And in both cases, it is usually the
marketing department that, if not directly to blame for any potential legal case, can
anticipate and avoid a litigious situation - if their compliancy skills are improved.

Such a proactive approach has helped Wilkinson Sword/Schick in its well-publicised

‘razor wars’ against Gillette. When challenged by Gillette’s Mach 3 range, Wilkinson
Sword was able to win a number of legal battles, not only in defending attacks on its
own claims for the Quattro razor, but also in forcing Gillette to withdraw an expensive
advertising campaign featuring David Beckham for its Turbo and Power razors. This
was due to a product claim that was found to be false and unsubstantiated in a
number of major jurisdictions in Germany, the USA and elsewhere. [Source: Rafi Azim-
Khan, Correspondence with Insights, November 2005]

FOUR
ABIDE WITH ME
The problems of legislating for marketing include:

• The time factor - by the time you’ve legislated, it’s often too late to prevent the ‘rogue
traders’ you were trying to stop
• New technology making new scenarios all the time. It takes time for Bills to be put before
Parliament and passed. Action needs to be taken in the meantime
• The Government trying to strike a balance between allowing an open market on one
hand, and protecting the public on the other. This can lead to a split in interests within
the Government and make it difficult for the laws that are eventually passed to be both
appropriate and effective
32

These reasons, taken as a whole, explain why self-regulation has set the historical
precedent for marketing’s relationship with the law. According to Ryan Storey of
Cambridge Marketing Colleges, “Self-regulation helps to create trusted
communications of quality and integrity, due to general industry compliance without
any further need for legal instigation.” [Source: Legal and Ethical Issues in Marketing, Ryan
Storey, Cambridge Marketing Colleges, September 2005, p6] Because of the nature of self-
regulation, codes can be implemented quickly to respond to the rapidly changing
technological situation, and become effective more quickly than legislation.

And self-regulation can close loopholes in existing regulations. This is why, according
to Storey, it has been “recognised as a feasible alternative to statutory control by both
the Department of Trade and Industry and the Office of Fair Trading, and also various
EU Directives (84/450 and 97/55 EC.)” [Source: ibid.]

But as we have seen, the effectiveness of the self-regulatory system is being

encroached on. We believe there has to be a more proactive stance taken by
marketers to prove to the government that the industry is a responsible one, and that
the rate of increasing legislation can be slowed. If a more interactive stance is not
taken, it is increasingly likely that the hands of responsible marketers will be tied to the
point that it becomes difficult to work effectively.

Rafi Azim-Khan stresses that marketers must become more

The Olympic Bill responsible. “ ‘Can we do this?’ is a question commonly raised
and the EU
by clients,” he says. Azim-Khan wants this mentality of pushing
limits to be reversed. “I prefer to turn the question round,” he
Comparative
says, “and ask, ‘what is your objective?’ Once we know what
Advertising they are trying to achieve, we can help steer through what is
Directive constitute now, without question, a legal minefield.” For Azim-Khan a
a wake-up call - it’s proactive approach “is no longer optional, but essential.”

time to act on it. The Olympic Bill and the EU Comparative Advertising Directive
constitute a wake-up call - it’s time to act on it.
 33

No marketer is an island:
Marketing and the Law

FIVE
WHO GOVERNS THE GOVERNORS?
In fact, the situation is not as problematical as it might first appear. Instead, says
Marina Palomba at IPA, it is simply that “the industry is rather naïve and
unsophisticated.” [Source: Correspondence with Insights, September 2005] There is also the
issue that it is in legal consultants’ and lawyers’ interests to make the legal scenario
more complicated than, in fact, it needs to be. The self-regulatory bodies try to reduce
this aura of mystery. Together with these bodies, we want to see more transparency in
discussion of legal matters. How can we achieve this goal?

One way is for companies to recognise the role of Marketing Compliance Officer. The
MCO, who should be a prominent member of the marketing department (the role
does not have to be a separate post, but may be so in larger companies), needs to
be someone who marketers can go to for relevant, accurate, up-to-date and impartial
advice.

The MCO will be the point of contact for marketers wanting to ensure compliancy with
laws and regulations, particularly the new International Financial Reporting Standards
(IFRS), and the Operating and Financial Review (OFR). By doing so, the MCO fills a
gap in the current make-up of the marketing department - someone whose role it is to
identify, assess and respond to the environmental and social impacts of marketing.

It is likely that the MCO will be a Chartered Marketer. Additionally, the MCO needs to
be clear about the differences between self-regulatory codes and laws, both in the
host country and in any foreign markets the company works in, and able to smooth
out inconsistencies in application of codes and laws. That knowledge can then be
passed on to the marketing team.

This new role will help to solve several of the key problems currently facing the
marketing profession:

• Marketing is perceived as an untrustworthy profession, where duplicitous methods are

used to sell customers products they do not particularly need nor want. Whatever the
level of truth of this accusation, the perception exists - and the presence of an MCO can
help reduce it
• Inadvertently, otherwise respectable companies can sometimes make mistakes, where
they are unaware that they are breaking a particular code, regulation or law. The MCO
34

can foresee, circumvent and close down such pathways before they occur
• The role will smooth the sometimes uncomfortable relationship between companies
(especially consumer products companies) and the ASA. It also means the ASA has a
quick, easy-to-locate contact in any company in the event of any issue or dispute.
According to Professor Malcolm McDonald, “much of the criticism levelled against
marketing is in fact directed against one aspect of it: advertising.” [Source: Correspondence
with Insights, October 2005] By having someone in the marketing department who is aware
of what can and cannot be done in advertising campaigns, many of these criticisms can
be anticipated and avoided
• The MCO raises the status of marketing as a profession - because it is further evidence
of the profession taking its responsibilities seriously

In companies larger than 150 employees, we believe that the Marketing Compliance
Officer will become an increasingly recognised role. For SMEs and micro-
organisations, it is unlikely that there will be the resources to allocate to an MCO.
Here, according to Laurie Wood of Salford Business School, “compliance is met on
an ad-hoc, needs-based level.” But it is important that all companies, large and small,
recognise and address the issue.

Where an MCO is not a viable proposition, individual marketers

can take a certain level of responsibility upon themselves to
In companies larger ensure they are legally compliant. The Chartered Institute of
Marketing has prepared an area of its Knowledge Hub,
than 150
www.cim.co.uk/knowledgehub, that lists the main laws affecting
employees, we marketers, outlines their provisions, and directs marketers to
believe that the external links for more information and clarification.
Marketing
None of this shift in thinking about compliancy will be achieved
Compliance Officer without buy-in at director level. This is because compliancy
will become an requires a budget, and as Laurie Wood points out, “what gets
increasingly measured (and funded) gets done.” Unless there is a budget line
against the activity, “it will always be a low priority squeezed out
recognised role.
against other more pressing needs which provide a more visible
return on investment to the organisation.” [Source: Correspondence
with Insights, October 2005]
 35

No marketer is an island:
Marketing and the Law

The board and managers of any company (or in the case of smaller firms, the owners)
must ‘support the agenda visibly, if they truly believe it is an important aspect of their
business operations.’

A process for this new way of considering legal compliance for marketing is outlined
below. Adapted from The Stage Gate Process ®. (devised by Professor R. Cooper. In:
Cooper, R. (2000) Doing it right - winning with new products, Ivey Business Journal,
July/August), the Marketing Compliance Process shows how at each stage of the
marketing process, legal compliance is checked by a clearly identified ‘gate’ that the
product has to pass through before it can move to the next stage.

Diagram 1: Marketing Compliance Process

Adapted from The Stage Gate Process ®. (devised by Professor R. Cooper.

In: Cooper, R. (2000) Doing it right - winning with new products, Ivey
Business Journal, July/August.
36

No marketer is an island:
Marketing and the Law

SIX
FROM RED TAPE TO BLUE SKIES
We are not going to be able to turn the clock back and return to a supposedly
‘golden age’ where self-regulatory frameworks were sufficient for marketing’s
compliancy needs.

The Chartered Institute of Marketing is revising its course and exam content to ensure
it contributes in an educatory role, and to increase public awareness of the Marketing
Compliance Officer role. The Chartered Institute of Marketing is also actively
developing its role as an interface between self-regulatory bodies, the Government
and individual marketers and companies.

Marketers can help themselves too, adds Rafi Azim-Khan. “Legal clearance is often
thought of as a nuisance. However, it can be a powerful tool to help you beat off
spoiler tactics from competitors, as well as interference from regulators.” [Source:
Correspondence with Insights, November 2005]

Rather than being a time-wasting obstacle, Azim-Khan asserts that it is in a

company’s interests to consider legal compliancy as a priority. “Get it right and you
can achieve your objectives. Get it wrong and, aside from convincing the legislators
that more law is needed, all the hard work, time and money can be for nothing. The
worse case scenario is a damages claim, product recall and hefty costs - not to
mention the related brand damage.”

By brushing up on our knowledge of legal matters and increasing awareness of the

need for compliance among marketing departments, the uncomfortable tide of
legislation can be stemmed. A more cogent, systematical procedure for legal
compliancy can be introduced to companies nationally and globally. Marketers can
then prove to customers that they are not the ogres they are sometimes painted to
be, who need ever-stricter laws to keep them on the straight and narrow.

© The Chartered Institute of Marketing 2006