Ads & Brands Law Digest: June 2021
28 May 2021
Welcome to the June 2021 issue of our monthly Ads & Brands Law Digest.
Advertising & Marketing
CAP issues guidance on advertising consumer surveys
CAP has issued guidance on advertising consumer surveys. It says that advertising claims from consumer surveys can be a great way to let the public know how highly your product or service is rated by consumers. However, many marketers have fallen foul of the CAP Code in the way they have communicated their findings.
Marketers should consider whether the headline claim accurately reflect the survey. The most common pitfall that marketers fall into is when their ads misleadingly represent their survey’s findings.
They should also consider if the sample size is statistically significant and if the sample is representative. The ASA will consider claims and supporting data on a case by case basis and marketers should ensure that their sample is of a sufficient size to adequately support the claim they’re making. The Code does not specifically require sample sizes to be included in marketing communications, unless it would be misleading to omit them. So, if results are based on a robust sample size in which statistically significant findings can be drawn, then there is no need to include the sample size in the ad. Marketers are not prohibited from conducting their survey on participants who are likely to view their product more favourably than a representative sample, so long as they make clear to consumers that this is what they have done. Marketers should ensure they make clear whether the participants are a representative sample or their own customers.
Read more here.
CAP issues guidance on when to include VAT in prices
CAP has also issued guidance on when to include VAT in prices. The CAP Code requires that prices in ads include non-optional taxes, duties, fees and charges that apply to all or most buyers. This applies to all advertising and marketing materials, including websites and social media profiles.
The correct use of VAT-inclusive and VAT-exclusive prices is a recurring issue in ASA complaints across industries and media.
The key tips are to include the VAT when any prospective buyers will pay VAT; clearly address any VAT-exclusive prices, and to include a statement of the amount or rate of VAT payable when quoting VAT-exclusive prices.
ASA issues another ruling on gender stereotyping
The ASA has upheld a complaint against SWAG MASHA LLC.
The in-game ad featured a cartoon video of a woman being splashed in her face with water by a faulty tap. On-screen text stated “Turn it off”. She bent down and looked into a cupboard under the sink and saw a leaking pipe. Behind her was a woman wearing a towel about to hand over a mobile phone. Two buttons were shown with the options “Help her” and “Take advantage”. A super-imposed cartoon hand selected the “Take advantage” button. The woman wearing the towel bit her lip and the video shot to the first woman’s face. She displayed a startled expression and then smiled. Beneath the video, text stated “Play and have fun You choose your destiny”. The app was described by SWAG MASHA in the Apple App store as a “series of interactive stories for guys” and a “thrilling game for men”.
The advertisement was banned because the ad objectified women, presented harmful gender stereotypes and was irresponsibly targeted.
Read more here.
Online Safety Bill published
The UK government has published its draft Online Safety Bill. Under it, search services, social media platforms, and other online services that enable user-generated content to be shared between users must mitigate the risk of harm arising from illegal content, for example by minimising the spread of such content. This includes child sexual abuse and terrorist material. These services will also be required to tackle user-generated online fraud.
Services will also need to take steps to protect children’s online safety. Some platforms, known as ‘Category 1' sites – will also be required to act on legal content that might be harmful to adults, such as cyberbullying or encouraging self-harm. They must make it clear how they will address these problems.
The draft bill also aims to ensure that people can express themselves freely online. It will require platforms to consider the importance of freedom of expression when fulfilling their duties. The draft bill also introduces new, specific duties for Category 1 services to protect journalistic content and content defined as ‘democratically important’.
Ofcom will be given the power to fine companies up to £18 million, or ten per cent of qualifying revenue, if they fail in their new duty of care.
The draft bill will be scrutinised by a joint committee of MPs before a final version is formally introduced to Parliament to complete the legislative process.
Read more here.
CMA consults on guidance on greenwashing
Last year, the CMA announced that it was investigating the impact of green marketing on consumers. As part of this, the CMA recently led on an analysis of websites – alongside other global regulators – which found that 40% of green claims made online could be misleading.
The CMA is now seeking views on draft guidance for businesses about ‘green’ claims. It has reviewed how these claims are being made and how people respond to them. It explains the best way for businesses to communicate their green credentials, while reducing the risk of misleading customers. It says that claims:
- must be truthful and accurate: Businesses must live up to the claims they make about their products, services, brands and activities;
- must be clear and unambiguous: The meaning that a consumer is likely to take from a product’s messaging and the credentials of that product should match;
- must not omit or hide important information: Claims must not prevent someone from making an informed choice because of the information they leave out;
- must only make fair and meaningful comparisons: Any products compared should meet the same needs or be intended for the same purpose;
- must consider the full life cycle of the product: When making claims, businesses must consider the total impact of a product or service. Claims can be misleading where they don’t reflect the overall impact or where they focus on one aspect of it but not another; and
- must be substantiated: Businesses should be able to back up their claims with robust, credible and up to date evidence.
Read more here.
Amex fined for sending four million unlawful emails
The ICO has fined American Express Services Europe Limited (Amex) £90,000 for sending over four million marketing emails to customers who did not want to receive them.
The ICO began investigating when it received complaints from Amex customers who were getting marketing emails despite having opted out from them. The emails included details on the rewards of shopping online with Amex; getting the most out of using the card and encouraging customers to download the Amex app. Amex had rejected its customers’ complaints saying the emails were servicing emails and not marketing.
The ICO found the emails were marketing. Its guidance defines the difference between marketing and services emails. It says that service messages contain routine information such as changes to terms and conditions and payment plans or notice of service interruptions. Meanwhile, direct marketing is defined as any communication of advertising or marketing material directed at particular individuals. Organisations often find themselves on the wrong side of the distinction.
Read more here.
Ofcom consults on advertising guidance for video sharing platforms
Ofcom is consulting on new guidance for video-sharing platforms (VSPs). It is proposing a regulatory framework which reflects the distinction in the Communications Act 2003 between VSP and non-VSP controlled advertising:
- VSP-controlled advertising: VSPs are legally responsible for ensuring that any advertising they market, sell or arrange themselves meets certain requirements to protect users from potential harm. Ofcom is proposing that day-to-day regulation of VSP-controlled advertising is administered by the Advertising Standards Authority, with Ofcom as a statutory backstop regulator.
- Non-VSP-controlled advertising: For advertising not marketed, sold or arranged by VSP providers, VSPs are legally required to take appropriate measures to ensure such adverts meet the user-protection requirements. Ofcom proposes that it will assess whether the measures taken by VSPs to protect users are appropriate.
It has also published draft guidance designed to help VSPs to understand and comply with their advertising obligations. The consultation ends on 28 July 2021.
Read more here.
Court of Appeal confirms liability of company directors for trade mark infringements by their businesses
Two company directors, Mr Kashif Ahmed and his sister Ms Bushra Ahmed, appealed against a High Court ruling that had found them liable as accessories for trade mark infringements and passing off by two companies of which they were directors. Their companies, amongst others, had been found to infringe rights in the Beverly Hills Polo Club word mark and device marks based upon horse-riding polo players. The companies had gone into insolvent administration, and so the claimants had come after the Ahmeds personally for an account of profits.
The Court of Appeal upheld the lower court’s ruling that the Ahmeds were jointly and severally liable for the infringements of the companies of which they were directors. They had argued in their defence that they had acted with no improper motive, had taken professional advice, and in all respects were acting bona fide in their capacities as directors of the companies. But the Court of Appeal confirmed that for a tort of strict liability such as trade mark infringement or passing off there is no need for there to be any improper motive. And when it comes to the liability of company directors, they would only have had a defence if their roles had been narrowly limited to carrying out a constitutional function in the governance of the company. But in this case the defendants had clearly played a more active executive role, with close personal involvement in the business activities that amounted to trade mark infringement, and thus could not avoid the finding of joint and several liability with the companies.
There was some better news for the Ahmeds, however, when it came to assessing what amount of profits they would be obliged to account for. The claimants had argued that the individual defendants should be liable for all of the profits made by the infringing businesses of which they had been directors, but the Court of Appeal held that they should only have to account for the profits that they as individuals were found personally to have received as a result of the infringements. In the circumstances of this case the profits they had to repay were based upon a loan that Mr Ahmed had received and 10% of their salaries (after tax), which the court found to be an equitable proportion to attribute to profits resulting from the infringement. Mr Ahmed was thus liable to account for just over £700,000 and his sister for just under £40,000 in profits that they were held to have received personally as a result of the infringements, which compared to the over £3 million and over £300,000 respectively that they would have had to pay if liable to account for the profits made by the companies.
Read more here.
Practice of “evergreening” EU trade marks by repeatedly registering the same mark can amount to bad faith
For the first five years after a trade mark is registered it cannot be challenged on the grounds of non-use. But thereafter it is open to potential revocation (in whole or part) if genuine use cannot be demonstrated for the relevant goods or services, and likewise genuine use has to be shown before the mark can be relied upon in opposition proceedings against competitors’ marks. These factors have encouraged some brands to employ a strategy known as “evergreening” whereby fresh registrations for the same mark are sought every five years to avoid ever having to demonstrate genuine use across all of the classes of goods and services for which the mark is registered.
It appears that Hasbro had been employing this kind of strategy in respect of its word mark “Monopoly” – it registered a new EU trade mark for that word in 2011 at a time when the company already had three other EU registrations for the same word. The validity of that 2011 registration was challenged in 2015 by a competitor on the grounds that it had been made in bad faith, i.e. it was just a duplication of Hasbro’s other identical registrations and was being registered in order to avoid having to demonstrate genuine use of the earlier marks. In 2019 the EUIPO Board of Appeal partially revoked Hasbro’s 2011 word mark on the grounds that, for some of the classes of goods and services covered by the registration, it had indeed been applied for in bad faith.
Hasbro appealed against that ruling, but the General Court of the EU has now confirmed that this type of “evergreening” strategy can indeed amount to bad faith where it is adopted to avoid the need to show genuine use (there can be other, legitimate, reasons for re-registering the same mark). Hasbro tried to argue that evergreening is a common practice amongst brand-owners, and that it had been adopted on the advice of IP counsel, but these defences were rejected. While the UK is no longer a member of the EU and thus this ruling is not binding upon the UK courts or UK trade marks, it is likely to be given some weight when the UK Intellectual Property Office and UK courts come to consider the same issues.
Read more here.