China’s New Rules On Internet Advertising

Specific vulnerabilities in users can also be exploited to target adverts, including those that are possibly harmful. Any measures to address harmful adverts incur costs and unless all competitors in the market face these costs, there is no incentive for a single business to act further. This is a coordination failure which in part stems from the fact that the current ASA regulation primarily covers advertisers – who as consumer-facing businesses are often driven by reputational incentives – rather than all businesses across the supply chain. This creates a regulatory gap which means that advertisers could effectively currently be held accountable for the role played by other actors in relation to placement and targeting of their adverts to consumers. Recognising the significant threat of fraudulent advertising, large social media platforms are taking steps to ensure fraudulent advertising is not appearing on their platforms. For example, Google stated that in 2020, it took down 3.1 billion bad ads globally, including over 123 million ads for violating their financial services policies.

Addressing these drivers of harm, by strengthening the regulatory framework for online advertising, will contribute to increasing consumer trust in online advertising, which will support its long-term sustainability for both advertisers, intermediaries, platforms and publishers. This may also create opportunities for innovation and growth within the online advertising sector. Harm can also be caused by the targeting and placement of adverts, where advertising supply chain businesses aim to maximise their profits by providing a cost efficient system to match advertisers with users. Technological innovation enables advertisers to target consumers with a high degree of specificity, for example, through data that has been knowingly volunteered (e.g. age and gender on a social media platform), as well as inferred (e.g. perceived interests and salary).

Depending on the severity of the breach, it can request the firm which has communicated or approved the advert to withdraw it or amend it so that it complies with the FCA’s requirements. The FCA may also ask firms to consider whether any customers may have acted on the non-compliant promotions and to take appropriate action to remedy any harm which consumers have suffered as a result. Lastly, the FCA can launch an enforcement investigation which may lead to a sanction, such as a financial penalty. This current industry-funded model means the ASA is independent from the government, and its regulation is not funded by the taxpayer. We note, and discuss in more detail in chapter 6, that any proposals to empower the ASA with further powers, sanctions and capacity would also require additional funding.

It is likely that better flows of information would help regulators understand the picture more effectively. In relation to the content of adverts, these harms can be separated into legal and illegal harms. The category of legal but harmful content is complex given the wide range of content it can encompass, including body image concerns as well as age restricted products and services. Illegal content may include advertising for fraudulent products or services, for illegal products such as weapons or drugs, for illegal activities such as adverts that facilitate immigration crime, modern slavery or sexual exploitation, as well as issues such as fake endorsement. The biggest concern raised by respondents to the call for evidence related to fraudulent advertising , with others citing concerns around legal but harmful advertising themes in advertising, such as body image. In this consultation we have considered the online advertising ecosystem, particularly the supply chain, the harms that can arise and the suitability of the current regulatory framework in addressing these harms now and in the future.

Rapid growth has, however, presented challenges for the regulation that governs online advertising. As a result, a spectrum of both legal and illegal harms have arisen which are impacting on the trust in and sustainability of the market. These current, new and emerging harms have wide-reaching impacts, which have in turn reduced consumer confidence in online advertising. A recent study has shown that trust in advertising has fallen dramatically over the last few decades, with 70% of people in the UK having stated that they do not trust a lot of what they see on social platforms, including posts from brands.

Advertisers are able to trace the path taken to where they are hosted, for example Ads.txt, Sellers.json (+Supply Chain Object) and Buyers.json (+Demand Chain Object). The ASA is primarily funded by a voluntary levy paid by advertisers and collected predominantly through a levy on media buying agencies. This levy of 0.1% on the cost of buying advertising space, and 0.2% on direct mail, funds the ASA’s regulation of advertising. The levy is collected by the Advertising Standards Board of Finance and the Broadcast Advertising Standards Board of Finance at an appropriate arm’s length from the ASA. The Code reflects provisions in legislation for particular goods and services , as well as being responsive to changes in society that have an advertising regulatory dimension. For example, rules that apply to on-demand providers and to VSP providers are backstopped by Ofcom.

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However, without harder-edged sanctions, this system is less likely to deal effectively with illegal activities such as fraud. It is also not clear that an industry-led approach reliant on reputational sanctions will be effective when applied to non-consumer facing actors in the supply chain, such as many third party intermediaries. In order for all actors to adhere to information-sharing measures and requirements to standardise reporting, and to identify bad actors in the supply chain, we may need regulators with the capability to audit, gather information or sanction organisations who do not comply. Video-on-demand regulation As with other digital platforms, advertising on UK-based on-demand streaming services must conform to the CAP Code, administered by the ASA.

Similarly, accountability standards that involve demonstrating care surrounding high-risk advertising and targeting, minimum standards for advertiser identity verification, and ad acceptance and publisher on-boarding policies, could be proposed as part of a self-regulatory framework. A statutory backstop is an alternative option, under which the ASA would continue as the frontline regulator, but backstopped more fully by a newly-appointed statutory regulator, to provide stronger powers of enforcement where needed. While statutory backstops such as the Gambling Commission or Buckinghamshire and Surrey Trading Standards already operate in discrete areas of the CAP Code, this option would relate to appointing a new statutory regulator to provide further powers of enforcement. This could, for example, be necessary to address both the presence of bad actors in the ecosystem and illegal harms, or when the sanctions available to the ASA do not go far enough to ensure compliance.