New Online Laws comes into force (UK)

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Online marketing under legal spotlight

By Tim Bradshaw

Published: May 26 2008 03:43 | Last updated: May 26 2008 03:43

Online marketing such as “viral” videos, blogging and campaigns on social networks will be regulated for the first time after the biggest overhaul of consumer protection laws in 40 years comes into force on Monday.

The new Consumer Protection Regulations adopt an EU directive requiring all businesses to treat customers fairly, closing loopholes that traders have previously been able to exploit.


They will ban 31 types of unfair sales practices outright and tighten controls on traders ranging from double-glazing salesmen to fortune tellers.

They are aimed at “unscrupulous” marketing tactics such as hidden costs in “free” offers, falsely advertised closing-down sales and using editorial comment without revealing it was paid for by an advertiser. Punishments include fines of up to £5,000 ($7,000) and two years’ jail for “neglectful, consenting or conniving” company officers.

Joel Smith, a partner at Herbert Smith, a law firm, described the changes as “a brave new world” for the UK. “It’s the biggest change in advertising regulation in the 40 years since the Trades Descriptions Act,” he said. “A lot of the problems may come from online use.”

While most advertisers have welcomed the codification of what constitutes unfair marketing and the promise of better enforcement from the Office of Fair Trading, some fear that legitimate online marketing campaigns may become caught up in the law.

Wayne Arnold, chief executive of Profero, a leading independent digital marketing agency, warned of a “huge lack of awareness” about the changes. “Very few clients are aware of it and very few agency practitioners are aware of it,” he said.

The Institute of Practitioners in Advertising, a trade body, has been working to educate its members ahead of the regulations’ introduction. “The internet’s very much been a wild west for the last five years,” said Marina Palomba, legal director at the IPA.

“People have been coming up with legitimate, fun ideas about blogs – but without realising it, they are being misleading.”

Nigel Morris, chief executive of Isobar, the digital agency owned by Aegis, said that the regulations highlighted longstanding issues with online marketing. “The further down the food chain you get, the more it goes on. Overall [the law] is probably a good thing, but it’s a pity it’s needed.”

Past online campaigns that could have fallen foul of the new laws include well-known brands. The chief executive of Whole Foods apologised last year for anonymously posting flattering comments about himself and his retail chain on message boards.

Tactics without upfront notification of corporate sponsorship, known as “astroturfing”, are now formally outlawed under the regulations.

“There could be a backlash, with people being far more conservative and taking fewer risks in viral and word-of-mouth marketing, and blogging,” said Mr Arnold. “Until there is a test case, nobody is clear about how the letter of the law will be read.”

The OFT is ready to enforce the law, even though regulating the internet is notoriously difficult. “It’s fair to say that we will try to seek clarity using some of the cases that we bring,” said a spokesman for the OFT, adding that the OFT would decide its enforcement approach “in light of our current overall priorities”.

Ms Palomba at the IPA said: “It only needs one case to be brought by the OFT and the reputational damage will be enough to dissuade advertisers.”