Mark Smith, founder and CEO of Purdy Smith, discusses some of the brand management issues in-house lawyers should keep an eye on in the upcoming decade, with a focus on the headline-grabbing areas of advertising and consumer law.
Having worked at two leading City law firms before setting up Purdy Smith in 2017, Mark Smith is well known for his expertise advising household name brands on advertising, consumer, intellectual property and data privacy law. We spoke to Mark to find out more about some of the trends he foresees in the 2020s.
I understand Purdy Smith has a deep specialism in advertising and consumer law. Do you see those areas as rising in prominence during the 2020s?
Absolutely – there are currently moves afoot in both the UK and EU to increase the powers of consumer law regulators. Presuming they come to fruition, we will likely see these areas rise up the agenda over the next decade in the same way that the Information Commissioner’s Office (ICO) getting greater enforcement powers saw data privacy law become much more prominent.
Following a request from the Competition and Markets Authority (CMA), the secretary of state indicated last June that in the government’s upcoming consumer white paper he would consider proposals to strengthen the UK system of public enforcement of consumer law. This would ensure that the enforcers of consumer law have the powers they need to incentivise firms to comply with the law and would include empowering the CMA to decide itself whether consumer protection law has been broken and impose fines for wrongdoing directly. At present the CMA typically relies on getting businesses to agree to undertakings under the Enterprise Act 2002 – if they subsequently fail to comply with those undertakings the CMA can seek an enforcement order in court, however, it is unusual for matters to reach that stage. Since last June there has been a general election, but there is no reason to think that the government’s position has changed as a result, and the long-awaited consumer white paper has most likely been delayed due to Brexit and the Covid-19 crisis.
On an EU level, Directive 2019/2161 on the better enforcement and modernisation of EU consumer protection rules came into force on 7 January 2020 and member states have two years to implement it into domestic law. As well as making various updates to EU consumer law, the Directive provides for a stronger and more harmonised enforcement regime for major cross-border infringements that affect consumers in several EU member states. In such cases, national authorities are given the power to impose a fine of up to 4% of the trader’s turnover in the member state(s) concerned, or up to €2m when information on turnover is not available, but member states are free to keep or introduce higher maximum fines if they so wish. It is worth noting that in the event the Brexit transition period is extended past early January 2022 the UK would be expected to implement the Directive into domestic law.
Increasing amounts of consumer litigation are also likely to drive interest in the area particularly if future developments mean collective actions become more prevalent, as has been predicted in some quarters.
Are there any specific types of advertising claims that you foresee attracting particular attention in the coming decade?
One area I can definitely see receiving increasing focus is that of so-called ‘green’ claims.
Environmental issues are becoming increasingly important to consumers and a greater influence on their purchasing decisions than ever before. Many businesses are aware that they can charge often a premium for products perceived as environmentally friendly and inspire consumer loyalty by being considered an ethical corporation. The consequence of that is that a lot of brands are becoming very keen to push their environmental credentials in their advertising and marketing, but as these claims rise in prominence and begin to drive increasing amounts of consumer behaviour, it is only to be expected that they will become of greater interest to regulatory bodies as well.
The rules that apply to making environmental claims can be complex and a high level of substantiation is usually required, meaning it is easy to get things wrong. If a regulator finds that a brand has made false or misleading environmental claims this can quickly turn what may have been a genuine attempt to create positive PR into something that achieves the very opposite.
A good example of that is a recent Advertising Standards Authority (ASA) adjudication against Ryanair which hit the headlines back in February. The airline had made bold claims such as ‘Europe’s low fare, low CO2 emissions airline’ in press, TV and radio ads that attracted a number of complaints to the ASA. In the subsequent adjudication it was held that, while the claims would be understood relatively in relation to other airlines, and that CO2 emissions per passenger distance was an appropriate metric for such a comparison, the basis of the claims had not been made clear in the ads and the evidence provided by Ryanair was not sufficient in any event. For example, they had attempted to rely on data from 2011 to substantiate claims in 2019. The adjudication received a lot of negative attention in both the mainstream press and on social media.
I should also highlight that the CMA has announced in its latest annual plan, published in March 2020, that during 2020/2021 it will be improving its understanding of ‘green’ claims made by seller to consumers and, where appropriate, will make use of its powers to correct false or misleading statements that affect consumers. Hence it seems likely that we will see some CMA enforcement in this area in the next 12 months or so, and I’ll be very interested to see what forms that takes and if any particular sectors are targeted.
What about so-called influencer marketing? It has become incredibly popular in the last few years but has often hit the headlines for all the wrong reasons. Do you see that continuing in the 2020s? How can brands manage the risks involved?
Marketing via social media influencers will continue to be a massive trend in the next decade and become even more widespread. Indeed, many brands see it as the perfect way to reach a young audience that is proving difficult to target via traditional media such as the press and TV.
I’ve advised a number of brands and agencies on influencer marketing in recent years, both with respect to commercial contracts and the regulatory aspects, and have certainly detected some justified concerns around the compliance risks. There are numerous examples of ASA adjudications where brands have had complaints upheld against them due to social media influencers not correctly labelling their posts as advertising or making misleading claims. Given influencer marketing is a hot topic, and there often is a celebrity angle involved, any regulator action in this area often hits the headlines.
There are steps that can be taken to mitigate the risks involved such as doing some due diligence on any influencers you are considering working with, putting a robust contract in place and providing the influencer with some easy to understand guidelines around how they should post. That said, particularly given that they are often young and inexperienced, it is also worth having someone check their feeds on a regular basis, not only to check the posts they have been paid for, but also to confirm that there is nothing else on their feeds that might raise concerns given their role as a brand ambassador.
Clearly influencer marketing will continue to be a huge area of interest for regulators and the CMA currently has an open investigation in this area. Back in 2019 it secured formal undertakings from sixteen celebrities that they would say clearly if they had been paid or received any gifts or loans of products which they endorse. One of the celebrities who provided undertakings was the vlogger Zoella, who has just been cited in an ASA adjudication against fashion retailer ASOS due to her failure to make sufficiently clear that an Instagram story in which she promoted one of their dresses was an advert. It will be interesting to see if the CMA takes further action against her as a result, such as threatening court action, especially as many commentators feel stronger enforcement of the rules is needed. I imagine it will depend if it was a one-off slip-up or not.
There are also some interesting developments happening in the USA at the moment. The Federal Trade Commission (FTC) recently sought public comment on the guidance in its endorsement guides, which have been in place for over a decade and could do with some updating. FTC commissioner Rohit Chopra also published a separate statement calling for financial penalties for brands in relation to undisclosed marketing posts, among other measures. On that basis, it looks like we may see some significant developments across the pond in this area.
Are there any other hot topic areas that spring to mind as ones to watch?
New rules prohibiting harmful and offensive gender stereotyping in the Broadcast Committee of Advertising Practice (BCAP) and Committee of Advertising Practice (CAP) codes, which regulate UK broadcast and non-broadcast advertising respectively, came into force in June last year, and we’ve already seen them cited in several highly publicised ASA adjudications involving household name brands such as Mondelez, Nestlé and VW. No doubt this will continue to be an area of great interest during 2020 and beyond and I will be curious to see if regulators in any other markets follow the UK’s lead and introduce similar rules. More generally, all forms of problematic stereotyping in advertising are likely to attract increasing levels of risk, with the ease of sharing such content on social media and greater levels of cultural sensitivity meaning that an error of judgment can rapidly lead to a PR disaster in addition to any regulatory consequences.
Certainly, the introduction of the GDPR has seen the handling of personal data rise up the agenda. Not only could a breach of the rules result in an enormous fine, but the levying of such a fine is guaranteed to attract huge publicity in the event it involves a well-known brand. While the GDPR has been in force since 25 May 2018 there are still lots of important developments in the pipeline. For example, the ICO continues to create new, post-GDPR guidance to help businesses understand and comply with the rules. For example, it has recently held consultations on a new direct marketing code of practice and updating its data sharing code of practice, with both documents likely to be finalised later in 2020 or in early 2021. Furthermore, due to its investigation timelines, the vast majority of the ICO’s enforcement action in 2018 and 2019 related to breaches under the Data Protection Act 1998, the predecessor legislation to the GDPR, or the Privacy and Electronic Communications (EC Directive) Regulations 2003. We are likely to see far more GDPR-related enforcement being made public from now onwards. Brands should clearly pay very close attention to the ICO’s guidance documents and enforcement action to avoid falling foul of the rules.
What have been the highlights since Purdy Smith opened its doors for business in July 2017?
I think the fact that Purdy Smith has advised household name brands from the outset is something I am very proud of. I really appreciate the support I’ve received from my clients, some of which I have had the pleasure of acting for since the early stages of my career as a lawyer.
I’ve also been very pleased with the amount of international advice the firm has co-ordinated and am grateful to my longstanding network of overseas contacts for their close collaboration in this regard.
Finally, I was delighted to see the firm recommended in The Legal 500 UK in the brand management category in both the 2019 and 2020 editions as well as being listed as a next generation partner in the travel category as a result of my work with some leading brands in that sector. It is great to see The Legal 500 recognise that smaller, boutique practices can do outstanding work.