Falling foul of UK advertising laws may prove dangerous for Indian businesses

The UK is home to more than 600 Indian companies and presents a profitable market for hundreds more. The State Bank of India, Jet Airways, Infosys, Tata Motors and Wockhardt have all made successful forays into the UK market in an effort to diversify their revenue streams and enlarge their global footprint. Now, even smaller players are jumping on the bandwagon. With competition tightening, advertising campaigns on billboards, television and online have become crucial for profit generation and product or service differentiation. As the pressure to deliver creative promotional campaigns intensifies, what should Indian businesses do to ensure they are compliant with legal and regulatory laws that govern advertising in the UK?

Advertising in the UK is regulated by several authorities, of which the Advertising Standards Authority (ASA) is the most prominent. Although there are general laws in place to regulate advertising, there is no single code or law that sets out the relevant restrictions or rules. As a result, navigating the complicated legal framework in the UK requires specialized domestic legal input.

The topics covered below aim to outline the key legal considerations for Indian businesses keen to advertise in the UK. These rules apply to Indian and other overseas businesses, regardless of whether they have a presence in the UK. Familiarity with these laws will help such companies save time and expenses while also avoiding the risks of inviting damaging legal action or even criminal charges, when drawing up promotional strategies for British audiences.

Non-broadcast advertising

Promotional posters, advertisements in newspapers, leaflets, emails and text transmissions all fall into the category of non-broadcast advertising. Under the regulations, which are enshrined in the Committee of Advertising Practice (CAP) Code and administered by the ASA, an Indian company must collate documentary evidence substantiating claims made in the advert, ensure that all claims are legal, decent and truthful, that they are fair, accurate and not misleading and that they contain nothing that may cause offence, (such as on the grounds of race, religion, sexual orientation or disability).

Further rules exist for specific sectors, such as the advertising of food and drinks (especially those that target children), financial products, medicines and medical devices, motoring, alcohol, gambling, tobacco, travel and health and beauty products. For example, the advertising of tobacco is heavily restricted through UK and European legislation and is effectively prohibited in all media. Unlike other forms of advertising regulation, contravening UK legislation on tobacco advertising is a criminal offence, which could result in imprisonment or an unlimited fine.

Indian companies that fail to comply with the regulations could face severe restrictions from the ASA, which could demand that adverts are pre-vetted, or impose civil or criminal sanctions. The ASA has the power to take unilateral action to restrain advertising which it considers is non-compliant with the CAP Code, however, the ASA generally reacts to complaints made by members of the public, or by competitors of the business responsible for the advert in question. The ASA conducts its own investigations and grants advertisers the opportunity to respond to alleged breaches of the code before publishing its decision. Although it is possible in some cases to have a verdict by ASA reviewed by an independent body, reversals of ASA decisions are, in practice, rare.

In 2007, the ASA banned a series of poster advertisements created for Tourism Australia and Qantas Airlines. The posters contained photos of Australia and prices of Qantas’ flights and asked jokingly: “Where the bloody hell are you?” The ASA maintained that the adverts breached the CAP Code rules on responsible advertising and advertising to children (because of the language used) since the posters were displayed in street settings and were thus easily viewed by younger audiences.

Broadcast advertising

The regulations applicable to non-broadcast advertisements are largely relevant to broadcast advertising, however, additional rules also apply.

There must be a clear distinction between the advert and programmes being aired. This requirement has been upheld by the ASA in the past in connection with teleshopping advertisements where the distinction between the advertisement and other editorial content has not been made clear. In addition, the advert must not confuse or mislead viewers (for example, by using expressions commonly used for news announcements such as “News Flash”).

Further, the advert must not publicize bodies with political objectives or carry messages that are political. For example, an advert produced by a UK government department warning of the dangers of global warming was recently investigated on the grounds that it was political in nature. Although the complaint is still being investigated, the ASA has, in the interim, banned the advert on a number of other grounds, including that the government department could not substantiate the claims made in the advert about the environmental effects of global warming.

Certain products and services are also prohibited, such as prescription-only medicines or products that treat alcohol or substance abuse. Sponsorship of programming is currently permitted under the regulations and product placement, which has historically not been permitted in the UK, will be legalized by the end of the year, subject to final governmental approval. The placement of tobacco, prescription-only medicines, alcohol, foods high in fat, sugar, or salt, baby products and gambling will, however, remain banned.

Targeted advertising

If an Indian company is advertising to a business in the UK, the advert must not be misleading or, in addition to the sanctions described above, the company could face criminal charges.

If the company is advertising directly to consumers, further regulations apply. Broadly speaking, unfair or misleading advertisements are prohibited if they convince the average consumer to buy a product or service that he or she would not otherwise have bought. This involves, for example, “bait and switch” advertising, where a product is advertised for sale at an attractive price even though the trader has no intention of selling the product at that price, or does not have sufficient stock of the product to meet demand. When the consumer enquires about the product the trader tries to sell them a different product.

Adverts should not include “blacklisted” practices. These practices are enshrined in the Consumer Protection from Unfair Trading Regulations, 2008. There are over 30 blacklisted practices which include, for example, describing a product as “free” if there is in fact a specific charge for the product (other than merely the cost of delivery, for example), or claiming to offer a prize without subsequently awarding the prize.

In each case there are very strict rules on comparative advertising, which allow fair “like for like” comparison with a competitor’s product, only where these are not misleading. While comparative advertisements may be permitted under the relevant regulatory regime, they are particularly susceptible to a challenge on other legal grounds as detailed below.

Intellectual property considerations

If the advert contains a sign which is identical or similar to a third party’s registered trademark (intentionally or unintentionally), the advertiser could face penalties as a result of trademark violation. In the UK there are several trademark registration regimes. Trademarks could be registered at a national level in the UK with the UK Intellectual Property Office; at a European Community level with the Office of Harmonization for the Internal Market; or at an international level designating the UK with the World Intellectual Property Office. Specialist advice is essential, particularly as the law can apply in varied situations. For example, some online service providers allow advertisers to buy “keywords”. When a user searches that keyword, the advertiser’s advert appears alongside the search results. Any use by an advertiser of a competitor’s trademark, or a similar mark, as a keyword, needs to be managed with care in order to avoid trademark disputes.

If the advert confuses consumers into thinking that the Indian company’s products or services are those of another company or individual, or are endorsed by them, the Indian company could face legal action in court (see case study on page 27).

If the Indian company’s advert contains any copyright protected work (for example, written or spoken words, photographs, paintings, music, film, software or dramatic works) the company will need copyright consent from every owner of each work, or the company could face potentially time-consuming and expensive legal action for infringement of copyright. As there is no central rights body or register for these rights, obtaining the consent from the rights holder can be a complicated process.

Creators of copyright works (who may not currently own the copyright) may also have “moral rights” to the work, for example, the right not to have their work subjected to mistreatment. This is particularly relevant to artistic works used in advertising. Again, the Indian company will need to acquire a waiver of the rights. Unless a waiver has been obtained, the owner of the moral rights would claim infringement if the work is being used in an advertisement without an acknowledgement that it is their work. Similarly, the owner of moral rights could also object to any derogatory treatment of their work where the treatment amounts to a distortion or mutilation of the work, or is otherwise prejudicial to the artist’s reputation.

Indian companies issuing adverts containing material that might damage an individual’s reputation, or expose a person to ridicule or contempt, could face legal action by that person. Particular care needs to be taken if the company’s website allows people to post blogs or other user-generated content. In a recent case, two rival airlines in the UK, Ryanair and easyJet, were involved in a legal dispute arising from an advert by Ryanair. The advert, essentially, through comic images, accused easyJet’s founder, Sir Stelios Haji-Ioannou, of deliberately withholding data about the carrier’s punctuality performance. Haji-Ioannou sued Ryanair and the parties eventually settled the dispute out of court with Ryanair making a full apology. The apology was in the form of a full-page advert in several newspapers and the existence and detail of that apology was also covered in various news media.

Companies will need to understand who will own the intellectual property to the advert itself. If an agency is commissioned to produce the advert, will the agency own the rights to the advert, or will the rights be properly assigned or licensed to the company? There are different methods of holding and transferring intellectual property rights. The right methods will depend on the facts of individual cases.

Indian companies should be aware of particularly harsh laws relating to references to the upcoming Olympics in London. Advertisers are not permitted to refer to the London Olympics, use the Olympics symbol and Olympics-related words or to use phrases such as “London 2012”. In addition, there are regulations on advertising in and around the Olympics. These laws were specifically introduced at the request of the International Olympic Committee to combat ambush marketing and were the subject of much resistance by the advertising industry and by brand owners in the UK.

The hard sell

A warning – international law

If an Indian company’s advert will be seen outside England and Wales, the laws of other jurisdictions may apply to it. Scotland has a separate legal regime to that of England and Wales although regulation of advertising in Scotland also falls under the ambit of the ASA. In particular, internet advertising will often have to comply with the laws of other jurisdictions.

Case Study: Re-branding exercise

A recent example of an Indian company that acquired a UK-based subsidiary (company A) in May 2008 highlights certain difficulties that might be encountered when re-branding.

The Indian company bought a pre-existing UK trademark from a third party (company B) to re-brand and re-launch its newly acquired subsidiary. Although the pre-existing trademark registration covered the trading activities of company A, as they were different from the activities of company B (the previous trademark owner) the trademark was potentially revocable.

This meant if anyone threatened company A with infringement of a prior right, the trademark registration would be of no use. In addition, the new name of company A was strikingly similar to a well-known consumer brand (company C) being sold in the UK, albeit in a different line of business.

The owner of company C – whose business was completely unrelated to that of company A – promptly began legal proceedings against company A for trademark infringement and passing off in the high court. Company C argued that consumers were likely to be confused between the two brands and that the use of a similar sounding name by company A would dilute and take unfair advantage of the former’s strong reputation in the UK marketplace.

Company C also claimed its reputation would be tarnished by company A’s use of the trademark. This was on the basis that company C’s product could only be marketed to adults, whereas company A’s was targeting consumers of all ages. Company C thus suggested that its reputation as a responsible advertiser in its market was being damaged.

Although the case filed by company C failed, the Indian company could have incurred huge losses had a judge delivered a verdict against it. The re-brand and re-launch of company A cost the Indian company approximately £15 million (US$23 million). Any judgment against company A could have forced the Indian company to abandon its new trademark, pay substantial damages and re-brand yet again. In addition, such a decision would have undermined the company A’s credibility considerably. In the end, after 18 months of costly and disruptive litigation, the parties entered into a confidential settlement out of court and a re-brand was avoided.

This case serves as a useful reminder for Indian companies of the risks of launching a brand without conducting thorough legal due diligence beforehand.

Omleen Ajimal and Charles Lloyd are partners at Taylor Wessing in London. Ajimal is head of the India practice and Lloyd is head of the advertising group. They can be contacted at o.ajimal@taylorwessing.com and c.lloyd@taylorwessing.com. This article is intended purely as a summary of the key issues relating to advertising. Timely advice should be sought on the facts of any particular advert or promotion, on the detail of the law and the regulation that will apply to it.