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GALA Chairman Speaks on Self-regulation in China's Advertising and Marketing Industry

30.11.07 14:55 Age: 13 yrs
GALA Chairman Speaks on Self-regulation in China's Advertising and Marketing Industry

A presentation given by Doug Wood, Partner with Reed Smith, at the First International Advertisers Conference held in Beijing

Self-regulation in the advertising and marketing industry is indeed a major issue, and adoption of a self-regulatory system is critical to a balanced approach to advertising regulation.

I have specialized in advertising and marketing law my entire career, written two books on advertising law, launched Adlaw by Request, the legal industry’s leading electronic periodical on advertising law developments, and lectured throughout the world on advertising law.  I say all that not to impress you with my credentials but to give you some perspective of my years of experience working with self-regulation, both the good side of it and the bad side of it.

So I hope you won’t mind a moment of immodesty as I ask you all to consider my comments today.  To prepare for this presentation, I asked the members of the Global Advertising Lawyers Alliance to complete a survey of self-regulation in their countries.

GALA is a non-profit organization formed by a network of independent law firms in over fifty countries throughout the world.  All of the members are experts in advertising and marketing law in their countries.  So the survey results are very instructive.  I am the Global Chairman of GALA.

In canvassing members, we asked them to complete three simple inquiries.  1.  The website for my country’s self-regulatory body is…, 2.  Self-regulation works in my country because…, and 3.  The best thing government can do to support self-regulation is….  The responses to the survey and interviews with many of the members are the basis for this presentation.  A complete copy of the survey is available at GALA’s website, www.gala-marketlaw.com and at both CANA’s and the WFA’s websites as well.

The responses to the survey and interviews with many of the members are the basis for this presentation.  A complete copy of the survey is available at GALA’s website, www.gala-marketlaw.com and at both CANA’s and the WFA’s websites as well.

Self-regulatory organizations – SRO’s – are not a new idea.  Most developed countries have enabled independent and semi-independent organizations to oversee the local advertising community.  Their primary purpose is to insure that advertising is truthful and appropriate to the sensitivities of the market.  Where such systems have been adopted, the commercial community has prospered and grown.  While I would not be so presumptive to suggest that a robust economy is created through self-regulation, I do believe its growth is fostered by allowing marketers the opportunity to police themselves in partnership with local governments. 

While these two principles – truth and sensitivity – may seem simple on the surface, they can, in fact, be very complicated in their application.  More importantly, the application of these principles is dynamic and changes with circumstances.  Thus, something might be truthful in one context and false in another.  Likewise, something might be perfectly acceptable for one category of product, but inappropriate for another.  Also, respect for certain religious and political institutions in a market might be applied differently market to market.

Why then does self-regulation in China make sense? The case for creating a self-regulatory system in China is compelling.  China as the largest consumer population in the world and has seen unprecedented import growth in the last five years.  Moreover, in China, industry is beginning to produce its own proprietary brands that will be sold worldwide.  Yet the advertising and marketing industry in China remains nascent and is only beginning to find its place in China’s society.

In addition, there are practical realities that government regulators should consider.  Whatever their regulatory budgets and staff sizes may be, policing such a large and rapidly growing industry alone is near impossible.  Government should leverage its enforcement efforts through a partnership with industry.

Regulatory priorities are also critical.  As China continues its exponential economic growth, it will face many issues.  Thus, partnership with the advertising industry to help address issues that arise in marketing practices makes even more sense.  Finally, the expertise in how a fledging advertising and marketing industry can best develop requires expertise that may not lie within government agencies.  So the argument for self-regulation is indeed compelling.

Most importantly, the government partnering with the marketing industry in developing a robust self-regulatory system is not about abdicating responsibility for marketplace oversight.  Government always reserves the right to step in if practices become unacceptable. Moreover, strong government intervention when a marketer refuses to comply with self-regulatory decisions is critical to supporting a system that will work.  So it’s clear that in a properly structured self-regulatory system, government plays a pivotal role.

So what are the key factors to a successful self-regulatory system that we can learn from other jurisdictions?

To maximize the prospects of success, there are a number of key criteria.  First, there must be a formal organization recognized and endorsed by the government.  The SRO must be responsive to market concerns.  Procedures adopted by the SRO must respect due process and allow companies involved the opportunity to fully participate and have their side of the story told.

The system must eventually be predicable and documented.  To assure due process, there must be an ability to appeal the initial decisions of the body. Thus an established and searchable record of the proceedings is important, including written guidelines that address specific practices and specific industries.

Most importantly, there must be unqualified support from the marketing community. Without it, success is unlikely.  Finally, there must be at least qualified support from the government.  I say “qualified” only because it would be presumptuous for me to suggest government authorities should blindly give support.  The industry must gain that support by showing its ability to provide active and effective oversight.  That will take some time.  But only when all these factors are present will the consuming public feel its interests are adequately protected.

So what are the first steps to take?  What’s next?

To be successful, an SRO must be a formal entity, recognized by the government.  It must have an independent Board of Directors with members drawn from industry, education, and government.  The staff must represent a diverse cross section of marketplace sectors concerned about regulation, including those who have experience with the advertising, production, government regulatory, and academic sectors.  Without that balance on the staff, decisions will not have the necessary credibility in the marketplace, an essential requirement for a successful system.
The organization will also require volunteers from various market sectors.  It would be impossible to assemble a staff with experience in every subject matter that may come before the self-regulatory body.

To support the organization, a graduated dues structure should be adopted, usually based on a relatively small percentage of the advertiser’s media spend.  Others who do not have specific media spending numbers could pay dues based upon their revenues.  Alternatively, dues could be flat.  Or any variation of them. 

There are some terrific resources out there to help establish general principles like the European Advertising Standards Alliance Blue Book on advertising self-regulation in Europe or on more specific issues like the U.S. based National Advertising Review Council’s White Paper on food advertising practices.  These are just two examples.  In reality, an abundance of resources are readily available to provide the beginning of a road map for China to consider should it elect to embrace a self-regulatory regime.

But even with all these wonderful resources that are available throughout the world, it is critical to keep in mind that self-regulation must reflect the market in which it operates.  It must reflect the grassroots concerns of the consumers in the local market.  Because in the end, grassroots support is critical to success. 

Assuming all of this can be put together and a partnership established, what is the road map to success?

The litmus test of success for any SRO will be its ability and commitment to rapidly respond to and resolve complaints from both consumers and competitors.  It must also have a clear line of communication with regulators to assure that is it responding to their concerns.  And most importantly, it should be empowered and encouraged to initiate proceedings on its own – sua sponte.  This last aspect is critical.  A successful SRO must not be passive, waiting for someone to bring a problem to them.  They must be proactive and step in when it believe marketplace behavior is problematic. 

Throughout all of this, however, we must also be conscious of the restraint factor.  As a market is developing and new ideas are introduced, players on all sides of the debate must exercise restraint by not engaging in overly aggressive marketing behavior even if it might be acceptable in another country and government organizations must restrain from intruding into new marketing practices in their infancy.  Government must allow the market to develop.  SRO’s must be allowed time to play the role of arbiters.  Hence the compelling need for government to partner with self-regulation.

For now, we need to continue our constructive dialogue.  Share ideas.  Create a task force.  Gain support at the grassroots level.  It’s a long journey and one of great discovery.  But in partnership with government, the advertising industry can work wonders and assure a truthful and respectful marketplace where all concerned prosper. 


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Doug Wood, a member of Reed Smith's Executive Committee and the firm's Advertising, Technology & Media Group, has more than 30 years' experience representing national and multinational companies in advertising, marketing, promotions, unfair competition, intellectual property, and e-commerce matters. Doug serves as legal adviser to several worldwide advertising industry trade organizations and is General Counsel to both the Association of National Advertisers and the Advertising Research Foundation. He is also the chief negotiator for the industry in relations and collective bargaining with the Screen Actor's Guild, the American Federation of Television and Radio Artists, and the American Federation of Musicians. In addition, Doug is the founder and Chairman of the Global Advertising Lawyers Alliance (GALA), a network of independent law firms, located in more than 50 countries, that have expertise in advertising and marketing law.

For more information, please visit the website of Lehman, Lee & Xu, GALA’s exclusive represntative in China, at http://www.lehmanlaw.com.

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