What is compliance?
Much of my working day is spent dealing with compliance in some form or other and I enjoy the challenge, but nonetheless I freely admit that compliance is not the most stimulating topic in the world. It is, however, an important one for any marketer and, indeed, anyone running a company.
All marketing must be legal, decent and truthful – that’s the bottom line. If you’re marketing a product or a service you must be honest about what it is or does, so you must describe it accurately, and you must also be socially responsible, which means you mustn’t encourage illegal, unsafe or anti-social behaviour.
Of course, to be effective marketing needs to be persuasive – naturally you want to highlight the benefits of your product or service – but nonetheless you must adhere to these principles. In the UK there are regulations which are designed to ensure that you do this and you must comply with them.
Which regulations apply?
There are two key sets of regulations. The first is the Consumer Protection from Unfair Trading Regulations. These cover a range of areas, including special offers, endorsements, promotional activities, and competitions and draws.
There are also specific requirements for certain sectors, particularly medicines, environmentally friendly products, beauty products, tobacco, food and alcohol. For example, you can only describe your drink as ‘low alcohol’ if it contains between 0.5% and 1.2% alcohol by volume.
The second is the CAP Code, which is the rule book for non-broadcast advertising, sales promotions and direct marketing. It’s administered by the Advertising Standards Authority (ASA) and it sets out in detail what marketers can and can’t do.
One of the areas it covers is making sure marketing communications can be clearly identified as such. There are also sections which deal with how to market to children and the need to obtain written permission before portraying members of the public in marketing communications.
~Business Game Changer Special Promotion~
Data protection rules
I’ve talked about the two key sets of regulations, but actually there is a third set – the data protection legislation, specifically the Privacy and Electronic Communications (EC Directive) Regulations 2003, the Data Protection Act 2018 and the General Data Protection Regulation (GDPR). These are administered by the Information Commissioner’s Office.
Data protection legislation obviously has a clear application to marketers undertaking direct marketing, but anyone gathering or storing information about customers or potential customers – for instance through a prize draw or other type of prize promotion – needs to take them into consideration. The guiding principle here is that you must look after other people’s data and keep it secure.
What happens if I don’t comply?
If you don’t comply with the Consumer Protection from Unfair Trading Regulations, you may be investigated by your local authority’s trading standards department. This could be a lengthy and potentially expensive process, which could result in your business being prosecuted and fined. Even if legal proceedings aren’t instituted, the episode certainly won’t enhance your reputation with your customers.
If you don’t comply with the CAP Code and a complaint is made against you, the ASA is likely to investigate. You’re obliged to respond to the ASA’s requests for information and it will ultimately publish a ruling, either upholding or not upholding the complaint. Even if the complaint is dismissed, merely being the subject of a complaint can be quite harmful for your business and if it’s upheld the reputational damage can be quite significant.
The fines for not complying with data protection legislation can be substantial. Under the Data Protection Act, fines of up to £500,000 can be imposed, depending upon the severity of the breach, and the maximum penalty for a GDPR data breach is 4% of the global annual turnover of your business or €20 million, whichever is higher.
Compliance in practice
As an example of what compliance can entail, if you’re running a prize promotion, which is what my company, Prizeology, specialises in, it’s covered by section 8 of the CAP Code. To give you an idea of the extent of this, there are 18 sub-sections and some of those run to several sub-sections of their own.
Section 8 starts by pointing out that promoters – that’s you, if you’re running the promotion –are responsible for all aspects and stages of their promotions and that they must conduct their promotions fairly, efficiently and in a timely fashion.
Promoters must also ensure – and this is very much a theme that runs throughout the CAP Code – that their promotion avoids causing unnecessary disappointment to the public. Despite what you might think, inserting a phrase such as ‘subject to availability’ does not relieve you of your obligation to do everything reasonable to avoid disappointing participants.
In fact, promoters must be able to demonstrate that they have made a reasonable estimate of the likely response and that they were capable of meeting that response or consumers had sufficient information to make an informed decision on whether or not to participate in the promotion. With a prize promotion, at its most basic this means you have to have the prizes you’ve promised available.
Terms and conditions
All marketing communications or other material referring to promotions must communicate all applicable significant conditions or information where the omission of such conditions or information is likely to mislead. In other words, promotions need terms and conditions.
It depends on the circumstances, but for a prize promotion Ts&Cs would normally include how to participate, including a clear explanation of any free entry routes, when the promotion starts and its closing date. Although not all types of promotion need a closing date, generally speaking prize promotions do. If you don’t have a closing date, you must be able to demonstrate that the absence of one will not disadvantage participants.
If there are restrictions on the promotion, for example geographic restrictions or an upper or lower age limit, they must be included in the terms and conditions, and in a prize promotion the number and nature of the prizes must be specified. If the exact number of prizes cannot be predetermined, as might be the case in, for example, a magic moment prize promotion, you need to make a reasonable estimate of that number.
It’s always sensible to get professional support when drawing up terms and conditions, whether that’s from a specialist like Prizeology or a lawyer with experience in this area. Never – and this is probably the single most useful piece of advice I can give you – simply lift terms and conditions from another promotion, because Ts&Cs must be tailored for each individual promotion.
Why is compliance so important?
If you decide to join an industry body such as the Direct Marketing Association (DMA), as a condition of membership, your company will be asked to comply with a code of conduct, which, although not a legal requirement, promotes good practice. This is because if an individual business does not demonstrate that compliance is important to them, it damages perceptions of the marketing sector as a whole.
However, compliance is also for your own benefit. In an era of ‘fake news’, trust may seem to be in short supply and compliance is particularly crucial in building trust between your organisation and your clients or consumers. The simple fact is that as a business, particularly a media business, you can’t afford not to take compliance seriously, because if you don’t and you’re caught out, the consequences can be serious and, whatever sector you’re in, can have a significant impact on your ability to operate.
By Sarah Burns
Sarah Burns is managing director of Prizeology, which works with businesses, brands and agencies on all types of promotion, in any space, with a particular focus on best practice and compliance.
