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ONLINE ADVERTISING: A BOOMING ALTERNATIVE TO TRADITIONAL ADVERTISING MEDIUMS
The increased availability of high speed internet connections and waning consumer interest in traditional print and television advertising have made the internet an attractive advertising medium. According to the Interactive Advertising Bureau (IAB), the online advertising market has enjoyed steady growth over the past twelve months, totalling just under $1.2 billion in the twelve months to 30 June 2007, an increase of 52.4% on the previous year.
Another factor in the growth of online advertising is lower cost when compared to television. The IAB reports that a 2005 study into the multimedia campaign behind the BankWest Zero MasterCard revealed for every dollar spent on online advertising, 2.4 dollars would need to be spent on television advertising to achieve the same result.
Before seeking to utilise the growing online advertising market, businesses need to be aware of a number of legal issues that will impact on their advertising strategy.
Trade practices laws are an important consideration for advertising, as an advertisement that misleads or deceives consumers will leave the advertiser business and possibly the advertiser liable under the Commonwealth Trade Practices Act 1974 (“the TPA”) or its State and Territory Fair Trading equivalents. For example, in Australian Competition and Consumer Commission v Nissan Motor Co (Aust) Pty Ltd both the car manufacturer and advertising agent were found liable for misleading and deceptive conduct under s 52 of the TPA. In this case the advertisement did not use the car model that the advertisement was intending to advertise, but rather it used a more expensive model.
Advertisers also need to comply with advertising industry codes of conduct. Australia has a self-regulatory system for advertising, managed by the Advertising Standards Bureau.
Also, advertising businesses wishing to design advertisements a particular size or shape, may encounter problems from online advertising service providers such as Fairfax, Google, Ninemsn and Sensis, who formed the IAB in 1997. Members of the IAB have agreed to standardise a set of advertisement sizes in order to reduce costs and inefficiencies associated with planning, buying and creating online media campaigns.
The online medium will attract an audience in many countries outside Australia, where trade practices laws and advertising codes of conduct may differ. To avoid any potential liability on the part of the advertiser business, an advertisement or campaign will need to comply (at the minimum) with the laws and codes of conduct in each jurisdiction in which the business has a physical presence.
Another important issue for businesses to consider, whether in online or traditional advertising mediums, is the advertising agreement. There are typically four parties involved in the production of an advertisement or campaign, namely the advertising business, the advertising agent or agency, a media buyer for the purchase of advertising space, and the proprietor of the advertising space..
The advertising business may need to execute an agreement with each of these parties, although the advertising agent or media buyer will contract with the media proprietor. If the advertisement contains an endorsement, for example a well known athlete endorsing a sports drink, an agreement between the advertising business and athlete will also be required.
The content of each agreement may vary depending on the parties involved. However, there are some common issues that need examination.
Each advertising agreement should cover intellectual property issues such as securing the appropriate authorisation, license or assignment from copyright and trade mark owners. This is particularly important in agreements between the advertising business and agency, as the advertising agency will own copyright in any original artwork it creates. The advertising business must either have the agency assign ownership of the copyright to them, or have the agency grant an exclusive licence permitting use of the artwork.
Under s 196 of the Copyright Act 1968 (Cth), all assignments and exclusive licenses must be in writing before they will legally bind the parties to the agreement. It is therefore imperative that the advertising business have a written agreement that provides for usage of copyright material.
Regulations under the TPA also need to be addressed in relation to advertising agreements, particularly where the advertisement contains an endorsement. Take the previous example of an athlete endorsing a sports drink. If the athlete were to state in the advertisement that he or she gains a competitive edge through frequent consumption of the sports drink, but in fact does not gain an edge or perhaps does not even consume the drink at all, the advertisement will be misleading and deceptive and therefore in breach of section 52 of the TPA.
Another source of misleading and deceptive conduct related to endorsements may arise where photographs are digitally ‘touched up’ to alter the appearance of the endorsing party (e.g. the athlete), or where footage is added to, subtracted from or otherwise altered in a moving image advertisement. The endorsing party may claim that they had been misled or deceived as to the content or format of the advertisement. Advertising businesses should therefore address this issue by ensuring the agreement allows for reasonable alteration or editing of the advertisement material.
While the above issues provide a starting point for businesses seeking to reap the benefits of the successful online advertising market, online advertisers should seek legal advice before entering into commercial advertising agreements.
