Preserving advertising standards

The board of the Advertising Standards Authority (ASA) is in a race against time to agree on and implement a new funding model and accredit its regulatory code. The stakes are high, as any failure to do so could result in commercial speech in SA being officially regulated. This, says board member Mike Gendel, would "bring its own set of problems, which marketers and the advertising industry don’t want".

The ASA, founded in 1968, has been put into business rescue, which, says Gendel, allows it to continue its work. In an interview with the Financial Mail, Gendel was at pains to point out that the ASA was still delivering on its core function of regulating the industry and adjudicating complaints. "In spite of the difficulties and under tough circumstances, it’s doing its job and doing it well," he says.

With an annual operating budget of about R14m, the ASA is showing a monthly shortfall of R400,000.

Money is at the heart of the problem. The crunch began five years ago, when big retail brands under increasing margin pressure started cutting their contributions.

The situation was compounded by the print media’s resignation from the ASA, which left just the broadcasting sector keeping it afloat, says Gendel.

The organisation’s difficulties were further compounded when a 2015 KPMG investigation into the structure, funding and efficiencies of the ASA recommended that it be either wound up and replaced by a new entity created by the industry, or put into business rescue to "staunch the bleeding". The report also recommended that a new board be elected with fair representation from all funders, and that the incumbent CEO and management should be "put on review and replaced if needed".

Gendel takes issue with the report, saying it does not give the full picture, claiming only two ASA directors were consulted and no members of the audit, risk & remuneration committee were spoken to.

He says it’s pointless to rake over the report while the priority "is to get the body back on its feet" and ensure "those who benefit from the code pay". He’s referring to the marketing community, the media and advertising agencies. Business rescue, he says, was a prudent decision, as going into voluntary liquidation would have meant government would have stepped in to regulate in terms of its obligations pertaining to the Consumer Protection Act.

Right now the ASA board, which consists of volunteers, is working to make sure that a new national regulatory code receives accreditation and that a funding model is reviewed. No decision has yet been made, but the ASA is looking at best practice from around the world.

In the UK, for instance, that country’s ASA is funded by advertisers through an arms-length arrangement that guarantees its independence.

In the US, the Advertising Self-Regulatory Council is funded by the business community through the Council of Better Business Bureaus.

Gendel says a hybrid model is being discussed in which marketers (brands) would pay a levy, there would be a contribution from media outlets and payment would still be made for business-to-business hearings. Complaints from the public would be adjudicated free of charge. The ASA board hopes to have all of this in place by April.

The challenge would appear to be who ponies up the money and how much is involved.

Gendel politely says the marketing community is "being engaged with" through the Marketing Association of SA and he is hopeful for a positive response, but it seems the challenge is a little tougher than that, as reaching consensus is proving to be difficult.

The other problem is that not all big advertisers are members of the association. The broadcast industry, through the National Association of Broadcasters, is committed to further funding, provided other stakeholders contribute a proportional share.

Gendel confirms the Interactive Advertising Bureau, which plays in the online space, has signed on as a member of the ASA and that efforts are being made to woo back the print and outdoor industries.