by Rachael Craufurd Smith, Reader in Media Law, University of Edinburgh

The Television Without Frontiers Directive (‘TWFD’) was designed to facilitate the free movement of broadcasting services across Europe by introducing a ‘one stop regulatory shop’ based on regulation by the ‘country of origin’ (Directive 89/552/EEC).  In order to deter forum shopping and a race to the bottom, as well as obtain the agreement of a majority of Member States, the directive also introduced a floor of common rules designed to advance certain general interest objectives, previously protected through domestic law.

Among these minimum requirements were a range of rules relating to broadcast advertising, which have remained broadly intact to date. Specific rules designed to facilitate the controlled introduction of product placement were added in the revisions leading to what is now called the Audiovisual Media Services Directive (‘AVMSD’), which broadened the scope of the TWFD to include on-demand audiovisual media services (Directive 2010/13/EU). The rules relating to the amount and placement of broadcast advertising in the original TWFD were not, however, extended into the on-demand field, which was seen as a new and developing sector.

The  AVMSD currently contains:

• Basic content standards to be met by all audiovisual media service providers. These include prohibitions on ‘surreptitious’ advertising and the need for commercial communications to be readily recognisable, not to be prejudicial to human dignity, human health or safety, or to encourage behaviour grossly prejudicial to the environment.  There are specific prohibitions on advertising certain products, such as tobacco products and prescription drugs, rules relating to the presentation of alcoholic beverages, and rules designed to protect children (article 9).
• Specific rules, also applicable to all providers, designed to regulate the inclusion of sponsorship messages and product placement (articles 10 and 11).
• Advertising rules applicable solely to television broadcasts, which focus primarily on the amount and placement of advertisements in and around television programmes (articles 19, 20, 22, 23).

These rules address consumer concerns over excessive advertising, as well as inappropriately placed, distracting, or surreptitious advertising.  As Rebecca Tushnet and Eric Goldman note ‘most consumers dislike most advertising most of the time’ and they often ignore, or seek to evade, exposure to advertising (Advertising and Marketing Law:  cases and materials Vol 1, 2^nd ed., 2014, 9). The AVMSD also seeks to protect consumers from harmful advertising and, more specifically, to protect children, who may not be able to understand the commercial context in which advertising operates. In addition, the restrictions on commercial communications are intended to protect the editorial integrity of audiovisual media services and enhance citizens’ access to reliable information as well as a number of other public interest objectives, such as respect for diversity and protection of the environment.

In response to technological and economic developments, the Commission commenced a wide-ranging review of the AVMSD, with a major public consultation in the summer of 2015.  In particular, the Commission focused on whether the regulatory load could be simplified or lightened and how best to strike an ‘optimal’ balance between the interests of consumers and commercial operators in this evolving landscape.  The public consultation did not, however, reveal any clear ‘consensus’ as to whether or how the advertising rules should be amended, though there was considerable support for further measures to protect children from exposure to unsuitable commercial communications, particularly those relating to unhealthy food and alcoholic drinks.

Despite this lack of consensus, in May 2016 the Commission put forward a proposal for revision of the AVMSD, which contains a veritable ‘bonfire’ of those commercial communication rules designed to protect consumers from undue exposure to commercial communications (COM (2016) 287 final).  Although Member States would remain free to impose more exacting requirements on domestic operators in this field, certain states have proved reluctant to enforce even the basic advertising requirements in the AVMSD, and it is possible that the minimum standards in a revised directive would become the de facto standards throughout much of the EU.

In September 2016, the European Parliament Committee on Culture and Education proposed a number of important modifications to these proposals, which, if accepted, would significantly re-balance the directive in favour of consumers (Draft Report, 5.9.2016, 2016/0151(COD)).  This call for further reflection on the direction taken in the Commission proposal is welcome.  It is, however, suggested that in certain areas the Committee amendments may not go far enough while, in others, they may go too far in seeking to extend the existing rules to video-sharing platforms and user-generated content.  These points are explained in more detail in the two sections below, which consider the proposals relating to television advertising and product placement respectively.

1. Relaxation of the Broadcast Advertising Rules

The Commission proposal (‘CP’) replaces the existing advertising limit of 20% per clock hour (article 23.1 AVMSD) with a daily limit of 20% (article 1(17) CP).  Recital 18 to the CP and the initial explanatory commentary indicate that the Commission also wished to remove the prohibition on isolated advertising slots (sports events being the only exception) contained in article 19(2) AVMSD, though this is not taken forward in the CP text of the directive.  In addition, the CP would make it possible to interrupt films and news programmes every 20 minutes, rather than, as now, every 30 minutes; though 30 minutes is retained for children’s programmes, provided the programme exceeds 30 minutes (article 1(16) CP).

These changes would enable broadcasters to cluster advertising in extended breaks within and around particularly popular programmes, notably during prime-time; to introduce additional breaks in films and news programmes; and possibly even include spot advertising.  Although article 20.1 AVMSD requires that ‘the integrity of the programmes, taking into account natural breaks in and the duration and nature of the programme’ should not be prejudiced, any attempt to enforce this provision, given the open-ended nature of terms such as ‘integrity’, is likely to lead to protracted debate.  Moreover, programmes can be deliberately structured to allow for commercial breaks, facilitating integrity through design.  Child protection from undue commercial exposure would also be undermined by extended advertising breaks between and within programmes, even if the number of advertising slots in-programme remain controlled.

These changes are presented as enhancing ‘flexibility’ and ‘balance’ (recitals 18 and 19 CP), both intuitively attractive qualities.  It is pointed out that consumers now have access to advertiser-free on-demand services and can thus decide not to watch services funded by adverts.  The existence of such alternatives may also impose competitive pressures on advertiser-funded services to respond to consumer sensitivities over advertising.  But flexibility for consumers, as opposed to broadcasters, through subscription to advertiser-free services, comes at a price that some may not be able to afford.  Moreover, certain attractive programmes may only be available on advertiser-funded channels.  It is, of course, possible that broadcasters will re-invest any enhanced revenues in attractive programming, so that consumers will ultimately benefit from the additional commercial exposure, but there is no guarantee that this will be the case. Profits may instead be paid to shareholders in the form of dividends and it is by no means evident that consumers will be happy with this ‘re-balancing’ of interests.

The EP Committee on Culture and Education proposes the insertion of a 20% limit on broadcast television advertising during the evening prime-time period of 20.00 to 23.00 (Am. 77, EPC). It would still, however, be possible to bunch advertising at certain points in this four hour period and the proposal does nothing to protect children from lengthy advertising breaks during the early evening.   In addition, the Committee proposal explicitly repeals the prohibition on isolated advertising spots in article 19(2) AVMSD.

These amendments arguably do not go far enough to protect consumers from the potential impact of the CP, which could lead to a significant increase in television advertising. In addition, allowing spot advertising could disrupt television viewing.  There is also a case for extending advertising controls to on-demand audiovisual media services in order to level the regulatory field and further protect consumers.  Although some on-demand providers operate solely on a subscription basis others rely on advertising and, as on-demand becomes an increasingly important mechanism for accessing audiovisual services, the argument for extending controls to this sector, rather than removing them from the broadcasting sector, is strengthened. The Committee clearly found the case for a level regulatory field convincing but did not seek to apply this principle to limits on advertising exposure.

2. Product Placement

Under the AVMSD, product placement in all audiovisual media services, not just broadcast services, is prohibited, though Member States can authorise product placement in films, series made for audiovisual media services, sports and light entertainment programmes (article 11 AVMSD), as well as  prop placement (ibid).  Product placement cannot be authorised in children’s programmes (article 11 AVMSD). The AVMSD also seeks to ensure that product placement does not have an undue editorial influence, give undue prominence to the products in question, directly encourage the purchase of such products, in particular through promotional references, or constitute a form or surreptitious advertising (ibid.).  To prevent the latter, viewers must be informed of the existence of product placement at the start and end of programmes, though this requirement may be waived where the programme was neither produced nor commissioned by the media service provider in question or an affiliated company (ibid.). Product placement for tobacco products and prescription drugs is prohibited (article 11.4 AVMSD).

The Commission proposal reverses the presumption of prohibition and allows product placement subject to certain exceptions.  This is explained on the basis that the previous liberalisation did not bring about the expected take-up of product placement, in part because of uncertainty caused by the nature of the rules (recital 15 CP).

The practical impact of the CP in the field of product placement is unlikely to be as great as in the field of broadcast advertising, discussed above.  This is in part because product placement would remain prohibited in news, current affairs, consumer affairs, and religious programmes, as well as programmes with a significant children’s audience (article 1(13)CP).  The latter prohibition in particular is to be welcomed, in that programmes aiming at a family or even adult audience may attract significant numbers of children.  Nevertheless, the provision does facilitate the inclusion of product placement in a wider range of programmes, for example, documentary, history, nature, and science programmes, which can only with some effort be considered ‘series’ or ‘light entertainment’ programmes, where product placement is currently allowed (article 11.3.(a)AVMSD).  It may be noted that regulators such as Ofcom in the UK have in fact taken quite a broad interpretation of these permitted categories, allowing product placement in, inter alia, ‘series made for television (or other audiovisual services)’, so that the impact of the change in certain countries may not be that great (see Ofcom Broadcasting Code, rule 9.6).

More significant is the removal in the Commission’s proposal of the prohibition on giving ‘undue prominence’ to the product in question and of the clarification that the prohibition on directly encouraging the purchase or rental of goods and services includes ‘making special promotional references to those goods and services’ (see article 1(13) CP cf article 11.3 AVMSD).  These changes could well encourage more overt forms of product placement.  Although this could render commercial communications more recognisable, within the meaning of article 9.1.(a) AVMSD, it could also make them more intrusive and disruptive for viewers. Although viewers must be informed of the existence of product placement at the start of a programme, affording them the choice to look for an alternative programme, programmes that have not been commissioned by the media service provider in question or an affiliated company may not be required to contain such a notice.  In many instances, therefore, consumers will not even be presented with this choice.

The EP Committee has proposed that, in order to create a level regulatory playing field, the basic standards relating to commercial communications required of all audiovisual media services in the AVMSD should be extended to video-sharing platforms (amendment 33 EPC).  A similar approach is adopted in relation to the product placement rules (amendment 35 EPC).  The Committee has, however, modified the terminology used by the Commission, which prohibits product placement in programmes ‘with a significant children’s audience’, to ‘children’s programmes and any other content aiming at children’s audience’.  The Commission’s approach focuses on whether a significant number of children in fact watch the programme, while the Committee focuses on the intention of the service provider and possibly other factors such as the marketing and timing of the programme.  The latter may make it easier for the provider to gauge whether product placement is permissible, but it also affords more scope to game the system by arguing that a given programme was never ‘aimed’ at children.

The Committee also reinstates the provisions relating to ‘undue prominence’ and ‘promotional references’, excluded in the Commission proposal (amendment 35 EPC).  Such a move is to be welcomed for the reasons indicated above, but their reinstatement could prove problematic in the specific context of user-generated videos.  In countries such as the UK, commercial communications in vlogs of this type are already subject to self-regulation under the Committees of Advertising Practice (CAP) Code, overseen by the Advertising Standards Authority (ASA) (see https://www.cap.org.uk/Advice-Training-on-the-rules/Advice-Online-Database/Video-blogs-Scenarios.aspx#4).  The basic rule is that vloggers must clearly indicate when they have incorporated paid-for commercial communications, including product placements, in their videos.  Guidance relating to the CAP Code suggests a number of ways of indicating the existence of product placement that could be more effective and helpful for the viewer than requiring identification at the start and end of the video (ibid.).  In the context of user-generated videos there may also be less cause for concern about the prominence of product placement or even promotional references, provided the nature of the commercial communication is made plain.  The Committee is correct to recognise that the inclusion of commercial messages in user-generated content can be problematic but, rather than carry over provisions designed specifically for audiovisual media services, it may be preferable to encourage the adoption of codes of conduct at the domestic level, which could afford greater flexibility in addressing this distinct field.

Conclusion

The Commission proposals for revision of the AVMSD would, if adopted, lead to a significant rebalancing of commercial and consumer interests.  Although the proposal includes specific provisions designed to enhance the protection of children, consumers in general are likely to find themselves worse off. In particular, the proposal would open the door to additional advertising on broadcast television and facilitate more prominent product placement across all audiovisual media services. It is doubtful whether consumers are aware of the implications of these proposed changes for the audiovisual services they consume and even more doubtful, given their antipathy to advertising generally, that they would endorse them if they were.  Although the amendments put forward by the EP Committee for Culture and Education go some way to addressing these concerns, it is arguable that they do not go far enough and it is consequently important that consumer and audience groups continue to make their views known at the European level, alongside commercial interests.