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COM 2004/0001 Directive on Services in the Internal Market and its Effect on the Advertising Industry

Dear Member of the Internal Market and Consumer Affairs Committee,

Since the release of the proposal for a Directive on Services in the Internal Market (2004/0001) last year there has been much controversy relating to what will fall within its scope and how this will affect Member State markets, as well as the internal market of the EU.

At this stage of the process, prior to first reading, it is still unclear to many what effect the Services Directive may have. This has resulted in misunderstandings relating to the detail of what the Directive proposes for certain industries and an aggressive stance against the Directive and its aims from some quarters.

In this letter it is the signatories' aim to demonstrate that the Directive will enable EU business to compete on an equal footing across the Community, whilst ensuring that high levels of consumer protection are maintained.

We would like to clarify to Members of the European Parliament exactly what will fall within the scope of the proposed Services Directive and, perhaps more importantly, what will not.

The benefits to the advertising and marketing sectors of the Country of Origin clause in the Services Directive are:

• All off-line sales promotion will fall within the scope of the Directive so it will be easier for businesses to run similar promotions on goods throughout the internal market;

• All advertising in the press which is sold across borders will fall within the scope of the Directive, thus expanding the market in this area;

• Advertising agencies wishing to offer their services in another Member State will have the right to compete on an equal footing with agencies established in that Member State.

• It brings off-line and direct mail in line with on-line or broadcasting which benefit from Country of Origin (the e-commerce Directive of 2000 and the Television Without Frontiers Directive of 1989).

As you can see from the bullet points above, the Country of Origin basis of this proposal has a small but significant and positive impact on how the advertising and marketing sectors are able to do business across borders in Europe.

Some myths relating to the effect the Services Directive will have on advertising services have been circulating over the last few months. Now is the time to dispel those myths in order that sensible discussions on how to make the best possible law for all can move forward.

Myth

The Country of Origin clause will allow business to circumvent national rules on misleading or aggressive commercial practices.

Fact

• What CoO does NOT do is give business carte blanche to behave in an irresponsible way, simply because it is subject to the rules of its own Member State instead of the rules of the Member State in which it is operating.
• The Country of Origin treatment of advertising services which do come within the scope of the proposed Services Directive will in no way affect the level of protection afforded to consumers in the EU;
• The Unfair Commercial Practices Directive (2005/29 EC and the Misleading & Comparative Advertising Directive (1997/55 EC) set out detailed rules for consumer protection which ensure that aggressive or misleading practices are not allowed in any Member State;
• The Enforcement Regulation (2004/2006 EC) obliges Member States to cooperate with each other when an aggressive or misleading practice takes place across borders;
• It is never in the interest of advertisers to alienate their clientele in this way. Self and co-regulatory codes are in place to ensure that consumers receive the highest possible levels of protection.

Myth

The Country of Origin clause will allow a flood of advertising which could be damaging to the health or moral well-being of vulnerable groups.

Fact

• Article 16 of the proposed Services Directive gives Member States the right to refuse advertising or promotions if they give cause for concern on health, public policy or environmental grounds;
• All advertising of tobacco is subject to the rules of the Tobacco Advertising and Sponsorship Directive (2003/33 EC), which bans the advertising and sponsorship of tobacco in the print media and on the radio;
• All television advertising is subject to the rules of the Television Without Frontiers Directive (1989/552 EC as amended) which ensures the protection of minors and human dignity and which has specific rules relating to the advertising of tobacco, alcohol and pharmaceutical products;
• The Unfair Commercial Practices Directive makes specific reference to practices which are aggressive in relation to vulnerable groups. It bans any 'direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them'.
• All advertising of pharmaceutical products is regulated at European level and direct to consumer marketing is prohibited.

Myth

The Country of Origin clause will allow a flood of advertising relating to gambling even in Member States which have banned this practice.

Fact

• All advertising relating to gambling and the provision of gambling services is explicitly excluded from the Country of Origin principle of the proposed Services Directive.

As you can see, the proposed Services Directive does not remove the autonomy of Member States to decide what advertising is or is not acceptable to their markets. The protections conferred by other important pieces of EU legislation relating to consumer law and advertising are unaffected by the Services Directive.

The change the proposed Directive does effect is to remove unnecessary restrictions on the freedom to provide certain advertising and promotions services across borders, whilst ensuring that consumer protection is maintained via EU and national laws.

The Services Directive will give legal certainty to a business which in 2003 attracted expenditure of over €98, 995 million across what is now the EU 25 (plus 52 billion Euro for direct marketing) and which employs over 930 000 Europeans in high quality jobs (plus 500,000 in direct marketing), contributing significantly to the achievement of the Lisbon goals by 2010.

For this reason it is entirely inappropriate to place advertising services under a Country of Destination regime, as suggested by the Rapporteur, Mme Gebhardt. Under this regime, legal certainty for business is significantly diminished. Small and medium businesses will not attempt to trade across borders under this regime, which surely undermines the whole purpose of the Directive.

The compromise amendment put forward by the Rapporteur, which gives Country of Origin treatment to market access and Country of Destination treatment to the exercise of business, will have the same effect as Country of Destination treatment for both access and exercise. Put simply, if a business is unsure of what law it is subject to, it will not risk falling foul of that law.

Consumer protection is uncompromised by a Country of Origin regime for advertising services, whilst possibilities for opening up the internal market in commercial communications are compromised by subjecting the industry to a Country of Destination regime. We already have had a long experience without problems of Country of Origin rules specifically for broadcast advertising, e-commerce, and, by implication, (supported by some Court of Justice cases) for all other advertising and marketing cross-frontier activities.

The European advertising industry urges you to ensure that a rational approach to deciding the regime advertising services will be subject to is taken. The facts relating to the efficacy of European consumer protection law within the context of the proposed Services Directive are clear and we hope you will use these facts in your deliberations.

We look forward to a sensible outcome to this debate which will ensure a vastly improved internal market in services, providing legal certainty and an enabling environment for business whilst maintaining the high level of consumer protection of which the European Union can be justly proud.

Signatories:

Andrew Brown - Director General, The Advertising Association
Andrew Brown and Georg Wronka - Directors, The Advertising Information Group
Ross Biggam - Director General, Association of Commercial Television in Europe
Dominic Lyle - Director General, European Association of Communications Agencies
Angela Mills Wade - Executive Director, The European Publishers' Council
David Mahon - Executive Director, European Federation of Magazine Publishers
Alastair Tempest - Director General, Federation of European Direct and Interactive Marketing
Bryan Ellis - Vice-Chairman, Toy Industries of Europe
Stephan Loerke - Managing Director, World Federation of Advertisers
RA Dr Georg Wronka - Hauptgeschäftsführer, Zentralverband der deutschen Werbewirtschaft