Deregulation Bill

Written evidence submitted by the Advertising Association (DB 15)

1. Introduction & context

1.1. The Advertising Association (AA) is the single voice in the UK for all sides of the advertising and promotions industry worth £17bn in 2012 – advertisers, agencies, and media. A list of AA members can be found here:

1.2. We welcome the opportunity to provide written evidence on the Deregulation Bill. We support the intentions of the Bill to reduce regulatory burden and remove requirements that no longer have practical use. It is within this context that we submit our views regarding the burden of lengthy and complicated mandatory information on financial services advertising. Such information is not effective in protecting or informing consumers and costs the media and advertisers considerable sums.

1.3. The creative industries, and marketing and advertising within that, are a key UK sector. The January 2014 statistical report by the Department of Culture Media and Sport [1] found that 1 in 12 jobs in the UK is in the Creative Economy. ‘Advertising and marketing’ remains the second highest employer within this sector, making up 18% of the Creative Economy. In 2012, employment growth in the Creative Industries (8.6%) was 12 times that of the wider economy (0.7%). The rate of export growth for the Creative Industries, from 2009-2011, increased by 16.1% compared to 11.5% for total UK exports.

1.4. As was found by research carried out by the think-tank Credos: "The advertising industry is central to the creative industries. It provides a third of all TV revenues and two-thirds of newspaper revenues; it supports sectors from photography to film production. We estimate that over 550,000 people work in jobs that are funded by advertising revenues, or involved in the commissioning, creation and production of advertising across the relevant supply chains." [2] The UK advertising industry is recognised across Europe for its leadership in adspend, creativity, and effective system of self-regulation.

2. Lengthy Terms & Conditions in Advertising

2.1. Lengthy and complex terms and conditions in financial services advertising are ineffective. Caveats or risk warnings in advertising of financial products are necessary to protect consumers. However, they are often too long and complex to be understood and absorbed. Consequently, they tend to be ignored and so fail in their objective. This affects all media to a greater or lesser extent and, within this, radio in particular.

2.2. Lengthy mandatory information scripts are ineffective because:

2.2.1. Advertising is an important early-stage communication with potential customers, but this stage is not the right moment in the purchasing decision process for the consumer to be expected to take in detailed, mandatory terms. Consumers do not want advertising to provide the minutiae of a product’s terms and conditions or risks – they would rather be directed to other reference sources (e.g. websites) for more information [3] which they can review at their convenience. They also consider these conditions to be more about the business protecting itself rather than the consumer [4] .

2.2.2. Consumers do not pay attention to "legals"; this is especially true for radio where attention levels for a radio ad with a complex, worked, credit example can fall away by as much as 50%. [5] Indeed, APR – as an example - is not always a useful piece of information – research conducted by the Government shows that it is not understood by consumers and, particularly where short-term credit is concerned, consumers are more interested in the total cost than the APR [6] .

2.2.3. Easy-to-remember catchphrases work: the Dutch risk warning "Borrowing money costs money" has over 85% recall [7] . Less is more: radio ads focusing only on critical information increase spontaneous recall by over 38%. [8] People do not remember the most important figures if they are lost (hidden) in complex mandatory wording (below 4% for a radio ad with a worked credit example). [9]

2.3. Current requirements for such information is creating substantial unnecessary burden and costs to industry:

2.3.1. For radio alone the estimates of the costs add up to £136.1m for the 12 months to December 2013, broken down as follows:

Cost impact of terms and conditions

Estimates 13 March 2014

Type of cost

Estimated annual value (£million)

Current airtime cost of terms and conditions


Lost revenue to advertisers (ROI) due to lower listener engagement and attention for campaigns affected [1]


Potential incremental revenue to radio of reduction in Ts and Cs [1]


Source: RAB

2.3.2. In other media, while the effect of the impact on audience engagement may differ, there may be additional costs in production and space/time purchasing.


2.4. We support the approach taken by the FCA in its recent consultation on the Consumer Credit regime for a short and simple risk warning in relation to high cost short term credit and signposting to the Government’s Money Advice Service. We would like to see this approach adopted on other products in order to increase the effectiveness of important messages for the consumer together with efficiency for advertisers and media. As noted above, lengthy, mandatory terms provide no discernable benefit to consumers and are a considerable burden for advertisers and the media.

Conclusion & recommendations

2.5. While we recognise that many of the requirements for information in advertisements comes from the EU, we would support the inclusion of wording in the Deregulation Bill to:

2.5.1. Reflect the need to have appropriate information and advice in financial services advertising in the interests of clarity and consumer understanding;

2.5.2. Encourage regulators to give equal prominence within their regulatory code to the importance of ensuring advertisers do not include irrelevant or excessive additional warnings (over-compliance) which serve no purpose other than to make the advertisements unclear and confusing to consumers;

2.5.3. Avoid gold-plating of EU rules beyond their minimum requirements;

2.5.4. Reduce the burden of existing EU rules for example excessive requirements for legal terms and conditions imposed by the Consumer Credit (Advertisements) Regulations 2010, with particular reference to the worked credit example; and,

2.5.5. Reduce the potential burden of legal terms and conditions imposed by Article 11 of the European Directive on Credit Agreements relating to residential immovable property.

2.6. We thank you for the opportunity to submit our views to the Committee and are available for further information.

March 2014

[1] Creative Industries Economic Estimates: January 2014 Statistical Release. DCMS. Available here.

[2] Advertising Pays: How advertising fuels the UK economy. Deloitte. 2012. Available here.

[3] Ipsos-MORI: Making Consumer Markets Fairer: Payday lending advertising research conducted for BIS. October 2013. Available here.

[4] Navigator: Radio Commercials and Wealth Warnings, research report prepared for The Radio Advertising Bureau February 2004. Available here.

[5] The Effect of Lengthy Terms and Conditions on Consumer Attention and Perceptions. Radio Advertising Bureau. 2013. Available here.

[6] Regulating Consumer Credit (Technical Paper). National Audit Office. December 2012. Available here.

[7] GFK Panel Services Research on behalf of AFM (Authority for Financial Markets in Holland) 2009

[8] Improving the effectiveness (consumer attention and understanding) of legal caveats and risk warning in radio advertising. Radio Advertising Bureau. 2013. Available here.

[9] Idem.

[1] Motors, telecoms, retail and finance.

[1] I.e. the opportunity cost currently incurred by radio of lengthy terms & conditions which discourage advertisers from using the medium.

Prepared 20th March 2014