Privacy Challenges in Marketing Practices European (over)ruling of the use of personal data?

This post was written by Avv. Felix Hofer.

Multinational companies planning to target EU consumers with sophisticated marketing techniques may easily find themselves on a marshy ground, if they do not deserve sufficient attention to European privacy laws. Costumer profiling, monitoring and categorizing offers essential information for crucial business decisions, but have also to comply with restrictions and prescription likely to result a lot stricter than those non-European companies may be familiar with. Find in the following article a summarizing picture of what to worry about when marketing strategies are meant to cross the Ocean and to reach out to Europe.

New Copyright Law in Chile

This post was written by Andrés Grunewaldt

On the World Intellectual Property day, we want to share the following information with you:

After a long and intense congressional debate that began in 2007, the Chilean government has announced the promulgation of a law amending important and sensitive subjects covered in our current Intellectual Property Law No. 17,336.

The changes that will soon go into effect can be divided into three groups: the establishment of a new framework of exceptions and limitations to copyright and related rights, the incorporation of new offences, increased penalties and the consecration of new tools intended to prosecute crimes against intellectual property, and an extensive chapter on the liability of Internet Service Providers (ISP).

With regards to the first group, the amendment seeks to find a balance between the rights of the owners of the works and the right of public access to them, increasing the range of exceptions. For example, extending the framework of action for libraries and nonprofit archives in terms of the reproduction, translation and digitization of a particular work allows for it to be used for criticism, illustration, teaching or research purposes and also expands the use of works that aim to benefit a person with visual or hearing impairment.

Regarding IP crimes, it establishes a new framework of civil and criminal penalties for copyright violations by introducing new mechanisms and tools of procedure for cases of use outside the legal framework, especially in cases of piracy, increasing prison sentences and fines, which in the case of repetition can reach up to US 140,000.

Lastly, an extremely important chapter is concerned with regulating the liability of internet service providers, where content is present in a web page that infringes on intellectual property. In this case, after many discussions, the system that was opted for was one in which only under a court order will it be possible to block a website. In addition, the ISP must meet certain requirements in order to be exempted from liability for illegal content that customers are able to put on to the Internet.

In short, this is the most serious reform that Intellectual Property Law has undergone since its publication in 1970; creating a completely new scenario from hereon out in terms of copyright protection.

Andrés Grunewaldt
Senior Associate
T (56 2) 445 6000

Arms' War in Italy: Aggressive Marketers Versus Privacy Watchdog

This post was written by Avv. Felix Hofer, and first appeared in Volume V of the Gala Gazette.

1. Implementing both, EU Directive 2002/58/EC of July 12th, 2002 (Directive on privacy and electronic communications) as well as Directive 2000/31/EC of June 8th, 2000 (Directive on electronic commerce) the Italian legislator decided that unsolicited commercial communication must always to adopt a strictly “opt-in” approach. The choice clearly didn’t drive marketers into a state of happiness: they felt that their business was unnecessarily harassed by complex and costly burdens. Therefore they decided initially not to care too much about the requirements set by the new regulations and to continue in their proven aggressive marketing techniques.

In doing so they nevertheless had underestimated a couple of factors: on one hand, consumers’ reaction (who became more and more annoyed by SPAM and behavioural targeting and were no longer tolerant of disturbing intrusions into their sphere of personal intimacy), on the other hand, the role of a Special Authority (the Privacy or Information Commissioner - DPA) in charge – in all countries members to the EU - of supervising proper compliance with the key principles of protection of personal data (and quickly focusing on the purpose of achieving a correct balance between consumers’ privacy and electronic marketing.

Click here to read the full article as published in Volume V of the Gala Gazette.

Children's Advertising - Fast Food Industry Initiative

This post was written by Peter Le Guay, Partner at Thomson Playford Cutlers.

The Initiative

Childhood obesity has become a major public health issue in Australia with evidence showing that excessive consumption of foods high in fat, sugar and salt is a major contributor to childhood obesity.

One of the most recent steps implemented to combat childhood obesity is the Quick Service Restaurant Initiative for Responsible Advertising and Marketing to Children (“Initiative”) developed by the Australian Association of National Advertisers (“AANA”) in conjunction with a number of fast food companies in Australia.

The Initiative, a self-regulatory scheme, commenced on 1 August 2009 and covers fast food ads run during children’s television viewing times as well as internet sites and computer games targeting children.

The aim of the Initiative is to ensure that only food and/or beverages that represent healthier choices are promoted directly to children (defined as being persons under the age of 14 years) and to ensure that parents or guardians can make informed product choices for their children.

The Initiative requires signatories to ensure that advertising or marketing to children for food and/or beverages represents:

(a)   healthier choices as determined by a defined set of nutritional criteria (being new sugar, salt and fat limits prepared in consultation with dieticians); and
(b)   a healthy lifestyle designed to appeal to the audience through messaging which encourages healthier choices and physical activity.

In addition, signatories must:

  • not engage in product related communication in Australian schools except where specifically requested or agreed to with the school administration;
  • not use popular personalities or licensed characters to promote food or beverage products to children unless that communication complies with (a) and (b) above;
  • not advertise premium offers in any medium directed to children; and
  • ensure that nutritional information is provided on packaging wherever possible including on company websites or upon request.

Major fast food companies such as McDonalds, KFC, Pizza Hut, Hungry Jack’s, Oporto, Red Rooster and Chicken Treat have supported the Initiative. However, other major fast food companies such as Nandos and Dominos Pizza are yet to sign.

Complaints in relation to alleged breaches of the Initiative can be made in writing to the Advertising Standards Bureau.

In addition to adhering to the specific rules set out in the Initiative, signatories are also required to abide by the following Codes of the AANA:

1.      AANA Code for Advertising & Marketing Communications to Children

The object of this Code is to ensure that advertisers and marketers develop and maintain a high sense of social responsibility in advertising and marketing to children in Australia. The Code contains, among other things, a prohibition on the sexualisation of children (defined as being a person aged 14 years or younger) or using sexual imagery in advertising/marketing to children that is contrary to prevailing community standards, as well as a prohibition on the portrayal of unsafe situations or unsafe use of products which may encourage children to engage in dangerous activities.

2.      AANA Food and Beverages Advertising & Marketing Communications Code

The object of this Code is to ensure that advertisers and marketers develop and maintain a high sense of social responsibility in advertising and marketing food and beverage products in Australia. The Code states, among other things, that advertising/marketing to children (defined as being 14 years or younger) must be designed and delivered in a manner to be understood by those children and shall not mislead or deceive in relation to any nutritional or health claims. Also, such communications must not state or imply that possession of or use of a food or beverage product will provide physical, social or psychological advantage over other children and shall not include any “pester power” appeal to children to urge adults responsible for their welfare to buy a particular food or beverage item for them.

3.      AANA Code of Ethics

The object of this Code is to ensure that advertisements are legal, decent, honest and truthful and that they have been prepared with a sense of obligation to the consumer and society and a fair sense of responsibility tocompetitors.

The Initiative follows recent changes to the new Children’s Television Standards (2009) which come into effect on 1 January 2010. Details of the 2009 Standards are set out below.

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(In)Game Advertising: The European Perspective on Related Legal Problems

This post was written by Avv. Felix Hofer.

1. When I came around 'game advertising' for the first time my attitude as a lawyer, not necessarily familiar with what I – snobbishly – considered as basically being “kid's or nerds' stuff”, was obviously extremely skeptic. Running more and more frequently into articles published on the topic, I very soon had to realize that this was already a definitely “hot” topic to a number of industry sectors, involving an incredible amount of investment as well as offering truly exciting business perspectives.

According to an interesting US study, published in June 2007 on in-game ad spending targeted to digital homes in the period 2006–2012, companies had already invested 370 mln. of USD and were expected to increase such figure up to 2.051 mln. USD in year 2012.

Fairly impressed by the forecast exposed in the US study I got curious about how feelings would be in Europe about potential business development with respect to the specific area. Again surprise, surprise: according to a study performed on behalf of the EU Commission total revenues from on-line content sales will reach 8,3 bln. on Euro by 2010 (at an increase rate of a growth of over 400% in five years!) and on-line games will contribute with a significant share to that quite remarkable pie. In Fall 2007 another study showed that the Internet had already become the most popular communication tool among youngsters aged between 16 and 24; in the specific target group 82% affirmed to go on-line at least 5 days per week for entertainment and information purposes, while 46% declared that they preferred the Internet over (and used it more than) TV.

With the final blow I was provided when I had to realize that 9,8 bln. Euro had been spent for game consoles only during the 2007 Christmas period, that even traditional community venues (as sports arenas, shopping centers) were arranging specific gaming areas and organizing new entertainment events (e. g. “disc burn” sessions) attractive for gamers, that digital platforms did score important come-backs for popular past-time games and that in France the gaming sector had surpassed the entertainment industry for the first time in annual revenues.

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Italy: The Use of a Person's Image

This post was written by Avv. Felix Hofer.

1. The general principle is that the use of a person's image without his/her consent is basically prohibited (this even more if such use is performed for marketing or – in general - commercial purposes). In Italy the right on a person's image is governed both by the Civil Code and the Intellectual Property Act (Law no. 633 dated April 22nd, 1941, amended and integrated in the following).

(i) According to Section 10 of the Italian Civil Code the image of a person, or of his/her parent, spouse, or child can be exhibited or published only if such use is explicitly permitted by law and provided that the use does not cause prejudice to the dignity or reputation of the person represented.

Should abuse occur (save for the cases in which the use performed results in a criminal offense), a local (civil) Court can order termination of the abuse and award damages.

(ii) The local Intellectual Property Act contains additional provisions on the use of a person's image.

(ii.a.) A person's image MAY NOT be exhibited, reproduced or put on sale without his/her consent (so Section 96 of Law n° 633 dated April 22nd, 1941).
(ii.b.) Exceptions to this basic provision (i. e. use without consent) are allowed if the reproduction of a person's image is justified by his/her notoriety (see Section 97) and by a public interest (e. g. for purposes of information to the general public).
(ii.c.) Finally, a person's image may not be exhibited or put on sale if such use causes prejudice to the represented person's honour, dignity or reputation (Section 97 of the Intellectual Property Act). 

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ASA Report on Green Advertising

The UK Advertising and Standards Agency (ASA) has recently published a report in response to an increase in consumer complaints regarding misleading environmental claims in advertisements. Companies and advertising agencies have been accused of "green washing" advertisements - making environmental claims that are less about saving the planet and more about exploiting consumer concerns. Particularly open to challenge are claims about CO2 emission and phrases such as carbon "neutral," "zero" and "negative," and claims about energy sources. A number of companies have recently fallen afoul of the ASA adjudication process by making misleading claims, including Shell Oil, British Gas, Lexus and Ryanair.

One of the biggest problems faced by advertisers is that the definition of "green" is always changing and scientific research can be open to interpretation. Advertisers are further hindered by unclear ASA and Committees of Advertising Practice (CAP) guidance on the subject. The report suggests that both advertisers and the ASA often lack the technical expertise to effectively vet environmental claims.

The ASA Director General has said that the ASA needs to:

1) Ensure that ASA/CAP staff expertise is up-to-date and comprehensive in order to evaluate environmental claims effectively.
2) Ensure the advertising code review process responds to the views of consumers and companies.
3) Investigate whether the CAP guidelines could be more explicit, even if this means that guidelines would need to be fluid because of the fast-evolving nature of science and technology in this sector.
4) Work with advertising agencies and companies alike to bolster technical understanding of issues and existing rules on environmental claims.

To avoid falling afoul of the ASA, and to avoid the costs and negative publicity associated with a negative adjudication, companies and advertisers must be certain when producing and clearing advertisements that environmental claims are accurate and can be clearly justified.

Environmental Marketing in Europe

This forum was written by Avv. Felix Hofer.

1. The European Approach

1.1. Up till now the Europe Union did not issue a set of harmonizing principles and rules meant to specifically govern 'environmental/green marketing'.

The main reason for such approach was not disinterest from the EU's institutional bodies towards the issue, but probably the conviction of being the traditional regulations on commercial communication perfectly suitable to cover this specific area in a sufficient and proper way.

In fact, these provisions had already established a number of basic principles requiring all commercial communication to:

  • not be misleading to the targeted public2,
  • be “readily recognizable as such and be distinguishable from editorial content” (and all surreptitious promotional messages to be explicitly banned)3,
  • not encourage behaviour grossly prejudicial to the protection of the environment4,
  • not to result in a misleading commercial practice5, a result that would occur any time:
    • «it contains false information and is therefore untruthful or in any way, including overall presentation, deceives or is likely to deceive the average consumer, even if the information is factually correct, in relation to one or more of the following elements..: (a)..the nature of the product, (b) its...main characteristics...such as its availability, benefits, risks, execution, composition, accessories, .. method and date of manufacture or provision, delivery, fitness for purpose, usage, .. or
      the results to be expected from its use»6,
    • «it omits material information that the average consumer needs, according to the context»7, where «information requirements established by Community law in relation to commercial communication including advertising or marketing, a non-exhaustive list of which is contained in Annex II, shall be regarded as material»8.

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To Bundle or Not to Bundle: Public Company Strategies in Packaging Corrective Disclosures in Press Releases

This post was written by Michael Coffino and Marc Goldich.

The press release is an efficient and effective way to provide new or updated information about the operations, business and financial performance of public companies, especially during periods between formal public filings, such as 10Qs and 10Ks.  Where there have been recent, material developments, companies may be required to make public disclosure (through a press release, a Form 8-K, or both) on a more immediate basis rather than wait for their next Form 10 K or Form 10-Q.  At other times, companies may wish to make a disclosure that, while not strictly necessary, concerns a significant industry or company development.  Because the current regulatory environment commands increased transparency in public companies, doubts about whether issuers are duty-bound to speak often are appropriately resolved in favor of the disclosure.  Companies often must make strategic decisions regarding what, when and how to disclose such information.  This is especially true when a company is compelled to correct a prior material misstatement by disclosing bad news that, taken in isolation, presents a limited picture of the company’s financial and business condition and prospects.

It is important to keep in mind that press releases tend to pack a punch, and sometimes disproportionately so.  Markets tend to absorb the contents of press releases with a fair degree of immediacy, and press releases often will have a discernable impact on stock price.  When the news is bad, in addition to a decline in stock price, consequences can include reduced workforce, reduced compensation, damage to corporate credibility and reputation, and increased risk of litigation.  It is not unusual for markets to overreact to news that is not placed in the overall context of the larger business or financial picture.  Worse, corrective disclosures in a vacuum can precipitate a rush to judgment by potential class action plaintiffs or their lawyers champing at the bit to launch a securities fraud class action.

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