Posted on June 28, 2010 by Joseph I. Rosenbaum

Ofcom Opens Consultation-Comment Period on Product Placement in the UK

Following up on the April 30th Legal Bytes posting Product Placement in the UK, our Reed Smith sister publication, ReACTS, has posted a note entitled Product Placement Ofcom Consultation regarding today’s opening, by Ofcom, of two consultations regarding changes to the Ofcom Broadcasting Code (one for television and one for radio) to allow for product placement in UK television programming.

Should you wish more information or need assistance in providing comments in response to the consultations – which close September 17, 2010 – just follow the link to the article above, and help is an email or phone contact away. Of course, any Reed Smith attorney with whom you work or I stand ready to assist or make the necessary introductions at any time. 

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Posted on April 30, 2010 by Joseph I. Rosenbaum

Product Placement in the UK

This post was written by Christopher Hackford, Marina Palomba, and Huw Morris.

The Audiovisual Media Services (Product Placement) Regulations came into effect in the UK 16 April 2010. Under the Regulations, product placement will now be permitted in television programmes made in the UK, although those featuring product placement will not be permitted until Ofcom has amended the Broadcasting Code, which may not be until sometime in autumn 2010.

“Product placement” is defined in the UK Regulations as the inclusion in a programme of, or the reference to, a product, service or trademark, where the inclusion is for a commercial purpose, has been paid for (by way of cash or other valuable consideration), and does not amount to prop placement (i.e., inclusion of a product that has no significant value and that was not included because of a payment or valuable consideration).

There are four types of programmes in which product placement is permitted: (i) films made for cinema; (ii) films or series made for television or on-demand services; (iii) sports programmes; and (iv) light entertainment programmes. No children’s programmes may carry product placements—programmes primarily aimed at viewers under 16. News programmes fall outside these permitted types, and UK-made religious, consumer affairs or current affairs programmes are not permitted to include product placement. There is also some catch-all wording to prevent programmes for which product placement is “unsuitable”—an undefined term. As for the BBC, it is still bound by its Royal Agreement and is prohibited from making or commissioning programmes that carry product placement, but programmes acquired from third parties and those made by BBC Worldwide will be subject to the new rules.

The new Regulations prohibit product placements of cigarettes, tobacco products or prescription-only medicines, as well as alcoholic drinks, if the programme is aimed at an under-18 demographic or encourages immoderate drinking. Not content, the UK government has expanded the list where the programmes are UK-produced or commissioned-television, or on-demand programmes (excluding films made for cinema), to also include smokeless cigarettes and smoking accessories; medicines (i.e., over-the-counter as well as prescription); any alcoholic drinks; infant and follow-on formula; food or drink high in fat, salt or sugar (HFSS); and gambling services. These were prohibited by the UK government to protect the health and welfare of viewers, especially children, but the result of this is that a vast swathe of potential advertisers who may have considered paying to place their products in programmes are now unable to do so.

The Regulations also fail to deal with the difference between product placement and brand placement. Can McDonalds, for instance, pay to have its name referred to (e.g., “Let’s all go to McDonald’s”) or would this be regarded as a promotion of an HFSS product.

There are also significant conditions that apply under the regulations. For example, the product placement must not influence content or scheduling to affect editorial independence; there must be no direct encouragement to purchase or rent the products; the programme must not give undue influence to the products; no subliminal advertising techniques can be used; and the way the product is included in the programme is not socially irresponsible and does not harm children. The point about “socially irresponsible” means it cannot “prejudice human dignity,” promote discrimination, encourage behaviour prejudicial to health, safety or protection of the environment, cause physical or moral detriment to children under 18, exploit children’s trust in parents, or show children in a dangerous situations.

As you may appreciate if you're watching the advertising marketplace in the UK, there is no indication that advertisers will increase marketing budgets to take advantage of new rules, rather than changing their priorities within existing budgets. In addition, parties cannot enter into contracts stating how, how often, when or whether the product is even placed into a programme, because this is contrary to the requirements for editorial independence. The consequence may well be that advertisers may be reluctant to part with their funds if they have absolutely no control or influence over the way their product is portrayed or used in a programme, or indeed, whether it ends up being used at all.

If you want to keep updated on product placement developments in the UK, or if you need help in understanding how the new UK product-placement regulations may affect you, contact Christopher Hackford directly or, of course, you can always call me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work.

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Posted on January 15, 2008 by Joseph I. Rosenbaum

Are You For Real?

In the 1960s, Stanley Milgrim, then a psychologist at Yale University, conducted a controversial experiment. In an obviously controlled setting for the study, Milgrim and his associates directed their subjects to give ever-increasing electrical shocks to strangers whenever they gave the wrong answer to questions in a test of memory. The strangers were really actors pretending to experience pain and did not actually receive any jolts of electricity. The study, intended to measure how compliant people would be to obey authority figures, even to the point of inflicting pain on otherwise innocent individuals, was disturbing, to say the least. The subjects, despite some discomfort at first, continued to “shock” the test-taking actors. The experiment raised ethical concerns about subject study methodologies, among other things.

However, recently, Mel Slater, a computer scientist at University College London in England (with a joint appointment to the Universitat Politecnica de Catalunya in Barcelona), reproduced this experiment without running afoul of the ethical concerns that the original study raised. Mr. Slater conducted his experiment in a virtual world where test-taking “victims” were avatars whose expressions changed from happy to pained in response to the actions of participants in the study—much the same way the real-life actors did more than 40 years ago. Not only were the results astonishingly similar, but to the surprise of many, the real-life participants experienced increased heart rates and described feelings of regret or feeling badly about delivering electrical shocks—even though they knew the strangers on the other side of the screens were avatars and not real people!

From a legal viewpoint, virtual worlds raise a host of issues regarding the regulation and interpretation of conduct—people manipulating digital puppets. Unlike social networking, virtual worlds provide an opportunity for social interaction. There is advertising and marketing with corresponding questions about privacy, demographics and disclosures. There is creativity and innovation and corresponding intellectual property concerns. There are lands and homes and buildings and hotels and corresponding issues of property rights. There are goods and services, raising issues of e-commerce and currency trading and, of course, there are concerns over the benefits and risks arising from the use and the abuse that affect the real-life counterparts of these virtual world avatars.

The law struggles to interpret and figure out just what rights should or shouldn’t apply to the people behind the avatars. Many claim they are immune from legal and regulatory scrutiny—after all, it is just make believe. But just as Dorothy didn’t listen to the Wizard of Oz who shouted “pay no attention to the man behind the curtain,” the law will press on because the social and ethical implications of virtual world role playing ultimately establish what is or is not permissible in society at large. Is it art imitating life or life imitating art? Is that an avatar in your virtual world or are you just glad to see me? While these may be tongue-in-cheek flippant questions, there are some very real implications to the growth of virtual worlds, the ability to study behavior, the ability to affect behavior and the ability to explore conduct without the normal physical and geographic boundaries we experience in the real world. This is indeed a fertile playground for study and an even more difficult one for the law to understand and regulate. I don’t know about you, but I’m sending my avatar to law school.
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Posted on November 7, 2007 by Joseph I. Rosenbaum

Content is King, but the Medium Is Still the Message

Recently lawyers have begun to debate the question of just how much control advertisers can exert when paying for product placements or branded entertainment before the line between First Amendment expression by the creative staff putting together the program and the financial subsidies from advertisers is crossed. Now, the Ninth Circuit has dealt with a similar question relating to the immunity that interactive computer service providers have typically enjoyed under the Communications Decency Act (the “CDA”). The CDA insulates service providers from liability so long as the service provider remains a publisher of information and content of others (there are exceptions, so the immunity is not blanket and you should always consult legal advice for specifics that apply to your situation). That said, a company that operates an online web service that specializes in matching roommates based on their preferences has been held in violation of the Fair Housing Act because a questionnaire put together by the company asks for certain demographic information that, when posted on the website, could be used by users and site visitors to discriminate against others. The company, Roommates.com, asked users to disclose information, among other things, about roommate preferences such as age, sex, children, etc. The Ninth Circuit held that although Roommates.com was immune as long as it was simply enabling the distribution or display of information provided by its members, when it became an information content provider, it lost immunity with respect to that activity and information. And by putting together the questionnaires and soliciting their preferences in response, Roommates.com was not simply posting content authored by users, but rather was eliciting specfic information that could be abused and that might or might not have been voluntarily posted or disclosed absent the questionnaires.

Hmmmm…user profiles, play lists, segmented marketing, asking consumers to participate in promotions…this is an interesting test of the limitations of the CDA to protect and insulate interactive online service providers from liability. As social networks, virtual worlds and other digital arenas that don’t simply enable but also solicit or encourage certain information to be provided, and as web services become more targeted, focused and segmented to match consumer preferences, the immunity is likely to be tested further. Stay tuned.

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Posted on September 3, 2007 by Joseph I. Rosenbaum

Media in the Crosshairs?

I know of no suit by the FTC against a media company for running an allegedly deceptive advertisement for someone else’s product or service. In a July 9 letter, the FTC states the “active participation in advertising preparation” by a radio broadcaster is subject to challenge for possible violations of §5 of the Federal Trade Commission Act, which gives the Commission broad authority to prohibit “unfair or deceptive acts or practices.” The FTC characterized the broadcaster as a “hybrid entity,” both producing programming and participating in preparing advertising. In the past, ad agencies have been held liable for a deceptive advertisement if the agency was actively involved in developing and producing the advertising. Now the FTC is stating that media companies can be subject to the same analysis. Increasing use of product placement, sponsorships, context-sensitive advertising, branded entertainment and the host of ways advertising and programming increasingly intersect and blur, make it inevitable that media companies will more actively be challenged in connection with what products and services show up on the screen as part of programming. Now the FTC has also indicated the media may have responsibility for what shows up in advertising if a media company participates in its creation or development. It should also come as no surprise that certain advertising (targeted at children; diets)—those that have been special targets for FTC enforcement action—should receive the most attention. Do you have a policy regarding participation in the creation or development of advertising (if you are an advertiser or advertising agency you probably do) and does it need updating? If you are a media company, you may not (other than for your own ads)—but then, maybe you should. Where can you go for help? The answer is not a useless fact, but it is compelling.

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Posted on November 30, 2005 by Joseph I. Rosenbaum

Product Placement--Time-Shifting Causes Ad Shifting

Product placement is an advertising activity which has grown for decades in the motion picture industry, going virtually unnoticed by legislators. When television began aggressively using product placement for advertising, concerns (and regulation) began increasing. Unlike motion pictures, television is legally required to distinguish between advertising and programming.

First, “infomercials” that looked and felt like programming were targeted by regulators, because they believed the infomercials were deceiving. After a number of cases, the industry developed and implemented disclosures to allay fears of regulators at the FCC and the FTC. Enter reality TV. Suddenly programs were using affiliations with sponsors as part of the content or story line, prompting fresh concerns. As cable television, pay-per-view and video-on-demand services, time-shifting and digital recording devices, and fast-forward buttons have become commonplace, advertisers have struggled to capture viewers’ attention with product placement. In 2004, product placement advertising rose to about $4.25 billion.

Why the fuss? Because product placement is advertising, subject to the same laws and regulations that govern commercials. On television, both the FTC and the FCC can regulate advertising, mandate disclosures and determine if something is deceptive or misleading. Where the line between harmless product placement and deceptive practices is drawn is increasingly blurred.

Whether a product placement is deceptive or misleading—sufficient to make it actionable under Section 5 of the FTC Act—depends on whether there is some representation or omission likely to mislead the consumer. The depiction of the product must be viewed from the perspective of a reasonable consumer in the situation and the representation or omission must be “material.” In other words, if the consumer knew or was told the truth, the consumer’s behavior would likely be affected in connection with the product.

The FCC also regulates deceptive product placements: viewers may not realize they are advertisements, hence the FCC requires disclosure. Failure to properly disclose the commercial nature of a product placement could amount to “payola” and would be illegal. Again, where the line is drawn between harmless inclusion of products in programming versus commercialization which misleads consumers is hardly clear.

The FTC and FCC regulations puts advertisers between a rock and a hard place. The FCC requires disclosure for a paid placement—which makes the product placement commercial speech. If it is commercial speech, is the placement then also subject to FTC disclosure rules? What if the advertiser has no control over the creative content and no approval over scripts or editing or even the extent of the product placement itself? Under those circumstances, how could the advertiser be responsible for the depiction of its product; the director, producer, actors, even the editorial staff, have ultimate creative control of what shows up on the screen. The advertiser could pay a substantial sum of money to watch its product wind up on the cutting room floor in post-production. Ouch.

But what if the advertiser seeks approval over content to ensure it gets what it pays for? Can that advertiser argue it shouldn’t be liable for false representations or the net impression created about the product—especially if the advertiser has some say in the creative surrounding a product placement? Does one risk a negative placement by foregoing participation in the creative, or fight to ensure favorable depiction of a product with the corresponding risk that liability will increase with participation in the content and placement.

Ultimately, the question of whether disclosure is required, whether product placement will be seen as misleading or acceptable, will depend on the “reasonable consumer.” Artistic expression of the creators of programming content, or blatant advertisement? In one case no disclosure is necessary. In the other, the law requires disclosure so the consumer is informed. As product placement becomes increasingly clever and interwoven into the fabric of programming content, and as advertisers increasingly participate in creative decisions surrounding placement and depiction of products, the risks of regulatory action increase.

Outside the United States, it doesn’t get any easier. In Ireland and Finland, product placement is prohibited in all media; in Austria, Norway and Italy it is specifically forbidden in television programming; Germany, Greece, Denmark and Liechtenstein allow it if it is integral to editorial content; and the Netherlands allows only product placement that lasts a “few seconds.” Then there is the European Commission Television without Frontiers Directive—but we digress.

Product placement will continue to challenge the balance between advertising and creative programming. Where and when disclosures will be required are likely to challenge advertisers, consumers, regulators and legislators for some time to come.

Thanks to Doug Wood for contributions to the material in this article. If you have any questions or need help with any of the issues, please contact Doug or contact me.
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