Internet: Will regulators cast their net over web advertising?

With such headline-grabbing developments, the self-regulating arena of online advertising has come under the spotlight. Industry bodies such as the IAB and the Internet Advertising Sales House (IASH) advocate a platform of continuing self-regulation. In contrast, regulatory bodies such as Ofcom are calling for greater control mechanisms. Such polar viewpoints have led to the inevitable question: how should online advertising be governed?

Following the premium-rate phone line scandal that rocked the television broadcasting industry last year, the issue of whether there are adequate controls to rein in potential over-zealous advertisers is a pertinent question. Ofcom is naturally wary of a similar situation occurring on the internet.

Ofcom's outgoing Chairman, Lord Currie, argues that the current system of self-regulation does not do enough to protect consumers. The very nature of internet scams means that it is impracticable simply to rely on investigations and enforcement based on complaints. As Lord Currie points out, ‘If consumers do not know that they have been diddled they do not know to complain’.

Suggestions for ‘light touch regulation’ are similarly dismissed as inadequate. Lord Currie argues that such regulation either means an arrogant assumption ‘that the regulator knows everything that is going on in the market and can apply just the right, discerning touch on the wheel to maximise wellbeing’ or a ‘palsied unwillingness to act, captive to the producer interest, when real detriment to the consumer is occurring’.

Stephen Cater, the new minister for communications, technology and broadcasting, is also in favour of greater regulation for the internet. He is currently preparing a report on internet user issues called ‘Digital Britain’, which will be unveiled in the spring.

The idea of increased regulation clearly has its benefits in terms of reducing internet advertising abuse. But does the reality of the internet as an ever-changing entity mean that any regulation that is implemented will quickly become outdated?

Supporters of self-regulation include both the IAB and the IASH. The head of the IAB's Regulatory Affairs, Nick Stringer, has identified plugging an education gap among MPs, peers and regulators, as the key component to maintaining an effective form of self-regulation. A series of educational programmes organised, for governmental bodies, by the IAB will go some way towards ensuring that the concept of internet advertising is broken down and understood by the relevant governmental officials. Consumer concerns will also be addressed by the IAB, in relation to behavioural advertising — a practice where individuals or groups will be targeted on their internet usage and habits.

The IAB is of the view that the current system is versatile enough to adjust to the fast-paced developments of the internet. A European directive implemented in May 2008 on misleading advertising has already been incorporated into the CAP non-broadcast code, to ensure the coverage of online advertising. Such versatility is a fundamental reason why the IAB and other industry groups are against a more formal regulatory regime. Nick Stringer endorsed this view when he stated that ‘Formal regulation is fundamentally the wrong way to look at online advertising’.

Among key industry protagonists supporting self-regulation is the IASH. Set up two years ago, the IASH aims to encourage best practice among online advertising sales houses through the adoption of an effective code of conduct. For example, to ensure that display ads placed via the IASH's networks do not appear on websites, which could jeopardise advertisers’ brands. The IASH Code provides a formal framework for best practice for IASH members to follow when dealing with advertisers, agencies, networks and site owners.

It is a telling sign of the internet times that there is no mention of the internet in the Communications Act. Parliament thought seriously about the issue during its debates leading up to the Act; however, this is an embryonic phase of the internet, and its implications are so uncertain, and so a period of legislative restraint was called for.

The future direction of internet advertising is under much debate. Whether or not this will lead to a regulatory-based regime remains to be seen. There is little doubt, however, that with the internet and internet advertising evolving at an already frenetic pace, the mechanics of control, whether under a self-regulating regime or a regulations-based regime, will be a closely watched topic in the coming years.

Samantha Shaw and Kathryn Graham, Trainees, Business & Technology Services

samantha.shaw@blplaw.com and kathryn.graham@blplaw.com.

One of these open source licences, the ‘Artistic Licence’, was recently considered in a court case in the US (Jacobsen v Katzer, United States Court of Appeals for the Federal Circuit, 13 August 2008). The court's decision was eagerly anticipated in the open source community because it had been suggested that where someone chooses to distribute their software under an open source licence, they may not be entitled to rely on their copyright to obtain an injunction against a licensee in breach of that licence. In other words, there was a concern that if you used an open source licence such as the Artistic Licence, you could be deprived of a very important remedy.

The judge made it clear that this was not in fact the case. He found that the Artistic Licence set down certain conditions that had to be met by the licensee, and that if it failed to do so, it no longer had the benefit of the licence. Without the benefit of the licence in place, it was open to the licensor to rely on its copyright to obtain an injunction against the licensee to stop further breaches of the open source licence. The open source community breathed a temporary sigh of relief. The Artistic Licence had teeth and could bite.

Of course, each open source licence is slightly different, and it remains to be seen whether others will be interpreted in a similar way — it really depends on how they are worded. The practical consequences of this case are significant to say the least. Anyone who uses software under an open source licence (and there are quite a lot of us — think of the Linux operating system or the Apache web server) will need to be sure that they comply with its terms. There is no room for complacency.

Toby Headdon, Senior Associate, Intellectual Property

toby.headdon@blplaw.com

Ian De Freitas

The use of the internet to criticise others has spawned a series of defamation claims against internet service providers (ISPs) and individuals. So far, the English courts have been happy to entertain those claims. More recent rulings, however, appear to mark a change in the court's attitude to proceedings centred on chat rooms and blogs.

In the course of his judgment, Mr Justice Eady referred to the prospects of Smith being successful in his underlying claims. The case involved comments posted on a bulletin board of a financial information website run by ADVFN. Smith had earlier obtained disclosure orders against ADVFN to reveal the identities of the people posting comments on the site that Smith was unhappy with. He launched a number of claims against individuals as a result. The Judge described the comments posted on these bulletin boards as contributions to a casual conversation, made in an ‘uninhibited and ill thought out’ manner. He held that Smith's claims faced several significant hurdles, and drew the conclusion that these claims were totally without merit. Among these hurdles were that the comments were mere ‘vulgar abuse’ and thus not actionable, or were subject to defences of qualified privilege or fair comment.

We would expect to see the courts now applying closer scrutiny to the question of whether to grant disclosure orders against ISPs to identify people posting material, and also for the courts to be more active in weeding out unmeritorious internet defamation claims at an early stage.

Ian De Freitas, Partner, Intellectual Property

ian.defreitas@blplaw.com