Herbex (Pty) Ltd v Advertising Standards Authority

• Jurisdiction: South Africa
• Judge: Du Plessis AJ
• Judgment Date: 05 May 2016
• Docket Number: 14/45774
• Hearing Date: 25 April 2016
• Counsel: A Subel SC (with S Stein SC) for the applicant. G Marcus SC (with N Ferreira) for the respondent.
• Court: Gauteng Local Division, Johannesburg

Du Plessis AJ: D

[1] The applicant is Herbex (Pty) Ltd, a company which sells and markets complementary medicines.

[2] The respondent is the Advertising Standards Authority, a voluntary association incorporated in terms of s 21 of the Companies Act 61 of 1973. E

[3] The respondent is an independent, industry-funded body that was established to promote and enforce standards in the advertising industry. From the preface to the code hereinafter referred to, it appears that it was F founded on the principle that advertising is a service to the public and should accordingly be informative, honest, decent and legal.

[4] Membership of the respondent is voluntary. Members consist of agencies, marketers and media. Members are voluntarily bound by the respondent's guiding document, the Code of Advertising Practice (the G code). The code applies to all commercial and non-commercial advertising. The respondent adjudicates complaints of breaches of the code on behalf of its members, who have an interest in maintaining the integrity of the advertising industry and in ensuring that only responsible advertising appears in their media.

H [5] The respondent's directorate has the primary responsibility for receiving and adjudicating complaints regarding advertising in order to ensure compliance with the code. Any party who feels aggrieved by a ruling of the directorate may within 10 days appeal the ruling to the I advertising standards committee (in respect of consumer complaints) or to the advertising industry tribunal (in respect of competitor complaints).

[6] The North Gauteng High Court (per Bertelsmann J) has recently confirmed that the respondent's processes operate in the public interest. J It held that:

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'There can be no doubt whatever that the rendering of a service in the A public interest lies at the heart of the [ASA's] genesis and existence. It is the official regulator of the advertising industry. It prides itself upon its close association with organs of state and consumer organisations.' [1]

And that the respondent investigates complaints 'with the interests of the public at large and that of consumers and children in particular in mind'. [2] B

[7] In terms of s 55 of the Electronic Communications Act [3] (the ECA) all broadcast-service licensees have to comply with the code. Where a licensee is a member of the respondent, it is empowered to consider complaints concerning alleged breaches of the code due to its C contractual relationship with the licensee. Where a licensee is not a member of the respondent, the complaints and compliance committee of Icasa is empowered to consider complaints concerning alleged breaches of the code. [4]

[8] Though it is an important statutory recognition of the legitimacy and D importance of the respondent, the ECA does not confer on the respondent the authority to regulate advertisements published by non-members.

[9] The respondent has applied for its code to be recognised as an industry ombud under the Consumer Protection Act 68 of 2008. This application has not been granted, but is ongoing. E

[10] The applicant is not a member of the respondent. Notwithstanding this fact, for a number of years the respondent has communicated with the applicant regarding complaints received in respect of some of its advertisements in the media; and the applicant has responded thereto, participated in and defended itself in internal hearings and procedures F conducted by or under the auspices of the respondent. The respondent has also issued rulings in respect of some of the applicant's advertisements.

[11] The applicant alleges that it was misled and induced by misleading and false statements and non-disclosures in the respondent's standard G letters to so participate in the respondent's procedures. After it obtained legal advice, it brought the present application in terms whereof the substantive relief sought can be categorised as follows:

[11.1]

Declaratory relief regarding the status and powers of the respondent;

[11.2]

declaratory relief aimed at restricting the respondent's powers H to regulate the applicant's advertising;

[11.3]

relief dealing with the way that the respondent represents its powers, which relief purports to flow from alleged misrepresentations of the respondent; and I

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[11.4]

A relief flowing from the respondent's allegedly unlawful appeal fees.

The respondent's jurisdiction over non-members

[12] The crux of the dispute is whether the respondent has any lawful B basis to exercise jurisdiction over persons who are not its members.

[13] The respondent accepts that the sanctions available to the directorate, the advertising standards committee, the advertising industry tribunal and the final appeal committee, are effective only insofar as its members agree to enforce them; and they are effective only in the media C owned by its members. The rulings of the respondent are not legally enforceable against non-members. The only consequence of a non-member's refusal to comply with a ruling of the respondent is that its members will decline to accept advertising from that non-member.

[14] The ultimate sanction available to the respondent is an ad-alert. If a D non-member advertiser ignores reasonable requests for co-operation, the respondent may issue an ad-alert to its members. The effect of an ad-alert is that none of the respondent's members will publish any advertisement of the offending advertiser in any medium.

[15] The respondent therefore accepts that the strict outer limit of its E jurisdiction is that none of its sanctions has any effect beyond the willingness of its members to enforce them. None of the respondent's sanctions has the force of law. They are not enforceable except to the extent that its members agree to enforce them. An ad-alert, for example, has no impact whatsoever in media owned by non-members of the respondent. Its only effect is that members of the respondent may decline F to publish advertisements of the offending advertiser.

[16] Despite the respondent's acknowledgement that it has no jurisdiction over non-members and that its rulings are not binding upon them, it insists upon its entitlement to make determinations pertaining to G non-members' advertising even where such advertising appears in a medium owned by non-members of the respondent.

[17] The respondent relies on the following legal basis for its consideration of complaints:

[17.1]

If the advertiser is a member of the respondent (or is a member H of one of the industry bodies that are members of the respondent), then the respondent is entitled to consider the complaint because the advertiser has agreed to be bound by the code, either directly or indirectly through its membership of an industry representative body or association.

[17.2]

I If the publisher of the advertisement is a member of the respondent (or is a member of one of the industry bodies that are members of the respondent), then the respondent is entitled to consider the complaint because the publisher has agreed to abide by the code. The code precludes those who are bound by it from accepting advertising that conflicts with the code. It J provides that:

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'All entities bound by the Code shall neither prepare nor A accept any advertising which conflicts with the Code and shall withdraw any advertising which has subsequently been deemed to be unacceptable by the ASA Directorate, Advertising Standards Committee, Advertising Industry Tribunal or Appeal Committee.'

[17.3]

If neither the publisher nor the advertiser is a member of the B respondent, the respondent is entitled to consider the complaint on behalf of its members, so that its members may make an election whether or not they wish to publish that advertisement, or any advertising by an advertiser who breaches the code or declines to participate in the respondent's system of C self-regulation. The respondent's members established it in order to make this determination on their behalf. When the respondent issues an ad-alert, its members enforce it by exercising their right to decline to publish advertising.

[18] The respondent denies that its conduct in considering complaints D regarding advertising constitutes an assertion of jurisdiction over non-members. The grounds relied upon for this denial, are the following:

[18.1]

The fact that the respondent's rulings are not binding or enforceable as against any advertiser. They have an effect only insofar as its members give effect to them, because the ASA's E members have agreed to do so.

[18.2]

The only consequence of a refusal to participate in the respondent's processes is that its members may decline to publish that particular advertisement, and, in severe cases, all of the advertisements of the relevant advertiser. This is made clear in the F respondent's standard letter alerting advertisers to a complaint.

[18.3]

Non-members of the respondent, such as the applicant, are legally entitled to ignore its rulings and procedures. However, in doing so they elect to place themselves outside the system of self-regulation established by the advertising industry. The consequences of this election may include the refusal of G members of the respondent to publish their advertisements.

[18.4]

The decision of a member of the respondent to decline to publish a particular advertisement or the advertising of a particular advertiser does not constitute an assertion of coercive jurisdiction over that advertiser. It is an election which the H respondent's members are entitled to make in terms of the common law and the Constitution. No advertiser has the right to insist on or compel the publication of its advertisements in the medium of its choice. No advertiser has the right to...