Overview of the Advertising Regulation

Overview of the Advertising Regulation

A modern person is exposed to 5,000 advertisements a day through an array of different media channels.

We can’t imagine spending a day without getting messages or calls promoting any kind of product or service, receiving promotional emails, watching commercials on TV, seeing multiple banners on our favorite websites and seeing targeted ads on social media.

In short, the variety of channels makes it possible for small companies or big brands to have our attention almost 24/7.

While it is a great era for brands and advertisers, there is still a dilemma when it comes to customer protection.

Years ago, when the choice of an advertiser was limited to traditional marketing channels such as radio, TV, and newspapers, it was relatively easy to control what kind of commercials was provided to a large audience. In recent years, advertisements have been rapidly moving to the digital world, and according to Forbes, 2019 will be a year when the spendings on digital advertising pass non-digital.

On the internet, it is a lot harder to control advertisements and how they are targeted. Therefore the subject of advertising regulation and customer protection is on the rise.

Most countries have general guidelines on advertising regulation that prevent businesses from misleading customers with false information or, for damaging the reputation of a competitor. However, there are certain products that might put an individual’s financial well-being or health under risk and therefore, require great care. Considering this, countries have special guidelines and advertising regulation on such products. This includes advertising and marketing financial products and investment services as well as promoting products like tobacco or alcohol. This article will give an overview of the advertising regulation for risk disclosure in promoting these products.

Advertising regulation for financial services

Financial services are one of the most highly regulated industries around the globe. Almost all countries have financial regulators that oversee the financial sector, including the regulatory requirements for risk disclosure in advertising. However, there has been a lot of cases of misleading customers with false statements in advertising. Many of the companies or brokerages that offer financial and investment services mislead customers with false statistics regarding their performance, regulations or return on investments. Therefore, it is important for countries to have a well-designed framework for advertising regulation and for customers to be aware of it to be on the safe side.

Marketing financial services in the EU

The regulatory body that is responsible for fair and proper advertising of financial services in the European Union is the European Securities and Markets Authority (ESMA). In order to ensure the investor’s protection and the safety of their funds, ESMA has made prominent restrictions on marketing certain financial products for retail customers. The companies that provide financial and investment services should have a risk warning that informs customers about the risks associated with the financial services in the clearest way possible.

The risk disclosure should be in a layout ensuring that it is visible, it should be in a font size that equals or is more than the font size of the advertising message. The risk disclosure should be in the same language that is used in communication or published information. Also, a retail client should be given fair information about any relevant skills when referring to any potential benefits that an individual might get from investment service or financial instrument.

When promoting financial services online the risk disclosure must be displayed on the relevant webpages. To put it simply, a person entering a website should understand that the message is important and worth noticing. It should attract attention by the size or a position on the page.

For example, these are the good practices of risk disclosure in the EU:

  • The warning is on a neutral background, the font is easily readable.
  • The size of font occupies a notable portion of the text.
  • Warnings are placed in a way to draw the attention of the reader and remain in their border.
  • On the website, warnings remain in a fixed spot on the screen even if the reader scrolls down.
  • Warnings are repeated on every page.

Warning are repeated on every page for advertising regulation

Some companies and brokers do not follow these rules, therefore one should pay attention if the firms are using a poor practice of disclosure of the risks, which might include:

  • Warnings that are placed outside the main advertisement border and are hard to notice.
  • Warnings that are written in small font sizes or unclear typestyles.
  • Warnings that are not on the website, but are placed in a pop-up box that appears only when the person visits the website first.
  • Warnings that are hard to find as they are located on specific pages such as FAQ, disclaimers, legal information, or terms and conditions.
  • Warnings that are placed on a patterned background that makes them less visible.

Warnings that are placed on a patterned background that makes them less visible for adverising regulation

Apart from this, ESMA has certain rules that must be followed by Forex brokerage firms, for example, disclosure of the information of their customers and the percentage of how many of them have lost their funds. The financial authority also prohibits promoting the status of professional services to their customers and offering different kinds of bonuses (defined as “trading benefits)”. However, some brokerages are still offering these benefits in the EU, and most of them also offer bonuses outside of the EU. You can learn more about XM bonus here to check one of the remaining marketing campaigns that are available nowadays.

Marketing financial services in Japan

As with ESMA in the EU, the Japanese financial authority also ensures that investors are protected and are aware of risks connected to financial services, investments and trading. In order to keep clients well aware of the financial risks connected to trading and investment, companies should provide information that can be classified into four levels:

  1. Actual profit and loss, it can be illustrated in histograms or graphs.
  2. Disclosure of expected degree of risk.
  3. Disclosure of risk management performance.
  4. Disclosure of other information on risk or on risk management.

Usually, the financial providers are obliged to provide this information in each quarter.

In addition to this, promoting welcome bonuses, deposit bonuses or any other promotional bonuses are prohibited in the country.

Marketing financial services in the U.S.

In the United States of America, advertising and promoting financial services is regulated by the Advertising Rule which is under the Investment Advisers Act. As in every country, it is mandatory to have a risk disclosure in the USA as well, which is similar to the one that is in the EU.

However, the advertising rule showcases a mandatory criterion that must be followed by every company that provides financial services.

  • The company must not advertise misleading performance results.
  • It is prohibited to publish and distribute advertisements that employ testimonials.
  • The advertisement should not include specific recommendations that were profitable in the past to any person.
  • The advertisement should not offer a service as “free or without charge” when in fact there is some condition or obligation attached to using this service.

Advertising regulation for tobacco products

For a long time in marketing history, tobacco companies were taking all possibilities to advertise their products through every channel possible, some of which does not even exist today. You would see tobacco products advertised on TV, radio, newspapers and even in cartoons.

Advertising tobacco products around the world for advertising regulation

Famous athletes, celebrities and doctors were smoking on commercials endorsing cigarettes as a great means for relaxation and even for keeping a fit figure. Even more, many of the big tobacco products were claiming that cigarettes were absolutely harmless and were suggested by the doctors and to show how harmless they were – many of the companies featured babies and pregnant women in their advertisements.

Viceroy filter the smoke for advertising regulation

Today, you might consider such advertisements absolutely unthinkable, but it actually worked. During the rise in the advertisement of tobacco products, the number of smokers raised significantly. Thanks to it, tobacco products, that were a thing of a pastime for a gentleman, became a mass consumption product.

However, the crazy times of tobacco advertisements were over when first in 1929 and later in the mid 1950s it was discovered that smoking was not as healthy as doctors in commercials suggested it was. At the time several studies had proven the relationship between smoking and lung cancer. Since then, the powerful and beloved phrase of all cigarette manufacturers “Doctor recommends!” lost its power.

Today, even though people are completely aware of the risk factors of smoking and there is no doubt about the health risks linked to smoking, the number of smokers is still huge. Smoking kills approximately 6 million people each year and is a leading cause of preventable death globally. While tobacco companies have different ways of advertising compared to the previous century, tobacco marketing is considered to be a massive driver of cigarette use around the world. Companies keep spending tens of billion dollars annually to push their products to customers. Many of them are using encouraging words in their advertisements to link certain values to smoking habits and their products – such as freedom, being bold, and thinking out of the box. Some of them try to suggest that their products are less harmful by packaging them using light colors and promoting them with words such as “light,” “low tar,” or “organic.”

The government of different countries are well aware of the problem and are trying to reduce the usage of tobacco. One of the most powerful ways to prevent people from smoking is raising the awareness of risk factors of tobacco usage and regulating how the tobacco companies are showcasing their products. While the idea behind it is the same for all of the countries, they do it differently and hence, in some parts of the world tobacco manufacturers have greater restrictions on marketing their products, and in some countries, they have more space to place their advertisements.

Countries or unions such as the EU have certain advertising regulation about promoting tobacco products. Usually, this framework includes regulating the advertisement of tobacco products and their packaging.

Regulations in  the EU

The EU tobacco advertising directive bans advertising tobacco on radio, print media and the internet. The law also prohibits tobacco companies from sponsoring cross-border events and activities. TV commercials of tobacco products have been banned in the EU since the 1990s and are governed by a different directive – the Audiovisual Media Services Directive. The only space for tobacco manufacturers to advertise their products is cinemas, where advertising is allowed and on billboards or through merchandising. However, some of the member countries of the EU prohibit these means of advertising too.

Regulatory requirements for tobacco usage risk disclosure for advertising regulation

As for the packaging, in the EU it is regulated by the Tobacco Products Directive, that requires health warnings on tobacco and other related products. All packages should include health warnings that cover 65 percent of the front and back of cigarette and roll-your-own tobacco packages. The health warning includes a picture, which illustrates the results of smoking on different organs and parts of the body, text, and information on how to stop smoking. While regulations on e-cigarettes are a bit different from tobacco products, the directive bans promotional and misleading elements on them and on other herbal or tobacco products for smoking.

Regulations in Japan

Regulations in Japan for advertising regulation

Japan has a different approach to reducing the number of people who smoke. Tobacco advertising and promotion are included in but not regulated by Japan’s Tobacco Business Act. To put it more simply, according to this act restriction on tobacco promotion, advertising, and sponsorship are left to industry self-regulation. Hence, there are some restrictions on tobacco advertising but there are no forms of them prohibited by law. The Tobacco Business Act simply calls on advertisers to be mindful when advertising tobacco products not to encourage smoking widely and actively.

The packaging regulation is also not as strong in Japan as it is in the EU, tobacco manufacturers are required to have health warning labels that cover 30 percent or more of the package.  However, as reported, Japan considers increasing the size of risk disclosure on packaging up to 50 percent by 2020.

Regulations in the U.S.

We cannot talk about tobacco advertisements without mentioning the United States of America, where tobacco marketing was flourishing for a couple of years until the negative effects of smoking were confirmed.

Tobacco products advertising regulation started in 1967 when the Federal Communications Commission (FCC) determined the Fairness Doctrine. It obliged broadcasters to present contrasting views on matters of public interest, including cigarette ads. Since then, till 1971, cigarette ads were presented alongside anti-tobacco ads. In 1971 cigarette commercials were banned from TV and radio, hence, there was no need for anti-tobacco ads and they disappeared as well. However, smokeless tobacco ads were still allowed on TV and radio till 1986. At the same time, promoting tobacco products in magazines, newspapers, and billboards were still allowed. In 1998, new rules were presented that prohibit billboard advertisements, including cigarettes in cartoons, tobacco brand sponsorships of sporting events and concerts, paid brand product placement and marketing practices that targeted youngsters (under 18 years old). Later in 2006, the law prohibited tobacco companies from using the words such as “light” that fraudulently made customers think that those cigarettes were less harmful when the manufacturers were well aware that there was no difference. Since then, companies cannot put similar words on packages or use them in commercials.

Regulations In the USA for advertising regulations

While there are strict rules for promoting tobacco products through different channels, the rules for packaging is still mild compared to other countries. The law requires that one out of four side panels of a package and at least 30 percent of the front or back side of the package is occupied by a warning, however, these rules are not always followed. There should be a warning on every advertisement as well and should take at least 20 percent of the total area.

Advertising regulation for alcohol

The case of alcohol advertising is pretty much the same as for tobacco. Alcohol advertisements were occupying a big space in media without any proper advertising regulation. Till today, alcohol advertisements are one of the most expensive ones and companies are spending billions to air their commercials or make a product placement. The regulations were brought only in 1995 when the member countries of the world health organization agreed on European Alcohol policy. The policy states that every child and young person has a right to live in an environment that is protected from the negative effects of alcohol usage and promotion of alcohol.

While every country agrees that minors should be protected from the advertisements of alcohol, the regulations on promoting and advertising alcoholic beverages are different in various countries, including the countries in the EU.

Alcohol advertising in the EU

Considering the regulations on advertising and promoting alcohol the countries can be divided into four categories: countries that do not have any restrictions, countries where there is self-regulation or voluntary regulations, countries with partial statutory restrictions (based on time, content, place or audience) and countries with a complete ban.

In the EU the regulations on alcohol advertising are partially statutory and it depends on the content. According to the law, advertising of alcoholic beverages shall comply with all of these criteria:

  • The commercials may not be aimed specifically at minors or show minors consuming alcohol.
  • It should not link the consumption of alcohol-enhanced physical performance or to driving.
  • it should not create an impression that the consumption of alcohol in any way contributes towards social or sexual success.
  • It should not claim that consuming alcohol has therapeutic qualities.
  • It should not encourage moderate consumption or present abstinence of alcohol or moderation of it in a negative way.
  • It should not state in any way that high alcoholic content is a positive quality of a beverage.

Some of the countries in the EU completely ban alcohol advertisements, and many of them allow TV advertisements at a certain time.

Alcohol advertising in the EU for advertising regulation

Alcohol advertising in Japan

There are no particular laws that specifically restrict the advertising and marketing of alcoholic beverages in Japan. However, there are certain governmental guidelines that must be followed by companies in terms of social responsibility. The guidelines regulate the labeling of alcoholic beverages and how they are represented. In addition, companies are required to pay attention to any possible adverse effects on the social environment in advertising of alcoholic drinks in order to prevent minors from drinking.

Japan has adopted self-regulations concerning marketing, advertising, and packaging alcoholic beverages. Which provide detailed rules on how to promote alcoholic drinks. Companies advertising alcohol should fulfill the following criteria when promoting their drinks:

  • The ad should not be aimed or appeal to minors (people under 2o years of age) and/or pregnant women.
  • They should not feature minors.
  • They should not encourage excessive drinking during exercising or coercion of drinking.
  • They must not be about the inducement of alcohol addiction.
  • Should not link alcohol with dangerous activities.
  • Should not show alcohol drinking while driving.

Alcohol advertising in the U.S.

The United States has a similar self-regulatory approach to promoting and advertising alcoholic beverages. The regulations are under the Federal Alcohol Administration Act (FAA) by the Tobacco Tax and Trade Bureau (TTB) hosted by the Department of the Treasury. Advertising alcoholic drinks are categorized into three main categories: Malt beverages and beer, wine, and distilled spirits. The requirement of information included in a commercial differs depending on the class of the beverage. The advertisement should provide the following information:

Malt beverages and beer:

  • The class that the product belongs to, for example, ale, lager and etc;
  • Name, address, city, and state of the advertiser.


  • Type, class and distinctive designation that the certain wine belongs to, for example, white or red wine, champagne, sparkling wine and etc;
  • Name, address, city, and state of the advertiser.

Distilled spirits:

  • The class and the type of a certain product, for example, vodka, flavored spirits, Whiskey, etc.
  • Alcohol content as a percent of volume.
  • Name of commodity and percentage of neutral spirits (if applicable).
  • Name, address, city, and state of the advertiser.

Alcohol advertising in the US for advertising regulation

In addition to this, there are certain criteria that need to be followed when advertising alcoholic beverages. The generally prohibited practices for alcohol advertising regulation include:

  • Using statements that are misleading, untrue or false.
  • Showcasing a competitor in a negative way or being disparaging about a competitor.
  • Misrepresenting standards, tests or analysis.
  • Indecent or obscene designs, representations or statements.
  • Falsely stating the health benefits of alcohol consumption.
  • Claiming that alcohol is made, sold or marketed under federal or state regulation.
  • Claiming that malt beverages or wine contain distilled spirits.
  • Using the word “pure” when advertising distilled spirits if the word is not referring to a specific ingredient.
  • Using statements that are not consistent with approved labeling.

Summing it all up

As you can see, each country has its own approach to advertising regulation and risk disclosure. They differ according to the environment in the country and respond to the needs of the residents.

While in some countries and unions the regulatory approach on advertising can be similar, as it is about promoting alcoholic beverages, for some products such as financial products and tobacco it can be different. However, all of them are put in place to protect people from consuming the products that can be harmful to their health or can damage their financial well being.

In any way, knowing what the advertising regulations for risk disclosure are will help you make the right decision and keep a safe environment for you and the people around you.


Leave a Reply

error: Content is protected !!