In last month’s bulletin, "Stealth Marketing: To Disclose or Not to Disclose – That is the (Legal) Question",1 we described the legal issues relevant to the practice of "stealth marketing", where marketers hire "influencers" to promote products in locations where a target market for the product would likely be found, sometimes without disclosing the influencer’s relationship to the marketer. For example, an attractive actor could be hired by a liquor company or advertising agency to pretend to be an ordinary customer at a trendy nightclub, who orders and raves about the liquor company’s new margarita cooler to other patrons.
Such "stealth marketing" tactics have been criticized by some consumer groups as "sneaky" and "deceptive". In a similar vein, certain interest groups have been critical of the nature of product placements in entertainment content and have pushed for increased disclosure of such placements. Other interest groups are concerned about the implications of "surreptitious advertising" on artistic integrity. Notwithstanding these criticisms, product placements are a legitimate, prevalent and potentially effective branding tactic.
Product placements are also not new. For instance, branded bars of soap were strategically placed in silent films in the late 19th century. The practice took off in the early 1980’s when marketers realized the effectiveness of advertising that is tied in to the plot of movies that reach global audiences.
Spending on product placements in the U.S. in 2004 amounted to $3.5 billion, a 46% increase over the previous year.2 A recent study estimates that the global product placement market will soar 25% to $7.5 billion this year and hit $14 billion by 2010.3 Marketers are currently faced with the challenges presented by popular digital technologies such as commercial-skipping digital video recorders, DVDs containing entire commercial-free seasons of television shows and digital cable which presents viewers with hundreds of alternatives to sitting through two minutes of advertisements. Such new technologies threaten the future of the "thirty-second spot". In response to these new technologies that enable viewers to ignore advertisements, marketers are increasingly turning to product placements.
Aside from traditional placement conduits such as television shows and movies, now video games, plays and even novels are being transformed to accommodate placements. The product is usually physically placed in the forefront or backdrop of a particular scene or worn by the actor. Advances in digital technology have also allowed advertisers and content producers to insert the branded items in the post-production phase. Such digital brand integration technology increases the flexibility of both how the brand is placed and how advertisers pay for such placements.
Product placement is a legal (and prevalent) marketing tactic in the U.S. Currently, the Federal Communications Commission requires product placements to be disclosed at the end of television programs when the closing credits are rolling, which means most viewers have likely already tuned out. In 2002, the Federal Trade Commission rejected a consumer interest group’s petition to take formal action to require advertisers to disclose product placements when they appear on screen with the prominent superscript "ADVERTISEMENT".
Likewise, there are no explicit legal restrictions against product placements in Canada. The Canadian Marketing Association’s Code of Ethics states that product placement within entertainment programing is acceptable. However, advertisers must still be cautious to ensure that the placements do not contravene other advertising and marketing laws, including:
- false and misleading advertising (e.g., product/service is used in such a way to give a deceptive impression about is attributes);
- industry specific restrictions (e.g., alcohol and tobacco placements); and
- marketing to children and young teenagers.
Unlike the U.S. and Canada, product placements are currently banned or heavily restricted in most European countries, unless an imported show is being aired. However, given the competitive disadvantage this restriction has placed on European advertisers and networks, the EU issued an amended Television Without Frontiers Directive (the "Directive") last December that would allow product placements on European-made shows.
The Directive, which also includes broad changes to European broadcasting and advertising laws, stipulates that the placements must be clearly identified at the start of programs so that viewers are aware of the advertisements embedded in the program. The proposals are years away from approval, as they face major tests before the European Parliament and the EU’s 25 national governments. Additionally, placements will still be banned from children’s shows and news programing.
Given that there are no current or explicit restrictions against product placements in Canada or the U.S. and restrictions in Europe are easing, it appears that the use of product placements will continue to grow. Indeed, one network executive recently commented that in the near future 75% of all scripted prime-time television programs will include product placements. With the challenges faced by marketers in reaching viewers through traditional channels, this is a natural and positive development.
Despite the lack of laws specifically regulating product placements in Canada, marketers should ensure that proposed placements are reviewed by legal counsel to ensure they comply within general advertising and marketing laws.
1. Available online at: http://www.mcmbm.com/Upload/Publication/StealthMarketing_0806.pdf
2. The Economist, "Lights, camera, brands", October 27, 2005, available online at: http://www.economist.com/printedition/displaystory.cfm?story_id=5088577
3. See PQ Media study referred to in Canadian Marketing Association’s Weekly Watching Brief dated September 1, 2006.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
© Copyright 2006 McMillan Binch Mendelsohn