In South Africa, the Advertising Standards Authority ("ASA") is a voluntary body and its members agree to be bound by its rulings. Yet companies that aren't members of the ASA often find themselves before that body. In addition, if the ASA rules that a non-member's advert contravenes the Code of the ASA, the non-member company's advert is effectively dead in the water. But why is that? And is it right?
The ASA Code covers a wide range of issues. Among these are passing-off type issues; in other words, advertising that might cause confusion as to the origin of the goods as well as complaints involving alleged misrepresentations or advertising claims that cannot be substantiated. The case of Medical Nutritional Institute (Pty) Ltd v The Advertising Standards Authority (South Gauteng High Court 15/30142, 18 September 2015) falls into the second category. What makes this case so interesting, however, is not so much the nature of the complaint, but rather the fact that the case focused on the ASA' s jurisdiction.
The background to this case is that the Medical Nutritional Institute (Pty) Ltd ("MNI") sells a product called AntaGolin and its advertising material promises that the product "combats insulin and assists in weight loss". A medical activist challenged this claim with the ASA, which ruled that the advert contravened the ASA Code. It also issued a so-called "Ad Alert", a notice that alerts media companies to an ASA ruling. As all South African media companies are members of the ASA, it's the Ad Alert system that really gives ASA rulings their teeth because, even if the company that places the advert doesn't belong to the ASA, the media companies are obliged to refuse to publish the advert.
MNI, which is not a member of the ASA, found this unacceptable. So it applied to the high court for an urgent interdict (injunction) pending the institution of full trial proceedings. It wanted an order suspending the ASA's ruling. What MNI was basically saying, said Acting Judge Dippenaar, was that the ASA "is unlawful in purporting to be the regulator of the advertising industry and ... cannot arrogate to itself the right to control advertisements sought to be placed by non-members who do not subscribe to ... [its] code".
The papers filed by the two parties suggest that there are some very grey areas here. For example, who is responsible for regulating the advertising of complementary medicines – the ASA or the Medicines Control Council, or does this fall within the realm of the Consumer Protection Act, 2008 ("CPA")? And what is the status of the ASA? Is it an "accredited regulator" under the CPA? Is it an organ of state? Is it regulated and recognised under the Electronic Communications and Transactions Act, 2002 ("ECTA") and, if so, what is the effect of that? Is the ASA in financial difficulty? MNI certainly seems to think it is, as it claimed that the ASA would not be able to meet a claim for damages that might be awarded against it. What is clear is that MNI is not the first company to challenge the ASA's jurisdiction – there is seemingly another similar high court case pending.
So what did Acting Judge Dippenaar make of all this? Well, in order to get an urgent interdict you only need to establish a few things. MNI did have a prima facie case in that the ASA's ruling against its advert was defamatory and injurious – the ASA's ruling also offended against the constitutional rights of freedom of association and speech. MNI had a reasonable apprehension of harm through loss of sales (MNI said that it had suffered damages of R25-million). And the balance of convenience did favour MNI. The judge therefore granted the interim interdict.
In the process, the judge made some interesting findings and remarks. She suggested that there were statutory regulators for products like AntaGolin, namely the Medicines and Related Substances Control Act, 1965 and the CPA. The judge said that the ASA's reliance on its apparent ECTA recognition was misplaced, because the ECTA regulates electronic communications and broadcast licensees rather than advertisers and, in any event, the Independent Communications Authority of South Africa ("ICASA") is the body concerned with such complaints, not the ASA. She also found it relevant that the ASA had not received accreditation under the CPA.
The interim interdict issued by the judge is an interesting one. It stops the ASA from imposing any sanctions (including Ad Alerts) on AntaGolin. It also prevents the ASA from doing anything that stops MNI from asserting in adverts that AntaGolin combats insulin resistance and assists with weight loss. It also requires the ASA to remove its negative ruling against AntaGolin from its website.
It's worth bearing in mind that this is simply an interim interdict, and that the judgment will eventually be replaced by one that follows a full trial during which the issues will be considered in far greater detail. In the interim, this decision is important when it comes to the issue of the powers that the ASA has in respect of adverts placed by companies that are not members of that body.
We will report on the outcome of the trial proceedings in due course.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.