The Advertising Standards Authority's future in South Africa is in grave doubt and it not only affects them and their employees, but the entire advertising fraternity and all consumers. Here are some facts that you need to know about what is happening:
- The ASA is a non profit body that has been in existence for 50 years, set up to assist self regulate advertising disputes. When working effectively it has allowed for speedy and relatively inexpensive dispute resolution for both competitors and consumers.
- On 21 October 2016, the Advertising Standards Authority (ASA) went into Business Rescue (an intervention that attempts to prevent a company from its financial distress to prevent its liquidation).
- The reasons why the ASA is in distress are:
- lack of funding
- lack of membership participation
- high operational costs
- costly litigation (the Herbex (pending) appeal and a damages claim of +-R17 million, set down for 6 March 2018)
- decreasing use of its services (including competitor claims)
- On 25 April 2017 is the ASA's second meeting of creditors and a special AGM has been called by the business recue practitioners to table a number of resolutions based on their research:
- a new management team and board
- a leaner organisation structure (from 20 to 13)
- a long term funding model
- a streamlined adjudication process
- By 30 April 2017 the ASA needs to secure at least R5 million to cover its historical debt. Within a short time thereafter, a further R3 million is required to fund its operating capital in the immediate future. As a result a fund raising initiative is being launched at the special AGM.
- The special AGM is taking place at the SAB World of Beer 15 President Street Newtown at 10am on the 25th. (Afro Leo just pointed out that this venue is interesting because it is a reminder of the 2015 packaging fight between SAB (now AB InBev) and Brandhouse Beverages over the Amstel Lite packaging (see here reported on this blog for example). It is poignant because the case illustrates the very need for the ASA i.e. this type of case (based on imitation - a special ground under the ASA code) would not easily be adjudicated in a court because imitation alone is not passing off and the courts are very reluctant to rule favourably on unlawful competition claims where there is no passing off - eg Cochrane Steel).
- The proposal for ongoing short term funding requires a commitment of R1.34 million per month from its members in proportion to their ad-spend.
- A failure to secure short term funding will result in an application to liquidate the ASA which will be to the detriment of creditors, up to 20 people will lose their jobs and the ASA services will be lost and/or left to the courts (with cost and other disadvantages) and/or government (which will mean the advertising industry will be regulated by the state).
- In the longer term the ASA intends to cover its costs through a hybrid model which includes an advertising levy (66%) and a contractually negotiated rates from media (34%).
- The ASA has applied to become an industry ombudsman under the Consumer Protection Act. This could alleviate its litigation challenges (over jurisdiction) and over time resolve some funding issues. (Afro Leo points out that accreditation may take some time because of strategic differences between the National Consumer Council and other stakeholders)
- The ASA are attempting to also deal with potential jurisdictional challenges through stronger member contracts requiring media, marketers and advertisers to agree to be bound by their Codes (which incidentally include the Sponsorship Code).
- Their are various risks to accepting the Business Rescue Plan - the retrenchment process will be costly, there is an unquantified risk of a damages claim which could bankrupt the ASA, the ongoing jurisdiction battles over non members is subject to an appeal which could severely hamper the ASA if the appeal by them is not successful.
Here is the invitation to the special AGM.