Contents
- The Digital Economy Act 2010
- New advertising codes
- Competition law update
The Digital Economy Act 2010
By Linda Burke
As a response to growing concern over copyright infringement, Parliament passed the Digital Economy Act 2010 in April this year. The Act is broadly divided into two sections.
The first section of the Act gives copyright owners the right to make a copyright infringement report to an internet service provider (ISP) if they suspect that a website hosted by the ISP infringes their copyright.
The ISP is obliged to:
1) inform the website subscriber of the report;
2) maintain a register of all reports; and
3) provide a copyright infringement list containing anonymous
details of subscribers that have
received a specified number of reports to
copyright owners on request.
Copyright owners can then pursue a court order to identify repeat infringers, in order to take legal action against them. The Act provides that failure to comply with the obligations may result in an ISP being fined up to £250,000.
Ofcom has recently published and is consulting on a draft code of practice to cover this procedure. Amongst other proposals, the draft code sets out how and when a report can be made and proposes that copyright infringers are included in a CIL if they receive three reports within a year. Initially, the code will only cover fixed-line ISPs with over 400,000 subscribers, although Ofcom will continue to monitor all ISPs and has power to increase the scope of the code if required.
If the above measures prove ineffective, a second more controversial collection of proposed provisions included under the Act may be implemented. These provisions could:
- impose an obligation on ISPs to take technical measures against
repeat offenders eg suspension
of internet accounts; - require the courts to grant blocking orders over certain websites.
They may only be introduced by the Secretary of State following a further review into the need for such measures and Parliamentary approval.
Implementation of the first section of the Act is in its early stages, and the draft code is not expected to come into force until early 2011. However, the Act has already sustained considerable criticism for imposing a disproportionate burden and penalty on ISPs and for being unfairly biased in favour of copyright holders.
Penningtons will keep you up to date on developments and on the introduction of the code.
New advertising codes
By Lawrence Milner
From 1 September 2010 new advertising codes from the Committee of Advertising Practice (the CAP Code) and the Broadcasting Committee of Advertising Practice (the BCAP Code) come into effect. The CAP Code regulates non-broadcast marketing and the BCAP Code regulates television and radio advertising. Both these codes have been updated simultaneously for the first time, following an extensive two year review, to ensure they are clearer, easier to use and more consistent.
The codes, which continue to promote legal, honest and truthful advertising, address four main areas:
1) Enhanced protection for children
Amongst other rules, the new codes prevent data collection from children and reinforce the codes preventing advertisers from exhorting children to buy products.
2) Consumer protection
The codes clarify the use of the word 'free' in marketing communications and also set out rules surrounding prize promotions, including 'guaranteed win' and 'instant win' promotions.
3) Social and environmental responsibility
There is a catch all provision which states that all advertisements must be prepared with a sense of responsibility to the audience and to society.
The codes continue to promote environmental issues and encourage compliance with the government guidance in this area. This includes a new explicit rule against exaggerating the environmental benefits of products.
4) Health
The codes incorporate new European legislation to prevent misleading claims about food products and their ingredients and regulate the advertising of herbal medicines.
Despite the extensiveness of the recent review, CAP is already consulting on the extension of the code's remit to cover marketing on a company's own website. This review is taking place with a view to extending the remit of the code later in 2010.
Penningtons will keep you up to date on further changes to the code.
Competition law update
By Anna Frankum
On 1 June 2010 a new safe harbour came into effect regarding the application of competition law to 'vertical agreements'. Vertical agreements are those where the parties operate at different levels of the supply chain, such as distribution, agency and franchise agreements. Very often, these types of agreements do not raise any competition law concerns, so a 'Block Exemption' exists for them. (This is an exemption from Article 101(1) of the Treaty on the Functioning of the European Union and Chapter I of the Competition Act 1998. Briefly, these prohibit anti-competitive agreements which affect trade between member states or in the UK respectively.)
The new Vertical Agreements Block Exemption replaces the previous one and will be in force until 2022. It retains many of the old provisions, but there are some important changes, summarised below.
1) The safe harbour is now narrower in scope because it only applies to agreements where each of the supplier and the buyer have a market share of 30% or less. Previously, only the supplier's market share was relevant. As a result of this change, agreements that benefited from the old Block Exemption, but do not fall within the new one, will need to be reassessed as to their effect on competition. They will not automatically be anti-competitive or illegal, but their effect on competition should be checked.
2) The second major change relates to restrictions on online selling outside the distributor's territory.The basic policy is that every distributor must be able to use the internet to advertise and sell its products. However, there are limitations to this, as set out in the guidelines.
Distributors can be prevented from making 'active' online sales (ie actively approaching customers) into the exclusive territory or to an exclusive customer group which has been reserved to the supplier or allocated to another distributor. A distributor might do this by sending unsolicited e-mails or targeting website advertising at a particular territory, for example. Bans on this type of online selling are acceptable under the terms of the Block Exemption.
However, distributors cannot be prevented from 'passive' online selling, such as responding to unsolicited requests from customers, or hosting a website which is accessible to customers located outside the distributor's territory.
In addition, the guidelines list some 'hardcore restrictions' which, if included in an agreement, will take it outside the safe harbour. These include:
- requiring the distributor to prevent customers outside its territory from viewing its website, or requiring the distributor to automatically re-route them to the supplier's or another distributor's website;
- requiring the distributor to terminate an online sale if the customer's credit card details reveal an address outside the distributor's territory;
- limiting the proportion of overall sales that the distributor can make online;
- requiring the distributor to pay a higher price for goods to be sold online.
There are separate rules for selective distribution networks.
3) The third major change concerns resale price maintenance. Price fixing remains a hardcore restriction which will almost always be considered anti-competitive. However, the guidelines give three exceptions to this. These are where a fixed minimum price is needed to:
- induce distributors to promote a new product;
- for short term low price promotions in franchise systems (and possibly selective distribution networks);
- to avoid free-riding of pre-sale services especially where the products are complex.
This is a complicated area. To avoid infringing UK and EC competition law, careful analysis is needed of any vertical agreement which contains restraints on competition law, and of its specific circumstances, including the parties' market shares.
There is a transitional period for existing agreements which fall within the old Regulations, until 31 May 2011. They will continue to be exempt until that time, but should be reviewed before then.
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.