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The Advertising Standards Authority: Business as usual?
09 February 2016
Facts and judgment
Medical Nutritional Institute (“MNI”), who is not a member of the ASA, manufactures, inter alia, a weight loss product under the name AntaGolin. Following complaints by two individuals relating to claims made by MNI, the ASA made several rulings to the effect that the advertisements in their current form must be withdrawn, and eventually ruling that sanctions must be imposed for a breach of the ASA Code of Advertising Practice. MNI brought an urgent application to preserve its reputation and ensure its commercial viability. What was at stake was the legitimacy of the ASA’s adjudication’s powers, specifically over non-members.The relief sought by MNI, in essence, was to stop the ASA from any further action against NMI, pending the institution of a trial action.
The court remarked that the dispute raises complicated and wide ranging issues of public, private and constitutional law. It was not necessary or appropriate to deal with them, as they will be considered in the trial. Nevertheless, in the course of considering the merits, certain relevant comments were made. The ASA argued that if it does not regulate the activities of NMI, there would be no control over NMI advertising its products in a misleading manner. NMI countered by indicating that its activities are subject to the Medicines and Related Substances Control Act. It also stated that its advertising is subject to the Consumer Protection Act. It also pointed out that the ASA was not an approved regulator in terms of the latter act. Further, allegedly, NMI’s constitutional rights to association and expression were limited by the ASA’s activities.
In its response the ASA referred to section 55(1) of the Electronic Communications Act. In terms thereof, all broadcasting service licensees must adhere to the ASA’s Code of Advertising Practice. This made it an organ of state it was argued. Granting an interdict, it was said, would prevent it from exercising its statutory powers.
The court stated that the crux of the matter was whether the ASA may exercise control over non-members, and interfere in their contractual relations. The court then considered whether NMI made out a case for the relief sought. It ruled that the view that the grounds of prejudice to NMI’s constitutional’s right to freedom of speech, trade, association and access to the courts,
, have prospects of success. The court also later accepted both arguments of NMI based on the Electronic Communications Act, and the Consumer Protection Act. More in particular, that these acts are sufficient to protect the public interest.
The ASA further argued that any restraint on its statutory powers will be in conflict with the principle of the separation of powers. This was however rejected as the court held that the ASA did not in fact, have statutory powers. In view of all the various considerations, the court granted the urgent application.
The first aspect that comes to mind is of course, the principle of prorogation. In other words, a submission to the jurisdiction of the forum. In civil procedure, there is no general rule on when the conduct of a party will amount to tacit submission to the jurisdiction of the court. However, a party may acquiesce through conduct, such as filing a plea without raising the question of jurisdiction (Harms
Civil Procedure in the Superior Courts
(2003) 24). It is arguable that a respondent to an ASA complaint that takes part in initial proceedings, being a non-member, could be considered to have agreed to be bound by the ASA ruling in given circumstances.
Secondly, with regard to the reference to being an approved regulator in terms of the Consumer Protection Act, or not being one rather, it is not clear that the approach alluded to in the judgment is correct. The sections referred to is section 82, which clearly states that the Minister
prescribe an industry code. There is no nexus with the operation of the ASA. The other provision, section 97 merely relates to interaction between certain entities. The position in terms of this Act may accordingly have been overstated.
Thirdly, is a more benign view of the ASA feasible? It is necessary to have regard to the decision in
Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards Authority.
Here the court dealt with a plaintiff’s claim for damages of R6.5m. A competitor, Netstar, lodged a complaint against an advertisement campaign of the plaintiff. After receiving written submissions from both parties the Directorate of the ASA upheld one ground of complaint and ordered the immediate withdrawal of the offending advertisements.
The plaintiff complied reluctantly, but appealed to the Advertising Industry Tribunal, which upheld the appeal, essentially because the complainant during the appeal hearing withdrew the particular objection on which the Directorate’s decision was based. The plaintiff alleged that the Directorate should have been aware that its ruling would have drastic implications for the plaintiff, who was forced to comply with the ruling. The court stated the following:
“An incorrect decision which was arrived at negligently during an adjudicative process which purports to serve the public interest cannot, in my judgment, be regarded as being unlawful. This applies even if the process is not based on legislation or contract and the principle is hence not dependent on consent. The public policy considerations mentioned in relation to the immunity of the judiciary apply equally. The process in this case purported to serve the public good and incorrect decisions, some based on wrong legal concepts, and others involving the erroneous exercise of a discretion or value judgment, some because of mistaken factual findings, are to be expected and have to be accepted by those affected by them, directly or indirectly.”
The tenor of this passage is in stark contrast to that of the NMI ruling, granted though that the facts differ. The court’s respect for the functioning of the ASA, and its aim to serve the public good, is significant.
What is clear is that it is certainly now not a Wild West free-for-all. The implications of the case is not that the ASA has overnight become a rogue tribunal, but it remains a contractual body that has been functioning well for many years, having as its members most significant players in the South African economy. Hence its statutory recognition by the legislature, and its acceptance in decisions such as the
case. Whilst it has been made clear that the ASA cannot bind non-members to action against a non-member; for members, it will indeed be business as usual.
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