Industry voice: Evidence not emotion: the case against increased regulation
Posted 28 July 2014.
by Paul Head
A ministerial review of alcohol advertising and sponsorship looms as a follow on from the Sale and Supply of Alcohol Act 2012.
Without prejudging the outcome of the review, there is little evidence to suggest partial or total bans have the desired effect of reducing alcohol consumption and related harm.
Indeed, there is significant international research to suggest that advertising restrictions and bans are at best ineffective and at worst can actually lead to increased consumption as products become increasingly commoditised, and price is the sole competitive battleground.
A case in point, economist Massimo Motta in Advertising Bans (1997), found advertising bans increase rather than decrease consumption. Companies are forced to differentiate their product through price competition, which ultimately decreases prices and stimulates more demand.
The findings were particularly prevalent in mature markets where consumer goods are similar and advertisers compete for market share and advertise brand attributes.
Research (Damien O’Flaherty’s 2007 Food for thought: The Impact on Advertising Bans, examining the impact of advertising bans on high fat, sugar and salt food, also supports the theory that bans have little impact on the consumption of such foods, and rather have the opposite effect.
Again, the research suggests advertising allows companies to sell benefits or create brand associations and preference and, without this opportunity, it is likely that competition will be significantly based on price, not differentiation.
Further studies have shown that drops in prices of high fat, sugar and salt food increase consumption.
Lifestyles, not ads
Moreover, recent studies of Canada and Sweden (OFCOM’s Childhood Obesity – Food advertising in context in 2004 and S Livingstone’s New research on advertising foods to children in 2006) indicate that obesity does not diminish in instances where advertising to children has been banned. The studies
confirm a relationship between television viewing and obesity is probably due to a sedentary lifestyle, not
These studies provide authority for the argument that advertising in a mature market results in brand switching while discounting price results in increased consumption.
In line with the conclusions from this related research, specific studies include a meta-analysis of the literature on alcohol advertising and billboard bans (Jon P Nelson and Douglas J Young’s Meta-analysis of Alcohol Advertising Bans: Cumulative Econometric Estimates of Regulatory Effects from last year) suggest that total or partial broadcast advertising bans do not make any difference to consumption.
A study on Saskatchewan in Canada (Cheryl R. Makowsky & Paul C. Whitehead’s Advertising and Alcohol Sales: A Legal Impact Study from1991) provides such an example. A ban on all alcohol advertising within the province was lifted in 1983, after 58 years in place. Examining data from details of monthly alcohol sales in the province revealed that “overall sales of alcohol did not increase between1981 and 1987.”
The researchers concluded that the change in legislation affecting alcohol advertising produced neither an abrupt permanent nor a gradual permanent effect on the pattern of the total volume of sales in Saskatchewan.
Evidence also demonstrates that alcohol counter-advertising is effective with teenagers and young adults (C K Atkin’s Survey and experimental research on effects of alcohol advertising from 1995). As new restrictions on alcohol advertising might also result in less alcohol counter-advertising, increased counteradvertising, rather than advertising bans, offers a better option for public policy.
Advertising bans are not the solution to the multifaceted issues around alcohol abuse – or other food and beverage-related public health issues. Public policy must be based on sound evidence, not emotion.
Despite the weight of evidence that increased regulation or bans are ineffective as public health tools,policy statements from opposition parties indicate support for restrictions or bans on advertising and sponsorship across a number of categories including food and beverages.
Calls for legislation or government regulation ignore the fact that many categories are already heavily regulated or have comprehensive, effective and highly responsible self-regulation via the Advertising Standards Authority.
The argument that advertising self-regulation is not working conveniently overlooks the fact that few complaints are made to the ASA concerning either beverage or food advertising, particularly in relation to young people. Furthermore, I can attest that the industry is committed to promoting responsible alcohol consumption and we are constantly reviewing our practices.
The communications and advertising industry contributes more than $2 billion to the New Zealand economy and we play a vital role in encouraging competition and consumer choice. Increased intervention in advertising has far-reaching implications for any organisation interested in differentiating its brand from the competition.
If we want to continue to fuel the economy and bolster consumer confidence, disregard the call for advertising restrictions and bans – effective, responsible self-regulation is the answer.