Continental draft

The tabloid press demonise the EU as an organisation that passes crazy laws in a deliberate effort to sabotage the British way of life. In reality, EU law may be about to open up the free market to UK-style sales promotions. By Martin Croft

Churchill once said that Communist Russia was “a riddle, wrapped in a mystery, inside an enigma”. If he were alive today, he would probably use that description about not Russia, but the European Union. And, for many UK businesses, the most enigmatic thing about the EU is its laws.

Most of what UK marketers “know” about EU laws is what they read in the UK’s newspapers – and the viewpoint they get is not, perhaps, the most impartial. EU laws are a favourite target for British media attack – but many of the idiotic notions the tabloids accuse Brussels of trying to inflict on the UK are either complete fictions, or the product not of EU lawmakers but of British ones.

This is because EU directives do not themselves have the force of law, but must instead be turned into law by individual EU member states, which have the right to interpret a directive according to their own legal, social and cultural traditions. The European Commission (EC), the EU’s executive arm, does not concern itself with the details of how a directive is turned into law in a particular country, so long as the spirit of the directive is complied with.

If no one’s told you not to…

In the UK, with a legal system based on case law and precedent, the approach is to assume that unless something is strictly forbidden by law, it is allowed, and to legislate as little as possible, preferring instead to rely on self-regulation. In most EU states, with legal systems based on the 200-year-old Napoleonic Code, the reverse is true – unless something is specifically permitted by law, then it cannot be done. When implementing a directive, these states will try to cover every possible eventuality in their laws.

As Institute of Sales Promotion (ISP) director-general Edwin Mutton says: “Two competing ideologies are at work. The UK believes that self-regulation allows a system to adapt swiftly to changes, while the German or Scandinavian model demands that legislation cover everything – which means that as soon as circumstances change, the law needs to be changed.”

In conjunction with the British Promotional Merchandise Association (BPMA), the ISP has set up the European Promotional Marketing Association (EPMA), a lobby group which has so far met with considerable success in its attempts to get British sales promotion techniques allowed across the EU. A draft directive on sales promotion is currently being considered by the EC.

The dreaded word ‘harmonisation’?

As things stand, some UK promotional techniques are illegal in many other EU countries. After a great deal of effort from the EPMA, the European Parliament recently adopted a version of the draft directive on sales promotion that would, if passed in its current form, effectively create a level playing field across Europe, with countries required to allow British-style promotional techniques.

Until that directive is adopted and implemented, however, as Margot Parker, European spokeswoman for the BPMA and co-director with Mutton of the EPMA, says: “Any company wanting to run a sales promotion across EU borders will have to know the laws and regulations in each and every country.” Her advice is: “Always take the safe route: do your homework and never try to cut costs to the bone.”

Julian Reiter, managing director of integrated agency Positive Thinking and a director of the Marketing and Communication Consultants Association, has not had problems at his current agency, but in a previous job fell foul of foreign laws over a promotion for a client in Germany.

They do things differently there

He explains: “We were working for a fashion company, which wanted to boost sales through a particular retailer. We took advice from a sister company, based in Germany, and were led to believe that you could give away a gift with a purchase if it was of “negligible” value compared with the item bought. So we offered an umbrella with a &£500 suit. Someone complained, and the store was threatened with closure. The marketing director at the client was having kittens.”

In fact, German law says that the value of any incentive cannot exceed three per cent of the value of the item being bought; so if the umbrella cost more than &£15, the promotion was indeed illegal.

The lesson to be learnt from this experience, Reiter says, is that companies “need to consult local specialists and get local legal advice”.

Many in the UK promotional marketing industry are excited about the idea of a single European market for sales promotion, run along British lines. But the problem is that the sales promotion draft directive is still only about a quarter of the way through the tortuous process by which it becomes a fully fledged directive. Even so, it is moving quickly compared with some directives – they can get bogged down for 20 years or more.

From its origins with the EC as a “communication” or report, published by EC director-general Jean Bergevin in April 2001, the draft directive has gone through the European Parliament, and is now back with the EC. The next step is for it to go to parliament again, before being passed to the Council of Mini

sters, who must “adopt a common position” – in other words, come up with a version they can agree on. Then it goes back for a third time to parliament, which also has to adopt a common position. It gets a second reading in the European Parliament, after which it will be presented to the council again for six weeks of “conciliation” – old fashioned horse-trading. If it survives that, it could be adopted as a directive as early as spring 2004.

The problem is that, at any of these stages, amendments could be made which might completely change the nature of the draft directive. Indeed, there have already been about 150 amendments – many of which have been struck out, but could be reinstated – covering a wide range of issues. If some of those amendments were included, then, for example, the “Bogof” – buy one, get one free – offer so beloved of UK retailers could be banned everywhere in the EU, instead of just in some countries, as could “happy hours”.

Help from Hewitt

Earlier this month, the EPMA met representatives of the Department of Trade and Industry, and secured Government support for its campaign to open up Europe for sales promotion. But, as Mutton says: “We need to keep up the pressure – if the EU puts the straitjacket on, it could destroy sales promotion.” That represents a significant threat to UK interests – the promotional marketing industry in this country employs 25,000 people and generates sales of &£20bn.

The EPMA wants to get the sales promotion draft directive moving as quickly as possible, because there is a growing call for the introduction of a much more powerful directive on fair trading. The fear is that, if a fair trading directive is introduced before one on sales promotion, the latter could shrivel up and die. Conversely, if a sales promotion directive is adopted first, then the EPMA and its allies hope to be able to have promotional marketing made exempt from the fair trading directive.

But even without either of those directives, there are already a number of EU directives that have been implemented in the UK and which affect sales promotion. Perhaps the best-known of these is the data protection directive, translated into the Data Protection Act in the UK. While a minority of marketers may chafe at the restrictions imposed on the collection and use of personal data about consumers, the majority recognise the need for such protection. Other, more recent directives which have had an impact on UK marketers include the distance selling directive and the e-commerce directive.

There are also Europe-wide rules governing product safety, particularly when it affects children. As Parker says: “Shoddy, bad or dangerous products are illegal under EU law – that’s simple.” If a company wants to be absolutely certain that the items it is using in a promotion are safe, she says then it should source them from a BPMA member.

ISP director of legal affairs Philip Circus observes: “You must always be aware of EU directives and how they are enacted in the UK.” Circus has just celebrated 25 years of advising marketers on the intricacies of UK and European law regarding promotions. He heads a legal advice service which last year handled more than 2,000 enquiries.

Westminster is at it, too

But, according to Circus, it is not just EU directives, and the way they are rendered into English and Scottish law, of which marketers have to be aware. Plenty of home-grown laws and regulatory codes already restrict marketers.

Sales promotion, direct marketing and non-broadcast advertising will be regulated by the Advertising Standards Authority from next year, with a single self-regulatory code governing all three. Broadcast advertising is controlled by the Independent Television Commission, a statutory body governed by law, rather than a self-regulatory code. The latest indications from the Government, however, are that it favours extending self-regulation to broadcast advertising when it creates the new super-regulator, Ofcom, next year.

Then there are the regulations governing the marketing of alcohol. Again, these are self-regulatory, administered by the drinks industry-funded body the Portman Group.

And there are more laws on the way – as everyone in the marketing industry must know, Parliament has just passed a law which should see almost all advertising and promotion of cigarettes, cigars and related products banned in this country by the new year. Meanwhile, the EC is still struggling to put together its directive on the promotion of tobacco products, which is unlikely to take effect for some years.

In a sense, the British system of relying on self-regulation allows marketers to give their creativity free rein. Rather than following the same strict rules every time, there is a constant challenge to develop something new that works within a relatively loose framework.

As Philip Slade, of promotional marketing agency Hicklin, Slade & Partners, says: “Every piece of work we do comes up against one set of rules or another. If everyone followed the regulations to the letter, marketing communications would be pretty bland – and consumers would stop looking at them after a while. If you just work inside the rules all the time, consumers might not hear your message. I’m not saying you should be breaking the rules – but you need to be constantly reinterpreting them.”

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