UNICE/ICC Symposium
Advertising
matters
Brussels, 27 April 1999 10.00 a.m.
Rules
and freedom in advertising
Opening speech of Mr. H.
Maucher, Chairman Nestl SA, Chairman ERT and Member of the Presidency of ICC
Your Excellencies
Honourable Members of European Parliament
Ladies and Gentlemen
Welcome to this joint UNICE/ICC
Symposium.
Advertising matters! It
matters for us from the private sector because it is the primary tool for the
manufacturers of consumer goods to communicate directly with the customer. It
matters for the consumer and it matters for the market economy because it is
a major source of competition.
These are just a few reasons why we - that is UNICE and ICC - have joined forces
to organise this seminar and to present our case to you. We want to inform,
because there are still misconceptions about advertising, the way it works and
its impact on society. Some of the misconceptions have led to quite adverse
trends: while we see liberalisation of markets everywhere and more world-wide
communication, we observe at the same time the emergence of more and more rigid
impediments to free market communication.
We have organised this symposium
because we are taking these developments very seriously. You will hear facts
and opinions on this issue from speakers with a wide range of experiences. We
very much invite you to be active participants, challenging our views with questions
and comments. I am sure that this will make our case for freedom within rules
in advertising even stronger.
You know of course what
ultimately triggered our symposium in Brussels today.
It is new regulations set
up by the Ministers of Health of the European Union to ban advertising for tobacco
and all products bearing tob
acco brands. You will hear from the UNICE people
what European industry thinks about this. But this is more than a European event.
The attitudes and misunderstandings behind the ban are not limited to Europe.
The same goes for the risks and the impact. The ban will affect producers from
all over the world and it will affect sectors outside tobacco, both directly
and indirectly, since it has also an impact on basic principles of a free market
economy.
All these are major reasons for ICC to be involved here today. ICC is the world
business organisation; I am speaking on behalf of it as a member of its Presidency.
It is the only global economic voice without any special interests. We represent
all sectors of industry, all sizes of firms from all countries and continents.
With this broadly based legitimacy we are involved in a dialogue with major
intergovernmental organisations and political leaders across the world. In this
dialogue and in the public debate we defend the interest of a free market economy.
Free market communication
within a coherent set of rules is one of the main issues of ICC. We summarised
our own point of view in a short statement published in January 1996; it is
in your folder.
The date of this ICC statement
shows that the problem of ever more impediments to advertising has already been
around for some time. We must continue addressing it because the various restrictions
appear to be part of a global trend, making the overall problem more and more
severe.
Let me just mention five
points why I think these impediments are steps in the wrong direction. Today's
speakers will come back to these and other points in more detail.
- My first point is about
freedom and rules. Business knows that we need rules, but we are in favour
of a balance between rules and freedom. This means that when new regulations
are being proposed, we must first discuss what kind of freedom might be at
stake.
The ICC statement spells
this out: overly restrictive regulation of advertising hinders industry to
speak freely about products that are legally manufactured and marketed. The
statement also mentions the freedom of information. The freedom to get information
on existing or new products is essential for free consumer choice.
Just to avoid misunderstandings:
When we communicate in an advertisement it is not only hard facts. Good advertising
also adds to the pleasure of products and services sold, maybe some emotions,
or dreams and fun. Here as in many other respects we think that it is ultimately
up to the consumer to chose his own private balance between pleasure and other
considerations.
- My second point is about
market efficiency. Communication and information are essential tools in any
economy. We have recently addressed this in the ICC Geneva Business Dialogue
with politicians and intergovernmental organisations.
I am quoting the final
declaration: "In the new context of global markets, practical business
tools such as marketing, advertising, or new financial instruments have
become even more important for creating wealth in an economy. Their potential
still needs to be better understood by public policy-makers." Here ends
my quote.
Producing more and more
wealth in a free market economy is a highly complex process, and th
e machinery
behind it is quite complicated. Marketing and advertising are essential.
I think that recent history has shown that to combine production with a central
plan is not good enough to increase wealth. Maybe, in order to illustrate
the point, one could compare the free market with a racing car. There are
actually possibilities for the authorities to steer; there are gears, accelerator,
brake, etc. etc., and these steering devices work well provided one understands
the mechanisms. Another thing is trying to control the race by taking off
one of the wheels of the car. This is more or less what happens when you ban
advertising instead of looking for ways how to best avoid things considered
as problematic.
But there is another aspect
to this. Some attacks on advertising go against the market in general. In
today's political environment it is even more important to be clear and coherent
on these issues. There are no longer communist systems, but still many people
I sometimes called "yes-but" capitalists. They avoid the frontal
attack but try to hollow out the market system that they neither understand
nor like. You find them among well-meaning regulators and in organised activist
groups. I am not saying that our market economy will break down because of
a ban on advertising or one of the many other interventions by the various
Councils of Ministers of the European Union. But most of these interventions
lead to a loss of efficiency, and as a result, of competitiveness.
- This brings me to my
third point, wealth. The ICC statement notes that over-regulation of
advertising and other commercial communications is an impediment to free trade,
and therefore to economic growth. We from industry do not always take the
time necessary to explain how these things are linked and how we work. It
may therefore also be our fault if certain opinion leaders think that economic
wealth is just there as given, mainly to be distributed, and forget about
the continuous effort behind it.
The ICC statement rightly
points out that commercial communication enhances the efficiency of the market
by providing consumers with the product information necessary to make informed
judgements. Advertising also promotes competition among producers, it helps
to market innovations, it opens a market to those not yet established and
contributes to dynamism. These are all things that benefit the consumer and
help increase wealth in an economy.
There are also very practical
things: recently, a top manager from Siemens mentioned to me a new computer
programme developed by his software engineers for Internet users. This programme
suppresses all the advertising banners on the Internet pages a user wants
to read on his screen. Meanwhile, the people at Siemens suddenly realised
that this may probably cut the finance for a big part of the Internet, damaging
the Internet with its freedom, creativity and enormous opportunities.
- My fourth point: We know
that there are some real concerns with regards to advertising which need to
be addressed, such as health, consumer protection, etc. etc. One of the things
we have to be very careful about is to avoid overly aggressive advertising.
On these and on other things we must have a dialogue with the consumers and
with you as opinion leaders and legislators. Let me add one aspect: most advertising
is for brands, and these brands are very much a long-term investment. In other
words: The firms advertising their products and services are as much interested
i
n long-term consumer satisfaction with all its aspects as you are.
- This brings me to my
fifth and final point, which is about some false assumptions. You may, for
instance, remember the theory about the hidden persuaders (Vance Packard).
It is the story about the psychological manipulations used by advertisers,
the alleged power of producers over consumers to make them buy things they
never wanted, etc. etc. Allegations and the alarming paranoid futurism of
these stories from the 1950s were mainly based on anecdotal evidence. Meanwhile,
the alleged manipulations have for a long time been seen through by the consumer.
Today, the persuasion methods and status symbols of that period can at best
be used in form of irony. Scholars of the hidden persuaders theory are clearly
underestimating the consumer, something we from business could never afford
to do.
Ladies and gentlemen,
let me sum up my introduction with a few conclusions and wishes for the discussions
today:
I know that there are concerns
related to advertising in general and to tobacco advertising in particular which
need to be discussed. All I am asking you - and this is my first conclusion
- is to put these concerns in a wider context.
This brings me to my second
conclusion and wish for our discussion: please give some more credit to the
market mechanism and in the industries own long-term interest. I mentioned for
instance some of the reasons why long-term thinking in firms does a lot to bring
the results which people and the public policy makers are looking for –
also in advertising.
Third, let’s keep in
mind that self-regulation has proven more effective than government regulation
alone. It is a good complement to legal frameworks, because it is both more
flexible and more comprehensive than legal regulation.
ICC is the world’s
foremost developer of self-regulatory codes for advertising and marketing practices.
We can react quickly to new developments, as we have demonstrated with the recent
ICC Guidelines on Advertising on the Internet. Our global advertising and marketing
codes promote high standards of business conduct and therefore consumer confidence.
Over half a century ago, the ICC International Code of Advertising was first
published. With five updates, it is still one of the most successful codes for
voluntary business self-regulation in marketing and is used throughout the world.
My fourth remark: please
do not underestimate the consumer, and please accept that individuals have their
own criteria for rational choice, even if it differs from what the policy makers
would like it to be.
ICC has a clear line of
thinking about advertising for products that are legally sold: rules yes, bans
no. All goods which can be legally manufactured and marketed should also be
legal to advertise, even those under heavy attack.
And, taking a last quote
from ICC: "Freedom of advertising and commercial speech, coupled with rules,
are cornerstones of the market economy, and must be vigorously protected and
promoted by the ICC, as well as governments and business associations alike."
Thank you for your interest.
I now pass the floor to
Mr. Dirk Hudig, Secretary General
of UNICE.
Commission
on Marketing, Advertising and Distribution