UK Advertising in a Digital Age (Communications Committee Report) - Motion to Take Note

– in the House of Lords at 11:52 am on 25th April 2019.

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Lord Gilbert of Panteg:

Moved by Lord Gilbert of Panteg

That this House takes note of the Report from the Communications Committee UK advertising in a digital age (1st Report, HL Paper 116).

Photo of Lord Gilbert of Panteg Lord Gilbert of Panteg Chair, Communications Committee

My Lords, I am pleased to introduce this debate on the Communications Committee’s report on the advertising industry. The report, which was published nearly a year ago, was the first published by the committee under my chairmanship. I would like to thank the staff for their assistance in preparing the report: Theo Pembroke, our clerk, Niall Stewart, who was then our policy analyst, and Rita Cohen, the committee assistant. I also thank Professor Agnes Nairn of the University of Bristol, who was the specialist adviser for our inquiry. I declare an interest as a freelance consultant to Finsbury, a PR company which is owned by WPP. However, I have no involvement with WPP. I have also received hospitality from ITV at events which it hosted but which were unconnected to the inquiry.

Advertising is an essential driver of growth in the economy. It helps businesses to win customers and to compete with one another. It is fundamental to the media and the creative industries in providing employment and nurturing the talents of creatives, including musicians, filmmakers, graphic designers and writers. Meanwhile, it provides the primary source of funding to most of the media, including radio, the press and television and now a vast quantity of content and services available online.

The UK is very good at advertising. London has become a global centre for it. According to the Advertising Association, the industry’s trade body, the UK now exports £6.9 billion a year in advertising services around the world, representing faster growth than the average for service exports. A large proportion of agencies hire individuals from overseas, giving them better understanding of overseas markets. This gives the industry a highly international character which, in a virtuous circle, makes it a more attractive destination for the most talented individuals from around the world. The success of the industry needs to be recognised and celebrated. Advertising, along with other creative industries, is likely to remain resistant to automation and so become ever more important in the economy of the future.

Given this background, the committee chose the advertising industry as a case study on the impact of education, skills and immigration policies on a key industry in the creative sector. We set out to discover how the advertising sector could be better supported and how individuals from all backgrounds can participate in this exciting and fulfilling work. The industry needs individuals with a blend of arts, digital and other STEM skills. Unfortunately, the education system in England encourages children to specialise at an early age. The drive for schools to do well in performance measures, such as the EBacc and Progress 8, which prioritise core subjects, can deprive children of the broad education that they need to thrive in advertising and the wider creative sector. In our report, we call on the Government to review the skills needed for the future economy. I would be grateful if the Minister could provide an update on this.

The advertising industry needs a diverse workforce that reflects the demographics of the UK. By that, we do not just mean people of different ethnicity and gender but, importantly, also people from different social backgrounds and those with disabilities. This is essential for the reputation and trust of the industry, which are necessary for advertisers to communicate effectively with their audiences. There is a risk that the advertising industry has become the preserve of the middle class. It has already taken steps to improve access and diversity in all its forms, but we recommended that it should now show further leadership in this regard. We argued that it should discontinue informal working and recruitment practices, such as unpaid internships, which present a barrier to those from lower socioeconomic backgrounds.

Better careers advice is needed so that young people from all backgrounds are aware of the opportunities offered by the industry. We recommended that the Government should provide more resources to encourage quality careers advice and should support schools which facilitate interactions between children and advertising employers. The industry should also do more by providing role models and tools to help schools, and by creating stronger initiatives to promote advertising as a career.

Although university is still the main source of workers in the industry, apprenticeships can present an alternative route in. They have the potential to increase the talent pool and diversity of the industry, but many businesses expressed frustration about the Government’s apprenticeship scheme. We heard that the scheme was failing to provide training of an appropriate quality that works for businesses, and that there were delays in approving apprenticeship standards. The Government must ensure that apprenticeships are of a high standard and satisfy the needs of industry.

The advertising industry’s global success relies on its ability to attract and retain international workers, who understand international clients and their audiences. If the tiered visa system is applied to EU workers after we leave the EU, the immigration system will become unmanageable and damage the advertising industry. We recommended that the Government should negotiate reciprocal arrangements with other countries, under which international workers with a job offer in the advertising industry would have the right to work in the UK.

As the inquiry proceeded, it became clear that trust in the industry was severely undermined by digital advertising. Our findings, which I will discuss, led to our subsequent inquiry on regulation in the digital age and our recent report, Regulating in a Digital World. We found that there was an urgent need to update regulation generally for the digital world. The lack of a level playing field has aggravated the decline of high-quality journalism and the regional press, which was the subject of The Cairncross Review. I also welcome the Government’s Online Harms White Paper, which is an important first step in dealing with some of the problems in the digital world and which we will have ample opportunity to debate in this House.

Following year-on-year growth, digital now accounts for more than half of all advertising expenditure in the UK. While this has spurred growth and innovation in the industry, it has also generated complicated business models to make money from the provision of online content and services which are not open to external scrutiny. The market for serving ads on to computer screens as we open a web page is opaque. Users of internet services have their data extracted so that they can be targeted. Recent research commissioned by the Information Commissioner’s Office and Ofcom shows that people have only a limited understanding of how ads are personalised and that people tend to view the personalisation process as unacceptable when they are given more information about it.

At the same time, users find themselves bombarded with “clickbait”. There is a risk that digital advertising will undermine the trust which this industry relies on to be effective. The evidence of Phil Smith, the director-general of the Incorporated Society of British Advertisers, to the committee on Tuesday supported this finding. He told us that public opinion of advertising has been steadily declining because of “bombardment”, which has four aspects: volume, repetition, irrelevance and obtrusiveness.

At the other end of the value chain, the lack of transparency in the digital ad market means that advertisers who pay for advertising cannot see where their ads are being delivered or whether they get value for money. Fraud is rife. While it is difficult to judge exactly how much fraud there is, according to one estimate more than $16 billion was stolen globally in 2017.

“Ad misplacement” was another problem that we identified. This is where advertising is displayed next to inappropriate or illegal content, damaging the reputation of the advertiser and helping to fund illegal content. We recommended that the industry take greater steps to regulate itself through independent bodies such as the Joint Industry Committee for Web Standards, known as JICWEBS. We encouraged Google and Facebook, the largest companies, to sign up. I am pleased that it appears that the industry has taken some steps to improve. The Internet Advertising Bureau says that the number of organisations participating in JICWEBS has doubled in the past year and that accredited companies must have a responsible officer to ensure compliance. I understand that Google is now fully certified with JICWEBS and that Facebook is registered and undergoing its audit process to become fully certified. However, there are indications that the scale of fraud remains overwhelming. What steps are the Government taking to address this?

Although the digital ad market comprises thousands of companies acting in different ways, it is dominated by just two companies, Google and Facebook, which together account for more than half of all digital ad expenditure. While these companies maintain that the market is competitive and that they do not abuse their position, the opacity of the market makes it hard to see what is really going on.

We recommended that the Competition and Markets Authority undertake a market study to ensure that this market is working fairly for consumers and businesses. These studies do not limit themselves to narrow competition law issues; they provide a broad health check of a market. Since we reported nearly a year ago, Dame Frances Cairncross endorsed our recommendation in her review and the Secretary of State for Digital, Culture, Media and Sport wrote to the CMA. I would be grateful if my noble friend the Minister could provide an update on this.

Dr Andrea Coscelli, the chief executive of the CMA, told us last October that he would be minded to undertake a study provided that there were resources and that this would depend on the outcome of Brexit. The digital ad market is vital to the digital economy, so this must be treated as a priority. I would be grateful if my noble friend the Minister could explain what resources the Government are providing to support the CMA in undertaking a study. I beg to move.

Photo of Lord Currie of Marylebone Lord Currie of Marylebone Crossbench 12:05 pm, 25th April 2019

My Lords, I congratulate the noble Lord, Lord Gilbert of Panteg, and his committee on their wide-ranging report and on this debate. I declare an interest as chairman of the Advertising Standards Authority and, until last June, of the Competition and Markets Authority. I will touch on several aspects of the report that relate to those two bodies, as well as picking up one or two points from last month’s follow-on report, Regulating in a Digital World.

I am pleased that the report says:

The UK enjoys high standards of regulation of advertising content through the self-regulation of the Advertising Standards Authority”.

I have had great respect for the work of the ASA, long before I had the privilege of becoming its chairman. That is why an early decision of Ofcom, under my chairmanship, was to delegate the regulation of broadcast advertising content to the ASA to create a one-stop shop for consumers and advertisers, with effect from 2005. This was a great simplification because, before Ofcom, broadcast advertising was regulated by three separate media regulators, sometimes contradicting each other. In 2011, the ASA’s remit was further extended to cover all online advertising, including ads on social media, companies’ own websites, apps and advergames.

The range of our work continues to develop as advertising morphs online. For example, we are at the forefront worldwide of regulating the newer forms, such as influencer, native and affiliate advertising, as well as how ads are targeted online and on social media platforms such as Facebook, YouTube, Instagram, Snapchat and Twitter. We place the burden on advertisers of age-restricted products to prove that they have done all they can to use sophisticated ad-targeting tools, which are becoming ever more refined, to direct their ads away from children. This includes using interests and browsing behaviour to identify the true, not the declared, age—a particular and special concern.

We are also looking to deploy new regulatory tools. For example, earlier this month we announced the results of deploying new monitoring technology in the form of child online avatars that simulate children’s browsing activity. As a direct result, we have taken action to ban ads from five gambling operators which were displayed on children’s websites, in clear breach of the advertising codes. These techniques mean that we are not wholly reliant on complaints from parents or children to hunt out and close down detrimental advertising—important though such complaints are to us. We work hard to ensure that our regulation works to provide equal protection online and offline—the first principle that the committee enunciated in its latest excellent report.

However, we are not complacent. While advertising content online is not the Wild West, our regulation of it needs to develop. The committee’s report identifies the many ways in which the rapidly rising volume of advertising is constantly changing, and that is reflected in our work. Regulation of companies’ own websites now accounts for more than half our case load, and that will only increase. It is for that reason that our new five-year strategy, launched last November in Manchester, is called More Impact Online. I will mention just two of its strands. One is to find better ways of working with the big online platforms to protect people from irresponsible ads, which is clearly a two-way process. We also need to find ways of deploying machine learning to improve our regulation and act more nimbly, as well as simplifying our regulation where possible without impacting its effectiveness.

The committee’s report specifically recommended that the ASA should ensure that it is clear online what is or is not advertising by creating a universal mandatory logo to signify content sponsored by a brand and next to any paid-for text or video. We absolutely share the objective, but have not been able to implement the specific recommendation for technical legal reasons. The unfair commercial practices directive, which underpins the consumer protection regulations, is a maximum harmonisation directive. This means that we can mandate a single logo only if we are fully satisfied that no other method of labelling or disclosure would meet the objective—which we cannot be—but we do strictly enforce the requirement that sponsored content must be clearly identifiable as such, and we are conducting research to ensure that we have the right standards in this area.

The committee also calls for the CMA to conduct a market study of the digital advertising market to investigate whether it is working fairly for businesses and consumers, and others have since echoed this call. So far the CMA has held back from this, very understandably in my view, given the potential major impact of a disorderly Brexit on its workload. If in due course the CMA does decide to launch a market study, the ASA will fully support this by making available its expertise and research. An additional impetus for this may come from the innovative development of competition analysis by the German competition authority, the Bundeskartellamt, putting data as well as price at the centre of the competition calculus. The Economist earlier this month carried a clear and accessible account of this. If this new mode of competition analysis carries sway—I have no doubt, from precedent, that it will be subject to a long-fought challenge through the courts—it could introduce a wholly new regulatory dynamic into online markets, including advertising.

There are growing calls for a new online regulator to tackle the many online harms that concern us all. The committee is the latest, with the sensible call in its new report for a digital authority. The Government’s internet safety strategy may well point a way forward. I will end with a plea and a pledge. My plea is: in putting in place further online regulation, let us avoid cutting across and weakening the regulation of advertising content, joined up across online and offline, which is the ASA system. Better, let us see if we can strengthen that regulatory system further. My pledge is: with any reformed regulatory landscape that may be put in place, the ASA will work co-operatively and effectively within it to ensure the best protections and outcomes for consumers, especially the vulnerable and young.

Photo of Lord McNally Lord McNally Liberal Democrat 12:12 pm, 25th April 2019

My Lords, it is a great pleasure to follow the noble Lord, Lord Currie, who, as he explained, has immense experience in this area, particularly over the last 20 years. The House listened with great care to what he had to say. I also congratulate the noble Lord, Lord Gilbert, and his committee on producing this timely and useful report.

Seventeen years ago I served on the Puttnam committee, the pre-legislative scrutiny committee looking at what became the Communications Act 2003, which led to the noble Lord, Lord Currie, becoming chair of Ofcom. That committee took a hands-off approach to the internet, the world wide web, partly because the spirit of the age was that it was going to be a massive stimulus to enterprise and innovation—and I think that that optimism has been justified. Of course, throughout history new technologies have been disruptive and old technologies have often tried to protect themselves with overrestrictive regulation. This is certainly true of advertising in the digital age. As the report reminds us, the internet is already attracting more advertising spend than all other media collectively, and this has had a dramatic impact on the business models of advertising-funded sectors, such as print media, commercial radio and commercial television.

However, before rushing into regulation, I think we have to be careful about who, how and what. In some ways it is good to look at the 1955 introduction of commercial television. That was extremely disruptive but was a benefit to television. The Government of the day had the confidence to say to those who were going to bring in commercial television that they must also sign up to strict public service responsibilities. Those public responsibilities gave us an excellent news service in ITN, which certainly raised the BBC’s game, and a network of regional television, which, even under its new structure, ITV still provides, giving a strong boost to the creative industries outside London. It depends on how confident the Government are in addressing these new technology powers. There is the view that they are so big and global that they are beyond the reach of the rule of law or any single Administration. I do not agree with that. A Government and Parliament with confidence can make sure that the FANGs come to the table.

We are also seeing advertising shying away from some of the initial impact of digital advertising. Reputational damage is causing both the suppliers and the advertisers to question its effectiveness. John Wanamaker, an American retailer in the late 19th and early 20th century—I had to go to Google to find out that it was he who actually said this—said:

“Half the money I spend on advertising is wasted; the trouble is, I don’t know which half”.

In advertising, there has always got to be caveat emptor—buyer beware, if you are going to spend large amounts. There are already signs in the industry that the big advertising spenders are taking such a view on these matters.

Both the Government and the committee have advocated self-regulation. The noble Lord, Lord Currie, gave us a perfect example of what a good self-regulator looks like. I worry that there is a slight difference in emphasis between the committee report, which seems to believe that the Joint Industry Committee for Web Standards, JICWEBS, is the answer, and the government response, which emphasises the excellent work that the Advertising Standards Authority has done. Perhaps I could tease out from the Minister where the Government want self-regulation to go. Will we have two regulators? That is not a recipe for good regulation, in my opinion.

JICWEBS has sent me a good brief, telling me how it is expanding, what codes it is putting in practice, et cetera. But why go for a new regulator when we have an excellent regulator in place to take on this responsibility? Beyond the law, one encouraging thing is that we successfully carried through the general data protection legislation, both within the EU and now in our own law. I was told the other day that other jurisdictions are looking at the GDPR—so the idea that it is not possible to create laws and limitations for this industry is false. We are very fortunate in having the right person in Elizabeth Denham, and the right organisation in the Information Commissioner’s Office, to pilot us through the next stage of bringing order and accountability into the digital world.

I am worried by all the mentions of the Competition and Markets Authority. The evidence that was given to the committee showed a perhaps justified reluctance in terms of resources for the CMA to take on a study of this industry. But this is not good enough and, again, I would be interested to hear where the Minister thinks we are at. However, it raises an even more fundamental problem. Professor Jason Furman chaired an expert panel for the Treasury on the need to update rules governing merger and antitrust enforcement in this new digital age. The call by the Furman panel for a code of conduct for the bigger digital platforms and a need to foster greater competition by opening up data to new players in the field is surely the right direction of travel. But it is worrying to hear that the CMA is still hesitant about its own capacity to carry out that kind of work.

The noble Lord who chaired the committee emphasised its work on education, and the Government are keen to promote their STEM initiative. From these Benches we would say merely that perhaps there is also a need, particularly in this sector, to recognise the important contribution of the arts here—perhaps a STEAM rather than a STEM initiative is the way forward. I was at a meeting last night where the speaker said that artificial intelligence would provide twice as many jobs as it would destroy. But the problem with that is that the jobs it destroys are done by people who are ill-equipped to do the jobs that it creates. The mismatch that this technological revolution is producing will be our biggest challenge as an economy: how to give people the skills and the ability to adapt to rapid change.

I have one final thought. As my bedtime reading I am reading a book called Titans, on the rivalry between Fox and Pitt in the 18th century. As I read it, it struck me just how much our procedures in both Houses of this place are in fact an 18th-century creation. I worry about whether government and Parliament have the flexibility to deal with the rapid changes in technology that are only just beginning. In one way, this House is providing help, with reports like this putting these difficult problems on the agenda—but I do not envy the next generation of Ministers and parliamentarians who will have to deal with them.

Photo of Lord Vaux of Harrowden Lord Vaux of Harrowden Crossbench 12:22 pm, 25th April 2019

My Lords, I add my congratulations to the noble Lord, Lord Gilbert, and the committee for this very clear and timely report, which raises a number of very important issues. I will touch on three of them.

First, the report describes how the traditional relationship between content providers and advertisers has been broken by digital advertising. Traditionally, advertising was targeted based on the media or content being viewed by the reader. Both provider and advertiser knew each other’s identity and had a direct contractual relationship with each other. Digital advertising, however, is principally targeted based on the data that has been obtained about the end reader, which may be completely unrelated to the media being viewed. That means it should be possible to present adverts that are more relevant to the specific consumer; although, as I think we have all experienced, that is not always the case. It also means that the advertiser may have no knowledge at all of the context their advert may be seen in, and the content provider often has no knowledge and little control over what is being advertised to the reader of their content.

The report sets out the risk of advertising misplacement that arises from this, where an advert may be viewed in an undesirable context—the report gives the example of a Sky advert being placed beside white supremacist content. While this is undoubtedly a problem, I see this as more of an issue for the advertiser. I am more concerned about a different effect—the other side of the coin, if you like—which the report touches on briefly: how this new approach to advertising can affect the news media itself. Because the advert is effectively separated from the content, it has become a simple numbers game: the more hits on your content, the more advertising revenue can be generated. It does not matter what that advertising is, it is following the user, not the content. Accordingly, content providers are incentivised only to maximise hits, regardless of the quality of the content.

This happens in two principal ways. The first is clickbait with multiple click points, which the noble Lord, Lord Gilbert, mentioned. We have all seen the classic top 20-type lists, where each item in the list needs a new click and therefore creates a new advertising opportunity. Secondly, and more importantly, we see the impact in increased sensationalism and ultimately, potentially, in fake news. It is a simple fact that a sensational story generates more traffic, and I fear that digital advertising can, and therefore probably does, encourage sensationalism and perhaps even fake news. This effect is further magnified by the way that media is now consumed online: mostly on an individual story basis rather than as a whole publication, in whatever medium that may be. I fear there is a real risk that the quality of our media is being negatively affected simply by the way that digital advertising works.

The second issue I want to address is the rise of what I call stealth advertising: advertising that is not clear that it is in fact advertising. The rise of the so-called social influencer blurs the lines between advertising in the traditional sense and the provision of content. It is often not at all clear when an influencer is being paid or sponsored to sell a product and where the line is or should be drawn.

A good example of this, which I have previously raised in a different context, is the targeting of vaping at children. The internet and social media are awash with videos of attractive, fashionable young people doing tricks with vapes or reviewing flavours and gadgets. The latest major entrant in this market, Juul, has been able to run an incredibly successful campaign of social media influencing, which appears to me to be very clearly targeted at children and young people. Another version of stealth advertising that is becoming an increasing problem, but which is not mentioned in the report, is the issue of fake reviews, where businesses pay people to post fake glowing reviews of their business, products or services on review sites. While not advertising per se, it amounts to the same thing.

It is extremely difficult to regulate stealth advertising, especially given the international nature of the internet. I agree with the committee’s recommendation that the ASA should create a mandatory logo to signify sponsored content—although I heard the point made by my noble friend Lord Currie in that regard. I think that the ASA needs to look at this area much more closely, as the rules seem to be consistently flouted.

My final point relates specifically to Google. The report is admirably clear in its description of the power and concentrated market position of Google in digital advertising, and I add my wholehearted agreement to the recommendation that the CMA should investigate this market. But the issue with Google is not just one of market dominance. To me, there is also a very clear conflict of interest between its role as the dominant search engine and its multiple roles across the whole of the digital advertising spectrum. Small businesses can be made or broken by where they appear in the Google search rankings. Yet the rankings are subject to opaque and often changing algorithms, and it can be hard for a small business to manage this or expensive to pay to be in the top “Ad”-branded sponsored searches. Whether or not it actually happens, it seems to me that there is a clear incentive for Google to prioritise in its search results content that provides the greatest opportunity for revenue—where a click-through from a search creates an advert opportunity from which Google can earn revenue. I urge the CMA, should it follow the recommendation of this excellent report, to include that aspect in its study.

Photo of The Bishop of Durham The Bishop of Durham Bishop 12:29 pm, 25th April 2019

My Lords, I also thank the noble Lord, Lord Gilbert of Panteg, and the committee for the report, which made for fascinating reading. My friend the right reverend Prelate the Bishop of Chelmsford sends his apologies for not being in his place today; he is elsewhere in the world with the most reverend Primate the Archbishop of Canterbury, and so asked me to address one or two matters. I take complete responsibility for what I say, although he said that I must talk about self-regulation.

We all love digital; at least, most of us do. We love its possibilities. I do not go anywhere without my phone, frankly: I keep looking at it and I get bombarded with adverts through it. It was not planned but, yesterday evening, as it happens, I watched a lecture from a two-day conference for theologians being held in Durham this week, entitled “Missio Dei in a digital age”. Maggi Dawn, a British theologian based at Yale University, tracked the history of the impact of digital on Christian mission. She said this about how we handle digital:

“We need to recognise both the glorious possibilities of digital and its profound brokenness”.

Her point was that although digital is wonderful, with glorious possibilities we must use to the full, we must not fail to recognise its profound brokenness because it is infected by human beings, who make all kinds of mistakes in their use of things.

In that setting, I want to pick up on three specific issues in the report. The first concerns self-regulation. I was gladdened to see the report identify the need for regulation, but I am concerned about the manner in which this regulation is recommended. As seen in the tremendous influence advertising has on children’s health and well-being, self-regulation is not a sufficient means by which to moderate online spheres. With the introduction of the Gambling Act in 2007, gambling advertising has inundated the public sphere and, more recently, social media. Most notable in the digital age is the new manner in which advertising is done: nudges, banners, social media profiles, clickbait and so on, as has already been mentioned.

A rising number of British children—at least 55,000 currently—are already problem gamblers. Some 66% of young people who gamble follow gambling companies on a social media platform. The special inquiry my friend the right reverend Prelate the Bishop of St Albans successfully campaigned for will look at the social and economic impacts of the gambling industry. I hope that will look at these areas of concern, which many noble Lords are also concerned about. What encouragement and support will the Government give that inquiry? Although I commend the Committee of Advertising Practice’s new penalties, introduced earlier this month to combat online gambling advertising to children, the reality is that little power has been given to implement such regulation.

Similar concerns may be had about online junk food advertising. Today, over the road in Church House, the Children’s Future Food Inquiry report was launched. It highlights some of these concerns. Research published late last year found that every hour kids spend online increases the chance of them buying junk food by a fifth. There is a lack of regulation around social media advertising, from Instagram influencers promoting diuretics to TikTok recently introducing flash ads for food-ordering apps.

Paragraph 86 from the committee’s report states:

“Many advertisers and content providers flout the rule that online advertising must clearly be labelled as advertising. There is currently no standard way to label advertising, and so even those who comply with the rule are inconsistent in how they do so”.

Self-regulation guidelines are available but the little influence given to official regulators is leaving young children vulnerable. The report’s suggestion is to label advertised content with a universal, mandatory logo. I see potential for this premise for general advertising; however, I expect it would have no impact on advertising aimed at children. We should instead prioritise providing more regulatory guidance to legislators. Clearly, we will have opportunities to debate this through the online harms White Paper—but the damage is happening now, so we must act swiftly.

I pick up on the point from the noble Lord, Lord McNally, about the capacity and capability of the House and Parliament’s procedures. I have a son who works entirely in the digital world. He is a sports journalist and does nothing that is not digital. He regularly reminds me: “Dad, you haven’t a clue”. He is not putting me down but being blunt when he says: “I have been raised in this digital world. I am inside it, day in and day out. You just don’t get it and your generation will struggle to”.

I move to education—as highlighted by the noble Lord, Lord Gilbert of Panteg, in his introductory speech—and particularly paragraphs 111 to 114. I commend the report on its suggested review of the Government’s unnecessary division between arts and STEM education at an early age. Students of science should be encouraged toward creative education in the interest of a broad and rich education. Where possible, arts and sciences should be blended during schooling years to empower students to be flexible, especially given the considerable speed at which society is changing within their developing years. This is important for advertising but also for a wider range of careers. The divide between science and arts no longer serves us well.

Finally, I make some points on immigration and paragraph 217. I hope the Minister will assure us that this section of the report will be fed into our debates on the immigration White Paper, which proposes a £30,000 threshold that some have already raised major questions about. It strikes me that the digital world is another area where we want international talent, and we must create a new immigration policy that works to attract people on the basis of their skills, expertise and ability rather than an arbitrary income threshold.

I commend this report, that which has followed it and all the work done. I trust that my contribution adds to our debate.

Photo of Lord Gordon of Strathblane Lord Gordon of Strathblane Labour 12:37 pm, 25th April 2019

My Lords, I joined the committee just after it started this review and just before the noble Lord, Lord Gilbert, became chairman. First of all, I take this opportunity to thank him for his chairmanship of the committee—he did superbly—and for his success in finally securing a debate on a report produced a year ago. Harold Wilson once said a week is a long time in politics. A year is an eternity in the digital world. Look at the changes that have taken place; how much better informed would my questions to Google have been had Shoshana Zuboff’s book The Age of Surveillance Capitalism been published then? Mind you, the committee would have taken a lot longer to reach its conclusion, because it is a real doorstopper of a book: 600-odd pages. I am wading my way through it slowly.

The noble Lord, Lord Gilbert, alluded to the success of the advertising industry. It is one of our success stories in Britain. We seem to be rather good at it—not because advertising is a particularly native British characteristic, but because a lot of people from all over the world have decided that London is a nice place to live, work and do business. That is wonderful at the moment, but should remind us that the advertising industry could be highly mobile. If the climate in this country turned very unfavourable to advertising, or difficult to operate through remoteness from trade arrangements—I put it no higher than that—all those skilful, well-paid jobs could disappear.

The noble Lord, Lord Gilbert, also referred to the fact that advertising, as well as being important for a market economy, is an important industry in its own right and provides jobs and so forth. It also has been used in this country to fund our press, television, radio and now the internet. Most people are prepared for a trade-off. They will accept getting their newspaper at a certain price while leaving themselves exposed to adverts. The problem with the internet is that much of what is done appears to be done by stealth. The viewer does not know that his eyeballs are being commercialised and sold on to someone else. That has led to a degree of distrust coming into the main off-line advertising industry, which is why that industry has reacted so adversely to some internet practices. Large companies such as Procter & Gamble have said, “We’re not advertising any more on the internet until you put your house in order”.

That has also started to spread distrust of the internet. I agree with the right reverend Prelate in his paean of praise for the internet—I think it is wonderful. But he was also quite right to point out its potential tremendous pitfalls as well. It is a question of trying to get the best out of the internet while avoiding the problems.

Matt Hancock, who was one of the Secretaries of State during the period of the inquiry, which rather dates things, pointed out that we need to attract great talent from all over the world and also rear our own talent. To take rearing our own talent first, to be fair, the advertising industry does better on diversity than anyone else in Britain. The percentage of BAME people it employs is higher than that of the UK population. It is less than it should be in London, but over the country as a whole it is pretty good. By and large, if the rest of the country were operating as well as the advertising industry, the country would be a lot better off in that regard.

I recognise the point about class. I think there is a parental problem there with working-class parents. In my part of the world, Clydeside, marketing was almost viewed as snake oil salesman stuff. You built the perfect locomotive and the world beat a path to your door. The fact that you had an empire that rather restricted the freedom of choice of the indigenous populations seems to have been ignored. When suddenly we were exposed to competition, we found that we had lost all those markets to the Americans. But people relied on the quality of the product and felt that that was all that mattered. They wondered whether advertising was really a serious job. That is changing, but I agree with the committee’s recommendation that we need to do more with careers advice to point out that advertising can be a very rewarding career.

On one minor point, the noble Lord, Lord McNally, pointed out the jobs that would be lost with the switch to robots. I am not saying that advertising is immune, but jobs that require flair are more immune to “robotisation” than others. People working in advertising are less likely to be threatened by the advent of new technology.

On apprenticeships, we all agreed that the Government had done a good job in introducing apprenticeship schemes. Full marks to them for that, but a report of the previous committee, which I was not on, found that the creative sector scheme was ill-equipped for purpose. A lot of people regarded apprenticeships as simply a tax on employment rather than a source of possible good training.

As regards foreign talent and the effect of immigration, the noble Lord, Lord Gilbert, pointed out that we need to be able to attract people readily. Our immigration system is simply not fit for purpose for the advertising industry and we face a severe problem.

Turning to other aspects, we also need to ensure that data transfer will remain aligned with Europe. Advertising cannot continue without adequate data transfer.

My next point, which I shall allude to only briefly and do not expect the Minister to reply to because we do not want to stray on to Brexit more than is absolutely necessary, is to remind the House that advertising is a service industry. We are already concerned about trade in goods, but goods are small beer in this country compared to our trade in service industries and unless we strike a deal on them, we have a problem. There is a worry in the broadcasting and advertising sectors that, while the Prime Minister’s speech at the Mansion House was very encouraging, that was the Monday, and by the Chequers agreement on the Friday, suddenly service industries were being ignored. We need to pay attention to that.

Coming on to the internet, which, as our chairman acknowledged, has begun to dominate our thinking, it is true that 2017 and 2018 were the years when the initial wonder and awe about it wore off a bit and people became first irritated by being bombarded with what they regarded as irrelevant advertising and then slightly concerned and fearful. People thought that Nineteen Eighty-Four really might somehow be yet to come. That view might be reinforced if you have read Shoshana Zuboff’s book.

Another factor in this, which we have to acknowledge, is that all briefing on this is dripping with self-interest. The press has turned anti-internet, for the very understandable reason that it has lost all its advertising to the internet. It is beginning to hit back, somewhat belatedly, but it means that any misdemeanour on the internet is magnified in the press, and that did not happen five years ago.

I commend box 2, on page 13 of the report, which is about programmatic advertising. The thing that really shocked us all was, as the noble Lord, Lord Vaux, pointed out, disassociation. Previously you put an advert during “Coronation Street”, or close to “News at Ten”, or on a page of a newspaper or in the sports section because that is where you thought your target market would look most. Now it is done by algorithms. Three-quarters of digital advertising is programmatic. As somebody pointed out, the internet advertising equivalent of “There’s no such thing as a free lunch” is “If the product is free, you’re the product”. The fact is that people’s eyeballs are, as it were, bought and sold and traded across markets. I commend that box. The frightening thing is that you move from the online auction of the fact that you are watching a page to a sale in microseconds, and nobody knows anything about it. The advertising industry does not know too much about it, and it is rather concerned about it. It is so complicated that it is time that the Competition and Markets Authority looked at it.

There is a slight difference of opinion. The noble Lord, Lord Goodlad, asked a Question in December about whether the Government would instruct the Competition and Markets Authority to do an inquiry into the internet advertising world. He got the normal, straight-bat written reply that it was a matter for the Competition and Markets Authority and that the Government do not interfere, all of which is perfectly true. Then, in his Spring Statement, the Chancellor of the Exchequer said that he is going to ask the Competition and Markets Authority to do an inquiry. I suspect that this is part of the negotiation about how much tax the digital companies will pay, and the Chancellor is perhaps rattling his sabre slightly just to remind them that he can make life a little uncomfortable for them. The amount of tax paid by internet companies seems to be determined by their public affairs departments rather than the finance departments. It is a question of what will keep people sweet for another year or two. If we are able to tax internet companies, why have we not done so already? Why are we hitting on the idea only this year? The other thing that the Competition and Markets Authority could look at in passing is whether the contract rights renewal provisions for ITV, which in my view have been out of date for at least 10 years, should now finally be put to rest.

In conclusion, I tend to be an optimist and I believe in self-regulation if it is possible. However, in the report we say:

“If businesses fail to do so”— in other words, to join up to JICWEBS and things like that—

“the Government should propose legislation to regulate digital advertising”.

For me, it is a combination of the stick and the carrot. I commend the Internet Advertising Bureau for doubling the number of companies that have signed up in the last year. It has also introduced a gold standard, which in my view is what the internet industry has to aim for. We have to infuse it with the desire to aspire to better regulation, because better regulation is in its own enlightened self-interest. If people do not trust a medium, it will quickly be discarded. A way of rebuilding trust would be for the industry to adopt the principles outlined in both this report and our subsequent report on regulation in a digital age.

We also have to bear in mind that we have not yet really seen the impact of the GDPR on this process. The fact that most eyeball trading is done without the knowledge, let alone consent, of the original viewer must surely contravene the GDPR, so sooner or later there will be a bit of a clash.

However, if we can get 95% of what we want with self-regulation, I will settle for that, unless the remaining 5% is extremely important, simply because we cannot operate this without the full, willing consent of the internet industry. We have to get it to realise that it is in its own best interests to be regulated. Lord knows, banks are bad enough even with regulation. Nobody would want to go into a bank that was totally unregulated. Regulation will help to build trust, and I hope that the internet industry will embrace it.

Photo of Baroness Kidron Baroness Kidron Crossbench 12:52 pm, 25th April 2019

The noble Lord, Lord Gilbert, has set out very admirably the findings of our report, particularly our concerns about the opaque nature of advertising and the lack of diversity in the industry. There is also a palpable concern that current education policy does not meet the needs of the creative industries and that the Department for Education is perhaps not in listening mode; and that the looming spectre of Brexit threatens London’s status as the premier hub, and first-choice location, of such a lucrative industry.

Rather than go over the ground that has been so admirably covered, I would like to pick up on one key issue that I believe would have been in the report if it were being published now and is clearly on the minds of other noble Lords; it became a considerable concern as we went on to our second report, Regulating the Internet. I refer to the monetisation, commercialisation and commodification of children online. In doing so, I refer noble Lords to my interests as listed in the register.

Children make up one-third of all online users globally and are therefore, like all users, subject to the business models of the world’s most popular online platforms, much of whose value comes from the commoditisation of data. That business model is to harvest from users as much personal data as possible, then use that data to encourage them into behaviours and decisions likely to generate profit—that is, to advertise, market or otherwise make the user available to those who wish to have their attention. As a result, children are bombarded with targeted advertising, irrespective of whether it is in their best interests. The platforms they use are designed to keep them online for as long as possible, even to the point of addiction. This is why the majority of companies that provide online services are incentivised not to care if their users are underage. If a user creates data, they create value; if they create value, then they are old enough.

Since this goes far beyond what we traditionally understand as advertising, it is perhaps useful to consider how it plays out in practice. I am uncertain, although I will take a guess, that not many of our small number have played Pokémon GO, a game that takes players out of the house to locate and collect virtual creatures in real-world places. But the chances are that even those who have played it—children included—do not know that the game’s real prize is not the collection of virtual creatures but, rather, the sale of the user’s location data to companies willing to pay.

The commercial arrangement between Pokémon GO maker Niantic and McDonald’s is the most prominent example of this. McDonald’s pays Niantic to place virtual Pokémon in its car parks and restaurants, thereby directing droves of oblivious children towards Big Macs, fries and chicken nuggets just as the game is finished. If this was an outlier, it would still be an affront, but targeting children is a growing norm.

In 2017, a leaked Facebook memo produced shocked outrage when it revealed that the company had given a presentation to advertisers demonstrating its ability to infer emotional states, in real time, from the posts and photos of millions of children, determining when they are feeling “stressed”, “nervous”, “overwhelmed”, “anxious” or “useless”. In other words, it was targeting children with advertising when they were at their most vulnerable.

This sort of profiling and targeting is a new frontier—not advertising as we once understood it, but using a child’s emotional state to help predict and shape their behaviour and then nudging them at the point they are most likely to respond. In more straightforward language, it is making them available to advertisers and marketeers at the precise moment that they are most vulnerable to the push of that commercial interest. This is not a fair fight.

Even if children are feeling their best, they are still vulnerable. Research on children’s cognitive development vis-à-vis advertising shows again and again that they are unable to spot native advertising—that is, advertising that adopts the look, feel and function of the media format in which it appears; it is designed to be indistinguishable from, and therefore to undermine, other content such as facts or news. No wonder Ofcom finds that only a fifth of eight to 11 year-olds and a third of 12 to 15 year-olds can differentiate between promotional and factual content, understand that prominent search results have probably been paid for, or identify and resist the nudge towards in-app purchase. The committee’s report correctly identifies that,

“many businesses exploit users’ data without informed consent”.

We must surely also ask whether it is appropriate to seek the consent of a child to treat them in any of these ways. Profiling, manipulating and targeting children is wrong in principle and harmful in practice.

The age-appropriate design code, launched in draft last week by the Information Commissioner, offers a new approach. It states that a child’s data must be processed only in circumstances where they are actively and knowingly engaged, and for purposes in their own best interests. This children’s code, as it is now nicknamed, will require online services—including the advertising sector—to reconsider how they treat children online by making them observe the norms and protections of childhood, including protecting children from economic pressure and exploitation. The code’s 16 provisions cover a number of interconnected aspects of data protection, such as high-privacy default settings, preventing sites recommending material detrimental to children’s health and well-being and strategies to minimise the gathering of data—since the very best way of avoiding abuse of a child’s data is not to take it in the first place. The code also covers data sharing, security of connected toys and the promotion of commercial activities that fail the bar of being in the best interests of the child. Its 16 provisions effectively take children out of the excesses of the business model.

Since its publication on 15 April, I have been asked repeatedly if I think it is reasonable to demand companies reduce their potential profit by preventing the commercial exploitation of children’s data. I do not understand the question. It is not desirable, safe or in line with the norms of our society to suggest that a 13 year-old—or the many millions of even younger children who access commercial sites—be asked to manage the complexities and intrusive demands of a world dominated by the interests of online advertising behemoths, not least when our report quotes expert after expert describing the digital advertising market as “highly opaque”, “murky” and “fraudulent”. Under these circumstances, one must ask what chance children or young people have to protect themselves, and come to the obvious conclusion that they have none.

There is nothing intrinsically wrong with the technology we are all using. On the contrary, within it lies the promise of a better and more equitable world. However, a greedy corporate culture has been allowed to develop and until now the sector has been given a free pass for the collateral damage of its model, including the monetisation, commercialisation and commodification of childhood. Rather than questioning whether businesses should protect their bottom line, we must reassert that protecting children should be everyone’s bottom line.

So does the Minister agree with me that innovation that does not include protecting the well-being of children is not worthy of the name, and that businesses in the sector, big and small, must put the best interests of children first when designing their products and services? Can he also confirm that the Government will stand firm behind the Information Commissioner, whose children’s code is much admired around the world as the first serious attempt to tackle the asymmetry of power between the tech sector and children, and resist the attempts of the commercial interests working furiously in the background to water it down?

Finally, if advertising now includes the ability to take a child out of their bedroom, out of their home and across town to a McDonald’s car park without their knowledge, understanding or informed consent, does the Minister agree with me that it is now time for society to formally uphold all the privileges, protections and legal frameworks that have defined childhood so far, irrespective of the nature of the service, who is paying for access to that child or where the owner is registered?

Photo of Lord Bilimoria Lord Bilimoria Crossbench 1:03 pm, 25th April 2019

My Lords, the UK’s advertising industry is a success story. It contributes £120 billion to the UK economy and supports 1 million jobs. London is seen as the global headquarters of advertising and a centre of excellence. We have heard that we export around the world and attract the best talent from overseas, giving us the highest quality internationally. Advertising contributes to our society and culture and highlights Britain as a great place to do business.

However, there is a but, which is that this sector is in a state of change and moving really quickly. I congratulate the noble Lord, Lord Gilbert, and his committee on their excellent and constructive report, UK Advertising in a Digital Age. It highlights the success of the industry and, once again, stresses that it is a significant sector of the economy in its own right. The report says up front that:

“Advertising is regulated by an industry-funded body with the aspiration that it should be ‘legal, decent, honest and truthful’”.

However, given the rapid change in the world with the internet, and with advertising spend on the internet being higher than on all other media collectively, other media are suffering. That is a challenge in itself, when you look at print advertising. The report also highlights that our departure from the EU poses challenges, particularly in attracting the best international workers in the industry.

The rise of digital advertising has changed the nature of business in the industry. The standards are questionable. We are all subject to bombardment by digital advertising and this can have a corrosive effect. A growing part of this, which has not been discussed much in this debate but is highlighted by the report, is programmatic advertising—the automated processes that are taking place. In 2017, $16 billion that was spent on digital advertising was stolen through fraud. I declare my interests and say that I am always worried about another problem: that my digital adverts will be placed next to something completely inappropriate or indecent, or something involving hate speech. Do I have much control over that at this stage? I would like to.

The report clearly recommends that the industry should take greater steps to self-regulate through independent bodies such as the Joint Industry Committee for Web Standards. Then again—this has been highlighted in the debate—the industry is completely dominated by a small number of large companies. The report recommends transparency and suggests that the CMA should investigate this market. I will come to that later. The Government’s digital charter needs to be addressed too. Perhaps the Minister could reassure us on whether the CMA will go ahead with an investigation. Whatever happens, we need to align with EU standards on data protection, and the report recommends that we have a seat on the European Data Protection Board.

The report makes an important point about which I am particularly passionate. It says that,

“the industry requires individuals with a blend of arts and science skills”.

I shared a platform on the BBC with Scott Hartley about his book, The Fuzzy and the Techie, in which he talks about the liberal arts ruling the digital world. There is a perception that it is all about science and STEM subjects, but it is not; it is about science and the arts. The report recommends that emphasis be given not just to science subjects but to the arts at school level, and that is excellent. It also recommends that universities should work very closely with the industry. As chancellor of the University of Birmingham and chair of the Cambridge Judge Business School, I could not endorse that more.

The conclusion of the report’s summary again raises the fears about the Government’s proposed migration rules, which will be disastrous for British industry on the whole, including the UK advertising industry. The self-regulation imposed by the JICWEBS is good; the intentions are good. If that fails, the Government will have to propose legislation.

The Incorporated Society of British Advertisers—ISBA—says that,

“content should not be made available for advertising placement unless it has been positively vetted”.

Is this practical? Can it be done in the real world? Consumers often do not pay for online services; they get them in exchange for giving up data. This is the way at Google and Facebook. Are the current competition laws fit for purpose in today’s world? The report recommends that,

“the Government should use the Digital Charter to gather evidence on this issue”.

Does the Minister agree?

The report says:

“Many advertisers … flout the rule that online advertising must clearly be labelled”.

This is where the report recommends that,

“the Advertising Standards Authority should create a universal, mandatory logo to signify wherever online content has been sponsored by a brand. It should enforce the use of the logo next to any paid for text or video”.

Do the Government agree?

Once again the report uses the term “STEAM”, not STEM. The fusion of arts and sciences needs to be encouraged.

On the Immigration Rules, the report recommends that,

“Tier 4 visas should be extended to allow all students to work in the UK for at least two years after graduation”.

As co-chair of the All-Party Parliamentary Group for International Students and president of the UK Council for International Student Affairs, which looks after all 450,000 international students in this country, I can say that as a country we are falling behind big time compared with our competitors: Canada, Australia and the United States. Canada and Australia in particular allow international students to stay on automatically for a minimum of two years. We used to allow that; we removed it. Research from international students around the world shows very clearly that the number one reason the UK is not their number one choice is because of lack of post-graduation work opportunities. The Government need to bring back the two-year post-graduation work visa. That will help the advertising industry as well.

The report also talks about freelancers in this world. The advertising industry relies on freelancers being able to move in this global world. We should create a visa environment that allows freelancers to work easily in the UK.

On the size of this market, UK internet advertising expenditure has increased from £3.5 billion in 2008 to £11.5 billion in 2017. This is huge growth. As I said, internet advertising overtook all other forms of advertising—television, press, radio, cinema and outdoor combined—to reach 52% of advertising spend. Paid-for search is the largest category of online advertising, accounting for 50% of UK online advertising spend in 2017, compared with 36% for display, 13% for classifieds and 1% for other formats. The right reverend Prelate, who is not in his place, showed his mobile phone. Mobile accounts for an increasing share of the online advertising market, with smartphone expenditure accounting for 45% of total online spending in 2017, compared with 37% just one year before in 2016. Social media, mainly Facebook and YouTube, accounts for an increasing share of internet display advertising. In 2017, 57% of online display advertising was on social media, compared with 49% in 2016. These growth rates are exponential. Is the industry keeping up with it?

We then come to what the noble Baroness, Lady Kidron, spoke about so passionately: the assessment of potential harms, whether individual, societal or economic.

Then we had the Cairncross review, which was published on 12 February 2019. It highlighted the scale of change, saying:

“The most striking aspects of the change that is occurring are its speed and its extent. A majority of people—in the case of young people, a huge majority—now reads the news entirely or mostly online. In 2018, the Reuters Institute for the Study of Journalism reported that 74% of UK adults used some online method each week to find news, and 91% of 18-24 year olds”.

This is the scale of the challenge we are addressing.

Then we come to what my noble friend Lord Currie spoke about. He is very authoritative in this area as chair of the Advertising Standards Authority. He addressed in his own way what the ASA says:

“Myth: online is a ‘wild west’ for advertising, where the level of protections in place for other media don’t apply. Truth: The UK ad rules apply equally to advertising online, including companies’ own claims on their own websites, social media spaces and advergames”.

The ASA says that as the independent regulator. The Committee of Advertising Practice says, “We’re keeping this under review; we’re on top of this. Ads have to be responsible”. Its ambition is to get every UK adds to be responsible.

The ASA’s slogan is:

“Legal, decent, honest and truthful”.

These are good intentions, but the IAB UK says that,

“online advertising is like the Wild West … but not in the way you might think”.

It says:

“The idea that online advertising is a wholly unregulated market is a myth. As we continue to develop self-regulation, IAB UK is committed to reducing fraud, increasing brand safety and improving the digital advertising experience for consumers”.

It talks about introducing a kitemark. But I will give noble Lords one very quick example. During the referendum an advert was placed by the leave campaign about the NHS. It linked very cleverly to the slogan of £350 million on the side of the bus: let us save that and give it the NHS instead. This was a video advert on social media that I saw a number of times, with a split screen showing a young woman taking an elderly woman to the hospital, to accident and emergency. On the remaining in the EU side of the screen they waited and waited, and got grumpier and gloomier. On the leave the EU side of the screen they were seen straightaway and welcomed. Everyone was smiling, the old lady was treated; they all left and lived happily ever after. Was that stopped? It was shown millions of times. Where was the ASA?

Here is the reality: when it comes to misleading claims, unlike commercial advertising, which is regulated by the ASA, there is no complaints procedure for political ads that make misleading claims. The ASA received complaints but was unable to act on them. What will the Government have to say about this? People can make blatantly untruthful claims such as this and get away with it. It is absolutely shocking.

On the whole Cambridge Analytica scandal, in which it was accused of illegally collecting online data of up to 50 million Facebook users, Chris Wylie, its former director of research, said that his work allowed Donald Trump’s presidential campaign to garner unprecedented insight into voters’ habits ahead of the 2016 vote. He added that a Canadian business with ties to Cambridge Analytica’s parent company, SCL Group, also provided analysis for the Vote Leave campaign ahead of the 2016 Brexit referendum. This research, Wylie said, likely breached the UK’s strict campaign financing laws and may have helped sway the final Brexit outcome. Another individual involved was Shahmir Sanni. He told the Observer that,

“Vote Leave deliberately broke the law by purporting to donate £625,000 to a youth group, BeLeave, but instead funnelled it directly to its data and ad-targeting firm AggregateIQ (which had links to Cambridge Analytica)”.

Can the Minister update us on what has happened with these allegations?

The Chancellor, Philip Hammond, said in March that the Competition and Markets Authority should conduct a review into the digital advertising market following recommendations made in a report. Will that go ahead?

From my own business point of view at Cobra Beer, we sell beer in a digital world. We have a digital strategy. It is a brand and business strategy, executed in digital. It is an opportunity for us to have more personalised contact, which is key to driving appeal and usage.

The final point I want to make is that creativity is the essence of this. Those who have design-driven, creative digital work are more likely to exceed their business goals. The Government should encourage creativity to be taught and encouraged to our youngsters at primary school, whatever their career might be, because that power to be creative will give this country the power to be innovative and to power ahead in every area, including in the advertising industry.

Photo of The Bishop of Durham The Bishop of Durham Bishop

For the record, I have been in my seat the entire time. So has my smartphone, which I have not looked at while the noble Lord has been speaking.

Photo of Lord Bilimoria Lord Bilimoria Crossbench

I apologise to the right reverend Prelate.

Photo of Lord Griffiths of Burry Port Lord Griffiths of Burry Port Opposition Whip (Lords), Shadow Spokesperson (Digital, Culture, Media and Sport), Shadow Spokesperson (Wales) 1:19 pm, 25th April 2019

My Lords, I must congratulate the noble Lord, Lord Bilimoria, on doing a bit of personal advertising for his product—but not online, of course.

I am most grateful to the noble Lord, Lord Gilbert, for presenting this report at last. A year is a long time and there have been multiple postponements when other activity, which seems to me more questionable, has dominated the procedures and business of this House. This debate comes at what I consider to be a difficult time: it has been a year, and much has happened to supersede the report. Having heard the business of the House for the coming two weeks only recently, it also comes just a few days before we discuss the online harms report, where much of this material will be rehearsed all over again. We must try to do honour to this report and thank those on the committee who produced it, noting of course that between then and now—it was 11 April last year when the report appeared—many things have happened. I will cherry pick from a bunch of bullet points that I have pulled together on things that have happened in the meantime.

First, the report looked forward to GDPR; that has now happened and we can evaluate it as we will. My noble friend Lord Gordon recommended a doorstopper book; I have something a little thinner than that, published last September. It is Martin Moore’s Democracy Hacked, which ought to be recommended reading for anybody taking part in these debates. I will willingly contribute to a fund to make it available for members of the committee and others who are interested. It is a systematic, scientific look at all the questions that have been raised in various parts of the House.

Then we got the Plum report, if I may call it that, which is included in the admirable briefing package that came from the Library. That report was commissioned by the DCMS and is called Online Advertising in the UK. It updates and extrapolates information, and presents it beyond the scope of the original report. The noble Lord, Lord Bilimoria, has just referred to the Cambridge Analytica scandal, which I presume came too late for inclusion in the report—in detail, anyway—and then there was the online harms White Paper itself. The noble Baroness, Lady Kidron, talked about the age-verification material that is becoming available, although I hope she can reassure us regarding a report in a newspaper that said:

“Age-related curbs on porn circumvented in minutes”—

Photo of Baroness Kidron Baroness Kidron Crossbench

The code that I referred to is the age-appropriate design code. That is about data protection and separate from the age verification of pornography, just for the record.

Photo of Lord Griffiths of Burry Port Lord Griffiths of Burry Port Opposition Whip (Lords), Shadow Spokesperson (Digital, Culture, Media and Sport), Shadow Spokesperson (Wales)

Thank you. In this area, I need correcting quite a lot so I welcome that intervention. For all that, the concern for children is picked up in the online harms White Paper. Certain harms identified when they affect children are stipulated in the list of harms there.

I cannot forbear mentioning this morning’s news about Facebook. If it can put £5 billion aside to pay for the infractions which have occurred in its activities, and if for all that £5 billion it can report a 26% rise in its profits, we simply have to ask: are we in waters that are too deep for us to swim in? There are contradictory elements happening that I find very threatening and bewildering.

I want to go back for a moment. I have compared the list of harms on page 31 of the online harms White Paper—I will do it more systematically before the debate next week on that paper—with the harms, hinted at by the noble Lord, Lord Bilimoria, listed in the Plum report: individual, societal and economic. There are so many harms identified in the Plum report that do not figure at all in the list in the DCMS online harms report. We had a Question for Short Debate on this when the paper was published and I was on a wave of euphoria, because after all that Brexit stuff we were talking about real things again. I really was flying but afterwards the noble Baroness, Lady Neville-Rolfe, said to me, “But there’s nothing about online harms for small and medium enterprises”. Then the noble Baroness, Lady O’Neill, came to me and said, “But there’s nothing in there about the harms for our democracy”. In the end, the paper has to be more generic and overwhelmingly across the spectrum than it currently is.

Let us look at the harms in the Plum report. There is,

“Digital advertising fraud … brand risk”, and,

“Inappropriate advertising … that is … offensive, explicit … or … contains malware”.

Under “Societal harms” there is,

“financial support for publishers of offensive or harmful content”.

There is also “Discrimination”, described as targeted data to inadvertently categorise people on gender, ethnicity and race.

There is a moment of confession coming up—wait for it. Every morning, I generally address the quick crossword from the Guardian newspaper, and if I do it very quickly I allow myself to do just a couple of exercises in solitaire. That really is a confession; I am trying to avoid addiction, and coming off it cold turkey is very difficult. But when I put those things on the screen, along with the crossword a very expensive car is advertised to me. I am a retired Methodist minister and when I came to this House, I came in my rusty Ford Fiesta. On what grounds of behavioural knowledge and profiling of me are they targeting me with a Bentley? When I come to solitaire, however, what do I find? It is ladies’ clothing. What in my life do they know that I would not want to share with Members of this House, for goodness’ sake? Is that clothing for my wife or some other woman, or for myself, if they think that I am interested in these garments? The more alarming thing still is that I have repeatedly allowed myself to press all the buttons that eliminate the advert from the screen, but no algorithm has yet picked up the fact that I am not interested in advertising. If it is behaviourally driven it should, but it has not; I still get the stuff anyway.

When Martin Moore wrote his book, he took us through all the stages that have produced this side of the internet. We must agree with the right reverend Prelate the Bishop of Durham and others who laud the democratic and communautaire aspects of the internet—what it makes possible for us. At the same time, I fear that the negative aspects—the underbelly or darknet—is becoming disproportionately controlling of the general aspects of this technology. One review said that just before Facebook went to the stock market in 2012—after starting by saying that it did not want any advertising when it first launched in 1998—according to Martin Moore it went,

“‘all out to create an intelligent, scalable, global, targeted advertising machine’ that gave advertisers granular access to users. And so it created the most efficient delivery system for targeted political propaganda the world had ever seen”.

I will read one final paragraph from the review of this remarkable book, because it points me to both what the internet can do and what is too often implicit in the very things it does well. If I read it, your Lordships will get the tale. It says:

“Actually, Google is already doing a very good job”, at helping in the field of education. It continues that:

“By mid-2017, the majority of schoolchildren in America were using Google’s education apps, which of course track the activity of every child, creating a store of data that—who knows?—might come in useful when those children grow up to be attractive targets for advertising. In the near future, Moore points out, we might no longer have a choice: ‘It will be a brave parent who chooses to opt out of a data-driven system, if by opting out it means their child has less chance of gaining entry to the college of their choice, or of entering the career’”, they aspire to. You are in because it is good for you, but being in makes you vulnerable to exploitation in the fullness of time. This is a matter about which we all must be concerned, because it affects us in incalculable ways. Even a Minister of Government as expert as the one facing me now will have to bow to the inevitable, as we stiffen our resolve to face this question head on and do something about it.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie Lord in Waiting (HM Household) (Whip) 1:29 pm, 25th April 2019

My Lords, I am pleased to respond to this debate, initiated by my noble friend Lord Gilbert, on the Communications Committee’s report into UK advertising. As the noble Lord, Lord Griffiths, said, it has taken its time to reach this Chamber and has had at least one false start—but we are here. It is a hugely important subject and one with global implications, as a few Peers have mentioned.

The broad context is the rise of digital advertising and the unprecedented opportunities and challenges that marketing delivered via online networks presents. The narrower context is change in public policy, with the Government providing global leadership in this field, including most recently considering a rare intervention into advertising regulation, specifically advertising of products high in fat, sugar or salt. I wish to say more about that later.

Against this backdrop, the committee’s report was a rigorous, helpful interrogation of the challenges and opportunities that the advertising industry faces, and I welcome many of its recommendations. Today’s debate has also been equally impressive in its thoughtful consideration of many of these issues. Before turning to those, let me add to the picture of the sector so elegantly painted by my noble friend Lord Gilbert.

I am pleased that a strong contribution was made today by the noble Lord, Lord Currie, because advertising in the UK is regulated by the Advertising Standards Authority. Its mission, as the industry’s independent regulator, is based on a set of foundational principles to which the Government subscribe, namely to ensure that advertising in all media is legal, decent, honest and truthful, to the benefit of consumers, business and society. Advertising cannot be discriminatory in content. It must afford particular protection to vulnerable groups, especially children and young people. I will say more about that later, particularly in response to the interesting speech from the noble Baroness, Lady Kidron. These principles remain vital to uphold, given the role that advertising plays in our lives. The noble Lord, Lord Currie, was reassuring in the actions that he and the ASA have taken and continue to take in this field.

Advertising’s direct purpose is commercial, but it also makes a major contribution to the public interest, not least in funding much of our media. A vibrant and pluralistic media at both local and national level is a cornerstone of our democracy. Advertising can also exert a significant influence on how we view ourselves and society. In many cases, the messages it delivers are socially beneficial, for example by encouraging us to eat more healthily. But, if not carefully managed, advertising can sometimes cause harm, for example by perpetuating harmful gender stereotypes. Effective regulation of advertising therefore needs to find a balance between ensuring that its influence upon society does not cause harm and allowing the industry the freedom to flourish economically and creatively.

Let my Lords be in no doubt that it is flourishing. The same research on the export of advertising services quoted at the beginning of this debate found that the industry’s export market has nearly tripled in size since 2009, and the sector has the largest trade surplus in Europe. Per capita, the UK has won more Cannes Lions—which are the Oscars of the advertising industry—than any other country. This all contributes to advertising’s central role in the UK economy, even in a landscape that is changing rapidly. The noble Lord, Lord Gordon, is right: London is a global centre of excellence for advertising and it must remain so.

I will focus on some detail. The committee’s report explored two key features of this changing landscape. Let me address the first, the rise of online advertising, which has been a game-changing development powering the internet. Just like the internet, it has the potential to lead to personal, societal and economic challenges, whether from market concentration, advertisements funding harmful content, misuse of personal data or children seeing advertisements they should not. The noble Lord, Lord McNally, gave a considered overview of such challenges, as did the noble Lord, Lord Vaux.

Fortunately, action is being taken across these issues. The many reviews or initiatives underway sometimes appear to be something of a spider’s web or duplicative work. However, I reassure the Chamber that there is strategy and structure to our approach. Aspects of the economic dimension of online advertising have been considered already by the Cairncross review into the sustainability of the press and the Furman review, which set out wider challenges around digital markets. The Government are also addressing online advertising in relation to both economic and social harms.

The right reverend Prelate the Bishop of Durham and the noble Baroness, Lady Kidron, spoke about damage to children and advertising products with a high fat, sugar or salt content. Our launch of a consultation on advertising these particular products online, as well as on TV, is just one example. Notwithstanding strict UK regulation, children still see a great many advertisements for products high in fat, salt or sugar, including through innovative techniques online, as touched on by the noble Baroness, Lady Kidron. I agree with the right reverend Prelate that it is right that we look again at the issue.

I point equally to a series of round tables convened by the Intellectual Property Office to explore the role of digital advertising in protecting the intellectual property of creative businesses. I also point to the fact-finding forum recently convened by the Information Commissioner’s Office to investigate the ad tech industry’s use of personal data. All this joined-up work across government and arm’s-length bodies reaffirms the UK’s position as the global thought leader on online regulation. Nowhere is this clearer than in our online harms White Paper, which I will talk about later and was referred to by the noble Lord, Lord Griffiths.

As highlighted by the noble Baroness, Lady Kidron, the impact of harmful content online can be particularly damaging for children and their mental health. The White Paper therefore sets out our plans for legislation, with clear responsibilities for technology companies to keep UK users safe on their platforms. I note, in this context, Mark Zuckerberg’s welcome call recently for Governments and regulators to play a more active role in internet regulation. As the noble Lord, Lord Griffiths, said, we will have ample opportunity to discuss online harms and the pitfalls or otherwise that he raised, which he or others might see as prevalent in this White Paper.

Although online advertising is not a principal focus of the White Paper, it is clear there is plenty of work already happening in this field, and a critical challenge is ensuring that the whole is greater than the sum of its parts. With this in mind, the DCMS Secretary of State Jeremy Wright recently announced a review of online advertising, which will look at the sector’s social and economic challenges in the round. This initiative is being considered against the backdrop of the continuing work of the Advertising Standards Agency, which aims to put the protection of consumers online at the heart of its work over the next five years. The noble Lord, Lord Currie, alluded to this, and there are other self-regulatory initiatives being undertaken by the industry.

As my noble friend Lord Gilbert noted from his committee’s report, the so-called JICWEBS is doing valuable work to improve the measurability of online advertising to help combat advertising fraud and misplacement. The noble Lord, Lord Bilimoria, also spoke about that point. I would like to say more about this area but, before I do, I note the comment made by the right reverend Prelate the Bishop of Durham about the comments of his son. A possible riposte is that he is perhaps feeding him fake news about his inability to grasp technology, but maybe we should put that to one side.

The noble Lords, Lord Vaux and Lord Bilimoria, raised concerns about fake news and reviews. I agree this is important, and we need to drill down on this area and look at it carefully. The Government are concerned about deliberate attempts to mislead UK audiences and manipulate political debate, including through advertising. We take this issue seriously. Whether through the online harms White Paper or the forthcoming Cabinet Office response to the Protecting the Debate: Intimidation, Influence and Information consultation, we are taking action to address this and there is much work to be done.

My noble friend Lord Gilbert asked what the Government would do to combat ad fraud. As I said earlier, the Government recognise the harm caused by advertisement fraud and misplacement, both to consumers and to an industry concerned by declining public trust in its work. Through our review, there could be scope to work with the ASA and the rest of the industry to better understand and address such challenges.

In response to the question asked by the noble Lord, Lord McNally, about the Government’s attitude to self-regulation of online advertising, I can say that our review will look at whether the current regulatory regime is equipped to tackle the unique challenges of online advertising. As he alluded to, proportionality is critical. We are very much alive to the need to ensure coherence between the different players in this space.

The noble Baroness, Lady Kidron, raised the question of putting children first, her speech focusing mainly on that area. I strongly agree with her that advertising needs particular attention. The ASA is already active in this field, in applying rules limiting children’s exposure to harmful or inappropriate products and governing the techniques used to advertise to children. I welcome the Information Commissioner’s consultation on an age-appropriate design code. We will of course have in mind the protection of all consumers, including children, during our online advertising review.

Let me touch briefly on the Competition and Markets Authority. As my noble friend Lord Gilbert and the noble Lords, Lord Currie and Lord Bilimoria, noted, there has been a veritable chorus of calls for the CMA to lead a market study on the digital advertising market. We are conducting a statutory review which will fulfil the requirement to review certain aspects of competition law by April 2019—that is, this month—as set out in the government response to this report. The Government are also reviewing the UK’s competition tools in the context of digital markets to make sure that the powers are effective in responding to current and emerging challenges, and we will consult on these matters in due course. The noble Lord, Lord Tyrie, who I do not believe is in his place, has written to the Secretary of State proposing changes to the competition regime. The noble Lord, Lord Bilimoria, asked when the Government would respond. We will consult on the proposals in the letter from the noble Lord, Lord Tyrie, and respond in due course.

In response to concerns about the CMA’s capacity to conduct such a review, it is important to note that the UK has always been a world leader on competition. We have a well-established competition regime and an independent enforcement authority that is regarded as one of the most effective globally, and we are confident in its readiness for EU exit. The Government have carried out a statutory review of certain aspects of competition law. This will complement work reviewing the UK’s competition tools in the context of digital markets. I take note, as will, I am sure, the noble Lord, Lord Tyrie, and the CMA, of the comments made by the noble Lords, Lord Gordon and Lord Bilimoria, about the actions that the CMA might wish to take.

All this activity takes place in the context of the second key feature of the landscape explored in the committee’s report: the UK’s departure from the European Union and the impact that this and other developments may have on the advertising sector’s workforce—I was quite surprised there was not too much focus on Brexit in the debate; perhaps it was something to do with the Easter holiday. Around 12% of employees working in the UK advertising industry were born outside the UK. Not surprisingly, our departure from the EU has given rise to concerns.

I want to be clear that the Government recognise that advertising is a people-based business which benefits from the most creative minds. Ensuring access to talent is critical to our competitive advantage. EU citizens currently working in advertising in the UK can stay. The EU settlement scheme is intended to be quick, easy to use and free. The scheme opened fully at the end of March and is, I understand, working smoothly. Our immigration White Paper, which the right reverent Prelate the Bishop of Durham alluded to, set out our vision for the future immigration system: a single, skills-based immigration system which will allow businesses to bring in the best talent from anywhere in the world. We are currently undertaking a year-long process of engagement with a wide range of stakeholders, including the creative sector, before finalising the detail.

Equally important is our ability to nurture domestic talent to give young people here in the UK the best opportunities. That is why we are carrying out the greatest reform to our technical and post-16 education system since A-levels were introduced 70 years ago; namely, T-levels. We are committed to ensuring that our children receive a broad and balanced education which takes into account the skills needed for the future economy.

The noble Lord, Lord McNally, raised some interesting points about the import of artificial intelligence. My brief tells me that, although it is never certain, up to 35% of jobs may disappear in the coming years as a result of AI. That is why we have introduced the national retraining scheme, with funding of £100 million, to look at how we can address this. As the noble Lord will know, this was never done in the 1980s, when there was enormous change. I hope that the so-called Titans from the 18th century to which he referred, Fox and Pitt, will be spinning in their graves knowing that we will be much better prepared this time.

The best schools in the country combine a high-quality cultural and digital education with excellence in core academic subjects. I assure noble Lords, particularly the noble Lord, Lord Bilimoria, that our students will continue to have access to all.

My noble friend Lord Gilbert mentioned apprenticeships standards. On developing these, employers in the creative and design and digital routes are firmly in the driving seat. Forty-one have now been approved for delivery in these sectors, including, for example, one for advertising and media executives. However, I hope that the Chamber will agree that the sector is more of a challenge, as it is more broadly based and varied, so we need to do more to redress the shortfalls. I saw earlier that the noble Baroness, Lady McIntosh, was in her place. If she were here, I think that she would be nodding at this.

We are also supporting the creative industries sector’s new creative careers programme, mentioned by the noble Lord, Lord Gordon. Our aim is to ensure that, by 2020, some 2 million young people will have better information about the range of careers on offer, opening up the creative industries far beyond their traditional sources of labour. Encouraging diversity and inclusion in this way is critical to making more of our domestic talent. We are committed to working with the business community to help our workforce thrive; for example, by supporting ambitious targets for gender and ethnicity in boardroom representation in the coming years.

But inclusion cannot stop there. We agree with the committee that encouraging social mobility is critical, which is why, in the service of that goal, we are working to stop illegal unpaid internships. I welcome the committee’s recognition that informal recruitment practices remain a problem for the advertising sector. Parts of the sector are showing leadership on this, but I share the view that it needs to do more. The law is clear that anyone performing work for an employer must be paid. HMRC has written to almost 13,000 employers in industries which often offer internships to draw their attention to the national minimum wage rules and help them to comply. We feel that the balance is right between bringing in legislation and using the “nudge effect” to make sure that employers uphold their responsibilities.

On a separate point, I know that the noble Lord, Lord Bilimoria, raised a question about Cambridge Analytica. The best thing to do is for me to write to him with some details on that somewhat complex area. I will do so and put a letter in the Library as well.

The UK advertising industry should be a source of great pride. Alongside the United States, we remain an advertising global superpower, a by-product perhaps of our diversity, tolerance and boundless capacity for creative enterprise. From Cadbury’s drumming gorilla to Sony’s colourful bouncing balls, we produce creative work with global impact. From Dove’s 15-year “Campaign for Real Beauty” to Channel 4’s “Superhumans” adverts for the 2012 and 2016 Paralympics, we produce work that drives social change. This is why the Government will help this industry to thrive through an unprecedented period of change.

Once again, I commend my noble friend Lord Gilbert and the committee for this report, which will help set the terms of the debate for the future of this vital sector.

Photo of Lord Gilbert of Panteg Lord Gilbert of Panteg Chair, Communications Committee 1:50 pm, 25th April 2019

My Lords, I thank all noble Lords who have contributed to this debate, especially the Minister, who responded to all the points made, and the Front Benches, from which there were interesting contributions. It was a pleasure to hear from the noble Lord, Lord Griffiths of Burry Port, who spoke with great wisdom and a little bit of poetry. He was quite right to point out that a lot has happened in the 12 months since this report was published, including the publication of a wider-ranging report from the committee on the regulation of the digital economy, a subject that was touched on in the debate.

I particularly thank the members of the committee, who are extremely experienced and expert in a range of areas relating to the creative industries. The debate drove home to me the centrality of the advertising industry to those industries, both in bringing in skills and in funding so many important areas of them. This is why it is important for public policy-making to have a strong focus on the future of the industry.

On future regulation—given that it may be 12 months until this House discusses the committee’s next report—it is worth reflecting, as the noble Lord, Lord McNally, did, on the sort of 18th-century institutions that we have for regulating in the digital world. This reinforces one of the findings of our most recent inquiry: we need to find ways of regulating in the digital era, not just regulating the digital economy. That means much faster-moving regulation and a different sort of role for Parliament. In our latest inquiry, we recommended a Joint Committee of both Houses of Parliament, working with a body which looks forward to issues that are going to arise in the future so that policymakers are not constantly reacting to the latest newspaper headlines but are creating public policy which addresses future problems. To some extent, that answers the right reverend Prelate’s concerns about the balance between statutory and non-statutory regulation. If you are looking forward and identifying issues, you can come up with a menu of options for assuring societal values are asserted and dealt with. This may often mean that less regulation is appropriate.

Finally, it is important to recognise that, as the Minister said, we have first-rate regulators in this country. The CMA, Ofcom and the Information Commissioner’s Office are highly respected around the world. In a post-Brexit environment, they will have an important role in asserting our soft power around the world, ensuring that they engage globally with other regulators and continuing to offer leadership in the areas that they regulate. A strong relationship between Parliament and their forward-looking work will be very important. I thank all noble Lords who have contributed to this useful and fascinating debate.

Motion agreed.