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Structure and function of the parties to the MOU

11 This section aims to encapsulate the basic building blocks of the new system, which may be further detailed as necessary in any relevant contractual documents.

Funding the system

12 The new broadcast advertising self-regulatory system is to be funded via a voluntary levy on broadcast advertising which will be collected by a newly incorporated company, the Broadcast Advertising Standards Board of Finance Ltd (Basbof). Members of Basbof will be representative of broadcasting and advertising interests.

13 ASA(B), BCAP and Basbof agree that the funding shall always be such as to secure the effective discharge of all the functions contracted out in accordance with the undertakings and standards set out in this MOU, the Authorisation and in any relevant contracts. This will be reviewed annually as part of the formal reporting process to Ofcom. It is also agreed that ASA(B) or BCAP are under a duty to inform Ofcom in writing immediately if Basbof is unable to provide adequate funding to meet these obligations. In this event, Ofcom itself will not make up, or contribute to making up, any shortfall but will invite Basbof to propose alternative means of doing so. In the unlikely event that the regulatory work fails to be carried out to the requisite standards, the recovery programme will need to commence as appropriate to the circumstances (see paragraph 85 below).

Operation of ASA(B)

14 ASA(B) Limited, a newly incorporated company, will be responsible for carrying out those functions specified in paragraph 10 in relation to the enforcement of the Advertising Codes and the investigation and adjudication of complaints. The Parties agree that it is more efficient for these functions to be carried out by ASA(B) in close liaison with, and under the organisational umbrella of, the ASA. Noting the interest and involvement of the ASA, the Parties recognise that the broadcast and non-broadcast advertising regulatory work is different, not least because of the differing status of the broadcast Codes (which have a statutory foundation) and the non-broadcast CAP Code (which is non-statutory), and because of the significant pre-clearance which operates in broadcast advertising. At the ASA, the functions designated by Ofcom will require governance, structural and operational changes to be made to the current system, new processes to be adopted and relevant expertise to be recruited.

15 ASA(B) Ltd is a company limited by guarantee and it is intended that the Memorandum and Articles of Association (M&A) will not be amended after the date of this MOU without prior consultation with Ofcom. ASA(B)'s Chairman will also be the Chairman of the ASA. Therefore the current Chairman of the ASA will be appointed automatically to this post. When the present incumbent steps down, however, the new Chairman of the ASA and of ASA(B) will be appointed by Basbof and Asbof by a proper process after due consultation in line with the M&A's of Basbof and Asbof to preserve his or her independence from Ofcom, industry and Government. The person appointed to these two posts will be appropriately qualified and of good standing, and free of interests in the advertising and media industries. Ofcom will be consulted regarding the appointment of the ASA(B) Chairman but will have no right of appointment or veto.

16 The person with primary responsibility to Ofcom for the delivery of an effective self-regulatory system will be the Director General of ASA(B) ^(-3-) , though he/she may depute a senior executive to be the day-to-day point of contact and liaison for Ofcom - see paragraphs 51 onwards for more details.

17 The ASA Council (the 'Council') is presently the body which adjudicates on non-broadcast advertising content. Adjudications on complaints about broadcast advertising content will be made by a group of persons (the "ASA(B) council") appointed by and representing ASA(B). All members of the ASA(B) council will be directors of ASA(B) and will be drawn from an appropriately enlarged Council. The new members of Council (whether or not members of the ASA(B) council) will be appointed by the ASA/ASA(B) Chairman, independently advised as appropriate, and by a proper process. There will be a ratio of 2:1 independent/industry membership on the enlarged Council reflecting its current composition (with the non-industry members being recruited by public advertisement, and the industry members selected by the independent ASA/ASA(B) Chairman). Membership will be expanded to include further lay representation and a member with broadcast advertising expertise, who can participate however only in the work of the ASA(B) council and its broadcast adjudications. A member of the Council will serve for a maximum of six years. All current members of the Council serving at the time the new system launches and who are to serve on the ASA(B) council, will receive suitable familiarisation and training in broadcast advertising rules and procedures. This training will be incorporated into the induction programmes as appropriate for future members of the ASA(B) council. Following any appropriate consultation, ASA(B) shall, before the date when Ofcom transfers to it the functions set out in the Authorisation, adopt and publish rules and procedures which shall govern the manner in which ASA(B) handles and resolves complaints relating to broadcast advertising.

18 The manner in which the ASA(B) council and ASA Council will make their adjudications shall ensure that separate and proper consideration will be given to broadcast and non-broadcast complaints, and the ASA(B) and ASA councils will be supported by the staff accordingly. This is to ensure that broadcast complaints are dealt with in accordance with the requirements of law, and in particular those set out in the Act and the Authorisation.

19 Appeals for a review of an adjudication by the ASA(B) council can be made to an Independent Reviewer in accordance with specific terms of reference. The existence of an Independent Reviewer is a new departure for broadcast advertising, and it is intended that this should be an improvement on the internal appeals process which previously existed. A review by the Independent Reviewer may be requested by a complainant or by a body complained about within 21 days of the date of the ASA(B)'s letter of notification of an adjudication. Specific grounds are required for a review to take place (ie. substantial flaw or new evidence), and during the review process, the original adjudication would stand. The Independent Reviewer would make a recommendation to the ASA(B) council, stating whether the adjudication should be reversed, amended or confirmed. The Independent Reviewer could ask the ASA(B) council to reconsider its decision, but the ASA(B) council would retain the power to take the final decision on the appeal.

Powers of ASA(B)

Enforcement of decisions

20 It is a condition of all relevant licences under the Broadcasting Acts that all licensees comply with directions issued by any body to which Ofcom has contracted out its functions under DCOA (see footnotes 12 & 13 of the Authorisation).

21 ASA(B) will communicate its decisions clearly and promptly to all parties in response to a complaint/challenge. The initial contact will be with the broadcaster, which as a Broadcasting Act licensee carries the ultimate responsibility for what appears on its channel(s), or with the relevant pre-Clearance Centre (eg BACC, RACC, BTSA) acting as the broadcaster's agent. The advertiser/agency will also be kept informed at all times.

22 Decisions in relation to upheld complaints/challenges may:

instruct the advertiser and broadcaster to change the advertisement prior to further broadcast,
instruct the broadcaster to restrict transmission as directed, or
instruct the broadcaster to cease broadcasting the advertisement altogether.

Publication of decisions will follow within 14 days via the weekly publication of adjudications on the ASA(B) section of the ASA website.

23 It is the responsibility of ASA(B) to notify the relevant clearance house or broadcaster(s) of decisions. Decisions take effect as soon as they are notified. The implementation of a decision would not normally be suspended following a request for a review, but the Director General of ASA(B) has discretion to do so, or to delay publication, pending the outcome of such a request for review.

24 Broadcasters will be required forthwith to cease transmission of, or to re-schedule any advertisement on the direction of ASA(B) either:

following a decision to that effect or
in certain circumstances, for example, where there is prima facie public detriment, pending the outcome of an investigation.

ASA(B) will not have the power to fine licensees; this sanction will remain Ofcom's.

Further action, including referral to Ofcom

25 Further proportionate action beyond the suspension of the advertising may be taken by ASA(B) in order to achieve prompt compliance with the Advertising Codes and with ASA(B) adjudications. ASA(B) and BCAP may take such further measures as may be considered appropriate to ensure future compliance with the Advertising Codes by the broadcasters, advertisers and agencies. These could include:

Calling the broadcasters, clearing houses, advertisers or agencies in for a meeting
Seeking assurances as to future compliance
Ruling out eligibility for industry award competitions

26 A system of Ad Alerts to broadcasters would alert those who do not use the Clearance Centres - e.g. local radio and smaller TV channels - of problems with an advertiser.

27 If, in the opinion of the Director General of ASA(B), a broadcaster:

fails to comply fully and promptly with a decision of ASA(B),
fails to co-operate fully and promptly with a reasonable request of BCAP,
demonstrates a repeated disregard for decisions of ASA(B) or the reasonable requests of BCAP, or
commits one or more code breaches of sufficient seriousness to warrant in ASA(B)'s opinion a statutory sanction

the Director General of ASA(B) shall, after ASA(B) has reached any relevant decision(s), refer the matter, together with copies of all relevant evidence and submissions, to Ofcom for Ofcom to consider further action. Ofcom undertakes to consider any such referrals promptly and to impose any such proportionate sanctions as it deems appropriate in the circumstances in support of ASA(B), taking into account any representations from the broadcaster(s) concerned. Such sanctions may include a formal reprimand, a fine, a warning about possible revocation of the broadcaster's licence or, ultimately, the actual termination of the licence. Ofcom undertakes to keep ASA(B) informed of its intended actions during this process, subject to any confidentiality requirements of the proceedings.

Operation of BCAP

28 The industry has established a new Committee, BCAP, to exist alongside and separate from the parallel, unincorporated CAP. BCAP will be responsible for setting and monitoring compliance with the Advertising Codes, which will become BCAP Codes, with CAP retaining the non-broadcast CAP Code. The two Committees will have a single Chairman and partly overlapping members to provide an adequate level of liaison between the two code-owning bodies, albeit it that they are operating with different Codes.

29 Broadcasters will be required by the terms of their Ofcom licences to ensure compliance both with the BCAP Codes and with the directions of ASA(B).

30 BCAP will:

set, review and from time to time revise the Advertising Codes;
help the broadcast advertising communications industry to operate in the interest of the public;
coordinate the action required to ensure compliance with the Advertising Codes, for example by monitoring broadcast advertisements and broadcast teleshopping services;
give advice, information, training and support on matters relating to broadcast advertising self-regulation to broadcast licensees and the advertising industry (with the exception of copy clearance of specific advertisements which remains the responsibility of BACC, RACC or individual licensees);
support the maintenance and preservation of broadcast advertising standards.

31 BCAP will establish a BCAP Advertising Advisory Committee comprising an independent Chairman, industry representatives, expert/ lay members (see paragraphs 41 onwards).

32 BCAP will be responsible for reviewing, initiating and proposing changes to the Advertising Codes, subject to the paragraphs below and, in particular, the procedural requirements set out in section 324 of the Act. BCAP will consult widely on proposed significant changes with licensees, other industry stakeholders, its Advertising Advisory Committee, consumer representatives, Ofcom and other interested persons. BCAP will publish the results of those public consultations together with its subsequent decision.

33 In any case, all rule changes, including minor or technical changes, or changes stemming from changes in legislation, must be agreed with Ofcom and licensees must be informed.

Accountability of decisions

34 Decisions of the ASA(B) council are sovereign under the self-regulatory system. However ASA(B) will have in place an independent review procedure to consider appeals for a review of its adjudications (see paragraph 19). Both the ASA(B) and BCAP are, of course, responsible and accountable for specific decisions and actions and may therefore be open to Judicial Review).

35 Ofcom will not normally intervene in specific decisions and actions of ASA(B) or BCAP in respect of matters that have been contracted out to them. However, Ofcom will remain ultimately accountable under DCOA for anything done, or omitted to be done, by ASA(B) or BCAP in respect of the contracted-out functions.

36 Ofcom will remain accountable to the Secretary of State and to Parliament, and open to judicial review, in respect of its statutory duties.

Ofcom's involvement in Code making and review

37 The Parties recognize that, under the terms of DCOA, Ofcom retains all its legal powers stemming from the Communications Act 2003, and is therefore able to implement Advertising Code changes itself.

38 Ofcom however accepts that BCAP is the "self-" in self-regulation, and in the spirit of the desire by all Parties to ensure that the new system is a success, undertakes to use the delegated powers only in exceptional circumstances.

39 This allows for the fact that there may be occasions when, for example in response to a particular public policy issue, Ofcom has to insist that a rule(s) should be amended or introduced, and if BCAP is unwilling to do so, Ofcom may have to amend or introduce a rule(s) itself. This may include the introduction of a prohibition on certain categories of product/service. It is understood that in practice, Ofcom will seek to have any such changes introduced following consultation, at Senior Partner or Director General level, with BCAP.

40 Ofcom also reserves the right to conduct research into advertising policy issues in co-operation with BCAP, and may from time to time request that BCAP review a section of the Advertising Code. BCAP would feed such a request into its normal rule-making process. The new Advertising Advisory Committee (see below) will provide an alternative route for feeding policy issues into BCAP's process.

An Advertising Advisory Committee (AAC) for BCAP

Background

41 Under the arrangements agreed between the advertising industry taskforce and Ofcom, BCAP will be the body responsible for the Codes governing television and radio advertising. Whilst BCAP will be the effective owner of the Codes, it nonetheless makes sense for it to seek input from a wide variety of sources.

42 BCAP will therefore set up an expert advisory committee (the AAC - Advertising Advisory Committee), based on the established precedent of the ITC's AAC set up as a result of the 1954 Television Act. The AAC will be a committee of BCAP and established so as to be part of BCAP. It will act as an independent advisory 'sounding board' to BCAP in exercising its functions with respect to the Advertising Codes.

Terms of reference

43 To provide independent, third party advice to BCAP on advertising issues, particularly in relation to the Advertising Codes.

Procedures and obligations

44 The AAC will provide timely advice to BCAP on Advertising Code issues and on other advertising issues as appropriate. Correspondingly:

BCAP will:

make all relevant research it undertakes available to the AAC,
keep the AAC fully informed of its plans for code revision, both with respect to timing and substance,
request AAC input on these plans in a way that allows the AAC time to give it timely advice, and

Basbof will make the necessary funding available to AAC.

ASA(B) and Ofcom will additionally make any relevant research they undertake available to the AAC through BCAP.

ASA(B) will include in its annual report a section written by the independent Chairman of the AAC on the year's activities of the AAC.

Composition

45 The membership of the AAC will have non-executive roles and will include an independent Chairman, the Chairman of BCAP, and 4-6 independent expert or lay individuals who can represent the interests of citizens and consumers in relation to the requirements of Section 3(1) of the Communications Act. Ofcom will have observer status.

46 The Chairman of the AAC will be appointed by the independent Chairman of ASA(B), independently advised, as appropriate, and by a proper process after due consultation to ensure his or her independence from Ofcom, industry or Government; he/she will be appropriately qualified and of good standing, free of interests in the advertising and media industries. The Chairman of the ASA(B) should consult with Ofcom on the appointment, but Ofcom will have no right of appointment or veto.

47 The expert/lay members of the AAC will be appointed by a process involving public advertisement and selection by the Chairman of the AAC, the Chairman of BCAP and the Chairman of ASA(B), and an independent assessor from Ofcom.

Transparency

48 Expert/lay members of the AAC would be required to participate as individuals, not as representatives of any particular organisations or interest groups. All members of the AAC would be required to respect Chatham House "substance not source" rules.

49 All contributions, whether from Ofcom or the AAC, should be evidence-based wherever possible. Ofcom will commit to maintaining its stance of a "bias against intervention".

50 The AAC will not generally publish its advice, but BCAP shall listen carefully to the AAC's advice and insights, and let the AAC know how it had responded and the outcomes of decisions. The Chairman of BCAP will have a duty to report to BCAP on the deliberations of the AAC.

Liaison Arrangements at executive and board levels.

51 A member of senior staff at Ofcom (the "Executive") will be appointed as the key contact between Ofcom and the appropriate managers of the system.

52 Regular contact should be maintained between ASA(B)/BCAP and Ofcom, to the effect that:

Procedures to be in place at ASA(B)/BCAP that any staff members involved in a broadcasting issue should have a route to contact Ofcom should advice, information or assistance be required
Colleagues in Content & Standards in Ofcom to give appropriate priority to contact from ASA(B)/BCAP, to help further the speedy resolution of outstanding issues.
Formal and regular contact to be maintained between the Executive in Ofcom and the Director General of ASA(B).
- Until the end of 2005, meetings to be held bi-monthly
- Thereafter, intervals to be agreed by both parties.
Code issues will be discussed with the BCAP Chairman as appropriate.

53 Ofcom will keep the new system under continuous review to ensure that the appropriate advertising standards are maintained.

The Executive at Ofcom will be responsible for reviewing the system
ASA(B) to provide Ofcom with performance data against key performance indicators (KPI's) - see below
Should the Executive at anytime have grounds to believe that there is a performance problem with the system, he/she can call for data or information from ASA(B)/BCAP outside the regular reporting intervals
The Executive may instigate audience/industry research as required on Ofcom's behalf and paid for by Ofcom, either relating to system performance or, in consultation with BCAP, to advertising policy issues
The Executive must not act so as to interfere with the independence of ASA(B)/BCAP
ASA(B)/BCAP may at any time comment on the working of the KPIs and suggest changes, either to the measures themselves or to the timing of the reporting. Any changes will be negotiated between the parties
The Executive shall report at regular intervals to the Content Board and to the Ofcom Board on the degree to which the new system is delivering Ofcom's statutory responsibilities

54 The Parties are committed to good communication, including a "no surprises" policy based on notifying each other where possible of significant announcements and policy developments. The Parties understand, however, that each may speak separately in public and to the media as necessary.

Footnotes

3:- The Director General of ASA(B) will be the same person as the Director General of the ASA