Product Placement: Watch Out for Brazilian Advertising Rules

The most recent Annual Conference of the National Advertising Division (the American organization for advertising self-regulation), held in New York in conjunction with Advertising Week 2005, raised discussion about an old advertising strategy: promoting marks in television programs or movies.

The so called "product placement" is a subtle form of subliminal advertising in which the advertiser sponsors the work (usually movies or television programs) in exchange for displaying his product in scenes.

This marketing strategy is not new. Marketers cite Hollywood films of the 1940s as the birthplace of product placement. Nevertheless, the practice has become increasingly popular these days .

Paradoxically, the resurgence of the old advertising tactic is due to a very modern issue: digital technology. Devices such as the DVR (digital video recorder, whose leading exponent is the American company TiVo), 3G wireless phones and MP3/MPEG players are changing the way content is distributed, and even more so viewer habits. In practice, the traditional "commercial break" is being threatened, since consumers are now able to "skip" this portion of the programming.

Advertisers were swift to react: if the future of commercial breaks is in jeopardy, advertising must penetrate the programs themselves, and thus the former strategy of product placement was resuscitated.

Setting aside the issue of this technique’s effectiveness in terms of ROI (Return on Investment) or consumer acceptance, the sudden increase of this type of exploitation has sparked discussion on the legal front.

In the United States, the consumer watchdog group Commercial Alert, whose mission is to defend society against exploitation in commerce, filed a formal petition with the FTC (Federal Trade Commission) calling for examination and regulation of the practice of embedding products in television programming. In the words of the group: "It is a basic principle of law and common morality that advertisers must be honest with viewers. Advertisers can puff and tout, and use all the many tricks of their trade. But they must not pretend that their ads are something else. (…) Broadcasters not only fail to identify their sponsors; worse, they fail to identify the ads themselves, and instead pretend that the ads are merely part of shows." The group believes that product placement that is not clearly identified as paid advertising has greater power to lure and persuade consumers, and that this is immoral and illegal under U.S. legislation.

The FTC, however, rejected the petition filed by Commercial Alert, arguing that advertising could only be considered deceptive if the advertiser made false claims about a product’s performance. It further defended the decision saying that a consumer’s desire to purchase is triggered when he sees the product, and does not depend on whether or not it is a paid advertisement. The FTC concluded that product placement abuse may be analyzed case by case, in compliance with general principles of truthful advertising, and that the creation of specific regulation is not warranted.

In Brazil, the Consumer Defense Code states that "advertising must be presented so that the consumer easily and readily identifies it as such" (Article 36). The Code of Ethics of CONAR (the Brazilian advertising self-regulation entity) likewise states that "an advertisement must be clearly identified as such, no matter its form or the means it is communicated" (Article 28). This rule also applies to product placement (Article 10).

Note that, unlike American legislation, Brazil’s normative model expressly states that advertisements must be labeled, requiring advertisers to identify their ads as such.

This does not mean that our legal framework bans the so-called subliminal advertising: it may require identification, but its does not specify how this must be done. Clearly the absence of such regulation does not mean an advertiser may insert an imperceptible label into the ad. This would violate the principles of truthful advertising (Article 27 of the Consumer Defense Code and Art. 1 of the CONAR Code of Ethics). Notwithstanding, the advertiser is given considerable flexibility in how to identify the ad, so advertising agencies may create forms of disclosure that do not compromise the work’s integrity (observing the legal principles).

It is essential for companies importing content into Brazil to pay close attention to these specific rules of the Brazilian advertising industry. As noted, the legislation of some countries does not stipulate that an advertisement must be identified as such. As a result, there is widespread broadcasting in Brazil of television programs, movies, and series containing product placement that does not comply with the local rules.

In order to avoid any liability before Brazilian authorities on the part of the advertiser or broadcaster with regards to product placement, it is recommended that content be thoroughly examined in light of applicable local rules.