Professional Advertising (Hansard, 6 August 1976)

§ Mr. John Fraser

These reports are being published today. The commission reached broadly similar conclusions and made broadly similar recommendations in each of the reports, but certain special features were noted in each case.

The Monopolies and Mergers Commission Report on the Supply of Veterinary Services in Relation to Restrictions on Advertising.

The commission found that monopoly conditions prevailed in the supply of veterinary services in relation to restric- 1210W tions on advertising in that the Royal College of Veterinary Surgeons, the statutory registering and regulatory body for the profession in the United Kingdom, promulgated a code of behaviour which severely restricted advertising by practising veterinarians. This was in the form of an advisory "Guide to Professional Conduct". The commission was satisfied that in general all suppliers of veterinary services in the United Kingdom complied with the restrictions as laid down in the Guide. The effect of the restrictions was to prohibit an individual veterinary practice from indulging in any form of advertising, promotion or publicity except for a bare minimum of permitted forms of publicity regarded by the profession as being essential for keeping the using public informed of the existence and location of practices or as being desirable in the interests of the profession as a whole.

The commission accepted that veterinarians had a special responsibility to their clients and a further responsibility to their animal patients. It accepted that certain kinds of advertising could lead to a significant deterioration in confidence within the profession, in the public's confidence in the profession, and therefore in the profession's ability to carry out those special responsibilities which it was in the public interest that it should assume. There was, therefore, a case for the continuance of a degree of restriction on the advertising of veterinary services. However, it could not support the present system of restrictions as being essential for the proper conduct of the profession.

The commission concluded that the present restrictions on advertising operated against the public interest in three ways:

(i) They unduly restricted the information given to the public about the kinds of services offered by individual veterinary practices;
(ii) They were likely to delay the introduction of innovatory methods and services and the setting up of new practices with probable disadvantageous effects on the competitiveness and efficiency of the profession generally;
(iii) They might enhance the influence upon the public of other, less desirable, methods of attracting custom and tend to create a false image of the profession harmful to public confidence and to relations between the profession and public.

The commission suggested that those provisions in the "Guide to Professional 1211W Conduct" which at present restrict advertising should be terminated and that they should be replaced by a rule which would permit any veterinary practice in the United Kingdom to use such methods of publicity as it thought fit provided that:

1. No advertisement, circular or other form of publicity used by a veterinary practice should claim for that practice superiority in any respect over any or all other veterinary practices.
2. Such publicity should not contain any inaccuracies.
3. Such publicity should not contain any claims to specialisation in particular areas of veterinary treatment except insofar as these are justified by the veterinarian's particular academic qualifications, provided that a veterinarian might state the species of animal he handled and any facilities available to, or provided by, him.
4. While advertisements, circulars and other publicity could make clear the intention of the veterinary practice to seek custom, they should not be of a character that could reasonably be regarded as likely to bring the profession into disrepute.

Provided these basic changes were made in the present code, the commission saw no need for modification of the present disciplinary arrangements within the profession.

Finally, the commission suggested that before the rule was formulated in precise terms there should be consultation between the Royal College and the appropriate authorities under the Fair Trading Act in the light of the proposals made by the commission. It suggested that this consultation could also cover the question of the revision of other passages in the "Guide to Professional Conduct" to ensure that they were not in conflict with the intention of the proposed new advertising rule.

The Monopolies and Mergers Commission Report on the supply of Stockbrokers' services in relation to restrictions on advertising.

The commission found that monopoly conditions prevailed in the supply of stockbrokers' services in relation to restrictions on advertising in that members of the Stock Exchange were required to observe such restrictions under the rules and regulations of the Stock Exchange. The commission was satisfied that in general all stockbroker members accepted these restrictions on advertising.

The restrictions prevented stockbrokers from using certain forms of advertising at 1212W all—for example, on radio or television. They also severely limited the content of any press advertising and the extent to which it might be used to obtain business. And finally they prevented the use of circulars—other than to existing clients—as a means of obtaining business from investors.

The commission accepted that stockbrokers had a special responsibility to their clients and to the investing public. So far as that responsibility related to avoiding the misleading of investors and avoiding false markets, it did not think that the present restrictions on advertising were necessary to reinforce the separate Stock Exchange rules, and relevant legislation, on these subjects. It accepted, however, that there were some kinds of advertising which if permitted and indulged in could seriously mislead some investors or could lead to a significant deterioration in confidence as between stockbrokers, in the public's confidence in stockbrokers, and therefore in their ability to carry out those special responsibilities which it is in the public interest that they should assume. The commission therefore saw a case for the continuance of a degree of restriction on the advertising of stockbrokers' services. However, it could not support the present system of restrictions as being essential for the proper conduct of their business.

The commission concluded that the present restrictions on advertising operated against the public interest in three ways:

(i) They unduly deprived members of the investing public of information which might otherwise be available to them.
(ii) They were likely to have disadvantageous effects on the competitiveness and efficiency of stockbrokers generally and on the introduction of innovatory methods and services and, in some circumstances, could act as a deterrent to new entry to practice.
(iii) They might enhance the influence upon the public of other, less desirable, methods of attracting custom and tend to create a false image of stockbrokers which was harmful to public confidence and to relations between stockbrokers and public.

The commission suggested that those provisions in the Stock Exchange's rules which at present restrict advertising should be terminated. They should be replaced by a rule which, subject always to any material statutory provisions including the Prevention of Fraud (Investments) Act 1958, would permit any stock. 1213W broking firm of the Stock Exchange in the United Kingdom to use such methods of publicity as it thought fit provided that:

1. No advertisement, circular or other form of publicity used by a stockbroking firm should claim for that firm superiority in any respect over any or all other stockbroking firms.
2. Such publicity should not contain any inaccuracies.
3. Recommendations about particular securities should not be made in any advertisement in the press or other news media, but should be confined to circulars to specific addresses in which the reasons for making the recommendations are explained in detail.
4. Whenever a stockbroking firm made recommendations about particular securities in circulars, it should make it clear that individual investors who might contemplate taking action as a result of such recommendations would need to have regard to their own particular circumstances.
5. While advertisements, circulars and other publicity might make clear the intentions of the firm to seek custom, they should not be of a character likely to bring stockbrokers into disrepute.

Provided these basic changes were made in the present code, the commission saw no need for modification of the present disciplinary arrangements governing stockbrokers' conduct.

Finally, the commission suggested that before the rule was formulated in precise terms there should be consultation between the Stock Exchange and the appropriate authorities under the Fair Trading Act in the light of the proposals made by the commission. It suggested that this consultation could also cover the question of those other rules of the Stock Exchange which have a bearing upon advertising, and how far the proposed general rule for stockbrokers should also be applied to those included in the registers of agents.

The Monopolies and Mergers Commission Report on the Supply of Accountancy Services in Relation to Restrictions on Advertising.

The commission found that monopoly conditions prevailed in the supply of accountancy services in relation to restrictions on advertising in that the four professional bodies of accountants covered by the reference advised their members to observe severe restrictions on advertising. The commission was satisfied that in general all suppliers of accountancy services as defined in the reference accepted the restrictions on advertising as laid down in the advice given by the 1214W bodies to which they belonged. The restrictions prevented every such supplier of accountancy services from using advertising as a form of competition to obtain business.

The commission accepted that accountants owed a special responsibility to their clients and a further and deeper responsibility to the public generally. It accepted also that there are some kinds of advertising which if permitted and indulged in could lead to a significant deterioration in confidence within the profession, in the public's confidence in the profession, and therefore in the profession's ability to carry out those special responsibilities which it is in the public interest that it should assume. There was, therefore, a case for the continuance of a degree of restriction in the advertising of accountancy services. However, they could not support the present system of restrictions as being essential for the proper conduct of the profession.

The commission concluded that the present restrictions on advertising operated against the public interest in three ways:

(i) They unduly restricted the information given to the public about the services offered by individual accountancy practices.
(ii) They were likely to have disadvantageous effects on the competitiveness and efficiency of the profession generally, on the introduction of innovatory methods and services, and on the setting up of new practices.
(iii) They might enhance the influence upon the public of other, less desirable, methods of attracting custom and tend to create a false image of the profession which was harmful to public confidence and to relations between the profession and the public.

The commission suggested that those provisions in the rules of the accountancy bodies covered by the reference, which placed a general prohibition on advertising and soliciting business, should be terminated and replaced by a rule which would permit any accountancy practice in Great Britain to use such methods of publicity as it thought fit provided that:

1. No advertisement, circular or other form of publicity used by an accountancy practice should claim for that practice superiority in any respect over any or all other accountancy practices.
2. Such publicity should not contain any inaccuracies.
3. While advertisements, circulars and other publicity might make clear the intention of the accountancy practice to seek custom, they 1215 should not be of a character that could reasonably be regarded as likely to bring the profession into disrepute.

Provided these basic changes were made in the present code, the commission saw no need for modification of the present disciplinary arrangements within the profession.

Finally, the commission suggested that before the rule was formulated in precise terms there should be consultation between the institutes, the association and the appropriate authorities under the Fair Trading Act in the light of the proposals made by the commission. It suggested that this consultation could also cover (a) the question of such other rules of the accountancy bodies as might have a bearing upon advertising and (b) the advertising of ancillary services where these are provided by firms covered by the reference.

Action on these Monopolies and Mergers Commission Reports

In the light of the commission's reports, my right hon. Friend takes the view that these groups should be given greater freedom to advertise than is at present allowed under their existing codes of conduct.

My right hon. Friend is therefore asking the Director General of Fair Trading to enter into discussions with the Stock Exchange and the relevant professional bodies about the proposed new rules and safeguards on advertising and allied matters.

In his discussions concerning stockbrokers, my right hon. Friend is asking the Director General of Fair Trading, in considering the necessary safeguards, to have special regard to the interests of the inexperienced investor.

In his discussions concerning the means by which the commission's recommendations concerning accountants can best be implemented, my right hon. Friend is asking the Director General to have regard amongst other things to the possible international implications for accountants and to the responsibilities of auditors under the Companies Acts.