4.4 FEATURES OF THE MARKET THAT MAKE SELF-REGULATION MORE OR LESS EFFECTIVE 4.4.1 Overall effectiveness in addressing market failure(s)
As is the case with advertising, the nature and extent of the market failure not only provides an incentive for firms to engage in self-regulation of direct marketing, but it also influences their ability to develop and operate effective systems of self-regulation.
In particular, the range and complexity of the market failures makes it much more difficult for firms to develop and operate effective systems of self-regulation to reduce instances of that market failure. For example, as discussed in section 4.2.3, the external costs arising from direct marketing range from simple instances of providing incomplete, inaccurate or misleading information on product prices, through to instances of invasion of personal privacy and data privacy.
It may be relatively easy to detect and prove that firms engaged in direct marketing have misled consumers over the price of a particular product, or have failed to provide them with sufficient information about the terms and conditions of their contract so they can determine its full price. However, it is much more difficult to detect and prove other potential sources of market failure such as coercion, particularly given:
the diverse views of consumers as to what types of direct marketing activities are socially unacceptable; and
the absence of clear legislative guidance as to consumer rights in the area of data privacy.
In addition, firms may have little information on the magnitude of the costs that their direct marketing activities are imposing on consumers.
These problems tend to reduce the effectiveness of self-regulation, particularly a single code of practice. No single code can be expected to be able to deal with a wide range of different forms of market failure, just as no single piece of government legislation could be expected to deal with those problems effectively.
The design of the present ADMA code reflects the existence of these practical constraints and takes a different approach to the present advertising code. Rather than rely on a single code to deal with a range of market failures, the present ADMA code in effect contains a number of sub-codes that are designed to deal with the particular types of market failures that arise from the use of certain media.
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