The effectiveness of the direct marketing code also depends on the extent to which firms engaged in direct marketing and consumers share a common interest in reducing the external costs arising from direct marketing activities. As outlined below, this depends on similarity of consumer and firm interests in reducing those costs, and the extent to which those interests overlap.
Self-regulation of direct marketing tends to be more effective in those cases where consumers share similar interests with each other in reducing the costs arising from direct marketing. This is more likely to be the case in those instances where direct marketing imposes monetary costs on consumers. For example, consumers tend to share relatively similar views about the ethics of direct marketing that provides misleading price information.
By contrast, self-regulation of direct marketing tends to be less effective in those instances where consumers have divergent views about the merits of reducing those external costs. This is more likely to be the case in relation to where the costs imposed on individuals are more non-pecuniary in nature. For example, consumers have divergent views on privacy issues.
This divergence of consumer interests tends to reduce the effectiveness of self-regulation by making it more difficult for firms to:
develop, monitor, and enforce a code of self-regulation that suits the interests of all consumers; and
determine the extent to which the consumers and other individuals in the community are adversely affected by direct marketing.
These problems are reduced to some extent by the existence of effective consumer organisations and the inclusion of consumer representatives in the Code Authority. The recently introduced Privacy Bill will also clarify consumer rights and ensure that the National Privacy Principles are legally enforceable.
Similarity of producer interests
The development and implementation of the present direct marketing code illustrates the strong common interest that firms using direct marketing techniques have in improving consumer acceptance of those techniques.
However, the wide variety of direct marketing techniques, and the wide range of heterogeneous products that are marketed using those techniques, also means that producer interests may diverge on the merits of regulating certain forms of direct marketing.
This divergence of producer interests in regulating direct marketing tends to reduce the overall effectiveness of self-regulation by making it more difficult for the Code Authority to:
develop, monitor, and enforce objective standards that suit the interests of all producers; and
determine the extent to which each firm’s activities adversely affect consumers, other firms, and the wider community.
The divergence of producer interests is reduced to some extent by the existence of an effective Code Authority that is able to reconcile those differences. It is also reduced to some extent by:
the manner in which the direct marketing code has been designed;
the existence of the “Direct Marketing Code Compliant” seal, which creates a common interest among member firms to preserve their joint reputation; and
the existence of legislation that clarifies acceptable business practices (eg trade practices and ‘fair trading’ legislation, and environmental legislation).
Self-regulation of direct marketing tends to be more effective in those cases where there is a significant overlap between the interests of firms, consumers and the wider community. That is, it will be more effective in those cases where most firms engaged in direct marketing and consumers share a common interest in reducing the external costs arising from direct marketing.
This is more likely to occur where those external costs are the result of the activities of only a few firms engaged in direct marketing, and most of those costs fall predominantly on consumers of the product, and other firms engaged in direct marketing. For example, both direct marketing firms and consumers share a strong common interest in the operation of a do not mail/call service since this saves consumers the costs of having to deal with unwanted offers and saves firms the costs of wasted marketing activities.
By contrast, self-regulation will tend to be less effective in those cases where the interests of firms engaged in direct marketing diverge significantly from those of their consumers and the wider community. This is more likely to be the case where those external costs:
are due to the activities of most firms in the market; and
fall on sections of the community other than consumers of those products or other firms engaged in the direct marketing of substitutable products.
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