Brazilian Advertising Council ruling discusses algorithm-based advertising
Council points out good practices for using algorithms and mitigating related risks
Algorithm-based advertising uses consumer information collected from digital media. Once interests are identified (such as online search patterns), customized advertising is then directed at a given target audience, increasing the likelihood of engagement with the offered product or service. It is not by chance that this advertising model has become increasingly popular with consumers’ growing online presence, while also spurring discussions across several areas of law.
The Brazilian Advertising Self-Regulation Council (Conar) recently analyzed a groundbreaking case involving advertising based on algorithms and artificial intelligence. Motivated by a consumer complaint, Representation No. 203/2021 concerned an advertisement for a video streaming platform. The consumer alleged the advertisement had misled them about the content on the platform, as the film shown in the advertisement was not available in its streaming catalog.
As such, the consumer alleged a violation of the Brazilian Advertising Self-Regulation Code, in particular:
- Article 1 – All advertisements shall be respectful, comply with the laws of the country and be honest and truthful.
- Article 3 – The advertiser, advertising agency and media shall be liable towards consumers for all advertisements.
- Article 23 – The advertisement shall not exploit the consumer’s credulity, lack of knowledge or inexperience.
- Article 27 – The advertisement shall contain a truthful presentation of the product being offered.
In its defense, the streaming platform clarified that its advertisements are created automatically through algorithms, which after having already identified the consumer’s interest in the film, would have then used the film to increase the consumer’s engagement with the advertisement. The defendant further argued that although the film was not available on Video-on-Demand (VoD), it was listed in its catalog for streaming on other media.
In evaluating the two parties’ arguments, Conar found that the advertisement did not convey incorrect information because “it did not specify in what form the film was available” and “this additional information can be accessed when contracting the service, upon installing the application”. According to the rapporteur’s vote, it was the consumer’s duty to examine the conditions of the contract, and the case was unanimously dismissed on this rationale.
Transformations, changes and improvements
In any case, Conar emphasized that advertisers should be cautious when using algorithm-based advertising. In particular, the Council pointed out that “it is important to improve these mechanisms in a balanced manner because the precision required for coming up with a successful digital solution can also narrow the field of available possibilities. This can often result in blocking consumers from the solutions they seek.” Moreover, Conar concluded that “understanding and keeping up with transformations, changes and improvements to algorithms is key, so they generate correct and good-quality advertising in line with consumer choices.”
Although the case was dismissed, Conar signaled that the advertising sector should be aware of transformations, changes, and improvements concerning algorithms to ensure that the advertising they generate meets the Brazilian Advertising Self-Regulation Code’s requirements.
Growth in algorithm-based advertising
Conar’s recent decision shows concern for balancing the need for advertisements to meet regulatory standards with the rising relevance of artificial intelligence and algorithms in the advertising industry, in order to avoid hindering technological progression in this area. Considering the popularity of algorithm-based advertising, Conar’s ruling under Representation No. 203/2021 is highly relevant and have the potential to influence future decisions.
For further information, please contact Mattos Filho’s Intellectual Property practice area.
|*With the collaboration of Lorena de Freitas Pereira.