The Advertising Standards Authority v Herbex (Pty) Ltd

The Advertising Standards Authority (ASA) is a voluntary association and independent, industry-funded body serving the purpose of self-regulation of the advertising industry. Herbex (Pty) Ltd is a non-member of the ASA that markets complementary medicines. The ASA adjudicated complaints against Herbex and issued rulings against it, published these rulings on its website, and extracted appeal fees from Herbex. Herbex contended it was induced by misleading statements to participate in ASA processes and that the ASA had no jurisdiction over it as a non-member. Herbex challenged the ASA's jurisdiction and sought declaratory relief. The ASA conceded that its Code binds only members and that non-members are legally entitled to ignore its rulings, but argued it could consider complaints about non-member advertisements for the purpose of advising its members whether to publish such advertisements.

• Whether the ASA has jurisdiction over persons who are not its members and who have not consented to its jurisdiction
• Whether the ASA may require non-members to participate in its processes, issue rulings against them, or sanction them
• Whether the ASA may consider and rule on advertisements by non-members for the purpose of advising its members
• Whether the ASA's actions infringed Herbex's constitutional rights to freedom of expression and trade
• What should be the content of the ASA's standard complaint letters to non-members
• The appropriate costs order in circumstances where parties reached agreement on appeal

The appeal was upheld in part. The High Court's order was set aside and substituted with the following: (1) Declaration that the ASA has no jurisdiction over non-members and may not require them to participate in its processes, issue instructions, orders or rulings against them, or sanction them in the absence of submission to jurisdiction; (2) Declaration that the ASA may consider and issue rulings to its members (not binding on non-members) on any advertisement to determine whether members should accept or withdraw such advertisements; (3) The ASA must include in its standard complaint letter that non-members are not obliged to participate but that the ASA may still consider complaints for the purposes of advising members; (4) Each party to bear its own costs of appeal; (5) The High Court's costs order (directing the ASA to pay costs including two counsel) remained undisturbed.

The binding principle established is that a voluntary association established for industry self-regulation has no jurisdiction over non-members who have not submitted to its jurisdiction and cannot require non-members to participate in its processes, issue binding rulings against them, or sanction them. However, such a self-regulatory body may consider complaints about any advertisement (including those by non-members) and issue rulings to its members (which are not binding on non-members) for the purpose of enabling its members to determine whether they should accept or withdraw advertisements in order to comply with industry standards to which the members have agreed. The ratio recognizes that self-regulatory schemes derive their authority from contract and membership, not from any statutory or inherent power over non-members, but can still fulfill their regulatory function by advising members.

The court made several non-binding observations: (1) The ASA serves an important public interest function as a watchdog ensuring that advertising is informative, factual, honest, decent and legal, and this self-regulatory system protects consumers and ensures fair play among advertisers; (2) The main purpose of the ASA Code is to protect consumers and ensure fair play among advertisers (citing Telematrix); (3) The court noted approvingly that the ASA accepted its standard complaint letter could be improved to make clear to non-members that they are not obliged to participate but that the ASA may still consider complaints to advise its members; (4) The court noted that section 55 of the Electronic Communications Act requires broadcasting licensees to adhere to the ASA Code and contemplates that the ASA will adjudicate complaints for its members; (5) In discussing costs, the court observed that the ASA had legitimate reasons to appeal to reverse the "wide-ranging effect" of the High Court's order which would have prevented it from determining whether advertisements breach the Code for purposes of advising members.

This case is significant for clarifying the jurisdictional limits of voluntary self-regulatory bodies in South Africa. It establishes that such bodies cannot exercise jurisdiction over non-members who have not consented to their authority, even in highly regulated industries. The judgment balances consumer protection and industry self-regulation objectives with the rights of non-members not to be subjected to private regulatory processes. It affirms that self-regulatory bodies can continue to perform their functions by advising members about compliance, but cannot impose obligations on or sanction non-members. The case provides important guidance on the scope and limits of private regulatory schemes and their interaction with constitutional rights. It also addresses the Electronic Communications Act's provisions regarding the ASA Code and clarifies how self-regulatory schemes operate within the broader statutory framework. The judgment is instructive on costs discretion where parties reach substantial agreement on appeal.