Harmonizing the Transparency of Political Advertising in the EU: A Business Perspective

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Hand holding a phone with Facebook app open against the background of the EU flag

by Dr Louis Karaolis (Director of Academic Affairs & Head of Law, CIM)

The digital revolution has led to a paradigm shift in the realm of political advertising. Traditional offline modes of political advertising have ceded to new online technologies. A consequence of this digitalization process is that political advertising can be disseminated via diversified platforms and by an increasing number of service providers.  

This proliferation of digital activity has created its very own ecosystem, which encompasses ad-tech platforms, data brokers, data analytics firms, social media platforms, and PR companies. Yet, unsurprisingly, this digital transformation has given rise to regulatory problems that impinge upon business, politics, and fundamental rights.

I. The business problem

Political advertising, and in particular rules pertaining to the transparency of political advertising, is not currently regulated in a harmonized manner across Member States. As such, there exists divergent rules regarding the preparation, placement and publication of political advertising. This heterogeneous regulatory approach is antithetical to the economic ethos of the EU, as it creates a fragmented internal market.  

At a granular level, this creates two obstacles for companies who provide political advertising services. Firstly, reduced legal certainty – as Member States regulate political advertising in distinct ways. Secondly, increased compliance costs – as service providers have to assess and satisfy different political advertising requirements. SME’s, such as data brokers, are particularly affected as they may struggle to absorb high compliance costs and are less disposed to either enter the market or provide services in a different Member State from which they are established.

II. The political problem

Businesses must be aware of the political landscape within which digital cross-border political advertising operates. In the wake of the Cambridge Analytica scandal, the EU has ramped up its rhetoric by pledging to stridently protect democracy and fair elections.

According to the Vice-President of the EU, ‘digital advertising for political purposes is becoming an unchecked race of dirty and opaque methods’. Elsewhere, the EU Data Protection Supervisor opined that ‘existing business models behind many online services have contributed to increased political and ideological polarization, disinformation and manipulation’. Taking this one step further, the European Commission President declared that EU citizens must be able to make choices ‘free from malign interference’. The net result of these pronouncements is that political advertising rules must be harmonized across the EU and contain high levels of transparency to ensure that they are not circumvented or manipulated by non-EU actors.

III. The fundamental rights problem

At the heart of this narrative is the relationship between digitalization and fundamental rights, and in particular the right to privacy and protection of personal data.  

One of the core concerns vis-à-vis online political advertising is the use of so-called microtargeting and amplification techniques. Stripped to its core, microtargeting operates on the basis that data is collected based on online activity, with the intention of planting targeted political advertisements, either to a particular person or group of people, to amplify reach.

The tripartite dilemma that arises is that personal data can be harvested on an industrial scale; political campaigns can exert significant influence over the behaviour and decision-making of voters; and last but not least, voters may be unaware of the influence that is being exerted over them, as it is not always easy to differentiate between paid political advertisements and organic political sentiment.

IV. The EU solution

To remedy these problems, and in particular the fragmentation of the internal market, the EU has proposed the adoption of an EU regulation that seeks to harmonize rules on political advertising and regulate personal data usage via targeting techniques.  

The regulation, which is to be directly applicable in all Member States, enshrines a common definition of political advertising and harmonises transparency requirements. This harmonized approach prevents national authorities from introducing transparency rules that deviate from those laid down in the regulation.

At a glance, transparency in this context means that political advertisements need to make explicitly clear, via textual disclosure, that they are in fact political advertisements. The identity of the sponsor of the advertisement is also required, as is the period during which the advertisement is scheduled to be published.

As regards fundamental rights, the regulation prohibits targeting techniques that use specific categories of personal data, such as ethnic origin or biometric data. Yet, this prohibition is enshrined in existing EU legislation. In this regard, it can be argued that the regulation compliments, rather than enhances, protection. Moreover, in line with existing law, the regulation contains an exception to the ban on targeting and amplification techniques based on explicit consent. As noted by the EU Data Protection Supervisor, however, the phenomenon of consent fatigue in today’s digital environment renders the notion of meaningful and informed consent somewhat dubious.

Nevertheless, from a business perspective, the regulation is to be welcomed as a remedy for the fragmented internal market on political advertising. Harmonized rules will enhance legal certainty and reduce compliance costs for small and large service providers of political advertising, which in turn allows citizens to receive those services. Crucially, those services will be subjected to high transparency requirements.

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