Important and Urgent Update on the SHOPS consumer protection scheme
Following the October 2015 announcement by the News Media Association of their intention to close and wind-up this advertiser-funded consumer protection scheme, the Direct Commerce Association (DCA) has been working closely with the Direct Marketing Association (DMA). Our principal aims have been to safeguard the future of the scheme, to expand its remit to include postal and online advertising, and to thwart any attempt on the part of the newspaper publishers’ association – the NMA – to pay itself any sort of dividend from the fund or to otherwise strip cash from an entity which was established in 1975 as a protection fund for the benefit of consumers.
The SHOPS consumer protection fund stands at some £3.9 million. These funds have been contributed exclusively by advertisers and their advertising agencies. Contributors have been prepared to make payments into the scheme over the past 40 years on the basis that these monies would be used exclusively to protect consumers against the risk of their cash deposits being lost in the event of financial failure on the part of any advertiser.
The DCA represents the advertisers who have funded this scheme and in early July this year, representatives of both DCA and the DMA met the NMA, to express their concerns and to propose that the scheme and its existing protection fund should be placed in the charge of the DMA, allowing the NMA to resign its membership of SHOPS.
It was subsequently agreed at meetings between the DMA and the NMA that the parties would conduct formal negotiations to reach agreement on the future of SHOPS and the terms of NMA’s exit from the scheme.
Negotiations between the DMA and the NMA have now broken down.
The DMA has now advised that after almost three months of negotiations, discussions with the NMA have reached an impasse. Whilst full details of the negotiations have not been revealed, it has become apparent that the NMA is persisting in the view that it has the right to loot the SHOPS consumer protection fund and pay itself a very substantial 7-figure sum which would leave the scheme with insufficient monies to continue its good work and expand the remit of the scheme.
The DMA has provided us with an update on the situation, as follows:
The DMA entered into negotiations with the NMA in good faith but the two parties remain far apart as NMA wants to extract a considerable amount of money from SHOPS which is contrary to the constitutional documents of the Scheme. For its part, the DMA considers it should remain in the Scheme to develop the Scheme for the future. Negotiations have as a result now broken off. DMA will continue to block efforts to take out funds.
The DCA position is that we consider the stance adopted by the NMA to be morally indefensible and contrary to the articles of SHOPS. The Articles of Association of the scheme specifically preclude members (the DMA and the NMA) from being able to take money out of the scheme in the form of undistributed profits.
It had been hoped that the NMA would abandon any notion of stripping a large amount of cash out of this scheme. The scheme was established for the benefit of consumers. Apart from a small amount of seed finance (£50,000) injected by the newspaper publishers at the time that the scheme was established, the scheme has been entirely financed by advertisers, with no cash sums contributed by NMA members.
The newspapers have derived considerable benefit from the scheme over the past 40 years as from the very outset, it boosted consumer confidence in cash-with-order advertising and distance selling generally. This led to improved rates of response to cash-with-order advertising which in turn made it easier for newspapers to sell advertising space. The notion that the NMA now somehow has the right to plunder this consumer protection fund is nothing short of scandalous.
I believe that we have a duty to bring the NMA’s sordid proposal to the attention of a wider audience. The DCA must do everything in its power to oppose and prevent the pillaging of this fund of advertisers’ cash. I will be discussing what legal and other means may be deployed to prevent the NMA from this line of action. Advertisers may also now wish to consider what sanctions may be applied in relation to their press advertising budgets if the NMA persists in its current intention.
On November 3rd, at Hampton Court Palace, the DCA is staging a conference event and the issue of SHOPS will be raised during the afternoon. We have a guest speaker from the DMA, Ken Goulding, who has been actively involved in the negotiations with the NMA and who will be joining me for a review of this key matter followed by sharing of the actions which I propose we take to block the NMA from profiting from our contributions.
Do please join us and I might also add that this event continues into the evening with an informal Supper which will enable us all to discuss the matter in more depth.
The events team has come up with a special rate of £85 for those of you wishing to attend the afternoon session and the supper. Do please call our offices without delay to confirm your place(s) – 01271 855545. Information on the event can be found on our website.
If you have any questions Jane Revell-Higgins will happy to respond – jane@directcommerce.biz
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