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Economics HL
Economics HL
Sample Internal Assessment
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[Microeconomics) Spanish government to ban advertising aimed at children of unhealthy foods such as chocolate, juices & ice creams

[Microeconomics) Spanish government to ban advertising aimed at children of unhealthy foods such as chocolate, juices & ice creams Reading Time
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[Microeconomics) Spanish government to ban advertising aimed at children of unhealthy foods such as chocolate, juices & ice creams Word Count
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The Consumer Affairs Ministry has announced it will use the strict guidelines set out by the World Health Organization as the basis for what can and can’t be shown to youngsters on TV, radio, internet, social media and apps

Figure 1

Spain’s Ministry of Consumer Affairs has announced that it will ban advertising for unhealthy foods and drinks that are aimed at children and adolescents via TV, radio, social media, websites, applications, cinemas and newspapers. Products included in the ban range from chocolate and candy, to cookies, desserts, juices and ice creams, among others.


The department will regulate the products that will be allowed to be advertised during times when children are watching these media outlets using the restrictive nutritional profiles of the World Health Organization. The consumer affairs minister, Alberto Garzón, explained on Thursday that the so-called “Paos Code,” which the food industry has used for self- regulation since 2005, has been shown to be “insufficient.” As such, Garzón has opted to use a decree as a tool reduce the “alarming” rates of childhood obesity in Spain. “This is a serious public health problem,” he said on Thursday.


Garzón – who is a member of leftist Unidas Podemos, the junior partner in the Socialist Party-led coalition government – was speaking in Barcelona on Thursday, accompanied by the mayor of the Catalan capital, Ada Colau. He explained that the regulation of such advertising would not, as he had initially planned, be controlled using the “Nutri-Score” system. This traffic-light rating for food and drink is based on nutritional values but has not been without controversy. For example, it gives positive ratings to some highly processed foods, while at the same time awarding a negative score to a product such as olive oil. Instead, the aforementioned WHO standards will be used for the future system.

Figure 2

The regulations, which are due to come into force next year, will affect five categories of products that will not be advertised to minors regardless of their nutritional content. These are candy made with chocolate or sugar, energy bars, sweet toppings and desserts; a group of products including cakes, sweet biscuits or cookies and other baked goods; and then three more categories that include juices, energy drinks and ice creams.


As nutritionist Juan Revenga explained to EL PAÍS via telephone, the WHO published a document in 2015 that set out the acceptable maximum levels of sugar, fat and salt content in products for them to be advertised to children. To do so, foods were divided into 17 categories, with the most unhealthy not to be advertised at all, and the rest permitted provided that a set quantity of sugar, salt or fat per 100 grams was not exceeded.


According to the ministry’s plans, advertising of unhealthy products will be banned all day long on TV channels for children, while they will be restricted on the radio or other TV channels before, after and during time frames when the under-16s will be watching. Social media, applications, the internet and the printed press will not feature advertising aimed at the under-16s.


The government is aiming to combat the issue of childhood obesity with these measures. According to the Aladino 2019 study, which is based on surveys of children aged six to nine, 40.6% of these minors are above their recommended weight, while 23.3% are overweight and 17.3% are obese.


The study, carried out by the Spanish Nutrition and Food Safety Agency (AESAN), shows that the parents of children who are overweight do not consider the issue to be a problem and frequently consider their child’s weight to be normal or just slightly overweight.


“In Spain, one in every three children is overweight or obese,” the Consumer Affairs Ministry stated on Twitter. “Advertising is one of the causes of this figure.”


Government intervention plays a major role in combating the production and consumption of demerit goods, which produce a negative externality when consumed. A negative externality of consumption occurs when consumption of a good imposes external costs on third parties outside of the market and no appropriate compensation is paid. Due to this, the government has to intervene to reach a socially optimum point. In Spain, the government intervened in the overconsumption of sugary products through regulations such as banning advertising for these demerit products. For the purpose of this IA, we can refer to unhealthy food items as junk food.


In Spain, government intervention aims to address the overconsumption of unhealthy foods among children. The overconsumption of sugar leads to obesity in Spain as mentioned in the article, and potentially diabetes which may cause people to end up in hospital and use up resources which could be used for others. Moreover, these additional children going to the hospital could cause everyone’s insurance premiums to rise. The consequence of overconsumption could lead to a shortened life span meaning they are unable to contribute to the economy, leading to negative long-term effects for the country.

Figure 3 - Shows The Negative Externality Of Junk Food Consumption

The market price and quantity demanded of junk food are where supply meets demand. The socially optimum level P* and Q* is when MSB=MSC. When these are in equilibrium, we are assuming that there are no externalities. There is market failure in this diagram due to the inefficiency of resource allocation. Junk food is overconsumed, which does not meet the socially optimum level to erase the externalities.


To correct the market failure, the Spanish government has decided to intervene with reduced advertising to minimize the negative externality. They banned advertising between certain times when children are likely to see them. Advertising typically encourages people to purchase the good, therefore banning advertising would reduce the demand, shifting the demand curve to the left.

Figure 4 - Shows Result Of Reduced Advertising On Sugar Consumption In Spain

The shift in demand decreases the quantity of sugar consumed, bringing it closer to the optimum level. (Q*) As we can see, the externality has not been completely erased, however, it has been reduced. It would not be completely internalized because there are not many substitutes for junk food that can still be somewhat healthy. Junk foods are often cheaper than healthier options such as fresh fruits and vegetables,so children tend to choose the unhealthier options over healthier ones. Junk food is also convenient and accessible with generally a lot of shops selling these unhealthy foods.


Furthermore, this method of intervention may not be greatly effective due to the addictiveness of the products, meaning that people will continue to purchase the good even when they are aware of the consequences. As well as that, television and newspapers are not commonly used by children under 16 so therefore will not have the same level of effectiveness. However, the Spanish government has considered this and is restricting advertising on social media as well. This will be more effective because the younger generation tends to use social media rather than newspapers and television. As well as that, the article mentions that some less sugary foods are still to be advertised. However, these products still contain sugar and therefore people will purchase those, and the externalities will continue to arise.


Spain attempted to symmetrize the information of junk food by providing information using their ‘Paos code’. However, the article mentions that it was “insufficient”, the consumers weren’t trusting the government and the information provided because products such as olive oil, which can be considered as a healthy food option, had a negative score, so they continued purchasing them.


The Spanish government identified that this method was not effective, so they decided to combine the symmetric information on packaging and limited advertising to minimize consumption.

Figure 5 - Shows The Result Of Cut Sugar, Fat, And salt Quantities In Products

The article states that some food could be advertised if it is within a set quantity of sugar, salt and fat. This suggests that becuase of the intervention some producers might cut sugar and fat content in order to advertise, thus the negative externality could be reduced and brought closer to the social optimum level as producer changer their ingredients. However, the externality is not completely erased as not all producers will do this.


Overall, the restricted advertising may reduce the negative consumption externality of junk food by children . And certainly this intervention by the Spanish government is a clear signal to consumers and producers that the overconsumption of junk food needs to be curbed.