(Microeconomics) UK to ban junk food advertising online and before 9pm on TV from 2023

Prohibition of adverts for products high in fat, salt and sugar could cost broadcasters more than £200m annually in revenue

The online ad ban will affect all paid-for forms of digital marketing, from ads on Facebook to paid-search results on Google, text message promotions, and paid activity on sites such as Instagram and Twitter. Photograph: Dominic Lipinski/PA

The government is poised to announce a ban on junk food advertising online and before 9pm on TV from 2023, as Boris Johnson looks to deliver on his pledge to tackle the UK’s growing obesity crisis.

The new measures, which will be some of the toughest marketing restrictions in the world, will heavily impact the more than £600m spent by brands on all food advertising online and on TV annually.

The 9pm pre-watershed ban on advertising TV products deemed to be high in fat, salt and sugar (HFSS) could cost TV broadcasters such as ITV, Channel 4, Channel 5 and Sky more than £200m a year in revenue.

The online ad ban would affect all paid-for forms of digital marketing, from ads on Facebook to paid-search results on Google, text message promotions, and paid activity on sites such as Instagram and Twitter. It is estimated that more than £400m is spent on advertising food products online in the UK annually.

The tough rules, which are expected to be announced as soon as Thursday, follow Johnson changing his view on personal health decisions after his hospitalisation with coronavirus last year. The prime minister is said to blame his own health issues for contributing to his illness. Overweight people are at greater risk of severe illness or death from Covid.

Research has found that one in three children leaving primary school are overweight or obese, as are almost two-thirds of adults in England. Last year, the government’s consultation on proposals to implement a ban estimated that children under 16 were exposed to 15bn junk food ads online in 2019, compared with 700m two years earlier.

However, the new restrictions include a significant number of “carve-outs” and exemptions which mean that they will fall short of the total ban proposed last year, which the advertising and broadcasting industry said was too “indiscriminate and draconian”.

For example, brand-only advertising online and on TV will continue to be allowed. This means a company often associated with poor dietary habits, such as McDonald’s, will be able to advertise as long as no HFSS products appear. Brands will also be allowed to continue to promote their products on their own websites and social media accounts.

The government is also to exempt a range of products from inclusion in the ban after the definition of junk food products proposed last year would have meant that the advertising of items including avocados, Marmite and cream would have been blocked.

These will include products not considered as traditional “junk food”, such as honey and jam, but will also cover zero-sugar drinks and McDonald’s nuggets, which are not nutritionally deemed an HFSS product.

Small and medium-sized companies – those with less than 250 employees – will continue to be allowed to advertise junk food products.

In addition, the business-to-business market – companies that do not target consumers but are part of the food industry supply chain – will still be allowed to advertise HFSS items.

Junk food advertising will still be allowed through audio media, such as podcasts and radio, and there will be no new restrictions for the out-of-home sector, which includes billboards, poster sites, on buses, and in locations such as railway stations and airports.

The list of products, and the ban itself, will be reviewed every few years.

This article discusses the response of junk food consumers after a ban of their advertisements online before 9 pm on TV. Based on estimations, from 2017 to 2019 there was a percentage increase of 2043% junk food adverts exposed to children under 16 in England. Junk food leads to obesity and « almost two thirds of adults in England » are obese. Therefore, it is a negative externality of consumption, a harmful side effect to society due to the consumption by an individual. These negative externalities have huge costs to society for which in this case, the government uses legislation as an intervention to diminish these costs. Negative externalities are examples of market failure – an economic situation where there is an inefficient allocation of resource.

The British government intervenes since consumers are irrational and they do not acknowledge the external costs of eating junk food. The external costs slow down the UK’s economy and do not contribute to it. Health problems caused by junk food can lead to poor productivity and inefficiency in the labour force, younger generations being unable to drive the future economy and overcrowding in hospitals increasing insurance premiums for the British population.

On TV, junk food is represented in a persuasive way inducing younger generations to become fast food consumers and creating a false image on their products while hiding the negative externalities they produce. This is often done using nudge theories and choice architecture to incite consumers.

The negative externalities created can cause large external costs for society and this is shown on the diagram below.

Junk food consumers consider only their private benefit in their choice; therefore, their marginal private benefit (MPB) is larger than the marginal social benefit (MSB) which lies below demand. As a result, the resources are allocated at the market equilibrium of P1 and Q1 instead of the socially optimum equilibrium of P* and Q*. This shows an overconsumption and overproduction of junk food since Q1 is greater than Q*, leading to market failure and an inefficient allocation of resources. Too many resources are allocated to the junk food market creating a welfare loss where society bears a larger cost than benefit.

The British prime minister Boris Johnson is willing to resolve this market failure through a ban of junk food advertisement on all paid-for forms of digital marketing before 9pm.

This diagram exhibits a shift of demand to D2 after imposing the ban. This shift to the left represents a decrease in demand for junk food products reducing the negative externality. This shift doesn’t move the market to a socially optimum market equilibrium however it moves closer to it. The negative externality is not completely internalised because there are many exemptions to this intervention. There are various substitutes where ads can be published. They will still be published « through audio media, such as podcasts and radio ». The quantity moves to Q2 where less is bought and the price decreases from P1 to P2. In the short run this legislation may reach the government’s goals since these advertisements will be unseen, however in the long run this ban may not be able to sustain the consumer’s high demand on the junk food market.

Furthermore, HFFS products will still be allowed to be advertised even though most of these products are deemed to be harmful. McDonald’s will still be allowed to advertise their nuggets or their sugar free drinks which significantly impacts the efficacy of the intervention. Chicken nuggets are a symbol for McDonald’s so their advertisements may continue to incite customers and their families to consume HFFS products and others in their restaurants.

On the other hand, different stakeholders are affected by this ban such as TV broadcasters, costing them « more than £200M pounds in revenue ». They may go out of business since junk food advertisements play a major role in their yearly revenue. This may leave people unemployed and therefore may decrease the economic growth of the country.

However, the government is protecting smaller firms to avoid them going out of business. This is an unfair advantage for bigger firms since they will not be allowed to advertise their products. The government may be creating a highly competitive market within the smaller junk food firms which may lead to an increase in junk food supply and variety. This increase in supply may increase consumption therefore once again hindering the efficacy of the intervention.

In conclusion, a ban of junk food adverts online and before 9pm on TV may likely result in a small decline in junk food consumption, slowly meeting the government’s objective, but may not completely reduce the negative externalities created by its consumption.