Product placement

The modern person is inevitably faced with advertising every day. It is everywhere: on TV-channels, radio, social networks, in various electronic applications and games. Advertising is one of the most effective tools to promote one’s product or service. However, such widespread introduction of advertising has led to a negative attitude towards it and, as a result, to a reduction of its effectiveness. Advertisers have been forced to use other ways to attract attention to their activities, without causing hostility on behalf of the potential consumers. Thus, product placement has appeared, which is currently one of the most effective tools in the world to promote one’s products. After all, it is in films, television programmes, serials, games, etc., where one can hide that advertising subtext that many people dislike so much.

There is no the legal interpretation of product placement, and its literal translation is “the placement of the product.” Professor of international marketing of the J.L. Kellogg School of Management at Northwestern University of the USA, Philip Kotler[1] described product placement in his works on marketing as a technology of placing the product, which is applied by producers in cinema films to promote it. In other sources, product placement is often described as a technique consisting in the use and demonstration of the movie prop (the product itself, the service or its logo) in a cinema film, a serial, a television programme, in games, etc., which has a real analogue.

Let us consider what the most common kinds of product placement exist:

• Visual, when directly the product itself or the logo is demonstrated. The examples of a successful visual product placement is the demonstration of a new collection of Chanel jewelry in the film Anna Karenina with the Ambassador of French Home Keira Knightley, Omega watches in the film Casino Royale with Daniel Craig, Ray-Ban eyeglasses in the film Top Gun with Tom Cruise, the demonstration which has increased sales by 40%, as well as the demonstration of clothing, shoes, accessories of the various fashion houses (Prada, Hermès, Dolce & Gabbana, Gucci, Chanel, etc.) in the film The Devil Wears Prada.  
• Audio. This kind is divided into verbal and nonverbal. The verbal one consists in the pronouncement by the actor of a phrase containing a name of the brand or product and advertising it. For example, in the film Basic Instinct, Sharon Stone is offered to drink whiskey Jack Daniels, and how many favorite fashion places of the main characters of the serial Sex and the City (the cafes, the restaurants, the clothing and shoes boutiques) were advertised. The nonverbal one, in turn, demonstrates the sound that characterizes the product or the service. This is a sort of a branded and recognizable sound, such as, for example, the sound of unlocking iPhone of the company Apple, the sound of launching Windows, etc.
• Kinesthetic. Consists in the demonstration of the properties and qualities of a product or service. Both visual and audio kinds are combined here. For example, the demonstration of the cars of BMW in The Mission: Impossible franchise.
• Through, when the product is not just mentioned in the work, but it is directly included in the plot. For example, in the film Taxi of Luc Besson, the plot is set around a taxi driver of the car of Peugeot 406, which is able to develop an incredible speed[2], in the film Outcast with Tom Hanks, the main character works in the delivery company FedEx and he “is on friendly terms” with a ball of Wilson, and in the very The Devil Wears Prada, there is a scene devoted to a search for a new book about Harry Potter, who is so loved by the daughters of the main character Miranda Priestly. 

Product placement has become the most widespread in the USA, where it is officially permitted and regulated not only by the law, but special agreements between the participants of the media industry market are also stipulated. In Europe, product placement has been prohibited until recently. The reason is a relatively small scale of the film industry compared to Hollywood, which is the largest film producer in the world. Currently, in some EU countries, product placement is allowed, but it is subject to particular restrictions, such as a prohibition on its use in the works for children, mandatory informing viewers about the presence of advertising in the work, compliance with the prohibition on advertising particular kinds of products, etc. In the Russian Federation, the concept of product placement has appeared relatively recently, what explains the lack of its clear legal regulation. The main normative legal act regulating the advertising activity in the Russian Federation is the Federal Law “On Advertising” of 13.03.2006 No. 38-FZ (hereinafter referred to as the Law). So, Paragraph 2 of Article 2 of the Law states that: “This law is not applied to the references about the product, the means of its individualization, the manufacturer or the seller of the product, which are organically integrated into the works of science, literature or art and they themselves are not the information of an advertising nature.” Based on this formulation, product placement cannot be considered advertising. There is not a clear definition in the legislation of what should be considered the “organic integration,” and the concept itself is also quite estimative. The specialists in each case have to analyze – whether the video material is a work of art and how much organically the particular product/service/logo, etc. is integrated into it. Some clarity was given in the Letter of the Federal Antimonopoly Service of Russia of 25.05.2011 No. AK/20129 “On the Recognition of Advertising as Being Inorganically Integrated into a Television and Radio Programme” (hereinafter referred to as the FAS Letter): 

This FAS Letter also states what should be considered as inorganic integrated advertising, namely:

            Thus, it will be possible to integrate product placement organically only into the work, which has a plotline. In case if the information about the product or service can be withdrawn without prejudice for the plot of the work, then such information should be considered in terms of the integration organicity, and, otherwise, recognized as advertising.

Speaking about advertising in the media industry, one should not forget that according to Paragraph 9 of Article 5 of the Federal Law “On Advertising” in Russia “the use in radio-, tele-, video-, audio - and film- products or in other products and the distribution of hidden advertising, that is advertising, which makes influence on the perception of the consumers, which they do not realize, including such influence through the use of special video roll-ins (double sound recording) and by other means shall not be allowed.” We shall analyze several cases for better understanding.

So, we shall consider the first example on the basis of Definition of the Supreme Arbitration Court of 11.03.2011 No. VAS-17991/10 in case No. A40-1839/10-110-13 on the recognition of the agreement between the producer company and MTS on the inclusion of the video materials in the film The New Year’s Tariff as void, as well as on preventing the exclusion of the video material from the film, while showing it publicly and distributing the film on DVD. The agreement was concluded with the aim of promoting the MTS products using product placement. The characters of the film demonstrated the new tariff plan, the mobile services of the operator, etc. And despite the arguments of the plaintiff that in this case the film scenes were hidden advertising prohibited by the Russian legislation, the court came to a conclusion that “the disputed video material was organically integrated into the feature film and it was directly related to the film plot The New Year’s Tariff, the exclusive right to which belonged to the company Igor Tolstunov Production Company, which had transferred the right to use the indicated work in a prescribed manner to the company Mobile TeleSystems. The use of a part of the film as an advertising clip does not constitute a basis for excluding this part of the film as advertising.”

Regulation of the Federal Arbitration Court of the Volga District of 12.11.2010 in case No. A65-7742/2010 is also demonstrative. During the show of the reality show Dom-2, the fragment, where the participants of the show were playing the gaming console of the Wii of Nintendo and where they were telling how to use that console, etc. was shown. The fragment ends with the indication of the Internet website address www.nintendo.ru, what is included in the list of paid sponsor advertising. The Administration of the Federal Antimonopoly Service in the Republic of Tatarstan decided that “the shown video clip had all signs of advertising and distributed advertising was inappropriate,” what was confirmed by the examination opinion.

 On the basis of the above circumstances, the Administration of the Federal Antimonopoly Service in the Republic of Tatarstan made a decision and issued an order to stop the violations of the legislation of the Russian Federation on advertising. However, TNT considered that the decision and order of the Antimonopoly authority did not comply with the law and violated their rights. The court, while considering the case, came to a conclusion that within the framework of that examination study, the conclusions had been made that the disputed fragment from the reality show “had been defined as having all features of advertising such as product placement (“product placement” is advertising included in a video plot) placed with the demonstration of the use and application of the product being advertised, what was an effective method to promote it on the market, a successful marketing ploy of the advertising campaign, while forming an interest to the gaming system on behalf of its potential consumer.” In addition, the examiner explained in the court that “product placement was soft advertising – a sub-kind of hidden advertising, and in case if it was paid, then such advertising ceased to be hidden.” Also, according to the examination opinion conducted by the Russian Institute of Culturology at the request of TNT, it was found that “the disputed fragment of the television programme (the reality show) Dom-2 organically existed in a general context of the programme, pursued other (not advertising) purposes, its content was not aimed at promoting a particular product on the market. According to the examiner, the analyzed fragment of the television programme “Dom-2” was fundamentally different in the purposes, content, genre and structural features from the advertising product, it was not advertising, except for 5 seconds, when the electronic logo with the website name of the gaming system was shown." Thus, the courts came to a conclusion on “the lack of evidence of the existence in the actions of the company of a violation of the legislation requirements regarding advertising imposed by the law to the distribution of advertising on television, because due to the evidence available in the materials of the case, it did not seem possible to make an unambiguous conclusion on the violation by the company of the legislation on advertising, as it was not possible to determine the start and duration of the advertising episode, to qualify the corresponding episode of the television programme as “hidden advertising.”

Now, we shall consider the judicial practice, when the information about the products in films was recognized as hidden advertising. For example, in 2014, the FAS of Russia recognized hidden advertising and imposed a fine on the film producer due to the violation of Part 2.1 of Article 21 of the Federal Law “On Advertising” for the demonstration of the logo of the vodka Khortytsya with the image of the crossed swords on a geographical sign Khortytsya located on the signpost next to other signs – Moscow and London – in a final episode of the film Viy 3D[3]. However, there are no other mentioning Khortytsya, such as a location, in the film plot. The same decision was made by the FAS Commission, which pointed out that the case could not be considered organically integrated into the film. 

Also, currently, the FAS of Russia has initiated the proceedings against popular blogger Ilya Varlamov[4]. In his release Non-Touristic Cairo: Garbage, Cemetery and Pigs on his YouTube channel, Varlamov talks about the journey sitting at the table, where a bottle of the whiskey of Dewar's is in front of him. The FAS of Russia considered it to be hidden advertising of alcoholic products and a violation of the Federal law “On Advertising.” According to Head of the Department for Control over Advertising and Unfair Competition of the FAS of Russia Tatyana Nikitina, “it seems that the information about the alcoholic drink in this video clip is alien, it is included in the clip inorganically, and the direction of its placement is to attract attention of viewers to these products, that is, it is advertising.” The outcome of this case is still unknown. 

The popularity of product placement is due to the apparent advantages:

• unobtrusiveness;
• the demonstration of the product or service, its properties and qualities;
• the possibility to form an image of the product or service, for example, the availability of some particular product ranks its owner to the elite of the society;
• an influence on a specific audience, for example, the products for children in the films for children or animated cartoons.
• a guarantee that several competing products will not appear in one work, as it happens at television during an “advertising pause.” 

Despite all these advantages, product placement in Russia is used too aggressively and evidently, what reduces its effectiveness compared to other countries of Europe and the USA. The examples of such evident product placement in Russia are the films The Irony of Fate. Continuation, What Men Talk About. Continuation, a music clip Egor Kreed feat. Philipp Kirkorov – Mood Color Black, etc. Speaking about an effective use of product placement, I also would like to give an example. So, in 2018, there was a scene in the Netflix film To All the Boys I've Loved Before, where one of the characters was drinking some sort of drink from a small bottle. Despite the fact that the film contained not a single mention of those products, the viewers recognized the Japanese yogurt of the brand Yakult in it by its appearance. The research and analytical company TickerTags by M Science[5], which analyzes the actions of companies and their influence on the reaction of the market, social networks, etc., found that after the release of the film, Yakult yogurt, which was always previously available in stores, it became difficult to be found on the shelves, and the company's shares rose. 

However, even product placement has its drawbacks:

• Cost. The cost of participation in the work will depend on its popularity and rating. As you know, the cost can be rather high;
• The probability of remaining unnoticed. For example, your products flashed unobtrusively in the short, practically nobody noticed them, and having paid the money, you did not get an expected reaction.
• A seldom repetition unlike with television advertising.
• A risk that the film will not be released at all or it will flop at the box office.

Thus, it can be concluded that currently, many disputed and unresolved issues, as well as the lack of a common understanding regarding the differentiation of product placement, or the organically integrated information and hidden advertising are left in the judicial practice of the Russian Federation. Consequently, it is necessary to bridge the gaps in the legislation: to introduce the concept of product placement, the conditions and prohibitions of its use, etc. After all, now this tool has a wide application in practice in Russia.