Small business ombudsman calls for a mandatory digital marketing code amid a spike in complaints from SMEs

Small business ombudsman Kate Carnell is calling for tougher regulations for the digital marketing industry, following a rise in complaints from small businesses paying excessive fees for ineffective advertising services.

Carnell and other industry leaders have written to the Australian Competition and Consumer Commission (ACCC) requesting it address unscrupulous tactics in the industry using a mandatory code, similar to the banking code of practice.

“We get constant complaints about digital marketing companies giving all sorts of promises to small-to-medium businesses, getting them to sign contracts that can go for years, and in some cases, there are no benefits at all,” Carnell says.

“The good players in the industry, and there’s lots of them, think that it [an industry code] is a really good idea,” she says.

Shoaib Mughal, founder and director at digital agency Marketix, says there is a need for further regulation in the industry because most of his clients have had negative experiences with other marketing businesses prior to engaging his services.

“I do think there needs to be better measures in place,” Mughal tells SmartCompany.

“There’re a lot of agencies out there that are essentially scamming small businesses,” he says.

Mughal often works with clients that have paid thousands of dollars in fees for services that have not been provided.

“I’ve gone into client accounts and looked at the history, and I see that no work has been done. No on-page work has been done, no backlinks have been built for a website, and they have been charged thousands of dollars a month for that,” he says.

Mughal says it is essential that any new code ensure a party can investigate and penalise marketing agencies found to deliberately use predatory tactics.

“I’m not sure how you implement something like that, but surely if there’s an agency that has had hundreds of complaints, that’s a red flag,” he says.

The small business ombudsman says a mandatory code of conduct could insure small businesses are not locked into lengthy contracts while receiving ineffective services and include a robust complaints mechanism.

“The industry would work with ACCC, and possibly us, to work up a code that has protections for small businesses, but at the same time ensures that the professionals in the industry are appropriately protected too,” Carnell tells SmartCompany.

“The people that the charlatans are hurting more than anyone are the good professional operators in this space,” she says.

Carnell’s calls for the establishment of a code come after the ACCC released its interim report for the digital advertising services inquiry in January.

In her submission for that inquiry, Carnell said her office had received multiple calls from businesses that have experienced difficulty in resolving issues with advertising publishers, including locked accounts and ineffective advertising products.

Carnell said these problems could be mitigated by including compulsory internal and independent external dispute resolution processes in contracts between advertisers and publishers, as well as by a mandatory industry code that sets standards of behaviour and provides enforceable mediation and arbitration.

“We’ve written to them [the ACCC] post that submission and suggested to them that now they have finished the platform inquiry, the sensible thing to do would be to follow up with some work in this space,” she says.