Lets be completely candid here. What makes that position untenable is that the question isn't "What makes it an advertisement?" but rather "What makes it NOT an advertisement?" I mean, if we tried to apply the standard of anything not openly being an advertisement as crime, most of us would be going to jail.
It comes down to "What is an advertisement?" and "What is deceptive?"
In spamming (deceiving the search engine to get better placement or prominence for their product or service), IMO their listing becomes an advertisement. The fact that it isn't labelled as an advertisement makes it deceptive. It's nothing to do with the claims that they make or the quality of their service - it's just that it is an advertisement that isn't labelled as an advertisement, masquerading as a relevant search result.
How many purely informational websites do you know that are run out of charity? There aren't many. Most are basically designed to draw in users and make a sale or lend credibility to their service. You could effectively argue that this very forum is exactly that, a deceptive advertisement, and toss the lot of you in prison. (which would actually be quite silly as this "advertisement" has benefit to everyone involved. )
On the retail side, it's arguable that ALL retail sites are advertisements. I mean, the entire site is geared for the sole purpose of selling you something.
Most SE spam is simply that because someone in the industry decided it was. We've had instances in this office where one guy thought something was a relevant result and someone else didn't.
I think a governing body would ultimately rob the user of the choice of SE as they all started to take on a nice, sterile sameness. It's the SE's job to police themselves, not some external entity. (besides, every single pure volunteer service ever has had tons of problems with bias, corruption, and a myriad of "you're not paying me to do this" problems, so it doesn't really work)
I hope that made sense, I'm not a writer. (: