ANA Regulatory Rumblings

The FCC Should Reject Proposals to Rate and Block TV Ads

When Congress called on the Federal Communications Commission (FCC) to examine rating and blocking issues, it specifically admonished the agency not to include in its report parental control technologies that “affect the packaging or pricing of content.”  In the current economy, the last thing the FCC should consider is a speculative regulatory regime that would seek to target and eliminate advertising.  That was the message in reply comments we filed today, along with the American Association of Advertising Agencies and the American Advertising Federation.

The FCC issued a Notice of Inquiry (NOI) on March 3rd seeking comments on the V-chip and other parental control technologies for video and audio programming.  We filed comments on April 16th urging the Commission to disavow any effort to require content ratings for TV commercials so that the V-chip could be used to block them.  Unfortunately, several advocacy groups have a long “wish list” of programming or commercial matter they would prefer to block.  So they filed comments asking the FCC to grant their wish -- to require TV commercials and additionally all programs with product placements to be rated so they could be blocked by the V-chip. 

Efforts to rate and block ads, while viewers can continue to receive the programs these ads support, would fundamentally undermine the economic foundations of a large portion of the TV media.

Also, rating TV commercials would be an administrative nightmare.  According to Nielsen data, thousands of new and newly revised TV ads appear each week, and several hundred thousand of these TV commercials appear each year.  Those ads appear in different media venues (broadcast, cable, syndication) and different versions (60-second or 30-second or 15-second) and are often produced and delivered under significant time pressure.  Requiring ratings on each of these ads would be highly disruptive and impossible to administer.  This ratings censorship scheme would be a clear example of regulatory overkill, as very few ads give rise to any controversy.

Imposing ratings on TV commercials and product placement goes far beyond the legal authority of the FCC.  It places an unconstitutional burden on advertisers and the programs they sponsor.  The First Amendment limits any regulation of commercial time that acts as a disincentive for speech. Even in good times, the FCC has always recognized the need to not undermine advertiser support for the media it regulates.  Rating TV commercials is a bad idea in any economic climate.  It’s a disastrous one in a period in which the media is already buffeted by the downturn in the economy.

Senate Tobacco Bill Violates the First Amendment

The U.S. Senate on Health, Education, Labor and Pensions (HELP) Committee is scheduled to vote next week on a major tobacco bill, the “Family Smoking Prevention and Tobacco Control Act.” (S.982).  This bill, introduced by Senator Edward Kennedy (D-MA), the Chairman of the committee, contains massive crushing and unprecedently broad advertising restrictions.  It gives the Food and Drug Administration (FDA) virtually complete regulatory control over all aspects of the marketing of tobacco products. 

The bill mandates the FDA to promulgate a rule to;

·         Ban all outdoor advertising for tobacco products within 1,000 feet of any elementary or secondary school or playground;

·         Require all permitted tobacco advertising, including direct mail, to be black text on a white background, except in magazines, newspapers or other periodicals with adult readership of 85% or more, or fewer than 2 million readers under the age of 18;

·         Require all advertisements and labels to identify the tobacco product as a “nicotine delivery device”;

·         Require all advertisements to contain a government-dictated “brief statement” (in addition to the current Surgeon General’s warning) to serve as a warning about possible dangers associated with the use of tobacco products;

·         Ban the use of promotional items such as hats or T-shirts containing the name or logo of a tobacco product, and prohibit other promotional techniques such as product give-aways, rebates or refunds;

·         Require sponsorship of athletic, musical, social or other cultural events in corporate name only regardless of the age of the audience;

·         Require all advertisers of tobacco products to fund and participate in a national public education campaign designed to discourage the use of tobacco products by minors. The FDA would require the annual fund established for this campaign to total $150 million;

·         Require compliance with more stringent requirements as enacted by state and local governments; and

·         Authorize the enactment of additional restrictions seven years after implementation of a final rule if the number of minors who use tobacco products has not decreased by 50% from 1994 levels.

Congress has the power to decide how to regulate the tobacco industry, but it must do so in ways that do not violate the Constitution.  ANA, the American Association of Advertising Agencies (AAAA) and the American Advertising Federation (AAF) delivered detailed comments to the members of the HELP Committee outlining our major concerns with the bill.

First, we believe the numerous marketing restrictions in the bill clearly violate the First Amendment.  The bill directs the Secretary of HHS to publish a final rule that is identical to the proposed rule adopted by the FDA in 1996.  It provides no opportunity for outside groups, within a fair regulatory rulemaking process, to be heard on the constitutional defects of the mandated rule.  In fact, legal experts from across the political spectrum agree that these unprecedentedly broad restrictions would result in a defacto ban on tobacco advertising. 

The mandated rule also would allow thousands of state and local governments to impose additional more stringent advertising restrictions beyond those contained in the mandated rule, making national advertising virtually impossible.

The bill also ignores a number of major developments since the FDA’s 1996 proposal.  The U.S. Supreme Court has made clear in a series of cases that every legal product, including tobacco, has the same level of First Amendment protection.  In 2001 in the Lorillard case, the Supreme Court struck down a Massachusetts provision identical to part of the mandated FDA rulemaking proposal.  Also, the tobacco industry voluntarily agreed to a broad range of serious changes in their marketing practices as part of the Master Settlement Agreement with the state attorneys general in 1998 – an agreement that raises no First Amendment concerns.

This is very troubling legislation that could create broad precedents adversely affecting advertising for many other controversial categories.

We urge members of the Senate HELP Committee to drop the unconstitutional marketing provisions from S.982.  If the committee fails to do so, the Congress should, at the very least, require a new, fair and open rulemaking by the FDA.  This rulemaking would allow the FDA to provide a fair hearing to those groups impacted by these restrictions and to take into account the many important Supreme Court and other judicial decisions affecting this area since the 1996 proposal.  The government can take strong steps to regulate tobacco sales and access to minors, but it must do so without trampling on the First Amendment.

 

Dysfunctional Legislation Syndrome

Congressman Jim Moran (D-VA) recently reintroduced H.R.2175, The Families for ED Advertising Decency Act. This legislation imposes a sweeping ban on the airing of all ads for medications to combat erectile dysfunction (ED) between the hours of six in the morning to ten o’clock at night.  Congressman Moran states that these broad restrictions are necessary to protect children from the “indecent” warnings aired during these ads.  This proposal is misguided, counterproductive and if enacted, unconstitutional. 

Ironically, the trigger for this censorship scheme is the inclusion of governmentally mandated warnings in the ads themselves.  The government simply cannot force companies to serve as a megaphone for their messages and then punish them for it by drastically restricting their speech.  The U.S. Supreme Court has made crystal clear that even where the subject of ads could be claimed to be “embarrassing” or “offensive” to some segment of the audience that fact does not authorize government bans or restrictions.

The Court, for example, in Carey v. Population Services noted that, “At least where obscenity is not involved, we have consistently held that the fact that protected speech may be offensive to some does not justify its suppression.” The Court also emphasized in Butler v. Michigan and Lorillard Tobacco Co. v. Reilly that where legal products are being sold to adults, the fact that some children will see the ads does not allow the government “to lower discourse in society to the level of the sandbox.”

The effort to substantially suppress the running of these ads completely overlooks their important health benefits.  In a study of over one million men who went to their doctors to discuss ED problems due to viewing ads discussing ED, over 140,000 of them were found to be suffering from serious and unsuspected health conditions like severe high blood pressure.  High blood pressure is rightly known as the “silent killer” and this early detection may have saved many lives or avoided other highly significant adverse health consequences.  An additional thirty-three thousand men in this group were found to have diabetes, which if not effectively treated can create an increased risk of blindness, kidney failure, stroke or heart attacks.

The prescription drug industry through the Pharmaceutical Research and Manufacturers Association (PhRMA) has developed Guiding Principles on direct to consumer advertising, which states that these companies will target these types of ads to an overwhelmingly adult audience.  For all of these reasons, the Congress should oppose these efforts to suppress and restrict ED ads.   Instead of tobogganing down this slippery slope of speech censorship, the Congress should categorically reject the increasing efforts to censor an ever growing number of categories of advertising as “indecent.”

ANA Calls on Supreme Court to Review Key Speech Case

In a “friend of the court” brief filed today in IMS Health v. Ayotte, ANA has asked the United States Supreme Court to consider a court of appeals decision that has broad implications regarding how advertising and marketing activities are analyzed under the First Amendment to the U.S. Constitution. 

A New Hampshire law, the Prescription Information Law (PIL), provides that “[r]ecords relating to prescription information…shall not be licensed, transferred, used or sold…for any commercial purpose,” which it defines broadly to include “advertising, marketing, promotion or any activity that could be used to influence sales or market share of pharmaceutical products.”  The law is designed to prevent the use of a physician’s prescription history to market prescription drugs to doctors, which the legislature claimed was a factor in the increasing prices paid by consumers for prescription drugs.  To prevent their use, the law therefore bans the gathering and dissemination of prescription histories. 

The First Circuit Court of Appeals held that the PIL was immune from First Amendment scrutiny since it regulates “conduct” and not “speech.”  Instead, the appeals court considered the activity of data collection as a “commodity” similar to regulating “beef jerky,” rather than the dissemination of truthful, nonmisleading information.  Since the court of appeals held that the protections afforded to commercial speech under the Supreme Court’s Central Hudson test were not applicable in this case, the PIL was examined under a lesser level of scrutiny (known as rational basis scrutiny) and upheld.

Our brief strongly argues that this decision is contrary to a long line of Supreme Court precedents and strikes at the heart of over thirty years of jurisprudence which has gradually increased the level of protection afforded commercial speech.  The Supreme Court has long granted First Amendment protection to the entire communication enterprise, from information gathering through to its dissemination.  All speech involves some sort of expressive conduct, from speaking to typing and printing.  If the First Circuit’s decision is permitted to stand, whole portions of the dissemination of truthful, nonmisleading speech for advertising and marketing purposes would be analyzed under a lesser standard of constitutional scrutiny and open to further overly restrictive regulation.  By drastically blurring the lines between conduct and speech the court of appeals threatens to severely undermine the foundations of speech protection in the United States.

Additionally, our brief asks the Court to clarify the definition of commercial speech, making clear the proper scope of the Central Hudson test.  Currently, there is a split among the lower appellate courts as to whether it covers speech that does “no more than propose a commercial transaction” or whether it applies more generally to “expression related solely to the economic interest of the speaker and its audience.”  This case could provide a forum to remedy definitional issues left open when the Court declined to hear the Nike case in 2003.   In that case, the California Supreme Court applied a broad definition of commercial speech to Nike’s public relations campaign in response to allegations of child labor and unfair trade practices overseas, and denying it full First Amendment protection.  A settlement in that case, however, left these important issues unresolved. 

Finally, this case also deals with a fundamental issue of the ability of advertisers to be able to develop and utilize data to target ads to consumers in an efficient manner, which provides a key basis for effective communication in a free society. 

 

If the Supreme Court decides to take the case, it will hear arguments in its 2010 term starting in October at the earliest. 

ANA Urges FCC to Reject Content Ratings for TV Commercials

ANA has urged the Federal Communications Commission (FCC) to disavow any effort to require content ratings for TV commercials so that the V-chip or other tools could be used to block them from the programming in which they appear.  Content ratings for TV commercials are unnecessary and would seriously undermine broadcasting and other ad-supported media such as cable and satellite programming.

ANA’s comments were filed today in response to a March 3 FCC Notice of Inquiry regarding a report the agency is required to submit to Congress under the Child Safe Viewing Act of 2007 on content blocking technologies.  Our comments were written by Robert Corn-Revere, noted First Amendment expert who is a partner at Davis Wright Tremaine LLP.

We believe that requiring content ratings for TV commercials would be economically ruinous for content providers in the electronic media.  Developing a system that enabled viewers to broadly block all ads while consuming the surrounding program would seriously diminish the value of all advertising, which underwrites the costs of production.

In addition, requiring thousands of ads to be rated because some may be “offensive” or “inappropriate” for children would be a clear example of regulatory overkill, as very few ads give rise to controversy.  Our comments describe the various industry self-regulatory programs that address concerns about ad placement for certain categories such as prescription drug products and alcohol beverage products.  We believe those programs are working.

Finally, we believe the FCC’s notice appears to go far beyond the scope of the Child Safe Viewing Act by raising the question of ratings for commercials separate from the programming in which they appear.  This is an issue the FCC considered and properly rejected a decade ago in the V-chip proceedings.

ANA Continues to Oppose ICANN Domain Name Proposal

ANA has filed supplemental comments with the Internet Corporation for Assigned Names and Numbers (ICANN) in opposition to their proposal to greatly expand the availability of generic top level domain names.  We filed detailed comments with ICANN last December outlining several specific concerns with this proposal.  In addition to comments from ANA and others in the business community, ICANN received comments from the US Department of Commerce’s National Telecommunications and Information Administration (NTIA), questioning whether a sufficient cost/benefit analysis had been performed.

While ICANN has made some changes in their proposal, we continue to believe that it is premature and highly likely to be counterproductive.  The contemplated expansion of the top level domain space will greatly increase the costs of brand management and create new opportunities for others to infringe, phish and engage in other deceptive practices.  We will continue to work with others in the business community and the US government to oppose the ICANN proposal and push for a real cost/benefit analysis.

ANA, 4A’s, AAF Strongly Criticize Proposed Tobacco Marketing Legislation

Today the Association of National Advertisers (ANA), American Association of Advertising Agencies (AAAA) and American Advertising Federation (AAF) submitted a detailed letter to Members of the House Energy and Commerce Committee expressing their strong opposition to H.R. 1256, the “Family Smoking Prevention and Tobacco Control Act.” The bill, introduced by the Committee’s Chairman, Congressman Henry Waxman (D-CA), and expected to be marked up in the House today, proposes the most severe restrictions on the marketing of a legal product in U.S. History.

The legislation would impose sweeping restrictions on the advertising of tobacco products that far exceed current regulations and clearly violate First Amendment protections of commercial speech guaranteed by the U.S. Constitution, according to the Associations and a broad range of legal authorities they have consulted.

“The terms of the legislation add local restrictions on top of federal regulations, essentially preventing tobacco marketers from implementing a national campaign,” said Dan Jaffe, Executive Vice President, Government Relations, ANA.  “The bill’s over-reaching prohibitions limit advertising to text only, ban pictures and color, and forbid outdoor advertising. This is a very troubling piece of legislation that could create broad precedents adversely affecting other areas of advertising.”

ANA Opposes as Premature FTC’s New Endorsement and Testimonial Guidelines

1) ANA just filed detailed comments with the Federal Trade Commission (FTC) on its revisions to the Guides governing the use of endorsements and testimonials in advertisements. 

Our comments again note the serious methodological flaws in the two studies relied upon by the FTC in drafting the changes to the guidelines.  Not only were the studies severely limited, but clearly their results cannot be extrapolated to the multitude of diverse categories of advertising where testimonials and endorsements are used.  Relying on these studies to determine how to revise the current guidelines would be inappropriate.  The proposed revised Guides would undermine the long standing existing FTC approach to Testimonials and Endorsements that ANA believes strike an appropriate balance between the governmental and business interests involved.  The proposed revisions would have a substantial “chilling effect” on truthful speech.  Advertisers, if the revised Guides are imposed, would be forced to comply with guidelines that often are likely not to be appropriate.

In addition, ANA believes the proposed revised Guides fail to take into account many important issues that arise from the technical and practical limitations of the emerging new media.  The FTC, by introducing examples that raise more questions than they answer, creates substantial and unnecessary uncertainty.  This approach threatens to interfere with the development of flexible and organic self regulatory approaches that are much more likely to work with the emerging technologies and the new media.  The FTC’s analysis, in fact, raises serious issues about the efficacy of disclaimers beyond the endorsement and testimonial arena. 

We urge the FTC to carry out careful additional analysis in regard to endorsements and testimonials in general and in particular as the guidelines relate to new media platforms, such as blogs and word-of-mouth marketing.  These comments were written by John Feldman and Tony DiResta, Partners at Reed Smith LLP.

2) ANA, along with a number of other groups, also submitted an additional detailed research analysis to the FTC that demonstrates further serious problems with the two studies relied upon by the Commission in proposing additions and revisions to the Guides.  This extensive analysis was carried out under the direction of the law firm of Kelley Drye & Warren and submitted by William C. MacLeod, a Partner at that firm.  It builds on comments Kelley Drye filed in response to the Commission’s original request for additional information.  Those earlier comments found that consumers understand that testimonials are frequently the “best case” scenario and are limited to the experiences of that particular user, and that consumers understand simple disclosures and also that endorsers are paid by advertisers.  Unfortunately, the Commission appeared to dismiss this research in its proposed revisions to the guides, prompting Kelley Drye on behalf of ANA and a group of other advertisers to again examine this issue in greater detail. These new comments strongly confirmed the earlier findings and amplified them.  This analysis consisted of a qualitative study of 500 consumers regarding their perceptions of weight loss and money-making program testimonial advertisements, which demonstrated that despite the FTC’s findings consumers largely understand that they may not achieve the endorser’s results.  This research also found that consumers are skeptical about endorsement and testimonial claims, so that adding the type of disclosure requirements that the FTC is proposing would have little impact. 

ANA believes that in light of all of this significant data and analysis it would be completely premature for the FTC to alter the existing Guides that have worked effectively and appropriately for decades.   

ANA Responds to State Ad Tax Bills

At least forty states are facing serious budget pressures.  While the federal stimulus bill signed yesterday by President Obama will relieve some of the pressure, many states will still need additional revenue to balance their budgets.  That could be bad news for the marketing community as states may consider taxes on advertising or other business services to bring in more revenue.  Ad tax bills have already been introduced in two states, South Dakota and New York.  The South Dakota bill (House Bill 1266) would impose a 4% gross receipts tax on all advertising in all media.  The bill in the New York State Assembly (A5030) would disallow the corporate tax deduction under state law for all DTC advertising.  Both bills are bad public policy and the New York bill raises serious First amendment concerns by singling out one category of advertising for differential tax treatment.  The US Supreme Court has consistently stated that taxes or other burdens on speech due to its content are unconstitutional.  Also, DTC advertising often provides life-saving or health-enhancing information to consumers and encourages them to see their doctors for needed health evaluations.  We have written to the members of the Taxation Committee in the South Dakota House opposing that bill.  We are also working with member companies and other industry groups to respond to the DTC bill in New York.  In this very difficult economic climate, this is absolutely the worst time for states to make it more expensive for marketers to communicate with consumers.

Congress Should Delay the Digital TV Transition

The transition to digital television is scheduled to take place on February 17^th.  However, there have been serious problems with the converter box coupon program being administered by the U.S. Commerce Department.  As a result, Nielsen Media Research has estimated that millions of Americans are not prepared for the transition and could lose access to TV in their homes. Many of these viewers, who are threatened by this cut off, are elderly or poor.  In this difficult economic environment, we believe that it would be very unwise not to provide some limited additional time to try to close this gap to provide a smooth transition to digital TV.

 

Legislation to fix the problems with the coupon program and delay the transition to June has been bouncing back and forth between the Senate and House in recent days.  Unfortunately, the issue has become mired in partisan gridlock as we get closer to February 17th.  With only 15 days remaining to the digital conversion deadline, we have called on the Congress not to allow the search for legislative perfection to block the necessary steps to foster this important program.  We, therefore, have written to the Congressional leadership urging them to put partisanship aside and pass legislation to delay the digital TV transition until June.