ANA Regulatory Rumblings

Positive Self-Regulation for Food and Beverage Marketing Continues to Grow

The marketing community is committed to addressing concerns about childhood obesity and we are making substantial progress.  

A new report from Georgetown Economic Services (GES) shows that the fifteen members of the Council of Better Business Bureaus’ Children’s Food and Beverage Advertising Initiative now account for over 80% of the food, beverage and restaurant commercials that children between two and eleven see on children’s television programming.  The CBBB initiative was created in 2006 to address the demand of consumers and policymakers for more advertising that supports good nutrition and healthy lifestyles.  At that time, the member companies represented two-thirds of all children’s food and beverage TV ads, so the new report demonstrates continued progress in the scope of the initiative.

ANA and the Grocery Manufacturers Association (GMA) submitted the new GES report today to the Chairman of the Federal Trade Commission (FTC).  The report is based on Nielsen Media Research data and is an update to a study that our two associations submitted to the Commission last September. That study, the first to analyze 2007 ad spending and impressions, found that children are seeing fewer TV commercials for food and beverage products and that the mix of commercials is shifting to healthier choices.

It is critical that policymakers have reliable measures of the various efforts that marketers have taken in recent years to respond to concerns about childhood obesity.

While our industry has arguably done more than any other sector of society to address this challenge, food marketing and marketing to children continue to be political hot-button issues in Washington, DC.  Some policymakers and critics have urged that food and beverage advertising should be taxed, banned or seriously restricted.  Those proposals will almost certainly intensify in the new Congress.

The new GES report clearly demonstrates that our proactive self-regulatory efforts are making substantial progress.

Food Marketing to Children Declines and Shifts

Two subcommittees of the U.S. Senate Appropriations Committee held a hearing today on food marketing to children.  For that hearing, ANA and the Grocery Manufacturers Association (GMA) submitted a report from Georgetown Economic Services (GES) with important data on food, beverage and restaurant advertising to children.  The report, the first to analyze 2007 ad spending and impressions, finds that children and adolescents are seeing fewer TV commercials for these products and that the mix of commercials is shifting toward lower-calorie food choices.

Among the highlights of the report:

• The typical child saw nearly 10% fewer food and beverage ads on children’s TV in 2007 than in 2006.  Since 2004, the decline is 25%.
• Spending for food, beverage and restaurant advertising, adjusted for inflation, dropped 6% over last year.
• The mix of advertising seen by children continues to shift.  Since 2004, advertising is growing fastest for bottled water and fruits and vegetables.  Advertising is shrinking the fastest for cookies, gum and snacks.

The report is based on Nielsen Media Research data and is an update of the 2004-2006 GES study on food, beverage and restaurant advertising spending, which was also commissioned by ANA and GMA.  It is critical that policymakers have reliable measures of the various efforts that marketers have taken in recent years to respond to concerns about childhood obesity.

Last July, the FTC released its long-awaited report on food/beverage ad spending in all media.  The report found that the total amount spent on food/beverage advertising to children aged 2-17 in 2006 was $1.6 billion.  This figure is significantly lower than the $10 to $12 billion figure that was cited in a 2004 IOM report on marketing to children.  The FTC report also had positive reviews for the Food and Beverage Advertising Initiative of the CBBB.  That initiative now has 15 members which represent two-thirds of all children’s food and beverage TV ads.  In July, the CBBB released a report indicating that all of the program members had met their pledge obligations in the first year of the program. 

We have a very positive story to tell about how our industry has responded to the childhood obesity crisis.

ANA Helps Lead the Charge to Protect Product Placement on Television

ANA and a large, diverse group of media and marketing companies and associations have urged the Federal Communications Commission (FCC) to reject any new requirements on sponsorship identification announcements for product placement.  The joint comments of the “National Media Providers” were filed in response to a Notice of Inquiry and Notice of Proposed Rulemaking (NOI/NPRM) by the FCC on potential new disclosure rules for “embedded advertising.”  The comments were drafted by Robert Corn-Revere, a media/First Amendment expert and partner at the law firm of Davis Wright Tremaine, LLP.  ANA was a leader in building this coalition, which represents all aspects of the national media businesses potentially affected by the FCC proposal.

The Notice asked a broad range of questions regarding the adequacy of current disclosures for product placement.  The Commission also sought comment on a proposed rule change that would require disclosures to have lettering of a specific size and to air for a particular amount of time during a program.

As our industry comments note, product placement has been in existence in one form or another since the earliest days of broadcasting.  In fact, product placement and other forms of commercial support from marketers are the life blood of our system of broadcasting.  There is already a large body of law, FCC rules and policy statements adopted over the years that address various forms of sponsorship practices.  We believe that the current disclosure rules and policies are fully adequate to inform and protect the public.  The expanded disclosure rules proposed by the FCC are unnecessary.  They would undermine the economic foundations of broadcast and cable, distract and annoy viewers and raise very serious First Amendment concerns. 

The recent increase in the use of product placement is a necessary response to the tremendous changes in the media environment.  Advertiser-supported media face greater challenges in the emerging “on demand” world, and product placement is an important part of preserving free or advertiser-supported media among the choices available to consumers.

Unfortunately, it seems that the Commission’s proceeding has been prompted by some advocacy groups, such as Commercial Alert, who would like to drastically reduce or eliminate the practice of product placement.  Many of these proposals are premised on child protection rationales that are totally inappropriate for adult programming.  In fact, there has been no showing of how the public is adversely affected by product placement.  The FCC proposal appears to be a “solution” in search of a “problem.”   
This is not a new issue.  Several years ago, Commercial Alert asked the FCC and the FTC to require “pop up” disclosures to appear on screen whenever a product appeared during a program.  ANA and other industry groups filed comments with both agencies opposing this proposal.  The FTC ultimately rejected the Commercial Alert suggestion.  This burdensome approach would destroy the flow and verisimilitude of programming.  It would clearly violate the constitutional strictures that require government restrictions on speech to be “no more extensive than necessary.

The FCC and the FTC under present rules have the power to adequately regulate in this area.  We hope the FCC will avoid serious new restrictions that could have damaging consequences and in fact protect no one.

House Tobacco Bill Violates the First Amendment

Sometime this week, the U.S. House of Representatives is likely to consider a major tobacco bill, The “Family Smoking Prevention and Tobacco Control Act.” (H.R.1108). This bill gives the Food and Drug Administration (FDA) virtually complete regulatory control over all aspects of the tobacco industry, including the marketing of tobacco products.

While Congress has the power to decide how to regulate the tobacco industry, it must do so in ways that do not violate the Constitution. We believe there are several very serious defects with the bill, including marketing restrictions which violate the First Amendment.

ANA, the American Association of Advertising Agencies (AAAA) and the American Advertising Federation (AAF) delivered detailed comments to the entire House of Representatives last week, outlining two major concerns with the bill. First, we believe the numerous marketing restrictions in the bill violate the First Amendment. We cited legal experts from across the political spectrum plus a U.S. Supreme Court decision (the Lorillard case) in which a Massachusetts provision identical to part of H.R.1108 was struck down. Second, we believe that regulatory authority over tobacco advertising should remain with the Federal Trade Commission (FTC), which has experience and expertise in this area.

These constitutional issues are fundamental and these serious defects in the bill need to be corrected before any final action is taken on this legislation.

A companion version of the bill (S.625) awaits floor action in the Senate. We will continue to oppose the marketing provisions of these bills.

ANA Urges NY State Lawmakers to Reject New Restrictions on Online Behavioral Advertising

ANA has urged members of the New York State Legislature to reject two bills that would impose serious new state-specific restrictions on online behavioral advertising.  Assembly Bill 9275-B and Senate Bill 6441-B would subject all Internet advertising, wherever it originates, to a narrow and rigid set of notice, choice and security rules dealing primarily with the collection and use of non-personally identifiable information (non-PII).  These bills raise serious constitutional issues by burdening interstate commerce and could encourage other states to act, leading to a patchwork of inconsistent state laws on the collection and use of non-PII.  ANA’s letters to the Assembly and Senate committees are available here.

In addition to the letters, ANA Senior Vice President Keith Scarborough is joining several companies and other industry groups this week in Albany for a series of meetings with members of both the Assembly and the Senate.  Our message is that consumer privacy in the online world can best be protected through strong industry self-regulation, buttressed by enforcement at the national level by the Federal Trade Commission (FTC).  Balkanized regulation by the states, particularly of non-PII, would seriously undermine the architecture of the Internet and the financial foundation that advertising provides to many online services.    

Online behavioral advertising makes it possible for consumers to see the right ad at the right time for the right product and allows marketers to better target their messages.  Just last week, ANA and eleven other trade groups filed comments with the FTC on a proposed set of industry self-regulatory principles to govern online behavioral advertising.  We share the commitment of policymakers in the states and at the federal level to protecting the privacy of consumers online. 

Behavioral Advertising Helps Fund Valuable Online Services

Advertising is critical to the economic foundation of the Internet and the vast array of products, services and information that is available in the online world.  The government should not adopt any rigid, overly broad rules on the collection and use of consumer information that would undermine that vital role played by advertising.  The privacy interests of consumers can be best protected by strong industry self-regulation and positive industry leadership.  This leadership is already buttressed by the FTC’s enforcement powers to make sure that companies are fully complying with their privacy promises.

Those were the important messages conveyed to the Federal Trade Commission (FTC) today by ANA and nine other trade associations (the American Advertising Federation; the American Association of Advertising Agencies; the Consumer Bankers Association; the Direct Marketing Association; the Electronic Retailing Association; the Interactive Advertising Bureau; the National Retail Federation; the Retail Industry Leaders Association; and the U.S. Chamber of Commerce).  These groups filed detailed comments on a set of proposed self-regulatory principles for online behavioral advertising that were released for comments by FTC staff last December.  The industry comments are available here.

Online behavioral advertising involves the tracking of a consumer’s online activities in order to deliver targeted advertising to meet that individual consumer’s interests.  The FTC held a two-day town hall meeting last November focusing on the possible privacy issues raised by online behavioral advertising.  On December 20th, the Commission issued a staff draft of self-regulatory principles to govern the practice of online behavioral advertising.  That draft is available at http://www.ftc.gov/opa/2007/12/principles.shtm

Our comments described the critical role that advertising plays as a funding source and economic foundation for the various services that consumers enjoy in the online world – from free e-mail to chat rooms to the rich content of thousands of newspapers and magazines.  The Internet economy is strong and online advertising is a major contributor to fueling its growth.  Our comments noted that in 2007, revenues from online ad spending exceeded $21 billion and online advertising is expected to grow 24% annually through 2011.

Behavioral advertising is just one component of all online marketing but it provides tremendous benefits for both consumers and businesses.  Behavioral advertising makes it possible for consumers to see the right ad at the right time about the right product, rather than simply a series of ads that may be irrelevant to them.  It also provides marketers with a more efficient and effective means of reaching consumers who are most likely interested in their offerings.  This efficiency supports competition and innovation and substantially strengthens the U.S. economy. 

We have serious reservations about some of the proposed principles suggested by the FTC, particularly the notion that consumers should be given the ability to opt-out of anonymous tracking and the collection of non-identifiable information across multiple websites.  Everyone agrees that consumers should have the ability to control the transfer of personally identifiable information to third parties.  Under long-standing privacy self-regulation principles, consumers are provided notice and choices when PII will be transferred to third parties for marketing purposes.  Such choices exist in the guidelines of every major privacy self-regulatory program and are included in the privacy policies of most major commercial websites. 

But what is the potential consumer harm if non-PII information is transferred to a third party?  Providing the same choice or control over non-PII as industry currently does for PII could have serious implications for the architecture of the web and undermine many business models.

We look forward to continued dialogue with the FTC and other groups about online behavioral advertising.  This is a very complex area involving numerous players.   There is clearly a need for more consumer education about how online behavioral advertising works and the tremendous benefits it can provide for them.  We also pledge to continue to evaluate our various self-regulatory privacy programs to make sure they are protecting the legitimate privacy interests of consumers in the online marketplace.

Tobacco Markup

The House of Representatives’ Committee on Energy and Commerce has reported favorably to the full House an amended version of H.R. 1108, the Family Smoking Prevention and Tobacco Control Act.  The final vote in favor was 38-12, with 11 Republicans joining the Democratic majority.  While there were no amendments offered that affected the troublesome advertising provisions in the bill, there were a few interesting exchanges during the markup that related directly to their constitutionality. 

Rep. Steve Buyer (R-IN) first asked whether the “findings” in the bill, couched as fact, were written in a way to satisfy the U.S. Supreme Court’s Central Hudson test.  Specifically, findings #30 and #31 state that the advertising provisions of the FDA’s final rule of August 28, 1996, which the bill would require the FDA to implement, are “substantially related to” and would “directly advance” the government’s interest in preventing youth smoking.  The findings also contend that “less restrictive and less comprehensive approaches have not and will not be effective in reducing the problems addressed by such regulations.”  As Rep. Buyer noted, however, since the tobacco industry reached the Master Settlement Agreement with 46 state attorneys general in 1998, youth smoking rates have declined.  In light of this decline, he asked whether it was still true that “less restrictive means” were not effective.   Rep. Henry Waxman (D-CA), the main sponsor of H.R. 1108, responded that the government’s interest in this area remains substantial, and this interest has been recognized by the Supreme Court. 

In this first exchange, Rep. Buyer also contended that the regulations went beyond the government’s asserted interest in lowering youth smoking and restricted speech about a lawful product to an adult audience, and thus violated the Central Hudson test.   In response, Rep. Waxman claimed that the provisions were narrowly tailored and would not affect advertising targeted to a primarily adult audience, such as in magazines directed to adults. 

Rep. Buyer also noted in a subsequent exchange that the Supreme Court struck down similar restrictions on advertising as those in the FDA rule in its 2001 decision in Lorillard v. Reilly.  In Lorillard, the Court struck down a Massachusetts law that banned outdoor ads within 1,000-feet of schools, parks and playgrounds and also restricted point-of-sale advertising for tobacco products.  In finding that the law was not narrowly tailored to satisfy the First Amendment, Justice Sandra Day O’Connor also wrote for the Court that the FDA rule raised similar issues.  Rep. Waxman argued that the Court struck down a state law in Lorillard and that the federal interest was different. 

Rep. Nathan Deal (R-GA) and Rep. Joe Barton (R-TX), the Committee’s ranking Republican, also warned that the advertising provisions raise First Amendment issues and could be subject to court challenge.  ANA, in conjunction with the American Association of Advertising Agencies (AAAA) and American Advertising Federation (AAF), filed extensive testimony with the committee that lays out all of the constitutional issues with the legislation’s provisions, and notes that there is opposition from leading constitutional experts across the political spectrum, from Judge Robert Bork to Professor Lawrence Tribe, to these proposals.  That testimony can be viewed at http://www.ana.net/advocacy/content/1097. 

ANA believes that these advertising provisions clearly violate the First Amendment and the Supreme Court’s Lorillard decision. 

It is not clear yet when the bill will be scheduled for floor action.  We hope that the committee will continue to work on revising the advertising provisions so that they do not unconstitutionally restrict truthful, nondeceptive speech about a product which is legal for adults to purchase. 

ANA Opposes Tobacco Advertising Legislation that Continues to Chart Path through Congress

The House Energy and Commerce Subcommittee is marking up H.R. 1108 on Thursday.  This bill would enact extraordinarily sweeping rules relating to tobacco products and advertising.  The rules relating to advertising would ban all outdoor advertising within 1,000 feet of a school, reduce ads to black text on a white background, require new disclosure requirements that would take up at least 20% of the ad, and remove federal preemption provisions that would allow the states to adopt even stricter regulations.

While ANA takes no position on tobacco regulation in general, we take strong exception to the advertising provisions.  Experts from across the legal spectrum have noted that the unprecedented restrictions relating to advertising in the proposed rule would amount to a de facto ban on ads and violate the First Amendment.  As the Supreme Court held in the Central Hudson case, which it has repeatedly reaffirmed, restrictions on advertising must be “no more extensive than necessary” to meet the government’s interest.  This means that truthful, nondeceptive advertising about a legal product (and tobacco products remain a legal product for adults) is entitled to strong First Amendment protection no matter what product is being discussed.  It is also important to note that the Court struck down similar regulations promulgated by the Massachusetts attorney general in the Lorillard case in 2001.

 

ANA, along with the American Association of Advertising Agencies and the American Advertising Federation, have written to the committee expressing these views, and discussing many of these issues in detail.  Our letter can be read at http://www.ana.net/advocacy/getfile/1305.. We hope that the subcommittee will   considers these arguments as it analyzes the legislation and removes the unconstitutional provisions.

The CPSC Reform Act

This week, the United States Senate is considering The CPSC Reform Act (S. 2663), a bill to reauthorize the Consumer Product Safety Commission, the federal agency that protects consumers, including children, from unreasonable risks posed by consumer products.  Protecting the public is a very important governmental function.  However, the Senate’s bill contains some provisions that are overly restrictive and would have a direct and negative effect on advertisers.

The provisions would require manufacturers of children’s toys or other products containing small parts to carry a warning in advertisements, including on internet and catalogue ads, about the product’s hazards. 

ANA has two problems with these proposed requirements.  First, requiring warnings everywhere a product is discussed is excessive.  Hazard warnings are usually displayed on a product’s packaging or elsewhere at the point of sale.  It’s unlikely that requiring warnings in advertisements, which are not viewed immediately prior to purchase, would do anything to enhance consumer safety.  Additionally, some products require multiple warnings, which will just add to consumer confusion and not to consumer protection.

Second, the excessiveness of the requirements raises constitutional concerns.  The U.S. Supreme Court has held in the Central Hudson case and in numerous others that regulation in the commercial speech arena must be “no more extensive than necessary” to achieve the government’s ends.  Limiting speech can’t, as Justice Sandra Day O’Connor wrote for the Court in its 2003 Western States decision, the government’s “first resort.” 

Instead, we have urged the Senate to consider the House of Representative’s approach to this issue.  Rather than mandating requirements for all ads, the House version allows the CPSC to conduct a rulemaking to determine what types of warnings should be required.  A rulemaking would allow for more flexibility and provide the affected industries more input into the eventual rules.   

We have sent a letter to all 100 members of the Senate detailing these concerns.  You can read that letter at http://www.ana.net/advocacy/getfile/1301.  We hope that the Senate will take our views into account as they consider this important legislation.

ANA, AAAA, AAF Send Letter to Senate HELP Committee

The Senate Health, Education, Labor and Pensions (HELP) Committee plans to mark up legislation tomorrow that would impose extremely burdensome, onerous and clearly unconstitutional restrictions on tobacco advertising.  Changes to the bill have completely failed to respond to the serious defects in regard to advertising regulations that were contained in the legislation that Senator Kennedy introduced in February.  It still contains proposals that legal experts from across the political spectrum have determined are unconstitutional.

To make the committee aware of these numerous serious constitutional infirmities, ANA, along with the American Association of Advertising Agencies and the American Advertising Federation, has sent a letter to the HELP Committee calling on the Committee to reject these proposals.  We believe these proposals would create very dangerous precedents for the whole advertising and media communities.  Our letter can be viewed after the jump.