ANA Regulatory Rumblings

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.

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.