Regulatory Rumblings

New Internet Regulation Rules Hold Great Significance for Advertisers

Posted: Feb 27, 2015 12:00am ET

Yesterday’s approval by the Federal Communications Commission of new Internet rules is a landmark change in the Internet regulatory landscape. It is almost certain to turn out to hold great significance for ANA’s members. The “devil still is in the details” of the 300-plus page document just approved. Although it’s not yet been posted by the FCC for public review, a few observations are already possible. In short, the FCC has now classified broadband services under Title II of the 1934 Communications Act, which means that high-speed services – previously largely unregulated -- will now be regulated in a similar manner to telephone companies (e.g., they must charge “just and reasonable” rates, they can’t unreasonably discriminate in charges or services, etc.). The FCC also relied on section 706 of the 1934 Communications Act (which permits the FCC to accelerate broadband deployment) and on certain other legal provisions that apply to mobile services, as the rules apply to wireless carriers as well. This is the FCC’s third attempt to adopt Internet regulations, since the two previous efforts were overturned by the courts.

Under the new rules, companies will be prevented from blocking access to content and services; they can’t impair or degrade traffic based on content/service; and they can’t give priority to particular traffic or content over others in return for payment. The FCC also will now be enforcing privacy policies, enabling the construction of new broadband pipes, and protecting those with disabilities. The FCC decided today to forbear for now (though not relinquish authority, so future changes could occur) from applying rate regulation, requiring automatic contributions to the Fund that ensures universal service for consumers, and applying Internet taxation.

Several new legal standards appear to be included in the new regulations, including an Open Internet conduct standard that precludes carriers from harming consumers, as well as a prohibition on unreasonable interference with Internet use. Both of these new standards will require additional interpretation and application in particular cases, so it’s unclear just now precisely what they mean and how far they will go. Also, until we see the actual language of the new rules, it’s not clear what will be the relationship between the FCC’s regulation and that carried out by the Federal Trade Commission. Under the FTC Act, the FTC cannot regulate an entity that is otherwise regulated as a common carrier by the FCC. The FCC’s action today seems to be partial common carrier application, so it’s quite possible that the FCC and FTC will now share some jurisdiction, with two potential “cops on the beat” for broadband. That could very well make it more difficult to ascertain where regulation by one agency starts and the other ends, as well as create potential compliance conflicts when and if the agencies impose differing requirements. So, we could have two privacy regulators, two entities determining what is unfair or unreasonable, and the like.  

Supporters claim the regulation is necessary to ensure against a world of Internet “haves” and “have-nots,” and point to the fact that some entities have been operating under Title II, continuing to invest in their infrastructure, and doing just fine. Critics complain that the Internet doesn’t need heavy-handed regulation, that this action will stifle innovation in products and services, and that this is just the beginning of ever-increasing regulation of the Internet. What seems certain is that the new rules will face substantial challenges in court. Furthermore, as was stated in a Washington Post article, “Other groups and companies are contemplating whether to ask for a stay of the rules — a legal order that would temporarily prevent the FCC’s regulation from taking effect.” Clearly, it is likely there will be several years of litigation yet to come. This time period would allow Congress ample time, if it so chose, to craft a proposal to supersede the FCC’s regulation. House Speaker John A. Boehner (R-Ohio) and Majority Whip Steve Scalise (R-La.) have already signaled that they plan to work on an alternative approach to net neutrality that doesn’t allow for broadband to be classified as a utility service.

Stay tuned; we’ll be reviewing the details of the new rules and closely consulting with our members as the issues raised by this new major initiative begin to become clearer.

Digital Advertising Alliance Launches Valuable Tools to Protect Consumers’ Privacy

Posted: Feb 25, 2015 12:00am ET

The Digital Advertising Alliance (DAA) today launched two new mobile tools for consumers – "AppChoices" and the "DAA Consumer Choice Page for Mobile Web." These innovations mirror the programs currently available on desktop browsers, which provide mechanisms for consumer choice and enhanced privacy controls. This evolution in the DAA's choice platforms adapts consumer-friendly, independently enforceable privacy controls to the fast-growing mobile medium, and is a large step in the right direction – towards tailored marketing and privacy protections.

The ANA supports these simplified means to control data collection and use across websites and mobile apps. As a member of the DAA Self-Regulatory Program, the ANA is committed to developing effective self-regulatory solutions for online data alongside its industry partners.  These tools are a representation of that mission, and were developed to provide a consistent user experience across these channels, the DAA reports. The two new mobile enhancements will help ensure that users have access to simple control mechanisms for mobile browsers and in-mobile applications. Starting today, AppChoices is available as a free download from major online mobile app storefronts, Google PlayTM, Apple App StoreSM, and Amazon Store.

Bob Liodice, President and CEO of the ANA, noted that “Mobile media has become foundational to the growth and effectiveness of consumer marketing. By launching a suite of new mobile privacy tools, DAA gives consumers comprehensive control over the interest-based advertising that they experience across the Internet. Marketers know consumers have become increasingly mobile. DAA’s important innovations ensure that consumers can confidently manage how they receive interest-based ads across all desktop and mobile media. We are very proud of this major step forward – a step that improves the quality and trustworthiness of our self-regulatory system."

The DAA also announced that it expects its independent accountability programs – the Council of Better Business Bureaus (CBBB) and the Direct Marketing Association (DMA) – to commence enforcement under the Mobile Guidance by late summer.

Based on the same self-regulatory principles underlying the DAA’s existing Consumer Choice Page for desktop Web browsers, AppChoices provides an easy-to-use interface to allow users to set their preferences for data collection and use across apps for interest-based advertising and other applicable uses. The DAA Consumer Choice Page for Mobile Web is an updated, mobile-optimized version of the desktop Consumer Choice Page already used by millions of consumers; and which will allow consumers to set their own preferences for data collection and use easily across the mobile sites they visit. The ANA will continue to support the innovative developments of the DAA, and the overarching goal to protect the privacy of consumers everywhere.

Narrow Window for Tax Reform is Cause for Urgency

Posted: Feb 19, 2015 12:00am ET

House Ways & Means Committee Chairman Paul Ryan (WI-1) has set an ultimatum for tax reform in 2015 – either a tax rewrite is done by this summer or not at all. As was stated in a recent PoliticoPro article, “That tight seven-month time frame is aggressive and specific, two attributes not typically associated with recent talk of tax reform.” Ryan has chosen to dedicate much of his time and effort as Ways & Means Chair to the tax reform cause, stating that this is a large reason why he is not running for President in 2016. He has also shown a willingness to work with the Obama Administration to get something passed, even if it is not a comprehensive package. Ryan said, “If we can do tax reform in phases and those phases work, well, then I’m open to doing that.”

Clearly, if Chairman Ryan has a sense of urgency on passing tax reform, then those who want to be treated fairly as this legislation is crafted must also ramp up efforts. We must actively work to ensure that advertising in particular is protected as an ordinary and necessary business expense, since it has already been targeted in recent tax reform proposals as a source of new revenue. The proposals to increase the tax burden on the effort to sell by imposing a requirement that 50% of advertising be amortized over 5 or 10 years would substantially hurt job creation and economic activity in the U.S. Studies by IHS Global Insight have demonstrated that advertising generates as many as 21.1 million jobs in the U.S. annually. Advertisers cannot simply wait until a new tax bill is out. We must mobilize now and set a summer deadline for ourselves as well in order to show all members of Congress the undeniable benefits advertising delivers to the economy and to our tax system.

Big Data, Differential Pricing, and Advertising

Posted: Feb 18, 2015 12:00am ET

On February 6th, the White House Council of Economic Advisors released an important report entitled “Big Data and Differential Pricing.”

Differential pricing is the practice of charging customers different prices for the same product, such as senior discounts for movie tickets or tiered pricing for air travel. One of the concerns expressed in the major White House Big Data report that was released last May (“Big Data: Seizing Opportunities, Preserving Values,” http://www.whitehouse.gov/issues/technology/big-data-review) was that big data analytics could lead to disparate inequitable treatment, particularly of historically disadvantaged groups.

The Council’s report is a thoughtful, balanced document which describes the evolving technologies and business practices for big data as well as the benefits that differential pricing can provide to both marketers and consumers. There were three important findings worth noting: (1) many companies use big data for targeted marketing, although only a fairly limited number are experimenting with personalized pricing; (2) while concerns about differential pricing in the age of big data remain, many of them can be addressed by enforcing existing anti-discrimination, privacy and consumer protection laws; and (3) providing consumers with increased transparency about how companies use their data would promote more competition and better informed consumer choice.

That’s where the Digital Advertising Alliance (DAA) self-regulatory efforts come in. To address the privacy concerns about interest-based advertising, the marketing community has built one of the most rapidly-growing and successful self-regulatory programs in history. ANA and four other industry groups were founding members of the DAA, which features an icon alerting consumers to the fact that they have been served an ad based on browsing history. When a consumer clicks on this icon, they can access detailed information about interest-based ads and learn how to exercise choice about how to opt-out of targeted ads if they wish to do so.

Since its launch in 2010, the DAA has rapidly brought enhanced notice and choice to consumers:

We have encouraged all of our members to join the DAA program.

The Council’s report suggests that “policies to prevent inequitable application of big data should focus on risk-based pricing in high-stakes markets such as employment, insurance or credit provision.” That is consistent with the DAA program, which explicitly forbids data collected for OBA purposes to be used for job, insurance, mortgages and other similar sensitive purposes.  
The report was an encouraging and positive first look at complex issues including the positive aspects of differential pricing and some reasonable approaches to mitigate these risks. These issues are sufficiently important that they are sure to continue to receive the careful consideration of policymakers and the ad community for the foreseeable future.  

Online Piracy – The Advertising Industry Fights to Protect Consumers

Posted: Feb 10, 2015 10:00am ET

With the strong support of the Association of National Advertisers, the Trustworthy Accountability Group (TAG) announced this morning the advertising industry’s newest campaign initiative, the Brand Integrity Program Against Piracy.  With a focus on protecting consumers and advertisers alike from “dangerous deficiencies in the digital communications supply chain,” TAG is a collaboration between the Association of National Advertisers (ANA), the American Association of Advertising Agencies (4A’s), and the Interactive Advertising Bureau (IAB).  

The Brand Integrity Program Against Piracy relays the immense importance to the advertising industry of protecting both advertisers and consumers from pirates and others who are seeking to take advantage of the growth of the internet.  The new program against piracy, and the initiatives advanced by TAG in general, show that advertisers are fighting back against critical concerns like ad-supported piracy, digital advertising fraud and malware.

Through the Brand Integrity Program Against Piracy, TAG has worked with other marketing and advertising trade associations, advertising technology trades, representatives from the recording and media industries, and a consumer protection coalition, to establish a strong network of advocates for the protection of consumers and advertisers alike.  Within the first phase of this initiative, TAG will work with independent third-party validators, including Ernst & Young and Stroz Friedberg, to certify advertising technology companies as DAAPs – Digital Advertising Assurance Providers.  This will help to enforce standards and provide tools that can limit a company’s exposure to undesirable websites.

This program is just one example of the ways in which the ANA and others in the ad community are working to ensure the safety of consumers and advertisers.  We strongly believe that U.S. advertisers should be confident that their ads are not unintentionally providing financial support to, or otherwise legitimizing, "rogue" Internet sites whose primary and apparent purpose is to steal or facilitate theft of the intellectual property of America’s innovators and creators. U.S. advertisers must also have confidence that their corporate brands and images are not being harmed by association with such unlawful activity. We will continue to work hard to protect such a valuable Internet environment, and the safe access of information by consumers nationwide.

ANA has been working on this issue for several years. In 2012, ANA issued a best practices white paper along with the 4A’s.

To learn more about TAG and this initiative, click here.   

How Will New Net Neutrality Rules Impact Advertisers?

Posted: Feb 6, 2015 12:00am ET

The media is riveted on the news that, for the third time, the Federal Communications Commission (FCC) is poised to adopt net neutrality rules (its two previous efforts were overturned by the courts). The exact details of this latest effort are not yet available, but the information trickling out already raises red flags and issues of great interest to advertisers.

Apparently, FCC Chair Tom Wheeler contemplates -- for the first time -- applying, to some still not fully defined extent, traditional Title II (i.e., “common carrier”) regulation to Internet providers. Title II of the 1934 Communications Act has been applied over the years to telephone providers, and involves such issues as tariff filings, rate regulation, service requirements and the like. Wheeler is asking his fellow commissioners to apply certain parts of Title II that, e.g., retain the FCC’s ability to take action in the privacy area, ensure build-out opportunities, oversee the Internet backbone, and prevent paid prioritization (i.e., “fast lanes”). Any obligations that are applied could then, of course, be enforced against violators. As of now, it doesn’t seem that the proposal will apply to price regulation, require that tariffs be filed, or demand contributions to the fund that provides universal communications availability. But without doubt, many telecommunications companies are already signaling that they are adamantly opposed to this far-reaching regulatory expansion.

Among the potential issues raised by the proposed rules is the critical questions of whether they will preempt the authority of the Federal Trade Commission (FTC) to oversee broadband provider activities. In order to avoid duplicative regulation, the FTC Act precludes the agency from exercising jurisdiction over those regulated as “common carriers” by the FCC. If the FCC “cherry-picks” and imposes some common carrier regulations, the FTC’s authority will be thrown into doubt, as it will be unclear whether – and to what extent – the FTC would still have authority over Internet providers. This will create great uncertainty and could result in inconsistent or duplicative regulation. States that enforce “mini-FTC Acts” based on FTC’s jurisdiction could have their authority called into question, further muddying the waters for advertisers and their customers about state requirements. Local jurisdictions also might not have authority to continue some of their efforts. Advertisers and their customers could be left guessing as to what is required of them, or risk enforcement for undertaking activities that are required or permitted by one federal agency but not another. In short, if these proposed changes are not carried out extremely judiciously and carefully, they could create a regulatory mess.  

Among the many issues ANA will be watching as the net neutrality rules are spelled out are:

Stay tuned; this is potentially one of the bigger issues to confront the Internet since its inception, and is sure to generate responsive legislation, litigation and tremendous controversy. We’ll be in touch as the details emerge, and ANA members should be vigilant as well. ANA also will be covering these net neutrality and other FCC communications issues at our 2015 Advertising Law & Public Policy Conference.

Forget Football: Everyone is Talking about Their Favorite Super Bowl Ads

Posted: Feb 3, 2015 12:00am ET

Good, bad or sad – this year’s slate of Super Bowl ads definitely got the attention of consumers and viewers nationwide. Links to watch the game online included separate (and heavily viewed) pages just to watch the ads as they aired, and Forbes stated that “several studies have proven that 50% of the Super Bowl audience tunes in just to watch the ads.” According to a recently conducted poll by Crowdtap, a people-powered marketing platform, and shared by Word of Mouth Marketing Association, 85% of people said that they “prefer the Super Bowl as it is now, ads and all, to a Super Bowl with no ads.”

As commercials aired, people quickly picked their favorites and tweeted and posted about which were the funniest, the saddest and overall the most compelling 30-second slots. Ranking ads even had its own twitter hashtag again this year - #Brandbowl – with some users stating that “the game was great, but I was really watching for the ads.”

With this increasing interest in advertising, there is also a renewed awareness of how innately valuable marketing and creative engagement with consumers can be. The 2015 Super Bowl drew a record 114.4 million viewers, meaning that those ads have an incredible impact. Translating those numbers into economic impact is easy – according to a recent study by IHS Global Insight, Inc., by 2017, advertising will directly and indirectly foster $6.5 trillion in U.S. economic activity on an annual basis and help support 22.1 million U.S. jobs. Looking at the issue another way, for every dollar spent on advertising; nearly $22 would be generated in the economy.

These facts make the issue of an ad tax, such as those periodically proposed by Congress, all the more problematic. Right now, advertising, like all ordinary and necessary business expenses, can be deducted immediately. Proposals, however, have been put forward to require that 50% of advertising expenses would have to be written off over 10 years. This onerous tax has the capability to cost the industry an additional $169 billion over that time period, a staggering sum that would place a heavy burden and brake on the selling process. This tax clearly would undermine the positive impact the advertising industry has on our nation’s economy, at a time when policymakers are focusing on economic and job growth.  

The proposed ad tax would have painful impacts on the companies that advertise, and those impacts last long beyond the short time frame in which ads like those on during the Super Bowl air. For companies advertising a product that is only newsworthy in the near-term, they could face paying taxes over 10 years for a product that might lack relevance in 10 months.

Advertising has long been treated as a necessary cost of doing business, and for good reason. Without advertising built in as an essential ordinary and necessary business expense, most businesses would be severely burdened by these new costs. An ad tax would restrict job growth and would harm our nation’s economy, making the impact on our nation stretch far beyond football. To protect such a productive industry, we continue to encourage policymakers to support the existing tax deduction for advertising, and to commit to continuing to generate millions of jobs across the country annually.

During Super Bowl, All Eyes are on Football and Advertising

Posted: Feb 2, 2015 12:00am ET

The Super Bowl is the one time of year when advertising truly dominates the news headlines and people spend a good deal of time talking about the best and most controversial ads. Excitement around creative advertisements was at an all-time high at the end of last week. Time covered which ads continue to make it into the hall of fame, with Volkswagen’s 2011 commercial reaching 61 million views on YouTube even after it aired. Slate compiled 48 years of their favorite Super Bowl ads, and Marketplace is looking forward to the naming of this year’s Super Bowl MVC – Most Valuable Commercial.  

People often don’t think about the fact that advertising powers the Super Bowl and virtually every major media channel. People across the U.S. are able to enjoy the game for free on network TV because companies are spending money on advertising during the highly watched game to sell their products and services. Year after year, the Super Bowl is the most-watched program on TV. The 2014 Super Bowl drew an average of 111.3 million viewers. Those advertisements can have an incredible impact, and generate enormous interest as hundreds of millions of people tune into the game.

As all eyes are on advertising during the Super Bowl, this is an excellent moment to highlight why advertising is so important every day of the year in every state and locality in the U.S. According to a recent study by IHS Global Insight, Inc., by 2017, advertising will directly and indirectly foster $6.5 trillion in U.S. economic activity on an annual basis and help support 22.1 million U.S. jobs. Whoever wins the Super Bowl, advertising assures that America’s consumers and the U.S. economy are winners as well.  

New ANA Survey Shows Importance of Native Advertising’s Legal Landscape

Posted: Jan 30, 2015 12:00am ET

A new ANA survey, which was just released, provides the marketers’ perspective on the increasingly popular method of native advertising. With native advertising, advertisers position their message in the context of the user's experience. The “Advertising Is Going Native” survey of 127 client-side marketers, which took place in the 4th quarter of 2014, examined marketers’ native advertising, utilization, budgeting, interior and exterior implementation, measurement processes, and importantly the perspective on disclosure and ethics issues.

There were several key findings from the study. Budgets for native advertising are increasing – but measurement remains a challenge. Additionally, disclosure and ethics are key issues for marketers with three-fourths of respondents reporting an ethical boundary for the advertising industry when it comes to native advertising.

The legal landscape of native advertising is vitally important for all marketers to understand. Legal perspectives on commercial speech and disclosures will be explained at the ANA's Advertising Law & Public Policy Conference from March 31-April 1 in Washington D.C. Leading the conversation will be John P. Feldman, a partner at Reed Smith LLP and Laura M. Sullivan, Staff Attorney in the Division of Advertising Practices of the Federal Trade Commission. We strongly encourage you to register for the conference to learn more about this important issue along with many other pressing legal and political topics for marketers.

Top Issue of Early 2015: Privacy and Data Security

Posted: Jan 28, 2015 12:00am ET

There is now no question that, as we earlier predicted in this blog, data security and privacy are the preeminent issues in the minds of many in Congress, at federal agencies, in state legislatures, and in the media one month into 2015. With the release of a new FTC Internet of Things report and a lively hearing on data security legislation taking place just yesterday, it is clear that this area has heated up substantially.

In honor of today’s Data Privacy Day, here are two important privacy and data security developments that ANA is actively monitoring.

Reps. Marsha Blackburn (R-TN) and Peter Welch (D-VT) are working on a privacy bill that they plan to introduce in the coming weeks. According to Blackburn, the aim of the bill is to outline “the responsibility that retailers have to educate consumers on how to protect their data.” The sponsors state that they have the support of Energy and Commerce Committee Chairman Fred Upton and Rep. Michael Burgess, head of the committee’s panel on commerce, manufacturing, and trade. ANA is watching closely for this bill in order to determine what implications it could have for advertisers.

Also, Sen. John Thune (R-SD), the new chairman of the Senate Committee on Commerce, Science, and Transportation, announced a full committee hearing on the Internet of Things to take place on Wednesday, February 11, 2015. This hearing will focus on how devices will be made smarter and more dynamic through Internet technologies and will most likely provide a follow-up to the recently released FTC report. Chairman Thune stated, “Standing on the cusp of technological innovations that will improve both the safety and convenience of everyday items, we shouldn’t let government needlessly slow the pace of new development. By engaging early in this debate, Congress can ensure that any government efforts to protect consumers are tailored for actual problems and avoid regulatory overreach." This statement from Chairman Thune signals a growing effort in the Congress to balance carefully the need to foster the continued explosive growth of Internet and mobile innovation fueled by more effective use of data and targeted marketing with the continued need for strong privacy protection. The ANA through the Digital Advertising Alliance, working with our association partners, is diligently attempting to see that consumers’ privacy needs are being protected in the new marketing universe.

These House and Senate initiatives are just two of several significant initiatives happening right now in the privacy arena. As these and other new developments become more concrete, we will update members and fight to ensure that advertising can continue to serve consumers in an efficient, personalized, and safe manner.

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About This Blog

Focuses on all federal and state government and legal initiatives that threaten national advertisers' freedom of commercial speech. The blog is penned by Dan Jaffe, the ANA's Group Executive Vice President, Government Relations, who also heads the trade association's Washington office.