Regulatory Rumblings

ICANN 53 – What to Expect in Buenos Aires

Posted: Jun 18, 2015 9:30am ET

By Clark W. Lackert, Reed Smith LLP

The next global ICANN meeting starts this weekend in Buenos Aires, an event important to brand owners and advertisers. Since the last meeting in Singapore in February, several seismic shifts have happened which may change the domain name ecosystem forever. Here are a few.

Perhaps the major change was the unexpected resignation of the ICANN CEO, Fadi Chehadé. While Chehadé has been under constant attack from various sources over the last few months, few observers thought he would resign in the midst of so many major projects and challenges including Second Round planning, IANA Transition, the continued rise of the GAC, and Accountability review. Chehadé said that he would step down in March of 2016. Now that Chehadé is a lame duck, ICANN 53 will be actively discussing what’s next, who will replace him, and how will his agenda be affected.

Another major change is an increased level of scrutiny for ICANN by the U.S. Congress, whether in hearings or correspondence, particularly on the more aggressive posture of the GAC to insert governmental objections and vetoes into the ICANN process. On June 10, 2015, Rep. Blake Farenthold wrote a scathing letter to ICANN, and signed by other members of Congress, to voice concern over the GAC’s desire for more power, an issue which has been consistently been of importance to ANA and its members. In fact, the letter referenced the ANA detailed negative comments on the GAC geographical name proposal last Fall as its first footnote. This proposal was authored by Olga Cavalli, Vice Chair of the GAC, and would greatly expand geographical name objections by GAC at the expense of brands. Another version of it will be discussed starting this weekend. It will be interesting to see if this new level of U.S. government monitoring will affect the GAC posture in Buenos Aires.

Further action from Congress comes in the form of the DOTCOM Act (HR 805), which would give Congress time to review the proposed IANA transition and require a Government Accountability Office audit of the transition before it is finalized. This bill expresses many lawmakers’ concerns that ICANN is not prepared for the IANA transition, highlighting questions about the transparency and accountability of the organization. Yesterday, the DOTCOM Act was voted out of the House Energy & Commerce Committee on a voice vote and is now headed for the House floor.

Although it may seem unrelated, the FIFA scandal has also affected public perceptions of ICANN, most importantly in the area of accountability, a hot topic at ICANN right now. Several commentators have noted that during transition and accountability discussions going on at ICANN now and soon in Buenos Aires, it is inevitable that the issue of lessons learned from FIFA will enter the debate at several levels.

Finally, following up on our posts on the “.sucks” controversy, now the Canadian government has also declined to intervene on the issue. Both the U.S. and Canadian governments have now sent the controversy back to ICANN to get its house in order. At the moment, about 100,000 names are on the “.sucks” Premium Sunrise (Market Premium) list, a development which continues to anger brand owners.

Whatever happens at the meeting, these complex challenges for ICANN are not going away soon. As always, ANA members should speak up now before Buenos Aires to make sure their views are heard.

Reed Smith LLP is the ANA’s General Counsel.

Dear Colleague Letter Shows Immense Support for Protecting Advertising

Posted: Jun 10, 2015 11:30am ET

Yesterday, Representatives Kevin Yoder (R-KS) and Eliot Engel (D-NY) sent a Dear Colleague letter to Speaker of the House John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) in support of protecting the current tax deductibility of advertising. This letter is extremely significant for the advertising community. Eighty-seven bipartisan members of Congress (48 Republicans and 39 Democrats) signed the letter.

This broad bipartisan support illustrates the growing opposition in Congress to amortizing advertising. Advertising’s immediate deductibility has been an important part of the tax code for over 100 years, and changing this key tax status would create serious harm for the economy. It has been proposed that 50% of each year’s advertising expenditures would have to be expensed over 10 years. This would impose at least a $169 billion in additional taxes on the ad community. Also, millions of jobs would be at risk if the effort to sell was saddled with heavy new tax burdens.

Representatives from 36 different states from all across the country signed the Dear Colleague letter. This fact is not surprising as advertising has a significant positive economic impact on every single state and congressional district in the U.S. A study carried out by the noted economic forecasting research organization IHS Economics and Country Risk demonstrated that advertising in 2014 supported 20 million jobs and drove $5.8 trillion in economic activity. These impressive numbers can only continue to be achieved in the future by supporting the current tax deductibility of advertising.

To view the letter sent by Reps. Engel and Yoder, click here. Click here to view our press release on this issue.

The “New ICANN”

Posted: Jun 4, 2015 2:30pm ET

By Clark W. Lackert, Reed Smith LLP

With the announced resignation of ICANN CEO Fadi Chehadé on May 21, 2015, effective next March, ICANN is truly entering a chaotic period. There are numerous key issues hanging fire including accountability requirements still undetermined, the announced delay for the technical functions transition, and the FTC's refusal to intervene in the ".sucks" controversy while blaming ICANN in part for the fiasco. It is too early to say at the moment what will emerge, although the picture should be clearer later this month at the ICANN global meeting in Buenos Aires. What is clear for advertisers and brand owners is that now, as never before, is the time to speak up about what is desired and needed in the "New ICANN".

In the Congress, Rep. Mike Kelley has introduced the Defending Internet Freedom Act of 2015 (H.R. 2251) on May 12, 2015 which would place certain restrictions on how the transition of technical functions of ICANN is handled. This issue has attained more relevance in view of the announcement by China that it will more carefully scrutinize and control the domain name sphere.

The continued rise of the Governmental Advisory Committee (“GAC”) within ICANN also could mean even more governmental intervention in complex intellectual property issues affecting domain names at ICANN. In addition, the Federal Trade Commission has just decided not to take immediate action against the “.sucks” registry outrage as set forth in its letter to ICANN of May 27, 2015, but has instead sent the controversy back to ICANN for their further review. The FTC did say, however, that ICANN ignored its previous policy recommendations and that it would monitor the activities of ICANN and the registries and take action as needed.

ICANN also has asked for community comments on the Review of the Generic Names Supporting Organization (“GNSO”), a 180 page comprehensive review issued on June 1, 2015 of the current state of play with the GNSO – comments are due by July 20, 2015. The GNSO is a key player in ICANN, since it supports various domain name legal and administrative functions, many of which affect trademarks. Additionally, the ICANN Cross Community Working Group (“CCWG”) on Enhancing ICANN Accountability also has been asking for public input. An opportunity to comment on accountability directly to ICANN may not come again in this form.

At the moment, ICANN can go in any number of directions, particularly with Fadi Chehadé leaving. It is important that interested advertisers and brand owners submit their comments directly to Congress, ICANN, and/or trade associations such as ANA to provide direction now rather than later before the path for ICANN is clearly set. If interested groups and companies believe there are issues with the New Generic Top Level Domain (“gTLD”) program and its rollout or needed safeguards for the internet as it transitions away from the United States, specific accountability mechanisms for the New ICANN, and the direction of the continuing issue of the GAC and geographical names, now is the time to provide feedback. Once the draft documents are finalized in Buenos Aires and later this year in Dublin, it may be too late to make further significant changes.

Reed Smith LLP is the ANA’s General Counsel.

As Congress Faces Deadline for Tax Reform, Advertisers Must Protect Ad Deduction

Posted: May 29, 2015 10:50am ET

Earlier this year, we took note of the narrow window for tax reform in 2015 as set by House Ways & Means Committee Chairman Paul Ryan (WI-1), who declared that either a tax rewrite can be completed by this summer or not at all. Now, with a marathon presidential campaign already under way and other pressing national issues taking center stage, experts agree that if a bill isn’t sketched out by Chairman Ryan’s deadline, any kind of comprehensive reform would have to wait for an entirely new Congress to commence in 2017.

At stake are the major changes necessary to overhaul our country’s current overly complex corporate-tax code. But we must also insist that these changes be improvements, and not further hindrances to economic growth.

ANA is supportive of a streamlined, revitalized corporate tax code that protects advertising as the ordinary and necessary business expense it has always been. We believe the corporate tax rate can be substantially lowered without penalizing or sacrificing the major benefits that the present treatment of advertising deductions provide the U.S. Proposals in Congress to alter this business expense deduction for advertisers by imposing a requirement that 50% of advertising be amortized over 5 or 10 years would have the exact opposite result tax reform intends – that is, it would without a doubt increase the cost of capital and impose a drag on job creation and the economy. According to a study by IHS, a highly regarded economic forecasting organization, advertising generates as many as 21.1 million jobs in the U.S. annually and multi-trillions of dollars in economic activity. Any change to the current tax deduction would severely adversely impact these numbers.  

We are building the kind of momentum necessary to ensure that advertising, both as an economic driver of sales and as a consumer resource, remains a valued component of corporate tax reform legislation. Through grassroots meetings with key senators and representatives in their home states and districts, ANA as a member of The Advertising Coalition (TAC) is working to show lawmakers that advertising needs to be protected in any new tax reform plan. TAC is comprised of media companies and national trade associations whose members are advertisers, advertising agencies, advertising clubs, broadcast networks, cable operators and program networks, and newspaper and magazine publishers. These companies and associations share a common objective—to protect advertising from initiatives by the federal government to tax or restrict the content of advertising. ANA strongly encourages our members to participate in these grassroots meetings when they take place. We can adequately protect the ad community only if our voices are heard loud and clear now.

As the deadline to reach consensus on tax reform rapidly approaches, advertisers must continue to actively work in favor of appropriate reform and achieve legislation that will ultimately lessen the regulatory burdens on business and encourage the kind of job growth the advertising industry has contributed to the U.S. economy.

Protecting One’s Brand and One’s Name

Posted: May 19, 2015 10:58am ET

The old adage goes, “sticks and stones may break my bones but names will never hurt me.” Well actually they can, as many major brandholders are increasingly learning. Imagine a company, celebrity or politician investing millions of dollars to create and promote a product or personal image, only to have an outsider attach a derogatory web suffix to that brandname and significantly damage that investment. No imagination, however, is needed; that’s just what is happening, despite the fact that ANA and others have been warning for years about the dangers of permitting this misuse of domain names.

Since the development of the Internet, the US Department of Commerce has had an agreement with the Internet Corporation for Assigned Names and Numbers (ICANN) to manage the use of domain names. Many of them are familiar to us all – .com, .net, .org. But a few years ago ICANN decided to permit the use of multiple domain names that are becoming more and more familiar – like .sucks, .xxx, .porn, .adult, .wtf and others. Incomprehensibly, at this very important juncture, the Department appears to be deciding to give up its major role in overseeing ICANN’s management of the domain process, which could occur sometime next year.

Meanwhile, ICANN has set up procedures to award domain names, and it has given the “.sucks” top-level domain to a company called Vox Populi, which is charging $249 for “.sucks” registrations. But if you want to defend yourself against someone else obtaining your brandname and registering it attached to “.sucks,” that will cost you $2,499 for what is known as a “defensive” registration. Protecting against all variations of those derogatory uses can add up.  At a hearing last week before the House Judiciary Committee, it was made clear that this is just the tip of the iceberg. Defensive registrations may have to be obtained in multiple languages in order to prevent global brand name harm.

Just ask Taylor Swift, who reportedly has purchased lots of variations for porn domains associated with her name. She wanted to get ahead of them becoming available in June, when others will be able to purchase these domain names and either cause her harm by using it or potentially attempt to extort payments from her to safeguard her image. And she’s not alone, as Kevin Spacey, Oprah Winfrey, and Microsoft (among others) also are reported to have bought their names in the “.sucks” domain. In 2011, the University of Kansas and other colleges including Michigan, Penn State, Missouri, Purdue, Pittsburgh, Carnegie Mellon and Indiana bought variations of the “.xxx” name. None of them are likely to use any of these names themselves, but they’re incurring huge expenses just to keep others from doing them harm.

At the House hearing, Rep. Blake Fahrenthold (R-Tex.) wondered about a politician’s exposure when he asked, “If I have to register blake.com, blake.net, blake.org, blake.biz, blake.us, blake.sucks, you know, where does it stop?” Clearly, the ever-growing list of potential Presidential aspirants also will be faced with these issues. Indeed, brandowners and others increasingly will be asking that question unless U.S. plans to surrender involvement in ICANN oversight are slowed and adequate safeguards are put in place to prevent just such financial hold-ups.

Shakespeare’s Romeo and Juliet asks, “What’s in a name?” Brandholders are learning that hundreds of thousands of wasted dollars in defensive registrations are the price to avoid harm when some offensive domain names are approved by ICANN. It is critical that you join with ANA and others in communicating your concerns to the Congress, the Department of Commerce and ICANN itself before the transition occurs. 

New Study Ignores Major Strides Made under the Children’s Food and Beverage Advertising Initiative

Posted: May 13, 2015 9:00am ET

A new report by Dale Kunkel at the University of Arizona in the American Journal of Preventative Medicine totally dismisses and blatantly ignores the multi-billions of dollars spent and the multitude of proactive steps that the food and advertising community have taken to address child obesity in the U.S.

The research used in this report is inaccurate and the categories used to define healthy food for children are overly simplistic. The report’s “Go, Slow, Whoa” model to categorize food is inconsistent with the U.S. government’s standards on nutrition laid out in the Dietary Guidelines for Americans and its standard for food served to children in the School Breakfast and School Lunch programs.

Unfortunately, Kunkel’s report thoroughly disregards the important strides the Children's Food and Beverage Advertising Initiative (CFBAI) has made to combat childhood obesity over the past nine years. The CFBAI Initiative was launched in November 2006 by the Council of Better Business Bureaus to provide companies that advertise foods and beverages to children with a transparent and accountable advertising self-regulation mechanism. CFBAI is aimed at shifting the mix of advertising messages directed to children under 12 to encourage healthier dietary choices and healthy lifestyles and is the most extensive self-regulatory program ever undertaken within the food and beverage industry.  Kunkel, in assessing the program, states “How much has been accomplished?  Virtually nothing.”  In fact, there has been enormous progress with thousands of new and reformulated products that are lower in salt, fat and lower calories. Furthermore, advertising to children has been transformed with the vast majority of products advertised to kids 12 and under for healthier products.

The CFBAI program’s director, Elaine Kolish, has written a very thoughtful detailed response demonstrating how completely off target and inaccurate the Kunkel study is.

The success of CFBAI and the food and advertising community cannot be dismissed. Often in consultation with First Lady Michelle Obama, the industry has cut more than 6.4 trillion calories out of foods in just the last four years. More than 20,000 food products have been reformulated to provide healthier food options. The Federal Trade Commission, which has extensively studied food marketing to children, has commended the progress of this important initiative.

Obesity is a major problem and the food and advertising communities have been proactive in responding to help people lead healthier lives. The advertising community pledges its continued support and will work to expand the strength and momentum of the CFBAI program, which has proven so successful to date.

ANA and Broad Coalition of Groups Oppose Onerous Data Breach Bill in Illinois

Posted: May 11, 2015 4:30pm ET

Today, the ANA and a broad coalition of other groups sent a letter to the Illinois House Judiciary-Civil Committee strongly opposing the extraordinarily broad Illinois data breach bill, SB 1833. That bill will be heard by the committee on Wednesday. The bill, which has already passed the Illinois Senate, is of major concern because it includes consumer marketing information as a category for breach notification. It is particularly bad for advertisers since it would expand security breach notice obligations far beyond the notice obligations that exist in any other state, which will set an onerous precedent.

This bill could have serious, negative implications to the economic stability and success of the state of Illinois. SB 1833 would negatively impact Illinois businesses and residents. According to a recent study, the Illinois Data-Driven Marketing Economy (DDME) is responsible for over $7 billion in revenues and more than 30,000 jobs annually to the state. Creating unnecessary compliance burdens on the businesses, marketers, advertisers, nonprofits and associations that drive Illinois’s data-driven economy absent a commensurate benefit to Illinois residents is not sound public policy.

The proposal is a significant overreach because it includes language that specifically targets advertisers but also including breaches of strictly marketing data as well as a number of other categories, including geolocation data. Even greater concern arises from the bill containing no risk of harm trigger, meaning that even information that is publicly available or that creates no risk to people whose information has been breached would be cause for notification. Consumers will therefore almost certainly be bombarded with breach notifications that will not serve any valid purpose because they would not be facing any threat of harm. ANA already sent an opposition letter to the Illinois Senate focusing on these areas of concern, and we intend to send one to Illinois House members to highlight the unnecessary burdens this would place on constituencies and consumers.

The prevalence of the introduction of these sorts of proposals in state legislatures is especially disturbing because it only adds complexities to the current patchwork of 47 different and inconsistent state laws regarding data security and data breach, and steers us further away from a solid piece of federal legislation. These inconsistencies yield a very difficult and constantly shifting regulatory environment in which businesses are unable to operate successfully and impose onerous and unnecessary costs.  

The movement of this Illinois breach proposal, and the damage that it could do to an already challenging system of various rules and regulations, is why the ANA and numerous other organizations are urging Congress to pass a federal data breach law that preempts the various state rules. Otherwise, we will continue to face individual proposals for unreasonable standards, and business will continue to struggle to abide by inconsistent rules. Until federal preemption is put into place, advertisers will continue to fall victim to attacks seriously burdening companies while not providing reasonable protection for consumers.

The full letter sent to the Illinois House Judiciary-Civil Committee can be viewed here.

Attention Advertisers: Companies are Required to Comply with New DAA Mobile Guidance Starting September

Posted: May 7, 2015 3:30pm ET

Today, the Digital Advertising Alliance (DAA) announced that mobile privacy enforcement, including compliance with new guidance specific to cross-app data, precise location data and personal directory data, will begin September 1, 2015. This is especially important for major advertisers who collect and use data across sites or apps for interest-based advertising.

The DAA with the support of ANA was created to implement cross-industry, independently enforced self-regulation of online interest-based advertising and data collection across digital platforms. This past February, the DAA launched two new mobile tools for consumers: AppChoices and the DAA Consumer Choice Page for Mobile Web, which mirror the programs currently available on desktop browsers that 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. 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 that allows consumers to set their own preferences for data collection and ensures that they can confidently manage how they receive interest-based ads across the Internet.

ANA will continue to support the innovative developments of the DAA and the overarching goal to protect the privacy of consumers. These efforts improve the quality and trustworthiness of our self-regulatory system and extend important privacy safeguards for consumers.

Companies with questions regarding their compliance obligations and the enforcement process can contact the Council of Better Business Bureaus at GBarton@council.bbb.org or the Direct Marketing Association at ethics@the-dma.org, the organizations responsible for the ongoing independent oversight of the DAA Principles on browsers and now extended to the mobile space.

Look Out, FCC Privacy Regulation is on the Way

Posted: May 1, 2015 10:00am ET

On Tuesday, the FCC held a workshop to explore its role in protecting the privacy of consumers who use broadband Internet access service. This major foray into the privacy sphere has been accelerated by the FCC’s recent net neutrality rules, which have opened up the door to broadband regulation by the Commission.

At the workshop, much of the discussion revolved around how advertising technologies impact the privacy of consumers using broadband services. Many broadband providers collect data that is used for advertising purposes but also for operational reasons. It was stressed by Robert Quinn, Senior Vice President-Federal Regulatory and Chief Privacy Officer at AT&T, that advertising allows for consumers to receive services at a much lower cost than they would if advertising were taken out of the picture. Furthermore, companies like AT&T use the data collected for network maintenance and to improve the user experience.

While it is clear that broadband providers are collecting data about consumers for many purposes, the question remains; how will the government regulate these activities? Under Section 5 of the Federal Trade Commission Act, the Commission has authority to police unfair or deceptive acts or practices – including advertising. In recent years, this has included how a company handles and maintains the safety of consumer data.

However, with the FCC now becoming more active, we are seeing the potential for substantially greater conflict or regulatory overlap in this area. As was stated in a previous post to this blog, enhanced FCC participation may result in concurrent jurisdiction between the FCC and the FTC, or even total FCC preemption of FTC regulatory authority in some areas.

ANA will continue to actively monitor new developments at the FCC as the developing increased regulation of broadband will clearly have large implications for advertisers. As was seen at this workshop, advertising is in the line of fire when it comes to consumer privacy, and we must work to ensure that misconceptions about the industry are not allowed to adversely influence policy and regulation. While there are major legal and legislative efforts to derail or overturn the FCC’s net neutrality efforts, for the time being at least they have created a substantially altered regulatory landscape for advertisers and the Internet.

Data Breach Bill in Illinois Threatens to Set a Dangerous Precedent

Posted: Apr 23, 2015 12:00am ET

Yesterday, a very troubling data breach bill was passed out of the Illinois State Senate and advanced to the House chamber. The bill, SB 1833, is especially bad for advertisers as it would greatly expand security breach notice obligations in Illinois far beyond notice obligations in any other state and would include breaches of strictly marketing data as well as many other categories, including geolocation data. Furthermore, the bill contains no risk of harm trigger. This means that even information that is already publicly available or that creates no risk to state residents whose information has been breached would be cause for notification. ANA has already sent an opposition letter to the Illinois Senate and will also be sending one to House members. We strongly encourage advertisers with a presence in Illinois to contact the Illinois legislature to let them know what an unnecessary burden this bill creates.

Bills like SB 1833 are becoming more prevalent in state legislatures as the states attempt to create their own powerful privacy regimes in the absence of federal legislation. Currently, the patchwork of 47 (with Alabama slated to institute the 48th) different state laws regarding data security and data breach have created a very difficult, inconsistent, and constantly shifting regulatory environment for businesses throughout the country.

As advertisers, we must work hard to ensure bills such as SB 1833 do not become law, instituting requirements that are overbroad and unnecessarily burdensome for companies. If SB 1833 does become law, it will set a dangerous precedent for other states around the country. Ideas that appear in one state very quickly spread to the others, meaning that one bad bill could be multiplied substantially in just a few years.  

The extraordinarily overbroad Illinois breach proposal is one more poster-child for why ANA is strongly urging Congress to pass a federal data breach law that preempts the expanding patchwork of state breach laws. Without federal preemption, we will continue to need to fight ever-changing attempts to put in place unreasonable standards. Until federal preemption is put into place, advertisers will continue to fall victim to attacks seriously burdening companies while not providing reasonable protection for consumers.

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About This Blog

Penned by Dan Jaffe, the ANA's group executive vice president of government relations, this blog focuses on advocacy initiatives and key legal/regulatory issues that threaten national advertisers' freedom of commercial speech.