Regulatory Rumblings

FTC Commissioner Ohlhausen Applauds Industry’s Successful Self-Regulation Privacy Program

Posted: Jun 11, 2013 10:45am ET

Last week, technology and policy leaders from across the country gathered in Washington for a Summit to discuss the role of effective self-regulation in ensuring the future of advertising-supported Internet content. Convened by the Digital Advertising Alliance (DAA), of which the ANA is a member, the Summit largely focused on enhancing transparency and ensuring that consumers are aware of the choices they have with respect to the manner in which they receive advertising.

During the Summit, the industry’s efforts were recognized by U.S. Federal Trade Commission (FTC) Commissioner Maureen K. Ohlhausen, who applauded the industry for its privacy opt-out program, which she said has “been one of the success stories in the space.”

She noted that the industry has moved quickly to meet privacy challenges and alleviate the concerns of Internet users who have become increasingly concerned about their online privacy. Ohlhausen called the Advertising Option Icon, the icon that consumers can click to easily find information about interest-based advertising, “an innovative way to reach consumers about their privacy options.”

In her remarks, she said that self-regulation works best when it is supported by compliance and tough enforcement and recognized DAA for “making enforceability a reality.” She was encouraged by DAA’s work to ensure that “companies live up to the promises they make” and help correct issues before they become serious problems for consumers. Already the enforcement arm of the DAA self-regulatory program has successfully finalized 19 cases.

Ohlhausen further remarked that she does not see a present need for Congress to pass new laws to protect consumer’s Internet privacy. She stated that she believed the FTC’s Section 5 false, deceptive, and unfair acts or practices authority was sufficient to regulate the marketplace. It is clear that DAA’s self-regulatory program that provides consumers with broad choice and control over how and whether they receive interest-based advertising is working.

The industry is constantly striving to adapt and keep up with the fast moving technology landscape. To that end, DAA will soon release guidelines for the use of advertising on mobile devices, another area of broad discussion at the Summit. These new guidelines will no doubt be a game changer for the industry and mobile users alike.

Finally, there were important panels at the DAA Summit on the key role Online Behavioral Advertising was playing in helping to create a more efficient, effective, and relevant Internet. Additionally, a panel on Internet self-regulatory efforts described how the DAA program has now been established in almost 30 countries. Clearly, the DAA has had an extraordinary reach in its less than 3 year existence.

ICANN Fails to Address Key Concerns About New Top Level Domain Names

Posted: May 16, 2013 1:35pm ET

ICANN (the Internet Corporation for Assigned Names and Numbers) in late April announced that it would push back the date of the rollout of as many as 1,400 new Top Level Domain (gTLD) web site suffixes. It did so to address the numerous concerns raised by many organizations, including law enforcement agencies and its own Governmental Advisory Committee (GAC), which have called attention to the significant threat these new general top level domain names (TLDs) could pose to brands and consumer protections without adequate protective mechanisms being put in place. Unfortunately, ICANN continues to fall short of truly addressing these concerns as the new web site suffixes have now precipitously been rescheduled to roll out in June and to begin to be put into the root system of the Internet beginning in August.

The Association of National Advertisers (ANA), representing the interests of major global advertisers, along with major companies like Verisign and PayPal, has long expressed concerns about the rush to deploy these gTLDs before ICANN has adopted sufficient trademark and security and stability protections for consumers and brandholders.

This week, ANA filed comments with ICANN to its proposed Registrar Accreditation Agreements (RAA). ANA recommends that in order to ensure that ICANN can manage registrations for TLDs effectively, the organization must finalize the accreditation agreements with registrars that will manage the domain names before any new gTLD contracts are approved and hold these registrars responsible for applicants complying with the RAA. In addition, we remain very concerned that ICANN’s compliance department still hasn’t been augmented sufficiently or that fully automated systems have been put in place to meet the expected increased compliance demands creating serious potential gaps in enforcement. 

ICANN’s premature launch of gTLDs will also increase the threat of cybersquatting and phishing, among many other potential cybercrime threats that jeopardize brand and consumer protections.  The law enforcement community has made several important recommendations to ICANN, including more robust verification of WHOIS information. These are highly valid concerns and it would be seriously premature for ICANN to rush ahead before fully heeding these warnings from law enforcement.

ANA also filed comments this week regarding the GAC advice given to ICANN in the Communiqué delivered at ICANN’s Beijing meeting last month.  ANA called on ICANN in particular to reconsider its earlier decision that allows for the singular and plural forms of suffixes (e.g., “.coupon” and “.coupons,” and “.auto” and “autos.”), which ICANN so far seems to believe will somehow not confuse consumers. It is unquestionable that consumers will find it difficult to identify the difference between these website when they are searching for suffixes that are practically identical. These virtually identical suffixes could lead enterprising applicants to apply for the plural (or singular) forms of popular TLDs intending to mislead or otherwise harm consumers.

In addition, ICANN continues to adhere to an overly aggressive timetable with regard to the public comment period regarding the GAC Advice and thereby has not provided adequate time to satisfactorily respond to all the important public interest issues raised.  Furthermore, we believe that the concerns raised by Verisign and PayPal about the potential clash between internal and external TLDs are profoundly serious and must be satisfactorily addressed before the roll out, if we do not want to create major increased cybercrime threats to the Internet.  

It is clear that ICANN has not taken the necessary steps to protect Internet users. The Internet is too valuable and important to consumers, brandholders and the global economy for ICANN not to address the issues raised. ANA urges ICANN to extend the time to truly consider these concerns before rolling out these TLDs that could permanently change the face of the Internet.

ANA Files Comments on ICANN Governmental Advisory Committee (GAC) Communiqué

Posted: May 14, 2013 4:00pm ET

Today, ANA filed detailed comments on the Governmental Advisory Committee (GAC) Communiqué, supporting most of its proposals. ANA particularly noted that ICANN should reconsider its earlier decisions in regard to singular and plural forms of generic Top Level Domain strings (e.g. .COUPON and .COUPONS). ANA pointed out that ICANN's timetable to consider the comments in regard to the GAC Advice was overly aggressive and fails to provide adequate time to satisfactorily respond to the public interest issues that have been raised.

ANA Files Comments on ICANN’s Proposed New Registrar Accreditation Agreements

Posted: May 13, 2013 4:50pm ET

ANA has filed comments with ICANN in regard to its proposed new Registrar Accreditation Agreements (RAA). The RAA is the agreement that ICANN has with operators of Top Level Domains. In particular, we pointed out that a strong compliance process must be an integral part of the new RAA program for these changes to provide effective protection on the Internet. The comments can be found here.

The Tax Fight Is Not Over

Posted: Apr 12, 2013 10:55am ET

In recent weeks, advertisers have seen some important positive developments in regard to state ad tax proposals. A number of major state tax reform proposals that imposed major burdens on advertisers have been revamped or scrapped. In early March, Minnesota Governor Mark Dayton announced that he was backing off from his plan to expand the state sales tax to most business services. A sales tax on advertising had been included in his original proposal.

Earlier this week, Louisiana Governor Bobby Jindal (who had proposed eliminating the state income tax, raising the sales tax, and expanding the sales tax to a number of services including ad agency services) said he would defer tax reform initiatives to the state legislature rather than pushing his own proposal. Jindal’s proposals had been receiving significant political flack and criticism before he backed away. And on Tuesday, the Ohio House of Representatives stripped Governor John Kasich’s plan to expand the state’s sales tax to cover almost all business services, including advertising, out of its budget bill.

The threat, however, is far from over. Governor Jindal has told the state legislature that he expects a tax proposal to phase out the state income tax. Should the legislature accept this challenge, inevitably they will have to look elsewhere to fill the revenue gap. Advertisers, therefore, could still find themselves in the line of fire. Also, in Ohio, the Senate has not yet come forward with a plan.

And then there is the Congress. The House Ways and Means Committee (the House tax writing committee) has divided its membership into eleven working groups, which have been tasked with reviewing current tax laws. On Monday, Senate Finance Committee Chairman Max Baucus (D-MT) and House Ways and Means Committee Chairman Dave Camp (R-MI) co-authored an article in the Wall Street Journal saying that tax reform was “alive and doable” and said they would look to close “tax loopholes.”

The real crunch will come when the Congress tries to determine what qualifies as a “loophole.” We have heard from various sources on the Hill that “everyone will have to be ready to give something.” In the past, too often we have seen advertising looked to as a potential source for new revenue. These tax proposals have been targeted at both specific so-called “controversial categories,” as well as on an across-the-board basis.

To respond, we have been proactively meeting broadly with Hill leadership. In doing so, we are relying on a major study carried out by the noted economic research group IHS Global Insight. That study demonstrates that advertising is responsible for $4.1 trillion in economic output and directly supports more than 15 million jobs in the United States annually.

Advertising, throughout the existence of the U.S. income tax code, always has been treated as an ordinary and necessary business expense. It has never been treated as an exception to or a special provision of the tax code. When business is still struggling to bounce back from the long economic downturn, now is certainly not the time to place additional tax burdens on advertising, one of the major economic engines of our economy!

Train Wreck Ahead: National Advertisers, PayPal, and Verisign Point to Major Internet Dangers

Posted: Apr 2, 2013 1:40pm ET

The start of the new month marks the final countdown to the impending deployment of potentially more than 1,400 new web site suffixes, which according to Verisign, PayPal, and other major companies poses significant threats to brands and consumer protections. On April 23, ICANN (the Internet Corporation for Assigned Names and Numbers) will launch new generic top level domain names (gTLDs). This date was set totally arbitrarily by Fadi Chehadé, the CEO of ICANN, and it is now apparent that preparations for this deployment are woefully inadequate.

Verisign (the largest domain provider, which stands to benefit financially from the gTLD deployment) and PayPal (the leading global online payment processor that is continually subject to Internet fraud issues) are the latest major companies to warn that extremely serious Internet security and stability issues will be significantly heightened with the introduction of the new web domains. (See: Verisign white paper and PayPal Letter).

The Association of National Advertisers (ANA), representing the interests of major global advertisers, has long expressed its concerns about the rush to deploy these gTLDs before ICANN has adopted sufficient protections for consumers and brandholders.

One of the greatest concerns is ICANN’s failure to release specifications regarding its Trademark Clearinghouse (TMCH).  Verisign stated, for example,  that the “absence of any clear commitment for when the specifications and the TMCH will be available for integration testing and when it will be live precludes organizations from proceeding with planning, scheduling, development and normal business planning and associated communications with customers." Without this information, organizations are unable to integrate their operations with ICANN’s system, and their millions of customers are the ones who will face harm.  In another area, internal company intranet certifications have been issued for .corp, .mail, and other domains, which are expected to mirror the names of many new TLDs.  VeriSign and PayPal have identified that name clashes could occur between external new gTLD name requests and existing internal company operations.   Clearly, the implications would be very serious if hackers tried to interrupt corporate communications from companies that serve critical functions (such as defense contractors, financial services, and public utilities).  

Nevertheless, ICANN moves relentlessly forward toward the April 23rd launch date, while ignoring the concerns voiced by those within and outside ICANN’s own operations.  To date, Fadi Chehadé continues to publicly dismiss concerns raised by industry experts. He has suggested that these concerns have been “discussed at length.”  But that’s like the Captain of the Titanic before the crash saying that the dangers of icebergs had been discussed for years.  Until clear answers are forthcoming that detail how ICANN intends to avoid the dangers spotlighted in these reports, launching the program would be ill-advised, and even reckless. Ultimately, ICANN’s premature launch of gTLDs will yield cybersquatting and phishing, among many other cybercrime threats that jeopardize brand and consumer protections. Adequate steps have not been taken to protect Internet users, and we are headed toward uncharted waters with major danger to consumers, brandholders, and the Internet itself.  The only prudent action for ICANN now is to delay this arbitrary domain name roll-out until it has fixed these very serious problems.

Privacy Remains Under Focus

Posted: Mar 4, 2013 3:35pm ET

Two months into 2013, it appears that online privacy will remain a topic of discussion for regulators and legislators at both the federal and state levels. Senate Commerce Committee Chairman Jay Rockefeller has just re-introduced his bill calling for the FTC to create regulations for a Do-Not-Track regime, “The Do Not Track Online Act of 2013.” Senator Rockefeller has been a long-time critic of Online Behavioral Advertising (OBA) and industry self-regulatory efforts.

In January, California’s Attorney General Kamala Harris issued a set of recommendations for privacy on mobile devices. Maryland Attorney General Doug Gansler, who is also the current president of the National Association of Attorneys General (NAAG), announced the creation of a new unit in his office dedicated to protecting online privacy and will be holding a major conference on this issue in April.

In the face of this heated political environment, the Online Behavioral Advertising efforts of the ad community continue to accelerate significantly. Since its launch in October 2010, the Digital Advertising Alliance’s (DAA) Self-Regulatory Program for Online Behavioral Advertising has grown enormously. The DAA’s Advertising Icon is now served on more than a trillion ads per month. In January 2012, a site dedicated to educational efforts was launched by the DAA at www.youradchoices.com. Consumers can also decide to opt out of receiving OBA at www.aboutads.info on an across-the-board basis, or specifically from individual companies. More than 13.5 million consumers have visited www.youradchoices.com since its launch, and nearly one million have invoked the OBA opt-out mechanism at www.aboutads.info since its launch in October 2010.

The Alliance’s efforts were recognized in 2012 by both the White House and outgoing FTC Chairman Jon Leibowitz. However, the recent actions in Congress and at the state level suggest that this area will remain one of key importance for advertisers this year.

This issue will be discussed in depth at ANA’s upcoming Advertising Law & Public Policy Conference in Washington at the Four Seasons Hotel on March 19th-20th, where Attorney General Gansler will be a keynote speaker. Other noted speakers at the conference who have been highly active in the privacy area include Senator Mark Pryor (D-AR) and FTC Commissioner Julie Brill.

ANA Writes to ICANN on RPMs

Posted: Feb 28, 2013 3:10pm ET

We sent a letter to the ICANN board of directors today urging them adopt significant rights protection mechanisms (RPMs) for new generic top-level domains before the new TLDs are activated. Our letter emphasizes the strong support of the Limited Preventative Registration proposal that ANA and numerous other groups put forward, with 66 organizations filing comments to ICANN urging it to adopt the Limited Preventative Registration (LPR) approach. 

Minnesota Ad Tax Threat Grows

Posted: Feb 25, 2013 3:30pm ET

With ad taxes still looming in Ohio, the threat in Minnesota is growing simultaneously. Governor Mark Dayton has put forward a broad tax proposal that would impose sales taxes on advertising and a broad range of business services.

This Wednesday, in the Minnesota House of Representatives, the Taxes Committee will hold a hearing on the bill that could implement these proposed changes, HF677. This bill, authored by Taxes Committee Chairman Ann Lenczewski, would lower the overall sales tax rate of the state from 6.8% to 5.5%, but substantially broaden the base of covered services. The Minnesota Department of Revenue released a report detailing the proposal last week. Newly taxed services include: advertising services, consulting services, publications, legal services, design services, and a number of others. Among those items still exempted are: medical services, food, and prescription drugs.

The Department of Revenue’s report states that services delivered to a buyer in another state (as is often the case with advertising services) will not be subjected to the tax. However, this proposal is still economically dangerous. According to IHS Global Insight, a highly regarded economic think tank, advertising is responsible for $109 billion in economic output in Minnesota (about 20.4% of the state’s economic output). Advertising supports 412,838 jobs in the state (about 15.1% of the jobs in Minnesota).

As in Ohio, the imposition of sales taxes on advertising, the driver of sales, will actually have the paradoxical effect of tending to diminish the revenue ultimately generated by broadening the sales tax base. ANA will be filing comments with the Taxes Committee. Advertisers, ad agencies, media, and similar groups should take immediate action to oppose these proposals before they gain unstoppable traction.

Trouble Brewing in the Buckeye State

Posted: Feb 15, 2013 10:00am ET

In the aftermath of the Fiscal Cliff and the looming sequester, most eyes have focused on budgetary matters in Washington.

But perhaps the most imminent threat to the advertising community can be found 400 miles west in Columbus, Ohio.  Ohio’s Republican Governor, John Kasich, has proposed to lower income tax levels in the state by as much as 20 percent for individuals and as much as 50 percent for small business owners. Governor Kasich’s plan would also lower the overall state sales tax from 5.5 percent to 5 percent.  To compensate for these lost revenues Kasich would vastly expand the types of services on which sales taxes would be imposed. Most state sales taxes, including Ohio presently, exempt business to business sales, including the purchase of advertising. Now, in Kasich’s new tax proposal, only services deemed “essential,” such as health care, would be exempted from the proposed expansion of the sales tax.

Governor Kasich is no stranger to ad taxes. As Chairman of the U.S. House of Representatives Budget Committee in 1995, then Congressman Kasich proposed to curtail the business tax deduction for advertising expenses.

Advertising is vital to the economic well-being of Ohio. According to IHS Global Insight, a highly regarded economic think tank and forecasting organization that utilizes the U.S. economic model originally created by  Nobel Laureate in Economics, Dr. Lawrence R. Klein,  advertising generates roughly $188 billion of economic output (or about 20% of Ohio’s economic output) annually. IHS Global Insight estimates that more than 758,000 jobs in Ohio are supported by advertising.

Advertisers should be monitoring this situation very closely.  Multi-millions of dollars annually could be on the line for both consumers and businesses.

And the challenge does not end with Ohio. Governor Mark Dayton of Minnesota, a Democrat, has proposed a similar idea. If these proposals are implemented in Ohio and Minnesota, other states, many of which are cash-strapped and have constitutional requirements to balance their budgets, might also look to taxing advertising as a source of revenue.  For states attempting to be more reliant on sales taxes, it seems extraordinarily short sighted and paradoxical that they would, at the very same time, consider placing additional burdens on advertising, the major engine of sales in Ohio and the rest of the United States.

Continued vigilance toward the actions of Congress and state governments will be absolutely necessary for advertisers in 2013.

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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.