Regulatory Rumblings

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.

Key Congressional Leaders Strongly Question Proposed Food Ad Guidelines

Posted: Sep 13, 2011 3:00pm ET

An important letter was sent yesterday to the heads of the Department of Health and Human Services (HHS), the Department of Agriculture (USDA) and the Federal Trade Commission (FTC) on the Interagency Working Group on Food Marketed to Children’s (IWG) proposed guidelines for food marketed to children.  This letter, from House Energy and Commerce Committee Chairman Fred Upton (R-MI) and signed by 21 other House members, including three subcommittee chairs, seeks a number of long-overdue answers from the IWG.

The letter notes that the initial request from Congress required a “study” of the issue, and not recommendations directed to industry. Chairman Upton and his colleagues called the proposed recommendations formulated without the benefit of a study “little better than a shot in the dark.”  The letter notes the profound problems with the guidelines as devised by the IWG – including the difficulties of reformulating products to meet the guidelines, the broad definition of “directed to children” and what marketing activities are covered.  In addition, the letter notes that there is no evidence that the guidelines would help reduce childhood obesity.  It also highlights the misnomer of labeling these proposals as “voluntary” in light of the fact that they have the weight of the government behind them.

The 22 signers strongly called on the agencies to withdraw the proposal and conduct the study as required by Congress.  The letter concludes with 10 detailed, pointed questions to the IWG, demanding answers by September 27th.  These questions seek more information on whether the study to Congress will be completed, how the guidelines were devised, what evidence there is the guidelines would reduce childhood obesity, the costs to industry and to the economy the guidelines would impose, and whether any alternatives were considered. 

ANA, other sister associations and many representatives from the food, beverage and restaurant communities have been highlighting these concerns with policymakers on Capitol Hill since the guidelines were released in late April.  We are encouraged that Congress is asking these critical questions of the IWG and requesting that it conduct a study before issuing any recommendations.  This letter is especially important since the House Energy and Commerce Committee has significant oversight authority over the actions of the FTC, FDA, and CDC.  We hope the Committee can convince the agencies to reconsider their sweeping, overly restrictive and misguided proposal. 

TRUTH in Labeling – Voluntarism Unmasked

Posted: Jul 20, 2011 9:00am ET

Last Thursday (July 14th 2011), the FTC ended its comment period on the Interagency Working Group’s (IWG) proposed principles for Food Marketing to Children.  Comments flooded in from virtually every segment of the food, beverage, restaurant and advertising communities. They forcefully pierced the façade that these “proposals” are anything other than thinly disguised government ultimatums, despite being labeled “voluntary” by the IWG.

The IWG is made up of representatives from the Federal Trade Commission, the United States Department of Agriculture, the Food and Drug Administration and the Center for Disease Control and Prevention. They have called on industry to cease advertising to anyone under 18 years of age, any foods, beverages or restaurant meals that don’t meet their extraordinarily stringent criteria for sodium, fats, or sugar.  Products like wheat bread, most yogurts, peanut butter, and even 2% milk would violate the standards.  In fact, this proposal wipes out virtually all food, beverage and restaurant products presently advertised on broadcast, cable and in many other media to those under 18.  It would adversely affect more than 1,700 programs on broadcasting and cable alone.

And it would all be for nothing.  Many commentators to the IWG noted the utter lack of any analysis in the Interagency Working Group’s proposals to demonstrate that if they were followed absolutely to the letter that there would be any material positive impact on obesity in the US for children or the general public.

The costs, however, would be all too real.  IHS Global Insight, a noted economic research group whose report was submitted to the IWG, emphasizes that if these proposed guidelines were put into effect in 2011,  74,000 jobs would be lost, resulting in an adverse economic impact in the US  of $28.3 billion.  The report concludes that these damaging economic impacts would continue to climb steeply from 2011 to 2015, with cumulative lost sales rising to over $152 billion.

But David Vladeck, the Director of the Bureau of Consumer Protection, has already stated in a recent blog, however, that these charges by the business community are simply “overly caffeinated.” According to Vladeck, everyone should relax because these proposals are merely “voluntary” and “provide no basis for law enforcement action by the FTC or any of the other agencies participating in the Group.”  Several other consumer activist organizations have chimed in to support this view.

However, a growing drumbeat of critics has placed a bright spotlight on this issue.  They have strongly demonstrated that the velvet glove of alleged “voluntarism” cannot hide the federal government’s coercive authority once key components of that government have stated clearly how highly regulated industries should respond to carefully defined nutrition standards. 

Kathleen Sullivan, the Stanley Morrison Professor of Law and former Dean of Stanford Law School, for example, in a submission presented to the IWG wrote:

The food marketing ‘guidelines’ cannot escape full First Amendment analysis merely because they are styled as ‘voluntary.’  A set of ‘guidelines’  issued by a group  of regulatory agencies with enormous regulatory and investigatory power over the food and media industries that are subject to those guidelines is the functional equivalent of government action, and companies may not be required to surrender free speech protections in exchange for the ‘benefit’ that government refrains from regulating them directly. (Kathleen Sullivan, Appendix A of Viacom Comments Submitted to the IWG, p. 2)

Professor Sullivan further notes that “Government action undertaken with the purpose and predictable effect of curbing truthful speech is de facto regulation and triggers the same First Amendment concerns raised by overt regulation” and that the Supreme Court has long held that such efforts are unconstitutional “even where the mode of censorship is informal and even where the acceptance of the speech restrictive conditions is nominally voluntary. “ (Ibid, p. 27). 

Professor Sullivan concludes that the IWG proposals “thus constitute an impermissible effort to substitute state censorship for parental control.” 

Martin Redish, Louis and Harriet Ancel Professor of Law and Public Policy at Nortwestern University School of Law, and a nationally regarded Constitutional law expert, has stated that the fact that the IWG proposals “are labeled ‘voluntary’ in no way camouflages their inherently coercive nature.  The force of powerful governmental agencies stands behind them, fortified by the explicit threat of mandatory regulations should voluntary compliance measures prove unsuccessful.  Government may not achieve through indirection what it is not constitutionally authorized to impose directly” (Redish, pp. 26-27).

Bruce Fein, the Associate Deputy Attorney General and General Counsel to the FCC during the Reagan administration, also has weighed in on the IWG “voluntarism” issue in the Huffington Post in an article entitled “Voluntary by Command.”  Fein forcefully maintains that “In substance, the IWG has delivered an ultimatum to the food industry: either reformulate …or cease promotion on TV, radio, websites”.  Fein points out that the enormous array of covert and overt powers that the Interagency Working Group wields “make industry compliance with the guidelines no more voluntary than yielding a wallet to a highwayman.”

The Wall Street Journal in an editorial entitled “Not So Grrreat!” (July 8, 2011) also pointed out that enforcement of clearly defined sweeping nutrition standards by the four powerful agencies of the Interagency Working Group does not have to be solely enforced whether, covertly or overtly, by the IWG.   As the Journal notes the “[IWG] doesn’t have to.  That job will be cheerfully assumed by consumer activists and their allies in the plaintiffs’ bar.”

Furthermore, as ANA’s own filing emphasizes the IWG can hope to carry out its censorship of advertising indirectly through pressuring broadcasters to refuse to accept ads that fail to meet the radically restrictive IWG nutrition standards. Under the Federal Communications Act, broadcast licenses are based on whether licensees are operating in the “public interest.”   Station owners clearly would have to fear attacks on their licenses by the FCC and activist groups if they failed to enforce bans on foods, beverages and restaurant offerings that do not meet the IWG food marketing standards.

Finally, and most tellingly, the lack of voluntarism of the IWG proposals is demonstrated by the overwhelming number of organizations representing the food, beverage, restaurant, media and advertising groups all attesting to the fact that they believe that these highly detailed, all encompassing, overly restrictive proposals will be treated as de facto government mandates rather than mere governmental recommendations by their members. 

To attempt to dismiss these concerns as merely “caffeinated” political hyperventilation by the business community, completely belittles and ignores the enormous economic stakes involved.  In light of the billions of dollars of potential adverse impacts and lack of evidence that the IWG proposals will provide material positive benefits to society, these counterproductive and insufficiently considered proposals should be withdrawn.

Regulatory Supersizing

Posted: Jul 5, 2011 11:30am ET

David Vladeck, the Federal Trade Commission’s Director of the Bureau of Consumer Protection, in a parting shot before the Fourth of July, released a blog post entitled “What’s on the table.”  The blog mocks, disparages, deprecates and dismisses a broad range of serious issues raised by the business community concerning the Interagency Working Group’s (IWG) Proposal on Food Marketed to Children.  The IWG, by the way, is made up of four powerful Federal Agencies: the FTC, the US Department of Agriculture (USDA), the Food and Drug Administration (FDA) and the Centers for Disease Control and Prevention (CDC).

This blog, unfortunately, is extremely disappointing.  By simply labeling the wide range of issues outlined by a broad cross-section of the advertising, media, food, beverage and restaurant communities as “myths,” it signals a striking unwillingness to seriously examine the growing critique of the IWG’s food and marketing recommendations.

The IWG proposal itself makes clear, however, how much is really at stake.  The proposal states that, “The Working Group recognizes that if the proposed nutrition principles were fully implemented by industry a large percentage of food products currently in the marketplace would not meet the principles.”  In fact, of the 100 most advertised food and beverage products in the US, 88 of them would fail to meet the IWG’s proposed nutrition standards.  Bananas, grapes, broccoli and a few other similar fruits and vegetables would be the only food products to make the cut.

The proposal, in a major understatement, notes that efforts to reformulate products to meet the nutritional goals might present “technical difficulties and challenges in maintaining the palatability and consumer acceptance of the product.” Stripped of bureaucratic legalese, this means that the IWG proposals are calling on industry to eliminate virtually all existing food, beverage and restaurant advertising directed to those under 18 years of age. 

During this extremely difficult economic period, this proposal, if acceded to by industry, would have multibillion dollar adverse impacts in the marketplace for the media, food, beverage and restaurant communities.

But not to worry - in an excess of regulatory modesty, the blog maintains that the proposal is “voluntary,” “not a rulemaking proceeding,” and “provides no basis for law enforcement actions by the FTC or any of the other agencies participating in the Group.”  This is a classic example of attempting to deflect criticism of government action and overreaching by claiming that it is so inconsequential as not to be of any concern.

This “Inconsequentiality Defense,” however, falls apart under even the slightest examination.  The four agencies of the Working Group have authority over virtually every aspect of the growing, marketing, labeling and advertising process that is fundamental to the health and well-being of the food, beverage, restaurant and advertising communities. The highly technical, restrictive and detailed IWG proposal was the product of a more than 23 month effort by an interagency task force.

The proposal explicitly states that it covers all media and virtually every theoretical type of marketing from product placement in movies, to point of purchase displays, to word of mouth advertising, to charitable and sporting activities.  In fact, after describing 19 other marketing categories to be covered by the IWG proposals, the final marketing category listed is “other.”

Most significantly, the proposal claims that while its goals are “ambitious” they are “warranted by the urgent need to improve children’s diet and health and address the epidemic of childhood obesity.”   Is it at all plausible under these circumstances that publicly held companies are not having a regulatory “Sword of Damocles” dangled over their head if they fail to “voluntarily” accept the IWG’s stringent marketing proposals?  Could they simply ignore these proposals without fear of government retribution?

Certainly, Martin Redish, a renowned constitutional scholar and law professor at Northwestern University, doesn’t think so.  Redish notes, “Simply as a matter of common sense it is all but inconceivable that the  federal government would incur the burdens and expense involved in establishing the Interagency Working Group and preparing the advertising regulations only  to have the food industry summarily ignore them.”  Redish then concludes, “The voluntary nature of the regulations is therefore appropriately deemed to be nothing more than a precursor to coercive enforcement in the event that the industry fails to comply.”

Therefore, labeling the IWG program as “voluntary” certainly should be considered a violation of truth in labeling laws.  Furthermore, if broadcasters accepted ads for foods, beverages or restaurant offerings that did not meet the IWG standards they would obviously open themselves up to facing challenges to their station licenses for failure, as is required under the Federal Communications Act, to operate in “the public interest.”

Finally, the blog fails to discuss, and barely acknowledges, the most glaring problem with the IWG proposal, which is its failure, despite Congress’ direction for them to do so, to relate or analyze the relationship of their proposals to preventing obesity among children and teens.  While the costs of acceding to the IWG mandates, as already noted, would be in the multibillions of dollars, the proposal is strikingly silent on any estimate of the benefits that the proposal would purportedly provide.

For all of these reasons, the ANA is calling on the IWG to withdraw its proposal as counterproductive, potentially seriously economically damaging and not responsive to Congress’ direction to the Interagency Working Group to focus on the evidence on how to combat obesity among our children in the United States.

<< 123456 >>

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.