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Washington Update

March 19, 2013

Executive Summary

With the re-election of President Obama, and Democrats making modest gains in Congress, there are several key issues facing marketers that continue to be debated. Dan Jaffe, group executive vice president, government relations at ANA, discussed the latest developments surrounding the planned expansion of generic top-level domain (gTLD) names by the Internet Corporation for Assigned Names and Numbers (ICANN), online privacy, and state advertising taxes.

Insights

At ANA’s Advertising Law and Public Policy Conference in March 2013, several legal issues that affect consumers and marketing industry were discussed, including trademark protection, online privacy, and advertising taxes in Ohio, Minnesota, and Louisiana.

ICANN

Advertisers are looking to ICANN to see how the organization will handle the new generic top-level domains. This is of great concern to advertisers, because Internet usage is exploding. In 2012, there were 274 million Internet users in the United States, up from 124 million in 2000. There are currently 22 generic top-level domains today, but this number is expected to increase 600 percent to nearly 1,400. Most of the new gTLDs are for generic words or terms like .bank, .inc, and .insurance, or for specific brand names or categories of goods and services. Multiple groups or companies who are seeking the same domain name may soon find themselves in bidding wars. Many of the new proposed gTLDs appear to be set up to create pressure for defensive registrations, like .wtf, .gripe, .sucks, .rip, and .sex. The recent rollout of .xxx saw hundreds of thousands of defensive registrations at the second level. New names like .cheap, .discount, and .free will most likely appeal to cyber squatters.

Recently, ICANN hired a panel to review almost 2,000 new gTLD strings to determine if any were confusingly similar. The panel identified 230 “exact match contention sets” where multiple applicants sought the exact same string and found just two “non-exact match contention sets”: “unicom” and “unicorm,” and “hoteis” and “hotels.” ICANN’s position resulting from these findings is that the singular and plural version of words such as “coupon” and “coupons,” “game” and “games,” “home” and “homes,” “hotel” and “hotels,” or “car” and “cars” aren’t confusingly similar. Brand holders fear this will only lead to an increase in defensive registration costs.

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Many in the advertising industry, including the ANA, are in favor of Limited Preventative Registration (LPR) to address the new gTLDs. However, there hasn’t been any indication that ICANN will adopt this approach. LPR would prevent the registration of exact trademark matches by anyone other than the trademark holder. Many believe this solution offers the appropriate safeguards for registrants with legitimate rights or interests across multiple domains at a reasonable cost. Sixty-six companies, including Brown Forman, Eli Lilly, the United States Postal Service, and Microsoft, are in support of LPR.

Other forms of protection include the Strawman Proposal, the Trademark Clearinghouse, Uniform Rapid Suspension (URS), and the WHOIS database. The Strawman Proposal didn’t include LPR, and would have cost brands significant amounts of money for a limited amount of effective protection. The Trademark Clearinghouse, a global repository for trademark data, began in March 2013, and it remains to be seen how effective it will be. Uniform Rapid Suspension is a new rights protection mechanism for new gTLDs. When a trademark owner files a URS complaint, the registry is supposed to immediately freeze the domain. However, those domains violating trademark rights won’t be transferred over to the rightful trademark owner. A candidate has now stepped forward to run the URS, but the critical operating procedures haven’t been finalized. The WHOIS database is intended to provide a clear record of the owners of websites, but it has traditionally been plagued with incompleteness and inaccuracies. It isn’t uncommon to see names registered to Santa Claus, Mickey Mouse, Donald Duck, and even God.

Online Privacy

There are legitimate privacy concerns from the public and the government about hacking, misuse of locational data, and other data that can cause harm (such as health information or financial data) in the wrong hands. But those types of threats need to be distinguished from online behavioral advertising (OBA), which uses anonymized data to serve up relevant ads to consumers. OBA is a critical tool for marketers to reach the right consumer at the right time with the right message. However, some consumers and policymakers believe that even anonymous interest-based advertising raises privacy concerns. In 2007, the FTC released its first set of OBA guidelines and called for strong industry self-regulation. To meet this privacy challenge, the ANA and four other industry groups established the Digital Advertising Alliance (DAA). The program’s icon alerts consumers to the fact that they have been served an ad based on OBA. From this icon, consumers can access information about OBA and are able to exercise the choice to opt out of further targeted ads from participating companies. The DAA program is based on the premise that consumers should choose whether they want to receive interest-based ads, not the government, browsers, or any other business entity.

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Microsoft has introduced a Do Not Track header to be turned on by default in Internet Explorer 10 and has begun to extend this program to earlier Internet Explorer versions. Do Not Track headers are not programs, but slogans. The claim that “this is what consumers want” is misleading. Many consumers believe that they’ll see fewer ads, but the reality is that they’ll see more un-targeted ads. Mozilla also announced plans to block third-party cookies. Blocking third-party cookies by default undermines OBA without providing any information about the benefits of receiving relevant ads.

Numerous bills have been proposed at the federal and state levels supporting Do Not Track. Senator Jay Rockefeller (D-W.Va.), the chairman of the Senate Commerce Committee, recently reintroduced his Do Not Track bill. ANA’s president, Bob Liodice, testified on behalf of the DAA at a Commerce Committee hearing on privacy issues last summer. At the hearing, Chairman Rockefeller stated that industry self-regulation can never work and that the industry cannot be trusted to regulate itself in this critical area.

State Advertising Taxes

There have been recent proposals to extend state taxes to advertising in Ohio, Minnesota, and Louisiana. In Ohio, Governor John Kasich’s budget would extend the state sales tax to advertising and other services to offset a reduction in the overall sales tax rate and the state income tax. Services “essential to modern life,” such as health care, prescription drugs, and social services, would be exempt. In Minnesota, Governor Mark Dayton had said his state would do the same, with the exception of national advertising coming into the state. However, due to pushback from local businesses and other entities, the governor has changed his mind and will drop business-to-business service taxes. In Louisiana, Governor Bobby Jindal’s budget proposal taxes advertising agency services, but not advertising time or space.

Question and Answer

Q. Can you talk about food advertising and violent media/advertising issues?

A.
We’re seeing a major effort by those who feel advertising is the driving force behind obesity in this country. In the last Congress, there was an effort by the Inter-Agency Working Group to impose strict nutritional standards that would have disallowed advertising to anyone under 18 who didn’t meet these standards. This would have wiped out most food advertising in this country, but we were able to block the proposal. Now, the Inter-Agency Working Group is saying manufacturers are creating food that’s so delicious that people are becoming addicted and, as a result, advertising needs to be restricted because people won’t be able to control themselves. I don’t believe this issue will go away until obesity decreases.

As for the violence issue, after the Newtown shootings, the National Rifle Association and other groups said that there was a need to restrict violent media, not guns. Senator Rockefeller has put forth a proposal for the National Academy of Science to study this issue further.

Q. What advice do you have for companies regarding the gTLD issue?

A. All companies should find out where their organizations stand on the gTLD issue so they know how to respond as the new gTLDs roll out.  

Q. Given the changes at the Federal Trade Commission (FTC), do you think the focus of the organization will shift?

A. I don’t think it will change dramatically. I think the issue of privacy will be a primary focus for the new chairman, since more things in our lives are becoming “smart” and are tracking what we’re doing.

Source

“Washington Update.” Dan Jaffe, Group Executive Vice President, Government Relations at ANA. ANA Advertising Law & Public Policy Conference, 03/19/13.

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