Regulatory Rumblings
New ANA Survey Shows Importance of Native Advertising’s Legal Landscape
Posted: Jan 30, 2015 12:00am ET
A new ANA survey, which was just released, provides the marketers’ perspective on the increasingly popular method of native advertising. With native advertising, advertisers position their message in the context of the user's experience. The “Advertising Is Going Native” survey of 127 client-side marketers, which took place in the 4th quarter of 2014, examined marketers’ native advertising, utilization, budgeting, interior and exterior implementation, measurement processes, and importantly the perspective on disclosure and ethics issues.
There were several key findings from the study. Budgets for native advertising are increasing – but measurement remains a challenge. Additionally, disclosure and ethics are key issues for marketers with three-fourths of respondents reporting an ethical boundary for the advertising industry when it comes to native advertising.
The legal landscape of native advertising is vitally important for all marketers to understand. Legal perspectives on commercial speech and disclosures will be explained at the ANA's Advertising Law & Public Policy Conference from March 31-April 1 in Washington D.C. Leading the conversation will be John P. Feldman, a partner at Reed Smith LLP and Laura M. Sullivan, Staff Attorney in the Division of Advertising Practices of the Federal Trade Commission. We strongly encourage you to register for the conference to learn more about this important issue along with many other pressing legal and political topics for marketers.
Top Issue of Early 2015: Privacy and Data Security
Posted: Jan 28, 2015 12:00am ET
There is now no question that, as we earlier predicted in this blog, data security and privacy are the preeminent issues in the minds of many in Congress, at federal agencies, in state legislatures, and in the media one month into 2015. With the release of a new FTC Internet of Things report and a lively hearing on data security legislation taking place just yesterday, it is clear that this area has heated up substantially.
In honor of today’s Data Privacy Day, here are two important privacy and data security developments that ANA is actively monitoring.
Reps. Marsha Blackburn (R-TN) and Peter Welch (D-VT) are working on a privacy bill that they plan to introduce in the coming weeks. According to Blackburn, the aim of the bill is to outline “the responsibility that retailers have to educate consumers on how to protect their data.” The sponsors state that they have the support of Energy and Commerce Committee Chairman Fred Upton and Rep. Michael Burgess, head of the committee’s panel on commerce, manufacturing, and trade. ANA is watching closely for this bill in order to determine what implications it could have for advertisers.
Also, Sen. John Thune (R-SD), the new chairman of the Senate Committee on Commerce, Science, and Transportation, announced a full committee hearing on the Internet of Things to take place on Wednesday, February 11, 2015. This hearing will focus on how devices will be made smarter and more dynamic through Internet technologies and will most likely provide a follow-up to the recently released FTC report. Chairman Thune stated, “Standing on the cusp of technological innovations that will improve both the safety and convenience of everyday items, we shouldn’t let government needlessly slow the pace of new development. By engaging early in this debate, Congress can ensure that any government efforts to protect consumers are tailored for actual problems and avoid regulatory overreach." This statement from Chairman Thune signals a growing effort in the Congress to balance carefully the need to foster the continued explosive growth of Internet and mobile innovation fueled by more effective use of data and targeted marketing with the continued need for strong privacy protection. The ANA through the Digital Advertising Alliance, working with our association partners, is diligently attempting to see that consumers’ privacy needs are being protected in the new marketing universe.
These House and Senate initiatives are just two of several significant initiatives happening right now in the privacy arena. As these and other new developments become more concrete, we will update members and fight to ensure that advertising can continue to serve consumers in an efficient, personalized, and safe manner.
ANA Opposes Proposals to Expand the Definition of Children’s Advertising
Posted: Jan 26, 2015 12:00am ET
A panel of experts brought together by Healthy Eating Research, a program of the Robert Wood Johnson Foundation, recently issued recommendations for company policies on food marketing aimed at children. The recommendations suggest that children 14 and younger should be covered by company policies, expanding substantially the current cutoff of children 12 and under, which is the age to which most companies’ children’s marketing policies apply. The recommendations also say that audiences of a media program or venue be considered child-directed if children make up 25 percent of the audience or more, as opposed to the 35 percent threshold typically used by companies with food marketing policies. The panel also recommends that brands marketed to children should only contain products that meet a specific nutrition criteria.
The recommendations are designed to fill so-called “gaps” in the Children’s Food and Beverage Advertising Initiative (CFBAI) self-regulatory program. The program has brought together 17 participants that represent about 80% of child-directed TV food advertising, including several ANA members. In response to these new recommendations, CFBAI and Children’s Advertising Review Unit (CARU) of the Council of Better Business Bureaus issued a statement addressing the successes of the program and highlighting the robust, highly-regarded self-regulation that has significantly improved the children’s food marketing landscape. The FTC, for example, has been very laudatory of the CFBAI’s efforts.
ANA believes that it is inappropriate to expand substantially the age where kids are treated as children needing special advertising protection from under 12 to 14 and under. Also, ANA believes that this proposal coupled with the effort to treat advertising where as little as 25 percent of the audience is under 14 years of age as “directed to children” is clearly misguided and will undermine efforts to advertise to adults. It is clearly misleading to claim that children are being targeted by advertising where as much as 75 percent of an audience is not made up of children. No advertiser is going to buy time where the vast preponderance of the audience are not young children in order to “target them.” This proposal is both logically and factually inaccurate and should not be supported.
CFBAI has administered a successful, voluntary program for the nation’s leading food and beverage companies since 2007. Its program ensures that only foods that meet meaningful nutrition criteria are in advertising primarily directed to children under age 12. The CFBAI’s Core Principles work extremely well to protect the interests of children and have been widely emulated around the world. ANA strongly supports the efforts of CFBAI and will continue working to combat the dangers of childhood obesity and provide healthy options for consumers.
Recent ICANN Developments Continue to Raise Issues in the New Year
Posted: Jan 23, 2015 12:00am ET
By Clark W. Lackert, Reed Smith LLP
Just as ICANN plans for the dual challenges of IANA Transition and Accountability in 2015, we should not forget that we are still in the midst of Round 1 implementation, and its aftermath. How implementation is proceeding is critical to brand owners and advertisers who are tasked with protecting their intellectual property on the internet.
A good example of how Round 1 is actually being implemented is the now infamous press release last month concerning the removal of domain names from a collision list for the “.xyz” registry. Last December, XYZ issued a press release advising that “…almost 20,000 names will be available for the first time” and that “amongst these new names are thousands of short, marketable keyword domain names including rare three letter and three number .xyz domains, as well as trademarked names such as Nike, Hulu, Netflix, Skype, Pepsi, Audi, and Deloitte”. Many in the trademark and domain name communities immediately viewed this as an announcement which could be misunderstood by the public and domainers as making these trademarks available to the public as domain names, inviting blatant cybersquatting. Of course, protected trademarks are not “available” to any and all comers, but rather should be registered only by the proper brand owners. Although the registry does not take responsibility for policing these new registrations, brand owners and advertisers need to be constantly on guard. After the public outcry, this press release was withdrawn. This example illustrates the importance of policing of brands in the new gTLD registries, which now number over 400. Best practices dictate at least a minimal surveillance program for major brands in the domain name space, with prioritized enforcement action needed, including online arbitration actions where appropriate. Most brand owners take action against major infringements in major markets for major brands, but not necessarily against every possible infringement. Each individual and company crafts a tailored policing program to suit specialized needs and budgets. This .xyz rollout is just one example of the issues arising from the complex ICANN rules on new gTLD management mechanisms.
ANA Priorities Top President Obama’s State of the Union Address
Posted: Jan 21, 2015 12:00am ET
The Association of National Advertisers welcomed the President’s remarks during the State of the Union on tax reform and data privacy, two issues that are also of high priority to ANA and its members.
In last night’s address, the President acknowledged that if we do establish sound data privacy policies “we can continue to protect the technologies that have unleashed untold opportunities for people around the globe.” The President’s new proposals concerning data security, including the Personal Data Notification and Protection Act, is a step in the right direction, and setting a federal standard for data security laws has been long advocated for by ANA and fifteen other industry groups. However, it remains imperative that, as these policies are constructed, we do not work hard to establish a federal rule only to allow individual states to once again undermine rational data breach standards with a plethora of approaches. Instead, we are looking forward to working with the Administration and Congress to find a way to preempt the current patchwork of 47 inconsistent state laws and develop a system that would allow businesses to better comply with data breach standards, preempting the state laws in the area and only requiring reporting for material breaches.
The President also spoke about his vision to simplify our complex tax code. Smart tax reform provides an opportunity to close loopholes and eliminate the special interest write-offs that restrict the competitiveness of all business, while refraining from proposing new deductions that could potentially hurt business. Advertising should continue to be represented as a business necessity as any changes to the advertising deduction could severely undermine the U.S. economy and put millions of jobs at risk. Advertising has long been treated as a necessary cost of doing business, and for good reason. It serves as the only way in which every company across the U.S. can communicate efficiently and effectively about their products and services. We were pleased that the President did not support proposals that have been floated in Congress to amortize advertising. Without advertising built in as an essential ordinary and necessary business expense, most businesses would be severely burdened by these new costs.
With a great focus on job creation and growth, we believe that the Administration would not want to implement policies with the potential to eliminate jobs. The President clearly stated that “no one knows for certain which industries will generate the jobs of the future. But we do know we want them here in America. That’s why the third part of middle-class economics is about building the most competitive economy anywhere, the place where businesses want to locate and hire.” Advertising is one of those industries that has sustained and will continue to create jobs in the U.S. In fact advertising is one of the major engines of the U.S. economy. According to a recent study by IHS Global Insight, Inc., by 2017, advertising will directly and indirectly foster $6.5 trillion in U.S. economic activity (sales) and help support 22.1 million U.S. jobs. We urge Congress and the Administration to actively oppose any tax on advertising. The continuing support of the existing tax deduction for advertising will help continue to generate millions of jobs across the country annually.
As an industry, we look forward to working with Congress and the Administration on smart and strategic tax reform, as well as comprehensive data privacy policies. Advertising is one of the prime movers of the American economy, generating a cascade of economic activity that creates jobs nationwide. We, and our more than 640 member companies who collectively spend over $250 billion in marketing and advertising, are proud to support an industry that strengthens the U.S. economy and stimulates job growth.
Federal Policy Should Preempt Onerous State-Level Data Privacy Laws
Posted: Jan 20, 2015 10:00am ET
The debate continues to heat up around data privacy laws and whether the federal government should preempt state legislation in this area. Just this week, we wrote about the Administration’s announcement of two new proposals concerning data security, including the Personal Data Notification and Protection Act, which focuses on setting a federal standard. ANA has long advocated for federal data security legislation as more and more cybersecurity incidents occur, with recent examples including Sony, Home Depot, Target and CENTCOM.
The New York Times editorial board joined the debate recently in an editorial titled, “Still Waiting for Strong Privacy Laws,” stating that a uniform federal law wouldn’t “adequately protect the privacy of Americans,” and that the President should be “careful not to give Congress an opportunity to undermine state laws.” ANA is advocating for federal data security legislation because we have already seen the stark issues that can come with inconsistencies and variations in state laws. The New York Times editorial tried to dismiss this concern by noting that “As a practical matter, privacy advocates say, companies are not hamstrung by having to follow different state policies because they usually do whatever is required by the strongest state law in all states.” This point of view, however, overlooks the fact that a more stringent law in one particular state, though it may sound good in theory, does not necessarily mean that it takes into consideration the best interests of consumers all across the country. Overly-restrictive laws implemented by one state could yield an over-abundance of unnecessary alerts about data breaches or security issues which eventually and inevitably will be ignored.
In early 2014, ANA joined with fifteen other industry groups to ask Congress to find a way to preempt the current patchwork of 47 inconsistent state laws and develop a system that would allow businesses to better comply with data breach standards. We have already stressed that this legislation should preempt the state laws in the area and only require reporting for material breaches.
We recognize the challenges in creating a policy on the federal level. However, it is imperative that we do not work hard to establish a federal rule, only to allow individual states to once again undermine rational data breach standards with a plethora of approaches.
We know this debate will continue as efforts to enact a national breach law have been tried unsuccessfully for the last eight years. The advertising industry looks forward to continuing to support the implementation of strategic and smart safeguards that will still allow an industry reliant on the appropriate use of data to develop a sound approach that is beneficial to consumers nationwide.
AICPA Calls Advertising Amortization Tax Proposal Competitively Disadvantageous and Overly Complex
Posted: Jan 14, 2015 3:30pm ET
The American Institute of Certified Public Accountants (AICPA) recently wrote to House Ways & Means Committee Chairman Paul Ryan (R-WI) on the Tax Reform Act of 2014, the comprehensive tax reform bill introduced at the end of last Congress. AICPA’s detailed, section by section statement specifically singles out the provision in the bill that would require the amortization of advertising expenses, and states that it “will add new unnecessary complexities.” The letter further states:
“Advertising is a key expenditure for a business in order to promote its product, mission, values, and business. The requirement to amortize current year advertising expenditures effectively increases the cost of advertising, which can result in a competitive disadvantage in the local, national, and international marketplaces.”
This strong statement against the amortization proposal follows statements by Curtis Dubay of the Heritage Foundation at a Ways & Means Committee hearing last July, which noted that the amortization proposal would increase the cost of capital and ultimately harm the economy. The Advertising Coalition, of which ANA is a founding member, submitted a statement urging the committee to preserve the full deduction of advertising costs and cited the important research done by several Nobel laureates in economics which has shown that advertising should be treated as an ordinary and necessary business expense and that theories advocating otherwise are invalid.
With the ongoing controversy over tax inversions by U.S. companies and the general concern over the competitiveness of the U.S. tax code in comparison to other countries, tax reform legislation is a distinct possibility this Congress. President Obama, Speaker Boehner, Senate Majority Leader McConnell, and Senate Finance Chairman Hatch have all stated they are willing to move forward to pass bipartisan tax legislation. ANA strongly supports tax reform. However, we believe it is essential for job creation and to create a positive environment for economic activity that the current tax treatment for advertising expenses that allows for the immediate full deductibility of advertising expenses, which has been in place for over 100 years, be maintained.
Cybersecurity Breaches Underscore Urgency for Action
Posted: Jan 13, 2015 3:30pm ET
Recent events have put a spotlight on the need to take action on data security and privacy. The data security issue has rocketed to the top of President Obama’s agenda after cybersecurity incidents have plagued Sony, Home Depot, Target and most recently, the official Twitter and YouTube accounts of the U.S. Central Command (CENTCOM). As these incidents continue to dominate headlines, President Obama is putting data privacy at the top of his agenda in the week preceding the State of the Union address.
The President in addition announced the imminent introduction of two new proposals around data security, including the Personal Data Notification and Protection Act, which will focus on setting a federal standard that gives companies a 30-day window to inform customers of a data breach or hack. The attempt to set a national policy is in response to current significant conflicts between state laws when it comes to data security issues.
ANA has advocated for federal data security legislation for some time. In early 2014, we joined with fifteen other industry groups to ask Congress to find a way to preempt the patchwork of 47 inconsistent state laws and develop a system that would allow businesses to better comply with data breach standards. We stressed that this legislation should preempt the state laws in the area and only require reporting for material breaches. In Congress, Representatives Marsha Blackburn (R-TN) and Peter Welch (D-VT) already have announced that they are working on a bill to lay the foundation for the Personal Data Notification and Protection Act.
President Obama is also seeking the creation of a “Consumer Privacy Bill of Rights.” In collaboration with the private sector, the Administration and FTC are establishing a list of “basic principles to both protect personal privacy and ensure that industry can keep innovating.” In remarks delivered to the FTC yesterday, the President stated that “consumers have the right to decide what personal data companies collect from them and how companies use that data, that information; the right to know that…personal information collected for one purpose can’t then be misused by a company for a different purpose; the right to have…information stored securely by companies that are accountable for its use.” That legislation is anticipated to arrive by the end of January.
Concerns around security and data privacy were also front and center at the Consumer Electronics Show (CES), which took place last week in Las Vegas. With over 150,000 attendees, and a Digital Disruption Track led by the ANA, it was clear that as much as people want cutting-edge technology they want to be assured that their data will not be compromised by its use. During opening remarks at CES, FTC Chairwoman Edith Ramirez framed the debate by stating, “In the not-too-distant future, many, if not most, aspects of our everyday lives will be digitally observed and stored. That data trove will contain a wealth of revealing information that, when patched together, will present a deeply personal and startlingly complete picture of each of us.” To meet this challenge, ANA with a number of its association partners has been a leader in responding to consumer concerns through the Digital Advertising Alliance (DAA), the online privacy self-regulatory program. This program recently has expanded to mobile media and provides consumers with broad control over targeted advertising.
Data privacy and security are very important to advertisers and ANA will continue to lead efforts and work with Congress, the Administration and the private sector to protect consumers. ANA and its members want to continue to ensure that advertising can reach consumers in a way that is efficient, personalized, tailored, and still safe. The advertising industry looks forward to the implementation of increased safeguards, and proactive safety measures that will still allow an industry reliant on big data to utilize it in a way that’s beneficial to consumers nationwide.
Falling Oil Prices Could Signal Tax Troubles for Advertisers
Posted: Jan 7, 2015 12:00am ET
The American public has been enjoying some long-awaited relief from the historically high oil prices we have experienced in recent years. With the holiday season now behind us, retailers certainly saw the benefit of these falling prices due to increased spending by consumers. Unfortunately, the low oil prices appear to be adversely impacting a number of state budgets.
Many states rely heavily on the revenue generated through oil and gasoline consumption. For most of these states, their revenues come through taxes on gasoline used for transportation. For others – in particular Alaska, Texas, and Louisiana – the oil and gas industry is a significant direct economic driver in the state. According to an article in the Washington Post last month, state officials already have had to revise revenue predictions downward and, if the price remains low for long, lawmakers could be forced to make substantial budget changes as legislatures reconvene. Therefore, some state lawmakers could be forced to face tough decisions over raising or implementing new taxes to make up for the revenue loss. Forty-nine states in the U.S. are constitutionally required to balance their budgets every year.
2014 was an unusual year in that there were virtually no significant ad tax proposals actively considered at the state level. We have seen numerous times in the past, however, that when states begin to feel cash-strapped, they look for “easy” opportunities to increase tax revenue by attempting to extend state sales taxes to advertising and agency services.
In 2013, Governors John Kasich (R-OH), Mark Dayton (D-MN), and Bobby Jindal (R-LA) each proposed new taxes on advertising and agency services as part of their budget proposals. As a result of coordinated opposition from the marketing and media communities, each of these proposals were ultimately dropped by the governors. Now, newly elected governor of Illinois Bruce Rauner has proposed extending the sales tax to a number of services, including advertising on billboards, radio and television as well as ad agency services.
As state legislatures ramp up in 2015, ANA and the ad community will have to keep a very close watch on state budget proposals to assure they do no impose tax burdens on advertising and the effort to generate sales. Our economic studies demonstrate that advertising is one of the key drivers of economic activity and job creation in every state in the U.S. It is vitally important that these ad tax proposals be stopped before they gain traction because states look at what their neighbors around the country are doing to find new ways of producing revenue. States should focus on finding innovative ways to save and spend as opposed to penalizing the companies that support their economies by advertising to consumers.
The “New ICANN of 2015” – What will it look like?
Posted: Dec 10, 2014 12:00am ET
By Clark W. Lackert, Reed Smith LLP
The ICANN 51 meeting just concluded in Los Angeles displayed many of the growing fissures in ICANN. As “IANA Transition” (“IANA” stands for the Internet Assigned Numbers Authority) looms in 2015, there is wide disagreement about how the “New ICANN” will look, or if it will be ICANN guiding former IANA technical functions at all. Right now the Department of Commerce oversees these technical functions through a contract with ICANN. How the domain name technical functions are transferred is a critical issue for brand owners, advertisers, and consumers since if the transition is not done properly, the safety of the domain name system itself will be threatened. While new gTLD strings continue to be delegated (approximately 430 thus far), a transition of control over the (IANA) is underway. The ICANN “Cross Community Working Group (CWG) on Naming Related Functions Draft Transition Proposal” issued its first report on December 1, 2014. The CWG essentially offered two options: (1) a small, external multistakeholder group to operate and supervise this function, or (2) increased internal ICANN safeguards. Whether either option is viable remains to be seen.
The U.S. government has maintained the constant position that control will not be assumed by another government or a multi-governmental entity, but rather must be supervised by a multi-stakeholder entity. These issues were being debated at the UN’s International Telecommunication Union’s Plenipotentiary Conference, just concluded in Busan, South Korea. As ITU Resolutions 101, 102, and 180 (Busan, 2014) indicate, the ITU (and representative governments) intend to take a much more active role in the ICANN debate, despite the official U.S. government position.
Coupled with the major theme of IANA Transition was the theme of “Accountability”, which was extensively discussed in meetings, hallways, and dinners. What kind of “accountability” – for the IANA Transition, for ICANN as a whole, for ICANN new gTLD decisions, to GAC governments? ICANN is now in danger of becoming a Tower of Babel, with different constituencies all speaking different trade languages and all with different agendas. ICANN has its work cut out for it for 2015 in order to move ICANN forward and to control the gale force winds trying to tear it apart. This second issue is also of great importance to brand owners, advertisers, and consumers since many view ICANN’s actions as without proper oversight today particularly in policy directions, finances, and the new gTLD decision making processes, let alone when parts of the ICANN management portfolio leave U.S. supervision.
Perhaps the other major story of ICANN 51 is the new assertiveness of the GAC concerning issues from protection of the Red Cross and Red Crescent names to geographical names to IANA Transition. GAC governments clearly want a larger voice in ICANN affairs, and some have openly questioned whether ICANN is truly the correct entity to address internet naming conventions at all (for example, the French government’s strong criticism of ICANN’s handling of the “.wine”/”.vin” applications), or to create new international law when it is not authorized to do so. Another major GAC initiative at the moment is the so-called “geo names proposal” which will significantly expand GAC control over any trademarks which may even remotely connote a geographical location. ANA is filing comments on this proposal, the deadline for comments for any interested party being December 31, 2014.
Surrounding this dialogue is increased uncertainty as to what 2015 will bring; topics include a so-called “remedial” round to review geographic names, community application requirements, and concerns of underserved communities and countries, particularly those in South America and Africa (call it “New gTLD Round 1 ½”). In view of these controversies, many believe that the second round of gTLD filings will not occur until 2017. The newly elected Republican dominated Congress in the United States may also contribute to further uncertainty given predicted attempts to block or stall the IANA transition due to concerns about non-U.S. government control, management, and censorship of the Internet. Despite a number of current cross-community working groups (CWGs) working within ICANN to address these controversial issues, there is no guarantee that what results from these discussions will be approved in whole or in part.
The ICANN 51 meeting with some 2,500 attendees demonstrated the diversity of the ICANN ecosystem but also the aftermath of the withdrawal of the U.S. as the guiding force of the organization. It still remains to be seen whether ICANN morphs into a global, multistakeholder community apart from U.S. oversight, a subdivision of the ITU or another intergovernmental agency with the inevitable higher levels of governmental control and bureaucracy, a group of competitors with administrators of other new “internets” of Russia and China when the global system fractures, or a newly born Swiss corporation. These issues and more will be on the overloaded agenda for ICANN 52 in Singapore in February 2015.
Reed Smith LLP is the ANA’s General Counsel.
