Regulatory Rumblings

Narrow Window for Tax Reform is Cause for Urgency

Posted: Feb 19, 2015 12:00am ET

House Ways & Means Committee Chairman Paul Ryan (WI-1) has set an ultimatum for tax reform in 2015 – either a tax rewrite is done by this summer or not at all. As was stated in a recent PoliticoPro article, “That tight seven-month time frame is aggressive and specific, two attributes not typically associated with recent talk of tax reform.” Ryan has chosen to dedicate much of his time and effort as Ways & Means Chair to the tax reform cause, stating that this is a large reason why he is not running for President in 2016. He has also shown a willingness to work with the Obama Administration to get something passed, even if it is not a comprehensive package. Ryan said, “If we can do tax reform in phases and those phases work, well, then I’m open to doing that.”

Clearly, if Chairman Ryan has a sense of urgency on passing tax reform, then those who want to be treated fairly as this legislation is crafted must also ramp up efforts. We must actively work to ensure that advertising in particular is protected as an ordinary and necessary business expense, since it has already been targeted in recent tax reform proposals as a source of new revenue. The proposals to increase the tax burden on the effort to sell by imposing a requirement that 50% of advertising be amortized over 5 or 10 years would substantially hurt job creation and economic activity in the U.S. Studies by IHS Global Insight have demonstrated that advertising generates as many as 21.1 million jobs in the U.S. annually. Advertisers cannot simply wait until a new tax bill is out. We must mobilize now and set a summer deadline for ourselves as well in order to show all members of Congress the undeniable benefits advertising delivers to the economy and to our tax system.

Big Data, Differential Pricing, and Advertising

Posted: Feb 18, 2015 12:00am ET

On February 6th, the White House Council of Economic Advisors released an important report entitled “Big Data and Differential Pricing.”

Differential pricing is the practice of charging customers different prices for the same product, such as senior discounts for movie tickets or tiered pricing for air travel. One of the concerns expressed in the major White House Big Data report that was released last May (“Big Data: Seizing Opportunities, Preserving Values,” http://www.whitehouse.gov/issues/technology/big-data-review) was that big data analytics could lead to disparate inequitable treatment, particularly of historically disadvantaged groups.

The Council’s report is a thoughtful, balanced document which describes the evolving technologies and business practices for big data as well as the benefits that differential pricing can provide to both marketers and consumers. There were three important findings worth noting: (1) many companies use big data for targeted marketing, although only a fairly limited number are experimenting with personalized pricing; (2) while concerns about differential pricing in the age of big data remain, many of them can be addressed by enforcing existing anti-discrimination, privacy and consumer protection laws; and (3) providing consumers with increased transparency about how companies use their data would promote more competition and better informed consumer choice.

That’s where the Digital Advertising Alliance (DAA) self-regulatory efforts come in. To address the privacy concerns about interest-based advertising, the marketing community has built one of the most rapidly-growing and successful self-regulatory programs in history. ANA and four other industry groups were founding members of the DAA, which features an icon alerting consumers to the fact that they have been served an ad based on browsing history. When a consumer clicks on this icon, they can access detailed information about interest-based ads and learn how to exercise choice about how to opt-out of targeted ads if they wish to do so.

Since its launch in 2010, the DAA has rapidly brought enhanced notice and choice to consumers:

We have encouraged all of our members to join the DAA program.

The Council’s report suggests that “policies to prevent inequitable application of big data should focus on risk-based pricing in high-stakes markets such as employment, insurance or credit provision.” That is consistent with the DAA program, which explicitly forbids data collected for OBA purposes to be used for job, insurance, mortgages and other similar sensitive purposes.  
The report was an encouraging and positive first look at complex issues including the positive aspects of differential pricing and some reasonable approaches to mitigate these risks. These issues are sufficiently important that they are sure to continue to receive the careful consideration of policymakers and the ad community for the foreseeable future.  

Online Piracy – The Advertising Industry Fights to Protect Consumers

Posted: Feb 10, 2015 10:00am ET

With the strong support of the Association of National Advertisers, the Trustworthy Accountability Group (TAG) announced this morning the advertising industry’s newest campaign initiative, the Brand Integrity Program Against Piracy.  With a focus on protecting consumers and advertisers alike from “dangerous deficiencies in the digital communications supply chain,” TAG is a collaboration between the Association of National Advertisers (ANA), the American Association of Advertising Agencies (4A’s), and the Interactive Advertising Bureau (IAB).  

The Brand Integrity Program Against Piracy relays the immense importance to the advertising industry of protecting both advertisers and consumers from pirates and others who are seeking to take advantage of the growth of the internet.  The new program against piracy, and the initiatives advanced by TAG in general, show that advertisers are fighting back against critical concerns like ad-supported piracy, digital advertising fraud and malware.

Through the Brand Integrity Program Against Piracy, TAG has worked with other marketing and advertising trade associations, advertising technology trades, representatives from the recording and media industries, and a consumer protection coalition, to establish a strong network of advocates for the protection of consumers and advertisers alike.  Within the first phase of this initiative, TAG will work with independent third-party validators, including Ernst & Young and Stroz Friedberg, to certify advertising technology companies as DAAPs – Digital Advertising Assurance Providers.  This will help to enforce standards and provide tools that can limit a company’s exposure to undesirable websites.

This program is just one example of the ways in which the ANA and others in the ad community are working to ensure the safety of consumers and advertisers.  We strongly believe that U.S. advertisers should be confident that their ads are not unintentionally providing financial support to, or otherwise legitimizing, "rogue" Internet sites whose primary and apparent purpose is to steal or facilitate theft of the intellectual property of America’s innovators and creators. U.S. advertisers must also have confidence that their corporate brands and images are not being harmed by association with such unlawful activity. We will continue to work hard to protect such a valuable Internet environment, and the safe access of information by consumers nationwide.

ANA has been working on this issue for several years. In 2012, ANA issued a best practices white paper along with the 4A’s.

To learn more about TAG and this initiative, click here.   

How Will New Net Neutrality Rules Impact Advertisers?

Posted: Feb 6, 2015 12:00am ET

The media is riveted on the news that, for the third time, the Federal Communications Commission (FCC) is poised to adopt net neutrality rules (its two previous efforts were overturned by the courts). The exact details of this latest effort are not yet available, but the information trickling out already raises red flags and issues of great interest to advertisers.

Apparently, FCC Chair Tom Wheeler contemplates -- for the first time -- applying, to some still not fully defined extent, traditional Title II (i.e., “common carrier”) regulation to Internet providers. Title II of the 1934 Communications Act has been applied over the years to telephone providers, and involves such issues as tariff filings, rate regulation, service requirements and the like. Wheeler is asking his fellow commissioners to apply certain parts of Title II that, e.g., retain the FCC’s ability to take action in the privacy area, ensure build-out opportunities, oversee the Internet backbone, and prevent paid prioritization (i.e., “fast lanes”). Any obligations that are applied could then, of course, be enforced against violators. As of now, it doesn’t seem that the proposal will apply to price regulation, require that tariffs be filed, or demand contributions to the fund that provides universal communications availability. But without doubt, many telecommunications companies are already signaling that they are adamantly opposed to this far-reaching regulatory expansion.

Among the potential issues raised by the proposed rules is the critical questions of whether they will preempt the authority of the Federal Trade Commission (FTC) to oversee broadband provider activities. In order to avoid duplicative regulation, the FTC Act precludes the agency from exercising jurisdiction over those regulated as “common carriers” by the FCC. If the FCC “cherry-picks” and imposes some common carrier regulations, the FTC’s authority will be thrown into doubt, as it will be unclear whether – and to what extent – the FTC would still have authority over Internet providers. This will create great uncertainty and could result in inconsistent or duplicative regulation. States that enforce “mini-FTC Acts” based on FTC’s jurisdiction could have their authority called into question, further muddying the waters for advertisers and their customers about state requirements. Local jurisdictions also might not have authority to continue some of their efforts. Advertisers and their customers could be left guessing as to what is required of them, or risk enforcement for undertaking activities that are required or permitted by one federal agency but not another. In short, if these proposed changes are not carried out extremely judiciously and carefully, they could create a regulatory mess.  

Among the many issues ANA will be watching as the net neutrality rules are spelled out are:

Stay tuned; this is potentially one of the bigger issues to confront the Internet since its inception, and is sure to generate responsive legislation, litigation and tremendous controversy. We’ll be in touch as the details emerge, and ANA members should be vigilant as well. ANA also will be covering these net neutrality and other FCC communications issues at our 2015 Advertising Law & Public Policy Conference.

Forget Football: Everyone is Talking about Their Favorite Super Bowl Ads

Posted: Feb 3, 2015 12:00am ET

Good, bad or sad – this year’s slate of Super Bowl ads definitely got the attention of consumers and viewers nationwide. Links to watch the game online included separate (and heavily viewed) pages just to watch the ads as they aired, and Forbes stated that “several studies have proven that 50% of the Super Bowl audience tunes in just to watch the ads.” According to a recently conducted poll by Crowdtap, a people-powered marketing platform, and shared by Word of Mouth Marketing Association, 85% of people said that they “prefer the Super Bowl as it is now, ads and all, to a Super Bowl with no ads.”

As commercials aired, people quickly picked their favorites and tweeted and posted about which were the funniest, the saddest and overall the most compelling 30-second slots. Ranking ads even had its own twitter hashtag again this year - #Brandbowl – with some users stating that “the game was great, but I was really watching for the ads.”

With this increasing interest in advertising, there is also a renewed awareness of how innately valuable marketing and creative engagement with consumers can be. The 2015 Super Bowl drew a record 114.4 million viewers, meaning that those ads have an incredible impact. Translating those numbers into economic impact is easy – 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 on an annual basis and help support 22.1 million U.S. jobs. Looking at the issue another way, for every dollar spent on advertising; nearly $22 would be generated in the economy.

These facts make the issue of an ad tax, such as those periodically proposed by Congress, all the more problematic. Right now, advertising, like all ordinary and necessary business expenses, can be deducted immediately. Proposals, however, have been put forward to require that 50% of advertising expenses would have to be written off over 10 years. This onerous tax has the capability to cost the industry an additional $169 billion over that time period, a staggering sum that would place a heavy burden and brake on the selling process. This tax clearly would undermine the positive impact the advertising industry has on our nation’s economy, at a time when policymakers are focusing on economic and job growth.  

The proposed ad tax would have painful impacts on the companies that advertise, and those impacts last long beyond the short time frame in which ads like those on during the Super Bowl air. For companies advertising a product that is only newsworthy in the near-term, they could face paying taxes over 10 years for a product that might lack relevance in 10 months.

Advertising has long been treated as a necessary cost of doing business, and for good reason. Without advertising built in as an essential ordinary and necessary business expense, most businesses would be severely burdened by these new costs. An ad tax would restrict job growth and would harm our nation’s economy, making the impact on our nation stretch far beyond football. To protect such a productive industry, we continue to encourage policymakers to support the existing tax deduction for advertising, and to commit to continuing to generate millions of jobs across the country annually.

During Super Bowl, All Eyes are on Football and Advertising

Posted: Feb 2, 2015 12:00am ET

The Super Bowl is the one time of year when advertising truly dominates the news headlines and people spend a good deal of time talking about the best and most controversial ads. Excitement around creative advertisements was at an all-time high at the end of last week. Time covered which ads continue to make it into the hall of fame, with Volkswagen’s 2011 commercial reaching 61 million views on YouTube even after it aired. Slate compiled 48 years of their favorite Super Bowl ads, and Marketplace is looking forward to the naming of this year’s Super Bowl MVC – Most Valuable Commercial.  

People often don’t think about the fact that advertising powers the Super Bowl and virtually every major media channel. People across the U.S. are able to enjoy the game for free on network TV because companies are spending money on advertising during the highly watched game to sell their products and services. Year after year, the Super Bowl is the most-watched program on TV. The 2014 Super Bowl drew an average of 111.3 million viewers. Those advertisements can have an incredible impact, and generate enormous interest as hundreds of millions of people tune into the game.

As all eyes are on advertising during the Super Bowl, this is an excellent moment to highlight why advertising is so important every day of the year in every state and locality in the U.S. 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 on an annual basis and help support 22.1 million U.S. jobs. Whoever wins the Super Bowl, advertising assures that America’s consumers and the U.S. economy are winners as well.  

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.

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About This Blog

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