Government Relations Amid a Pandemic and Presidential Election

November 12, 2020

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ANA’s Dan Jaffe provided a year in review of ANA’s government relations efforts, detailing how the COVID-19 pandemic and presidential election have affected issues ranging from data privacy to advertising taxes.

Advertising is at a major inflection point, as the major drivers of the digital marketplace are being challenged, according to Dan Jaffe, group executive vice president of government relations at ANA.

Ad and Data Tax Threat Rises

During the COVID-19 pandemic, advertising spend fell in key markets and across most channels, putting advertisers in a growing hole. Due to the pandemic, budget deficits in states have increased the threat of ad taxes being implemented as new sources of revenue. It remains to be seen if the federal government will provide relief to state governments to fill these budget gaps.

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The Maryland Digital Ad Tax is an example of state legislation that threatens advertisers. It was designed to establish a new tax of up to 10 percent on “annual gross revenues of a person derived from digital advertising services in the state.” ANA formed a working group with a broad coalition of associations and companies, urging the Maryland Legislature to reject the legislation, but the bill was passed in March 2020.

ANA sent a letter to the Maryland governor asking him to veto the bill, along with a joint letter to the government from the coalition, supporting the veto. The governor vetoed the bill on May 7. This veto could be overridden by a 3/5th vote in the Legislature. Legislative leadership has indicated that they plan to override the veto.

South Dakota and Nebraska are states that have considered broad advertising taxes, but they have not acted on them. ANA defeated an ad tax proposal in South Dakota, while Nebraska’s attempt to pass an ad tax bill was also unsuccessful.

In the District of Columbia (DC), the Council of DC included an advertising and data tax in its fiscal year 2021 budget proposal. ANA activated its ad tax coalition to fight the tax. ANA and its partners also held meetings with Council members, including the Chairman, and sent numerous letters and other communications to the Council. ANA won a critical victory when the Council removed the ad tax from the budget.

A digital tax in New York would impose a sliding scale of taxes on digital advertising services that use personal information about the people the advertisements are targeting. It starts at 2.5 percent and tops out at 10 percent on revenues exceeding $10 billion (an identical bill was introduced in the Senate in March 2020).

If Congress broadly revisits tax issues in 2021, ad tax deductions may be up for consideration.

Privacy, Politics, and the Pandemic

As of July 1, 2020, the California Consumer Protection Act (CCPA) is now enforceable and includes a global browser “do not sell” opt-out notice (now in use by a consortium of news organizations) and a private right of action for data breaches.

Stipulations of the CCPA

  • Went into effect on January 1, 2020; enforceable as of July 1, 2020
  • Applies to a “business” that collects personal information; includes “service provider” and “third party” as additional defined entities
  • Consumers have a right to access, delete, and opt-out of sales of personal information; minors have the right to opt into personal information sales
  • Private litigants may bring suit for certain data breaches. The California Attorney General may bring actions for other violations, and may promulgate regulations implementing the law

A new privacy-related ballot initiative, the California Privacy Rights Act (CPRA), was approved by Californians during elections in November 2020 and will become effective January 1, 2023. It will create an administrative office specifically tasked with enforcing privacy requirements. 

Stipulations of the CPRA

  • Will go into effect January 1, 2023; enforceable as of July 1, 2023
  • Expands CCPA applicability to a business that “controls the collection” of personal information; includes “service provider,” “third party,” and “contractor” as additional defined entities
  • Consumers have the right to access, delete, correct, and opt-out of sales and “sharing” of personal information and restrict processing of “sensitive personal information”; minors have the right to opt into the sharing and sale of personal information
  • Private litigants may bring suit for certain data breaches; a new California Privacy Protection Agency (CPPA) may bring actions for other violations; the California Attorney General has additional regulatory authority, which transfers to the CPPA after a certain period.

Republicans in the House of Representatives have called for federal privacy legislation. Rep. Cathy McMorris Rodgers (R-WA) and Rep. Greg Walden (R-OR) have both made recent calls for federal privacy legislation, and Congress has already passed COVID-specific privacy legislation. Numerous privacy bills have been introduced at the federal level, including those from Sen. Commerce Chair Roger Wicker (R), Sen. Commerce Ranking Member Maria Cantwell (D), and Sen. Jerry Moran (R). There has also been a bipartisan discussion draft of privacy legislation authored by the House of Representatives staff.

In 2020, while CCPA went into effect, data privacy bills were introduced and discussed in states such as Washington, Hawaii, Texas, and New York. In 2021, many states will be in session after a layoff due to the COVID-19 pandemic. The New Year is certain to see a major increase in data privacy legislation from state legislatures and at the federal level. Adding to the confusion is that many of these bills are inconsistent with the CCPA, CPRA, and each other.

Privacy For America

Creating a national standard for data privacy has become even more important due to the massive reliance on digital communication throughout the economic system.

Privacy For America (P4A), whose Advisory Board is chaired by ANA CEO Bob Liodice, is a movement that attempts to shift away from a primary focus on opt-in and opt-out models. P4A has devised a new paradigm for a national law that aims to set clear definitions for data use, including:

  • Per se reasonable uses
  • Per se unreasonable uses
  • Other uses left up to regulation

P4A would give the FTC increased rulemaking and enforcement authority.

Industry Challenges

Issues in the privacy area are also being created by Apple’s proposed restrictions on the Identifier for Advertisers (IDFA) in iOS 14 regarding applications. The company has delayed the rollout of its privacy changes until 2021. Google Chrome has also stated that it will phase out the use of third-party cookies within two years.

Partnership For Responsible Addressable Media (PRAM)

The Partnership For Responsible Addressable Media (PRAM) is a collaborative effort of the leading advertising trade associations and companies representing every sector of the global advertising industry to advance and protect critical functionalities like customization and analytics for digital media and advertising while safeguarding consumer privacy and improving the consumer experience.

Privacy Shield

Geographic barriers are being created for the movement of data. On July 16, 2020, the Court of Justice of the European Union (CJEU) published a summary decision on “the adequacy of the protection provided by the EU-US Data Protection Shield.” According to the summary decision, the EU-U.S. Data Protection Shield does not provide adequate data protection under the European Union (EU) data privacy law. In addition to GDPR, this shows that European regulation is impacting privacy regulation in the U.S.

The digital marketplace is the fastest-growing marketplace in history because of the ease of entry and ability to provide effective advertising. However, this progress may be undermined due to less competition, greater dominance by first-party advertisers due to larger barriers to entry, less relevant ads, and higher costs to consumers.

Mandatory Disclosures

On May 8, 2019, the Department of Health and Human Services (HHS) promulgated a new rule that requires “direct-to-consumer television advertisements for prescription pharmaceuticals covered by Medicare or Medicaid to include the list price, if that price is equal to or greater than $35.”

ANA filed comments in opposition to the rulemaking during the comment period. It joined with Merck, Eli Lilly, and Amgen to bring a lawsuit to enjoin this direct-to-consumer price disclosure rule that would damage the First Amendment protection rights of advertisers.

On July 8, 2020, a federal judge ruled against HHS and stopped the implementation of the rule, but on August 21, 2020, HHS filed a notice of appeal. The case then went to the Court of Appeals, where the rule was invalidated, with the Court saying that HHS does not have the authority to create the rule.

The government did not appeal the Court of Appeals decision, which was beneficial to ANA and the ad community. However,  there will likely be a legislative effort to deal with the authorization of these types of disclosures. Senators Chuck Grassley and Dick Durbin (D-IL) have already pushed for this type of legislation.

Other mandated disclosures have included graphic tobacco warnings. In March 2020, the FDA finalized its new rule requiring 11 new warnings on cigarette containers and advertisements. The warnings must occupy the top 50 percent of the area of the front and rear panels of cigarette packages and at least 20 percent of the area at the top of cigarette advertisements. Some tobacco companies are suing in District Court, claiming the proposals violate the First Amendment.

Other disclosure cases included CTIA v. Berkeley (revolving around a Berkeley ordinance that requires wireless producers and sellers to provide a point-of-sale public notice regarding radiofrequency safety) and American Beverage Association (ABA) v. San Francisco (mandating disclosure warnings on sugar-sweetened beverages).

Supreme Court

Following the death of Supreme Court Justice Ruth Bader Ginsburg, and her replacement with Amy Coney Barrett, it is not yet known how this change will impact issues affecting advertising.

FTC Endorsement Guidelines

In February 2020, the Federal Trade Commission (FTC) announced that it is seeking public comment on its endorsement guides as a part of its review of all current rules. ANA filed comments in response to the request and received useful input from members.

The FTC held a public workshop relating to its April 4, 2019 Notice of Proposed Rulemaking announcing proposed changes to the Commission’s Safeguards Rule. The public workshop occurred earlier this year. The FTC’s proposed guidelines would drastically increase the coverage of financial institutions.

Jaffe said there are many ways for ANA members to stay connected to the news on industry regulations, with ANA resources that include webinars, podcasts, blogs, the website, social media feeds, and Legal Affairs and Government Relations Committee meetings.  

CLE Materials

Source

"Government Relations Amid a Pandemic and Presidential Election." Dan Jaffe, Group Executive Vice President of Government Relations at ANA. ANA Marketing Law Conference, 11/12/20.

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