Transparency 2.0: Looking Beyond Rebates and Production Transparency to Data

March 15, 2018

Keri Bruce, partner at Reed Smith LLP, led a discussion about legal issues related to data-driven sanctions. Therese Craparo, partner at Reed Smith LLP, and Cassidy Seghal, VP of digital and advertising counsel at L’Oréal USA, evaluated common data issues, both internally and with counterparties.

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Moderator Keri Bruce, partner at Reed Smith LLP: We’ve been hearing about transparency for several years now. Transparency, or the lack thereof, has meant many different things. While the industry is working to gain better transparency, data transparency is becoming more top of mind. We’ll talk more about what we mean by data transparency and why it’s important to understand your company’s data ecosystem.

First I want to talk about why data transparency is coming to the forefront of transparency discussions. It’s not just the class action suits and regulatory inquiries relating to violations of consumer privacy expectations that are driving the need for data transparency; it’s also the fact that marketers are becoming more sophisticated and comfortable with programmatic media. They’re understanding the need for data and how data is driving media. This increased sophistication has led to marketers asking more questions about data. We’ve seen advertisers who have learned through their own investigations that industry partners have been brokering their campaign data without their knowledge. Advertisers are having heated discussions with their industry partners about getting access to their own data when their contract said they could access it. Advertisers have also found that industry partners are intentionally concealing campaign performance. This all boils down to data and access to data.

Therese, why should companies care about their data ecosystem?

Therese Craparo, Partner at Reed Smith LLP: The first thing you need to understand to make smart marketing decisions is what the risks are. When we’re talking about data transparency and collection, the first thing associated with that is regulatory risk. You have state data breach laws and state data protection laws. You have certain security laws for different industries and consumer specific laws. There’s also the FTC and state attorney generals who enforce laws governing unfair and deceptive trade practices. For the regulators, it is about consumer protection and privacy.

What we’re hearing more about is consumer awareness. Do consumers know enough to be able to make smart choices about what’s happening with their information? When advertisers collect data using ad technologies, where does the data go? If advertisers don’t know, then how can consumers know? In terms of transparency, the regulators are really focused on that. We have self-regulatory entities which are setting standards in the industry and bringing their own enforcement action to start focusing on transparency. Foreign regulation is also pushing data transparency and consumer awareness of what’s going on. Underlying all of this are privacy policies and terms of use. What is your company doing to tell the market and consumers about what you’re doing with their data? When you start to talk about data transparency and the risk associated with it, you can’t know that your representations are accurate if you don’t know what’s happening with your data. The biggest risk is always risk to reputation and consumer trust. There’s a benefit to data transparency that we can’t lose sight of.

What are the benefits of better understanding your data ecosystem?

Craparo: The work I do to help organizations map their data is driven by legal and compliance, but a lot of it is driven by the business. Companies want to know how they can do more with their data to better leverage it. There are so many different ways that data can be collected. Understanding that can be a huge benefit to the business. It helps expand the business and it helps with customer relationship management. There’s also a value in the ability to monetize data where it makes sense. First-party data is more valuable in many cases than third-party data. It’s more reliable, you know where it comes from, you have a handle on its accuracy, and you have more control over it. You can also use first-party data to validate third-party data. The more you know about your data, the better you can analyze it, and the smarter choices you can make about spending money on advertising. It can give you a competitive advantage.

Cassidy, what are some of the big issues that L’Oréal is dealing with?

Cassidy Seghal, VP of Digital and Advertising Counsel at L’Oréal USA: From a legal and business perspective, we’re really seeing that data is in everything. Fifteen years ago, if I did a joint business agreement with a publisher, it was a different deal than it is today. The publishers are trying to reinvent themselves and they’re starting to create content with us and do partnerships with us. The whole nature of what we do has changed so dramatically. In many ways it’s guiding everything from our creative decisions to our media buys, and it’s in all aspects of how we engage with our consumers. The issues of transparency and understanding the validity of our data is critical. We really don’t know how well we’re doing if we don’t know how good our data is. L’Oréal has been focused in this area to make sure we’re understanding it. We need to come together as an industry to think about these issues and call for greater transparency.

How do you approach data transparency with new partners?

Seghal: You have to ask what the nature of the services is, because nothing is the way that it used to be. You have to understand the full data flow from beginning to end. Is consumer data being collected? What kind of consumer data? I negotiate agreements with our creative agencies, and even with those agencies there is valuable advertising information and I have to start thinking about data and security. How is the data used? Who is using it? Which third parties will have access to it?

Territory is another critical thing for all of us to be thinking about. I have a story to share about that. We were launching this mascara and the campaign was critical to us. Two or three days into this huge campaign, we found that ads were serving to men in Europe who read GQ. This was for a mascara launch in the U.S. It was a lesson for us about the importance of talking to every part of the supply chain about territory and including it in our agreements. A few years ago, we began conversations about moving a lot of media in-house. That was when we started to think about our data and how it was being stored with our agency partners. Security issues have come up a lot in the last year. You have to know who the data-storing partners are and you’ve got to vet them.

Therese, what are some of the things that you’re seeing in the marketplace about data?

Craparo: I tend to see things when something goes wrong. The No. 1 issue that comes up over and over again is a lack of communication and coordination internally. Different teams within a company aren’t coming together to understand what’s happening with the data. This is true for pretty much every industry. Data is not function-specific; it doesn’t only affect one industry. It flows throughout your organization, which means there is not one group who understands everything that’s going on with your data. You end up having good intentions that go awry because there wasn’t sufficient communication. If you don’t understand what’s going on or understand the technical jargon, bring someone to the table who does. You have to do your diligence on the parties that you’re working with and the technology you’re using. Standard contracts are not enough for dealing with these issues. You have to look at the provisions that cover data ownership. In the U.S., there’s not a clear legal landscape dictating what it means to own data. Ultimately the thing that’s going to govern data ownership is the contract.

Therese, you talked about doing diligence, and that sounds like a lot of work. How do you determine how much diligence you actually have to do?

Craparo: I get this question a lot when talking about vetting and auditing vendors. When you start to look at it, you have to come at it from the perspective of managing risk. You need to know the details about your data and your vendors so you can allocate money to managing risk.

When we were preparing for this panel, we talked about four goals that companies should have when entering into contracts with third parties that involve data. The four goals are access, control, portability, and risk allocation. Cassidy, can you start with access and give us more insight into that?

Seghal: It’s about making sure that you have visibility into who is collecting your data. That means not just asking the partner that’s in the room with you, but all of the other folks that they may be working with along the way. You also want to have visibility into the cost of data. We don’t always know what we as advertisers are spending when we’re running campaigns. You want to understand what each data enhancement is costing you and not just sign off on a blanket term that allows for charging of data. You want to have visibility into the quality, validity, and authenticity of the data. There’s a lot of questions right now about whether all of these data partners are created equally. Asking for access to all of the key metrics is necessary for understanding viewability and attribution.

Therese, can you talk about control?

Craparo: The first thing to think about is control over how your data is collected and stored. What are the protections around it? Can it be identified to be deleted? One of the risks is keeping data longer than you need it. A number of regulators have talked about this as well. Clear delineation of rights to data and data auditing are other issues.

Cassidy, can you talk about portability?

Seghal: It’s the concept of being able to take your data with you. If you own the data, it’s not enough to have it in the contract. The contract may say you own the data, but that’s absolutely meaningless if you try to access, extract, or move it. You need to understand how that’s going to work. Understanding if you can integrate and reuse your data is important.

Therese, can you talk about risk allocation?

Craparo: Companies need to think about who is in the best position to manage risk and how to allocate that risk across the organization. It’s important to identify risk areas and see how you can mitigate and allocate that risk, and also calibrate it across the organization so that resources are put in the right place.

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"Transparency 2.0: Looking Beyond Rebates and Production Transparency to Data." Keri Bruce, Partner at Reed Smith LLP; Therese Craparo, Partner at Reed Smith LLP; Cassidy Seghal, VP of Digital and Advertising Counsel at L'Oréal USA. 2018 ANA Advertising Law and Public Policy Conference, 3/15/18.

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