The Harbingers of 2018

The top 10 legal concerns marketers will face this year

By Doug Wood

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With 2017 behind us, we wonder what brands will face in 2018 as they try to reach consumers who are not only human but who might also be inclined to favorably respond to a marketing message. From marketing's own "deep state," which lurks beneath the surface of digital marketing, making measurement and viewability elusive goals, to the changing regulatory landscape brands will have to traverse in 2018, the year will provide no shortage of headaches for brands and agencies.

Here are the top 10 legal issues for 2018.

 

1. Transparency 2.0

No doubt many media buying agencies and brands are tired of hearing about transparency, but whether they like it or not, it's not going away. In fact, the issue of transparency is only going to expand. The 2016 K2 Intelligence report commissioned by the ANA addressed non-transparent activities in traditional and digital media. The findings of the report sent seismic tremors throughout the industry that are still affecting relationships today. Many contracts have been renegotiated and future RFPs will mandate transparency levels.

Without question, the unacceptable behavior of the past in traditional and digital media is seeing a rapid sunset. In 2018, we'll see transparency expand into promotion and experiential marketing as well. Spending in promotion and experiential reportedly matches (and, some believe, exceeds) traditional and digital spending. Brands will do even more to monitor their supply chain for all areas of the marketing ecosystem. Globally, annual spending on traditional and digital media, promotion, experiential, public relations, etc., may well exceed $1 trillion. As we begin 2018, the strategy adopted by some in the marketing community to deny, delay, and disguise will fall to the demand for disclosure, data, and discovery.

 

2. Singing the Song of Digital Accountability

Accountability in digital media reminds me of a line from the Frank Pooler/Richard Carpenter song "Merry Christmas, Darling": "Logs on the fire fill me with desire …"

A study jointly conducted by the ANA, the Association of Canadian Advertisers, Ebiquity, and consulting firm AD/FIN found that despite protestations to the contrary, log-level data is available from the demand-side platforms (DSPs) in the digital supply chain. Arguments to the contrary — that the data was proprietary, inaccessible, or subject to non-disclosure agreements — were revealed as red herrings once the brands that participated in the study made it clear they would not accept excuses.

Claims that log files are not available to advertisers are empty. In fact, on the publisher's side of the transaction, the supply side platforms should be able to provide the same log data as DSPs. Likewise, the exchanges can also provide whatever data is needed at the log level.

Ultimately at stake are brands' spending and publishers' income. Calls for accountability within the vast wasteland occupying the middle ground of the digital supply chain will continue. In 2018, expect to see more brands demanding full access from their DSPs.

 

3. Europe As the Weakest Link

We've all read about the impending May adoption of the European Union's General Data Protection Regulation (GDPR) and the e-Privacy Directive that will soon follow. Numerous surveys indicate that brands and the supply chain are not prepared.

With fines as high as 4 percent of global turnover, brands need to appreciate that the buck stops with them. They are the ultimate targets. Traditional contractual indemnities and reliance on suppliers will no longer cut it. Non-compliance may mean major implications for brands:

  • Data on customers presently in the hands of brands may be poisoned and no longer legally available for use
  • Brands might be banned for some period of time from dealing with EU consumer data at all
  • Data aggregation may be a relic of the past unless consumers opt in to co-mingling of data

And say hello to the newest member of your C-suite, the data protection officer (DPO). If the GDPR applies to a brand, it must appoint someone to that role with the mandate that he or she report to the highest levels of the brand and conduct annual assessments of risk and compliance.

The DPO cannot be fired for doing his or her job, so there is an element of whistleblower protection as well. In fact, the title of DPO is perhaps a bit of a misnomer; the individual appointed is probably better called a consumer protection ombudsman.

If you're a brand manager in China, you may want to start saving some bail money. With such dramatic change with a global reach, one also has to wonder if the European model will become the global default approach to data collection and use. If it does, the change is dramatic when compared to how U.S. marketers are currently regulated.

If the GDPR weren't enough of a headache, China's data protection legislation becomes fully effective at the end of 2018. In addition to fines and revocation of business licenses, the penalties in China include imprisonment. So if you're a brand manager in China, you may want to start saving some bail money.

But there may be a silver lining in all of this. One possible result of the GDPR is better alignment of brand spend and accountability, and greater control over data by advertisers. Advertisers may be in a position to have better insight into how ads are placed and how third parties are using their data because GDPR compliance may necessitate it.

 

4. Where in the World Is the Federal Trade Commission?

There are currently two active commissioners on the Federal Trade Commission, one of whom is sitting beyond her statutory term. The commission is supposed to have five commissioners. President Donald J. Trump has nominated a new chair but confirmation has not been completed. With only two sitting commissioners, what can the FTC do? Will it be 2018's paper tiger? Not likely.

There are several things to look out for in 2018 from the FTC.

  • There will be an increased focus on the nature of any consumer injury, particularly from the perspective of data privacy. The FTC will look for cases where there is a quantifiable or measurable injury rather than sheer speculation.
  • In the area of national advertising, the FTC will be reluctant to seek monetary redress merely for failure to possess and rely upon a reasonable basis when making claims. That's good news.
  • The commission will tend to bring cases seeking monetary relief in more serious fraud cases and will refrain from such demands in cases where the issue is one of substantiation.
  • The FTC will be cognizant of how its actions — particularly consent orders — have the potential to "chill" truthful speech, particularly in emerging business areas. For example, in 2018 the commission will consider whether the restrictions on speech could have an unanticipated impact on certain types of technological developments.
  • The FTC is poised to litigate more cases administratively rather than in federal courts. The commission will likely rely on its administrative courts to raise important issues and through the decisions establish industry-wide principles and guidance, as they did in the 1980s for standards governing deception, unfairness, and substantiation.

The approach is in lieu of seeking monetary damages. As Acting Director of the FTC's Bureau of Consumer Protection Tom Pahl described it: an exercise of "prosecutorial discretion to seeking monetary relief in advertising substantiation cases only if the advertiser engaged in dishonest or fraudulent conduct."

 

5. DOJ and Bid Rigging

In 2016, the U.S. Department of Justice made headlines when it acknowledged there was an investigation into bid rigging in commercial production. The revelation brought back memories of a similar investigation in 2002 that led to prison terms for some ad agency executives.

Press reports indicated that in 2017 a number of the advertising agency holding companies were subpoenaed in the investigation. Since then everything has gone silent and no further word has come from the DOJ. One has to believe that this investigation, one way or the other, will conclude in 2018.

 

6. NAAG As a Nanny and Caregiver

The National Association of Attorneys General has announced a 2018 focus on advertising and marketing directed to children and the elderly. While the industry has a robust self-regulatory regime for children's advertising, no such specialized unit exists for advertising to the elderly.

As more baby boomers enter their golden years, there will undoubtedly be more pressure to protect that growing population from deceptive and unfair advertising practices. Since the FTC is unlikely to step in any time soon — welcome to regulation by 50 states.

That's a letter of inquiry no one wants to receive.

 

7. Weeding the Garden

There was much talk in 2017 about walled gardens at Google, Facebook, and other digital publishers that are allegedly preventing brands from fully accessing details of their advertising investments. That has been coupled with headlines that have questioned the accuracy and integrity of some analytics from behind those garden walls. The Media Rating Council is trying to work out more transparency and accountability with the providers and 2018 will reveal how far providers are willing to let brands get into the digital weeds.

 

8. To Err Is Human

Bots plague the digital landscape. Statistics are questionable given all the non-human traffic skimming billions of dollars from the brand community's investments. Industry consultant White Ops has now completed three studies for the ANA in an effort to find ways to minimize the non-human intrusion.

This black eye has done more to damage digital spend than any other factor. At least one major marketer cut back spending by millions in 2017 and reported it had no negative effect on the impact of its marketing. Others followed. In 2018 this trend can be expected to continue as brands begin to question their commitment to digital and the failure of the supply chain to solve the fraud epidemic.

The argument that because impressions are so cheap, brands shouldn't care won't work in 2018, so investors might not want to go long in martech for the coming year.

 

9. Safety Patrol

As if the plague of bots wasn't bad enough, brand safety was a major concern in 2017. Some think it is even more important than fraudulent, non-human traffic. Being associated with reprehensible websites or digital purveyors goes to the heart of a brand's integrity and good will. Bots only waste money.

The issue of whether brand safety can be assured remains a center of great debate. Some say there is no effective technology solution and that digital publishers cannot afford the manpower to monitor and weed out offensive associations. Unless that discussion turns from debate into solutions, brands in 2018 will have more reason to move away from digital and back to traditional media. So the pressure is on Google and Facebook. Are their programming and algorithm safety patrols up to the task?

 

10. Power to the Brands

The biggest story for 2018 will at first not seem to be a legal one at all. The ANA has called for brands to take back control of the ecosystem, long relegated to the supply chain. This year the momentum of brand control we saw in 2017 will accelerate. This will mean new contracts, greater accountability, increased transparency, movement to in-house operations, and more.

Like it or not, the chaos that will follow is grist for the legal mill.

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So there you have it. Ten predictions for 2018, the year of the dog in the Chinese zodiac. Happy Barking New Year.

 


Douglas J. Wood is a partner with Reed Smith LLP and general counsel to the ANA. You can email him at dwood@reedsmith.com.