Marketers Cast Wary Eye on Regulatory Agenda
January 5, 2009
With a new administration, a substantially new Congress and an array of crises that President-elect Barack Obama will have inherited from the soon-to-be-ex, the crystal ball is murky on key regulatory issues that marketers will face.
But a couple of things are likely: with regulatory-minded lawmakers set to oversee commerce and communications and the credit crisis compelling even Republicans to rethink laissez-faire, there will probably be more power to oversee marketing at the Federal Communications Commission and Federal Trade Commission (FTC), and more rules about everything from product placement to behavioral marketing.
"Nobody knows what's going to happen," concedes Dan Jaffe, executive vice president of government relations at the Association of National Advertisers (ANA). "But there is the largest potential agenda we have faced in many years, and a substantial turnover at the Congressional level."
Jaffe says the direction of legislation may be evinced by two appointments: Rep. Henry A. Waxman (D-Calif.), former chairman of the House Committee of Oversight and Government Reform and an advocate for stricter regulation of tobacco marketing, carbon emissions and prescription drug advertising, will chair the powerful Energy and Commerce committee. The committee's purview includes environmental issues, health care, and consumer protection.
Sen. John Rockefeller (D-W.Va.)--who, as a member of the Senate Commerce Committee has advocated for laws curbing TV violence--will chair that committee, which also oversees Science and Transportation.
And, Jaffe says, a lot of issues were raised in 2008 that have not been resolved. One was the FTC Reauthorization act (S. 2831) sponsored in April by Sen. Byron Dorgan (D-N.D.), one of the top-ranking Senate Democrats. Jaffe says Dorgan's proposal would constitute the largest re-draft of the FTC act in more than a generation, and would increase the size of the commission over the seven years of authorization--"doubling funding, dramatically increasing powers, giving [the FTC] immediate civil-penalty authority and the right to bring across-the-board rule changes under very fast time frames."
"At some point [this] year, this is likely to come up--but when, I don't know," he says. "It would dramatically increase the authority of the FTC over banks, financial institutions, and not-for-profits." He says it would also give the commission new authority to regulate telecommunications carriers in the areas of advertising, marketing and billing.
Jaffe says the ANA wants a strong FTC "because we want a fair marketplace. But it has multiple effects."
The ANA says one effect would be "a serious 'rush to judgment,' allowing the FTC to make major industry-wide regulatory changes without adequate time for business input and thoughtful consideration. The bill also would give the FTC power to impose civil penalties without any prior rule or order by the agency, an authority the agency has never had before."
Another piece of legislation that is almost certain to move because of Waxman's new chairmanship is tighter tobacco advertising restrictions.
Jaffe says that in 1996, Congress passed very broad rules covering virtually every type of advertising of tobacco products. "That was struck down by the Supreme Court. New legislation would provide [Food and Drug Administration] jurisdiction and then reinstitute that rule in toto, raising all sorts of issues because it includes an outdoor advertising ban, requires 'tombstone' advertising, and enforces black-and-white ads with major disclosures."
Jaffe argues that such broad restriction on tobacco products will create precedents for products "way beyond tobacco."
Waxman had, for example, put forward advertising limitations on new drugs and introduced legislation to give the FDA jurisdiction of over-the-counter drugs--which, like the tobacco bill, would fall under the FDA's purview. "So you see the potential of both the FDA and FTC to become much larger players," says Jaffe.
Jaffe worries that expanded jurisdiction will mean a bottleneck if it doesn't come with more funding. "When you expand their jurisdiction, are you funding oversight sufficiently? This may be a major increase in FTC authorization and a major shift [of oversight] to the FDA, which could regulate not just prescription and over-the-counter drugs, but also devices and their advertising."
In the food arena, Jaffe says two recent studies could exert pressure on Congress to tighten advertising. One, a nationally funded study this year by researchers with the National Bureau of Economic Research, suggests that banning fast-food advertising on TV would reduce obesity among 3- to-11-year-olds by 18%.
The other study, "Media and Child and Adolescent Health: A Systematic Review," (led by Dr. Ezekiel J. Emanuel of the National Institutes of Health and brother of Obama's incipient chief of staff, Rahm Emanuel), is a meta-analysis of 173 studies over the past three decades. It found that 86% of the studies on media exposure and childhood obesity showed a direct relationship between the two.
Notes Jaffe: "In one case you see food ads being attacked as the cause of obesity; on the other hand, media, supported by ads, is a cause of health risks, so either directly or indirectly, advertising has been implicated."
He argues that the studies force advertisers into an uphill battle because the former may get better publicity and do not reflect recent voluntary industry self-regulation programs like the Food and Drug Initiative.
"You now have less advertising in the total of food products and the composition of that food advertising substantially changing, so we think we stand on a strong foundation if we have to debate the food issue with regard to obesity," he says.
Also up for review are guidelines dealing with behavioral advertising and targeted marketing--issues raised by Ed Markey (D-Mass.), the House Subcommittee on Telecommunication and the Internet chairman. Jaffe says that targeting works for business and consumers. "We think that ads must be efficient and effective. And consumers don't want to be bombarded by untargeted ads, which is spam. So on both the consumer side and on the business side, we think behavioral targeting is critical."
And on Feb. 17, the nation will convert to digital television--making TV, as Jaffe puts it, part of the Internet. "The firm prediction that can be made is that this is going to be a Congress that leans pro-regulatory on both sides of the aisle."