Wednesday, March 16, 2011

ANA part 3

Luncheon Keynote
Jim Davidson, Executive Director of the Alliance for American Advertising and The Advertising Coalition, Chair, Public Policy Group, Polsinelli Shughart PC

Unprecedented level of attacks: taxes on ads (limits on deductibility); restrictions on food ads, especially for those under 18; online ads for prescription drugs (stalemate at FDA about this); limits on online consumer research.

100 new Republican members with no commitment to prior priorities. Having difficulty setting priorities and implementing them. Hostility towards certain types of ads, particularly pharma. Tax poses a major threat. Republicans were behind 2 of 3 of the major attempts to tax ads in the last 15 years—it’s a way to raise revenues without being seen. On the table to fund the Bush tax cuts.

Ending deduction for DTC pharma ads alone, as approved last year in House Ways & Means, could raise $37 billion over 10 years. The debt is big, so everything is on the table.

FDA is catatonic on the issue of social media to communicate information on prescription drugs.

Various proposals: maybe all businesses should take a haircut to share the pain. (Interestingly his examples are 2/5 individuals: mortgage deduction and retirement age.) Deductions are attractive targets in this environment.

Under 18: proposal from interagency group of USDA, CDC, FTC, and FDA to ban all food ads to those under 18. Another: extend FTC powers to regulate ads (he means, move from Magnusson-Moss rulemaking to APA rulemaking, though he didn’t mention notice and comment). Proposal to tax ads for unhealthy foods and use them to fund PE, but why pick on ads? Major advocacy campaign to label food ads the next tobacco.

Interagency nutrition standards would affect most advertised foods, including peanut butter, yogurt, vegetable soup, almost all cereals. (I’ve got to say, maybe you shouldn’t put quite so much sugar into that yogurt, then.) Would affect adult ads because of crossover viewing; 1700 programs rely on these ads for funding. Also, Institute of Medicine 2005 study say there’s no current evidence of a causal connection between marketing to children and childhood obesity. Academics are trying to disprove this. Our mission is to keep on top of that and provide contrary research.

Ads are a vital part of the US economy in every state. IMS Global Insight used a model developed by Lawrence R. Klein, Nobel laureate. Every dollar of ad spending generates just under $20 of economic output (RT: advertising encourages consumption, but it still doesn’t affect obesity—a miracle!). Every $1 million of spending “supports” 69 American jobs. Ads contribute $5.8 trillion of economic activity.

Meetings with Senators/Representatives in their home states/districts are most effective. Explain the impact of ads—local broadcasters, ad agencies, etc. should be part of meetings to bring the message home.

Keynote Address
Bryant Godfrey, Regulatory Counsel, Division of Drug Marketing, Advertising and Communications, Food and Drug Administration

Standard disclaimer: these are his views. DTC is legal but consumers sometimes walk away with misleading impressions. DDMAC has initiatives to promote voluntary compliance; encourages presubmission of ads, issues guidance documents, travels around the country for outreach efforts.

FDA looks at net impression of the promotional piece as a whole. Social media: public hearing in Nov. 2009. 12 FDA panelists and 77 presentations by industry, advocacy groups.

2007 act allowed FDA to pre-review DTC TV ads, give monetary penalties for violations, and make rules on the major statement. Existing regs require broadcast ads to disclose major side effects and contraindications in audio or audio and visual (the major statement); also require fair balance between information relating to risks and to effectiveness. Proposed rule, issued March 2010: a major statement is clear, conspicuous and neutral if the info is presented in language readily understandable by consumers; audio standards for volume, articulation and pacing; textual information has standards for contrasting background in size and style of font that allows easy reading; should not have distracting representations in any medium that detract from the information.

Info should be provided in other languages, especially for communities with limited English proficiency. Target community wants to be involved in development of message to ensure it’s relevant and culturally sensitive.

Risk based enforcement approach, looks at impact on public health, with factors including newly approved products, scope/breadth of advertising, health risks, whether the company has been a violator in the past, and competitor complaints. Common violations: omission/minimization of risk information; unsubstantiated claims of efficacy/safety; unsubstantiated comparative claims; promotion of unapproved uses (huge settlements with DoJ); broadening of FDA-approved indication.

We like to start off with untitled letters for violations that aren’t as egregious; warning letters are for more egregious violations.

Example of violation: Viva Viagra ad that was mostly a song, but called the drug the most prescribed “for erectile dysfunction”—tiny super said consult doctor for risk information. This was not enough.

Bad Ad Program: dedicated email and phone line for submitting complaints. Derma-Smoothe warning letter: company webpages. Violations included omission/minimization of risk information (many limits on who can use the product and where—but the page said “no adrenal suppression” and that it could be applied on over 90% of the body, neither of which were true; warning says that it should be prescribed with caution to those with peanut allergies, but the site said “peanut allergies are not a problem”); unsubstantiated claims of efficacy/safety; unsubstantiated comparative claims; and broadening of FDA-approved indication. Also made a claim that the patient would only need one bottle to treat the condition, but there was no evidence this was true.  

Green Marketing
John Feldman, Partner, Reed Smith LLP

Green claims are credence claims, leaving consumers particularly vulnerable: cost of determining truth of claim far exceeds value of determination. And yet green claims are of increasing import to consumers who are clamoring for more environmentally friendly options.

Proposed Green Guides—focused on deception, not environmental policy. International standards were not a priority. Most important was the consumer perception data.

Consumers take myriad messages from general environmental claims. 50-60% think green/ecofriendly means recycled; 40% think compostable, and 36% think made with renewable energy. When the FTC tested green claims with qualifications, miscommunication went down considerably (though was not eliminated). Interpreted results as demonstrating that general unqualified claims were likely to communicate a variety of messages, all of which require substantiation; unlikely that advertiser could do so. Thus the new version of the guides say that you’re so unlikely to be able to substantiate that the default should be not to make an unqualified green claim. Ensure that the context, even with qualification, isn’t deceptive through implication. “Buy my wrapping paper because it’s not made with chlorine, which has been shown to harm the environment.” This would be deceptive if the alternative bleaching agent was equally harmful to the environment. How far does this principle go?

James A. Dudukovich, Marketing Counsel, Coca-Cola North America

FTC is worried that people are dumb and need to be spoonfed. He agrees to a great extent, because environmental action has such a positive halo, because optimistic consumers are likely to round up.

Feldman: suppose you stop bleaching, but then you need a new pigment formulation with greater toxicity. So it’s not exactly a tradeoff; but could there be an implied claim here?

Dudukovich: Absolutely. If you brag about the good, may have to disclose the bad.

Feldman: certification/seals of approval. Is it deceptive, as the Green Guide proposal says, to use a third party seal if you’re a member of the third party trade organization? Will this survive to the final, and how does it relate to the Endorsement guides?

Dudukovich: We still don’t really know how the Endorsement guides will be enforced. But the area of seals is definitely ripe for action, because consumers will round up unless you explain what that seal means. In terms of trade association membership, for which we pay membership dues, do we need to disclose the material connection? He doesn’t know what the consumer takeaway is—what they need for an informed decision. If we pay $500 a year to belong, if the seal clearly discloses what it means and the product actually complies, does it matter? He believes that years back some Coca-Cola products participated in “gold medal taste award” programs that it paid for. Go back to the fact that these are faith-based, untestable claims.

Feldman: recent FTC action on “Tested Green Green Certified” logo available to anyone who paid a fee; Tested Green did not confirm anything and also portrayed itself as endorsed by other entities, in fact not independent.

Dudukovich: this is everything you could do wrong in one almost unbelievable package. The statement is meaningless and it wasn’t even tested!

Feldman: degradable—FTC guidance requires breakdown within a reasonably short period of time after customary disposal—FTC proposes 1 year. But shouldn’t science be built on science rather than public opinion? FTC turns to consumer research for guidance on meaning of compostable as well. Compostable: there should not be any unqualified compostable claims unless facilities are available to a substantial majority of consumers/communities—60%. This entails rejection of ASTM standards for meaning.

Dudukovich: can present a daunting task for new players to substantiate.

Feldman: and therefore raises competition issues. Legal tension between consumer perception and science in an area that has been heavily based on the latter.

Recyclable: FTC has continued its focus on availability of recycling stations. Unqualified claim can be made when facilities are available to 60% or more (substantial majority); when facilities are available to a significant percentage, you can make the claim with a disclaimer; when facilities are not available to a significant percentage, you have to be specific about where/what percentage.

Free of/nontoxic: may be deceptive even if true, if the item has substances that pose the same or similar environmental risk as the substance not present, or the substance has never been associated with the product category. Background levels/trace amounts of a substance ok.

If a manufacturer takes out ozone-depleting substances from its refrigerant, and calls it environmentally friendly, FTC example says that’s deceptively broad if the AC unit consumers a substantial amount of energy/relies on greenhouse gases.

Dudukovich: this seems like it’s covered elsewhere (don’t make unqualified claims)—do you have to do a lifecycle analysis for everything? If you don’t, what’s up with this example.

Feldman: various new claims addressed for the first time—carbon offsets. Mostly these are logical extensions of principle: you need substantiation; you need to be consistent with consumer perception; you need to avoid double-counting. Based on consumer perception survey, FTC recommends that carbon offsets that take more than 2 years be disclosed as to their length. FTC also recommends that you can’t use things you’ve been required to do by regulation as advertising benefits (additionality), apparently because consumers can’t figure that out.

Guides didn’t address sustainability, organic/natural, or life cycle analysis, in part because of First Amendment concerns. “Sustainable” meant “durable” to consumers, not a general environmental claim—an aspirational type of claim. FTC will look at life cycle claims on a case by case basis, requiring substantiation.

Young companies, unless irresponsible, will not be able to make cutting edge claims. FTC needs to be cautious about the costs it’s imposing on marketers.

Dudukovich: the environment isn’t going to go away as an issue. As corporate citizens, companies may be focusing not entirely on message, but on doing the right thing—so there may be some activities that are environmentally beneficial, and as we get our feet under us our ability to talk about them will grow.

Q: seems to be a growing FTC distrust of the value of disclaimers.

Feldman: distinguish mouse print from full-size disclosure right next to the claim; this is difficult next to the seals/certification marks which the FTC treats as unqualified green claims—they want it right there on the logo, impacting creative decisions.

Dudukovich: creatives sometimes lump disclaimers all together and put them in a lump in the bottom—compliance w/network standards is not the same as clear and conspicuous.

Feldman: note that our presentation is US-focused; should also consider world marketing.

Putting It All Together: New Media and the Future of Advertising (Social Media, Behavioral Advertising, Blogging, Astroturfing and More)

Rebecca Tushnet, Professor of Law, Georgetown University Law Center

Panelists: Matt Forsyth, Vice President, Legal and Assistant General Counsel, Sapient
Jeffrey Greenbaum, Partner, Frankfurt Kurnit Klein & Selz PC
Felix Hofer, Partner, Hofer Lösch Torricelli
Peter Le Guay, Partner, Thomsons Lawyers
John Salloum, Counsel, Heenan Blaikie
Sarah Stuart, Associate General Counsel, Reebok International Ltd.

We had a very good conversation which I can’t replicate, though we talked about Etsy’s recent trouble with switching all user profiles (including items they’d listed as favorites) to “public,” making real names searchable along with usernames if the user had filled that out back when it was private. Hofer reminded us that Europe takes privacy much more seriously, as a human right and not a consumer protection issue, and that written consent is required for disclosure of sensitive personal information—which some of the “favorites” information might qualify as, given that Etsy sells sex toys.

Stuart talked about a couple of Reebok promotions making use of social media—getting consumers to design custom Reeboks, and asking their friends to “like” their designs in order to qualify for the final round, where a celebrity endorser picked the winner. Another upcoming initiative involves “checking in” at physical stores and sending a photo of oneself engaging with the product, in order to earn points redeemable for rewards. A couple of points on this one: be extremely careful with photos; again, written consent would be required in Europe and maybe here to use them to promote the product to other people. Reebok’s plans don’t include that, but they still have to provide for data security. If the use were more extensive—if, for example, the check-in was shared on Facebook, and the consumers received rewards for doing this, issues of endorsement would arise, both under the FTC’s Guides and under the laws of other countries.

Devolution of marketing: what happens when affiliates or other entities—franchisees, individual authors promoting their books on behalf of their publishers—do things online? Example: many authors these days blog and give away free copies by random selection, sometimes for comments and sometimes for retweeting book announcements. Salloum suggested that this was a sweepstakes and needed to comply with relevant regulations, and said that Canada had actually jailed a poet for running an unlawful sweepstakes—it’s a criminal regulation in Canada—so one ought to take this seriously. It’s not just that you want to train your affiliates about endorsement guidelines, though that’s true—you don’t want your authors going to jail!

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