Facing the Regulatory Music1 Nov, 2008 By: Thomas Haire Response
Leading legal and industry association experts discuss the current regulatory landscape in direct response marketing.
Bill McClellan, vice president of government affairs, ERA: The first and most important thing that's going to be an issue for the industry and the association is the streamlined sales tax. Because of the weakened economy, the states have a stronger play in Congress to try to get legislation. We are gearing up to have a fight next year with the advocates of the streamlined sales tax. Those include the National Retail Federation (NRF), the National Governors Association (NGA) and the National Conference of State Legislatures. Another issue that is important in the industry is net neutrality. We've done a pretty good job in making small steps toward the neutral net, both at the FCC, with the Comcast decision, and also with policymakers — making the case that this is crucial. We expect there will be a couple pieces of legislation that will be hotly debated. A third issue is behavioral advertising. There are two subsets of conversations we're having with Congress right now. The first is behavioral advertising in its traditional context, which is a third-party ad network and how people drive consumers over those networks or different Web sites. A secondary issue — and one that people are looking at more closely — is deep packet inspection. Deep packet inspection concerns the new routers that companies like Comcast and AT&T are starting to put into service that have the ability to open and lift any information that goes through them. They can open your E-mail, they can open a packet of data stream and record that. Then they can use that information to serve advertising. The scary part of it is that they will be able to look at anything and everything a consumer does. This has the opportunity, if not properly maintained and regulated, to be a lot more sinister than other forms of data collection.
Linda Woolley, executive vice president, government affairs, DMA: As a new member of the team here, one of the things that makes DMA unique is that it encompasses many different channels, industries, platforms, businesses and companies. Because of this, one of my top priorities will be that of building on and strengthening the terrific relationships that DMA already has in place with other trade associations and regulatory agencies, and finding commonality amongst our many diverse interests. Additionally, I am looking forward to working with the talented, experienced government affairs team that is already in place at DMA and building on that teamwork. Lastly, DMA's government affairs team will use the remainder of the year and the beginning of next to prepare for a new president and administration — and, to that end, we will be sensitive to any changes that might be taking place in key positions throughout the federal government.
For many years, certain sectors of the direct response TV industry believe the FTC has targeted them. Do you believe this has been the case, and if so, is this targeting slowing down or is it still growing? What effect is the ERA's self-regulation program, debuted a few years ago, having on this back-and-forth?
Knowles: The FTC has frequently stated that they do not have a particular hostility to the direct response industry, and I do not believe they intentionally target our industry. However, the FTC's position has to be understood in the context of three overall industry trends. First, the FTC has, in some respects, ceded regulation of national advertising to the National Advertising Division (NAD) of the Council of Better Business Bureaus. You can count on the fingers of one hand the number of FTC advertising cases that have been brought against Fortune 500 companies this year. It has become an agency that is almost exclusively interested in advertising that approaches fraud or threatens injury to the health of consumers, and that has led it to focus heavily on bogus weight-loss and other health-related claims. Coincidentally, weight-loss and health products are two of the major areas in DRTV, which gives rise to the second reason for apparent FTC concentration on direct response marketing. Thirdly, the FTC is interested in returning money to consumers when it is able to prove a violation of advertising law. This is much easier to accomplish in the direct response context — where the seller has a record of the name, address and other identifying information of each purchaser — than it is in the typical retail distribution model.