ERA Launches Self Regulatory Program1 May, 2004 By: Response Contributor Response
The Complete Process Unveiled to the Public
In February during the Spring Conference in Miami, ERA hosted a panel discussion that outlined the organization's revolutionary Self Regulatory Program. This program, unprecedented in nature, stands to greatly improve the playing field in which direct response professionals do business. During February's session, ERA's leadership, including Barbara Tulipane, Jim Lehrburger, Linda Goldstein and Jack Kirby, addressed the audience and explained what ERA hopes its Self Regulatory Program will be able to accomplish. While this panel highlighted numerous program specifics, many of the details were confidential due to pending contract negotiations. Well that is until now.
Since its inception, ERA has had marketing guidelines in place that require members to comply with ethical standards of best business practices. These guidelines, while valuable in content, lacked the enforceability to truly be effective at maintaining optimal industry standards. In 1990, ERA was founded on the basic principle that industry leaders must band together to self-police an evolving marketplace to avoid federal scrutiny. While it has taken some time to be fully realized, this vision truly began to take shape and seem actionable last year.
ERA's Self Regulatory Program - The SpecificsOn April 12, ERA announced the formal launch of its Self Regulatory Program to the general public and national media. Overall, this program was created to improve industry business practices and increase consumer confidence, while also allowing direct response professionals a forum to review claims independent of federal regulation. In 2003, it was estimated that the direct response industry grossed more than $256 billion and is growing at a rate of almost 10 percent annually. These statistics are staggering and help illustrate public demand for the convenience that E-retailing provides. However, with astounding growth and profitability, also come unscrupulous marketers who erode consumer confidence when fraudulent product claims are brought to light. ERA's members understand that poor marketing practices destroy industry credibility and have initiated the creation of a self-regulation program to help remove the biggest offenders from the airwaves.
When ERA first began to create its Self Regulatory Program, it was decided that three distinct characteristics were necessary to make the program effective: it had to be independent, it had to be expeditious and it had to be enforceable. In order to ensure independence, ERA teamed up with NARC, the National Advertising Review Council, to act as the program administrator and overseer of the program. NARC, an investigative arm aligned with the Better Business Bureau, also runs the National Advertising Division, which reviews truth in general advertising. NARC worked with ERA for some time to determine what exact fit was needed for a direct response industry program. "NARC's administration of the National Advertising Division is quite effective, but the more we looked at it, the more we realized it just wouldn't work for our industry," says Barbara Tulipane, ERA's president and CEO. "NAD's review process can take months, even years-and given the speed in which profits are made from DR shows-we needed something different and more expeditiously effective."
With this realization came the creation of a unique, independent arm under NARC called ERA's Self Regulatory Program. Under this unit, a program attorney reviews all referred shows within 60 days of receipt for substantiation related to claims made in direct response advertisements. This element of speed was most important to remove the most egregious offenders immediately. "NARC is determined to review programs as quickly as possible to minimize damage to the consumer resulting from unsupported advertising claims," states Jim Guthrie, president and CEO of NARC and administrator of the program.
In addition to a complete review and evaluation within 60 days, ERA's Self Regulatory Program allows no opportunity for appeal. "Appeal further impedes the process and allows bad shows an opportunity to stay on the air longer," says Tulipane. "While we understand this will make our process a bit less thorough for extensive scientific reviews, it is necessary for our purpose of going after the worst offenders to work fast."
Questionable programs can be referred by multiple parties, including ERA members and nonmembers alike, as well as advocacy and consumer groups that see questionable advertising claims. Once a program is referred, the marketer is given 15 days to provide substantiations for claims being made. After that time, the program administrator renders his or her recommendation: either the claims are valid, or the marketer must pull the show and make adjustments. If the marketer chooses the latter, then that case is immediately referred to the appropriate regulatory body.
Enforcement EffortsWhile ERA hopes that marketers will be willing to make adjustments to unsubstantiated programs, the realization is that some may refuse. Therefore, in the event that a marketer declines the program's recommendations, both ERA and NARC jointly will publicize the findings through press releases, Web sites and news bulletins. "The purpose of publishing the results is to maximize negative exposure to hinder vendors, suppliers and other industry professionals from doing business with unscrupulous marketers," says Tulipane. "Our members want bad shows off the air and we want to make sure they're aware of who the true offenders are." In addition to negative publicity, ERA will also remove any offenders from ERA's membership and immediately cease benefits and services.
As a final measure of enforcement, ERA will refer the noncompliant program to the appropriate federal agency, predominately the Federal Trade Commission (FTC) or Food and Drug Administration (FDA), depending on its subject matter. ERA's Self Regulatory Program has drawn the support of the Federal Trade Commission and, particularly Chairman Timothy Muris. "The ERA Self Regulatory Program can be an important step forward for consumers and business alike. I commend ERA for its initiative in developing this program and look forward to seeing the results," says Muris. In addition, the FTC has indicated to ERA that they will give any referred program a very close look when making a determination. "I am very encouraged by the voluntary self regulatory efforts of the Electronic Retailing Association and the direct response industry as a whole," he added.
In addition, the organization is also reaching out to television and cable associations to make them aware of these industry self regulation efforts and to publicize noncompliant findings to their respective memberships. Cable and TV networks need to be made aware if they are running shows with unsubstantiated claims that stand to harm the consumer. ERA is hopeful that networks and cable associations will support the program and work with ERA on future developments of the program.
Public InterestTwo days after the national program announcement, ERA's Self Regulatory Program received significant press attention, including coverage in the New York Times, on Good Morning America, CNBC News and CBS Radio, and in numerous industry trade publications like Advertising Age and DM News. This type of media attention illustrates the need to create a program of this magnitude and the significant amount of consumer interest in the direct response industry. "ERA advocates increased ethical standards in the direct response industry because it's not only the right thing to do, but because consumer confidence is good for business," says Tulipane. "ERA is confident that this Self Regulatory Program will help level the playing field to increase industry profitability and credibility that ultimately will result in improved sales." ERA hopes to have the program fully operational by May 1 to begin the review process.
For more information, contact ERA directly at (703) 841-1751 or visit ERA's Web site at www.retailing.org.