Ad Industry Gears Up for Battles With Washington

Health care, behavioral marketing and kids' TV among myriad fronts

Up to now, advertisers and agencies have dodged a bullet on one of the administration's marquee issues: health-care reform. They've mounted a successful campaign to block an amendment that would help pay the tab for health care with billions in new taxes on TV drug ads. But the battling has only begun, and a years-long war over ad-related issues that could threaten billions of dollars in spending is on the horizon.

The operative question is whether decreased ad spending in a down economy, combined with an administration vowing a consumer focus that translates into tightening the regulatory reins, could produce a perfect-storm scenario for advertisers.

“I think a lot of people use 'perfect storm' and they are really talking about squalls,” says Dan Jaffe, executive VP of government relations for the Association of National Advertisers. “This is more like a tsunami. We have a new cast of characters in the leadership of the Congress, the presidency, the executive agencies and the regulatory agencies with an extraordinary agenda, and the advertising and media community had better ramp up to meet this unprecedented challenge.”

Key issues, representing billions in potential ad dollars, could turn the tide. First, the Obama administration is proposing the creation of a Consumer Financial Protection Agency that would take over some of the duties of the Federal Trade Commission relating to oversight of financial services. Meanwhile, FTC reauthorization legislation could lead to new enforcement powers for the agency, such as the ability to impose immediate civil penalties, that trouble ad industry lobbyists.

Also, an online privacy bill, a priority in the House Communications Subcommittee, could take a toll on behavioral marketing, a growing category for advertisers looking to secure the audience being siphoned from traditional TV. It is a “very major issue” for advertisers, according to Jaffe: If privacy regulation is not carefully drawn, advertising “could be seriously disrupted.”

Health-care reform may mean millions of ad dollars in the short term as both sides take their campaigns to the airwaves, but in the long term it could be a double-edged sword.

In addition to the deduction for drug advertising that may still resurface in a final bill, there is the issue of obesity, which costs billions in health-care spending. This could put food marketing back in the crosshairs, despite an ongoing industry self-regulation effort that has resulted in new food labeling, healthier offerings and limits on TV marketing to kids, say ad industry lobbyists.

Jaffe believes the health-care bill could have another side effect: House Commerce Committee Chairman Henry Waxman (D-Calif.) has said he will “revisit” the ability to advertise prescription drugs in general.

Clark Rector, executive VP of government affairs for the American Advertising Federation, agrees with Jaffe and stresses that the deductibility issue might have the biggest impact. “If that were to pass, I don't think anybody thinks it would stop at prescription drugs,” Rector says. “If you set the precedent of going after [direct-to-consumer advertising], there are lots of products out there where they have talked about restricting advertising, including alcohol, soda and snack foods.”

A recent study by the Urban Institute suggests that that there should be a tax on snack foods and more restrictions on food marketing to battle obesity, which the government calls a growing health crisis.

Then there is the bill—with 88 co-sponsors at last count—that would regulate commercial volume (as in loudness, not number of ads) on television. The industry is working on self-regulation in hopes of heading off that effort.

The FCC, for its part, is likely to ban interactive ads in kids' shows absent parental consent. This is part of a larger review of its children's TV rules—due to Congress at the end of the month—that could create other headaches for advertisers, particularly one proposal from Common Sense Media that would require TV ratings on ads as well as shows.

FCC Chairman Julius Genachowski, a founding board member of Common Sense Media, has indicated that he is inclined to ban the interactive ads. Kids, he said, should not be treated like “little consumers.”

“I believe that advertising aimed at kids and teens will be the subject of genuine scrutiny, and I think that is good,” says Common Sense CEO James Steyer. “There needs to be clear limits in certain areas, and that could have significant impact in the public health context.”

Finally, the FTC has signaled it is likely to tighten its guidelines on on-screen testimonials for health and weight-loss products. And at a recent oversight hearing, Sen. Claire McCaskill (D-Mo.) said she would ask the FCC to look harder at TV ads that mimic newscasts.

“There has never been this level in the past that I can remember,” says Jaffe of the scrutiny. He expects to have a very busy August.

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