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This post was written by Rachel Rubin and Adam Snukal.

Is there an advertiser in California (or perhaps anywhere) who has an idea of what California’s single-publication rule even provides?

Before answering that question, let’s define the rule itself.

The single-publication rule generally provides that publishers and advertisers alike that use a person’s image, either in an inappropriate and tortious manner or without authorization, with broadly circulated products that are visible to most people, can generally only be slapped with a single tort claim no matter how many times the offending image was reprinted. The rule carries a two-year statute of limitations, commencing from the first publication, unless a person whose image was used had no “meaningful ability” to be aware of that publication.

So that’s the rule. And at least one company – Nestlé USA – is now very aware of it.

In 2002, Russell Christoff, a former model, unexpectedly came face to face with his own picture on a container of Taster’s Choice coffee when a woman standing in line with him at a Home Depot store told him he looked just like the guy on her coffee jar. Several years earlier, Christoff had posed for the photograph for Nestlé Canada. He was paid $250 and given a contract guaranteeing him $2000 plus an agency commission if Nestlé Canada used the photo. Christoff never heard another word. Allegedly unbeknownst to Christoff, Nestlé Canada used his image on the product. And between 1997 and 2003, Nestlé USA placed his image on millions of Taster’s Choice labels cross the United States and abroad. Within a year of his fateful discovery in the checkout line (and six years after Nestlé USA began using his image), Christoff brought suit for appropriation of his likeness under California’s right of publicity law, where use of a person’s photo for advertising is prohibited absent his or her written consent.

In 2005, the California trial court held in favor of Christoff and the jury awarded him $15.6 million on the basis that Nestlé used Christoff’s image without permission or the requisite rights to do so. On appeal in 2007, however, the Court of Appeals reversed the $15.6 judgment, holding that the “single-publication rule” applied to a right of publicity claim such as that asserted by Christoff. Since Christoff had not filed his lawsuit within two years of Nestlé’s first “publication” of the label in question, his cause of action was barred by the statute of limitations. According to the Court of Appeals: “unless a reasonable person in Christoff's position had no meaningful ability to discover the publication, Christoff must have filed a lawsuit within two years of when Nestlé first published his image or republished his image.” Because the trial court refused to apply the single-publication rule, and permitted Christoff to proceed on his claims even though he did not file suit until approximately five years after Nestlé's first use of his image, the Court of Appeals held that the entire judgment had to be reversed for a new trial, and narrowed the scope of any new trial to just “republications” of Christoff's image by Nestlé, if any, that occurred within the limitations period.

Christoff then appealed to California’s highest court. On Aug. 17, 2009, the California Supreme Court agreed, in general, that the single-publication rule applies to causes of action for unauthorized commercial exploitations / misappropriations of a likeness. The court, however, disagreed that Christoff’s claim was barred by the two-year statute of limitations. According to the court, “The Court of Appeal’s ruling presupposes that Nestlé’s various uses of Christoff’s likeness, including its production of the product label for a five-year period, necessarily constituted a ‘single publication’ within the meaning of the single-publication rule. While Christoff’s counsel argued that the single-publication rule does not apply to Nestlé’s printing of its product label because it is not ‘a single publication’ (i.e., a one-time occurrence) such as a newspaper, book, magazine, or television broadcast, Nestlé asserted before the court that the single publication rule was intended all along to apply to multiple printings of the same publication.”

The California Supreme Court has remanded the case back to the lower court to decide whether producing the labels was a single substantiated publication or not, citing that the parties never had the opportunity to present their positions on this issue. If on remand it is established that all or some portion of the production of the label constituted a single integrated publication, then the lower court was instructed to further consider whether the statute of limitation began anew because the label was “republished” within the meaning of the single-publication rule.

The key element of the California’s Supreme Court’s ruling in this case centers around what constitutes a “single integrated publication,” as this is the primary determinative factor in applying the single-publication rule. “While it is clear that the publishing of a magazine or a newspaper is a well-defined publishing event, there is limited authority or case law on the characterization of a label or dissemination of a national advertising campaign.” The court noted that Christoff’s likeness not only appeared on coffee jars, but also on coupons, transit ads, Internet banners, newspapers and magazines. All of these various examples raise the question of whether each such use should be considered a “single integrated publication” or whether, collectively, they constitute a “single integrated publication.” 

Why This Matters

Though book and magazine publishers are guaranteed some repose from defamation, libel or misappropriation suits after the first publication of their product, advertisers do not yet have this protection. Because the court declined to define “single publication” as applying to advertising materials and campaigns, and because there is, according to the court, little guidance as to whether a manufacturer that produces a product label for a period of years is entitled to the same limited liability (especially while that product label is still being produced), it remains a factual question as to whether the unauthorized use of an image on a product is a single, overt act, or a continuing wrong. The court indicates that this decision will turn on “the manner in which the labels were produced and distributed, including when production of the labels began and ceased.”

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We have received some questions on how existing allocation disputes in multi-service celebrity endorsement deals should be resolved in light of the procedures adopted in the new Collective Bargaining Agreement (“CBA”).

As you are fully aware, the determination of appropriate allocations of compensation between covered and non-covered services in multi-service contracts and the process to resolve disputes in that regard have been major issues between the Unions and the Industry for many years. Controversies and disagreements over allocations have resulted in litigation and substantial costs for all the participants, and the previous procedure left Producers at a distinct disadvantage. The prospect of litigation under federal pension laws and the remedies afforded the Pension Plans under those laws created an uneven playing field. The new procedures create a more balanced approach considerably more favorable to Producers.

At the negotiations of the new CBA, the Industry pressed for a more precise methodology to determine allocations and a dispute resolution format that precluded the Plans resorting to litigation under ERISA until such time as the Unions and the Producer either agreed on an allocation or settled a dispute through an expedited arbitration procedure. The Industry took the position that such an approach was mandated by the decision in the arbitration brought by the JPC against SAG over resolving disputes over allocations. The Unions and Industry also agreed on a set of Guidelines that are presumed safe harbors, although that presumption is rebuttable should the Unions show adequate reason to disregard them.

Since the Industry and Unions did not address whether the new procedures should be retroactive, they are not binding on either Producers or the Unions with respect to disputes that arose prior to adoption of the new CBA. That said, however, it seems logical that the new provisions should apply to existing allocation disputes, including the agreed-upon Guidelines, for the following reasons:

1. The decision of the arbitrator and the U.S. District Court in the action between the JPC and SAG clearly provides that arbitration is the method to resolve disputes. The arbitrator held and the U.S. District Court confirmed the arbitrator’s opinion that such a conclusion was mandated by the language contained in the then current CBA. Since this holding interprets the language contained in the previous CBA (and, by extension, the same language in prior CBAs), the requirement to arbitrate disputes applies to all pending allocation cases. While one could argue that the expedited process agreed upon under the CBA is not retroactive, I believe that process is fair and reasonable and ought to be the approach taken by the parties. Otherwise, any arbitration will be complicated and expensive, as well as subject to appeal if the Unions feel they didn’t get enough.
    
2. Whether the old, unpublished, allocation guidelines or the new formal Guidelines should apply in such disputes is unclear. What is clear, however, is that the Industry never agreed to the old guidelines. The formal Guidelines in the new CBA, however, reflect an agreement arrived at through the collective bargaining process and, as such, represent a set of mutually acceptable criteria between the Unions and the Industry. As such, it seems abundantly logical that they ought to apply to existing disputes. Also note that the new Guidelines recognize that there may be disputes that do not fall under any of the specific guidelines. In those instances, the parties are free to either agree to an alternative solution or to submit a dispute to arbitration.
    
3. All future disputes will be governed by the new provisions and the Guidelines. Positions contrary to the new provisions taken in the future by either the Industry or Unions will set no precedent. As such, is makes sense to take advantage of the efficiencies and economics now embodied in the CBA and resolve old cases with due consideration of the newly bargained for procedures.

Of course, no one is in a position to bind any Producer to adopting the new procedures with regard to existing disputes. Each Producer must make a decision under the facts and circumstances of their specific case.

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Has blogging made critics out of us all? Maybe so, but we still have to watch what we say as illustrated in a recent New York case, Cohen v. Google/Blogger.com. Fashion model Liskula Cohen filed suit demanding that Google disclose the name of an anonymous blogger (who we now know was Rosemary Port) who created and operated the blog now infamously known as “Skanks in NYC.” Cohen alleged that Port posted sexually suggestive pictures featuring her, together with derogatory comments about her — labeling her as, among other things, “skank,” “ho” and “whoring.” Google refused to reveal the blogger’s IP address, citing its policies on protecting the privacy of bloggers. 

In New York, the elements for a cause of action for defamation “are a false statement, published without privilege or authorization to a third-party, constituting fault as judged by, at a minimum, a negligence standard, and, it must either cause special harm or constitute defamation per se.”   Cohen petitioned the court that because Port posted, essentially, “per se” defamatory content about her, the blogger’s identity must be disclosed to enable her to pursue her viable claim for defamation. Port filed papers on an anonymous basis in response to the petition, claiming that the statements were “non-actionable opinion and/or hyperbole,” and further argued that even if the words were capable of defamatory meaning, “the context here negates any impression that a verifiable factual assertion was intended” since blogs “have evolved as the modern day soapbox for one’s personal opinions,” by “providing an excessively popular medium not only for conveying ideas, but also for mere venting purposes, affording the less outspoken, a protected forum for voicing gripes, leveling invective, and ranting about anything at all.” While this pleading is certainly an accurate description of how blogs are frequently used by bloggers, the court was not persuaded that Port’s identity should be protected from disclosure because her statements were “reasonably susceptible of a defamatory connotation and are actionable.” The court held that Cohen was entitled to an order directing Google to disclose information as to the identity of the blogger. 

It turns out that Port is an acquaintance of Cohen who frequently attended the same social functions as she did. With Port's identity discovered, it has been reported that Cohen will file a defamation suit against her. In turn, Port has indicated that she will sue Google for $15 million for failure to protect her privacy, claiming that Google “breached its fiduciary duty to protect her expectation of anonymity.” While the merits of Cohen’s claim against Port and Port’s claim against Google are yet to be determined, the lesson for every blogger is that he or she may not hide behind a mask of anonymity with respect to blogs that may cross legal lines and create causes of action, such as defamation. 

Companies also need to be vigilant in connection with the development of policies around blogging by employees or agents. Imagine the scenario where an employee of a consumer products manufacturer posts malicious statements on a consumer opinion blog regarding a competing product. The rival company petitions for the identity of the blogger, and ultimately discovers that the blogger is an employee of a competitor. In this situation, not only the individual, but potentially the company as well, may be subject to a claim by the rival company for unfair competition, or for certain other Lanham Act or Communications Decency Act claims.

Tread carefully with your blogging, or you might get a flogging. (Sorry, we couldn’t resist).

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For decades, advertisers, agencies and the media have hung onto every Neilson rating to tell them who was watching television, what they were watching, and for how long. 

Others have tried to capture a piece of this ratings market with different measuring tools, technologies, or methodologies, but almost all of them have fallen by the wayside. But in the latest news, Neilson’s monopoly is being challenged once again; this time by a consortium consisting of several large media, marketing and advertising companies that have joined forces to develop an alternate source of audience measurement.

What is driving this initiative? According to news reports, it’s primarily a belief among the consortium participants that more detailed, precise, and reliable data and measurements are possible, particularly as more consumers turn to the Internet and mobile to watch TV. The fact that new technologies such as set-top boxes and digital video recorders enable data to be compiled more readily seems to be fueling the desire of the consortium members to take another crack at creating a competitor to Nielsen.

Interestingly, each category of participant within the consortium comes to this initiative with its own agenda and objective. In the case of media companies, TV networks for many years have frequently disputed the accuracy of Nielsen data in traditionally difficult areas of viewership measurement. Advertisers, similarly, have questioned Nielsen’s figures, though primarily in connection with determining the real, monetized value for all the money they spend to buy commercials on TV (estimated at $70 billion in 2009). Advertising agencies, naturally, are always seeking data to both guide and support their channel and network recommendations, especially if/when their clients take issue with the accuracy of the ratings presented by their agencies.

Why This Matters: Whether or not the consortium successfully achieves traction in its ability to produce a viable data product that is recognized across different but related industries is an idea that has seen many past iterations. Perhaps this effort, joined by a diverse group of interested parties, will work this time. If it does succeed, whether the consortium can grab market share from Nielsen is a difficult question to answer. Regardless, the mere fact that such a consortium exists demonstrates that changes are needed to the way industry tracks, understands and sells TV ads. As TV viewer habits and dynamics change, so too must the measuring stick that tracks and sells this medium. However, central to the consortium’s success is retrieving more robust information on consumer habits, and that means skirting the edge of privacy rights, inextricably linked to this initiative. This may well fuel a privacy debate that could turn out to be the Achilles Heel for both the consortium and Nielsen.

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PCMag: Web Ad Group Pushes For Ethical Blogging

The Federal Trade Commission is currently investigating fair blogging practices, but an advertising group is one step ahead, and has forced two companies to clearly disclose their relationship with the health-related products they promote via blogs and Web sites.

Environmental Leader: UK Food Label Would Show Items’ Environmental Impact

The UK may implement a food labeling scheme that details elements such as the number of miles from the source to the UK - a.k.a. food miles - as well as the amount and type of chemicals used on the product.

Environmental Leader: FTC Charges Clothing Firms With ‘Bamboo-zling’ The Public

Four companies selling clothing marketed as made from bamboo have been charged by the Federal Trade Commission with deceptive advertising and marketing claims.

Environmental Leader:  Green Guide Helps Businesses Prevent Greenwashing

Firms that want to prevent customers frustration over green claims that can be misconstrued as “greenwashing” should develop a framework that incorporates more effective communication that aligns with the true impacts of their environmental initiatives, according to a new report.

Environmental Leader:  Good Company Seal: Responsible Firms Only Apply

A new seal of approval is intended to steer consumers to companies that operate under best practices in corporate social responsibility, including the environment.

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The CARU Annual Conference is scheduled for October 7, 2009 at New York City's W New York Hotel; 541 Lexington Ave. Expert panelists will consider challenging issues presently facing the Children’s Advertising Industry, focusing on how the digital age has changed the way companies market their products to children. Panelists will examine and demonstrate the practical application of governing standards and industry guidelines to these new emerging media platforms.

The conference will provide attendees with the opportunity to be on the forefront of the latest regulatory developments including an update on U.S. self-regulatory food initiatives, and the EU Privacy Directives.

Keynote speaker, Pete Blackshaw, Executive VP, Strategic Services, The Nielsen Company

Scheduled sessions: "The Rules of the Digital Playground,” "Delivered Straight from the Source: Examining the Latest Regulatory and Legal Framework for Addressing Emerging Media Forms,” "Recognition vs. Persuasiveness: What do kids know and when do they know it?” and “Working with CARU – The Anatomy of a CARU Case.”

Up to 5 Credits for Continuing Legal Education
This course has been submitted for approval in accordance with the requirements of the New York State Continuing Legal Education Board for approximately 3-5 professional practice credits.

Accreditation will be sought for registrants in those jurisdictions with continuing education requirements.

Conference Location
The W New York Hotel
541 Lexington Avenue, New York, NY

For general questions regarding this conference please contact:
Reshma Persaud
Marketing Coordinator
212-705-0113
rpersaud@narc.bbb.org

For more information and to register, go to www.narcpartners.org.

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Reprinted with permission from Mobile Marketer at http://www.mobilemarketer.com.

Earlier last month the leading media, advertising and marketing trade associations, including the American Association of Advertising Agencies, Association of National Advertisers, Interactive Advertising Bureau, Direct Marketing Association and the Better Business Bureau, representing an overwhelming majority of industry participants, released their Self-Regulatory Principles for Online Behavioral Advertising (the “principles”), with the objective of protecting consumer privacy in ad-supported interactive media.

These generally follow the advisory principles that were released in February 2009 by the Federal Trade Commission. In fact, upon the FTC’s release, then-commissioner Jon Leibowitz remarked that anything industry can do to adopt, promulgate and enforce the principles represents “the last clear chance to show that self-regulation can – and will – effectively protect consumers’ privacy in a dynamic online marketplace.”

The principles were aimed at the following categories: education, transparency, consumer control, data security, material changes, sensitive data and accountability. Each principle is well thought out and tailored to specific areas within the universe of online behavioral advertising.

These principles can be summarized, in part, as follows:

1. Educate consumers and businesses about online behavior advertising.
    
2. Disclose and inform consumers about data collection and use practices, including various forms of notice that may be required depending on the nature of the data collected and the party collecting it.
    
3. Give consumers options regarding the collection, use and sharing of information to non-affiliates.
    
4. Require service providers and carrier networks – for example, non-first or third parties – to obtain consent before a user’s data may be used for behavioral advertising.
   
   Thereafter, the data may only be obtained for as long as necessary to fulfill a legitimate business need, or as required by law.
    
5. Special treatment afforded to sensitive information, such as medical and financial information, as well as information from users under the age of 13.
   
   Moreover, service providers engaged in online behavioral advertising should undertake steps to help preserve the de-identified status of data collected and used if and when that data is shared with non-affiliates.
    
6. Entities should maintain appropriate physical, electronic and administrative safeguards to protect the data collected and used for online behavioral advertising purposes.
    
7. A user’s consent must be obtained before either a Web site or some other third party uses the previously collected data for materially different behavioral advertising purposes. Typically, a material change would be a more expansive collection or use of data than previously disclosed to the user.
    
8. Establish accountability processes that should consist of monitoring programs, complaint procedures, reporting and compliance requirements, enforcement and public disclosures of offenders.

Does any of this sound familiar?

As early as 2007, many leading agencies, aggregators and publishers throughout the mobile marketing industry have stood behind most of these same principles and incorporated them into various codes of conduct and best practices.

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Thanks to our colleague, Joe Rosenbaum, Editor-in-Chief of LegalBytes, we are happy to provide our Adlaw by Request readers with a uniquely comprehensive survey of the Gift Card laws across the country. As the title suggests, the guide is a good tool but shouldn't replace your local, advertising attorney.

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In collaboration with our sister blog, LegalBytes, we're jointly taking on the recently disseminated Self-Regulatory Principles for Online Behavioral Advertising, topic by topic, to explain these Principles in a way that our readership can better understand. Please check back with us on a weekly basis as we tackle each of these 7 Principles.

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Environmental Leader: Consumers Want More Green Info at Retail Level

About 40 percent of shoppers say they are left wanting when it comes to green information at the retail store level, according to a new report from Miller Zell.

Broadcasting & Cable: 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.

NY Times: Notice Those Ads on Blogs? Regulators Do, Too

BLOGGERS, be warned. Advertisers, you too.

Two of the National Advertising Review Council’s investigative units plan to announce Tuesday their first decisions involving blogs. Their recommendations call for clear disclosure when a company is sponsoring a site or paying for product reviews.

BBC News: Rivals bid to snatch green domain

Rival environmental groups are lining up supporters to try to take control of a new net domain aimed at green groups.

At least two consortiums are known to be preparing bids to control .eco.

In March this year, former US vice president Al Gore backed a bid by the California group Dot Eco to operate the proposed "top level domain" (TLD).

But now a Canadian environmental group known as Big Room has launched a competing bid to manage the TLD, which is similar to .com or .uk.

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Few people are aware that the union collective bargaining agreements that govern the employment of performers and musicians in commercials in traditional and non-traditional media are collectively the largest union agreements in the entertainment business. Under these agreements, advertisers pay union performers and musicians nearly $1 billion a year. In the collective bargaining process, the industry is represented by the ANA/4A's Joint Policy Committee for Broadcast Talent Relations (JPC), while actors in commercials are represented by the Screen Actors Guild (SAG) and the American Federation of Television and Radio Artists (AFTRA), and musicians who perform in commercials are represented by the American Federation of Musicians (AFofM).

In May of 2009, the membership of SAG and AFTRA ratified the new three-year television and radio commercials agreements, which was the culmination of two months of negotiations between the JPC, SAG and AFTRA. As part of the new agreement, the unions and the JPC have agreed to conduct a two-year multi-million dollar pilot project to test a new way to pay performers that represents fair compensation, but also provides advertisers with a measureable return on their investment. The pilot will test the GRP Payment Model developed by Booz & Company in a $1.4 million study previously commissioned by the JPC and the unions.

Negotiations with the AFofM will commence in October 2009.

Advertisers and advertising agencies can become signatories to the SAG, AFTRA and/or AFofM contracts either by authorizing the JPC to represent them in collective bargaining or by directly signing onto those contracts after they are negotiated by the JPC. While the vast majority of major advertisers and advertising agencies are represented by the JPC, this memorandum explains why it’s critically important that responsible advertisers and advertising agencies be a part of the bargaining process through the JPC as opposed to being direct signatories with the unions.

Click here to download the full white paper.

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This post was written by Rachel Rubin.

Website users have grown accustomed to the quid pro quo of Internet use and advertising: we browse websites, and those same website collect customer personal data or habits that are used to generate targeted advertising. But how far is too far in terms of data collection? Is our current system of consumer privacy protection a functional one, or one that falls short of adequately protecting the individual and his/her personal information and data?

According to the Federal Trade Commission’s new chief of the Bureau of Consumer Protection, David C. Vladek, the answer is the latter, and our system gets a failing grade. The FTC has expressed both distrust and displeasure with the current standard practice of online disclosure statements, and one-click, cookie-cutter privacy statements that consumers rarely read or understand, as neither may be enough to protect consumers from increasingly invasive Internet tracking practices and technologies. Also, the FTC sees this issue as having a consumer dignity interest element at stake, not merely consumer economic interests. The New York Times and the Wall Street Journal recently reported that Mr. Vladek will be scrutinizing online advertising and consumer privacy issues closely. Within his first few days on the job, Mr. Vladek announced that one of his “major goals” was “rethinking” the FTC’s approach to consumer privacy issues. 

As yet, Mr. Vladek has not articulated what these changes will be, but said he is not committed to “imposing regulation.” [quote from NYT article]. In his first few weeks in office, Mr. Vladek has been working with companies, public interest groups, and academics to evaluate the current rules and to suggest new ways to better protect consumer privacy. According to the Wall Street Journal, “the goal [is to have] new privacy guidelines in place by next summer.” 

These changes are part of the FTC’s move toward close evaluation of online advertising practices, which included the June settlement of a case with Sears Holdings Management Corp. In that case, Sears invited customers to download onto their computers, “research” software that allowed the company to track their online browsing. In return, customers were paid $10. The FTC found that the software also tracked consumer bank statements and prescription records, which some consumers did not realize, despite a lengthy privacy policy. The company was required to stop the program and to destroy the information it had collected. Mr. Vladek emphasized that the FTC was not just interested in protecting consumers from economic harm, but also in protecting consumers’ “dignity interest[s] wrapped up in having somebody looking at your financial records when they have no business doing that.” [quote from NYT article].  

How and what consumer data is collected has been a hot issue in recent months, with the release of a report from the FTC on its online behavioral advertising principles, followed shortly thereafter with self-regulation guidelines from industry groups. 

Why This Matters

Some industry groups fear the potential stricter regulations will harm their business models. It is clear that the FTC will expect more transparency from companies, but Mr. Vladek’s approach seems to be a collaborative one so far. Advertisers and industry groups should take advantage of this opportunity. As a practical matter, advertisers should be vigilant in adhering to consumer privacy and consumer information protection guidelines already in place, and should stay abreast of any and all developments in this area. Advertisers should also evaluate the programs and policies they use to protect the consumer information they collect, and alternative means of communicating the extent and use of personal data collected to consumers.

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On June 18, 2009, Congressman Rick Boucher (D-Va.) participated in a House subcommittee hearing on behavioral advertising, and gave an opening speech in which he outlined his desire to introduce behavioral advertising legislation for consideration by this Congress. In this speech, Congressman Boucher admitted to being both a supporter and beneficiary of targeted advertising, and he recognized that “online advertising supports much of the commercial content, applications and services that are available to Internet users without charge.” By his own admission, his proposed legislation will not disrupt this business model. The full text of Congressman Boucher’s speech can be read here.

In the approximately seven weeks since giving this speech, Congressman Boucher has revealed little about how he intends to craft legislation that is sensitive both to the commercial needs of online businesses and the privacy needs of consumers. Last week, in a speech given to The Congressional Internet Caucus Advisory Committee during the State of the Net West conference, Congressman Boucher gave a preview of the privacy bill he is planning to introduce in the near future. 

Based upon the excellent recap from Professor Eric Goldman (who helped organize the event), and first-hand accounts of a number of twittering attendees, we can expect that Congressman Boucher’s bill will include:

• A requirement to prominently post a privacy policy (which is something that any reputable web-based business should already be doing)
• A split in treatment between “data sharing necessary to enable first party ads” and targeting based upon information shared with third parties. Users can opt-out of first-party targeted ads, but must opt-in to having their information shared on behavioral ad networks.
• A grant of enforcement authority to both the FTC and state attorneys general

Clearly a lot remains to be seen with this proposed legislation, but a few initial questions come to mind.  First, how will the "opt-in/opt-out" switch work?  What kinds of user authentication will be required for this? Will it be more than just a simple screen name and password?  Perhaps a social security number or other unique identifier so one cannot sign another up for behavioral tracking? But such a high level of user authentication may come with its own issues (e.g., security of SSNs).

Second, there may be issues with trying to define the difference between “data sharing necessary to enable first party ads” and "data sharing among behavioral networks."  Will a distinction be made for corporate siblings or other affiliated entities? Consider Amazon.com’s “Recommended for You” program. At first blush, this may seem to be “first party” ad targeting. However, a consumer can easily purchase items from sellers that are not Amazon.com, but who use Amazon.com for their web infrastructure. If Amazon.com were to store this purchase history in your profile, would this be “first party” or “third party” information under the proposed bill? Will Amazon.com be required to treat this information differently from information gleaned from its own sales? Does it at all matter if the consumer doesn’t know or doesn’t care about the difference?

Finally, with industry groups like ANA and IAB promulgating self-regulatory codes of conduct, will there be room for self regulation in Congressman Boucher’s legislative regime?

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According to eMarketer, online sales in 2009 are likely to reach $133 billion. It shouldn’t come as any great surprise to discover that cash-strapped states all across the country are trying to figure out ways to convert these sale dollars into tax revenues. Well, some states have figured out a way, but at what cost?

From the dawning of e-commerce, affiliate marketing has been a fundamental, cost-effective and ubiquitous vehicle for marketing and lead-generation in the vast digital marketplace. Moreover, these affiliates were almost universally likened to advertising channels (i.e., no different from a local radio station or regional magazine) than employees or contractors. Aside from entering into affiliate agreements, complying with a retailer’s affiliate marketing policies, and receiving commission checks, little, if any, relationship has traditionally existed between retailers and affiliates. The universe of affiliate marketing, however, has been shaken by recent developments within various state tax regimes.

Before going further, let’s understand some basic principles of State Sales Tax 101: Retailers are generally required to collect and remit sales tax to the state in which a sale of products or services occurs. A state may generally not impose a sales tax on sales made outside of its borders, unless the retailer has a sufficient taxable nexus in the state. Although each state will apply its own nexus standards, the answer will generally depend on an application of an inherently imprecise facts-and-circumstances analysis that asks whether the seller has “sufficient” contacts with a state to be subject to its jurisdiction. Traditionally, “nexus” was established where an out-of-state retailer had employees or agents physically present in the state, or where the out-of-state retailer engaged in-state, third-party contractors to perform certain activities on its behalf.

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FTC.gov: End of the Line for Financial Telemarketer Who Violated Do Not Call Rules

Court Order Imposes Five-Year Ban on Telemarketing to Consumers

A financial services telemarketer who allegedly violated several requirements of the Federal Trade Commission’s Do Not Call Rule – from calling hundreds of thousands of consumers on the National Do Not Call Registry to failing to transmit accurate caller ID information – has settled the government’s charges and is banned from telemarketing to consumers for five years.

Environmental Leader: USDA ‘BioPreferred’ Label Intended for Retail Shelves

A new federal ‘BioPreferred’ label would give marketers of certain products - those composed “wholly or significantly of renewable plant, animal, marine or forestry materials” - a new way to present their products on retail shelves. Additionally, companies using the items in their operations might be able to claim a certain level of environmental stewardship.

NY TimesFresh Views at Agency Overseeing Online Ads

Most of the online world is based on a simple, if unarticulated, agreement: consumers browse Web sites free, and in return, they give up data — like their gender or income level — which the sites use to aim their advertisements.

The new head of the Bureau of Consumer Protection at the Federal Trade Commission, David C. Vladeck, says it is time for that to change. In an interview, Mr. Vladeck outlined plans that could upset the online advertising ecosystem. Privacy policies have become useless, the commission’s standards for the cases it reviews are too narrow, and some online tracking is “Orwellian,” Mr. Vladeck said.

InternetNews.com: Facebook Tightens Ad Guidelines

The social media site folds privacy policies into ad guidelines, warning that violators will be booted from the site.

Attention Facebook advertisers: If you don't follow the rules, you'll be banned.

The social networking giant this week updated its guidelines for advertisers to include stricter privacy policies, curtailing the potential for behavioral ad targeting.

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The National Advertising Division (NAD) of the Council of Better Business Bureaus (CBBB) is the premier self-regulatory body for advertising cases in the United States. It handles the majority of contested false advertising cases every year, compared with actions brought under the Lanham Act. In fact, in 2008, the NAD handled 214 cases, including 84 challenges by competitors. Historically, the NAD has been funded by the CBBB entirely. Participants did not “pay to play.” In the early 1990s, the National Advertising Review Council (NARC), formed under the CBBB to administer the NAD and other self-regulatory programs, instituted fees to cover document duplication costs. 

In 2001, NARC revised the NAD procedures and introduced the first filing fees to “challengers” to help defray the costs of the system. Currently, those fees are set at $6,000 for companies that are not ongoing financial supporters of the advertising self-regulation system (i.e., non-CBBB Corporate Partners) and $2,500 for CBBB Corporate Partners. According to the NARC, the current filing fee for non-CBBB Corporate Partner challenges pays for only part of the cost to NAD of a challenge case (i.e., a case in which there is a challenger, not just the NAD questioning an advertisement). The remainder comes from CBBB Corporate Partner dues. Thus, the CBBB members continue to subsidize a portion of the cost of challenges.

On July 27, 2009, the NARC announced a new fee schedule designed to be more equitable and to drive CBBB membership. Under the new plan, the filing fee for a non-CBBB Corporate Partner will be adjusted depending on its annual revenue.

• Non-CBBB Corporate Partners will remain at the current level of $6,000 for challengers with gross annual revenue of less than $400 million.
• The fee increases to $10,000 fornon-CBBB Corporate Partner challengers with gross annual revenue of more than $400 million and less than $1 billion. 
• The fee increases to $20,000 for non-CBBB Corporate Partner challengers with gross annual revenue of $1 billion or more.

The filing fee paid by CBBB Corporate Partners remains at $2,500.

As is the case today, there is no fee for consumer challenges, and NAD policies will continue to provide for a waiver or modification of the filing fee on a showing of economic hardship.

Why This Matters

As a practical matter, this only affects those companies that wish to use the NAD system to challenge an advertisement, but that are not CBBB members. The cost of membership varies by size of the company. A large company that is a “frequent user” of the NAD process will likely be convinced to become a member. Indeed, based on the membership fees for the Council (companies with $1B to $2B in annual revenue generally pay about $11,000), becoming a CBBB member turns into a no-brainer if the company is a regular user of the NAD process. Thus, the increase in fees is clearly going to incentivize membership. It also may have the effect of making potential challengers think twice about their litigation choices, but I doubt that it will have a major impact on the caseload experienced by the NAD. One always has to evaluate the costs and benefits of pursuing an action in federal court or at the NAD. One of the key factors has been cost. For some large companies, the increase from $2,500 to $20,000 will probably make them spend more time trying to resolve the matter without any litigation; but even with an 800 percent increase in the top-level filing fee, the cost of pursuing a civil action in federal court is still much higher and is associated with much more risk (e.g., counterclaims, discovery, publicity). Thus, the increase will probably not significantly slow the use of the NAD, and will probably significantly increase CBBB corporate sponsorship.

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Save the Date

ANA Advertising Law Conference, March 17-18, 2010

Park Hyatt, Washington, DC

Change has come to Washington and to ANA’s Advertising Law Conference! Our fifth annual Advertising Law Conference is now scheduled for March 17-18, 2010 at the Park Hyatt in Washington, DC for ANA’s 100th anniversary. We’ve moved the conference to the nation’s capital to bring in more of the policy makers and agenda setters that are so substantially impacting the advertising community in these extraordinary times. Rest assured that we will continue to ramp up the cutting edge legal curriculum and superb faculty you’ve come to expect. We believe this will be our best conference yet, and CLE credit, of course, will be offered.

Look for an agenda and confirmed speakers soon.

If you have any topics you would like to see covered at the upcoming conference, or have any questions, we would like to receive your suggestions. Please contact Dan Jaffe in ANA’s Washington office at 202-296-2359 or at djaffe@ana.net.

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Broadcasting & Cable: Ad Community Concerned About New Financial Services Agency

Agency would police the financial services and products markets in the wake of the financial meltdown

The House Financial Services Committee is holding a hearing next week on a bill that has the advertising community worried. The bill is the administration-backed H.R. 3126, which would create a new Consumer Financial Protection Agency.

Excite News: Jackson Browne, Republicans settle lawsuit

Jackson Browne has settled a lawsuit and received an apology from Sen. John McCain and the Republican Party over use of his song "Running on Empty" during last year's presidential campaign.

Adweek: Poll Finds Ad People, General Public Out of Sync

If an ad makes you "stop and think," is it apt to be very effective? How about if it gives you "new information"? In a LinkedIn Research Network/Harris Poll, majorities of professionals involved in decision-making about ad campaigns thought such advertising would work quite well. Alas, their opinion was not shared by the general public. For that matter, few kinds of advertising were regarded as highly by consumers in general as they were by ad people.

Environmental Leader: Lower-income Shoppers More Likely to Pay Small Premium for Green

Lower-income shoppers, including Gen Yers and Millennials just coming into the broader economy, are more likely to pay up to 10 cents more for green products, according to a new report from Miller Zell. In total, the report found that half of all shoppers are willing to pay a premium for green items.

Environmental Leader: 62% of Shoppers Respond to Green Item Impulse Buys
Showing the power of impulse buys, about 62 percent of shoppers say that the availability of green product options can impact unplanned purchases, according to a new report from Miller Zell.

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As an update, the FTC has just announced that the enforcement date of the Red Flags Rule is being extended again, this time until November 1, 2009. Here is the agency press release.

You can find more information about Red Flag Regulations at Reed Smith's Life Sciences Legal Update blog. 

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It's our pleasure to provide you with a link to an article written by Joe Rosenbaum that recently appeared on our sister-blog, Legal Bytes, describing yet another controversy over Facebook's User Policy.

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