The Countdown to Compliance Has Begun

The countdown is underway to the deadline when the digital marketing ecosystem needs to be in compliance with the Digital Advertising Alliance guidelines for Online Behavioral Advertising.  Failure to comply may expose brands and companies to actions by the Online Interest-Based Advertising Accountability Program and potentially negative press releases. 

For more information on staying compliant and avoiding potential FTC action, read our recent blog post covering this issue and this article published by DataGuidance.

BBB Accountability Program Reminds Advertising Industry to Act Now to Comply with Enhanced Notice

This post was written by Douglas Wood and Frederick Lah.

In its first ever compliance warning, the Online Interest-Based Advertising Accountability Program Council (“Accountability Program”) noted that many website operators are omitting notices of data collection for online behavioral advertising (“OBA”) on their websites where third parties, such as ad networks, are not able to provide notice without the website operator's assistance. Such notices are required under the Self-Regulatory Principles for Online Behavioral Advertising (“OBA Principles”).

In an effort to encourage compliance, the Council has delayed enforcement against first parties that fail to provide the required enhanced notice beginning until January 1, 2014.

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DAA Continues Focus on Obligations for Website Operators Employing OBA

The Digital Advertising Alliance (DAA), the self-regulatory program for online behavioral advertising (OBA), was busy last week, releasing four formal review decisions.

The cases discussed below highlight DAA’s commitment to spreading consumer awareness about OBA, educating consumers on OBA activities, and providing consumers with options regarding the collection of their data. The cases were initiated by DAA itself, and not by competitors or consumers. OBA activity is a relatively unregulated area, and consumer protection authorities have largely relied on businesses self-regulating to protect consumers. To avoid heavier regulation, it is important that businesses make concerted efforts to be aware of and comply with DAA’s Self-Regulatory Principles for Online Behavioral Advertising (OBA Principles).
 

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Mobile in the Spotlight with Digital Advertising Alliance Guidance

This post was written by Joshua B. Marker.

The Digital Advertising Alliance (“DAA”), a self-regulatory group that represents marketing and media organizations, released new guidance this week for advertisers in the mobile space. Entitled “Application of Self-Regulatory Principles to the Mobile Environment,” the guidance builds on well-known principles such as notice (or transparency) and choice (or control), and tailors them to the unique challenges that face the mobile environment.

The DAA guidance establishes principles for the collection, use and transfer of three distinct types of mobile data: Cross-App Data, which is defined as data that is collected over time and across applications from a specific device; Precise Location Data; and Personal Directory Data, which includes address books, photos/videos, calendars, and phone or text logs. Further, the guidance breaks down the responsibilities of both First Parties, such as the application owners, and Third Parties, which include ad networks, and analytics companies.

While the DAA provides various methods for compliance with these new rules, and the guidance bears close examination for anyone applying it, certain principles are consistent throughout. Covered parties should provide notice to the consumer of their data collection practices in a “clear, meaningful, and prominent” manner. Further, consumers should have the ability to consent to, and exercise choice with respect to, collection of their own data. Finally, the DAA guidance notes some exceptions to the general notice and choice principles, primarily when data is collected for systems management (authentication, compliance, security, etc.), or product development purposes.

Even though implementation is not immediate, many interesting issues are raised for companies in the mobile advertising space. Parties may have to engage the consumer directly if consent for Cross-App Data is to apply to a device in its entirety, rather than a specific app, and parties may want to re-examine their contractual relationships to understand who is responsible for obtaining and verifying consent for the collection of specific types of data.

WHY IT MATTERS. It is clear that any company in the mobile advertising environment needs to have a complete picture of its data collection, use, and sharing practices, and have a full understanding of the other parties with whom it does business in that environment, and those parties’ data collection practices. The DAA guidance should also be reviewed by advertisers to guide the vendor selection and oversight process.

The Risks of 'Native Advertising'

This post was written by Frederick Lah and Sulina Gabale.

Kim Kardashian is notorious for setting Twitter trends with her fashion-forward tweets. But would a consumer buy the same product knowing she was paid up to $20,000 for tweeting it?

The term "native advertising" refers to when an advertiser masks ads as editorial content in an effort to market more seamlessly to consumers. The intent behind this practice is to make advertisements less intrusive and to associate a brand with an experience.

For example, BuzzFeed, a popular blog notorious for hosting viral content, commonly features articles such as "24 Reasons Why 3D Street Art Is The Best" that look just like any other blog post, but are actually paid advertisements. In these instances, BuzzFeed clearly identifies the advertiser in the face and body of the post by indicating the article is "Presented by Canon."

But what about ads that don’t feature clear disclosures? Twitter has now become a hotbed for such activity, especially within the context of celebrity endorsements. A New York Times blog investigated a tweet by pop singer Miley Cyrus to her 12 million followers, thanking a private jet company for a flight. Although Ms. Cyrus declined to comment, the company admitted that she was given some consideration for her tweet. Nowadays, it is becoming increasingly unclear to consumers whether celebrities are genuinely plugging a product they admire or if they are just paid to tweet about it.

With this concern comes a push for both publishers and marketers to meet ethical standards in native advertising so consumers aren’t duped by ads posing as editorial content. The National Advertising Division ("NAD"), part of the Council of Better Business Bureaus, establishes the policies and procedures for self-regulation in the advertising industry. In an editorial for Ad Age, Laura Brett, staff attorney for NAD, mentions that this debate has been longstanding ever since the FTC ruled back in 1968 that sponsored content "which purports to give an independent, impartial and unbiased view ... [must] clearly and conspicuously disclose that it is an advertisement."

Three months ago, the FTC once again addressed this concern within the context of native advertising by issuing its latest version of the "Dot Com Disclosures" guidance, which explains how to make sponsorship disclosures clear and conspicuous to avoid misleading consumers. While such guidance does not have the effect of binding law, if a company fails to comply with the guidance, the FTC could potentially bring an enforcement action alleging an unfair or deceptive practice in violation of the FTC Act.

Whether featuring a suggested story on Facebook, branding a playlist on Spotify, or hiring a celebrity to throw you a shout out on Twitter, companies should consider the risks of native advertising before diving in head first.

CARU's 3rd Annual Children's Advertising & Online Privacy Conference

CARU’s West Coast Conference 2013 is scheduled for April 10 at the Beverly Hills Hilton, and once again promises to be a not-to-be-missed event.  Confirmed speakers include Mamie Kresses, Federal Trade Commission; Katie Ratte, The Walt Disney Company; Jeannette Neumann, Mattel; Cynthia Nishimoto, Bandai; Stevan Levy, Kabillion; and Ryan Shadrick Wilson, The Partnership for a Healthier America.  CARU believes if there is one conference to attend this year, this is the one, particularly in view of the impending COPPA modifications.  CARU will devote a panel to the COPPA changes and will have detailed, lively discussions about the impact to the industry at-large.  Indeed, rather than just a panel discussion, CARU hopes it will be more of a training session to prepare advertisers and website operators for the changes.  Additionally, panelists will examine domestic and global challenges to self-regulation in the areas of social media, mobile marketing, sweepstakes, and food and beverage advertising.

For more information, please visit the Advertising Self-Regulatory Council's website.

Who's Watching You? Facebook Agrees to Provide More Transparency with Online Advertising

This post was written by Christine Nielsen, John Feldman, and Caroline Klocko.

Yielding to pressure from advertisers, ad agencies, the media, consumers, and, perhaps, the FTC, Facebook has agreed to place The Digital Advertising Alliance’s (DAA) “AdChoices” logo on ads served on its site via its FBX ad exchange. The move makes Facebook more accountable for educating users about online behavioral advertising and allowing them to opt-out.

The AdChoices icon alerts users when an ad has been placed on their screen based on behavioral-targeting methods. When clicked, the icon takes the user to an informational page that allows the user to learn more about targeted marketing and to opt-out of such advertising. The industry has promoted the opt-out, understanding that information such as products viewed online by users, who their friends and connections are on Facebook and Twitter, which websites they have visited, and relevant search history, while not historically defined as “personally identifiable” is nonetheless very private, and very valuable.

The Council of Better Business Bureau’s Online Interest-Based Advertising Accountability program has lauded the move, finding in a recent decision that it is “a meaningful step in increasing transparency and choice.” However, the change, which Facebook has said will take place by the end of the current quarter, is not as transparent as some would like, and it remains to be seen whether it complies with the FTC’s “clear and prominent notice,” standard. The social media giant has only committed to displaying the AdChoices logo when a user hovers over the ad with the mouse and then hovers over the grey “x” that appears. This unconventional display of the icon, which usually appears on the ad regardless of whether the user hovers over the ad, was approved by the Online Interest-Based Advertising Accountability program.

Facebook users are accustomed to clicking on the “About this ad,” link to find information about online behavioral advertising methods. The text of this link, while not fully descriptive, indicates to the user that something might be going on behind the scenes that they might want to check out. By agreeing to participate in the DAA’s program, Facebook is adding something new to its current practice of informing consumers about advertising: accountability.

Facebook’s voluntary agreement to participate in the program means that the social networking site will now be subjected to compliance reviews and scrutiny by the entities that enforce the AdChoices program. Facebook’s participation also increases the icon’s visibility, which in turn can help to make more consumers aware of their choices to receive targeted advertising. Such increase in visibility is also due to the use of the icon in the mobile space, which began last August and was covered in a previous Reed Smith blog post.

In contrast with this self-regulatory approach, Blackberry has just announced what it touts as a technology-driven solution to the consumer choice conundrum in the mobile and web environments. Please click here to read about Blackberry’s announcement on our sister blog, Global Regulatory Enforcement Law Blog.

FTC COPPA Rule Revision Comments-Deadline Extended to December 23

No need to fret over Thanksgiving! The Federal Trade Commission has extended until December 23, 2011, the deadline for the public to submit comments on proposed amendments to the Children’s Online Privacy Protection Rule. That's good news because the revisions are significant and include the demise of the flexible "sliding scale" approach that permitted operators to install an "email plus" method of obtaining verifiable parental consent when the collection and use was of a very limited nature. Without any data or evidence of consumer harm, the FTC has determined that the "shelf life of 'email plus' has expired," to use the phrase of Commissioner Julie Brill at a recent Promotion Marketing Association conference. Apparently, making it harder for industry to market to children will force it to "innovate" new ways to comply. Sounds expensive. But, unless industry can come up with some hard evidence of those costs, the process of engaging children in interactive media will be significantly altered. There are other major changes. (The proposed changes will mean the end of user-generated contests for kids if they involve any uploaded photographs of themselves, for example.) Several industry groups, including the PMA, are planning to file comments. This extension will give industry more time to come up with hard numbers. Our sources at the staff level indicate that although there is a definite desire to kill email plus, carving out exceptions might be possible (at least in the Frequently Asked Questions that the FTC has published to help operators comply with the COPPA Rule) if commenters can produce solid reasons why this removal of the flexible approach is going to impose unreasonable costs, compared with the potential protection from admittedly hypothetical harm.

Unlike some of the recent FTC initiatives, which are arguably overreaches, these revisions, albeit aggressive, are probably within the broad Congressional authority granted to the Commission under COPPA. That makes it even more important that commenters come up with numbers about the costs of these revisions and how they might be likely to affect jobs. Even with regard to the Commission's apparent usurpation of oversight from self-regulatory bodies in the area of children's privacy, those bodies are subject to regulation by the FTC by virtue of the safe-harbor provisions. Thus, even though it will be imposing new costs and requirements on the Children's Advertising Review Unit (CARU), which was monitoring the collection and use of information from children before there even was COPPA, CARU, because it sought safe harbor status, is subject to whatever new requirements the Commission may impose. One has to wonder, however, whether the existing safe harbor entities are sanguine about the new burdens because the FTC will be effectively making the barrier to entry for new safe harbor competitors nearly impossible. Interesting anti-competitive question.

FTC Signals Retrenching on IWG Proposals

After a swift left to the chin in early September from the Republican-controlled House Energy and Commerce Committee Chair, Rep. Fred Upton, David Vladeck, the FTC Director of the Bureau of Consumer Protection, testified before the Subcommittee on Commerce, Manufacturing, and Trade, and the Subcommittee on Health, October 12, 2011, discussing the International Working Group (IWG) and changes that are underway.

  • The tone of Vladeck’s statement bore a marked respect for, though not deference toward, advertising self-regulation. This is in contrast to his speech before the self-regulatory National Advertising Division of the Council of Better Business Bureaus October 3, 2011, in which he only mentioned in passing the positive role of self-regulation. In his statement before the Subcommittees, he made a much more significant effort to acknowledge the success that has been achieved to date by self regulation both in the form of the Children’s Advertising Review Unit (CARU) and the Children’s Food and Beverage Advertising Initiative (CFBAI).
  • Because there is no scientific link between marketing of food and obesity, Vladeck made it clear that the Commission is asking industry to take on a share of the responsibility for solving the obesity problem “regardless of whether or to what extent food marketing may have contributed to the problem of childhood obesity” in the first place. In other words, according to Vladeck, it is a proper role of government to pressure industry to help solve multi-factored social problems by not marketing (and therefore not selling) products that may have no relationship to the social problems that the government is seeking to address. Vladeck referred the Institute of Medicine (IOM) Report from 2008 to highlight the fact that marketing influences food and beverage preferences, purchase requests and short-term diets of children under 12 to support the Commission’s position that industry should use its marketing power to eat certain foods rather than other foods. One can interpret this initiative as simply government telling industry what to advertise and what to sell based on a stated political goal. “Children’s health is the ultimate goal, and marketing of more nutritious foods is one effective tool to help achieve that goal.” 
  • Vladeck, who famously dismissed the notion that the IWG proposals could raise First Amendment concerns last summer in a blog post, apparently has been convinced that there may be some validity to the First Amendment arguments made by academics and lawyers in the advertising field. He states, “Our commitment to finding the best balance between what is best for children’s health and what is workable for industry has guided this entire process. . . . .The Working Group’s proposal is strictly voluntary. The Commission recognizes that some forms of regulatory action could raise First Amendment concerns.”
  • After 29,000 comments and after new CFBAI guidelines, which go a long way toward achieving the government’s goal of restricting marketing behavior related to certain foods and beverages, the FTC is signaling significant changes to its proposals. Those changes include:
    • Limiting the scope of marketing to children to those aged 2-11, rather than the originally proposed 2-17. Vladeck: “It is often difficult to distinguish marketing designed to appeal to this age group from marketing directed to a general or adult audience.”
    • Limiting the scope of the marketing activities included within the proposals. Vladeck: “The FTC staff believes that philanthropic activities, charitable events, community programs, entertainment and sporting events, and theme parks are, for the most part, directed to families or the general community and do not warrant inclusion with more specifically child-directed marketing. Moreover, it would be counter productive to discourage food company sponsorship of these activities to the extent that many benefit children’s health by promoting physical activity.”
    • Eliminating recommendations regarding trade dress and brands. Vladeck: “The Commission staff does not contemplate recommending that food companies change the trade dress elements of their packaging or remove brand equity characters from food products that don’t meet nutrition recommendations.”
    • Eliminating recommendations regarding in-store displays and packaging of seasonal or holiday confections.
    • Adjusting the proposed audience share criterion for “traditional media marketing,” including television, radio, and print, from 30 percent children ages 2 to 11 years, to 35 percent – which is the same age criterion used by CFBAI.

The IWG proposal is not dead, however. Expect to see the revised version focused more specifically on traditional media and on online, digital, and social marketing. Also, the IWG proposal will still seek to press its recommendations in the area of advertising or product placement in movies and video games. Additionally, it will cover sweepstakes and premium offers. And, in the one remaining proposal that will cover children and adolescents, Vladeck signaled that the proposal will cover marketing activities in schools for both children and adolescents.

Thus, the IWG proposal will be scaled back significantly. One important lesson: Self-regulation is critical, but industry must be careful of using self-regulation so aggressively that it creates a blueprint for “voluntary” regulation by governmental bodies. Cooperation between government and industry that results in co-regulation is not self-regulation. With the FTC standing right beside self-regulatory efforts, tweaking self-regulation as it deems necessary to advance espoused governmental goals of protecting children, the augmented CFBAI standards may be likely to be the presumptive norm for governmental expectations (and enforcement?). Let’s hope that the blueprint we’re now working off of will build a structure we can all live in.

CARU Annual Law Conference - Explore the role of self-regulation in the U.S. in the area of Marketing to Kids and Get a Discount

From the proposed changes to COPPA to the latest developments in the area of self-regulation of food marketing to children, the CARU conference to be held Wednesday, October 5, 2011 in New York City will be one of the best places not only to learn the details but also to interact with leaders in the industry to are on the front lines of self-regulation. Furthermore, FTC Commissioner, Julie Brill, will give a keynote address. Commissioner Brill tends to represent the more activist tendencies of the Commission, and those in attendance should be able to ask pointed questions and express concerns. The agenda and full conference information is located on the CARU website.

Because Reed Smith is a sponsor of the CARU conference, if you register by contacting Rey Persaud at 212-705-0113 or via email at rpersaud@narc.bbb.org and mention this blog post, you will receive a $100 discount on the conference fee. Offer expires October 3, 2011.

FTC OKs Self-Regulation Program for Online Behavioral Advertising

The Federal Trade Commission issued an advisory opinion letter this week saying that it has no present intention to challenge the Council of Better Business Bureaus' accountability self regulatory program for companies engaged in online behavioral advertising. The program is designed to foster compliance with the Self-Regulatory Principles for Online Behavioral Advertising, which were released by the FTC in 2009. The issue presented to the FTC by the CBBB was whether the accountability program would be viewed as a restraint of trade under the antitrust laws.

For more information, please read Reed Smith's Client Alert, written by Christopher G. Cwalina, Amy S. Mushahwar and Frederick Lah.

Commissioner Brill Introduces Competition Analysis to Privacy Debate

FTC Commissioner Julie Brill stated today that "there may be a tipping point" at which self-regulatory privacy initiatives "turn[] anticompetitive, particularly in cases where the mechanisms are developed by a trade association or industry players that have a dominant market position." A self-regulatory privacy proposal could raise "competition concerns," she said, if it "disadvantages competitors of the platform offering the proposal, especially if the platform operator has a dominant market share and is vertically integrated." Proposals offered by a group of rivals or their trade association could raise competition concerns if the rivals "act in ways that favor their own economic interests to the detriment of other competitors and consumers." In the recent Google Buzz settlement, FTC Commissioner Rosch raised similar concerns about whether seemingly pro-privacy moves could have anticompetitive effects.

For more information on Commissioner Brill's Analysis, please read Paul Bond's and Chris Cwalina's article on the Global Regulatory Enforcement Law Blog.

The UK and the USA -- A Special Relationship

As President Obama visited Ireland and England this week enroute to the G8 meeting in France, much was said about the "special relationship" between the United States and England. Coincidentally, I happened to be in our London office participating in one of the firm's Consumer Goods and Brands Group Breakfast Seminar Series. The topic was the Advertising Standard Authority's new jurisdiction over digital advertising (website, mobile, etc.). The ASA is Great Britain's self-regulatory body akin to the National Advertising Division in the United States. At the conclusion of the session, I was struck, not so much by the special relationship between our two nations, but by how countries can be so divided when it comes to self-regulation.

Attending was Malcolm Phillips, the CAP (Committee of Advertising Practice) Code Policy Manager. (The CAP Code is independently administered by the ASA.) Mr. Phillips outlined how the ASA is proceeding with its new jurisdiction over digital content. I was there to provide the U.S. perspective. What was fascinating to me was how Mr. Phillips and I compared the two self-regulatory systems. Whatever our special relationship may be, when it comes to self-regulation, it's my impression that we're on two different planets. And the UK is in a far smarter place than the United States.

In the United States, one of the ways we tout the success of our self-regulatory system is to cite the level of compliance by advertisers with NAD rulings. Indeed, compliance is well into the 90 percentile. Impressive. The ASA compliance is just as effective, if not better. In the United States, we also cite the many supportive statements by federal regulators, most notably the FTC, about the efficiency and effectiveness of our self-regulatory system. On that level, both the UK and the Unites States are on the same page. But unlike the United States, the UK regulators mean what they say and have a true hands-off attitude with respect to ASA proceedings. While U.S. regulators and legislators are quick to compliment the NAD and its sister organizations within the National Advertising Review Council (NARC), those compliments are increasingly followed by calls for more regulation and greater governmental intrusion into free markets. Not so in the UK, where regulators and legislators take a clear "wait and see" approach and do not second-guess ASA rulings, but instead give them increasing authority to oversee marketplace activities. Contrast that with the developing trend in the United States that fails to give self-regulation a chance to mature and adjust to the marketplace before the government steps in, either from a bully pulpit or, worse, with its own regulations. As a result, self-regulators are forced to become overly aggressive where little or no proof exists that doing so will promote better consumer protection. In the UK, self-regulation is allowed to grow and adjust. Not so in the United States.

Moreover, the UK is not plagued with the specter of class actions and multi-state attorneys general actions that may spin off from self-regulatory rulings. This obviously makes dealing with self-regulators in the United States far more complicated than dealing with them in the UK (and most other countries that depend on self-regulation). Nor are advertisers in the UK faced with anywhere near the financial exposure present in the United States, where a challenged advertising claim can lead to millions in settlements, fines and other costs. In the UK, once the ASA rules against an advertiser, that's pretty much the end of it, particularly since media cooperates with the ASA and declines to run advertising the ASA has found unsubstantiated.

All this leads me to ask which system is better. Are consumers better-protected in the United States by an approach that depends on a hydra of protagonists and financial Armageddon, as opposed to one self-regulatory body? I think not. Consumers in the UK are just as smart as any U.S. consumers. Or, alternatively, they can be misled in the same fashion. Yet in the UK, brands, regulators, and consumers have come to truly respect self-regulation, resulting in a far less complex marketplace and, by definition, a more open market. In the end, that's all to the consumers' benefit.

So to all the U.S. federal regulators, state attorneys general, and judges in class actions, I say "Back off!" Give self-regulation a true chance and not just lip service. Because it really does work. Just take a look at the UK. Or is our special relationship truly divided only by a common language of consumer protection?

New Principles for Food Marketing Presented for Comment

This post was written by John P. Feldman and Michael L. Sacks.

The Interagency Working Group of Food Marketed to Children (“Working Group”) today has requested comments on proposed nutritional principles that it hopes will help in the fight against childhood obesity. The Working Group, established in 2009 by the FTC, FDA, CDC, and USDA at Congress’s request, hopes that by 2016 industry actors will meet its two-pronged self-regulatory vision: a marketing environment in which advertisers encourage kids to choose foods that make for a healthy diet; and a production environment in which food companies will police limits on the fat, sugar, and sodium content of their products marketed to kids.

In formulating its principles, the Working Group set its sights on the most heavily marketed foods to children and adolescents, ages 2-17: breakfast cereals, snack foods, candy, dairy products, baked goods, carbonated beverages, fruit juice and non-carbonated beverages, prepared foods and meals, frozen and chilled desserts, and restaurant foods. In a press release, the Association of National Advertisers, calling the proposals “sweeping” and “overly restrictive,” criticized the Working Group for inappropriately “treating teenagers as if they were young children” and employing “limited and outdated” data.

Despite these differences, the Working Group and Food Marketers can agree that these voluntary proposed principles respect industry’s preference for and progress in its self-regulatory efforts to keep our kids healthy.

Action item? Take time now to determine just how divorced from business reality these principles are for your company. If they end up suggesting that a formulation tweak would be all that it takes to be a poster child for the Working Group then go for it. If they suggest to you that it will be impossible or very costly to reformulate then get set to comment. Objective, quantifiable data is needed to make your comment useful. So, do the analysis as soon as possible and let's see if what they're imagining has any semblance of reason.

CARU Gets a Emmy Nomination

The role of self-regulation is partially educational. Wayne Keeley's CARU has demonstrated once again why the self-regulatory body he heads up is relevant and focused on ensuring that the educational mission is not lost in the day-to-day cases they hear. CARU has produced a Public Service Campaign entitled “Do You Know Where Your Children Are…On The Internet?” And, with Mr. Keeley's background as a film director, CARU ended up producing something good enough to be nominated for an Emmy Award in the Public Service Campaign category. We understand that the CARU PSA campaign has aired on WABC (Live with Regis, GMA and Rachel Ray among others); CBS; and Discovery Kids. It is presently airing on Cartoon Network. The PSA Campaign can also be seen on CARU’s Facebook page and You Tube and Vimeo:
 

CARU Children's Advertising Review Unit Asks Do You Know Where Your Children Are...On the Internet? from CARU Staff on Vimeo.

 

Keep Your Children Safe on the Internet with the Children's Advertising Review Unit (CARU) from CARU Staff on Vimeo.

 

Children's Advertising Review Unit (CARU) asks Do You Know Where Your Children Are...On the Internet? from CARU Staff on Vimeo.

 

We often hear about educational solutions targeted at consumer protection problems. CARU is definitely contributing to that end. 

The Industry Speaks Out - Developments Within the Digital Advertising Alliance

This post was written by Edgar Hidalgo.

The online behavioral advertising sector received a rude awakening at the end of 2010 from unsatisfied federal regulators. Both the Federal Trade Commission and the Department of Commerce published reports espousing increased regulation of online behavioral advertising – the former report encouraging Congress to consider a “Do Not Track” regime and the latter expressing an arguably more favorable stance on industry self-regulation. Similarly, legislators on one side of the aisle have introduced online privacy legislation, and those on the other side have at least intimated interest in the issue. Thus, it comes as no surprise that just three weeks into 2011, the advertising industry has taken steps to strengthen its collective effort at keeping the government at bay and beefing up its self-regulation arsenal.

On Tuesday, January 18, the president and CEO of the Association of National Advertisers, Bob Liodice, reached out to the association’s members in direct response to the FTC’s report. Via email, Liodice encouraged the ANA members to adopt privacy best practices and the self-regulation program the association and its progeny, the Digital Advertising Alliance (DAA), published and implemented in the past two years. Additionally, the email was accompanied by a newly drafted toolkit geared to facilitating compliance with these best practices. (The email and toolkit can be seen in full here.)

Right on the heels of the ANA’s outreach, on Thursday, January 20, the DAA announced its approval of a third trustmark privacy platform provider, TRUSTe and its TRUSTed Ads platform. TRUSTe joins DoubleVerify and Evidon as the third approved provider of consumer privacy icons and platforms. These icons and platforms form a significant piece of the DAA’s self-regulation program that seeks to appease privacy concerns by giving consumers clear disclosures on how data collected through ad is used, as well as providing them with opt-out mechanisms. (More details on the DAA program can be found at http://www.aboutads.info/home/.) To encourage advertiser compliance with the DAA’s self-regulation program, TRUSTe is offering its platform for free on a trial basis. With more trustmark ad platform options, the DAA can expect to gain additional buy-in from online advertisers.

While commentary on the FTC report does not close until the end of this month, regulators have clearly presented the ad industry with strong incentives to speed up its self-regulation efforts – and thus far, the industry seems to be responding swiftly.

Letter from the President of the Council of Better Business Bureaus -- Self-Regulation of Behavior Advertising

Dear Corporate Partners,

As the Internet and the advertising practices that increasingly support online content continue to evolve, a group of the nation's largest media and marketing trade associations in conjunction with the Council of Better Business Bureaus (CBBB) have been working to develop enhanced industry self-regulation in ways that will foster transparency, knowledge and choice for consumers.

Today, I am pleased to announce the details of a comprehensive Self-Regulatory Program for Online Behavioral Advertising that will give consumers enhanced notice and control over the collection and use of data regarding their Web viewing for online behavioral advertising (OBA) purposes. 

I am writing to introduce a few key components of the Program and to encourage your participation in a set of educational sessions where you can learn much more.

This new Program provides specific implementation practices in support of the Self-Regulatory Principles for Online Behavioral Advertising, which the industry released in July 2009. Together, the Principles and Program respond to the Federal Trade Commission’s call for more robust and effective self-regulation of online behavioral advertising practices.  The Program includes several important components:

  • Advertising Option Icon: The Program promotes the use of an icon and accompanying language, to be displayed in or near online advertisements or on Web pages where data is collected and used for behavioral advertising.  The Advertising Option Icon indicates that the advertising is covered by the self-regulatory program, and by clicking on it consumers will be able to link to a clear disclosure statement regarding the data collection and use practices associated with the ad, as well as an easy-to-use opt-out mechanism. 
  • AboutAds.info: Starting today, companies collecting or using information for behavioral advertising are encouraged to visit www.AboutAds.info to acquire and begin displaying the Advertising Option Icon, signaling their utilization of behavioral advertising and adherence to the Principles.  Interested companies engaged in behavioral advertising can also register to participate in the easy-to-use consumer opt-out mechanism on the www.AboutAds.info site.
  • Consumer Choice Mechanism: As business registration and use of the Advertising Option Icon expand, consumers will have an opportunity later this fall to visit www.AboutAds.info for information about online behavioral advertising and to conveniently opt-out of some or all participating companies’ online behavioral ads, if they choose.
  • Accountability and Enforcement: Starting in 2011, the CBBB and the Direct Marketing Association (DMA) will be responsible for monitoring and enforcing compliance, as well as managing consumer complaint resolution.  DMA and CBBB will employ monitoring technology to report on companies’ adherence to the transparency and control provisions of the Program. 
  • Educational Campaign: To build awareness of the program among the business community and consumers, the trade associations will conduct a broad-based educational campaign.  To facilitate this initiative, we have planned a series of webinars for businesses on how to implement the Principles.  (Details on how to register for those sessions are included below.)

Over the coming weeks and months, the Council of Better Business Bureaus is committed to doing everything we can to help the industry understand and comply with the requirements of this new self-regulatory program.  As a next step, we hope that you will join us for one of the implementation webinars scheduled throughout the month of October:

  • Thursday, October 7 from 12:00-1:30 p.m. Eastern Time
    Register
  • Friday, October 15 at 12:00-1:30 p.m. Eastern Time
    Register
  • Wednesday, October 20 at 9:00-10:30 a.m. Eastern Time
    Register
  • Tuesday, October 26 at 12:00-1:30 p.m. Eastern Time
    Register
  • Thursday, October 28 at 9:00-10:30 a.m. Eastern Time
    Register

Sincerely,

Stephen A. Cox
President and CEO
Council of Better Business Bureaus

Déjà Google

Give Google credit that when it announced its acquisition of AdMob, a leading provider of mobile advertising services and technology, in November 2009, it proactively addressed the likelihood of a Federal Trade Commission (FTC) investigation into the transaction. Google even went as far as posting a web page that the media, regulators and other interested parties alike could access that explained why it believed the deal did not pose any “competitive” (note: antitrust) concerns.  Whether it was a self-fulfilling prophesy or just an inevitable step whenever Google makes an acquisition in the digital advertising space, Google last week announced it received a second request for information from the FTC on the AdMob acquisition. This, however, is familiar territory for Google, which has been the target of government scrutiny over previous deals. The FTC held an eight-month investigation into Google's plan to buy DoubleClick Inc. in 2007 before approving that transaction, and last year Google walked away from a search deal with Yahoo after the U.S. Justice Department indicated that it would consider blocking the agreement and strategic alliance.

What Google may not have expected is the data privacy and consumer protection industry group backlash that has taken up the not-yet-completed transaction as a struggle to protect consumer data and the mobile advertising market. At least two prominent consumer groups reportedly approached the FTC, asking it to block the acquisition, arguing that a Google/AdMob combination would put “significant amounts of data for tracking, profiling and targeting” of U.S. mobile consumers into the hands of a single advertising network. Google and AdMob combined will form the largest mobile-advertising company, with 30 to 40 percent of the market, according to Karsten Weide, an analyst with researcher IDC in San Mateo, California. These groups want the FTC to consider whether Google's access to AdMob's technology will give it an unfair advantage in selling mobile advertising.

Understandably, Google has asserted that the economic/market impact of such an acquisition would be almost impossible to measure against the dozens of other mobile ad networks that compete with AdMob on a daily basis. Moreover, a spokesperson for Google has suggested the deal will provide users with more free mobile applications, in some cases as an alternative to pay-to-download apps, since it will allow developers to subsidize their products through better and more targeted mobile advertising.

One interesting issue that has arisen from this and other similar transactions over the past couple of years is whether and how consumer privacy fits into an FTC antitrust analysis. It is well documented that the FTC primarily rests its antitrust analysis on two categories: (i) agreements that are per se illegal, and (ii) agreements that are analyzed under the Rule of Reason. Types of agreements that have been held per se illegal include agreements among competitors to fix prices or output, rig bids, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce. On the other hand, agreements not challenged as per se illegal are analyzed under the Rule of Reason to determine their overall competitive effect. A Rule of Reason analysis entails a flexible inquiry and varies in focus and detail, depending on the nature of the agreement and market circumstances. While this analysis still begins with a review of the primary agreement (e.g., merger, joint venture, license, etc.) driving the FTC’s analysis, it will then extend to other external factors.

Largely until 2007 and the Google/DoubleClick transaction, the issues and types of analysis described above were primarily centered on consolidations and combinations of goods and services, and not privacy or consumer information. During the FTC’s review of Google’s acquisition of DoubleClick, however, all five FTC commissioners who reviewed that transaction agreed that data privacy can constitute a form of non-price competition under a Rule of Reason analysis and, where/when appropriate, should be considered as one of many pieces in their study and review of a prospective transaction. In fact, the FTC, in its decision approving the Google/DoubleClick transaction, provided, “We investigated the possibility that this transaction could adversely affect non-price attributes of competition, such as consumer privacy.” At the core of the FTC’s review was whether, given the nature and economics of online and digital advertising, the concentration of user information that results from a Google/DoubleClick combination meant that no other company would be able to buy, target and optimize ads as profitably, thereby substantially reducing the ability of other ad networks to compete.

On what basis, then, is consumer privacy evaluated? Proponents have successfully argued that privacy harms can reduce consumer welfare, which is a principal goal of modern antitrust analysis. In addition, these same groups have argued that privacy harms can lead to a reduction in the quality of a good or service, which is a standard category of harm that results from excessive market power. On the other hand, those who oppose the incorporation of a privacy review in any antitrust analysis generally rest their argument on two points: (i) they disagree that privacy is a competition-related issue and point to precedents in which non-competition issues (like pollution) have not been traditionally factored into an antitrust analysis, and (ii) these transactions have proved themselves to create market efficiencies and improved offering/technology that ultimately benefit consumers with a more personalized online experience. This latter opinion may best be summarized in a Yahoo statement from 2008: “The advertising model has made Internet content and services available to millions of people in the United States and around the world—for free. The business model of relying on advertising revenue to fund websites has meant that vast amounts of information on the Internet has been fully accessible to people of all ages and income levels.”

Why this Matters: 

Those who ignore history are doomed to repeat it. Our economy today is flush with companies that have been created to essentially trade in almost every aspect of behavioral advertising and consumer data. In fact, one might argue that consumer data has become a currency of sorts in the digital advertising and media industries. As consumer privacy becomes, on the one hand, increasingly protected by both legislation and self-regulatory initiatives (leaving aside the even more complex discussion of the implications of cross-border transactions and acquisitions where the same piece of consumer data may be subject to varying laws), and also a valuable commodity that is highly sought after, companies should be more aware of the legal implications associated therewith in all spheres of their business – including the arena of mergers and acquisitions. Whether one agrees that consumer privacy should be factored into an FTC antitrust analysis or not, it seems unlikely that the FTC will shift from the position it seems to have taken (as evidenced by the Google/AdMob transaction) over the past couple years, and therefore, companies that are contemplating mergers or acquisitions in the digital media and advertising arenas should at least consider the implications that consumer privacy may have on their deals.

Maine Introduces COPPA Extension Bill

This post was written by John P. Feldman and Andrew R. Boortz.

Last year, the Maine Legislature adopted 10 MRSA c. 1055, which, among other things, attempted to extend COPPA-like protection to all minors (that is, children under the age of 18). The law was plagued by a number of issues, including questions regarding its constitutionality, and ultimately caused the Maine attorney general to promise not to enforce the law as written. Based on this, it was generally understood that the Maine Legislature would revisit the law in the 2010 legislature session.

The legislature did not wait long. On January 7, 2010, a new children's privacy bill was referred to the Maine Senate Committee on Business, Research, and Economic Development. The new bill, currently listed as LD 1677, would repeal the existing children's privacy law, but would enact a new prohibition on the collection and use of personal information that is: (a) collected and used on the Internet; (b) about a minor; or (c) for the purposes of pharmaceutical marketing.

Although this bill is narrower in scope than the law it seeks to replace, there are still problems with it. First, the bill applies to any personal information about a person under the age of 18, regardless of whether that information is related to health. Therefore, any information about a minor, including name, e-mail address, etc., would be covered. Second, the law seems to apply only to information collected on the Internet; it is unclear whether this information would apply to information collected through other means such as offline collection, mobile device, etc. Third, the text of the prohibition is poorly worded. The prohibition states that "any person may not collect and use information collected on the Internet ..." (emphasis added). Thus, by a literal reading of the text of the bill, a company could collect information about a minor for the purpose of pharmaceutical marketing and avoid liability if it does not use the information. Alternatively, a company could use information that is collected on the Internet by someone else since it would neither have collected nor used the information.

Of course, it is unlikely that the Maine attorney general would interpret the law in this way because this would create a substantial loophole. Instead, it is more likely that the law would be interpreted as creating two strict liability offenses—one for collection of information if the reason for the collection is to promote pharmaceutical sales, and one for the use of any information about a minor to promote pharmaceutical sales, whether or not the information was originally collected for that purpose.

Why This Matters: If enacted, this bill would place a higher burden on companies that sell either over-the-counter or prescription drugs, including pharmaceutical manufacturers and retailers. Such companies will have to be very careful with any marketing program that could conceivably collect or use information about a minor. For example, an e-mail blast with weekly offers that includes discounts on over-the-counter products could violate the bill's prohibition on marketing to children if a minor's e-mail address was included in the recipient list. Companies that sell pharmaceutical products should watch the progress of this bill closely to determine what kinds of systems should be created to avoid liability. There may be an opportunity to comment on rules that must be promulgated by the Maine attorney general within a year after enactment of the law.

Are self-regulatory ad guidelines sufficient to satisfy federal regulators?

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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NAD Challenger's Fees Go Up for Non-BBB Members

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.

Be a Good Sport!

As anyone who has been through a case at the National Advertising Division (“NAD”) can tell you, bragging’s not allowed. One of the cardinal rules in self-regulation is that you cannot use an NAD decision for advertising purposes. What if you just send the decision around to, say, customers of the competitor you challenged? You didn’t actually say anything promotional.

Nope. Won’t work. You can’t send the decision around as if it’s the hot news off the presses. You can’t even send the press release around without a significant degree of risk. Risk of what? Of an embarrassing press release calling you out as a violator of NAD procedures.

Last year, GP Plastics Corp., the maker of PolyGreen plastic bags, made some “green” claims. It was challenged by Mexico Plastic Company, doing business as Continental Products. The NAD eventually recommended that GP Plastics stop making the “green” claims because consumers were likely to misinterpret the claims and take away an unsupported message. GP even started to appeal the decision, but in the end, agreed to change its ads.

All fine. Except Continental Products, the challenger in the case, (and NAD specifies that it was Continental Products’ lawyer who was actively involved), disseminated the decision to third parties, including customers of GP Plastics. To make matters worse, the dissemination happened before NAD even released the decision to the public. NAD announced that Continental Products was in violation of NAD procedures and chastised it, saying, “The self-regulatory process requires fair dealing on the part of both parties; the NAD procedures and participation agreement both note that parties are prohibited from using NAD decisions for promotional purposes.”

Why This Matters

Self-regulation works because industry believes in it. It can lose its integrity if it becomes a tool for promotion by one party against another. Therefore, NAD has to take a strong position against promotional use of decisions. If you want to get your victory in front of the right people, the right way to do it is to tell Linda Bean at the National Advertising Review Council to send the official NAD press release to the news organization you wish to know about your victory. She will send it along with access to, or a copy of, the decision. You get pretty much the same bang without the kick in the pants.

Skechers Seeing Red Over CARU Decision

The Children's Advertising Review Unit (CARU) determined recently that Skechers, the maker of Red Phrans-Phavorite Sneakers, and Marc Ecko Enterprises, which markets the product, should modify or discontinue advertising that suggests the shoes shine red when used. CARU picked up the ad during its monitoring practices, as it aired during after-school hours on Nickelodeon. Vanessa Hudgens is shown dancing in the commercial, and as she does so, her shoelaces light up in bright red. Her back-up dancers also wear shoes that appear to light up. There is even a close-up of the laces illumiunated in red. Oh, and did I mention the shoes are called "Reds"?

Red-faced with frustration, Skechers and Marc Ecko Enterprises have decided that CARU is wrong to assume that kids think the laces really light up. So they are going to appeal to the National Advertising Review Board (NARB). Appeals from CARU cases are rare, so this should be interesting. It should be noted that CARU has no power to pull an advertisement, and it cannot refer the matter to the FTC while an appeal is pending under its procedures. Thus, Skechers and Marc Ecko might be planning to run the spot through Easter and then pull it before the NARB hearing. If so, that's an interesting strategic move.

Why This Matters

You can't misrepresent how a product works, but the threshold is very low when it comes to kids. Shoes that appear to light up or that make you jump really high are two ways in which CARU has limited marketers' ability to exaggerate in the area of kids' advertising. Also, when it comes to the self-regulatory process, it's good to know the rules.

What Do We Have to Look Forward to in 2009

It’s a new year, and change is in the air. Although the holidays are over, some groups in Washington are hanging on to their wish lists with the hopes that President Obama will grant their desires.

Over the past few months, Obama has sent agency review teams into dozens of government offices, ranging from the Pentagon to the EPA to the FTC. These teams are dissecting agency initiatives, poring over budgets and reviewing functionality. Many lobbying groups see this time of transition as a prime opportunity to achieve desired changes by gaining the ear of the new administration.

In fact, in December, leading privacy and consumer groups met with leaders of the FTC review team to spread the message that the FTC has allowed industries to self-regulate online privacy practices – to the detriment of consumers – for far too long. Privacy groups are not alone in their concern. Obama himself said during his campaign that “[d]ramatic increases in computing power, decreases in storage costs and huge flows of information that characterize the digital age bring enormous benefits, but also create risk of abuse. We need sensible safeguards that protect privacy in this dynamic new world.” He committed to “strengthen the privacy protections for the digital age and to harness the power of technology to hold government and business accountable for violations of personal privacy.”

During their meeting with the FTC agency review team, privacy groups stressed a need for better (more?) regulation of targeted online marketing, oversight in the data broker industry, and privacy policies for medical information, just to name a few. Susan Grant, director of consumer protection at the Consumer Federation, called the Network Advertising Initiative’s behavioral advertising self-regulatory code of conduct “deceptive on its face,” and called for the FTC to establish a “Do Not Track” registry, similar to the popular “Do Not Call” registry for telemarketing. In support of increased oversight of data brokers, Beth Givens of the Privacy Rights Clearinghouse cited numerous complaints from consumers about use of their personally identifiable information by companies in violation of stated privacy policies.

In addition to Obama taking office, a Democratic shift in Congress has the potential to lead to increased regulation. In fact, two senators (Markey (D-Mass.) and Dorgan (D-N.D.)) have already expressed an interest in introducing Internet privacy legislation that would likely outlaw behavioral targeting, cookies and “deep packet inspection.” In addition, a bill currently pending in Congress would expand and enhance the authority of the FTC, possibly increasing the number of FTC litigations.

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CARU Provides Toy Industry Guidance

The self-regulatory group that monitors advertising aimed at children has issued new guidelines designed to ensure that advertisers do not mislead children into believing stationary toys can move on their own.

"Toys that do not move on their own, or cannot perform certain movements on their own, should not be portrayed in advertising in a manner that will lead children to take away the net impression that the toys move on their own," stated a new guidance released by the Children's Advertising Review Unit (CARU).

CARU's new guidance on "Advertising Depicting Movement of Stationary Toys" further states that "[w]hen a doll or toy that cannot move on its own is depicted as moving, there should be a clear and conspicuous appearance of a hand [or hands] (or a person) manipulating the doll or toy...

"Methods that contribute to a misleading impression about a toy's abilities include the use of stop-action, quick cuts interspersed with animation, disguised or inconspicuous hand manipulation and other techniques," the guidance noted.

An example of an ad that would not comply with the guidance, according to CARU, would be a commercial for a stationary doll depicting several dolls dancing to music, which includes brief shots of fingers moving the dolls, but the fingers blend with the flesh colors of the dolls and are not noticeable during ordinary viewing. The commercial would not be brought into compliance by including a disclaimer at the end of the commercial stating that the dolls do not move on their own, CARU said.

Read CARU's press release on the guidance and view CARU's guidance at caru.org.  

Build-A-Bear Workshop Asked To Change Commercial

The Children's Advertising Review Unit (CARU) has recommended that the popular Build-A-Bear Workshop modify or discontinue price advertising claims, which the self-regulatory group says may confuse children.

CARU objected to a commercial, which the organization said it spotted through its own monitoring of advertising directed to children, that showed a child at a Build-A-Bear store choosing a stuffed monkey, clothing and accessories. The announcer stated, "You can make a new furry friend starting at $10 and continue the adventure at Buildabear.com." Though the bear initially appeared unclothed, and a large video disclosure stated that animals start at $10, the bear later was shown to be wearing a shirt, shorts, sunglasses and sneakers.

"CARU concluded that a child could reasonably believe that any fully clothed and accessorized animal would cost $10, although the monkey depicted cost $18 and outfitting the animal similar to the one depicted would cost approximately $40," the organization stated.

The advertiser noted that the commercial in question had run its course, but said it would consider CARU's concerns in future advertising.

Read about CARU's decision at caru.org

FCC Head Calls for Online Targeted Ad Ban

A Federal Communications Commission official is pushing a proposal to ban interactive ads targeting children. FCC Commissioner Jonathan S. Adelstein's call for regulation came amid the latest in a series of public meetings to address childhood obesity and its alleged link to food advertising.

"With the growing convergence of TV and the Internet, we need to set the rules before interactive advertising becomes an established business model," Commissioner Adelstein stated, speaking at the Vanderbilt Forum on Pediatric Obesity in October. The FCC "tentatively" concluded in 2004 that interactive ads targeting children should be banned, he noted. "[W]e need to act quickly ... to implement sensible restrictions on interactive ads targeting children."

Commissioner Adelstein dished up some harsh criticism of the food marketing industry. "The facts show that a vast majority of the food marketed to children are high in calories, high in sugar or salt, and low in nutritional value," he stated. He pointed to the recent campaign for Frosted Flakes featuring Olympian Michael Phelps. "Trying to make Frosted Flakes this generation's ‘breakfast of champions' is symptomatic of this age of hyper-commercialism, which has contributed to childhood obesity."

Parents feel inundated by the "seemingly relentless march of material that is too commercial, unhealthful, violent, or sexual for their children," charged Commissioner Adelstein, himself a parent. In addition to banning interactive marketing efforts (such as TV ads that point kids to websites), Commissioner Adelstein suggested the FCC should clarify its guidelines concerning what constitutes "educational content" for purposes of children's television regulations, and allocate resources toward educating the public on health and media issues.

FCC Commissioner Deborah Taylor Tate, who also spoke at the Vanderbilt conference, did not call for regulation but instead urged the private sector to continue to make self-regulatory strides. A member of the public-private Joint Task Force on Childhood Obesity, Commissioner Tate noted with approval efforts such as the Children's Food and Beverage Advertising Initiative, under which advertisers voluntarily agree to limit their advertising to primarily healthier food and beverage products.

Read Commissioner Adelstein's remarks, Commissioner Tate's remarks, and FCC Commissioner McDowell's remarks at the same conference at fcc.gov. 

Read more about the issue at broadcastingcable.com

No Cold Meds for Kids Under 4, Companies Say

Children under the age of 4 should not be given over-the-counter (OTC) cold remedies, according to new labeling being prepared by leading cold medicine manufacturers.

The manufacturers of medicines sold under brands such as Dimetapp, Pediacare, Robitussin, Triaminic and Little Colds have agreed to voluntarily change their labels to state "do not use" for children under 4. In addition, manufacturers of products containing antihistamines will add language to their labels warning parents to refrain from using these medications to induce drowsiness in young children.

The changes came following consultation with the Food and Drug Administration, which earlier this year recommended that children younger than 2 years old should not be given cold medications.

Children's cough and cold medications are safe and effective when used as directed, stressed the Consumer Healthcare Products Association (CHPA), the trade group that announced the voluntary labeling changes. "Research shows that dosing errors and accidental ingestions-not the safety of the ingredients themselves when properly dosed-are the leading causes of rare adverse events in young children," the CHPA stated.

Indeed, a study by the Centers for Disease Control and Prevention, which concluded that thousands of young children are hospitalized annually after ingesting cough and cold medicine, also determined that the vast majority of children hospitalized had taken medication while unsupervised.

Read about the labeling changes at chpa-info.org. 

View news coverage concerning the change at apnews.excite.com. 

CARU Refers Advertisers to FTC

The Children's Advertising Review Unit (CARU) has referred two cases to the Federal Trade Commission because the advertisers failed to substantively respond to its inquiries.

CARU examined advertising for the "Spray Racer," a toy vehicle powered by water and air that is compressed when a child manually pumps a holding tank. CARU questioned whether a TV commercial showing a child pumping once to launch the car at a speed of 272 scale miles per hour was an accurate reflection of the product's performance.

The self-regulatory group asked the advertiser, Summit Products, whether substantial pumping was in fact required to maintain the speed depicted. When the advertiser did not respond, CARU referred the matter to the FTC.

CARU also referred to the FTC a case involving the website www.virtualfamilykingdom.com after the company that operates the site allegedly did not respond to CARU's inquiry regarding apparent failures to comply with the Children's Online Privacy Protection Act of 1998 (COPPA).

Upon reviewing the site, CARU noted that it had an option whereby personal information could be collected from children without first obtaining parental permission, and that the site failed to include offline contact information, as required by COPPA. In addition, the posted privacy policy did not conform to actual practices on the site, CARU claimed.

View a summary of the "Spray Racer" case and of the Virtual Family Kingdom case at caru.org.

Toys 'R' Us Sets Tougher Safety Standards Than Feds

Toys ‘R' Us has announced a series of tightened safety standards for toys and cribs. The announcement follows a series of massive recalls in recent years.

The new requirements provide for general increased quality assurance standards and oversight, including increased frequency of third-party testing, and standards regarding the allowable amounts of lead that can be contained in coatings and toy materials.

The retailer also issued enhanced crib-testing standards, which go beyond federal regulations, and include specifications for wood density and types, and measurements for crib rail spindles, among other requirements.

In addition, by the end of 2008, Toys ‘R' Us no longer will carry toys that are made by adding phthalates and polyvinyl chloride to them, the retailer said. Similarly, the toy store will phase out sales of baby bottles that contain bisphenol-A (BPA) by the end of the year.

Read more about Toys ‘R' Us safety standards and practices at toysrus.com.  

Read more about the issue at chicagotribune.com.  

CARU Makes More Movie Ad Referrals to MPAA

The Children's Advertising Review Unit (CARU) has referred ads for yet another PG-13 movie to the Motion Picture Association of America (MPAA) for being advertised during children's programming. The move is the latest in what appears to be an increasingly tense stand-off between CARU, the advertising industry's self-regulatory arm, and the motion picture industry.

CARU said it referred TV advertising for the Warner Bros. film, "Sisterhood of the Traveling Pants 2" to the MPAA for being shown on Nick 1 during children's programming. The movie was rated PG-13 by the MPAA for "Mature material and sensuality," noted CARU. Similarly, CARU has referred ads to the MPAA for PG-13 rated movies such as "The Incredible Hulk," "Indiana Jones," "Get Smart," "The Mummy: Tomb of the Dragon Emperor" and "The Rocker" for being shown during kids' shows.

CARU's Self-Regulatory Program for Children's Advertising states that advertisers "should take care to assure that only age appropriate videos, films and interactive software are advertised to children, and if an industry rating system applies to the product, the rating label is prominently displayed."

The referrals fall under an agreement struck by CARU and the MPAA, which cover ads for films rated PG-13, R or NC-17 that run in any medium primarily directed to children under 12. CARU agreed to first attempt to determine whether an ad placement was intentional, and if it was found to have been unintentional, to ask the advertiser to pull its ad and ensure the placement did not reoccur.

If an ad placement in children's media was deemed to have been intentional, CARU agreed to refer the matter to the MPAA Advertising Administration, which pledged to determine whether the film at issue "is appropriate to be advertised to children."

Read previous KidAdLaw coverage of the issue:  "CARU Rulings: Movie Referrals", "CARU Rulings: Movie Referrals" and "CARU Strikes Agreement With MPAA".