Advertising, Marketing And Promotions 2004 Year In Review Don't Cross The Line In 2005

Wednesday, December 1, 2004 - 01:00

By all accounts, 2004 was a star-studded year in the world of advertising, marketing and promotions.Janet Jackson, Steve Garvey, Arnold Schwarzenegger, Eliot Spitzer and a bevy of milk mustache wearing celebrities made a significant impact on the industry.While it remains unclear what the stars hold for 2005, here we re-cap some of the major moments of 2004 and consult the astrological charts in an attempt to predict what's in store for 2005.

The New Conservative Television Ethos

Janet Jackson began the year with the moment that shocked the world.The now infamous "costume malfunction" at the 2004 Super Bowl caused massive public outrage prompting Congress to quickly introduce the Broadcast Decency Enforcement Act which will, when passed, increase fines against indecent broadcasters.The impact on advertisers?A much more conservative approach from the networks and other television outlets as to what is permissible on the airwaves. Desperate Housewives actress Nicolette Sheridan and Philadelphia Eagle Terrell Owens ended the year with "towelgate," a football promo incident that prompted Federal Communications Commission (FCC) Chairman Michael Powell to state, "I wonder if Walt Disney would be proud." Expect the conservative retrenchment to continue in 2005 and beyond.

Got Milk?

Lindsay Lohan, the featured actress/singer from the recently published 200th "Got Milk?" advertisement, as well as other celebrities who have appeared in the campaign, would likely be surprised to learn the government program that helped support the campaign was this year found to violate dairy producer's First Amendment rights.The decision itself seems to have had little impact on this particular campaign, but will generally mean less money will be flowing to support the program.In the mean time, the Supreme Court is set to hear the Bush administration's appeal of a similar decision involving, "Beef: It's What's for Dinner."The decision, if left to stand, will be a victory for commercial speech, but will have a significant impact on advertising budgets for this type of advertising.

Endorsements/Testimonials

In September, the Ninth Circuit Court of Appeals ruled that baseball legend Steve Garvey was not liable for statements he made in infomercials for Enforma weight-loss supplements.This decision is the highest ruling covering Federal Trade Commission (FTC) policies on celebrity endorsements and is significant because it limits the circumstances under which an advertising spokesperson can be held personally liable for product claims.The Court found that the FTC failed to show Garvey was recklessly indifferent to the truth of his statements or that he was aware of highly probable fraud.Despite the ruling, celebrity endorsers should continue to be careful with the types of products they endorse and the claims they make about those products, since the FTC is not likely to step back from its regulatory stance on this issue.

Marketing Violent Entertainment To Children

In July, the FTC issued a report on the Marketing of Violent Entertainment to Children.The report concluded that the motion picture, music recording, and electronic game industries continue to advertise violent and explicit movies, games and music in media widely watched by teens and that teens can purchase R-rated products at many locations.The report recommends that these industries improve efforts to avoid advertising restricted or labeled products in venues popular with under-17 audiences and that rating information disclosures be improved. If the industry does not curb the marketing of violent entertainment to children, government regulation may not be far behind.

Regulatory Trends

Verizon Wireless, Cingular and Sprint settled their long-running dispute with a consortium of 32 state Attorneys General, agreeing to, among other things, create maps for consumers showing where their wireless signal is available, add detailed information to their advertising materials disclosing service rates, conditions and limitations, implement a trial period for new customers, and reconfigure bills to unbundle discretionary fees from mandated taxes.The carriers also agreed to pay $5 million to the AGs' individual consumer funds.This settlement signals not only the areas of interest and activity by AGs throughout the country engaged in consumer affairs for 2005, but also suggests that lawmakers are losing confidence in businesses' ability to self-police and self-regulate effectively through industry codes and market pressures.

Telemarketing And Facsimile Advertising

The national do not call registry passed its final legal test when the Supreme Court declined to hear an appeal challenging its legality, and, this summer, the FTC began enforcing the registry.The FCC also had a busy year in the teleservices area culminating with the publication of rules implementing the Telephone Consumer Protection Act.In order to address industry concerns, the FCC established a limited safe harbor period in which marketers will not be liable for placing autodialed or artificial or prerecorded message calls to numbers recently ported from wireline to wireless service. The FCC also amended the existing safe harbor rule for telemarketers that must comply with the registry to require such telemarketers to access the registry and scrub those numbers from their call lists no more than 31 days prior to making a telemarketing call and, in response to industry concerns, extended, through June 30, 2005, the effective date of its amended rule requiring an entity sending an unsolicited advertisement via fax to obtain a signed, written statement as evidence of a recipient's consent.

While most of the controversy relating to telemarketing has faded since the implementation of the amendments to the Telemarketing Sales Rule, don't expect enforcement to fade any time soon.Look for both the FTC and the states to continue to aggressively attack do not call violations.

Sweepstakes And Online Gambling

New York AG Eliot Spitzer brought sweepstakes back to the forefront in 2004 through actions against A&P grocery stores, CVS Pharmacies and Tylenol.A&P and CVS failed to provide or disclose adequate free methods of entry in their sweepstakes, and paid $36,000 and $75,000 in penalties, respectively.The most significant action, however, was brought against Tylenol in connection with a sweepstakes that directed consumers to purchase Tylenol, log onto a web site and enter the UPC code from the Tylenol bottle.Though the Tylenol sweepstakes provided consumers with a non-purchase entry method by visiting the sweepstakes web site, the AG took exception to the fact that a consumer could only learn of such entry method by visiting the web site.Tylenol paid $50,000 in penalties.More significantly, however, this case suggests that a mail-in alternate entry method should have been provided and disclosed in advertising.In any event, the recent actions in New York could spawn similar actions in other states during 2005.

Online casinos are illegal in the U.S., however, there has been much recent controversy over the permissibility of advertisements for legal offshore online casinos on U.S. web sites.This controversy started in 2003, when the Department of Justice (DOJ) sent letters, and later subpoenas, to a number of media organizations, requesting they instruct their members that accepting Internet gambling advertisements might subject them to prosecution.This summer, Casino City, a company which hosts web sites with links to online casinos, filed a complaint against the DOJ seeking a declaratory judgment ruling that advertisements for online casinos are protected by the First Amendment.While we can expect the declaratory ruling in the coming months, we don't foresee a speedy resolution, since both sides are likely to appeal.

E-Mail Marketing

Industry survived its first year of the CAN-SPAM Act, with most legitimate businesses having to deal with nothing more than figuring out how to identify their unsolicited e-mail as a solicitation and how to honor opt-out requests.While the Act did little to stem the unceasing flow of unsolicited e-mail (Bill Gates alone receives 4 million pieces of spam each day), both government and industry took legal action against spammers under the new law, and new rules by the FCC prohibit sending spam to wireless devices without consent of the recipient.What has caused the industry the most concern about the Act (what is the "primary purpose" of the e-mail) will be addressed in regulations to be finalized by the end of 2004.Count on seeing numerous actions against spammers, and possibly against legitimate businesses that inadvertently fail to comply with the Act, in 2005.

Privacy And Technology

Governor Schwarzenegger continued California's 2003 trend by enacting new laws affecting privacy and the Internet.The first law, the Online Privacy Protection Act, requires companies that collect personally identifiable information from California consumers to post a link to a privacy policy on their home page.The second, effective on January 1, 2005, requires businesses that collect and share personally identifiable information from California consumers to either respond to consumer requests in writing with the types of personal information disclosed and the names of the parties to whom such information was disclosed or provide a method for consumers to opt-out of such disclosures.

2004 also saw the controversy over adware and spyware move from the courtroom to the statehouse.Utah became the first state in the country to enact an anti-spyware law, which was later enjoined.California passed an anti-spyware law which becomes effective on January 1, 2005 and is substantively similar to the bills currently pending in the U.S. House and Senate.As these laws are enacted, it is likely that adware providers will modify their practices to ensure that they comply with the notice, consent and removal requirements of these laws.

Children's Obesity And Advertising

Many regulatory agencies, research bodies and consumer advocacy groups, continued to focus on the growing problem of obesity in the U.S. this past year.Major developments included a report published by the FDA recommending that the FDA and FTC "increase enforcement actions against weight loss products having false or misleading claims,"a statement during congressional hearings by the Centers for Disease Control stating that it intended to comprehensively review the effects of advertising and marketing on children's dietary patterns, the publication of a white paper by the National Advertising Review Council maintaining that self-regulatory advertising guidelines will remain effective in ensuring the truth and accuracy of food advertisements, and a report released by the Institute of Medicine of the National Academies recommending specific actions be taken by the advertising, media and entertainment industries in order to prevent obesity in children and youth.The Institute of Medicine report also suggests that voluntary guidelines be developed and that the FTC be given the authority to monitor compliance. Obesity lawsuits were also in the public eye with several states enacting statutes preventing consumers from filing obesity lawsuits.While 2005 is shaping up as another year of back and forth among industry, government and consumer groups on this controversial issue, there is not likely be an outcome that will negatively impact industry . . . yet.

Branded Entertainment

The past year saw brand-integrated entertainment become entrenched in virtually every format and type of entertainment programming, including the hit reality program Extreme Makeover: Home Edition , which featured the prominent presence of SEARS and Craftsman products being touted by Ty Pennington and the hit summer series The Days , produced by the media buying giant MindShare, featuring seamless integration of products and advertising for its clients. Continuing to threaten brand-integration, however, is Commercial Alert (CA), a consumer advocacy organization whose board of advisors includes Ralph Nader. CA filed complaints with the FTC and FCC to require prominent, upfront disclosure of any arrangement between an advertiser and broadcaster in entertainment programming, akin to those for infomercials.The FTC and FCC have been examining the issue for nearly a year and both indicated that they expect to issue a ruling on the complaints by late 2004 or early 2005.

Viral Marketing

While not the subject of any legal actions in 2005, advertisers increasingly turned to so-called "viral marketing" techniques to bypass marketplace clutter and consumer indifference.Viral marketing strives to have consumers propagate an advertiser's message through word-of-mouth and e-mail chains, instead of using costly traditional methods.These campaigns have been most effective when consumers do not immediately perceive it as marketing, but rather as entertaining or informative content that they disseminate to others.Because of its comparatively covert messages and methods, viral marketing raises a host of serious legal implications for advertisers, including issues related to CAN-SPAM, online privacy, fraud and intellectual property rights.Expect regulators to turn to this issue soon - perhaps 2005 - and exercise heightened caution before embarking on viral campaigns.

Conclusion

The advertising, marketing and promotions practice areas are among the few areas of the law where substantive legislative and regulatory changes and enforcement actions occur rapidly and frequently.How well you keep up with these changes will help you predict and avoid the legal pitfalls in this unique area of the law next year.

Joseph J. Lewczak is a Partner, and Michael Abitbol is an Associate, in the Advertising, Marketing and Promotions practice group of New York based Davis & Gilbert LLP.
Authors' Note:The authors gratefully acknowledge the assistance of each of the attorneys in the Advertising, Marketing and Promotions and Intellectual Property practice groups who contributed to this article: Ashima Dayal; James Johnston; Gary Kibel; Kara Paldino; Linda Siegel; Ivana Starr; and Tiffany Towers.

Please email the authors at jlewczak@dglaw.com or mabitbol@dglaw.com with questions about this article.