A Win-Win For The Promotion Marketing Industry: Trade Association And Outside Counsel Share Perspectives

Sunday, May 1, 2005 - 01:00

Editor: Would each of you gentlemen tell our readers something about your professional background and experience?

Lewczak: I am a partner at Davis & Gilbert and have been a practicing attorney for 13 years. I started my legal career as a corporate associate at Willkie Farr & Gallagher, and for the past nine years my practice has focused onrepresenting a wide variety of companies in their advertising, promotion and marketing efforts.

Kabak: Following law school, I began my career as a litigator and wound up engaged in a great deal of publishing work. That led to my becoming General Counsel at Grolier, Inc./Lagardere Group, an organization that had evolved from encyclopedias to direct marketing and telemarketing and online publishing. Four years ago I joined PMA and am Chief Legal Executive.

Editor: Mr. Lewczak, please tell us about your practice at Davis & Gilbert.

Lewczak: My practice is extremely varied. I am in the firm's advertising, marketing and promotions group, which has over 20 lawyers. We represent numerous marketing communications companies, including advertising agencies and promotion agencies, as well as advertisers, in all of their day-to-day needs in the creation of marketing communications materials. This includes counseling our clients on compliance with various consumer protection laws, including, in the promotion marketing context, laws concerning skill contests and sweepstakes, rebates, coupons, gift cards, cause-related marketing and other techniques. We also advise on various direct marketing issues, including telemarketing, SPAM and privacy. Finally, our practice touches on all matters relating to intellectual property, including the creation, protection and use of trademarks and copyrighted materials. Other issues we address include compliance with commercial labor union codes and a whole variety of entertainment issues, including branded entertainment, and a broad range of food-, drug- and cosmetic-related matters.

Editor: Mr. Kabak, please tell us about PMA and its mission. Who are its members? What kinds of services does it provide its members?

Kabak: PMA is the national trade organization for the promotional marketing industry. It is a tax-exempt organization under §501(c)(6) of the Internal Revenue Code, and it has a related §501(c)(3) public foundation as well.

The organization has a history that dates back to 1911, and in recent decades it has reinvented itself to be the voice of the promotion and integrated marketing industry. It is relied upon by marketers as the primary source of promotion education, information and interaction. Themembership consists of about 600 organizations representing thousands of brands. Promotion marketing is defined as marketing communications which motivate specific action by a specific audience during a defined time period. This constitutes, on an annual basis, a 350 to 400 billion dollar U.S. industry.Promotion marketing is strategic and includes event marketing, entertainment marketing, retail and interactive marketing. The tools of promotion are varied and include sweepstakes, games, contests, experiential marketing, product placement, loyalty programs, coupons, rebates, premiums, gifts and a host of other forms.

PMA's membership includes marketing members - a considerable number of Fortune 500 companies fall into this category - and brands, suppliers, which includes advertising and promotion agencies, the legal membership, and an academic membership.

The services that PMA provides include a state-of-the-art annual legal conference for promotion marketers, business conferences, web seminars, legal and business publications, and specific marketing research on a variety of issues. The organization is also involved in monitoring statutes, rules and regulations at every level of government. When, for example, the Deceptive Mail Prevention and Enforcement Act was in the process of enactment in 2000, we were able to modify some of the provisions on behalf of the industry.

Editor: The relationship between Davis & Gilbert and PMA goes back many years. Given the firm's focus on a rather specialized practice area, it is in a unique position to serve the industry's trade association. Can you tell us about the evolution of the relationship over the years?

Lewczak: We help each other in a variety of ways. We believe that it is important for our clients in this industry to belong to an organization which is a conduit for information on developments within the industry and its representative to the outside world. We develop materials for, and participate in,various PMA conferences, and we help the organization in a variety of federal and state legislative initiatives that affect the industry, including drafting comments to proposed regulations. At a more informal level, Ed Kabak is a terrific resource for me in coming to grips with emerging issues, and I believe I serve in somewhat of the same capacity for him. We confer on an ongoing basis.

Kabak: PMA has a very active legal committee, which serves, among other things, as an excellent cross-fertilization forum for ideas and networking. Davis & Gilbert, along with other firms, has been invaluable in the work of the committee, which includes monthly bulletins for members and an annual treatise on promotion marketing laws. PMA and the committee also provide expert testimony on PMA's behalf in hearings before legislative and regulatory bodies.

Editor: One of the ongoing themes of our publication is the importance of partnering between law firms and corporate counsel. That appears to be underway here.

Lewczak: Partnering is one of the hallmarks of Davis & Gilbert. We like to view ourselves as partners with our clients in the sense that we confront the same issues, and in the case of PMA, we act as mutual sounding boards on issues that impact not merely one client but an entire industry. Each of us, PMA and Davis & Gilbert, has a vital interest in being able to draw upon the accumulated expertise and wisdom of the other.

Kabak: As a trade association, PMA represents the industry as a whole, but at the same time we must recognize that there is not always a single industry-wide point of view. Our members are diverse, and they address the issues from a variety of perspectives. Davis & Gilbert's and other firms' experience with this diversity of views is a valuable resource for us.

Editor: Please tell us about the principal challenges that the promotional marketing industry faces today.

Lewczak: The biggest challenge, I believe, involves the rapid development of technology, the uses to which it is put and the legal issues that derive from it. For example, wireless devices constitute a new medium for promotional activities, and the industry is attempting to address legal issues that are, in a sense, unique because they arise with respect to an entirely new medium. The threat of class action lawsuits and regulatory action is very real in this situation, as we see an increasing number of new players in the industry who seek to promote new products and services directed at the wide audience of people who own wireless devices. A good example is the recent lawsuit in California against JAMSTER! alleging fraudulent practices in its promotion of "free" ringtones.

Kabak: One challenge is the rapid pace of technology. We already have seen, for instance, a technology called radio frequency identification. Like the EZ pass, it allows silicon chip information scanning and reading off consumers in a shopping mall and would increase marketing efficiencies. A balance must be achieved here between the marketer's legitimate rights to address the consumer's needs through marketing and the individual's right to privacy. The pace of technological development is making this a particularly timely issue.The evolving nature of branded entertainment is another issue for us.

Lewczak: I think it is premature to speak of the death of traditional advertising. It has changed and, I think, it is going to be more beneficial to both marketers and consumers. Promotions will play an increasing role as we move forward because consumers are looking to interactive advertising and the kinds of promotional advertising that generate benefits, including rebates, coupons, sweepstakes and other premiums. Branded entertainment is another area that is attracting a great deal of interest at the moment. Many current TV shows feature numerous product placements, although there are diverging opinions as to whether this is effective. On the positive side, the FTC's recent response to Ralph Nader's Commercial Alertgroup relating to product placement and brand integration in television programming indicated that an "advertisement" disclosure would not be necessary in such a situation. However, the FTC did leave open the door for the necessity of a disclosure if a celebrity had been paid to discuss aproduct in entertainment programming. We expect to hear more from the FTC on this issue when it finalizes its regulatory review of its Endorsement Guides this year.

Editor: You are both part of an industry that is regulated by a number of jurisdictions, but almost by definition that industry is borderless. Please tell us about the challenges and opportunities that globalization presents.

Kabak: Just by advertising online, you can be in every country at the same time, and each country has its own laws governing promotional marketing. In some cases, foreign jurisdictions are much stricter than the U.S., and in others much looser. In the very near future there will be an EU-wide directive that is very close to our handling of deceptive advertising, but in general the single EU directive on promotion marketing issues is the exception, not the rule.The globalization of technology is permitting us to address people on a worldwide basis, but there is no commensurate standardization of the rules as to how we are supposed to go about it. That is a real challenge.

Lewczak: The biggest impact of globalization in my view has to do with legal compliance. Clients sponsoring a promotion in the U.S. are generally going to have to satisfy a federal layer of regulation and those of 50 other jurisdictions, but at least there are some common denominators among these jurisdictions. If the promotion is taken into the global arena, perhaps 20 additional jurisdictions are involved, and their rules may differ radically from what prevails in the U.S. and among themselves. The cost of compliance - the retention of lawyers in each jurisdiction, for starters - might become prohibitive.

Editor: Would you share with us your thoughts on where the industry is going to be in, say, five years?

Lewczak: I think we are going to see increased attention to the technology issues that relate to privacy. Congress appears to be very interested in leaks, inadvertent and otherwise, of personal information by data companies.That will have an impact on the promotion marketing community because much of direct marketing is about reaching individual consumers who have been personally identified in someway. The issue of obesity in children is a prominent one, and if self-regulation does not work, there is a potential for regulation by the government. The growing popularity of wireless productsis going to give rise to an increased focus on the part of regulators. In summary, as the industry evolves as a consequence of technological advances, regulation, in one form or another, will inevitably follow.

Kabak: First, there are numerous new forms of wireless, event/experiential marketing that combine traditional promotional material with new and useful techniques and venues. Second, I would say that it is important not to overregulate here. We are moving into uncharted seas with the explosion of technology. PMA, with the support of Davis & Gilbert and other firms, is going to be part of a discussion that, I trust, will result in a regulatory regime that protects the interests of the public, and that gives focus and direction to their continued enjoyment of the myriads tools and methods of the promotion marketing industry. This is a very exciting, and, I think, important, time to be a part of this ongoing discussion.

Please email the interviewees at jlewczak@dglaw.com or ekabak@pmalink.org with questions about this interview.