Privacy, Ad Deductibilty Top 4As’ DC Agenda

In the never-ending campaigns to shape (or head off) laws and regulations in Washington, broadcasters have had no closer ally that the American Association of Advertising Agencies. Over the years, the 4As and the National Association of Broadcasters have found their interests closely aligned and worked together. “We are bonded at the hip with the NAB,” says Dick O’Brien, EVP, 4As director of government relations.

With that relationship in mind and with the trade group preparing for its annual conference (March 7-9 at the Hilton Austin in Austin, Texas.), TVNewsCheck Contributing Editor Kim McAvoy interviewed O’Brien to find out what’s on the 4As’ Washington agenda.

At the top is online privacy, which ties into marketers’ desire to target advertising to individuals, O’Brien says. Also high on the list are tax reform efforts that may limit the deductibility of advertising expenses. Such efforts could ultimately depress advertising spending on media.

The good news, O’Brien says, is that the push for stiffer regulations on advertising of direct-to-consumer drugs and certain foods as part of the fight against obesity have abated — at least for the moment.

An edited transcript:

What are some of the top issues confronting your industry in Washington this year?

Online privacy will probably be the hottest issue. The ability to target advertising very specifically, based on the behavior of people online, is something we have been working closely with the Federal Trade Commission for the past three years.

The FTC wants to be sure that as we collect data online, and tailor it so that we can target the advertising particularly to a person’s interest, that we are doing it in a very responsible way.

To that end, we have put together a voluntary intra-industry coalition of everybody involved in online advertising — the ISPs, the advertisers, the advertising agencies, the ad networks and the publishers.

We have put together a self-regulatory voluntary code of conduct, which we are now exposing to the world, and getting people to join. We set up a mechanism for how to be sure that the collection of data is being done responsibly.

That program is up and running. We are working with the FTC to make sure it evolves as the technology evolves.

Privacy also caught the eye of Congress. We are now working with the Congress to be sure that the industry is regulating itself responsibly so that there will be no need for legislation or regulation.

We are working with the White House because they are concerned about it as well.

How does the self-regulatory program work?

What you will start seeing shortly is an advertising icon with each ad. It invites you to click on it and takes you to a Web page: http://www.aboutads.info/home/

The page tells you about the program, what tracking means, and who’s doing the tracking. If you would like that to be stopped, please click here, and we will opt you out of it.

Everybody has started calling it the “about ads.info program.”

Is this Congress likely to regulate direct-to-consumer drug advertising?

That’s not something we are picking up any increased or new congressional activity.

But, over the past 10 years, there’s been much activity particularly on Capitol Hill, toward limiting the ability of prescription drugs to advertise directly to the public. At one point, they proposed something that could have made it impossible to advertise prescription drugs on television. We had to go in and be sure that did not go forward.

What do you think about a law permitting drug companies to work together with doctors and patient groups to create joint ad campaigns?

It’s a bit of a new idea to me. I am not 100% sure of what the need for that would be. We have reams of data that suggests that when people see ads for specific drugs it triggers conversations with their doctors that might not have otherwise taken place.

The form of advertising as it exists today is doing a valuable job for the patients of America. I am not entirely sure what the motive would be for fixing something that’s not broken.

What impact did last fall’s mid-term elections have on your association’s agenda.

Basically, I think coming out of the election, the public sent out such a clear message saying we want the government to pull back a little bit and not to be quite so activist.

I think President Obama is putting forth this order saying let’s look at everything and be sure that there aren’t regulations out there that are excessive. I think what you will see is probably less of a regulatory activist bent coming out of the administration.

What that means for us is we will still have a lot of work to do with the administration and with the Congress, but it probably will not be at the same fever pitch that it was during the first two years of the administration.

The public has basically said, OK, slow down, and catch your breath. The Republican landslide in November was sort of a manifestation of that.

So why would this Congress still want to regulate in areas such as online privacy?

I think the public really wants the partisan infighting in Congress to stop and for things to get done.

What that means is that Democrats and Republicans are going to need to find places where they can work together and show the American people they are actually making things happen and moving things forward.

They are going to have to find issues where they agree and where they can feel comfortable making progress. Some issues lend themselves more to that than others, and one of those could be privacy. Privacy is not a Democratic issue or a Republican issue.

My belief is that privacy may be one of those areas that is not hard for them to agree on and not hard for them to move on. The change in the composition of the Congress may actually propel privacy to a faster track then we would have had otherwise.

Is there any likelihood that Congress might want to eliminate the deductibility of advertising expenses as part of a tax reform package?

Congress may actually make a serious move to reform the tax code. There are already conversations with the business community.

The White House and Congress are floating the notion that if Congress were to lower the corporate tax rate from 35% to 28%, it would have to eliminate all kinds of deductions. They are asking the business community how it feels about that.

Frankly, the first reaction from the business community has been that they are interested in the idea. One category of deduction is the deductibility of advertising as a business expense.

Each year corporations can write off the full cost of their advertising and marketing expenditures as a necessary business expense on their tax returns. One of the things that could be looked at could be the deduction for advertising. I am sure they will look at everything. It could very well happen. We will work very closely on this issue with broadcasters.

Overall, do you think congressional interest in restricting certain types of advertising content may wane?

You can easily find Democrats wanting to put restrictions on a category as you can Republicans. But because the priorities of the nation are so focused on finances and gaining financial stability, and there is limited time to act, the first order of business probably will be some re-examination of the tax code.

If they are looking for things that could move quickly and easily through the Congress, online privacy is much easier to explain than some of those other issues.

It’s harder to explain and talk about prescription drug advertising or the advertising of food and beverages. But if you say to the public, I want to protect your privacy; the public is going to feel that’s a good thing for you to do.

Since curbing childhood obesity is a White House priority could it lead to a regulatory push in Congress?

I don’t think so. We are working with the White House. Mrs. Obama has her program called “Lets Move,” which is a very well-conceived program.

We went to Mrs. Obama when she announced the program and volunteered the resources of the advertising industry to work pro bono and put together the advertising and message around that campaign.

The Ad Council is now working with Mrs. Obama. They actually have a very robust program which I think is going to be launched fairly soon.

Her initiative is really a very positive one and she has very good intentions. The industry is really reaching out to help.

And the food and beverage industry has stepped up to put together the Children’s Food and Beverage Advertising Initiative. It’s a code of conduct administered by the Better Business Bureau. Virtually all of the major food and beverage companies are party to it. They have put together voluntary guidelines on how to responsibly advertise food and beverages to kids.

Frankly, I think a lot of impetus for Congress to get involved has gone away. I think working with Mrs. Obama and taking the positive side of the argument is where are efforts are better directed.

We can teach kids that eating smart and exercising more is important and is something that is good to do. That’s what the advertising industry does best: persuading people to do stuff. Because the industry has been so responsible in policing itself, the Congress doesn’t have to get that involved.

Are there other issues the 4As is tracking?

We have been working with the FCC on its Future of the Media project. Apparently, there will be some activity coming up in the next couple of months. The whole thrust of that project is the government trying to figure out what is the best way to manage the changing media environment.

There is all this wonderful new technology exploding, but newspapers, magazines and local broadcast companies are really hurting. Part of what the FCC is trying to grapple with is, if those local media are weakened, and they are not able to function, who will replace that local news function.

So the FCC is looking at it a little bit as an issue of public policy, social policy almost. How do you get local news to people, particularly in parts of America that rely on local stations and local newspapers, if in fact those vehicles disappear as this whole media revolution takes place?

It’s going to be much more of a futurist document, I believe. I think it’s more focused on what’s the proper and appropriate public policy to ensure that important information is conveyed to local audiences if some of these local media operations disappear.

Specifically, what role has the 4As played in that project?

We were a resource to them. We helped them understand the facts of the media marketplace as it exists today and with predictions of where the media marketplace may go in the future.

The most important thing to the FCC, if it does try to navigate its way through a changing media environment, is that its actions be based on factual information. That’s what we can provide. We happen to know the facts about what the media are delivering today and we are also very knowledgeable about where the media may progress into the future.

We just wanted any conclusions they might have, to be based in hard facts, which is what we can bring to the party.

Are there any other advertising issues that TV broadcasters should be following?

No. We work so closely with the National Association of Broadcasters. We are bonded at the hip with the NAB. If there is anything of importance, they work with us and we work with them.

When we work with the Congress or work with the White House, or work with the Federal Trade Commission, we never do it alone. We generally form a group of people around an issue. We put together coalitions.

The broadcasters are probably our most consistent partner in protecting the right of content to go forth over the airwaves unobstructed. We work with them on coalition after coalition, they are wonderful partners.