• by Karl Greenberg , March 10, 2009

The advertising and marketing business is facing a Christopher Columbus moment this year, with serious threats on a broad range of issues, and no horizon in sight.

While the new Administration is likely to favor government regulation of how marketers tout their products and to whom, this economic downturn is the worst time to put shackles on advertising, says Dan Jaffe, EVP, government relations at the Association of National Advertisers (ANA.)

Speaking at the ANA's Advertising Law and Business Affairs conference in New York on Monday, Jaffe said: "This could be a year of living very dangerously. Clearly, it's a year of anti-business sentiment." And he flashed a cartoon of rats jumping a ship called Wall Street, carrying trunks labeled "Bonus" and "CEO."

"Self-regulation is now dead: we now face a skeptical outlook of policymakers toward self-regulation in general. Even Republicans have shown willingness to intervene in the regulatory system. Advertising is the engine of our economy. But the whole movement is toward greater and greater regulation in all areas and all at once."

In an environment almost defined by the failure of self-regulation in the financial sector, marketers must prove themselves the "gold standard" in the practice, he said.

"Key leaders in Congress want to broadly expand the Federal Trade Commission (FTC) and Federal Communications Commission and their enforcement of food and drug marketing, so if we can't convince regulators that we are regulating well, they will do it for us."

He quoted FTC Commissioner Jon Leibowitz, who has reportedly said: "Industry needs to do a better job of meaningful, rigorous self-regulation or it will certainly invite legislation by Congress and a more regulatory approach by our commission."

Jaffe says the Supreme Court is also likely to pose new challenges, since many key decisions that impinge on advertising have been made on a 5-4 vote. "The majority of the court is quite old, so President Obama may replace up to three in his first term. Even a one-person change could swing the court in key issues."

And advertisers may see an end to tax-free advertising. He pointed out that with the projected deficit this year of $1.2 trillion--three times greater than the last record deficit--lawmakers on both the federal and state levels would look at taxes on advertising as a way to garner revenue.

"There are ways taxes could be imposed: from across-the-board ad taxes [which would] garner as much as $160 billion in the next five years, to specific taxes on unpopular categories, such as tobacco, direct-to-consumer pharma, and certain food categories," he said.

One ominous development is regulation of marketing messages directed at certain age groups for products that are legal for that group. "Congress is considering four agency working groups to study and consider guidelines for food marketing to kids," he said. "Never before has there been a government mandate to restrict advertising to a group who can legally purchase the products involved."

And he noted that last week Rep. Henry Waxman, D-Calif., reintroduced a bill to allow the Food and Drug Administration to regulate marketing on tobacco that was, per Jaffe, a de facto ban on tobacco ads. "It was put in on Tuesday and passed on Wednesday, without a hearing, and no debate," he said. "That was unusual."

Deborah Platt Majoras, VP and general counsel at Procter & Gamble and former FTC chairman, took a brighter view. "I doubt we will see new, across-the-board regulation of advertising. I do think we will see increasingly aggressive enforcement of current rules."

She said the First Amendment stands as a bulwark for commercial speech, and while the Supreme Court has indeed been nearly split, the lower and appellate courts "have been loath to pass new regulation.

"And for all the skepticism that the anti-business environment is engendering, the facts are the system of self-regulation among advertisers works very well. The point to make to skeptics is that companies have participated heartily in self-regulation precisely because it is in their interest to do so. It is also in consumers' best interest, partly because it is regulation whose cost is not borne by the taxpayer."

And while she conceded that the FTC's Leibowitz had expressed some skepticism, "he also said that almost all of us want to see self-regulation succeed.

"I do think that for many years, the FTC has managed ad issues in a way that is balanced and responsible. That's not to say that there aren't decisions we couldn't disagree with."