Mktg - Obama Promises Change; Is It Bad for Marketers

Jim Edwards

The election of President Barack Obama will bring with it a Democrat-controlled Congress and a revised set of priorities for the various federal agencies that regulate media and advertising.

The finance crisis has brought an end to the idea that markets should regulate themselves. Lobbyists, fed-watchers and CEOs say that they are already worrying about heightened scrutiny and, perhaps, new rules governing what they do.

Here’s a look at the worst-case scenario for marketers under Obama. The caveat: It is unlikely that all of these things will happen; the Iraq war and healthcare are higher priorities for the new president. But these are the issues that will likely be debated over the next few years:

• An end to the corporate tax deduction for advertising: With the deficit in the trillions, preventing companies from writing off their ad expenses against their taxes would give the Obama White House a new way to fund its spending. This has already been floated by Obama’s new chief of staff, Rahm Emanuel. “He has already started looking at ad deduction issues,” said Dan Jaffe, evp of the Assn. for National Advertisers. “It is my guess that some people will revisit an across-the-board ad deduction as well.” Such a move would drive down ad spend as companies scramble to save their bottom lines from increased tax levels.

• Sweeping Internet privacy legislation: Sen. Byron Dorgan, D-N.D., and Rep. Ed Markey, D-Mass., propose outlawing behavioral targeting, cookies and “deep-packet inspection” (a way for advertisers to see what Web users are downloading so they can serve relevant online ads). “[Markey] said there should be some sort of global bill of privacy rights,” said Bennet Kelley, founder of the Internet Law Center in Santa Monica, Calif. Such a move could hobble the online ad business—the only area of marketing spend still growing. “There’s absolutely going to be people screaming for privacy regulation,” added Michael Cassidy, CEO of Undertone Networks in New York.

• Repeal of the right of drug companies to advertise to consumers: The U.S. and New Zealand are the only places in the world that allow Rx consumer drug advertising, and there are plenty of Democrats who feel that it simply adds to the cost of medicine and healthcare. “The forthcoming revised PhRMA guidelines are going to call for either a six- or 12-month delay in promoting any new pharmaceutical” in hopes of heading that off, said Peter Pitts, a former FDA official who is now svp, health affairs, at Manning, Selvage & Lee. “That’s the way it’s going. It’s always better for industry to self regulate.”

• A ban on advertising food to children: Targeting junk food at kids is virtually illegal in the U.K., and if U.S. obesity rates don’t improve, American politicians will draw inspiration from across the pond. “They could in theory project the tobacco experience to other new product categories, like alcoholic beverages, or certain snack foods to kids,” said Ron Urbach, a partner and FTC watcher at Davis & Gilbert in New York. “Tobacco may be viewed from the government perspective as a success story.”

• An end to media consolidation: Call the fall of the Google-Yahoo! deal Obama’s first victim: Seeing the antitrust writing on the wall, the two companies last week mostly abandoned their attempted hookup. “There’s going to be a focus on the FCC’s [relaxed] view of allowing media to get bigger and bigger, across print owning, with Rupert Murdoch owning these megagiants. It’s partially antitrust,” said Urbach.

• A newly litigious FTC: There is a bill in Congress right now to expand and enhance the authority of the FTC. “It is likely that bill will perhaps be passed,” said Anthony DiResta, a partner at Reed Smith in Washington. “It increases civil penalties and the authority of the commission. It includes banks and nonprofits.” Jaffe added: “Also in that legislation was a provision to allow civil penalties against anyone who aided or abetted in false or misleading advertising, which would impact all ad agencies, anybody who was part of the chain. That could go all the way down to the media, to their printers, etc.”

• The FCC takes a heavy hand with product placement: The agency—which has jurisdiction not only over TV and radio but also videogames—is currently considering disclosure requirements for branded entertainment. Strict disclosure could end burgeoning ad networks that are growing inside online games. “That would have a dramatic effect on the converged industries of media, marketing, entertainment and the like,” said Urbach.