AAF Government Report

September 24, 2009

Clark Rector Jr., Executive Vice President – Government Affairs

*This issue of the AAF Government Report includesa legal brief provided by AAF member Frost Brown Todd, LLC. We hope you find it useful and informative.

FTC to Hold Privacy Workshop

The Federal Trade Commission has announced a series of public roundtable discussions to begin in December to discuss issues related to consumer privacy brought on by new technology and accompanying business practices.  Topics will include online behavioral marketing; social networking; cloud computing; and mobile marketing.  Business practices to be covered by the discussions include how information is used by data brokers; retailers; and third party applications.  More information can be found on the Commission’s website at http://www.ftc.gov/bcp/workshops/privacyroundtables/index.shtml.
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Congress and FCC Push Net Neutrality

House Energy and Commerce Chairman Henry Waxman(D-Cal) has signed on as a cosponsor of a net neutrality bill introduced by Rep. Ed Markey (D-Mass.).  Past efforts to pass legislation have been unsuccessful but some commentators expect a much stronger effort by proponents this year.

At the Federal Communications Commission, Chairman Julius Gernachowski believes the Commission should pass net neutrality rules preventing companies from deliberately blocking or slowing certain Web traffic.  Gernachowski is also said to want carriers to publicly reveal the way they manage traffic on their respective networks. 

Sources indicate that the Chairman presently enjoys majority support among the five FCC commissioners for his proposals, with the vote appearing to break down along party lines.  A vote on the proposal could come as early as October.   If so the introduction of a final rule could happen during the spring or summer of 2010.
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FDA Announces Public Hearing

The U.S. Food and Drug Administration announced it will conduct a public hearing on “Promotion of Food and Drug Administration-Regulated Medical Products Using the Internet and Social Media Tools.”  Administration will be examining how existing laws and regulations concerning advertising and promotional labeling can and should apply to product related information on the Internet and new technologies, such as blogs, social networks, podcasts, Twitter, etc.  The hearing will be on November 12 and 13.  More detailed information about the hearing can be found in the FDA’s Federal Register notice at http://edocket.access.gpo.gov/2009/pdf/E9-22618.pdf.

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Partnering With Charities For Goodwill (And Increased Sales)

By Nilesh (Neal) Patel, Frost Brown Todd, LLC

There is no doubt a tough economy can spur creativity.  In the advertising world, we are seeing more and more businesses looking for different, more cost effective approaches to reaching relevant target audiences.  But different need not mean new.  Indeed, for some, creativity is not realized through the generation and adoption of novel marketing efforts, but through the first time adoption of marketing techniques that have long been effective for others.  Whether couched as a “me too” effort, smart, or both, a tough economy can force exploration of new and old ideas alike.  Enter the world of charitable sales promotions. 

Officially termed commercial co-venturer programs, charitable sales promotions reflect a merger of for-profit and non-profit interests.  These programs combine the appeal of a charitable cause with the sale of products or services of a for-profit business.  For definition purposes, a charitable sales promotion is an advertising or sales campaign which represents that the purchase or use of goods or services offered by the for-profit entity (a/k/a the “commercial co-venturer”) will benefit a charitable organization or purpose.  Modern day examples are abundant.  If you’re looking for ways to support the fight against AIDS in Africa and happen to also need a new baby stroller, look at the (RED)TM branded Bugaboo stroller where about 1% of the purchase price goes to The Global Fund.  Or, join the fight against breast cancer and select from the hundreds (perhaps thousands) of products available through the Susan G. Komen for the Cure®.  Whether promoted by the for-profit or charitable entity, we’ve all seen them and have been (or eventually will be) moved to purchase an item or two as a result. 

While these types of promotions are not exactly unfamiliar to most, what often comes as a surprise to lawyers and advertisers is that these promotions are regulated under charitable solicitation laws in over 20 states.  This would not come as a surprise if all of the obligations were placed on the charitable organization – but, this is not the case.  In many of these states, specific requirements are placed on the for-profit entity engaging in charitable sales promotions.  For example, while each state law is different, common requirements placed on the for-profit entity include: (1) existence of a written contract between the entities setting forth the parameters of the charitable sales promotion; (2) specific language or terms that must be addressed in each such contract; (3) the filing of written contracts with the relevant state entity; (4) registration with the state prior to commencement of the charitable sales promotion; (5) posting of surety bonds; (6) specific disclosures in advertising for the charitable sales promotion; and (7) preparation and maintenance of a final accounting for the charitable sales promotion. 

The purpose of this article is not to detail or examine all of the requirements of each state law.  Rather, it is to counsel against a tendency to assume that a charitable organization will “handle” all legal obligations under various state charitable solicitation laws.  Charities will no doubt ensure they are in compliance with the laws that impact their organization, but providing advice on the legal obligations of for-profit entities likely falls outside their charitable cause.  For-profit entities should not, however, be discouraged from engaging in charitable sales promotions. These types of programs can in fact benefit both charitable and for-profit entities.  In addition, the reality is that many state laws impose only moderate obligations on for-profit entities.  Experienced counsel can help you navigate the requirements in these states as well as those with perhaps more onerous requirements (e.g., Alabama, Maine, Massachusetts and South Carolina).   The key to fully benefiting from this valuable promotional tool is proper attention and planning. 
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