AAF Government Report

December 11, 2009

Clark Rector Jr., Executive Vice President – Government Affairs

AAF Files First Amendment Brief

The American Advertising Federation, 4A’s and the ANA have filed an amicus brief in U.S. District Court in support of a challenge to the law enacted last summer that gives the U.S. Food and Drug Administration unprecedented authority to restrict tobacco and tobacco advertising.

The restrictions in the law include a prohibition on the use of color and images in most tobacco advertisements; a requirement that the top 20% of ad space be used for anti-tobacco warnings; and a ban on outdoor advertising within 1,000 feet of schools and public playgrounds.

The brief explains how the restrictions violate the First Amendment free speech guarantees for commercial speech. The U.S. Supreme Court has said that any restrictions on truthful advertising must directly and materially serve an important governmental interest without restricting speech more extensively than necessary to serve that interest. It further requires that if the government has options to achieve its interest without restricting speech, it must exercise those options first.

The brief cites the Court’s decision in Lorillard v. Reilly (2001) which states that “so long as the sale and use of tobacco is lawful for adults, [there is] a protected interest in communication about it [ ] and adult consumers have an interest in receiving that information.” The decision in Lorillard struck down a number of advertising restrictions virtually identical to some of those currently being challenged.

The brief can be found here.
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Congressional Budget Office Looks at DTC

The Congressional Budget Office has released an issue brief on direct-to-consumer advertising of pharmaceuticals. The brief recognizes some of the positive aspects of DTC advertising– such as the fact that it prompts people to see a doctor when they have an illness rather than postponing action. It also suggests there is research that shows that the advertising helps encourage patience compliance with their prescriptions.

The report includes a breakdown of “marketing costs” for pharmaceutical products. It suggests that manufacturers spent $20.5 billion in 2008. Of this, $12 billion was spent on detailing, $3.4 billion on professional meetings and events, $0.4 billion on ads in professional journals, and $4.7 billion on DTC advertising.

A copy of the issue brief can be found here.
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Senator Dorgan Assails DTC

Senator Byron Dorgan, D-N.D., recently devoted a few minutes of his statement on the Senate floor to pharmaceutical advertising. The primary focus of his statement is the rapidly escalating price of prescription medicines, which he believes is driven in large part by advertising. Senator Dorgan has not called for a restriction on advertising or its deductibility. Instead he has offered an amendment to allow Americans to import prescription drugs from Canada and other countries. However, his statement could embolden those who would favor such restrictions. Senator Dorgan’s statement can be seen on YouTube.
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FTC Official Offers Priorities


David Vladeck, Director of the Federal Trade Commission’s Bureau of Consumer Protection, discussed a number of his future enforcement priorities to a crowded meet and greet audience at the AAF.

Vladeck confirmed that the Commission, in cooperation with other federal agencies, will soon release draft nutritional guidelines for use in marketing foods to children under 17.  He was very complimentary of proposed self-regulatory guides for online behavioral marketing, but stated that self-regulation could only go so far and that government action would likely be necessary as well. 

Vladeck commented on the revisions to the Commission’s Endorsement and Testimonials Guides.  He said that contrary to much public comment, the revised guides do not bar most consumer testimonials, but require that they be substantiated and requires that consumers not be misled by the advertisements in their entirety.

He also said that the FTC is conducting an ongoing review of its Green Guides for marketing to continually assure that environmental claims made in advertising are truthful and meaningful.
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Anti-SPAM Plaintiffs Find Little Success in the Courthouse But They Can Cause Mountains of Attorneys’ Fees

By Kevin T. Shook

As businesses across the country increase their efforts to market their products through e-mail, a motley crew of plaintiffs have created a cottage industry of lawsuits seeking damages for e-mails that they claim violate the federal CAN-SPAM Act and deceptive advertising laws.

Fortunately, federal courts have done a good job filtering through the cases and rejecting those plaintiffs who seem to bring claims for no reason other than to generate income. Last week, in a case titled ASIS Internet Services v. Azoogle.com, the Ninth Circuit rejected CAN-SPAM claims brought by a small ISP plaintiff. The Ninth Circuit relied upon its previous ruling in Gordon v. Virtumundo, finding that Azoogle.com lacked standing to bring a CAN-SPAM claim because it was not “adversely affected by” any statutory violation. Specifically, the Ninth Circuit stated:

The mere costs of carrying SPAM emails over Plaintiff's facilities does not constitute a harm as required by the statute. While Plaintiff argues that employee time was spent on spam-related issues, Plaintiff concedes that it has no records detailing employee time. Plaintiff also spent money on email filtering, though the cost of email filtering did not increase due to the emails at issue. Such ordinary filtering costs do not constitute a harm. Thus, Plaintiff has not suffered a harm within the meaning of the statute and lacks standing.

The ruling is significant because Azoogle.com is an actual ISP, albeit a small one, with real users who have real e-mail accounts. This case did not involve the same kind of facts encountered in Gordon v. Virtumundo, where the plaintiff set up an ISP for the sole purpose of collecting e-mails and filing lawsuits based upon technical violations. The Ninth Circuit’s clear message is that it will not entertain CAN-SPAM lawsuits that consume judicial resources and cause excessive attorneys’ fees, when there is little to no actual damage to the plaintiff. Under this standard, we may be headed toward a legal framework in which CAN-SPAM claims can only be brought by larger ISPs, social networking websites and state actors.

However, even under this framework, the onslaught of e-mail advertising lawsuits does not appear to be going away any time soon. Numerous private plaintiffs not only continue to bring e-mail advertising claims under the CAN-SPAM Act, but they are also bringing claims under the general federal and state deceptive advertising laws.

For example, the Ohio Administrative Code has specific rules about the use of asterisks in advertisements and the font size of any qualifiers used in connection with the use of the word, “FREE.” As a result, plaintiffs in Ohio have filed numerous e-mail advertising lawsuits seeking to capitalize on these kinds of provisions and claiming nothing but statutory damages and attorneys’ fees.

While these kinds of claims have been repeatedly rejected by the courts, the cost of defending such cases can be pricey. The best practice is to obtain legal counsel before publishing your e-mail advertisements to make sure all laws have been followed and there are no technical problems for plaintiffs to prey upon.
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