AAF Government Report

April 30, 2010

Clark Rector Jr., Executive Vice President – Government Affairs
Alaina Flaherty, Federation Intern

Senate Begins Consideration of Financial Regulation Overhaul

The U.S. Senate has voted to begin debate on financial overhaul legislation. The House of Representatives has already passed a version of the bill which grants vastly expanded powers to the Federal Trade Commission in all its areas of jurisdiction, not just financial. The AAF has sent an alert to its members asking them to contact Senators to oppose the expansion of powers as unnecessary and harmful. AAF has also joined many allied associations in an advertisement in the Capitol Hill newspaper Roll Call and in letter to Senate leadership.
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National Broadband Program Prompts New Inquiries

Senator Jeanne Shaheen, D-N.H., a member of the Small Business Committee, recently raised concerns over the planned infrastructure of the National Broadband Plan, and whether it is wasting taxpayer money. The Senator is concerned that billions of dollars are being spent on creating duplicate networks across the country and thus are being wasted. Sen. Shaheen, has called for an investigation into whether the grants for developing national high-speed Internet service are raising costs of commercial broadband for some markets.

Lawrence Strickling, an assistant Commerce Secretary who directs the National Telecommunications and Information Administration has responded by saying his office consults various data on broadband penetration before allotting funds to a certain area. He believes that while home Internet coverage may be high nation-wide, many areas are still lacking adequate coverage in schools, libraries and hospitals. Federal Communications Commission Chairman Julius Genachowski strongly believes in the necessity of the National Broadband Plan, saying that "too many small businesses... still do not have access to high-speed broadband infrastructure at all."
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Possible Overhaul to Video Program Access Rules

The Senate Judiciary Antitrust Subcommittee, headed by Sen. Herb Kohl, D-Wisc., is considering writing legislation to revamp a federal law which governs access to video programming and expand its reach to the Internet. The legislation would change the FCC's program access rules, which were mandated by the 1992 Cable Television Act. The program access rules are meant to assure that premium content is available to all competitors, not merely the media companies which control production and distribution. Some members of the committee are concerned the current rules have too many loopholes and cannot keep up with rapidly developing technology and video availability on the Internet.

The members are worried that because of their size and scope, media conglomerates are becoming exclusive Internet providers of "must-have" programming. Many major companies are releasing new content online, available only to cable subscribers. The FCC does not currently have authority over Internet programming, so it cannot control how media companies regulate the distribution of online content.
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FTC Educates Children About Advertising

The Bureau of Consumer Protection, of the Federal Trade Commission has announced a new program designed to educate children in grades four through six about how advertising works and to enable them to make better choices as consumers. The advertising literacy campaign can be found at their new game-based website, admongo.gov. The goal of the site is to help them understand advertising and what is good advertising to help them make better choices when they shop, alone or with their parents. The FTC wants to make sure children understand the differences between common and commercial speech, especially with regard to persuasion.

Lee Peeler, President and CEO of the AAF supported National Advertising Review Council praised the program, saying "To me, the great thing about Admongo is that its gaming format is designed to reach out to children right at the age where they can actually distinguish between content and advertising."
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Who told you that ad was okay?

by Jill P. Meyer, Frost Brown Todd LLC

In a recent opinion, one federal court (the 7th Circuit Court of Appeals in Illinois) has let stand a lower court's ruling that should make most advertisers and advertising agencies feel at least slightly uncomfortable. That opinion held that when an advertiser's in-house lawyer conveyed legal advice to the advertiser's outside agency about the content of advertisements under development, that communication is not protected by the attorney-client privilege. Whirlpool Corp. v. LG Electronics.

In that case, a trademark infringement action by LG against Whirlpool, Whirlpool asserted the attorney-client privilege to keep from producing communications sought by LG between Whirlpool's legal counsel and outside advertising agencies. While the presence of a third party typically does eviscerate the attorney-client privilege, the presence of an outside agency who is working closely with an advertiser and their legal counsel is not commonly viewed as that type of situation. Oftentimes, depending on the jurisdiction (the law varies slightly from state to state), the agency is viewed as an agent of or de facto employees of the advertiser itself and, thus, the privilege extends to the agency. Whirlpool asserted the de facto argument, claiming that its attorneys' communications to its ad agencies were covered by the attorney-client privilege that Whirlpool itself enjoys with its legal counsel. The trial court disagreed, and the appellate court declined to disagree. The lower court also had rejected the argument that the "common legal interest" shared by the advertiser and its outside agency supported the extension of the privilege.

What remains - for those even beyond Illinois - is a word to the wise advertiser when an outside agency is developing its advertisements: keep your own legal counsel as your own and let the agency speak directly with its own. While it might be more efficient, especially in cases where there is no disagreement between the advertiser and its agency as to the legality or risks of an ad, separate is safer. As the court held, "fear of a lawsuit" is not a sufficient reason to justify the extension of the attorney-client privilege. One easy alternative, as stated by the trial court, is to have the advertiser's non-lawyer staff "screen counsel's legal advice and communicate [the advertiser's] business concerns to the agencies without revealing [the advertiser's] confidential communications to its counsel." That way, the confidential communications remain only between the parties who clearly own them and stay protected.
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