AAF Government Report

July 1, 2010

Clark Rector Jr., Executive Vice President – Government Affairs

Dunn Anderson-Sweet, Federation Intern

Financial Reform a Mixed Bag for Advertising

As reported in last week’s issue of Government Report, the conference committee on the financial services reform legislation finished work without greatly expanding the industry-wide rulemaking authority of the Federal Trade Commission.  However, the conference report does contain language that could be very harmful to the media and advertising agencies. 

The legislation would extend liability to any party that “knowingly and recklessly” provided “substantial assistance” to anyone who violates the new consumer financial protection law.  This could potentially include advertising agencies that help prepare, or media that carries, advertising for covered financial products that is later found to be deceptive.  This contradicts established Supreme Court doctrine that holds that the media is not liable for the content of an advertisement, unless the ad on its face proposes an illegal offer.  The case in question was concerning an ad for a “gun for hire” in Soldier of Fortune magazine.

The bill does protect media that “solely” sells time and space to a client.  However, any media that does any sort of review for obscene or offensive content could be said to do more than solely accept the ad and could potentially be held liable.  Likewise, an advertising agency that prepares creative for a client, but does not have the expertise to verify the substance of an offer could nevertheless be subject to potential liability for false or deceptive claims.
Should the final bill become law, the AAF will join with other interested parties to discuss with the FTC and new Consumer Financial Protection Bureau to clarify how they will interpret the language.

While the FTC’s rulemaking authority was not expanded, it still has the ability to craft industry-wide rules addressing deceptive acts or practices in the marketplace under the previously existing “Magnuson-Moss” procedures which require that before enacting wide rules, the commission must

  1. hold hearings on the proposed rules,

  2. prepare a statement of basis and purpose including the economic impact of a rule, and

  3. identify an actual harm that a proposed rule is designed to address (prevalence).

The AAF believes these procedures give the Commission adequate authority to pursue rules while simultaneously providing protection for consumers and businesses alike.

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Google Triumphs in Copyright Case

A New York judge has ruled in favor of Google’s YouTube site in a three year old suit filed by Viacom alleging copyright infringement.  Judge Louis Stanton cited the Millennium Copyright Act when acknowledging that YouTube is “not only generally aware of, but welcomed, copyright-infringing material being placed on their website.”  However his ruling concluded that “general” awareness was not the same as allowing specific content under copyright protection to be shared.  Viacom had been seeking $1 billion in damages.

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Disclose Act Could Mean the End of 30-Second Political Ads

A campaign finance bill that has already passed the U.S. House could mean the end of many 30-second political advertisements.  The so-called Disclose Act would require corporate interests and unions to include a paid-by disclaimer from both the head of the organization sponsoring the ad and from a number of the group’s top funders.  Many strategist estimate that the disclosures would take up as much as half of a 30-second ad, thereby either eliminating many ads or increasing the number of 60-second advertisements.  The measure passed the House on a narrow 219-206 vote.  Senate action is uncertain.


The Government Report will not be published during the week of July 5 due to the Congressional recess.

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