Obama, Democrat Win Could Cause Ad Industry 'Pain'

[Pharma Newshound]

Source: AdvertisingAge

DTC Curbs, Privacy Czar and Expanded FTC Oversight Among Possible Changes

By Ira Teinowitz

Published: November 05, 2008
WASHINGTON (AdAge.com) -- Now that the election's over and Sen. Barack Obama is the president-elect, the real fighting can begin. With the Democrats riding to victory with promises of change, it's a safe bet the next Congress and administration will look to make a mark on advertising and marketing issues.

Most of those battles won't start until next year, but some of the implications could become apparent in coming weeks as Congress reorganizes and the new administration names its leadership.

Washington advertising and marketing association officials suggest that the election's focus on the economy and health care could mean many marketing issues would take a back seat, but that doesn't ease their worries.

Their biggest concerns: A major debate about health care could prompt discussion of limiting direct-to-consumer drug ads and perhaps of ad taxes.

"Fasten your seat belts. It's going to be a bumpy ride," said Dick O'Brien, exec VP of the American Association of Advertising Agencies.

He said U.S. Rep. Rahm Emanuel, D-Ill., who could be chief of staff in an Obama administration, talked to the 4A's board of directors several weeks ago.

"He predicted that the first order of business in the new Congress will be shoring up the economy and bringing the deficit under control. Then, out of the blue, he volunteered that this would cause our industry some pain. When pressed to elaborate, he said that, in their quest for new revenue, one likely possibility would be to go to pharma and tell them they could keep the write-off for R&D or DTC, but not both."

Other association execs said that a change in administrations could bring new efforts to impose privacy curbs on the profiling marketers can do, as well as heightened antitrust enforcement.

Here are some of the implications they point to:

Drug ads: Congress will be under pressure to act on health care, and ad groups worry that discussion could severely limit DTC either directly or through stepped-up regulation. Congressional Democrats have pressed the Food and Drug Administration to more actively review the ads, and a more Democratic Congress could lead to stronger pushes for a moratorium on advertising for new drugs.

The biggest worry of ad groups is that DTC's unpopularity would foster attempts to limit its deductibility as business expenses, setting a precedent for other unpopular ad categories and potentially kicking off a court fight. Ad groups argue that advertising fuels the economy and that limiting the deductibility violates the First Amendment.

Privacy: The Bush administration has approved a series of deals allowing marketers to better profile and target consumers, rejecting the objections of privacy groups. Privacy issues are expected to get far greater scrutiny. There has been discussion of naming a privacy czar in a Democratic administration.

The FTC: The Federal Trade Commission regulates many industries, but not telephone companies or airlines, and its regulation of financial services is limited. Sen. Byron Dorgan, D-N.D., has proposed expanding the FTC's duties into additional areas and giving the agency authority to levy civil fines and the ability to speed rulemaking. A more Democratic Senate and a Democratic administration will increase prospects for those changes.

The FCC: The first question is whether the Federal Communications Commission would reverse the Bush administration's easing of media ownership rules. Mr. Obama has been exceedingly critical of recent changes to the rules. He questioned whether the FCC acted before sufficiently understanding the impact added consolidation could have on minority media ownership, local programming and local news. Whether he would backtrack is uncertain.

Net neutrality: With Democrats in charge, a ban on internet providers giving favored content providers a faster path to consumers is a near certainty. The only real question is whether the ban is imposed by Congress or by the FCC. Consumer groups contend a ban would make it far easier for smaller upstart internet content providers to grow.

Justice Department: Critical scrutiny of marketer- and media-related deals will likely increase.

Congress: The election will change some of the main players for media issues, carrying with that change some uncertainty. It's not yet clear if the Senate Commerce Committee's chairman, Sen. Daniel Inouye, D-Hawaii, will depart to head another Senate committee, but if he does, his replacement would be Sen. Jay Rockefeller, D-W.Va. Mr. Inouye has held relatively few hearings on media issues, while Mr. Rockefeller has questioned violence in the media and offered legislation that could set some limits. On the Republican side, ranking Republican Sen. Ted Stevens, R-Alaska, is expected to be replaced either by Sen. Kay Bailey Hutchison, R-Texas, or Sen. Olympia Snowe, R-Maine. Ms. Snowe has been critical of media consolidation.

[JohnMack]

PhRMA -- the pharmaceutical trade association -- is way ahead of you ad guys: it is already drafting new DTC advertising guidelines that will include a voluntary DTC moratorium.

More importantly, however, is the fact that a MANDATORY moratorium for ALL drugs may actually add to the bottom lines of pharmaceutical companies, although NOT to the bottom lines of ad agencies that produce DTC ads for pharma -- see "An Experiment: Ban All DTC Broadcast Advertising for One Year"