Battle of the Brands?

Experian, a subscription-based credit reporting services formerly found at FreeCreditReports.com, selected an actual rock band named "The Victorious Secrets" to replace a fake rock band comprised of actors and front men that appeared in Experian's ads. The actual Detroit based group was selected through a promotional contest.

The New York Times reports that Experian recently dumped its domain nameFreeCreditReports.com following creiticism by personal finance experts that Experian's ubitquitous ad campaign took advantage of consumer confusion between Experian's website that sells a credit report subscription service for $14.95 per month and a website AnnualCreditReport.co that actually provides free credit reports.

As the real band The Victorious Secrets replaces Experian's popular fake band, one wonders if consumers be confused as to affiliation, endorsement or sponsorship of the real band by Victoria's Secrets. My advice? Avoid the color pink and cross-dressing during their Experian debut at the MTV Music Awards.

FAQ's Simply FTC Endorsement Guides-- Interns Help

Renegade's Intern did her homework on how the FTC Endorsement "Guides" can apply to ordinary bloggers. Although the Guides provide 35 examples demostrating how the Guides apply to offline and online situations, the Guides do not much guidance as to the FTC's enforcement priorities. Recently the FTC issued a set of "Frequently Asked Questions ("FAQs") for the Guides that pretty clearly state the FTC's concern, namely, whether the audience understands the reviewer’s (whether bloggers, celebritys or advertisers) relationship to the company whose products are being reviewed. Also, advertisers like Ann Taylor that "hire" bloggers are more likely to be the target of an investigation than the blogger herself. Claims that are decptive may also be regulated, see FTC guidance on deceptive ad claims, here.

Legislative fortune teller sees tax hikes and spending cuts in our future

Are we surprised? No, but stay tuned. Len Lazarick, Staff reporter for MarylandReporter.com reports that Department of Legislative Services recommends legislators consider extending Maryland's sales and use tax to include services:

"The no-growth budget for next year that legislative leaders recommended Thursday, combined with a promise of no new taxes, might soon look like a relic of the good old days if a new report from the Department of Legislative Services proves accurate. In a section of a new 246-page study of the issues facing the legislative session that begins in three weeks, budget analyst David Juppe forecasts “structural deficits” of at least $2 billion in each of the next five years. ...

Juppe gives examples of potential tax or fee increases: 'expansion of the sales tax base to services, a more progressive restructuring of the personal income tax, repeal of tax credits or improved tax compliance.'”

As this past weekend's online holiday shopping broke retail records, one wonders when state revenue collectors will target online sales originating from their jurisdictions.

Read Lazarick's entire report here...

"Results Not Typical" — Bloggers and Celebrities (and Advertisers) Must Comply with New FTC Guides

Grass roots marketing just became a little less green. The Federal Trade Commission (FTC) issued the final updated Guides Concerning the Use of Endorsements and Testimonials in Advertising. Effective December 1, 2009, the new Guides expand in scope to include advertising messages in websites, blogs, and other social media. Bloggers failing to follow the Guides could pay up to $11,000 per violation. Advertisers and agencies connected to a blogger's post may share liability. It's imperative that businesses review current marketing practices with the new Guides now. The FTC can challenge misleading and deceptive advertising anytime.

That's because the new Guides do not change the law. The Guides were developed to help advertisers and agencies determine if their advertising is deceptive under Section 5 of the FTC Act. The Guides provide principles and examples demonstrating how the FTC determines if advertising is misleading. By following the old Guides, advertisers and ad agencies could steer clear of FTC enforcement actions and the class action lawsuits and state enforcement actions that often follow. The new Guides cast a broader net, and in uncharted waters. No, the new Guides do not provide an unambiguously safe path for blogging about products. But they do reveal the types of marketing activities the FTC is targeting. Continue reading here.

Ad Adversaries Continue to Battle

New York Times reported that the ongoing Soup Wars have not benefited either Campbell's or Progresso, both losing market share in canned soup products. The article says advertisers continue to challenge their competitors' advertising as false and misleading despite the recession.

The NYT also reports that the National Advertising Bureau (NAB) is settling about one disparaging puffery dispute a month. The NAB is the industry self-regulatory division of the Better Business Bureau resolves disputes between large advertisers. The NAB procedures are less expensive than court but take longer to stop misleading advertising. NAB decisions also have few teeth, relying on the parties to voluntarily comply with settlement terms. But, competitors who refuse to comply and change false and misleading advertising, risk the NAB referring the matter to the FTC. See my previous post about how to avoid the risk that ad puffery disparages the competition's goods or services.

Potential New Threat to Snack Food Advertising

Today's AAF Government Report brings news of new threats to advertising. Congressman Dennis Kucinich, D-Ohio, sent a “Dear Colleague” letter to other members of Congress announcing his intention to introduce legislation to “eliminate the tax deductibility of fast food and junk food advertising directed at children.” The Congressman is inviting other members to join him as a cosponsor. While well-intentioned, this plan, if enacted would increase the cost of convenience food and restrain advertisers from communicating healthy messages about food.

A misleading statement made by Mr. Kucinich is that snack food advertisers are granted a special tax write off to subsidize obesity, see bolded text below. All businesses have the right under the tax code to deduct ordinary and reasonable business expenses like advertising. To eliminate the deduction for some advertisers but not others would violate those advertisers's Constitutional right to be treated equally under the law, in addition to restraining commercial speech.

Mr. Kucinich's letter follows, as does his aide's contact info. Please let him (and your own Congressional members) know that you do not agree!

Re: Don't Subsidize Childhood Obesity
From: The Honorable Dennis J. Kucinich
Date: 10/28/2009

Dear Colleague:

Research clearly shows that childhood obesity has reached epidemic proportions in this country. As we develop programs to combat childhood obesity, we must also examine the root causes of this problem. The effect of advertising on youth, especially advertising of fast food and junk food, has long been a concern of mine. The Institute of Medicine estimates that in 2004 approximately $10 billion was spent on food advertising directed at children, using every method available--television, radio, the internet, even embedded in video games. Simply put, marketing to children works--companies would not make such a substantial investment if it were ineffective. See n. 1.

Marketing directed at youth is extremely well constructed and relies heavily on behavioral science. The developing brain of the child cannot discriminate fact from opinion; cannot think critically; and cannot yet fully understand abstract thinking. This makes no difference to food advertisers, who exploit this using cartoons, cross branding with popular toys, giveaways, and myriad other methods to develop brand loyalty and shape judgment as early as possible, knowing that those affinities are the most enduring.

Astonishingly, the federal government subsidizes this methodical preying on children by granting a tax write-off for expenses associated with it. (Emphasis added by Ad Disclaimer) This must stop. The government must take action to protect American children and ensure that they grow up in a healthy environment. For this reason will be introducing legislation that would eliminate the tax deductibility of fast food and junk food advertising directed at children. I invite you to join me as a cosponsor of this legislation. There is precedent: approximately 50 countries, including Sweden, Norway, Australia, and Great Britain, have limited or prohibited food advertising directed at youth. Additionally, recent research has concluded that eliminating the tax deductibility of food advertising directed at youth would reduce obesity among youth. See n. 2.

For more information or to cosponsor, please contact Tom Mulloy in my office at 5-5871 or thomas.mulloy@mail.house.gov.

Sincerely,

/s/

Dennis J.Kucinich Member of Congress

n. 1. Institute of Medicine (2006). Food Marketing to Children and Youth: Threat or Opportunity? National Academies Press.

n. 2. Chou, S., Rashad, I. & Grossman, M. (2008). "Fast Food RestaurantAdvertising on Television and Its Influence on Childhood Obesity."Journal of Law and Economics, 51(4), 599-618.

The Threat Returns-- NO TAX ON DTC-- email now!

Senators Al Franken, D-Minn., Sherrod Brown, D-Ohio, and Sheldon Whitehouse, D-R.I., have introduced legislation (S. 1763) to disallow the federal tax deduction for all advertising and marketing expenses for prescription drugs. The Senators have indicated they would like to have the proposal added to the health reform legislation and may offer it as an amendment when the measure is considered by the full Senate.

Please contact both of your Senators as soon as possible and express your strong opposition to any effort to deny the deductibility of advertising expenses. Talking points and contact information are both included.

Here's the rest of Clark Rectors' message. Suggested email text is below.

You know the drill:

Contact Senator Mikulski here.

Contact Senator Cardin here.

Dear Senator _________:

As a taxpayer working in Maryland's advertising industry, I oppose any effort to eliminate tax deductions for the cost of advertising prescription drugs. There are several compelling reasons NOT to eliminate the deduction of advertising prescription drugs as ordinary and necessary business expense:

• It will increase the cost of informing the consumer about prescription drugs by 35%. If an advertiser is taxed at the highest corporate rate of 35%, the loss of the deduction for prescription drug advertising becomes a 35% tax on such advertising.
• Taxing advertising expenses for prescription drugs but not other advertising expenses is discriminatory.
• Taxing advertising expenses for prescription drugs chills constitutionally protected commercial speech. In 1936, the Supreme Court struck down a 2% tax on newspapers as an unconstitutional restraint on speech in Grosjean v. American Press Co.
• Consumers - particularly elderly consumers - will receive less information about prescription drug choices if advertisers reduce spending on prescription drug advertising.
• Legislation requiring a tax on advertising expenses for prescription drugs will make it easier to tax other advertising expenses, adversely affecting the advertising industry.

Advertising for all products and services helps generate $6 trillion in U.S. economic activity and supports more than 21 million jobs. I request that you do not support any legislation that eliminates tax deductions for the cost of advertising prescription drugs.

Sincerely,

Your Name
Address