Byline: THOMAS PARDEE
While federal policies have sweeping effects for all U.S. marketers, ever-changing and often complex state-level regulations can prove even thornier obstacles--especially as peckish state budgets continue to struggle toward recovery.
Finding new revenue streams remains difficult, and states continue to institute new fees and policies to fill fiscal holes. "A number of states are still facing serious economic problems with unemployment and declining revenues," said Keith Scarborough, senior VP-government relations with the Association of National Advertisers. "Their sales tax numbers haven't picked up, and even though the economy has turned the corner, there's a lag of one to two years until their budgets show signs of improvement."
Meanwhile, a number of pending or proposed regulations could pose unique challenges, or spell out what kind of regulations advertisers will face in the future. A few worth keeping an eye on:
ZIP CODES DEEMED 'PERSONALLY IDENTIFIABLE INFORMATION'
The once-routine practice among retailers of asking customers for their home ZIP codes became quite the liability in California last month when a state Supreme Court judge ruled in Pineda v. Williams-Sonoma Stores, Inc that ZIP code information is personally identifiable information. Now, businesses in California are restricted from requesting and recording a person's ZIP code as part of a credit-card transaction. (Combined with the customer's name, it could be used to locate a customer's address for direct-marketing purposes.)
But the new policy applies retroactively, which means dozens of big marketers (including Target, Walmart, Tiffany & Co., Victoria's Secret, Crate & Barrel and Bed Bath & Beyond) are facing class-action litigation for prior violations.
Linda Woolley, exec-VP of the Direct Marketers Association, said this could set difficult precedent when it comes to collecting and using data. "It greatly expands what is considered [personally identifiable information]," she said. "If it spills into other states, it could have an enormous impact."
MARKETING FAST FOOD TO KIDS
After the San Francisco city council banned fast-food marketers such as McDonald's from including toys in their high-calorie kids' meals, the members of the Nebraska state legislature introduced a bill that took the concept a step further. Not only would fast-food restaurants be restricted from selling high-calorie meals with enticing toys, but they wouldn't even be allowed to advertise them unless they met nutritional standards.
The bill, dubbed the Children's Health and Responsible Corporate Marketing Act, was contested by the ANA and eventually squashed. But Keith Scarborough, senior VP-government regulations at ANA, said that this is only the beginning-the war on childhood obesity will increasingly be fought with proposed ad regulations. "If a bad idea bubbles up in one state, you'll see it in other states."
OUT-OF-STATE TAXATION AND REPORTING
A continuing issue plaguing remote online and catalog marketers (such as Amazon) is the introduction of bills that aim to determine that a state can tax the sales made to its residents by out-of-state companies. These proposed "nexus" bills-often presented in different forms as business activity bills or reporting and notification bills-are creating new concerns for retail marketers and consumers.
The Internet Sales Tax Bill, introduced in the Colorado legislature last year, stated that a company must have a physical presence in Colorado in order for purchases to subject to state sales taxes. Though it didn't define affiliates (for example, Colorado websites that referred consumers to Amazon.com, as opposed to Amazon.com itself) as a "physical presence" like similar laws in New York and North Carolina did, it mandated that retailers either collect sales tax, or inform consumers that sales tax was due to the state and report the names and purchase amounts of sales made to out-of-state retailers to the department of revenue. According to the DMA, which effectively challenged the bill, it wasn't whether the state had the right to tax that was the problem with the bill-they conceded that it did. The problem was the reporting mandate, which the DMA claimed had serious invasion-of-privacy implications for consumers.
Still, Ms. Woolley said the tax was another attempt by lawmakers to find new revenue streams. "It's all driven by the idea if they just taxed out-of-state retailers, there'd be a pot of gold at the end of the rainbow that would solve all state deficits," she said. "But the numbers don't bear that out."
A federal judged blocked the bill in Colorado earlier this year, but similar nexus and/or notification laws have been proposed in other states including South Dakota, Arizona, Hawaii and Vermont, with more bills expected to crop up in the coming year.
AD SERVICE TAXES
Though no state-level taxes on advertising services currently stand (many have been proposed, and all effectively defeated for decades), each year new efforts to impose them are introduced into state legislatures. (For instance, last year one was pitched by Pennsylvania Governor Ed Rendell, but quickly killed.) According to an October 2010 study conducted by the Advertising Coalition, businesses in the U.S. spent almost $280 billion on advertising annually. Still, bills that would tap that flow are usually widely maligned, as they could suffocate the industry and decrease the competitiveness of American marketers.
ONLINE BEHAVIORAL ADVERTISING
Even as consumers dump their most personal information onto their Facebook pages (and under increasingly dubious terms), advocates say they are simultaneously more worried about privacy than ever before. It's no surprise that legislative efforts to regulate online privacy on the federal level are ongoing, but even states are going to bat to protect consumers' cookies.
In New York State, the Online Consumer Protection Act was introduced last month to mandate that ad networks post clear and conspicuous privacy policies so that users could make more informed decisions before allowing their activity to be tracked for marketing purposes.
Copyright 2011 Crain Communications Inc. All Rights Reserved.
No comments:
Post a Comment