Seven Legal Issues That Agencies Should Be Thinking About in 2011

Where Does Your Shop Stand on These Topics?

By Published on .

An unprecedented number of legal issues are facing the ad business today. It's not just about court cases, laws and regulations -- these are bigger, weightier legal issues, the kind that will represent real forks in the road and critical decision points for advertising executives.

It's a definitive moment in time where ad people have an opportunity to shape the future of the new American economy, as well as solidify the role the industry plays in that economy. It may sound dramatic, but the fact is, any one of the below points could dramatically change the way the ad business operates.

Here are the top legal debates raging in advertising agency industry in 2011. It's critical for business leaders to understand these issues, and it's also imperative that your company knows where it stands.

1. Should the government, the industry or the market decide how the new economy uses and protects data?
Self-regulation is a critical core of the advertising industry, with the National Advertising Division long leading those efforts. The hallmark of self-regulation is flexibility to react to a changing environment, while balancing consumer protection and business needs. The rapid importance of data to advertising has led to serious debate about government vs. self-regulation. We are at a critical inflection point. Is government intervention necessary? And if it prevails, will a consequence be a stifling of innovation?

2. Should the First Amendment protections of traditional media apply to today's new media and tomorrow's future media?
We all know about the First Amendment protections of speech and press. But how will the First Amendment apply to the media of today and tomorrow, which has a blending of commercial content with traditional speech? Will social-media sites that have contributed to the revolutions in the Middle East be given the same level of First Amendment protection as traditional media? If so, what are the implications to the industry? The world of media has changed and is continuing to change. The rise of new media is as integral to our future society and economy as was the rise of traditional media.

3. Read my lips: no new taxes -- except on advertising. Should we care?
On a national and state basis, taxing advertising is high on the list of ways to raise revenue. Whether it's an actual tax or a reduction in the deductibility of advertising costs, the advertising industry is a big target . It is a target not only for certain industries (prescription drug or sugared soft drinks), but the industry overall. The deficit is really large, so hold on to your wallets.

4. Personal responsibility or government nanny: What role should consumer protection take?
Advertising regulation has always been about providing information so consumers can make their own choices. The government's role is to ensure that information provided is truthful, not misleading and not deceptive. But there are moves afoot to change that model. We have all seen how aggressive the government can be. We have read about the recent moves to prohibit sugared soft drinks, toys in Happy Meals or high-salt foods. Where does it stop? Should this be the role of government?

5. Should consumer protection be driven by government budget gaps or consumer need?
The historically strong moral objections against gambling ultimately changed due to one critical reality: the need by state governments to raise revenue. Today, you see state lotteries, regional lotteries, and legal gambling in almost every state. States hungry for current and future non-tax revenue have their sights set on advertising and marketing practices. The monies secured in lawsuits and settlements against advertising are an easy win for the states -- a lot more money, and there is no political downside. Who is going to object to a state Attorney General attacking advertising or marketing practices? Not many.

6. Contracts, indemnification and insurance -- is it my force field or an illusion?
No matter how small or local an advertising agency, the fundamental fact is that it has a global marketplace today -- for clients and suppliers. It is not uncommon to have your digital partner be in Brazil, Finland or China. Your lawyer may draft a great contract with strong indemnification provisions, which the supplier dutifully signs. You might even have your supplier provide insurance. When a dispute arises, you may find that the contracts are not worth the computer screen on which they appear. If a supplier is a small source supplier with limited assets in a far away jurisdiction, then the U.S. agency, not the supplier, is the one at risk since it is the one who made the promises to the client. So think, do not act on rote action. There may be more other ways to protect you and your client.

7. You hated science in school, so why should you care about patents?
Everyone who creates interactive content today is a scientist. Patents and patent litigation -- once the world of engineers and technicians -- are now invading the world of advertising creative and production. Those who make websites, apps and online content are now being attacked by patent trolls. You should first review your agency-client contracts and your production supplier agreements to see who has patent liability. But, it is an industry problem that cannot be resolved by a contract. This is why the 4A's has recently issued a report on the problem.

The advertising industry and the agency business is not simply being buffeted by change, they are change agents. Today, the importance of advertising to the economy, society and the introduction of new technology has never been more critical.

Ron Urbach is the chairman of Davis & Gilbert and co-chair of the firm's advertising, marketing and promotions practice group.
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