ROUNDTABLE: AD ASSOCIATION CHIEFS DISSECT ISSUES OF '97

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To discuss issues facing advertising, the heads of three major ad groups-American Association of Advertising Agencies President-CEO

O. Burtch Drake, American Advertising Federation President Wally Snyder and Association of National Advertisers President John Sarsen-met with Advertising Age editors for a wide-ranging discussion. Following is an edited transcript:

Advertising Age: How important is the upcoming tobacco advertising case? If the government was to win, would it greatly affect the ad industry?

Mr. Snyder: It is going to depend on what the court says. In this area of First Amendment, case to case they build. It is very important because it puts before the court squarely the issue of how much government control there is on truthful advertising.

This [Food & Drug Administration] regulation is about as broad as it could be. It strikes down colors and scenery and people in most tobacco advertising.

We feel we have an excellent chance to win . . . The [Supreme] Court has made it very clear that the government has a very tough burden. The government is going to have to show that there's this reasonable fit, that this regulation, draconian as it may be, is going to have a real impact on underage smoking. We think the studies around the world show it won't have a positive effect in reducing underage smoking.

The second thing that's very important, the court said the government has got to use non-speech alternatives before it tackles speech regulations. We think there are all kinds of non-speech things the government should be doing. One is they ought to tighten up the licensing and sales requirements.

AA: You don't think tobacco is different enough that a loss wouldn't translate into other areas?

Mr. Snyder: I think the court is going to pretty much say free speech is free speech. If you want to regulate the product, regulate the product. But that is the issue.

AA: Let's assume they do make that distinction. What do you think will happen? How would that translate to alcohol, other products?

Mr. Snyder: If we lost, it essentially would mean that, for controversial products, the legislature simply has to take a vote. And if they got 51 votes out of 100, they could ban the speech. That's what it comes down to.

That's the way it was before [advertising] had First Amendment protection . . . It would be much more of a political game, and we would find ourselves working very hard in legislatures all across the country.

AA: What other categories would be endangered?

Mr. Drake: Beer and wine have been talked about [with] the Kennedy bill; liquor, casino, lottery advertising are on that target scope.

AA: Apart from the legal considerations, there's an issue of perception. How do you factor in how consumers and politicians view aggressive efforts to protect the rights of tobacco companies to advertise?

Mr. Drake: These industries are not insensitive to consumers. And I think all of their radar screens are up these days to ensure they are not doing anything that can be perceived as overtly marketing to minors.

And there are a lot of checks and balances along the way that a lot of people aren't aware of, starting with network [TV] reviews, in-house counsel, agency counsel. The Federal Trade Commission still has a role in all this, at least as regards truth and accuracy. So this stuff does not go uncensored, so to speak.

AA: Why should we think those reviews work any better than the beer industry's? Ad Age and The Wall Street Journal did stories recently about brewers violating their own code in advertising on MTV.

Mr. Drake: Well, I don't know all the facts involved in the MTV thing. But if that is all true, it's a very small aberration. The beer industry spends what .*.*. $750 million a year in advertising? I've got to tell you that 99.44% is aimed directly at legal-age consumers.

With all advertising, there is some spillover. The Super Bowl has some children watching, there's no question. I think when the problem was identified on MTV, Anheuser-Busch very quickly and smartly and properly moved.

AA: If you felt the industry codes were sufficient and working, why did the National Advertising Review Council undertake to study whether there was a need for further self-regulatory mechanisms?

Mr. Sarsen: NARC has been held out as a kind of a model of self-regulation . . . Over the years, NARC has adjudicated several thousand cases; given that expertise . . . is there a way for NARC to lend that expertise to the various industries that are in what I'll call controversial areas . . .

Our objective was to look at the codes of the various industries, to talk with a number of companies and individuals and experts to see if there wasn't some way we could lend that NARC expertise to the existing codes and regulations.

Mr. Drake: Let me . . . try and clear up some misperceptions. .*.*. One is that in asking NARC to look at this, they [would] have some sort of oversight role in these controversial product areas. None of us were in any way implying that we're walking away from our stand on the First Amendment, the constitutional right of marketers of legal products to advertise their products in a truthful and accurate manner to adult consumers . . .

And the second thing, in no way were we implying that we thought that any companies or any of these industries were overtly or improperly marketing their products to teens . . . In the vast, vast majority of cases, we truly believe that these products are being marketed responsibly . . . But there's perception and reality . . . and a lot of people don't have that point of view . . . which led us to the thought: "Well, why don't we ask NARC-which has a 25-year reputation as successfully self-regulating our industry, an excellent track record, well-respected . . . to consider looking at administering the existing codes in each of these product categories to provide an objective, neutral, third-party review?"

AA: This is as opposed to having a set of age-oriented guidelines drawn up that don't exist now?

Mr. Drake: That is correct. The concept was to say there's a neutral body out here that's well respected, has a track record, that we think we could offer to these industries and to these companies

. . . We had conversations [but] we pretty quickly realized you can't have one code that cuts across all product categories. So that was a non-starter right away. Can NARC set up a unit to look at each industry's advertising? Sure we can, if they want us to.

AA: Does it come down to them not wanting you to do it?

Mr. Snyder: I think what we should say is that the door is not closed yet. I know there are concerns raised [about the fact] this had failed and was over. But I think it's really now in the hands of the industries.

AA: You say there may be some spillover with the Super Bowl-there may be some kids watching. In fact, there are a lot of kids watching.

Mr. Snyder: We're always going to have children . . . in the audience. The worst type of standard would be where the government decided you couldn't have any advertising directed to adults when the product could not be used by children. That would be impossible.

Mr. Sarsen: One of the characteristics of the successful NARC code administration is the agreement that all the parties participate . . . They're not coerced; they agree. So what we have is an open-door policy.

We would love to have a group come to us and say, "We are at a stage where we would like to have NARC administer our code, or consult with us" or do whatever.

Mr. Drake: Some of the examples you cite involve placement of advertising. We've never looked at placement before . . . So these were big issues that needed to be talked about for the first time, identified for the first time, and it's not an easy thing . . . The biggest problem is it is hugely subjective.

AA: Do you gentlemen believe that if these companies, these industries, all said they'd agree to it, action by NARC or its administration of these codes would go a long way to heading off government intervention?

Mr. Snyder: Yes, it would. Except remember: in the area of tobacco we've already had a hostile FDA decision and we're really in the end game. That's now in the courts. . . . So you look at the other products. . . . We've said beer is not in a particularly difficult problem, and [brewers] shouldn't be because of what they have done.

When you look at liquor, there's all sorts of regulatory pressures. The FCC and [Chairman] Reed Hundt has been up on the bully pulpit; he wants to hold hearings.

But . . . not everybody in Washington agrees that the FCC has authority . . . So I don't think the FCC is going to have a great deal to do with regulating this issue . . . There may well be hearings in Congress, but I don't think there's going to be congressional action to ban broadcast advertising Dissecting issues for '97

of liquor products.

Mr. Drake: All this ties together with what's a hot issue in Washington: children.

It began with the FDA action

. . . [Commissioner David] Kess-ler, a pretty smart strategist there, said: "We're not going to make the issue any more about the health of adults, we're going to make it about protecting our kids." . . . And, you've [got] the V-chip.

AA: You're presenting this as if fairness is the only issue, the question of accuracy. Don't the advertising associations have some responsibility to speak out for standards of what adpeople should be allowed to do? Are we just going to let the marketers decide everything?

Mr. Drake: We all feel pretty strongly that the responsibility for developing industry codes of advertising rests with the individual industries . . . Now, a neutral body like NARC can then help interpret those codes or deal with those codes.

But I can tell you, it is not the business of the Four A's to be writing specific codes for any product category. Our board is emphatic on this point, that it's outside of our mandate and our mission.

AA: There's a code for lawyers that the American Bar Association puts out, a code for doctors that the American Medical Association puts out, a code for . . .

Mr. Drake: And we have a creative code, too, that says "You shall not disparage minorities," but we don't get into the specifics of individual product categories.

Mr. Sarsen: Most major advertisers have their own codes . . . They then take that to their functional association . . . and that association generally has a code of conduct. I think what Burtch is saying is that to now lay another one on top of that, we have not, to date at least, found productive.

AA: Do we have anything in the creative code right now that says anything about targeting underage consumers?

Mr. Snyder: These three associations started self-regulation in this country. It's become the most significant industry self-regulation code. So we do take very seriously the standards for advertising, because we know first of all it's important that advertising be truthful to enhance this credibility.

Now, the problems we're talking about here are ones . . . of defining what those standards should be. What we're saying is we have to rely on the expertise of the individual industries.

AA: Tobacco has been an issue for years. Do you have any sense that there is some mood in the country, a certain Puritan ethic rising up?

Mr. Drake: These things go in cycles. You go back to the early '70s, when there was a lot of attention focused on various product categories. But I say the key has been that kids have been identified as a good political issue . . . That's where I see it moving.

Mr. Snyder: We started out by saying that some of these products are very controversial

. . . We've tried to make it very clear that we are not defending tobacco, and we're not.

Mr. Sarsen: We're not defending the product.

Mr. Snyder: We're defending the advertising.

Mr. Sarsen: The right to advertise.

Mr. Snyder: Now, that's an important right for that industry, according to the Supreme Court, and it's an important right for everybody in our industry. That's why our boards have been very clear and steadfast over the last 15 years-that if the advertising is truthful and the product legal, we should defend it.

AA: Don't you have some responsibility to talk about what should be allowed?

Mr. Snyder: We do have a responsibility and we've taken it seriously. We've supported the government's proposal to strengthen licensing requirements for tobacco sales. We've talked about what we would like to have happen in self-regulation. And Burtch mentioned consumer education . . . Those areas . . . are consistent with what we've been doing in protecting the First Amendment.

I don't believe the image-if the image is there-that all we're doing is defending these products. We're trying to do more than that.

AA: Is there a point where tobacco becomes indefensible?

Mr. Snyder: What we've told our members is that this is now going to be up to the Supreme Court . . . Sure, we're involved in this lawsuit, legally all of us are. And a number of other associations are as well. That's where the action is now. We are not up lobbying on the Hill on this issue. We're not defending tobacco. We never have defended tobacco . . . The question is whether they're able to advertise their product.

AA: If you win in District Court, obviously the other side is going to appeal, but meanwhile there's going to be all sorts of attempts in Congress to attack tobacco advertising from the deductibility issue.

Mr. Snyder: The action in terms of taxation is also a constitutional issue, and it's one we have to worry about this next year, not only for tobacco but for alcoholic beverages.

AA: It sounds like you're foreseeing a fight there.

Mr. Drake: Maybe they will take a pass at deductibility. Maybe they will take a pass at some other elements of the FDA regs involving vending machines and a lot of these other issues.

Mr. Snyder: The hope is that they would focus, and the government agencies would then focus on the extent that FDA has jurisdiction . . . The hope would be that if we're upheld in the speech area, that they redouble their efforts in the non-speech area.

AA: But, specifically, how worried are you about deductibility?

Mr. Snyder: A considerable amount of resources are being-from our three associations and others-directed toward that issue, and it's really a proactive issue.

Mr. Drake: We have an effective game plan. We see this as a major issue for our industry this year.

AA: Is this preventative or are you worried about the Clinton budget plan? This coming up in dealing with tobacco? Or liquor?

Mr. Sarsen: It could be any one or all of them . . . You know there's going to be constant pressure on the budget . . . We know that states are going to be continually active as the [federal] government transfers obligations . . . so their budgets are going to be under pressure. We've all beefed up our state capabilities.

Mr. Snyder: The problem is in the dynamics of tax lawmaking. Nobody comes in and says "Here's my tax bill." They come in with goals and then they start discussing where it's going to come from.

Mr. Drake: And some of this can be done in the back room; the deal is cut. That's why this anticipation, pre-sell, if you will. To get our story across to the key players and the key committees is so important.

AA: After you won the last deductibility fight, where President Clinton was considering including it in his budget, some members of Congress said it didn't want to go through that again. Is it realistic to believe they won't revisit the idea?

Mr. Snyder: Last year it was raised by none other than Rep. John Kasich (R., Ohio), chairman of the budget committee . . . It's a funny issue, because it keeps coming back as a way to change the code.

AA: Are you more worried about the general deductibility of advertising or specific attempts to hit certain industry groups, such as tobacco and liquor?

Mr. Drake: If you lose it on tobacco or alcohol, then two years later they'll be back and say, "OK, let's extend it." So you can't lose any of them.

AA: Let's move off tobacco; you mentioned the V-chip. In terms of the ratings of TV shows, do you have a position?

Mr. Sarsen: We strongly encouraged the networks to institute some kind of ratings system. All of our members, the large majority, have restrictive and closely monitored rules and regulations in terms of the kinds of shows that they're on . . . Now there's an issue whether the ratings currently published are really adequate. We plan to survey our members to see what they think.

AA: What are you doing in similar areas, say the Internet and children?

Mr. Sarsen: We're at the final stages now of gaining universal approval of privacy guidelines affecting kids through the Children's Advertising Review Unit.

Mr. Drake: These guidelines are being pilot-tested by some advertisers. And that's where CARU works so well, because it's more discussion and dialogue than a hard set of rules.

Mr. Snyder: It's indication of how respected NARC is by the FTC. [Chairman] Bob Pitofsky has said repeatedly this is the best self-regulation unit. FTC is aware that CARU is looking at this.

AA: Can you give us a glimpse or the goals or main approaches of these guidelines?

Mr. Drake: To be honest, it's pretty much common sense. The same types of guidelines that already exist for children's advertising in the commercial world, the broadcast world. It's taking those over, but specifically dealing with some of the Internet issues.

Mr. Snyder: The key is in the area of when you can collect [information] and what the parent's role is and what a technological response is . . . That's what's being discussed right now.

Mr. Drake: I'd make one last point on this issue of children and the Web. It's like national advertising. There are very few problems with national advertising directed against kids . . . If you talk to the FTC, the problems they've got on the Web are scams; phony, illegal people that are scamming other people; porn artists or whatever. This is not the mainstream of the advertising business, but it creates a problem.

AA: On the other hand, you have the Center on Media Education, which has accused various companies of collecting information from kids that their parents don't know about, including in one case information on how much money their parents earn.

Mr. Snyder: They filed a petition with the FTC. . . . And in the whole context of what we're discussing, we're certainly aware of that and I think the solutions are going to take care of the problems.

AA: What are the implications on advertising for David Kessler's leaving the FDA?

Mr. Snyder: The FTC is now viewed very favorably by Congress, and has really worked closely with FDA and pretty much has held on to its jurisdictional powers. I guess you always have to worry about food advertising . . . I'd hate to see a new commissioner came in and say, "Gee, I don't like food advertising,

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