The update dictates that agency as well as client can be held
responsible for false claims. What's more, new precedents being set
by the courts suggest that the treatment of communications between
a marketer and its outside agencies as something akin to
attorney-client privilege may be a thing of the past.
"The idea that an agency is responsible for the content that it
creates for a client is a lesson that is sometimes forgotten," said
Ron Urbach, chairman of New York-based law firm Davis &
Gilbert, which for decades has been an adviser to many of Madison
Avenue's biggest players.
"It's basic law that exists, but often times agencies get so
caught up in the negotiation of an agency-client agreement ... they
forget that independent of that contract is what the government
requires. And the federal government requires that an ad agency has
a responsibility to make sure that the advertising is compliant
with the law."
The FTC first issued its Green Guides in 1992 as a way to assist
marketers unsure of whether their claims were accurate. Since then,
the guidelines have been revised several times, most recently last
year when the FTC was met with some consternation from the American
Association of Advertising Agencies.
Said Dick O' Brien, head of the 4A's Washington office, last
December: "We believe that our own self-regulatory efforts and the
existing regulations meet most of the concerns expressed by the
commission in their new proposals. Green marketing is fragile and
can be harshly affected by too many rules that make it almost
impossible to discuss the environment benefits of products and
Beyond the Green Guides, the FTC also appears to be taking more
seriously its ability to file "administrative complaints" as an
issue of public interest when it believes the law is being
violated. In a recent example, it charged and won a settlement from
a public-relations agency hired by video-game developers. The FTC
claimed the firm, called Reverb Communications, engaged in
deceptive advertising by having staffers pose as ordinary consumers
posting game reviews at the iTunes store, and not disclosing that
those reviews were done by paid employees working on behalf of the
"One of the ways the FTC tries to effect policy is by taking
individual actions against individual players," said Mr. Urbach.
With those actions, "they are trying to really speak to the
industry. In some recent actions where they have gone after
agencies, they've sent a reminder to the industry to say, 'Don't
forget you have a responsibility to comply with the law, and you
can't hide behind the client.'"
Legal experts note the feds aren't the only reason agencies
should step up their due diligence. In a recent false-advertising
case between LG Electronics and Whirlpool -- over the use of the
word "steam" in ads for clothes dryers -- LG during discovery asked
for correspondence between Whirlpool and its ad agency. The latter
company refused on grounds of legal privilege. But a U.S. Court of
Appeals mandated Whirlpool turn over documents, and that the
third-party agency wasn't protected as the functional equivalent of
a Whirlpool employee.
"Agencies used to work with the legal departments of advertisers
pretty closely, exchanging information back and forth about how the
product works, shortcomings in performance, whether the ad is
accurate or overstating the benefits," said Chris Cole, a partner
in the firm's Washington office Manatt, Phelps & Phillips. "All
of this happens over email for the first part ... pretty candid
communications. Frequently when we're in cases, some of the worst
documents come out of agencies. They're more freewheeling, throwing
out ideas that may or may not work, and sometimes come up with
initial ideas that are off the charts in terms of being false. It's
not until the lawyers intervene sometimes that an ad can be aired
that is truthful and not deceiving to the consumer."
PROTECT YOUR FIRM
Four things agencies should consider to better shield themselves
- Internal education on a regular basis to make sure new hires
know the rules about communicating over email, text message or
- Establishing internal processes for due diligence to be able to
trace whether the agency is meeting federal guidelines for
advertising or not.
- Don't trust broadcast networks or clients' approval of
advertising; make sure it meets your own standards.
- Ask clients for the ability to work on site, and/or for a
company email address.
Source: Manatt and Davis & Gilbert
The legal trends are ones that some in the agency community are
flagging as worrisome -- and not merely because of the potential
financial burden and time-suck posed by an inadvertent courtroom
showdown, but also due to fears that such legal precedent could
hamper agencies' creativity.
"Further regulation and over-reaching by the government will
cause agencies, and in particular creative people, to be less
inventive and look over their shoulder more," said Peter
McGuinness, the CEO of Interpublic Group of Cos.' Gotham and a
member of the 4A's government-relations board. "It will
fundamentally impact how we do business, because we're always
pushing advertisers to be more aggressive, but [legal concerns]
will ultimately cause us to dial back, water down and make agencies
more risk-averse than they already are. You can't do a
middle-of-the-road campaign and then be expected to steal
It's a trend that would likely leave a bad taste in marketers'
mouths, too. Already, beverage maker Pom is fighting back. In a
turn of events, the marketer sued the FTC last year alleging that
its new advertising standards for the food industry have not given
companies a chance to submit input and that it's violating First
Amendment rights to engage in truthful speech, and harming the
company's brand association as a healthful-juice company.
For now, the best agencies can do is be cautious. And at the end
of the day, a little paranoia could go a long way in terms of
helping an agency avoid an unnecessary headache.
"The most clear direction is one that would apply to any
company, irrespective of an ad agency, and that's to be really
careful what you say in electronic communications, whether in an
email or a text message," advised Mr. Cole. "It can be retrieved
after the fact, and it could come back to haunt you."