'Fasten Your Seat Belts': Industry to Play Defense on Regulatory Front

Year of Warnings to Give Way to 'Year of Prosecutions'

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Advertisers will be playing a lot of defense in 2013, when a new Congress is gaveled in and President Barack Obama is sworn in to his second term, industry watchers say.

"Fasten your seat belts, it's going to be a tumultuous year," said Dick O'Brien, Washington lobbyist for the American Association for Advertising Agencies. There are reasons for all the activity, Mr. O'Brien said. The Obama administration will be more activist in a second term because the president doesn't need to worry about re-election and there are likely to be new people with new agendas at the federal agencies.

A big change could come at the Federal Trade Commission, which has been embroiled in privacy matters and other issues of interest to advertisers.

It's widely speculated FTC Chairman Jon Leibowitz will step down after the new year. To avoid a contentious Senate confirmation, Mr. Leibowitz's replacement is likely to be someone who already serves in the FTC, Mr. Obrien said.

Next in line
That would make commissioners Julie Brill and Edith Ramirez prime candidates, with Ms. Brill holding a slight edge, he said. "She would be of the same bent as Leibowitz in protecting consumers. Maybe even more so."

But David Vladeck, the hard-charging director of the FTC's Bureau of Consumer Protection who once worked with Ralph Nader, is leaving the agency at the end of the year to teach at Georgetown University Law Center.

Mr. Vladeck brought landmark privacy actions against Google and Facebook. His deputy, Charles Hardwood, is expected to serve as acting director and continue Mr. Vladeck's policies, but perhaps in a less confrontational style.

Linda Goldstein, chair of the advertising division at Manatt, Phelps & Phillips, said the "supercharged" issue of privacy -- especially when it concerns children -- will bring a "maelstrom" of enforcement actions by the FTC next year.

Beyond warnings
She sees other trends developing, including a crackdown on deceptive ads that target aging Baby Boomers, especially those concerning health products and financial services.

Ms. Goldstein also predicts an increase in FTC actions against companies that don't follow proper social-media policies.

"This year is the year of warnings. I think next year is the year of prosecutions," she said.

Mr. O'Brien of the 4A's said the FTC may next year decide to regulate certain food and beverages advertised to children, seeking legislation from Congress if necessary.

"Congress would probably be pretty receptive," Mr. O'Brien said. "I hope the Republican House will slow things down."

Writing off ad expenses
But the first battle in Congress may be over writing off advertising expenses for tax purposes.

Mr. O'Brien and other industry lobbyists will lobby Congress to allow businesses to keep their ability to write off advertising expenses when lawmakers attempt to overhaul the tax code next year.

"A lot of people like me will spend a lot of time on Capitol Hill," he predicted.

November's elections were called "the status quo elections" because President Obama was returned to office, the Senate remained in Democratic hands and the GOP held on to its majority in the House of Representatives.

More personnel changes
But there are some important personnel changes on Capitol Hill.

A big one is the decision of Sen. Jim DeMint, R-S.C., to quit Congress to become president of the Heritage Foundation, a conservative think tank.

Mr. DeMint was the senior Republican on the Senate Commerce, Science & Transportation Committee, which has authority over a wide range of issues important to advertisers. The industry likes Mr. DeMint because he once owned a marketing firm and understands their issues.

Sen. John Thune of South Dakota, who isn't considered an expert on advertising issues, will be the top Republican on the panel in the new Congress and Sen. John Rockefeller, D-W.Va., a fierce consumer-rights advocate, will remain the committee's chairman.

Linda Woolley, a lobbyist for the Direct Marketers Association, said losing Mr. DeMint is a blow, but Missouri Democratic Sen. Claire McCaskill's re-election in a tight race is a victory.

Senator McCaskill also sits on the commerce committee and is an ally of advertisers on privacy issues.

Yet all in all, Ms. Woolley had hoped power in the Senate would switched hands.

"Is it better for us that things are controlled by Democrats than Republicans? The answer is 'no,'" Ms. Woolley said.

But congressional Republicans are more eager than Democrats to cap the charitable tax deduction. That, Ms. Woolley said, would hurt marketers who work for nonprofits, so the DMA is fighting that effort.

Advertising lobbyists are also watching for changes at the Food and Drug Administration, which may step up actions against companies that run misleading prescription drug ads.

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