Top ad lawyer on how COVID is changing sponsorship deals and what to look for if the Dems take control of the FTC
Brands and event organizers have yet to rush to court to settle disputes over sponsorship agreements upended by the coronavirus pandemic, choosing to talk it out instead, according to one of the nation’s top ad lawyers.
“We have not seen any litigation yet arising from these agreements, but we’ve seen a lot of negotiation,” Linda Goldstein, a partner at BakerHostetler, says on the latest edition of Ad Age’s “Ad Lib” podcast, while touching on a range of legal issues affecting the marketing industry.
The pandemic has forced the cancellation or suspension or just about every major music or sporting event across the globe since cases began spiking in March. While some events are resuming or have plans to resume–such as pro soccer, basketball and baseball games—most are taking place with significant alterations, like no fans in attendance. This has put pressure on sponsors to renegotiate deals in hopes of wringing some concessions to reflect the fact that the properties—which refers to the teams, leagues or event owners selling the sponsorships—haven’t been able to deliver the full value of deals that brands anticipated pre-COVID.
On the podcast, Goldstein dives into the complexities of so-called “force majeure” clauses in contracts, which allow brands or properties to exit deals in the wake of unforeseeable events. But it often comes down to the fine print. “The force majeure clauses tend to range from the very general to the more specific. They are interpreted differently by different courts in different states,” Goldstein says.
She cautions brands now negotiating deals to examine carefully the language in the clauses because “the argument that a pandemic in the future is an unforeseeable event is probably not going to gain a lot of traction.”
Goldstein on the podcast also discusses how the Federal Trade Commission has acted under the Trump administration. The perception is the FTC is passive during Republican administrations and more aggressive under Democrats, but Goldstein says that is not always true. “The popular thinking in that regard isn’t really accurate,” she says, noting that the FTC under Trump has been “one of the most aggressive administrations we have ever seen.”
But if Joe Biden wins in November and the Democrats take control, “I think we actually may be looking at an even tougher FTC than we have now,” she says. Goldstein points to the fact that the two Democratic members of the five-member FTC, Rohit Chopra and Rebecca Slaughter, have dissented on some key cases, believing corporate penalties have not gone far enough. That includes the FTC’s move last year to fine Facebook $5 billion for privacy issues related to the Cambridge Analytica data scandal.