LAW & ORDERS

The Birth of NIMA

By:

Jeffrey D. Knowles

Jeffrey D. Knowles

It’s been said that “advertising is the lifeblood of television.” It’s also been said that the business of television is selling. Not surprisingly, infomercials trace their roots to the earliest days of television.

In the 1960s, however, the Federal Communications Commission (FCC) began to react to growing complaints from consumer groups about the overcommercialization of television and the limited amount of broadcast time available. In tandem with the National Association of Broadcasters (NAB), the FCC imposed restrictive limits on the amount of television advertising. As a result, infomercials and other program-length sales presentations disappeared from the airwaves.

By the early 1980s, the FCC’s commercial time restrictions had become a significant obstacle to the fast-growing cable industry, which lobbied heavily through the national Cable Television Association in Washington, D.C., for their removal. In 1984, as part of the Reagan Administration’s deregulation efforts, the FCC lifted its commercial time limits, paving the way for today’s infomercial industry.

Between 1984 and 1989, the infomercial industry slowly but successfully emerged from the shadows of late-night television. Fueled by low-cost airtime on cable networks and independent TV stations, toll-free 800 numbers, and universal acceptance of credit cards, a handful of entrepreneurial marketers across the United States began to capitalize on direct access to millions of television viewers. These marketers also began to attract the attention of the media and government regulators concerned by what they viewed as the rapid opening of a new, lawless frontier of television advertising, populated by an unscrupulous group of marketers.

In the late 1980s, the Federal Trade Commission (FTC), which has jurisdiction over all national advertising except prescription drugs, and the Postal Service began to target the activities of television marketers in response to a growing number of complaints that infomercials were masquerading as real programming and disseminating false or misleading product claims. The government’s law enforcement efforts to that point had been limited and not widely publicized.

NIMA’s inaugural meeting was a watershed event.

All that changed, however, with Hal Morris’ successful launch of the Money Money Money infomercial, featuring author Wayne Phillips’ Government Grants book on how to obtain low-interest government loans and grants. Thousands of viewers watched the infomercial and began to call federal, state, and local government offices inquiring about the availability of what Phillips promised was $33 billion in grants. Deluged by phone calls from frustrated consumers, officials of the Small Business Administration (SBA) and other government agencies began to complain angrily to members of Congress.

In May 1989, Congressman Norman Sisisky (D-Va.) held the first Congressional hearing in Washington, D.C., on the proliferation of infomercials, and Money Money Money in particular. Angry members of Congress lashed out at regulators from the FTC, FCC, and Postal Service for failing to rein in abusive television advertising.

A year later, Congressman Sisisky and Congressman Ron Wyden (D-Ore.) held a second joint Congressional hearing to investigate the progress of government regulators in policing television marketers. In the weeks leading up to the May hearing, I worked closely with Greg Renker, president of Guthy-Renker Corp., on his testimony before the subcommittees and explanation of this new advertising medium. We also coordinated with Tom Fenton, cofounder of Synchronal; Nancy Langston, president of Media Arts International; and Don McDonald, CEO of National Media Corp.; in preparation for the hearing.

During the May 1990 hearing, representatives of Congress and the FCC attacked what they described as a “fringe element” within the infomercial industry, and threatened to introduce legislation to curb further abuses by renegade marketers. On a friendlier note, Congressmen Sisisky, who had been chairman of the National Soft Drink Association before being elected to the House of Representatives, asked those testifying whether there was a trade association representing the infomercial industry and called for self-regulation of its members through the development of industrywide marketing standards.

Under the glare of national television and press coverage, Greg Renker and Don McDonald defended their companies’ use of the infomercial format, their corporate ethics and business practices, and their compliance with applicable laws and regulations. Drawing parallels to the mail-order industry, they explained the beneficial uses of the infomercial medium and supported, in Greg’s words, “all efforts to eliminate the opportunists and charlatans who are giving this industry a bad name.”

In the weeks following the hearing, I worked closely with Greg [Renker], Tom Fenton, and David Chaladoff in staging a series of organizational meetings in Washington, D.C. Their extraordinary dedication, energy, and enthusiasm were essential in helping forge an alliance of companies interested in working collectively to stave off onerous and potentially devastating government regulation of the infomercial industry.

In July 1990, I formally incorporated the National Infomercial Marketing Association (NIMA) as a not-for-profit corporation in the District of Columbia. The founding directors of the association were Doug Bornstein, David Chaladoff, Tom Fenton, Kevin Harrington, Tim Hawthorne, David Marsh, Don McDonald, Greg Renker, and Gene Williams. With a strong vested interest in the industry’s continued success and prosperity, the nine founding members committed almost $100,000 in dues revenue to support the association’s startup and threshold activities.

From the outset, NIMA’s highest priority was the establishment of industrywide guidelines that all of its members would be required to meet. Working with Congressional staff and the staff of the FTC’s Division of Advertising Practices, NIMA created marketing guidelines that set up legal principles and standards of ethical business conduct. The guidelines reflected the association’s belief that truthful and informative programming was the best way to win and hold public confidence and gain lasting acceptance for the industry. Compliance with NIMA’s guidelines was made an express condition of membership in the association.

Briefly, the guidelines required that all infomercials must be identified onscreen at the beginning and end as paid advertisements for a particular product or service. The guidelines also addressed the content of infomercial programming, requiring accurate and truthful information about the products and services being marketed and substantiation for all objective advertising claims made. Finally, they addressed the use of testimonials and endorsements, and the terms and conditions of product guarantees and refunds to customers.

NIMA’s marketing guidelines were widely disseminated within the infomercial industry for comment, and subsequently distributed to broadcasters and cablecasters across the country as part of the association’s self-certification and enforcement program. NIMA members in good standing were required to self-certify to broadcasters and cablecasters that their infomercials complied with the guidelines.

Efforts began immediately to establish NIMA as a de facto entity and build an identity for the organization. Additional goals and priorities for the association were established, identifying and bringing together the common interests and concerns for the advancement of the infomercial industry, with both major and smaller companies alike benefitting under the umbrella of NIMA. An overarching goal was to maximize the contribution from each member company and preclude the predominance of any one company, so that the organization was strengthened for the benefit of all.

Much of NIMA’s early success was the direct result of two other priorities set by the board. First, NIMA began to build and cultivate relationships with members of Congress and their staff, regulators from the FTC, FCC, and Postal Service, and with allied groups such as the National Association of Broadcasters and the Association of Independent Television Stations. Second, NIMA embarked on an aggressive public relations campaign to improve the industry’s credibility and image. Building on the framework of NIMA’s self-certification and enforcement program, the association began to craft important messages to key constituencies, laying the groundwork for acceptance of the infomercial industry and the infomercial format as a credible and powerful marketing tool.

In September 1990, NIMA held the first-ever event for members of the infomercial industry at the Grand Hotel in Washington, D.C. The meeting drew more than 125 people, including members of Congress, government regulators, and representatives of the industry at large. Congressman Sisisky gave the keynote address, praising the industry’s efforts to establish a vigorous self-regulatory program for its members.

NIMA’s inaugural meeting was a watershed event for other reasons, as well. As the first meeting of its kind, it helped establish a sense of community, camaraderie, and common interest shared by everyone who attended. Many of those present had never met each other, or even spoken by telephone. The meeting captured the spirit of a young, lively, entrepreneurial group of marketers, and laid the framework for today’s industry and the exchange of ideas and information.

In October 1991, NIMA’s Executive Committee approved the hiring of Helene Blake as NIMA’s first full-time staff member. Helene and I worked closely with NIMA’s Board of Directors, helping the association grow rapidly and expand its power and influence. Years later, NIMA [now the Electronic Retailing Association] stands as the trade association for the electronic retailing industry.

Adapted from a column written on the occasion of NIMA’s fifth anniversary that originally appeared in Infomercial Insights,
an essay collection published in 1995 by Cannella Response Television.

Jeffrey D. Knowles is a partner in Venable LLP’s Advertising, Marketing, and New Media practice group. He can be contacted at (202) 344-4000.