When all was said and done, it was a rout. The midterm elections in November swung control of the nation’s legislative branch decisively to the Republican Party.
Convened Jan. 3, 2015, the 114th Congress now has the largest Republican majority since Herbert Hoover’s administration. The GOP took control of the U.S. Senate with 54 seats (Democrats hold 44 seats; Independents, 2), and added to its majority in the House of Representatives, taking 246 seats to the Democrats’ 188, with one seat vacant.
Republicans now dominate Congress, and along with it, much of the conversation surrounding current legislative proposals and—at least in the near term—the course of the country. The conventional wisdom/campaign storyline says that Republicans are more pro-business, anti-taxation, and anti-regulation. But following the acrimonious obstructionism of recent years, is an even more conservative Congress likely to get anything done?
“There is some optimism out there that something will get done,” says Bill McClellan, ERA’s vice president of Government Affairs. “I think that at a minimum, there will be a lot of activity—at least they will be trying.”
The pressure is on Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker John Boehner, R-Ohio, to produce. “They are looking for accomplishments,” says Elise Pickering, of the Washington, D.C.-based lobbying firm Mehlman Castagnetti Rosen Bingel & Thomas. “They realize that they have to make a change, or the majority in the Senate will turn around in 2016 just as fast as it did in 2014.”
With offices occupied and committees assigned, the new Congress is now slowly getting started on the business of legislating. How will the zeitgeist in Washington affect the regulatory oversight of direct response and the issues of interest to marketers, if at all—and what can DR marketers expect for the next two years?
An Independent Agency
As the direct response industry’s main watchdog, the Federal Trade Commission (FTC) remains mostly unaffected by changes in Congress. The Senate confirms the sitting President’s nominations for members of the bipartisan, independent five-member commission, but that’s largely where political influence ends.
“It’s not that the FTC is nonpolitical, but it isn’t as political as executive branch agencies,” says Ed Glynn, partner with the law firm Locke Lord Edwards. “The people nominated tend to be very smart, very committed, mainstream antitrust lawyers and professors. A new president would have to wait until a commissioner resigns or his or her term ran out [to] nominate a new commissioner.”
If people don’t feel safe on your website, they are not going to go there.
What’s more, the mandate of the Bureau of Consumer Protection (BCP)—stopping unfair or deceptive consumer advertising—is popular across party lines. “The FTC has long enjoyed bipartisan support for its consumer protection mission,” says Lee Peeler, CEO of the Advertising Self-Regulatory Council (ASRC) and executive vice president of the Council of Better Business Bureaus (CBBB).
“There is no constituency for misleading advertising, poorly disclosed negative option plans, or faulty billing practices,” Peeler says. “While the direct response industry may well see a shift in emphasis in the coming year, the core values ERA members support—truthfulness and fair dealing with consumers—will continue.”
Any change in focus will be subtle at best, the experts say. “The FTC is an independent agency—most of the decisions they make are not political decisions,” says Amy Mudge, partner in the Advertising, Marketing, and New Media practice at Venable LLP. “All decisions are done at the staff level, and these are career government folks; how they approach their cases doesn’t change depending on who won an election.”
Regulating the Regulators
While politics has a limited effect on The FTC’s day-to-day work, the GOP’s anti-regulation positioning could inspire greater scrutiny of government “overreach” from all agencies, Glynn says, independent or not.
“With the Senate going Republican, I think there will be a lot more oversight,” Pickering says. In particular, Sen. John Thune, R-S.D., has been “open about wanting to do more oversight of independent agencies, from what I hear from staff.”
“You might see Senate oversight in areas such as Operation Choke Point, or you might see fewer hearings like the Dr. Oz hearings,” Mudge says. “That’s not the type of activity you expect from a Republican Senate. In cases where perhaps [the FTC] is seen as being too aggressive, we might see some Congressional intervention to stand down a bit.”
The FTC can continue on its current course without overstepping its bounds at all, of course, policing disclosures, negative option marketing, and other aspects of truth in advertising. One new issue is attracting attention from consumers, regulators, and legislators, though.
“Where our particular industry needs to be concerned is privacy,” Glynn says. “We have all of this confidential information about individuals and their buying habits. Peoples’ names, account numbers, personal information, and the disclosure thereof is a very big deal, and that’s an area where the FTC has been extremely active. The biggest danger for our industry is how well we protect the data we get from consumers.”
People need to make sure that their voices are heard. Don’t be afraid to be an advocate for what’s important to you.
When people see ads from a big consumer brand like Coca-Cola, he says, they go out and buy the product on a fairly anonymous basis; direct response sales ask for much more information. “You get the name, address, and certainly a credit card number, plus information about the product they bought and perhaps other sensitive information. That’s the nature of the DR interaction.”
After more than a year of high-profile data breaches affecting millions of JP Morgan Chase, Target, and other companies’ customers, digital privacy is more than a blip on the radar screen. “The more breaches there are and the more concerns people have about their privacy, the more likely we are to see a bill pass,” Pickering says. “Every time you see a hack or a breach, the chances for some kind of digital privacy initiative grows.”
Constituent concerns often drive committee action—and constituents are concerned about privacy. “Privacy is a terrific example of a consumer concern for which there is bipartisan support for action,” says Peter Marinello, director of the Electronic Retailing Self-Regulation Program (ERSP) and vice president of CBBB. “At the same time, data is the oil in the digital economy’s engine, so responsible self-regulation by the industry is both advisable and necessary.”
“It’s a hot issue in Congress,” Glynn says. “Whether you’re conservative or liberal, the ability to not have personal information stolen is really important to people.”
Rep. Darrell Issa, R-Calif., has complained that the FTC’s mandate doesn’t cover digital privacy protections, so action on this front could produce Republican rancor. The most familiar FTC rulemaking of recent years is the creation of the Do
Not Call list in 2004, however—a popular privacy initiative that bans unwanted telemarketing pitches.
If a new law or rule is established, digital privacy protections could be a challenge to install—but the customer is always right. “It will create another set of rules and more regulation, but at the same time, people stop shopping when they feel like their information isn’t secure,” Mudge says. “If people don’t feel safe on your website, they are not going to go there.”
Still other, more familiar issues face DR marketers. The National Retail Federation (NRF) pushed hard for passage of online sales tax during Congress’ lame-duck session late last year, and some pro-business Republicans supported it. An online sales tax has a 50/50 chance of making it through the 114th Congress, Pickering estimates, if it becomes a bargaining chip or gets piggybacked onto another bill.
The Federal Communications Commission (FCC) and the Obama Administration have thrown their support behind Net Neutrality—the concept that Internet providers should treat all Web traffic equally in terms of transmission speed and reliability. Republicans and some companies oppose this expansion of FCC authority; Sen. Thune has discussed overhauling the Communications Act in 2015, but would need to attract Democratic votes to pass legislation.
Both sides of the issue have substantial resources, Glynn says. “I don’t think there is going to be a change for another election or two, and the current default is pro-Net Neutrality.” Business models change, Pickering adds, and Net Neutrality has benefited. “A lot of the companies that were opposed to it back in 2006 are now running ads in favor of it,” she says.
For the time being, the FTC has the same mission, manpower, capabilities, and goals that it has had for several years running, and will continue to target less-than-scrupulous marketers as well as the businesses that support them. Without any additional oversight, the FTC may even redouble its efforts against suspicious telemarketing and negative option practices, Mudge says. “It is not a time for a grand celebration in the streets.”
Support businesses should remember that if they choose to ignore warning signs of malfeasance such as high numbers of returns or complaints, they will pay the price. “These days, when the FTC goes after somebody, they are also looking at the guys who answer the phones, the guys who process the credit cards,” Glynn says. “A lot of the marketers are small-potatoes, [but] you have deep-pocket companies that helped the bad-guy marketer. To what extent should they be held liable?
“You need to tell the truth and have substantiation—that’s been the rule since 1990, when NIMA was formed,” he advises. “You need to be able to figure out what best practices you need to have in place. And if you are a fulfillment house or a payment processor, what should you be doing to keep the FTC happy?”
Service to Yourself
If anything, the recent changes in Washington will intensify the necessity for vigilant self-regulation. “Representatives on the Energy and Commerce committee want to see corporations and associations be good citizens and encourage that,” Pickering says. “They view their role as only having to be involved if they absolutely have to.”
Industries can help forestall regulation in emerging areas by defining best practices as quickly as possible. “Areas in which the industry gets together and comes up with a solution, we might not see regulation—and that’s a good thing,” Mudge says. “The opportunity to band together and control your own destiny—as long as those efforts are meaningful and sincere—is very robust.”
Self-regulation even has a pro-business whiff that might appeal to the new Congressional majority. “With concerns about limited government resources, there is an even better opportunity for self-regulation to demonstrate its value as an effective and cost-efficient complement to government enforcement, freeing limited government resources to focus on the most serious problems in the marketplace,” Peeler says.
Heard on the Hill
But for DR marketers to get the message across that they can be trusted, they must be represented in the political process. “Politics can affect the bottom line,” Pickering says. “People need to make sure that their voices are heard—because you know what? People on the other side never miss an opportunity, no matter what the issue is. Don’t be afraid to be an advocate for what’s important to you.”
With so many new members in Congress, it’s a great time to introduce yourself and your concerns; it may be the very first time a senator or representative has heard from the infomercial industry. “Reach out to regulators and legislators,” Marinello says. “Be sure they understand the industry’s concerns, your commitment to treating consumers truthfully and fairly, and your support for strong self-regulatory programs. And by all means, go to ERA’s [Government Affairs] Fly-In.”
“Stay engaged, both personally and through the association,” Pickering adds. “If there is something that the government is talking about, don’t assume it is not going to happen. Call your Congressman; call the association; find out the status. The best thing people can do is stay engaged. If you have the opportunity to get to know your local, state, and federal officials, never miss an opportunity to bend their ears.”