WARNING SIGNS
From taxes to privacy, DMers face daunting legal issues The direct marketing industry is now confronting the typical melange of legislative and regulatory issues. But no matter how seriously you viewed privacy in the past, you would do right to ratchet up that concern by several notches.
The most explosive development in the privacy area this year was the Federal Trade Commission’s report this summer asking for legislative authority to expand its online-privacy rulemaking – despite finding that 90% of the companies had privacy policies posted on their Web sites.
It’s unclear whether Congress will act this year, but if not, the matter will likely be on the front burner early in the next Congress.
“The FTC wants to make sure that notice, choice, access and security are followed by everyone,” says Jerry Cerasale, the DMA’s senior vice president of government affairs.
The stickler for the DMA is access. Cerasale says that even the FTC couldn’t come up with recommendations for what it would mean to allow consumers access to the data that companies have about them.
In another major FTC development, the agency reached an agreement with the Network Advertiser Initiative – a group of 12 Internet advertising companies such as 24/7 and DoubleClick – to allow consumers to opt-out from having these companies track their online behavior to better target banner ads. The FTC has asked Congress to let it regulate the 10% of such Internet advertising companies that don’t belong to the group.
Congress is active on the privacy front as well. A House bill that would set up a commission to study privacy has been reported out of subcommittee and could move forward this year. Bills on the use or distribution of Social Security numbers also concern the DMA because those numbers are used to verify that people are who they say they are. Sen. Judd Gregg (R-NH) has a measure concerning the display of Social Security numbers on Web sites and in the windows of envelopes.
In the financial area, Gramm-Leach-Bliley – the law that allows banks to sell securities – has privacy provisions holding that, beginning July 2001, financial institutions transferring information to third parties must give consumers notice and opt-out. FTC regulations included the header information as financial information. The Individual Reference Services Group has brought legal action to try to stave that off.
Both houses are mulling several online-privacy bills. For example, Sen. John McCain (R-AZ) has introduced a measure that would require marketers to spell out what information they’re collecting and offer an opt-out. Hearings were scheduled at press time. The House’s corresponding bill would require an opt-in.
Another Senate bill, the Inbox Privacy Act, would, among other things, prevent e-mailers from falsifying header information. It would also allow the FTC to enforce Internet service providers’ own rules for unsolicited commercial e-mail. “It would require marketers to look at the policies of thousands of ISPs, and those policies could change, so it would mean a constant review,” says Cerasale. “We oppose that because it’s an astronomical burden and has the federal government enforcing private laws.” Cerasale says it’s possible that some version of this legislation could pass by the time Congress recesses in October. In July, the House passed Rep. Heather Wilson’s (R-NM) similar bill by a vote of 427 to 1.
Further afield, the European Union recently adopted a so-called “safe harbor provision” that would allow companies doing business in Europe to address the continent’s tougher privacy regulations through their contracts.
As for telemarketing, the FTC is doing its normal five-year review of the Telemarketing Sales Rule, especially looking at whether “do-not-call” lists provide enough protection for consumers. As part of that, there is pressure from some sectors for a national do-not-call list; it’s unclear how conflicts with already existing state lists would be worked out.
The moratorium on new Internet taxes – scheduled to end in a year – remains a hot issue. The House has passed a measure expanding it from three years to five years, but the Senate has not acted. Sen. Byron Dorgan (D-ND) would extend the ban but if states simplify sales tax, they can go in and force marketers to collect the tax. “We think the status quo should remain,” says Cerasale. “It would be a huge burden for marketers to collect for all 7,000 tax jurisdictions.”
On Nov. 8, the Postal Rate Commission will vote on the USPS’s request for a 6.4% overall rate bump. “We’ve put in to cut the request to close to one-half,” says Cerasale. “Some catalogers are looking at 12% and 13% rate increases. Something’s wrong when inflation is significantly less than 5% and the postal service looks for increases like that.”
Of course, while dealing with all these legislative and regulatory matters, the DMA continues its efforts for self-regulation. But as Pat Faley, the DMA’s vice president of consumer affairs, points out, that now involves contending with increasing outside pressures. “Self-regulation today isn’t what it used to be,” she observes. “We have a lot of external input into our self-regulation now, including the government.”
