12/09/12 Davis/Urbach

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Ronald R. Urbach the commercialization of American culture. program, which shared its title with the At the center of the current debate over tagline for Ford’s truck and SUV lines, and Martin Garbus the legitimacy of branded entertainment is prominently featured Ford vehicles in this and James L. Johnston Commercial Alert, which has petitioned the outdoor-themed reality program. Federal Trade Commission (FTC) and Fed- What Is The Fuss About? DAVIS & GILBERT LLP eral Communications Commission (FCC) to initiate rulemaking to regulate product Those, such as Commercial Alert, who From the Little Orphan Annie radio show placement practices in television program- oppose these various forms of branded enter- sponsored by Ovaltine in the 1930s and 40s ming. Commercial Alert’s proposal would tainment or seek more stringent disclosures, to the Texaco Star Theater of the late 1940s require real-time “pop-up” notifications of maintain that product placement is so ubiq- and early 1950s to this summer’s second any product placement arrangement in tele- uitous that television programs are becoming season of Pepsi Smash on The WB television vision programming. Yet this proposal comparable to infomercials, without incor- network, the presence of advertisers and would have First Amendment implications porating the sponsorship disclosures brand names in popular entertainment has which extend far beyond the issue of notifi- required of infomercials. Furthermore, these again come full circle. This latest iteration cations. It would fundamentally alter a form advocates argue, television programs not of the branded entertainment phenomenon is of communication which has traditionally only neglect to identify their sponsors, the penetrating every form of media. In print, been accorded the deference of core First current product integration practices “fail to marketers such as Abercrombie & Fitch are Amendment speech. identify the ads themselves, and instead pre- tend that the ads are merely part of shows.”1 blurring the lines between catalogs and mag- What Is Branded Entertainment? azines. On the Internet, Sony Electronics is Without adequate disclosure, these advo- taking the concept of advertorials to the next Branded entertainment in television, cates argue that product placement is “an level with web-based articles written by sometimes referred to as product placement, unfair and deceptive advertising practice. It Sony and its advertising agency that product integration or strategic entertain- is inherently deceptive, because it is often ment, can take many forms. Its recent resur- below viewers’ threshold of awareness.” In appeared on such editorial sites as national- gence coincides with the rise of reality an effort to thwart this “affront to honesty” 2 geographic.com and wired.com – not as television, where a lack of scripts and a and uphold “fair dealing,” 3 many who object advertisements, but as content. Similarly, focus on “real world” situations lend them- to the prevalence of product placements are BMW is expanding the boundaries of adver- selves to the integration of products and calling for regulations to require real time tising formats on the web with the bmw- brand names. At its most basic, branded pop-up disclosures indicating that product films.com website, where the short films entertainment can take the form of passive placements are paid advertising. To be featuring BMW automobiles are the attrac- product placement, such as the prominent effective, Commercial Alert notes that the tion, not an advertising distraction. depiction of the Coca Cola name and marks disclosures must be of a size, and remain But nowhere has this practice become in the program American Idol, or the Ameri- onscreen for a length of time, such that the more prevalent or controversial than on tele- can Eagle apparel that each cast member on audience will certainly notice and under- vision. Befitting its status as America’s dom- the patriarch of reality programs, The Real stand them. inant mass media, the recent resurgence of World, wears. In other cases, the product is On the other side of this argument are branded entertainment in television has been integrated into the “storyline” for the pro- media organizations, advertising coalitions hailed as an opportunity to engage con- gram, such as the use of the American and lawyers traditionally concerned with sumers in a different and meaningful way by Express card by the proprietor of The First Amendment issues. The Freedom to marketers and has provoked anger and com- Restaurant. Sometimes, branded entertain- Advertise Coalition (“FAC”), which repre- plaints by media watchdogs who object to ment appears as a form of sponsorship, with sents advertisers and media, and the Wash- marketers like Pepsi attaching their names to ington Legal Foundation, a public interest Ronald R. Urbach is Co-Chair of and James programs such as Pepsi Smash in much the law and policy center, are two organizations L. Johnston is an Associate in the Advertis- same way Texaco did over fifty years ago. which sharply oppose the central argument ing, Marketing and Promotions Department of Meanwhile, other marketers are attempting in Commercial Alert’s petition. The FAC New York-based Davis & Gilbert LLP. Mar- to combine various of these elements, as asserts that “product placement can be an tin Garbus is a Partner in the firm’s Litigation Ford Motor Company attempted through its essential ingredient in the story being told Department. participation in the No Boundaries television through a program.” 4 Products often

Please email the authors at [email protected], [email protected] or [email protected] with questions about this article. Volume 12, No. 9 © 2004 The Metropolitan Corporate Counsel, Inc. September 2004 become an important part of the story by inappropriate...” 7 While it declined to pro- from getting into an automobile, since it communicating traits of a character or era mulgate the proposed rule, the FTC stated it might be inherently deceptive to show some- that simply could not be demonstrated so would address situations where product one driving safely after consuming alcoholic effectively via dialogue. Advocates of this placement purportedly led to consumer beverages? position claim Seinfeld would not have been injury on a case-by-case basis. While these suggestions may seem the same without the Yoo Hoo, Bosco, Snap- While it is possible that the passage of extreme, they represent exactly the type of ple, Drake’s coffee cakes, and the ubiquitous time may lead to a different result, Commer- disclosure obligations that marketers deal boxes of brand-name cereals that occupied a cial Alert has not identified any specific con- with in traditional advertising. Equating permanent position on his kitchen shelf. sumer harm as a result of the product television programming that includes Nondescript boxes of generic flakes and placement strategies that it protests. As a branded entertainment with traditional com- puffs would not have been quite as effective basis for its allegations, Commercial Alert mercials, as Commercial Alert appears to be in silently communicating Seinfeld’s boyish points to numerous sources indicating the doing, leads us down this path and creates a and bachelor tendencies. Similarly, Drake’s, increased use and effectiveness of product substantial chilling effect on the ability of a brand not available in Hollywood, con- placement. However, the petition does not television producers to create storylines fea- veyed a sense of place on that program as tie product placement to any specific con- turing real products and brands. Even if the much as the diners, subways and taxicabs in sumer injury, and, as WLF has pointed out, FTC and FCC did not expressly take such an which the characters spent their time. provides no reason to overturn the FTC’s extreme position, any extension of the cur- The views outlined by these organiza- prior determination. Mere complaints that rent product placement disclosure require- tions represent starkly different visions of product placement is effective as a form of ments would likely lead broadcasters to be how product placements should be viewed. marketing does not lend support to broad, much more conservative and render the Yet they represent only the beginning of a vague allegations of harm to consumers. entire branded entertainment category much larger debate over the scrutiny which Moreover, the method of disclosure sug- unnecessarily risky and irrelevant. will be applied to communications in which gested by the CSC is far less disruptive to Some argue that this is precisely Com- marketers are involved, regardless of the programming than the real-time pop-up dis- mercial Alert’s goal. They contend that it is scope of that involvement. closures recommended by Commercial not disclosure but the elimination of product Alert. placements that Commercial Alert hopes What Does It Mean? Even lesser remedies, such as more com- will be the end result of its efforts. While The proposal advocated by Consumer prehensive (though not real-time) disclo- this is unlikely, it is important for the media Alert would dramatically alter television sures, will likely need to demonstrate more and advertising industries to understand that programming. WLF fears the proposed rule tangible consumer harm than has been artic- this debate over disclosures has potentially would impair or even effectively sound the ulated to date by Consumer Alert and those far reaching consequences that could forever death knell for product placement on televi- who support its position. alter the longstanding relationship between sion. The large and conspicuous pop-up dis- brands and entertainment. closures Commercial Alert envisions will Beyond Product Placement certainly be disruptive. The FAC has called The current battle over product place- them “extreme,” “impractical,” and border- ment disclosures is only one area in which 1 Letter from Gary Ruskin, Executive Director, Commer- 5 cial Alert, Re: Complaint, Request for Investigation, and ing on “ludicrous.” The pop-ups may, the the debate over the place of marketers in the Petition for Rulemaking to Establish Adequate Disclosure FAC asserts, make television “virtually national dialogue is taking place. There has of Product Placement on Television, to Marlene H. Dortch, impossible to watch.” 6 As such, networks been a growing effort to characterize any Secretary, Federal Communications Commission (Sept. 30, 2003) [hereinafter referred to as “CA Letter to FCC”]; may elect to forgo product placements alto- communication which has a marketer as its Letter from Gary Ruskin, Executive Director, Commercial gether. However, this may have an equally source as being entitled to less First Amend- Alert, Re: Request for Investigation of Product Placement detrimental effect on the quality of program- ment protection than those originating from on Television and for Guidelines to Require Adequate ming. For those who produce television pro- other sources. In addition to the product Disclosure of TV Product Placement, to Donald Clark, 8 Secretary, Federal Trade Commission (Sept. 30, 2003) gramming, product placements have become placement debate, the Nike v. Kasky case [hereinafter referred to as “CA Letter to FTC]. Both letters a valuable offset against the rising costs of demonstrates that this heightened scrutiny is are posted at www.commercialalert.org. production. The loss of this offset could have occurring in other media as well. 2 CA Letter to FCC at p.12. 3 CA Letter to FTC at p. 3 a significant impact on production budgets, If this concept continues to take hold, it 4 Letter from Darryl Nirenberg, Counsel, and Penelope reducing the amount spent on programming would have a potentially overwhelming Farthing, Counsel, Freedom to Advertise Coalition, Re: or altering the mix and type of programming effect on the entire category of branded Opposition to Request for Investigation of Product Place- ment on Television and for Guidelines to Require Ade- available. Moreover, networks would lose a entertainment. If the mere existence of prod- quate Disclosure of TV Product Placement, to Donald valuable resource in keeping advertisers in uct placements require prominent, real-time Clark, Secretary, Federal Trade Commission (Nov. 12, the television marketplace, spending their disclosures to identify them as advertise- 2003), [hereinafter referred to as FAC’s Letter to FTC]; money on the thirty second commercials that ments, what is the next level of scrutiny that Letter from Darryl Nirenberg, Counsel, and Penelope Far- thing, Counsel, Freedom to Advertise Coalition, Re: pay for the rest of the programming. will be applied to these transactions? If a Opposition to Petition for Rulemaking Related to Disclo- The likelihood of the Commercial Alert specific brand of automobile is featured in a sure of Product Placement on Television, to Marlene H. proposal being adopted by either the FTC or car chase in a television program as a result Dortch, Secretary, Federal Communications Commission (Nov. 12, 2003). Hereinafter referred to as FAC’s Letter to FCC is probably low. In 1992, however, the of a product integration transaction with the FCC]. Both Letters are posted at FTC denied a similar industry-wide rule- automaker, would a “Closed course. Profes- www.ana.net/news/2003/11_12_03_fac.cfm. making petition brought by the Center for sional driver” disclosure be warranted? If 5 FAC’s Letter to FCC at p. 2. 6 FAC’s Letter to FCC at p. 5. the Study of Commercialism (“CSC”). In its that vehicle is hit with gunfire or flips over, 7 Federal Trade Commission, FTC Denies CSC’s Petition petition, the CSC requested that the FTC must the program disclose any modifications to Promulgate Rule on Product Placement in Movies, require movie studios to disclose paid prod- to, or optional equipment in, the vehicle in Dec. 11, 1992. See www.ftc.gov/opa/predawn/ F93/scs- uct placements at the beginning of each the program? If the character of a situation petit5.htm. 8 Nike, Inc. v. Kasky, cert. dism’d, 123 S. Ct. 2554 (2003). movie. In its response, the FTC stated that comedy regularly consumes a specific brand At issue is whether NIKE’s responses to allegations of “[d]ue to the apparent lack of a pervasive of alcohol as a result of a product integration unfair labor practices abroad in the form of press releases pattern of deception and substantial con- transaction with the importer or distributor, and other communications, is subject to the same First Amendment protections as the statements of its foes in sumer injury attributable to product place- would a “responsible drinker” disclosure be the international labor debate, or some lesser degree of ments … an industry-wide rulemaking is required? Would that person be prohibited protection.