Marketers Fight the D.C. Squeeze

NEW YORK Did you ever think the next sale of Trojans or e.p.t. would help fund President Obama’s healthcare reforms? While Congress has backed off on taxing such products after pressure from Republicans and a flurry of behind-the-scenes industry lobbying, it still has marketers fully in its sights. The sparring over taxation and advertising regulations has only just begun.Obama's healthcare reforms

So far, marketers appear to be faring well in what American Advertising Federation’s evp of government affairs Clark Rector described “as busy a time as I can recall in quite a few years.” Given the activist bent of the Obama administration and the Democratically controlled Congress, he added, “the thinking is that the business community is under fire and marketing tends to be the most visible face of that.”

Last week, manufacturers of everyday consumer items such as condoms and home pregnancy tests were nearly included in proposed tax legislation for “medical device manufacturers” under a bill pushed by Senate Finance Committee chairman Max Baucus, (D, Mont.) to help fund comprehensive healthcare. Baucus’ committee reconsidered as the tax on items $100 or less would likely have resulted in higher prices, which consumers could perceive as a stealth tax.

Less high profile than funding issues for healthcare reform are regulatory ramifications arising from a proposal to create the Consumer Financial Protection Agency. Intended to protect consumers from predatory lending practices, critics claimed the sweeping, vaguely defined legislation would impact businesses beyond banks and weaken the Federal Trade Commission.

“This is one of the most important pieces of legislation facing the ad industry right now,” said Dan Jaffe, evp of government relations at the Association of National Advertisers. “It’s a very broad law that affects every player in the advertising community: advertisers, agencies, media and the FTC — the major regulator we have a long history with.”

Proponents of that proposal claim the American business lobby, led by the U.S. Chamber of Commerce, has been waging a scare campaign. But in releasing draft legislation of the bill last Friday, Rep. Barney Frank (D-Mass.), head of the House Financial Services Committee drafting the legislation, bowed to the fierce opposition of business interest groups and scaled back.

Two weeks ago, one of Senator Baucus’s Democratic colleagues on the Senate Finance Committee, Sen. Bill Nelson (D-Fla.) published a letter in the St. Petersburg Times vowing to reintroduce an amendment to eliminate the tax deductibility of pharmaceutical TV advertising to help finance healthcare, an idea House Ways and Means chairman Charles Rangel (D-N.Y.), floated earlier this summer then dropped. Nelson himself has gone curiously quiet on his promise — his office has not responded to requests for clarification — while groups like the ANA declare the effort dead.

Nelson and Rangel projected eliminating the DTC TV deduction would raise $37 billion for healthcare reform, a high number given those marketers spent a total of $4.1 billion on ads in 2008, per Nielsen. But there’s no doubt lawmakers want to reach into some deep corporate pockets: In the 52 weeks ended July 2009, two sources of federal taxes, one currently in effect — tobacco products (and accessories) — and one potential, soft drinks, rung up $9.6 billion and $42.9 billion, respectively, in sales.

While there’s no current legislation for a tax on sugar-sweetened drinks, the Center for Science in the Public Interest urged Senate leaders to consider one, which President Obama recently called worth “exploring.”

Coca-Cola didn’t return calls for comment; Dr Pepper and PepsiCo reps referred calls to the American Beverage Association, which has been on the offensive. It created a coalition called Americans Against Food Taxes, which has 400 member organizations and has encouraged 67,000 individuals to send opposition messages to Congress. On Sept. 16, the group launched a second wave of TV, print and radio ads, in a campaign that has included full-page ads in The Washington Post, The New York Times and USA Today. “It makes no sense to single out one product as the cure to obesity when all calories count,” said Kevin Keane, svp of public affairs at the ABA.

Even within the beleaguered ranks of tobacco manufacturers, it’s been a tough year: Three weeks into taking office in February, President Obama put into law an approximately 150 percent increase of a federal tobacco excise (adding $1.01 to the cost of a pack) and the government subsequently shifted ad jurisdiction from the FTC to the Food and Drug Administration, which wants to institute stronger product warnings and unprecedented restrictions on marketing like the type of imagery allowed in ads.

David Howard, an R.J. Reynolds rep, said when it comes to tobacco the industry has bipartisan foes. “[Politicians] can tax tobacco … because it doesn’t affect 80 percent of the population,” he said, but noted the steep increase this year penalizes smokers with household incomes under $50,000 — the same middle class to whom Obama made a campaign pledge he would not raise taxes.

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