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Ad Agencies: California Law Threatens Commercial Speech

Association of National Advertisers
(Image credit: ANA)

Ad agencies are pushing back hard on a California bill that could extend liability for defective products to advertising agencies.

According to the Association of National Advertisers (ANA) and other ad associations, a California consumer protection product liability bill was amended this week to include provisions they said thwart the stated intent of the bill to exempt online advertising from liability exposure.

The American Association of Advertising Agencies (4A’s), the American Advertising Federation (AAF), ANA, the Interactive Advertising Bureau (IAB), and the Network Advertising Initiative (NAI) said the bill would chill commercial speech and reduce the availability of digital content at a time when the economy "is already under significant strain." They did not mention the COVID-19 pandemic, but obviously that is the current major strain, as well as the reason availability of digital content in a work-and-study-and-play-from-home is even more important.

The bill, as amended, "could create the broadest expansion of strict liability requirements in U.S. history, radically depart from existing jurisprudence, and subject small businesses to crippling financial exposure,” said Dan Jaffe, group EVP of government relations for ANA.

They are principally concerned with an amendment adding the provision that the bill covers businesses “facilitating the placement of products into the stream of commerce," without defining what facilitating constitutes. They fear that could that it could apply to any business deriving a direct or indirect financial benefit from products that were deemed effective.

They are concerned about what was taken out as well as added. They says another amendment removed a provision "clarifying that fees received for advertising do not constitute a 'financial benefit from the sale of the defective product.'" Without that, ad dollars are clearly at risk from "defective" products.

“The most recent amendments impose draconian potential penalties on publishers," said IAB EVP for public policy, Dave Grimaldi. "To avoid potential liability, a publisher would either need to test and evaluate each product for defects prior to allowing advertising for the product or significantly limit advertising on its site. This would reduce resources for publishers to provide digital news, content, and online services.”

“The broad and undefined language in this amendment could expand the law’s scope beyond a merchant selling a good to cover a news organization or Mommy blogger than runs a single ad and a product reviewer who receives high traffic to an article reviewing a product that is later deemed to be defective,” said Alison Pepper, EVP of government relations for 4A’s.