Apr 10, 2008 6:05 AM, PROMO Xtra, By Brian Quinton

Marketers may find themselves in the regulatory crosshairs if the economy experiences a sustained downturn, as state and federal regulators look to replace lost tax revenue by getting more aggressive about enforcing laws in areas like truth in advertising and “green” claims.

“In many states, the fines collected by regulatory actions go into their operating budgets,” said Ron Urbach, a partner with Davis & Gilbert LLP, at the Promotional Marketing Association’s 2008 Integrated Marketing conference in Chicago Tuesday. “You’ll have a significant move by mostly state regulators to close budget gaps, and one way they can do that is to bring regulatory actions.”

That’s what happened when California saw a revenue shortfall in the early ‘70s, and Urbach said the climate is right for a recurrence, no matter what the outcome of the November election.

“To the third-party regulators out in the marketplace, you are a scapegoat,” he said. “Nobody is going to feel very sorry about challenging a marketing, advertising or promotional program.”

William Heberer, partner at Manatt Phelps & Phillips LLP, agreed that the pace of state enforcement actions has picked up recently.

“Our office has definitely seen a spike in state activity in the last few months across many marketing areas: telemarketing, a lot of online marketing, marketing to children, some pure disclosure cases,” he said. “They’re bringing more cases than I’ve seen in the last three to four years.”

One of the areas that may see increased regulatory scrutiny is so-called “green marketing,” which is now picking up steam in the U.S.

“You’re going to have new products, new packaging, and new claims issues to be concerned about,” Urbach warned.

He pointed out that the Federal Trade Commission is currently considering revisions to its “green guides” for marketers and is actively looking for cases that can help them establish their jurisdiction in this growing campaign trend.

“The way [the FTC] stamp their position on new areas is to go off and bring enforcement actions,” Urbach said. “That’s not to say you shouldn’t do it, but you have to be very careful in terms of what you’re doing. The biggest issue for green marketing is about using general comments to support our position without dealing about the real limitations that apply [under FTC guidelines]. Anyone dealing with anything ‘green,’ be aware that it’s now a hot-button issue for the FTC.”

Another area that regulators will be examining more carefully is campaigns aimed at specific ethnic groups such as Hispanic consumers. Heberer said his firm has had a lot of clients who want to target the Hispanic demographic but may not be prepared to go all the way and make their ancillary services available to those consumers in Spanish.

“I can’t say I’ve seen a case around that yet, but I can foresee seeing a case,” Heberer said. “If you engage in a telemarketing campaign to Hispanics or some kind of e-mail offer, but then your Web site or your online loyalty program are only in English, then that person can’t enjoy the full use and benefit of a product that was sold to them in Spanish but provided to them in English.”

Urbach advised against advertisers thinking that these issues around ethnic marketing are really problems for their dedicated multicultural marketing or ad agencies, not for them.

“The FTC is very aggressively looking at cases in the Hispanic marketing area,” he said. “Again, it’s an area the government very clearly wants to jump in on, to make the point to the overall industry that they’re paying attention and that the rules apply here as elsewhere. The mere fact that it’s in a different language isn’t going to make a darn bit of difference.”

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