Introduced by Representatives Anna Eshoo (D-CA) and Jan Schakowsky (D-IL) in the U.S. House of Representatives and Cory Booker (D-NJ) in the U.S. Senate, the BSAA seeks to provoke a radical shift in the online advertising landscape by completely prohibiting advertisers – subject to a few exceptions – from targeting consumers with ads. While not likely to pass, the bill would endow the Federal Trade Commission (FTC) and state attorneys general (AGs) with enforcement authority while creating a private right of action, significantly ratcheting up potential risks – such as uncapped monetary fines – to businesses situated in the online advertising space.
Say goodbye to third-party data
In short, the bill seeks to:
- Prevent advertising networks and facilitators – firms that publish advertisements – from using any data linked or reasonably linkable to an individual for the purposes of targeted advertising.
- Prohibit advertisers from targeting or causing an advertising facilitator to target ads based on (i) third-party data and (ii) protected class information such as race, gender, and religion.
Notably, the only forms of targeted advertising excluded from this sweeping proscription would be (a) contextual advertisements based on information the consumer is actually engaging with, and (b) broad location targeting, which would permit targeted advertisements towards “recognized places” such as congressional districts and TV markets.
Moreover, marking a stark departure from the consent-based frameworks adopted by other comprehensive privacy laws, such as the California Consumer Privacy Act (CCPA) and the General Data Privacy Regulation (GDPR), the bill would completely remove the consumer from the decision-making process, banning targeted advertising regardless of whether a consumer grants their consent.
Enforcement
Paired with the private right of action, the FTC and state AGs would be charged with enforcing the new rules. In particular, entities found to have violated the proposed rules could be subject to a fine of up to $5,000 per violation.
A sign of more to come
Although the bill is unlikely to pass, it is indicative of both regulator dissatisfaction with the status quo and where the conversation is moving regarding the regulation of data privacy and mobile advertising. This proposal dovetails with (i) the recent passing of comprehensive data privacy laws in California, Virginia, and Colorado – with numerous other states considering similar laws this year – (ii) new privacy changes instituted at the platform level, such as Apple’s App Tracking Transparency (ATT) and Google’s plans to phase out third-party cookies; and (iii) a recent petition to the FTC to define targeted advertising as an “unfair method of competition” under Section 5 of the Federal Trade Commission Act.
Accordingly, it is clear that both consumer and regulator scrutiny of targeted advertising will only increase going forward, making it essential that potentially affected businesses – particularly those that heavily rely on the use of third-party data – begin to think about the risks and opportunities associated with increased regulation. More specifically, it is imperative that marketers begin to consider how strategies can be proactively modified now to mitigate regulatory costs stemming from onerous legislation similar to the BSAA in the medium to long term.
First-party data and contextual advertising
Given these regulatory trends, a proactive approach beyond a wait and see attitude could pay long-term dividends regarding future regulatory compliance and competitive market positioning. While targeted advertising remains a primary advertising tool, in light of the recent regulatory focus on targeted advertising, advertisers are investing in (i) first-party data and (ii) contextual targeting in order to diversify advertising strategies and allow advertisers to pivot quickly in the coming year.
Takeaways
- Legal counsel should watch legislative and industry developments in order to prepare their marketing and business teams for upcoming changes involving the use of third-party data.
- Advertisers that are innovating consumer engagement activities should continue to monitor their obligations vis a vis personal information under existing privacy laws to balance their need for robust first-party data with notice, choice, compliance, and minimization requirements.
Client Alert 2022-068
