November, 1, 1998 | DRTV News

New Trends Bring Shift in Government Scrutiny

5 min

Previously published in DRTV News

With this week's Electronic Retailing Association meeting in Las Vegas, it's an appropriate time to take a look back at how far the infomercial and direct response television marketing industry has come since the founding of the National Infomercial Marketing Association in 1990. It's a story of some successes, some ironies, and some fresh challenges deriving from the growth of infomercials and the Internet as complimentary marketing tools.

The infomercial was born through a mixture of regulatory and deregulatory action. In 1967, the Federal Communications Commission decreed that "excessive commercialization" of television programming be prohibited, but it never spelled out what this meant. The three major networks, operating through the National Association of Broadcasters, agreed that they would allow no more than 18 and a half minutes of commercials per hour.

Reagan Reforms

The Reagan administration in 1982 attacked this private agreement as a violation of the antitrust laws and a federal judge struck it down. The FCC, recognizing that the prohibition on "excessive commercialization" no longer applied, dropped the provision entirely in 1984, paving the way for the growth of infomercials. Long-form advertising began reaching television screens in 1986, and by 1989 the foundations were in place for the growth of the modern industry.

The Blu Blocker sunglasses case against JSA in February 1989 was the first FTC infomercial case. However, the main assault on program-length commercials began in the spring of 1990, when the commission brought two cases against Twinstar Productions and TV, Inc. It then followed those cases in the summer with ones against Money, Money, Money, Inc. and Consumer Direct, Inc. Congress, expressing an interest in this new form of advertising, held two sets of hearings and expressions of alarm were heard that this emerging industry could be legislated out of existence before it had a chance to get started.

Concerned about the direction of events, NIMA was born at a meeting of its founds in a conference room at our law firm in the fall of 1990.

One of the earliest major complaints about infomercials was that they were commercials "masquerading" as entertainment or news programming. Concern was expressed, both on editorial pages and in the halls of Congress, that people not be "fooled" into thinking they were watching non-commercial programming. It is in this area that NIMA (now the Electronic Retailing Association, or ERA) has been particularly successful, issuing its Infomercial Marketing Guidelines in early 1991.

The Guidelines require that all infomercials contain -- at the beginning, at the end, and before each ordering opportunity -- a statement that the program is a paid advertisement for a particular named product. No other regulatory -- or, more properly, self-regulatory -- requirement is more widely followed in the infomercial industry, and the result is clear: The FTC has virtually dropped the claim, common in the early 1990's, that the viewer is being fooled into thinking that he or she was watching an entertainment program.

Perot Tries Infomercial

The 1992 political campaign also played a role in making viewers familiar with the new format. During his campaign, Ross Perot popularized the use of half-hour political advertisements to advance various political arguments, and the media widely described this advertising as "infomercials". So widely had the term entered the public lexicon that, by the end of the campaign, The New York Times dropped the use of the quotation marks around it.

Since its first decisions in the area, the Federal Trade Commission has insisted that the standards it applied to infomercials are exactly the same as those applied to other advertising, and, in one sense, that is clearly the case. Outside of the "misleading format" claims discussed above, all of the doctrines used by the Commission to analyze long-form advertising are identical to those used in reviewing short-form and print advertising. The problem, of course, is that with 30 minutes of air time to fill, the infomercial is a large, slow moving target, presenting many express claims, product comparisons and demonstrations. Consequently, the application of traditional FTC methods of analysis to the express claims of an infomercial will continue to present challenges, especially compared to short form "brand awareness" ads.

Scrutinizing the Internet

Where will the next hot regulatory issues emerge? Looking down the road, there are a couple of areas which merit attention. The first is the re-emergence of the entertainment/commercial format issue, although in a much broader context. The lines between information, entertainment and marketing are becoming increasingly blurred, especially on the Internet. Also, since infomercials, traditional television marketing and Web marketing are increasingly being viewed as different, complimentary tools to accomplish the same end, the mixture of these media will become increasingly commonplace. Times have changed, and the entertainment/commercial dichotomy of 1990, which provided the basis for earlier FTC cases, no longer accurately describes the mix of programming available on television and the Internet.

The second big area of regulatory revision will come in the health and dietary supplements and prescription drug area regulated by the Food and Drug Administration. The FTC takes the position that a marketer can sell just about anything it wants as long as the advertising for the product is truthful and substantiated. The FDA, on the other hand, says there are certain claims that may not be made for products, even if those claims are truthful and substantiated, until the FDA has given its blessing to them.

With increasing interest by Americans in taking control of their own health, there is a tremendous demand for information about health-related products, especially natural, herbal products. The proliferation of marketing channels represented by the growth of the Internet and the development of television direct response marketing may be increasingly at odds with a regulatory regime that was designed to handle traditional drugs and is somewhat hostile to aggressive marketing.

The last decade has seen infomercials, home-shopping and other electronic retailing techniques grow and develop in ways that could not have been anticipated 20 years ago. Technological advances, new products, and legal and regulatory developments will no doubt result in even more dramatic change in the next decade than we witnessed in the past one.