How can marketers appropriately remedy the prizes for sweepstakes and promotions that can no longer be fulfilled due to the limits imposed by the coronavirus outbreak? Where are anti-gouging and fair pricing laws applicable? What’s the fine line between responding to the current health crisis and carrying on with business as usual?
Today, the Association of National Advertisers released a comprehensive legal guide that helps marketers address the bevy of challenges and concerns posed by the ongoing pandemic on brands.
The 31-page guide was detailed and prepared at the request of the ANA by the association’s general counsel and strategic law partner, Reed Smith, which is one of the few international law firms that specializes in advertising and marketing law with a primary focus on brands rather than agencies.
“The impact of the coronavirus crisis has had an immediate and, in all likelihood, lasting impact on the marketing and advertising industries,” ANA CEO Bob Liodice said in a statement. “Questions regarding legal issues are among our members’ key concerns at this time, and this wide-ranging, all-inclusive guide provides many of the answers they are looking for.”
For example, the legal guide extensively covers key contract issues because, during this time, brands may want to terminate contracts, delay performance under a contract, or otherwise modify a contract. Fundamental terms that are discussed at length include the force majeure clause, termination rights, breach of contract rights, makegood policies, amendment and modification rights and insurance.
Each of the 15 separate chapters within the guide addresses a different aspect of marketers’ contractual arrangements and legal risks with partners, vendors and regulators, offering background information, general guidance and recommendations on hypothetical options for operational changes.
A copy of the guide is available for free on the ANA website.
Though the guide was written by an assortment of Reed Smith attorneys, Liodice stressed in the statement that the guide is not intended to provide formal legal advice, and urged all marketers to consult with their own legal counsel before taking any action.
The biggest legal issues facing marketers
Douglas Wood and Keri Bruce, partners at Reed Smith, confirmed to Adweek that some of the critical legal issues marketers are currently facing (or will face) amid the pandemic are employment; health and safety issues; how to terminate, modify or delay performance under contracts without penalty and without getting sued; and how to obtain makegoods, credits and refunds where applicable, all while marketers want and try to keep their brand promises.
“Astute [media] supply chain participants will realize that being cooperative with brands in modifying or canceling contracts will be well worth the future goodwill,” Wood said.
According to the two Reed Smith partners, those supply chain participants that do not cooperate with brands may face long-term declines because there are many competitive outlets around for media, events, sponsorships, spokespersons and production.
“On the other hand, brands need to understand that the supply chain is also a vital partner in reaching consumers in an effective manner. So they too must be reasonable in asserting remedies or relying too forcefully on a force majeure or cancellation right,” Wood added.
Speaking of the force majeure provision, a contract-specific clause that may excuse a party’s performance of a contract if an unforeseen event outside the party’s control prevents the party from performing its obligations, the Reed Smith partners indicated that these clauses are what marketers should be most aware of during the pandemic.
“Force majeure provisions can be hard to successfully invoke, depending on how they are drafted,” Wood said. “Brands need to look at their options holistically and not see force majeure clauses as a panacea. They are not.”
Advice for marketers
The firm believes that marketeers should be thinking holistically about all of their interrelated marketing related contracts and efforts, mapping out different scenarios to anticipate changes and how this will impact contracts.
“The inability of one piece of the supply chain to fulfill its obligations can have an impact on all the other [marketing related contracts and efforts,] Wood added. For instance, the inability to launch a new product campaign on time due to supply chain issues and the inability to shoot advertising materials may impact media buys, talent contracts and production agreements.
Reed Smith also advises marketers to keep in mind that they “hold the purse strings” to how much money flows through the ecosystem and how their actions will have a trickle-down effect. Marketers will want many of their providers to still be in business when this period ends.
Marketers should also be analyzing their insurance policies for coverage and meticulously documenting how they will mitigate losses.