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B2B DIRECT MARKETING
Direct marketers are about to have a lot more on their hands than marketing, if recent legislative or regulatory activities are any indication. From postal-rate increases to taxes on Internet sales to restrictions on data collection, the fate of direct marketers increasingly seems to be in others' hands.
In the short run, increases in mailing costs present the biggest headache for companies that do a lot of mailing. Last week, the U.S. Postal Service announced plans, subject to regulatory approval, to increase postal rates dramatically, a move the Direct Marketing Association decried immediately.
“We think postal-rate increases can be counter-productive,” said Jerry Cerasale, senior VP-government affairs at the DMA. “It may increase revenue to the USPS in the short run, but it will put pressure on mailers to get out of the system.”
The USPS' proposal is to raise first-class mail to 49 cents, an increase of 6.5% from the current 46 cents. Similar steep price hikes have been proposed for standard mail, used most often for advertising, periodicals and package services. Standard flats used by catalogers would be hit with a 6.1% rate increase.
The proposed price hikes are higher than allowed by current law, which ties increases to the Consumer Price Index, currently 1.5%. The USPS made its request to exceed that because of its “precarious financial condition” and the uncertainty of postal reform legislation, Mickey Barnett, chairman of the USPS Board of Governors, said in a statement.
The USPS lost $3.9 billion in its first nine months this year.
There are a number of postal reform bills moving through Congress, but Cerasale said a bill that overhauls current legislative burdens on the USPS and allows a reduction of weekly mail delivery is preferred by the DMA.
Both the DMA and the American Catalog Mailers Association have been strongly opposed to states collecting sales tax on Internet sales. Troubling to both is the proposed Marketplace Fairness Act, which would require all e-commerce sites to collect state sales tax at the time of a transaction. Current law requires this only if the e-commerce company has a physical presence in the buyer's state.
Calculating sales tax on thousands of differing taxing jurisdictions would increase catalogers' costs by as much as 10% because most also run parallel e-commerce sites based on their catalogs, ACMA said in a statement. The organization plans a “Policy/Caucus Fly-in” Oct. 9-10 in Washington to enable catalogers to lobby Congress against the bill.
“There's a growing body of evidence that the Senate-passed bill is very unpopular among voters,” said Hamilton Davison, ACMA president and executive director. “MFA will add less than one-half percent in new tax receipts; it may actually be a net loss, should sales-corporate-personal revenues fall as companies fail.”
While federal officials move to impose national standards on this issue, some states have also been active individually. The Colorado legislature passed a so-called “Amazon.com bill” that would impose a 2.9% tax on all Internet purchases made by state residents.
Following challenges and counter-challenges, the law is on track to be implemented, but DMA earlier this month announced it would seek to block it one more time.
“We can't cripple our entrepreneurs,” Cerasale said. He urged allowing businesses “to start something in their garages and have it grow significantly before they get nailed with all kinds of tax regulations.”
Direct marketing increasingly relies on personalization, but its future is also clouded by the possibility of government-imposed restrictions on Internet data collection for the purposes of target marketing. The Federal Trade Commission has said it is considering recommending such regulation, and numerous Internet privacy bills have been introduced in Congress. The marketing industry has argued for self-regulation.
The simmering conflict was underscored in August when FTC member Julie Brill wrote a column in the Washington Post equating the collection of Internet browsing behavior for advertising purposes with the data-collection practices of the National Security Agency, which have attracted much controversy recently. Brill wrote that companies that collect Internet data for marketing purposes “push legal boundaries.”
Last week, Sen. Jay Rockefeller (D-W.Va.) demanded that 12 websites that focus on personal finance and health divulge whether they share consumer data with third parties. Rockefeller charged that data brokers obtain data from websites that collect and pass on personal information they gather from surveys, sweepstakes and questionnaires.
“Americans have fully embraced a data-driven way of life, and the countless economic and social benefits they derive from responsible data use,” said Peggy Hudson, DMA's co-senior VP-government affairs, criticizing Rockefeller's move. Hudson was hired by DMA this month to succeed Cerasale, who will retire at the end of the year.
“We as an industry have a responsibility to educate members of Congress about the differences between what marketers collect as data and the NSA,” Hudson said. “And it is unfortunate that Rockefeller has chosen to single out a couple of poorly named marketing categories as a reason to demagogue an industry that is the brightest beacon of American innovation.
“We continue to stress that self-regulation is critically important,” Hudson said.