LEGAL
Companies engaged in online behavioral advertising (OBA) should ensure their practices comply with the Network Advertising Initiative's (NAI's) recently published 2013 Code of Conduct (2013 Code) for internet based advertising.
The 2013 Code supersedes the NAI's 2008 Code of Conduct (2008 Code). Both the 2008 Code and 2013 Code require NAI members to notify and educate internet users about certain OBA and to allow them the choice to opt out of OBA. However, the 2013 Code is more relevant to modern business practices because it addresses the recent growth and expansion of the third-party online advertising ecosystem.
Similar to the 2008 Code, the 2013 Code focuses on advertising networks that collect data across websites to create user-specific ads. However, unlike the 2008 Code, the 2013 Code applies the rules to new OBA business models, such as:
Under the 2013 Code, NAI members have more data protection flexibility than before. The 2013 Code created three data sensitivity categories, each of which carries its own data protection obligations:
NAI members who violate this code can face sanctions or removal from the NAI, or referral to the FTC for possible government investigation and penalties.
See Practice Note, Online Advertising and Marketing for more on online behavioral advertising regulation and compliance.
Recent SEC staff guidance may significantly reduce or even eliminate some issuers' reporting obligations under the conflict minerals rules.
On May 30, 2013, the SEC's Division of Corporation Finance issued frequently asked questions (FAQs) on the conflict minerals and resource extraction disclosure rules. To the surprise of many practitioners, the FAQs clarified that packaging is not considered part of a product. Issuers applying this new staff guidance may determine that disclosure is not required.
For example, an issuer may manufacture a package or container that contains a conflict mineral and then use that package or container in the display, transport or sale of a product the issuer also manufactures. According to the FAQs, the conflict mineral necessary to the functionality or production of the package or container is not considered necessary to the functionality or production of the product. Only a conflict mineral that is contained in the product itself would be considered necessary to the functionality or production of the product.
However, if an issuer manufactures and sells packaging or containers independent of the product, the packaging or containers would then be considered a product. In this case, conflict minerals disclosure may be required.
See Conflict Minerals Rule Compliance Toolkit for more on the impact of the FAQs and conflict minerals rules.
Before a company receives compensation or disclosure advice either directly or indirectly from a law firm, in-house counsel should understand the firm's position on the new compensation committee advisor rules. A firm's position may impact the approach the company takes when addressing its disclosure requirements.
Beginning July 1, 2013, NYSE and NASDAQ listed companies must comply with the first set of new rules relating to compensation committees and their advisors. Among other requirements, a compensation committee must assess the independence of any law firms advising it.
However, law firms are taking different positions on what constitutes advice to the compensation committee. When a firm communicates directly with the compensation committee, it is likely that the firm will consider that providing advice to the committee. However, a firm's position may be less clear if the firm simply reviews a company's Compensation Disclosure and Analysis (CD&A) or if the firm reviews the CD&A and in-house counsel explains to the compensation committee that the disclosure has been approved by the firm. Some firms are taking the position that when drafting and reviewing the CD&A, they are representing the issuer, not the compensation committee.
A compensation committee assessing the independence of a law firm must ask the firm a set of questions, which may include sensitive topics. Firms are also taking different approaches in responding to these questions. For example, the firm will be asked to disclose all fees it received from the company for a 12-month period. A firm might choose to respond to this question by specifying a dollar amount or, alternatively, a percentage of the firm's total annual revenue.
At this early stage, it is unclear which position, if any, will emerge as market practice. However, it is important for in-house counsel to have knowledge of these matters before seeking advice or making any representations to the compensation committee regarding the law firm's involvement in the CD&A disclosure.
See Legal Update, Compensation Committee Listing Standards July 1, 2013 Deadline Approaching for more on the new listing standards and smaller reporting company exemptions.
Employers defending against pattern-or-practice discrimination claims may present any type of admissible evidence to rebut a plaintiff's prima facie showing of discrimination. In USA v. City of New York, the Second Circuit held that although statistics underlie most of these disparate treatment claims, an employer may use any type of evidence to rebut inferences of intentional discrimination, not just evidence to contradict the plaintiff's statistics.
In City of New York, the defendants conceded that their firefighter entrance exams had a disparate impact, but rebutted an inference of discriminatory intent by showing the City's:
Employers should review their hiring policies and practices to ensure:
Employers without diversity or recruiting programs designed to hire the best candidates and build a diverse workforce should consider devising one.
This look at the major issues on the horizon for corporate counsel comes from Practical Law – an online legal know-how service. View all the looming issues now – compliments of Practical Law The Journal, which covers the latest transactional and compliance topics that impact your practice. To gain access to more related know- how resources, please visit us.practicallaw.com.
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