Performance Marketing Association lawsuit

Strategy Session: One Association’s Judicial Full-Court Press

As the Performance Marketing Association learned in its battle with the legal system, sometimes, what you don't know can help you.

“We thought we could deal with the appeal when it came up. You really need to assume the appeal and raise the money upfront. —Rebecca Madigan

Rebecca Madigan has learned a lot from her organization’s journey through the American judicial system, but the most surprising lesson may be this: Sometimes, what you don’t know can help you.

Madigan, executive director of the Performance Marketing Association, and other PMA leaders made a considered decision three years ago to bring a lawsuit on members’ behalf challenging an Illinois law that required out-of-state online retailers to collect sales tax. But had they seen clearly what they were getting into, they might have stopped before they got started.

“That naivete and that determination, that persistence and that lack of knowledge, is the thing that helped us,” Madigan says now.

In performance marketing, an advertiser places ads on websites and pays only for the ones that get clicked and lead to sales. The problem that the Illinois law (and similar ones in 12 other states) poses for PMA’s members—both website publishers and marketers—is that once out-of-state retailers are required to collect sales tax, they stop advertising. Madigan estimates that the industry has shrunk by about a third as a result of the tax statutes.

Still, “there was no assumption that we would sue,” Madigan says. Discussion began with PMA’s officers and then expanded to the full board. Once the lawsuit was a go, board members got involved in bringing PMA’s legal team up to speed on the industry.

While Madigan expected to mount a significant fundraising effort, she didn’t anticipate how often she’d need to return to the well. “We thought we could deal with the appeal when it came up,” she says. “You really need to assume the appeal and raise the money upfront.”

At the same time, she had to contend with the “drag” the tax battle was putting on PMA as it repeatedly tapped member support for legislative grassroots campaigns and the lawsuit. “Our industry is very fatigued with this issue,” she said. To counter that, PMA shifted member engagement activities back to its volunteer groups to work on developing tools and resources to solve member problems.

Meanwhile, the litigation continues. Last fall, the Illinois Supreme Court upheld a lower court ruling in PMA’s favor. The U.S. Supreme Court may be next. And while Madigan says if she knew in 2011 what she knows now about fighting an extended policy battle in legislatures and the courts simultaneously, she may not have gone down this road, that would have been a missed opportunity.

“If we never had done it, we wouldn’t be where we are,” she says. “We gained a reputation for being everywhere—every state capitol where these laws were coming up. We’d just show up, and we’d just fight. And it turns out that was incredibly effective.”


Julie Shoop

By Julie Shoop

Julie Shoop is the Editor-in-Chief of Associations Now. MORE

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