Advertising & Marketing

Subscribe to Advertising & Marketing

When hoping to resolve advertising concerns or disputes quickly and easily, companies should not only consider utilizing the National Advertising Division (“NAD”), but also the potentially lesser-known Electronic Retailing Self-Regulation Program (“ERSP”).  ESRP is a self-regulatory program administrated for the Advertising Self-Regulatory Council (“ASRC”) by the Council of Better Business Bureaus.  The program was established in 2004 and its mission is “to enhance consumer confidence in electronic retailing by providing a quick and effective mechanism for resolving inquiries regarding the truthfulness and accuracy of claims in direct response advertising.”

Like actions before the NAD, ERSP actions provide guidance regarding certain advertisements.  ERSP is focused on reviewing direct-to-consumer advertising campaigns—largely infomercials but also radio ads, internet marketing efforts, TV shopping channel marketing, and pop-up advertising—for substantiation of claims, with the goal of preventing continued dissemination of deceptive claims.  ERSP members, as well as consumer or advocacy groups, can refer campaigns to ERSP for review, and ERSP reviews approximately 7-10 per month.  After review, ERSP may recommend that marketers discontinue making certain claims and may even alert the Federal Trade Commission about non-compliant companies.  ERSP reports that it has worked with companies to modify or discontinue use of almost 200 advertisements.

For more information, visit the Electronic Retailing Association’s website or read the ASRC’s blog posts regarding recent ERSP actions.

Although they may not immediately connote a traditional form of advertising, food menus and labels serve as a form of advertising in the minds of many consumers and are regulated by Food & Drug Administration (“FDA”).  Read below for two important updates/reminders in the food-related space.

62909081 - calorie dessert for each piece. problem with obesity. popular dessert menu.Menu Labeling:  As a follow up on a prior blog post and as detailed in today’s Consumer Update from the FDA, the FDA is requiring this month that certain types of food establishments post calorie information on menus and menu boards and provide nutrition information upon request in order to help consumers make informed choices in ordering food items.  The FDA’s requirement applies to chain restaurants as well as eating establishments with more than 20 locations, and the FDA’s Consumer Update provides examples of the types of locations where consumers should expect to now see calorie posting, if they don’t already.

Nutrition Facts Label:  Following up on another prior blog post, the FDA recently announced that it is extending the deadline to comply with its Nutrition Facts Label rule and its Serving Size rule by 18 months.  Instead of requiring compliance by certain manufacturers this summer, the FDA will now require compliance by January 1, 2020 for larger food manufacturers and January 1, 2021 for smaller food manufacturers.  This extension is intended to provide sufficient time to ensure industry compliance.

When marketing products or services to children, companies should be aware of applicable statutes and guidance and should be particularly cautious with their advertising claims.

Lanham Act & FTC Act

The prohibitions against false, misleading, and deceptive advertising under the Lanham Act and Section 5 of the FTC Act of course apply to advertising claims directed at children.  It’s important to remember that the advertisements may be viewed by a court or by the FTC as ordinary children would view them (not as the actual buyers, i.e. parents or other adults, would view them).  Therefore, companies should ensure that any advertising claims directed at children do not have the tendency to mislead or deceive those children.

FTC Guidance

The FTC advises companies to comply with truth-in-advertising standards when advertising directly to children or when marketing kid-related products to parents.  For example, the FTC is concerned with child privacy, marketing violent entertainment to children, and, given the rise in childhood obesity rates, food advertising to children.

COPPA

38772807 - little girl hand touch touch pad notebookThe Children’s Online Privacy Protection Act (COPPA) is a federal statute meant to protect children’s privacy and safety online by prohibiting unfair or deceptive practices relating to the collection of personal information from internet users under the age of 13.  COPPA requires providing certain information in privacy policies, giving parents direct notice, and obtaining parental consent before collecting personal information from children.  The FTC’s step-by-step COPPA compliance guide can help a company determine if it is covered by COPPA and, if so, how to comply with the rule.

CARU

The Children’s Advertising Review Unit (CARU) is an investigative unit of the advertising industry administrated by the Council of Better Business Bureaus.  CARU monitors advertisements (tv, print, radio, and online media) with the goal of advancing truthfulness, accuracy, and consistency and eliminating deceptive or inappropriate advertising directed toward children.  CARU publishes self-regulatory guidelines for advertisers and relies upon voluntary cooperation and change by advertisers themselves.

The FTC filed a lawsuit this week against Lending Club, a peer-to-peer lending company that operates an online marketplace for personal loans.  The lawsuit accuses Lending Club of luring consumers to its website with online advertisements promising “no hidden fees,” only to go ahead and deduct significant “up-front” origination fees from the loan proceeds.  As a result, customers were surprised when the amount that actually showed up in their bank account was less than the “Loan Amount” they thought they had signed up for.

According to the FTC, this deception is made worse by the fact that Lending Club never adequately discloses the up-front fee to consumers during the entire online application process.  The fee is only mentioned once—inside an explanatory “pop-up bubble” that only appears if the applicant happens to click or tap on a relatively small and inconspicuous icon. Because applicants are not required to click or tap on the icon in order to move forward with their loan application, many applicants never saw the disclosure at all.

“This case demonstrates the importance to consumers of having truthful information from lenders, including online marketplace lenders,” said Reilly Dolan, acting director of the FTC’s Bureau of Consumer Protection, in a statement. “Stopping this kind of conduct will help consumers make informed choices about loan offers.”

This case is a reminder of advertisers’ responsibility to ensure that advertisements are honest and forthcoming, especially in the ever-changing landscape of online advertising.  Some key takeaways:

  • If a disclosure is needed to prevent an online ad from being deceptive or unfair, it must be clear and conspicuous. This rule applies to all forms of online advertising, including paid blog posts or ads on social media platforms.
  • The “clear and conspicuous” rule also applies across all devices and platforms that consumers may use to view the ad. Advertisers must therefore ensure that required disclosures function properly on all programs and devices.
  • Putting necessary disclosures in hyperlinks or “pop-up bubbles” is strongly discouraged, particularly where the disclosure involves important information like additional costs or consumer safety. Where they are used, ensure the link is labeled accurately and that it functions properly regardless of device or platform.

Though apparently not when it comes to suing for copyright infringement.  Earlier this week, the Ninth Circuit issued a ruling in a case involving photographs taken by a monkey on a camera left unattended by a nature photographer in Indonesia—aptly deemed the “Monkey Selfies.”  The copyright infringement case was filed by People for the Ethical Treatment of Animals, Inc. (PETA) as “Next Friends” of the monkey named Naruto against the photographer and entity that published the Monkey Selfies in a book that identified themselves as the copyright owners (although also noting that Naruto took the photographs).  After a lengthy dispute, the Ninth Circuit affirmed the district court’s ruling and held that animals like Naruto cannot sue for copyright infringement because, as nonhumans, they lack the required standing under the Copyright Act, which does not expressly authorize animals to sue.

There are over 330 million domain names supporting over 1.8 billion websites having a unique hostname on the internet right now. But who owns each of these? There are many reasons one may want to identify the owner or operator of a particular domain or website. In addition to law enforcement and cyber security, owners of IP need to be able to enforce their rights against illegal use of their IP or bad faith domain name registration and use. For example, if your trademark is being infringed by its use on a particular website, you would want to be able to identify the owner, send a cease and desist, and/or sue. Somewhat similar to registering a home or motor vehicle, domains or websites are typically registered and information useful to identifying the individual responsible for the domain or website has, historically, been publically available.

WHOIS is a system established in the 1980s, as the modern internet was emerging. It is used to look up domain registrations in databases that store the registered users or assignees of, e.g., a domain name or IP address. Currently, the name, mailing address, phone number, and administrative and technical contacts of those owning or administering a domain name must be made publicly available through WHOIS, pursuant to the Internet Corporation for Assigned Names and Numbers, or ICANN. WHOIS is not an independent database, but rather relies on third-party accredited entities to manage data and registration. According to ICANN, it is “committed to implementing measures to maintain timely, unrestricted and public access to accurate and complete WHOIS information, subject to applicable laws.” Id.

Enter the General Data Protection Regulation, or GDPR, which is a European Union data protection regulation that will apply to any company that transacts with EU citizens, regardless of the location of the business. The GDPR requires any business that collects any personal data to request explicit permission from the subject before using that data. Personal data is defined as any information that can be used to directly or indirectly identify that person, e.g., a name, photo, email, computer IP address, etc. Under the GDPR, enterprises must limit access to personal data to only authorized individuals that specifically require access to that data. The penalties for violations are significant – up to 20 million Euros or more – and there are no exceptions for enterprise size or scope. Id. The GDPR goes into effect May 25, 2018.

ICANN has been struggling to identify a proposal that bridges the gap between the requirements of the GDPR and the access to WHOIS information. The proposals, thus far, do not do enough to assuage the fears of the third party entities that manage WHOIS data that their actions of publishing information to WHOIS are sufficient and justifiable. On the other hand, brand owners and other WHOIS users are concerned that the proposal takes an unjustifiably conservative approach. Thus, ICANN expects a WHOIS blackout period starting May 25, 2018. Going forward, there may be significantly less publicly available information to conduct enforcement investigations, send cease and desist letters, or prepare and file suit.

Online brand enforcement is about to become much more difficult if not, in some cases, nearly impossible.

The Copyright Act grants the owner of a copyright certain rights, including the right to reproduce, to distribute, and to perform and display the copyrighted work. 17 U.S.C. § 106. However, these rights are limited by other sections of the statute. One such limitation to the distribution right is known as the “first sale doctrine,” which states, “the owner of a particular copy or phonorecord lawfully made [] is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. Id. at § 109(a). For example, if you purchase a DVD at the store, you own a particular copy of a copyrighted work. You can resale the DVD, give it away, or destroy it without infringing the copyright owner’s right of distribution. The same is true for any number of copyrighted works fixed in a variety of mediums, e.g., a CD, cassette, vinyl record, book, photograph, art print, etc. But what about digital content? That is, can you resell a song or movie you lawfully purchase and download?

The United States Copyright Office (“USCO”) has acknowledged digital content differs from traditional physical copies of works. In 2001, the USCO stated that with traditional physical copies, the natural degradation of works (e.g., scratches, fading, etc.) and “the need to transport physical copies of the works” “act as a natural brake on the effect of resales on the copyright owner’s market.” The USCO further stated that these limitations no longer exist with digital transmissions. “Digital information does not degrade…. [and] time, space, effort and cost no longer act as barriers to the movement of copies, since digital copies can be transmitted nearly instantaneously anywhere in the world with minimal effort and negligible cost.” In addition, the USCO recognized the product of a digital transmission “is a new copy in the possession of a new person” and thus the recipient “obtains a new copy, not the same one with which the sender began.” For example, when we email or text a photo, we retain our “particular” copy while the recipient receives a new copy.

In Capitol Records, LLC v. ReDigi Inc., the court, relying in part on the USCO’s report, found that it was impossible to digitally transfer the “particular” copy purchased; any digital transfer creates a new copy of the work, even if the original file is deleted during the transfer. First, the court found the new copy violates the copyright owner’s reproduction rights, to which the first sale doctrine is not a defense. Second, because the thing being sold is an unlawful reproduction and not the “particular” copy originally purchased, the first sale doctrine does not protect such a distribution. In another recent case, the court held that the first sale doctrine was inapplicable until a particular physical copy of copyrighted work was downloaded. Disney Enterprises, Inc. v. Redbox, Automated Retail, LLC (declining to extend the first sale doctrine to the reselling of a digital code that would allow a user to download a copy of the copyrighted work). That is, in order for the first sale doctrine to likely apply the copyrighted work must physically exist as a digital copy but once downloaded, it probably cannot be digitally transferred without creating an unlawful reproduction.

The court in Capital Records also held the owner of a copyrighted work may sell, gift, or otherwise dispose of the hard drive, iPod, or other memory device onto which the digital file was originally downloaded. This solution may alleviate the numerous concerns expressed by the USCO in 2001. However, by forcing the user to dispose of their digital content in this manner it forces the user to dispose of at least part of their electronic device, which in all likelihood includes digital copies of multiple copyrighted works. In other words, in order to be protected by the first sale doctrine the owner of the copyrighted work must dispose of significantly more than he or she initially bargained for.

As digital downloads increase in popularity, the importance of this issue will continue to grow. The Second Circuit, where the Capital Records case is currently on appeal, is poised to give us further guidance by creating the first circuit level case law on digital first sale. However, when the Digital Millennium Copyright act was introduced nearly 20 years ago, it was acknowledged that this was “only the beginning of Congress’ evaluation of the impact of the digital age on copyrighted works.” Ultimately, it may again be time for Congress to evaluate this impact.

McDonald’s Twitter account on March 8, 2018

Today is International Women’s Day. As a way to celebrate, McDonald’s has flipped their iconic golden arches upside-down. The arches, one of the most recognizable logos, have been physically flipped in one California location but can be seen on McDonald’s social media channels. Putting aside the effort to flip the California sign, by simply rotating its logo on social media McDonald’s was able, whether intended or not, to accomplish several marketing and advertising objectives. First, the move helped bring further awareness to an inspiring campaign; a great way to enhance brand identity and perception. Second, it created plenty of buzz and free publicity with news outlets in the U.S. and around the world picking up the story. Third, while the change was significant enough for people to take notice, it was not significant enough to cause any brand confusion. That is, consumers could still quickly identify the source.

This move serves as a great reminder that companies can use their brand identity, including their logos and other trademarks, in creative new ways to accomplish a variety of goals. Today, McDonald’s has helped to make sure that International Women’s Day and its objectives are a part of our global conversation. I’m loving it and I’m sure McDonald’s is too.

Failing to have adequate substantiation for advertising claims can land companies in hot water.  Case in point: The Federal Trade Commission (“FTC”) recently announced that it had settled charges against a company and its CEO related to their advertising of anti-aging products using what the FTC believed were false or unsubstantiated claims.  According to the FTC’s Complaint, Telomerase Activation Sciences, Inc. and Noel Patton (“TA Sciences”) lacked scientific evidence to support claims that their topical cream product and capsule/power product provided certain anti-aging and other health benefits.  Specifically, the FTC alleged that it was false, misleading, or unsubstantiated for TA Sciences to make the following representations about one or both products:

  • reverses aging;
  • prevents and repairs DNA damage;
  • restores aging immune systems;
  • increases bone density;
  • reverses the effects of aging, including improving skin elasticity, increasing energy and endurance, and improving vision;
  • prevents or reduces the risk of cancer;
  • decreases recovery time of the skin after medical procedures.

Additionally, the FTC alleged that TA Sciences made misrepresentations related to a paid program being independent and educational, related to consumers in its ads being independent users, and in promotional materials provided to other marketers.

The FTC alleged that TA Sciences’ conduct violated section 5(a) of the Federal Trade Commission Act, which prohibits unfair or deceptive acts, thus allowing the FTC to bring suit to enjoin such conduct.  The FTC’s suit alleged counts of (1) false or unsubstantiated efficacy claims, (2) false establishment claims, (3) deceptive format, (4) deceptive failure to disclose material connections with consumer endorsers, (5) false independent users claims, and (6) means and instrumentalities to trade customers.  The FTC’s proposed settlement order prohibits TA Sciences from making a number of representations related to these counts.  It also requires TA Sciences to notify purchasers of the products at issue about the FTC settlement order.  After a period of public comment, the FTC will decide whether to make the order final.

Of course, companies should ensure that they have adequate substantiation for advertising claims, whether health-related or otherwise.  As a reminder, the FTC requires that advertisers have a reasonable basis for advertising claims before disseminating them.  For more information regarding claim substantiation, review the FTC Policy Statement Regarding Advertising Substantiation.

Earlier this week, the Federal Trade Commission (“FTC”) announced a settlement with PayPal, Inc. over allegations that Venmo, a PayPal-owned mobile payment and social networking application, misled customers on issues relating to account transfers and privacy settings and enabled fraud through inadequate security practices.

Founded in 2009, Venmo lets users easily transfer money to one another and share information regarding such payments through a social network feed.  From a user perspective, Venmo operates a lot like any other major social media network, letting users “pay” each other in the same way you “tag” a friend in an Instagram post.  Thanks to its familiar social media-style interface and the ease with which it lets users split everyday expenses like bar tabs and rent payments, Venmo quickly became a favorite among millennials and college students.

According to the FTC, however, Venmo’s perceived simplicity was deceptive.  In a complaint originally filed against Venmo-parent PayPal in 2016, the FTC alleged that Venmo’s notification policy misled consumers and constituted a “deceptive or unfair practice” under Section 5(a) of the Federal Trade Commission Act.  Under the policy, Venmo notified users that funds were credited to their account before Venmo had reviewed and verified the underlying transaction.  According to the complaint, this practice resulting in unexpected delays and reversals.  It also created an ideal environment for fraud.  By falsely conveying to sellers that transactions had cleared, scammers were able to buy goods and services with fake or fraudulent information, leaving sellers with nothing when the transactions were ultimately reversed.

The FTC further charged that Venmo misled consumers about the privacy of information about their transactions.  Under the application’s default settings, whenever a user pays or is paid through the application, a description of the transaction and its participants is shared with all of the user’s “friends” in a social networking feed.  While Venmo offers privacy settings that let users limit who can view their transactions, it failed to accurately explain to users how those privacy settings actually work.

Additional charges alleged that Venmo misrepresented the extent to which consumers’ accounts were protected by “bank grade security systems” and violated the Gramm-Leach-Bliley Act’s Safeguards and Privacy Rules.

“This case sends a strong message that financial institutions like Venmo need to focus on privacy and security from day one,” acting FTC chairman Maureen Ohlhausen said in a statement.  “Consumers suffered real harm when Venmo did not live up to the promises it made to users about the availability of their money.”

For businesses dealing directly with consumers, this case underscores the importance of taking your duty to educate consumers about your product seriously, especially when it comes to how customer information will be used.  Such businesses should regularly review disclosures and other consumer-facing messages to ensure they are not only accurate but also consistent with reasonable consumer expectations.  And whenever costumers are given options as to how their information will be used, make sure those options are clearly conveyed and, perhaps most importantly, honor their choices.