July 2019
July Advertising Law Headlines
Welcome to the July edition of The Ad Matter. This month’s newsletter highlights a range of ad law headlines including a case on yoga pants, SPAM (CAN not canned), and the latest COPPA vs. big data collection story.
And new this month:
A How-To section to awareness on best practices for some common challenges in the creative services industry.
Alo? Anyone Listening?
The Federal Trade Commission is the federal agency tasked with enforcing advertising laws but claims against advertisers can be brought within the advertising self-regulatory framework, which provides an alternative and often less costly procedure for such claims.
The ERSP (Electronic Retailing Self-Regulation Program), one of many advertising self-regulation agencies, opened an inquiry into Alo Yoga, a popular high-end yoga wear company, after examining about 60 Instagram accounts which provided endorsements of the brand. According to ERSP, the Instagram posts featured influencers wearing Alo Yoga clothing in photographs and videos, and several of the posts included comments about the influencers’ experience with the brand and information about the clothing being worn. Each of these posts mentioned or tagged Alo Yoga’s Instagram account (@aloyoga) and other accounts operated by the marketer.
Because ERSP determined that these posts were in fact endorsements as defined in the FTC Guidelines, the posts should have had clear and conspicuous disclosures about the relationship of the endorser to the brand. Conspicuous placement of disclosures is required so that consumers understand that the posts were paid endorsements. These posts did not strike the right pose. In fact, some disclosures were hidden among a list of hashtags, some were placed at the end of the post, and some even used different languages in a single post.
While Alo did agree to voluntarily prepare guidelines for their “ambassadors”, as a result of this inquiry, it did not necessarily agree to modify or remove the actual non-compliant Instagram posts. Because of this refusal to comply, ERSP referred the matter to the FTC. That in turn caused Alo to go ahead and engage with the ERSP.
ERSP pointed out that while the brand guidelines were a good start, they too fell short by not requiring a process for monitoring and following up with questionable practices by endorsers. Brands can’t necessarily control the editorial aspect of influencer and endorser posts but they can most certainly enforce compliance with legal and regulatory standards.
Why It Matters:
Self-regulatory agencies are active, present, and paying attention. This case is another reminder about compliance with the FTC Endorsement Guides, namely that disclosures need to be clear and conspicuous (not buried in the middle of a long string of hashtags), must appear in the same language as the rest of the post and continue to appear in subsequent posts to provide transparency to consumers. Advertisers and influencers alike are responsible for compliance and should have appropriate programs and enforcement mechanisms in place.
CAN(t) – SPAM:
The Federal law, CAN-SPAM, stands for Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003. A long name indeed which is why it’s most always referred to as its acronym – CAN-SPAM. This reg enforced by the FT “sets the rules for commercial email, establishes requirements for commercial messages, gives recipients the right to have you stop emailing them, and spells out tough penalties for violations.”
In addition to the federal CAN-SPAM, there are state laws that regulate email marketing. In Washington for example, the Commercial Electronic Mail Act (“CEMA”) has recently been used as the basis for two class action lawsuits alleging that “percentage off” language used in email subject lines was misleading and therefore violated CEMA and other Washington consumer protection laws.
In one of the cases which involved retailer Eddie Bauer, the plaintiff alleges that 43 emails were sent since 2017 offering discounts such as “Ho-Ho-Whoa! 50% Off Everything” and “Starts Today! 40% Off Everything”. Plaintiff alleges that these emails were deceptive and misleading. The plaintiff is seeking statutory damages of $500 per email per recipient, estimated to be over $1 billion in damages, plus interest and attorneys’ fees. Yes, 1 billion.
Eddie Bauer moved to dismiss the case stating that the email subject lines “…. which inform customers about promotional pricing, accurately characterize the subject matter of the emails” and were therefore not deceptive or misleading. Eddie Bauer argued that email subject lines (as opposed to actual emails) should not be evaluated under CEMA (which does not require proof of injury) but under the other consumer protection statute which requires a plaintiff to show actual damages. According to Eddie Bauer, the plaintiff cannot show actual damages because he could have, but chose not to, opt out of the emails.
Why It Matters:
Email subject lines are frequently full of “% off” messages. This ruling will be one to watch. If Eddie Bauer loses on its argument that email subject lines are not subject to state spam laws (which are broad in their interpretation of what constitutes false and misleading) then retailers and email marketers will need to reassess their practices with email marketing.
It’s a First: CRFA Enforcement:
The Consumer Review Fairness Act has laid pretty low since it was put into effect in 2017- until recently. This month the FTC issued three separate proposed administrative complaints and orders enforcing the Consumer Review Fairness Act (“CRFA”). The CRFA prohibits businesses from using “form contract” provisions that bar consumers from writing or posting negative reviews online, or threatening them with legal action if they do. The companies mentioned in these FTC actions had contracts with consumers that barred the consumers from posting negative reviews about products, contained restrictive confidentiality provisions and a liquidated damages clause in the event of breach.
As a result of these actions, the companies are prohibited from offering a form contract to any consumer that contains a review-limiting contract term or requires acceptance of such terms as a condition of the company complying with the contract. Furthermore, the orders require that the companies notify all consumers with contracts containing allegedly illegal non-disparagement clauses that such provisions are void and of no effect. The companies also agreed to create and maintain certain records, submit compliance reports, and subject themselves to compliance monitoring by the FTC.
Why It Matters:
This is a reminder to advertisers to make sure that their consumer contracts and online terms and conditions do not contain any provisions limiting consumers’ rights to post fair and honest reviews.
Just Google It:
The FTC and Google/YouTube have reportedly reached a settlement regarding violations by YouTube of the Children’s Online Privacy Protection Act (“COPPA”). COPPA regulates the collection of data on children under the age of 13. YouTube has been under scrutiny for some time now over its lack of effort on regulating children’s use of YouTube and its data collection practices. Regulators argue that because YouTube knows kids access the site (just look up “toy reviews”) and because YouTube states in its privacy policy that “collects many types of personal information”, YouTube is collecting such information from the under 13 crowd and using it without the COPPA required verifiable consent from parents. The settlement, although not official, is in the millions which critics argue is not enough given the size and reach of this particular tech behemoth.
July How-To:
What’s a Work for Hire Agreement?
The term “Work Made for Hire” is defined in US Copyright law. Generally, the creator or author of a protected work is the owner. The exception to that rule is when a work is deemed a “work made for hire”. In this instance, a hiring party (and not the author) is the author and initial owner of the work, unless otherwise agreed to by the parties. There are specific statutory requirements for a work to qualify and several factors need to be considered. Is the author of a work an employee creating under the scope of employment? Is the author an independent contractor specifically commissioned to create a work for another entity? A work made for hire agreement will define who owns the work and what rights (if any) remain in the creator as opposed to the owner.
Before you sign your work over as a work made for hire, or alternatively, before you hire or commission a third party to create a work made for hire, make sure that you have a good agreement (have a lawyer draft one up) outlining the rights and obligations of each party and make sure that the work being created falls into the specific definition of a work made for hire under applicable copyright law.