Schroder Brooks Law Firm, PLC
CREATIVE LAWYERS FOR THE CREATIVE COMMUNITY

News

Blog

Nevada Gets Into the Game
qtq80-esbAvG.jpeg

Game. On.

Nevada joins California in enacting its own privacy statute to protect consumer data. The California Consumer Privacy Law, is a broad sweeping regulation that applies to all businesses, regardless of industry, that that collect consumer personal data, do business in California, and meet one or more of the other criteria set forth in the law. The Nevada law by contrast, will apply only to website operators and online service providers, and will only pertain to certain circumstances in the collection of personally identifiable information.

Both laws require an opt out mechanism – either online or a toll-free number, and both are subject to verification. The Nevada law has some exemptions though including entities in the healthcare or financial space regulated by the Health Insurance Portability and Accountability Act or the Gramm-Leach-Bliley Act.

For the full law and more information on compliance requirements, see here.

Addie Johnson
CBD Advertising: Don’t Get Caught in the Weeds
kara-eads-1594959-unsplash-e1558800777529.jpg

It’s high time for CBD advertising regulation according to the FDA and FTC. The agencies sent letters to three companies -Nutra Pure LLC, PotNetwork Holdings, Inc. and Advanced Spine and Pain, LLC – who sell and advertise products containing cannabidiol (“CBD”).  Upon review of the companies’ websites, the agencies determined that the advertising might violate the FTC Act by making false and unsubstantiated claims.

Products such as “CBD Salve”, “Hemp Oil”, and “Liquid Gold Gummies” were advertised as being able to treat diseases like cancer, fibromyalgia, and Alzheimer’s.  Other examples of the claims include:

  • “Studies suggest that cannabinoids may be a new class of drugs for the treatment of chronic pain.”

  • “Cannabidiol may provide treatment for Alzheimer’s disease.”

  • “CBD . . . can possibly be used as a therapeutic agent for treatment of type 1 diabetes at an early stage of the disease.”

  • “Researchers suggest that it may be effective for panic disorder, obsessive compulsive disorder and post-traumatic stress disorder.”

Hemp (from which CBD is derived) along with marijuana, heroin and other narcotics were considered Schedule I drugs under the Controlled Substances Act (“CSA”), part of the FDA. The CSA still regulates marijuana and marijuana “derived” products (those that contain a .3% or more level of THC (tetrahydrocannabinol)), but the Farm Bill passed in 2018 legalized hemp. This regulation has prompted a host of drugs and other products using CBD to enter the mainstream marketplace.

Recently the FDA approved the use of CBD in one anti-epilepsy medicine, but retailers and manufacturers should not take this as a license to advertise false and misleading claims about their own CBD based products. The FDA conducts rigorous and thorough testing for any new drug and all health claims must be backed up by supporting data.

Because many of the products sold by the companies targeted in the letters were in fact advertised “for the for use in the diagnosis, cure, mitigation, treatment or prevention of disease” or to “affect the structure or function of the body”, they would be subject to the FDA regulations. Advertising such use without substantiation is also false and misleading, and a potential violation of the FTC Act.

Why this Matters.  The Farm Bill of 2018 only regulates hemp  but 41 states have legalized marijuana in some form. The popularization and legalization of hemp and marijuana will help grow a potentially massive industry, but it also highlights the importance of providing truthful, substantiated claims with regard to these kinds of products. Consult with an attorney or a resource who understands the applicable regulations so you don’t get caught in the weeds of a false advertising claim.

Addie Johnson
#PlaybytheFairUseRules
dan-cook-508166-unsplash-1-e1558800945624.jpg

As the song from Annie goes, “You’re never fully dressed without a smile.” But one company wasn’t smiling so much this week when a California federal court granted an injunction against them for using a competitor’s hashtag in social media posts.

Invisalign, by Align Technology, makes a scanner called iTero, that can take a 3-D picture of a patient’s mouth. The scanner uses a single sleeve that slides over a scanning wand. Strauss Diamond Instruments, which also sells dental devices and other dental goods, makes a version of the sleeve called MagicSleeve.

Align filed suit against Strauss, alleging trademark infringement based on Strauss’s use of Align’s marks on social media posts and advertising for the MagicSleeve.

For example, one social media post stated in part: “Our brand new MagicSleeve is autoclavable and allows for a faster scanning time.” Five hashtags followed, including “#invisalign” and “#iTero.” Another post showed a picture of an iTero machine (an image created by Align) with the MagicSleeve superimposed on the image.

While a trademark can be used in advertising under certain circumstances,  such use can’t create the likelihood of confusion or perception of association or affiliation between the product or service being advertised and the trademark. This is called Fair Use, and is often used as a defense in trademark infringement cases.   In order for the Fair Use defense to be valid, however,  the user has to show that the product or service in question is not readily identifiable without use of the mark, only as much of the mark is used as is reasonably necessary, and the use of the mark does not suggest sponsorship or endorsement by the trademark owner of the product or service in question.

Strauss argued that their use of Align’s hashtags was Fair Use – specifically that use of the Align marks was reasonably necessary to identify the product and using the mark did not suggest sponsorship or endorsement by Align of Strauss’s products.

The court didn’t bite. “First, in some cases, Strauss used the marks to refer to its own product….Second, in all cases, Strauss used more of the marks than is reasonably necessary to identify the product.” It was not possible to view #iTero as referring to Align’s products and #MagicSleeve as referring to Strauss’ products as they “are altogether references to the MagicSleeve”. Further, the court argued, “the use of the marks in the hashtags is never reasonably necessary to identify the MagicSleeve.”

The court also stated that a reasonable person would be “confused into thinking that Align has endorsed or sponsored, or given its approval or authorization for, the MagicSleeve”. Strauss was enjoined from further infringing activity.

Why It Matters. The widespread use of social media in advertising makes it virtually impossible that this issue won’t cross your desk at some point. How do you know whether you can use a competitor’s or third party’s trademarks in advertising? First, analyze why you want to use the mark – is it to identify your product? To compare yours to theirs? Take a look at the reasoning behind the use of the marks, the context in which you want to use the marks, and always consult an attorney to make sure you are playing by the Fair Use rules.

Photo: Dan Cook, Unsplash

Addie Johnson
Call for Backup: Substantiation in Advertising Claims

What is substantiation?  It’s not what we do the day after we have ice cream sundaes for dinner (that’s rationalization). It’s what advertisers should do every time they make a claim about a product or service. Whether you are advertising its effectiveness, purpose, price, or any other attribute – if you claim it, you need data to back it up.  

Take the recent letters the Federal Trade Commission (“FTC) and Federal Drug Administration (“FDA”) sent to three dietary supplement companies warning them about making claims that their products would treat, fix, or otherwise address various diseases and health conditions.

Gold Crown Natural Products, TEK Naturals and Pure Nootropics, LLC all received letters stating that the FTC and FDA believed the companies’ ads could be seen as making unsubstantiated claims regarding their ability to treat or cure serious diseases such as Alzheimer’s and Parkinson’s, among others.

The companies’ advertising made claims as to the medical effectiveness of their products. Some examples included: “Responsible for lowered LDL cholesterol”, “The treatment of ear infections . . . and even some forms of cancer”, “Possible treatment for Alzheimer’s patients” and even, “Helps prevent cancer”. Pretty bold claims.

The FTC letters stated that the claims, which were used on websites, blogs, posts, and across social media platforms, established that the supplements were “drugs” under the Federal Drug and Cosmetic Act (“FDCA), by purporting to tell consumers that the supplements had disease curing attributes. (Dietary supplements are not the same as FDA approved drugs, and are not allowed to make the same kinds of claims as an FDA approved drug.)

Further, according to the FTC, the dietary supplements were not “generally recognized as safe and effective for the uses for which they were advertised” and were considered “new drugs” (because of their claims) under the FDCA.  Under the statute, a new drug must go through the FDA approval process prior to being released. These were not.

The FTC also informed the companies that any claims as to the effectiveness of the products must be substantiated and backed up by hard data, tests, trials, or other reliable scientific evidence. If not, they may face further penalty for violating the FTC’ substantiation requirement.

Remember, advertisers need evidence and science to back up any health claims.  In the FTC’s 1983 Advertising Substantiation Policy Statement, it states that “when the substantiation claim is express (e.g., “tests prove,” “doctors recommend,” and “studies show”)” the expectation is that the advertiser has “at least the advertised level of substantiation.” And while lots of things from the 80s aren’t around today (scrunch socks anyone?), substantiation in advertising claims will never go out of style.

If you represent expressly or by implication that your product can prevent or treat diseases or serious medical conditions, back up those claims with measurable scientific evidence.

Addie Johnson
A What Not to Do List

ROSCA is the Restore Online Consumer Confidence Act. It’s the rule under the FTC that regulates negative option offers. You know those offers, they go something like this:

Step 1: A “risk-free” trial offer; Step 2:  Undisclosed charges if you don’t cancel the un-risky trial; Step 3: You also got that automatic shipping with your free trial; Step 4: You end up with confusing and illegal charges to your credit card; Step 5: No matter how you try, you can’t stop the shipments and charges. 

In a recent lawsuit against a Puerto Rican business owner (and his eight companies), the FTC found multiple ROSCA violations. The business sold skin care products using the “risk-free” trials for products sold in pairs which consumers believed would cost them “just $4.95” to evaluate over a 2-week period.

However, in the already hard to read terms and conditions was an even harder to see hyperlink that led consumers past the fine print to the teensy tiny print. Only after clicking the hyperlink would a consumer be able to see that after the two weeks were up, they would not only be charged $90 instead of $4.95, but they were also automatically enrolled in the scheduled shipments until they actively cancelled.

As the FTC points out: size does matter. The misleading offer was in large print during the checkout process and included a second misleading free trial offer (with the exact same egregious terms as the first), but the relevant terms and conditions were buried in the fine print.

Among the many violations, the Puerto Rican company assured consumers that they could cancel the orders any time but in reality, consumers could barely reach an operator. They often received only partial refunds (with the shipments continuing). Further, the company allegedly used more than 100 fake names as well as false employer id numbers in order to hide the operations from payment processors and banks.

While this case is an extreme example of ROSCA violations, online retailers can avoid these traps by following the clear ROSCA guidance.  As the FTC states, ROSCA prohibits online negative options “unless the seller: 1) clearly discloses all material terms of the deal before obtaining a consumer’s billing information; 2) gets the consumer’s express informed consent before making the charge; and 3) provides a simple mechanism for stopping recurring charges”. No secret or hidden rules and conditions in fine print.

The FTC continues to focus on enforcement of negative option offers.  Take positive and proactive steps to review terms and conditions and payment processing procedures in any online offer. You don’t want to end up as an example of what not to do.

Addie Johnson
Here Comes Generation Alpha

There are lots of scary headlines lately but this one may be the scariest yet: Here Comes Generation Alpha. The name is what it implies – move over Millennials, Alphas are the new, well, alphas, when it comes to who is making household purchasing decisions. These are kids born in 2010, the same year that the iPad came out. They are the new influencers. They are the generation who won’t remember when you could look something up on google by the act of typing because they know all you have to do is ask (a device, not a real person).   

Hotwire surveyed 8,000 parents of Alphas in multiple countries for its “Understanding Generation Alpha” report (link below). An overwhelming majority of parents said that their kids’ preferences influenced the parents’ tech purchases.  Mark McCrindle, a social researcher in Australia, created the name “Generation Alpha” and according to his research, more than 2.5 million Alphas are born every week.   Further, McCrindle states that this generation will be “the most formally educated”, “technology-supplied”, and “wealthiest” group ever.

So what is the effect of this highly educated and demanding generation on the advertising world? To start, there is a focus on engaging the young consumer but also making mom and dad happy. Brands that traditionally sell to mom and dad are asking what they can do to expand their brands to attract the kids as kids have more of a role in family decisions.  The days of being seen and not heard are long gone….

However, as Spiderman’s Uncle Ben says, with great power comes great responsibility.  Marketing to children comes with the added responsibility of ensuring that such marketing complies with the Children’s Online Privacy Protection Act, particularly in the realm of digital and connected toys.  On top of that, we enter the murky waters of data collection in the age of Alexa. Information can be stored as audio files. When your six-year old asks Alexa about baby elephants, that may not count as personal information (as the FTC ruled in 2017) but what if he or she gives out their name or address?  The Alphas are sophisticated for sure but are they sophisticated enough to protect themselves from what we recognize as privacy and data concerns? Maybe not yet. But marketers (and parents) will be wise to keep an eye on this generation.

Link to report: hotwireglobal.com/generation-alpha

Addie Johnson
Ooh La La…GDPR Fines Google Beaucoup

If we were waiting to see what effects the General Data Protection Regulation, fondly known by now as the GDPR, would have on US based companies, we have clues. Another 56.8 million of them – the amount of the fine against Google for non-compliance with the consent requirements of the GDPR.  

France’s data protection regulator (CNIL) found that Google was not sufficiently transparent about the use of personal information from its users and didn’t obtain specific consent from users to use that data for ad-targeting purposes, among other claims.    

Recall that GDPR requires that users consent to each specific use of their data. For consent to be valid it has to be freely given, specific, informed and unambiguous, and given with a clear affirmative action.  GDPR provides that the consent is “specific” only if it is given distinctly for each purpose. While the fine is notable, another notable aspect of this claim is that universal consent forms – which set out the laundry list of uses of data that consumers and users consent to – are no longer going to work for purposes of “specific” under the GDPR.  

The burden of showing how consent is obtained often lands in the marketing departments of companies seeking to use that data.  Eliminating the validity of the universal consent form adds another burden of compliance when it comes to ad targeting because users will have to affirmatively and specifically consent to ad targeting (or any other specific use) and companies will have to track and monitor these consents.

GDPR may be an EU driven phenomenon but it has become part of our own discussion on privacy here in the US.  While we don’t know for sure what the long term effects of this ruling will be on the US advertising and marketing industry, it will surely disrupt the joie de vivre of personalized advertising to the EU consumer.

Alas, c’est la vie!

Addie Johnson
Best in Show: Five February Ad Law Headlines
qtq80-gi0BVu.jpeg

While February is the shortest month (and for us Richmonders, the one with the strangest weather), it was not without an abundance of advertising law updates and headlines.  Below, I’ve summarized my top Five for February, although there was so much content that it was hard to just pick five). In the interest of space and attention span, I’ve narrowed it down. Time to March on.

1. An Ineffective Asterisk

A California federal court ruled that a disclaimer cannot save an otherwise false claim made in an advertisement.  Defendant in this case sold biotin supplements with the claim “May support health hair, skin, and nails”, with an asterisk next to the claim.   Follow the asterisk to the back of the label which then stated “Biotin may help support healthy hair, skin, and nails in those that are biotin deficient”. Plaintiffs alleged that the claims were false and misleading because the product didn’t actually provide any benefit to the general population.   As the court found, the vast majority of the general population (more than 99.9%) already has enough biotin in their systems from daily diet and that this population could be “misled” by the produce representations.   Further, the judge found that an asterisk next to one claim is not enough to lead the reasonable consumer to the back of the label for the fine print, and even if it was, the disclaimer was itself lacking in substance.  Bottom Line: There are risks using an asterisk or other symbol to try and amend an otherwise faulty claim.

2. Made in Canada?      

If you bought an Asahi beverage between April 2013 and December 2018, and thought you were buying a genuine Japanese brewed beer because of the Japanese characters on the bottle, you’re not alone.  Asahi, a Canadian beer, used Japanese script and characters on the labeling and packaging, which, the plaintiffs claimed, led reasonable consumers to think the beer was Japanese.  Asahi paid attorney’s fees of $765,000 and an estimated $300,000 for administrative expenses, in addition to fees to each member of a very large class action. Beer is big industry and consumer actions alleging false advertising based on the brewing location of various beverages have been popular in recent years.  Asahi beer bottles will soon have “Product of Canada” displayed prominently.  Bottom Line:  Growth and increasing competition in this industry will cause regulators and consumers alike to pay close attention to the advertising of alcoholic beverages. Don’t brew up fabricated marketing ploys.

3. Mastercard is The Master

Merchants of Mastercard who sell physical items such as clothing, skincare and healthcare items, will now have additional obligations when offering “free trials”, also known as negative options or subscription-based marketing.

In addition to the FTC regs on negative options, the federal Restore Online Shoppers’ Confidence Act (“ROSCA”), and the state laws, Mastercard merchants now must comply with Mastercard’s new free trial rules.  Mastercard recognizes that free trials are a legitimate business tool, however, especially in the health care product space, these free offers “can unwittingly turn into a recurring product subscription that is difficult to cancel” and that its new rules will help to “increase transparency.”  Changes are set to take effect this April and will require certain data be provided to the cardholder for each transaction.  Bottom Line: The FTC has taken notice of the risks of negative option offers to consumers, and now industry is too. If you fit into one of the Mastercard categories, pay attention to these new regs.

4. Bots and Puppets

New York and Florida Attorney Generals announced a settlement against a company called Devumi who sold fake social media followers and engagements to help influencers boost their reach and appeal to advertisers.  This is a first enforcement action against the sale of fake social media. 

Devumi used both bots (accounts operated by computers) and sock-puppet accounts (accounts operated by one person pretending to be many people) in order to generate followers and engagements for influencers. It also copied social media accounts of real people (without their knowledge) to make the fake accounts appear to be legitimate.  

Devumi earned almost $15 million in revenue through its sale of phony followers and engagements. The practice became so widespread that in 2017, Facebook estimated that up to 60 million accounts on the platform were fake.  Devumi duped its users and their followers, journalists and researchers who use follower counts to attribute certain attributes to politicians and policies, and the social media platforms themselves by committing violations of their anti-fraud policies. Operations ceased in mid-2018 and the company was forced to pay fines and attorney’s fees.  Bottom Line: Don’t sell fake followers and accounts.  Fraud using fake accounts is still real fraud.

5.  Musical.ly’s Practices – Not Music to the FTC’s Ears

Musical.ly is one of the most popular apps for budding rock stars and tweens alike. You can create videos, synch with your favorite Miley Cyrus song, and interact with other users.  But recently the FTC, thanks to some quick referral work by the Children’s Advertising Review Unit (“CARU”), has alleged that the ap violated the Children’s Online Privacy Protection Act (“COPPA”) by collecting personal info from these little stars without parental consent.     

As the FTC states, COPPA applies to “operators of websites and online services that: 1) are directed to children and collect personal information from them, or 2) are directed to a general audience, but have actual knowledge they’re collecting personal information from kids”.   If a site meets just one of the two criteria (and Musical.ly met both), it must get parental consent before collecting personal information from children under 13.  The complaint lists numerous violations of COPPA by Musical.ly and in addition to the almost $6 million civil penalty, the app will be changing its tune must change its tune when it comes to data collection practices.  Bottom Line: Remember that COPPA is broad reaching and applies to both apps and websites that expressly target children, and to apps and websites that know they are colleting such data, regardless of children being their target audience.

Addie Johnsonfashion, art, law
Alphabet Soup Part II: Who’s Who in Advertising Self-Regulation
r.jpeg

In Part I of Alphabet Soup, I outlined the online advertising self-regulatory framework.

In Part II, I focus on the Advertising Self-Regulatory Council (“ASRC”), administered by the Council of Better Business Bureaus, and its mission of providing guidance and standards for truth and accuracy in advertising for national advertisers. Much like the Federal Trade Commission, the ASRC is concerned with brands being truthful and not deceptive and providing a set of rules that apply to all types of advertisers across all types of industries and media.

The ASRC, is comprised of four units:

The Children’s Advertising Review Unit (“CARU”):               This Unit sets policies and conducts content review for ads targeted to children (and works in conjunction with COPPA, the Children’s Online Privacy Protection Act, regulated by the FTC);

The Electronic Retailing Self-Regulation Program (“ESRP”):              This Unit addresses issues related to direct-response advertising, those pesky ads that use toll free numbers or websites you have to access to make a purchase;

The National Advertising Division of the Council of Better Business Bureaus (“NAD”):        This is the Unit that deals with most all other kinds of media ads;

And finally, the National Advertising Review Board (“NARB”), which handles appeals from decisions rendered by the other Units.

Claims for false or deceptive advertising can be brought to the ASRC (or the applicable unit within the ASRC) which has the right (but not the obligation) to refer such cases up to the appropriate governmental regulatory authority. Rather than make claims through the FTC, which can be expensive for both sides, claims by consumers or claims by a brand against a competitor are often resolved by the NAD investigating and then issuing guidance on how to fix the faulty ad.  In fact, the NAD’s decisions regarding advertising are the largest body of decisions in the U.S. and cover a wide range of industries. Some of the most recent cases include:

NAD Finds Kraft Heinz’s Claim, “Upgrade Your Mayonnaise” on Displays is Puffery When Used to Attract Attention to its Own Product But Not in Comparative Setting

NAD Recommends T-Mobile Discontinue its “100%” Coverage Claim and Claim that It Covers More of Certain Cities than AT&T

Advertising Claims About Insulin Sensitivity, Other Health Benefits of AstraGin Dietary Supplement Permanently Discontinued Following NAD Inquiry.

Miller Lite Can Claim “More Taste” than Bud Light and Michelob Ultra, Says NAD; Recommends Changes To Its “Know Your Beer” Campaign.

Brand integrity isn’t just producing a great product and campaign, it requires constant monitoring of how that brand is used (an unauthorized mention, a competitor unfairly using a proprietary mark etc…) and how it’s perceived by consumers (deceptive or unsubstantiated ads).  These groups provide a way to follow high advertising standards and also promote consumer trust and protection.


Addie Johnson
Alphabet Soup Part 1: Who’s Who in Advertising Self-Regulation
alphabet

 PART 1 – ONLINE ADVERTISING

Everyone is familiar with the Federal Trade Commission which is the main federal body regulating and enforcing advertising laws.  But in addition to federal regs, the advertising industry has a robust and complex self- regulatory framework. This framework provides voluntary guidelines and best practices for all aspects of the advertising industry.

The online advertising self-regulatory groups are comprised of independent bodies of experts and professionals in the advertising and technology fields. They set the standards for quality and ethical conduct in the purchase, sale, and display of online advertising.   Among these groups are the NAI, Network Advertising Initiative, which focuses on responsible data collection and use of that data in online advertising, with an emphasis on third-party ad tech companies; the DAA, Digital Advertising Alliancewhich focuses on ethical self-regulation in the online advertising and ad tech industries, and its purpose is to expand self-regulation for interest-based advertising; TAG, the Trustworthy Accountability Group, which focuses on “fraudulent digital advertising traffic, combating malware, fighting ad-supported Internet piracy to promote brand integrity, and promoting brand safety through greater transparency”; the DMA, Direct Marketing Association, which advocates policies that promotes the use of ethical data-driven marketing with positive outcomes for both end-users and marketers; and, the IAB, the Interactive Advertising Bureau, a member organization that develops technical standards, best practices, and research regarding the value of digital advertising.

Why are these groups important?  It’s not only the state and federal regulators who are addressing the need for data and privacy rules. These groups are also studying how to balance privacy and consumer protection with effective advertising and how data can be optimized to effect meaningful communication with consumers and build (in some cases, maintain) trust between the consumer and the marketer, among other industry studies and areas of focus. Be on the lookout for initiatives and findings that will enhance or perhaps disrupt, advertising business as usual…


Addie Johnson
The Toys are Listening (even if your kids aren’t)

Everyone wants to give the latest and greatest toy or gadget to their children for the holidays.  When I was 10, it was a Cabbage Patch Kid, and now with most ten-year old’s it’s something that starts with an i.  But beware, parents – while smart toys may have lots of appeal, they may not be safe.

Internet connected toys are often equipped with cameras,sensors, tracking capability, and more. Some even know your child’s voice or yours.  These toys provide educational and valuable experiences, but they also collect data on those interactions. And further, the toys, like any other connected device, are capable of being hacked or having the data misused.

Take a look at the toys’ privacy and data collection policies before you plug them in. Any smart toy should have a robust and clear privacy and data collection policy that complies with the Children’s Online Privacy Protection Act (“COPPA”) and that clearly indicates to parents, what data is collected and how it’s used.  Key provisions of COPPA require that if the toy is collecting information from a child under 13, the toy company must reveal its privacy practices, ask for parental consent, and give parents the right to have your child’s personal information deleted.  If you don’t see these policies in place, consider a less cool toy. Teddy bears are always nice.

You can also do some due diligence. According to the FTC, one way is to look up the name of the toy and add the words “complaint,”“security,” and “privacy.” You will get a read on whether this particular toy is recalled, has been the subject of consumer complaints, or named in any lawsuits.

Other questions to consider, per the FTC: 

Does the toy come with a camera or microphone? What will it be            recording, and will you know when the camera or microphone is on?

Are you okay with a toy that sends email to your child or connects to social media accounts?

Can parents control the toy and be involved in its setup and management?

What kind of information does the toy collect when your child plays with it?

Where is this data (including pictures and recordings) stored, how is it shared, and who has access to it? Does the toy company give parents a way to see and delete the data?

To add to the stress of the season now you have to do due diligence on the presents? Yes, but rest assured, there is a silver lining: even if your kids aren’t listening to you, their toys may be.

Addie Johnson
Tips for Successful Real Time Marketing
3.jpeg

What is Real Time Marketing?

Real Time Marketing (“RTM”),  is when marketers react quickly to a moment such as an event, a national celebration, a big game – in an effort to add some relevance into a consumer conversation as that event is happening, usually via social media or instant response platform. It’s marketing based on time, place, and demographics designed to garner immediate feedback from consumers.

Brilliant tactic, right? Yes, but it’s also risky. If a marketer is responding to an event as the event is happening, who’s calling the attorneys to vet the response? Who’s getting legal review for that single, well placed, oh so clever tweet that could in fact create a copyright, trademark, or right of publicity claim? Chances are, unless you have a vetting process or procedures in place, no one is doing the legal vetting and you could be the next halftime headline. A brand may also run the risk for negative publicity if its RTM is made without a thorough understanding of the event and cultural context of the event.

What should a brand do?

1) Engage your trusty lawyer to train everyone on the basics of intellectual property. Know what you are and aren’t allowed to use in a tweet, retweet, or other real time marketing tactic so that you don’t unwittingly create a claim for infringement. For example, if you’re not a sponsor for the Super Bowl there’s a good chance you can’t even mention it in your own campaign.

2) Know your advertising laws. RTM is subject to the same laws and regulations as other advertising. If you’re making a claim about a product, you have to have data to back up those claims. Your RTM can’t be misleading, deceptive, or false. Are you using influencers or endorsers to do your RTM? Make sure the disclosures are placed in accordance with FTC guidelines

3) Finally, think about having an internal process so everyone has a procedure to follow before sending out that piece of marketing. If you have lead time before an event during which the marketing will be sent out, pre- vet the piece before you send it. Be proactive and not reactionary by creating a catalog of appropriate RTM options for an event… it will save you the hassle of trying to backpedal when something does go out that shouldn’t have. Remember, once it’s seen, it can’t be UNseen, whether it’s by consumers or regulators.

Addie Johnson
You Can Run, But You Can’t Hide……
training-pace-calculator-1534874738.jpg

You Can Run, But You Can’t Hide: FTC Reinforces its Position that Compliance is Everyone’s Responsibility

In a recent FTC action, a PR agency, its CEO, a magazine publisher, and its owner, were found to have broken several FTC rules: namely, the were found to have misrepresented paid endorsements as independent consumer opinions and commercial advertising as journalistic content.

HealthPro Brands Inc. (HealthPro) hired a public relations agency, Creaxion Corporation (Creaxion), to help launch and promote a new insect repellent during the 2016 Zika virus outbreak.  The FTC claimed that Creaxion’s CEO contacted the owner of Inside Publications, LLC  (Inside Publications) to broker a partnership between HealthPro and Inside Publications, where Inside Publications would distribute the repellent to athletes and others attending the 2016 Summer Olympics in Brazil, the epicenter of the Zika outbreak.

Inside was tasked with creating “advertorial” content to promote and market the repellant through social media and other channels. According to the FTC, two gold medal Olympic athletes posted testimonials and endorsements about the repellant on social media but never disclosed that they had been generously paid for those endorsements – a key requirement under the FTC’s guidelines.

These endorsements were then allegedly re-posted by Inside Publications – minus those pesky disclosures again. The FTC alleged that the parties also conducted an online consumer/employee review program that reimbursed employees and their “friends” for purchasing the repellent. Surprise – no one added disclosures about their relationships here either.

The campaign was rife with examples where the parties neglected to include the requisite FTC disclosure statements, including on paid social media posts and on paid ads for the product.

Section 5 of the FTC Act clearly prohibits false representation and requires that endorsements reflect the independent opinions and experience of impartial users; further, you must disclose material connections between the endorsers and the marketer of the product (specifically that endorsers get paid); and endorsers cannot falsely represent that paid ads are independent statements and opinions of impartial publications.

The FTC looked closely at the written agreements between the parties to determined who had responsibility for the marketing materials, and who should be named in any enforcement action by the FTC. Notably, the FTC did not name HealthPro in its complaint – only Creaxion and Inside – the agency and the publisher.

This case reiterates the FTC’s position that any and all parties in a marketing campaign may be, and can be, held liable for infractions of the FTC rules and regs. This includes corporate entities, agencies, and their individual owners, officers, and directors in their individual capacities, who could be exposed to significant liability in the event that there is an enforcement action by the FTC.

Addie Johnson
Brands on a Mission
1.jpeg

Brands on A Mission

A federal court in California just made it a little harder for your goods to be sold by unauthorized resellers on online marketplaces, giving brands the advantage when it comes to protecting brand quality and safety.

In ADG Concerns Inc. d/b/a Health Concerns (a health supplement company), vs. Tsalevich, LLC, the court entered judgment against Tsalevich for trademark infringement and unfair competition resulting from Tsalevich’s unauthorized sale of Health Concerns products on online marketplaces.

Grey market resales are a widespread problem for manufacturers. Often online resellers are anonymous, negatively affecting a marketer’s ability to control the safety and quality of its products. Such deception also causes confusion among consumers and may even cause health risks, as in this case where the product was actually ingested. Further, on many of the marketplaces, consumers can’t distinguish between an authorized and an unauthorized seller. When there’s a product that is damaged, broken, defective, or  has other quality issues  – it’s the brand itself and not the reseller who suffers from negative reviews or worse, legal action.

As the court writes, “the “first sale doctrine” prevents trademark infringement and unfair competition liability for the “mere resale” of a trademarked product. The idea is that a trademark holder’s right to control the sales of its goods extends only to the initial sale. After that first sale, however, the trademark holder may establish infringement only if he demonstrates that the goods are materially different.”

In fact, the complaint alleges that Tsalevich sold products with the expiration date scratched out, had a substantially different consistency than other Health Concerns products, and had a “dark substance” inside the wrapping around the cap. The products resold by defendant were deemed materially different because they did not meet Health Concerns’ quality control standards, processes, and requirements, which were well documented and applied to all authorized resellers.

This ruling is important for several reasons: 1) that these practices of unauthorized resellers are unlawful; 2) that the unauthorized resellers can no longer rely on the defense of “first sale doctrine”, which they have traditionally relied upon.
The court issued a permanent injunction against Tsalevich preventing it from advertising or selling Health Concerns products on online marketplaces. Defendant’s site has since been shut down. Health Concerns was also awarded damages and attorneys’ fees.

The court made loud and clear that brands with good quality controls for their authorized goods can bring legal claims against unauthorized resellers distributing their products outside of those quality controls. Best practices include having processes and guidelines in in place regarding storage, shipping, packaging, inspection, returns, damaged goods, inventory, and other quality control and safety concerns.   In addition to setting up good internal controls, ensure that you have strong contracts in place with your authorized resellers so help maintain the integrity and safety of your brand.

Addie Johnson
Goodbye 2018, Hello 2019: End of the Year Ad Law Update

End of The Year Update – Best of December

2018 ended with some exciting advertising law headlines: dropped lawsuits, cannabis regs, and SEC settlements with DJ Khaled and Floyd Mayweather, Jr.

1.  Production Transparency.       The Department of Justice has halted its investigation, which began in 2016, into whether ad agencies were directing production business to their own in-house folks rather than to independent agencies. The DOJ examined whether this practice was fixing the bidding process by enabling production houses to increase their prices so the in-house groups would win the contracts. IPG, MDC Partners, Omnicom, Publicis Groupe and WPP were all part of the investigation however, the DOJ has confirmed that no action was taken against any of these holding companies. This investigation came and went so what’s next?  No less than the FBI vs. fraudulent media buying practices. Transparency in this area of the advertising industry will continue to be a focus by federal agencies for the foreseeable future.

2.  Cannabis Rules.          In an effort to create “a trustworthy, professional and ethical business space,” the National Association of Cannabis Businesses (“NACB”), finalized its first Advertising Standards. The NACB guidelines allow the cannabis industry to show its dedication to operating at high levels of ethics and responsibility. The NACB explained. “It is important that the cannabis industry develop a robust set of business-approved guidelines to build trust amongst market participants and local, state and national regulators,” Eugene Morgulis, director of NACB’s Legal and Strategic Initiatives, said in a statement. “With consumer-targeted ads becoming more prevalent, we need to self-regulate or we will face charges by heavy-handed government-driven rules that may hinder business’s ability to market to and educate consumers.”   

For the full set of guidelines, click here: https://www.nacb.com/national-advertising-standards

3.           No Party for DJ Khaled and Floyd Mayweather, Jr.         DJ Khaled and Floyd Mayweather, Jr. settled claims brought by the SEC alleging that the celebs failed to disclose payments they received for promoting investments in Initial Coin Offerings (“ICO”).    This case was the first ever brought by the SEC to address endorsement violations in the world of cryptocurrency. It certainly won’t be the last, however, given the interest of influencers looking to work in and capitalize on this area.  The SEC acknowledged that celebrities and others, “are using social media networks to encourage the public to purchase stocks and other investments,” and that celebrities “do not have sufficient expertise to ensure that [an] investment is appropriate and in compliance with federal securities laws.” Celebrity endorsements may be illegal if celebrities don’t disclose the amount and nature of any compensation paid to a them to endorse such an investment.  In these cases, DJ Khaled failed to disclose $50,000 in payment and Mayweather failed to disclose $300,000 in payments from separate cryptocurrency companies when they promoted such ICO’s on their various social media and other outlets.   They each paid hefty fines and agreed not to promote any securities for 2 and 3 years respectively.   A TKO for celebrities who now have to comply with not only the FTC Endorsement Guides but also SEC rules when they endorse ICO’s.

Addie Johnson
Data Driven, Privacy Sensitive – Ad Law 2019
qtq80-U4oKbI.jpeg

The overarching theme this year at the Association of National Advertiser’s Annual Marketing Law Conference was Data. How we use it, how we gather it, what is its current definition (which may depend on what country you live in), how much do we willingly share, how much do we unwillingly share, and ultimately, who is responsible when something goes wrong with that Data.

With the emergence of the General Data Privacy Act (“GDPR”) and now in the US, the California Consumer Privacy Act (“CCPA”) Act, which by all accounts is even more cumbersome than the GDPR, the battle between privacy and data will eventually turn our attention to some sort of national regulation. No one wants fifty separate privacy rules. The GDPR has already caused some businesses to halt growth because of compliance costs – imagine what fifty separate laws would do to creative and other industries that survive on reaching consumers through different channels which require the use of consumer data.

This focus makes it more and more important that all parties involved in the advertising and marketing process – agencies, marketers, publishers, and consumers alike – are aware of the demons lurking out there in the world of data and privacy. Bots, fraudulent and false impressions, data breaches, consent requirements, placement of programmatic ads. These issues, if not addressed, can result in not just consumer complaints and bad PR but legal consequences as well. Even the most airtight indemnity clause between parties to a contract cannot keep regulators away.

Creative decisions that were traditionally made by just the “creative team” or by a hired agency can’t be made in a vacuum anymore because these decisions aren’t just creative decisions. They could affect every aspect of your business or your client’s business. The FTC has increasingly gone after agencies who didn’t keep their clients in check when it came to regulatory compliance. Understanding what to ask – regardless of whether you are a marketer or an agency – in this data driven but privacy sensitive climate is going to be key to mitigating risk.

Addie Johnson
Predicting the Future? New FTC Tools Share Insights

In October, the FTC launched a new tool to view aggregated consumer complaint data. Rather than being released annually, the FTC will now release this data on a quarterly basis. Users can see aggregated consumer complaint data organized by state, type of consumer issue (fraud etc…), the amount of loss and other detailed information.

For example, in Virginia alone we have lost over $19 million to fraud (last year was approximately $15 million); further, Virginia is ranked #2 for reports of travel, vacation and the dreaded timeshare fraud. This gives consumers more information to help weed out scams and other fraudulent offers.

For more aggregated information, go to: https://www.ftc.gov/enforcement/data-visualizations

The FTC also launched its new Consumer Protection Data Spotlight, which will give insights on the kinds of complaints that the FTC receives, in addition to aggregated data. Will the trends in complaints indicate where the FTC will focus its efforts? Perhaps.

The FTC notes that between 2015 and 2018, complaints involving gift cards increased 270%, specifically, complaints involving gift cards as payment mechanisms. Below, some practical tips on how to avoid gift card scams:

1) Consumers should be cautions when someone demands to be paid with a gift card.

2) Retailers should be suspicious if someone purchases multiple gift cards but seems evasive if asked why.

3) If you’re a gift card issuer or a program manager, give consumers an easy way to report fraud – that’s how the bad actors get caught.

Even if the FTC isn’t imposing any rules per se on gift card issuers and managers, they are certainly indicating that businesses need to be aware of and take responsibility for preventing their gift cards from being used for fraudulent activities.

https://www.ftc.gov/news-events/blogs/data-spotlight

Addie Johnson
Affiliate Marketing Tips
qtq80-wmClRy.jpeg

Affiliate Marketing is a great way to promote your goods and services and like all things advertising, transparency and truth are key to having a successful and lucrative Affiliate Marketing program.   Many of the ads online are created by marketers who get paid each time a consumer clicks on the ad. If the click takes you to another site where you sign up to purchase or try a product, there’s a good chance that marketer gets paid even more by the manufacturer, creator, or producer of that product.  This is Affiliate Marketing – third parties are paid per click or purchase to promote a particular product or other offering.   Everyone, from the producer of the product to the marketer, gets a percentage of the sales resulting from that click. And from that click, your information may be tracked by multiple parties.

There are a few issues to be careful of when using Affiliate marketing either as a tool for your business or as a consumer making a purchase. 1)  If you use Affiliate Marketers as a tool, make sure those affiliates comply with advertising laws such as CAN-SPAM, that they don’t make false or other wrongful advertising claims about your product, and that they accurately disclose their business relationship to the marketer.  It’s also a best practice to have a uniform set of guidelines, or an agreement with your Affiliate Marketers to ensure legal compliance which will in turn, help you protect your brand.  2) If you are a consumer, make sure you know who is truly behind the ad and understand which parties are tracking you as you make the purchase. Be careful of scams too – if the ad says one price and you’re charged another – it’s a good sign that it was a scam.  Below is a visual tool provided by the FTC to show marketers and consumers how affiliate marketing works.

how-affiliate-marketing-works_082817.png
Addie Johnson
Advertising and Marketing Law Update
qtq80-Lqjaup.jpeg

Below is a list of topics that may be of interest to you or your clients and for the month of November, I am offering thirty minute sessions (free) to provide updates as well as guidance on best practices.

Email me at Abrooks@SchroderBrooks.com to set up some time.

  • Influencers, native advertising, and the right of publicity

  • VR, AR, AI

  • Updates on the latest Ad Tech

  • Use of Block Chain in creative contract management and advertising

  • Trademarks, copyrights, claim substantiation

  • Third Party rights and thorny issues regarding agency-client relations

  • What legislation will affect advertising, marketing and promotions industries

  • Children’s Advertising, retail laws,  food laws, endorsements and cause marketing

  • Alcohol and Marijuana marketing

  • Regulatory Coverage – FTC, FCC, FDA, NAD, CARU

  • Role of Data in marketing post GDPR

  • Basics of Sweepstakes and Promotions

  • Disclosures on Social Media

  • Price and Sales marketing

  • Right of Publicity and other Content Claims

Addie Johnson
Two New False Advertising Claims – An Unhappy Cow and a Super Starch
qtq80-FmaURQ.jpeg

The Cows Did Not Jump Over the Moon in This Claim:

Plaintiff Organic Consumers’ Association alleged in its Washington D. C. state court claim, that Ben and Jerry’s (and its parent company Unilever) falsely advertised that the milk used in their ice cream came from happy cows raised in caring dairies.  Unfortunately, all was not happy with the actual facts – some of the milk products did in fact come from mass – production, commercial farming operations that employ cow confinement and antibiotics in their processing.  Such operations made up a minority of the members in a farm coop known for its environmentally safe and friendly practices but nonetheless, alleged the Plaintiff, made the advertising of “green fields and grazing of ‘happy’ cows” false and misleading.

According to the Plaintiff, no reasonable consumer would think these farming practices lead to happy cows or would be found in a Caring Dairy.  Plaintiff requested injunctive relief and corrective advertising, along with costs and attorneys’ fees.

High Performance or Just High Expectations?

The UCAN Company was sued in Illinois for claiming that its sports performance products, made with “SuperStarch” would produce such lofty results as sustained energy, optimized performance, and enhanced fat burn (among other claims) without the usual gastrointestinal issues that so many high performance sports products cause.

SuperStarch turned out to be just corn. Further, UCAN relied on “internal” experiments to make their claims, which it turned out was conducted by a member of UCAN’s own Advisory Board.  UCAN also also failed to disclose whether the research was conducted properly. In fact, most of the claims made by UCAN as to enhanced performance weren’t accurate and the one link to reliable scientific evidence found on their website failed to support the claims.  The Plaintiff in this instance is seeking to certify a national class and a multi-state consumer fraud class for compensatory, punitive and other damages.

Why is this important:   Whether it’s an ice cream claiming to only use milk from the most well-adjusted bovine, or a super ingredient claiming to give all of us weekend warriors super powers, brands should steer clear from making any false, deceptive, misleading or unsubstantiated claim.

Addie Johnson