Podcast: AD-ttorneys@law: Marketing a Subscription-Based Service? Beware

We used to think of subscriptions as mostly for newspapers and magazines, but today you can subscribe to get cosmetics, cars, clothes, mental health counseling – even a curated selection of cat toys and treats that will show up on your doorstep every month. Is your brand offering a subscription-service? Linda Goldstein explains how to mitigate your legal risk.

Questions and Comments: lgoldstein@bakerlaw.com

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PA Supreme Court Finds Intent Is Not Nine-Tenths of the Law

We regularly tell clients that intent is meaningless when it comes to deception under Section 5 of the FTC Act. And that’s true (or we wouldn’t say it). But fewer people realize that it’s not necessarily true when it comes to a minority of the states. As of a couple weeks ago, however, that number has shrunk by one, courtesy of the Pennsylvania Supreme Court. In Gregg et al. v. Ameriprise Financial Inc. et al., the Pennsylvania Supreme Court held that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (CPL) does not require a showing of intent to hold defendants liable. This 4-3 decision, which was nearly 20 years in the making, makes clear that the statute functions in a strict liability manner. There no longer needs to be a finding of fraud or negligence for a court to deem a business’s practices deceptive. This broadens the power of the law to regulate unscrupulous business practices.

In 1999, Gary and Mary Gregg enlisted the expertise of Robert A. Kovalchik, a financial adviser and insurance salesman for Ameriprise Financial Inc. Kovalchik engaged in what the trial court described as deceptive sales practices, as Kovalchik misrepresented his investment strategy for the Greggs. It was not disclosed to the Greggs that Kovalchik would earn a significant amount of money in commission while the Greggs would incur additional costs. Continue Reading

Podcast: AD-ttorneys@law: False Advertising or Just Puffing?

Absolute truth in advertising is something of a rarity, but not every untrue statement is false advertising. In this episode, BakerHostetler partner Randy Shaheen is going to ply you with pointers on avoiding puffery’s promotional pitfalls and potential problems.

Questions and Comments: rshaheen@bakerlaw.com

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Beware Operation CBDeceit

The Federal Trade Commission (“FTC”) announced on December 17 that it has taken action against six sellers of CBD products.  In case you need a refresher, CBD is a substance found in the cannabis plant that is widely touted for its health benefits.  The 2018 Farm Bill legalized hemp-derived CBD at the federal level, and almost all states have followed suit in the last two years.  Notably, however, the FDA still prohibits adding CBD to food and dietary supplements.  While CBD is generally thought to have certain health benefits – including, for example, sleep, relaxation, inflammation, pain – to make health claims in advertising requires a high level of scientific support.

Which brings us to Operation CBDeceit.  The FDA and FTC alike have previously sent warning letters related to CBD claims, but last week the FTC announced the first organized crackdown against unsubstantiated CBD claims: Operation CBDeceit.  That’s right, CBDeceit.  We may just keep repeating it because it’s that fun to say.  Hats off to whoever at the Commission thought of this one.  The focus of CBDeceit is the same as that of the warning letters – companies that claim their CBD products can treat serious diseases, such as cancer and Alzheimer’s.  In its press release, the FTC described it this way: Continue Reading

Podcast: AD-ttorneys@law: Consumer Reviews: Paid? Fake? Negative?

Let’s be honest. Customer reviews and testimonials influence buying decisions — an online review can make or break the path to purchase. Amy Ralph Mudge is her authentic self as she outlines the legal framework and counts down an essential list of legal dos and don’ts.

Questions & Comments: amudge@bakerlaw.com

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California Ballot Referendum on CCPA Will Have Significant Effects on AdTech

On Election Day, California voters approved a ballot measure, Proposition 24, known as the California Privacy Rights Act of 2020 (CPRA).  Referred to by some as CCPA 2.0, the CPRA amends certain provisions of the paradigm shifting 2018 California Consumer Privacy Act (CCPA), which went into effect in January 2020 and became subject to enforcement in July 2020. Moreover, the CPRA will introduce a number of new provisions and concepts to a law that regulators are still fleshing out and businesses are struggling to understand. Like the CCPA, the CPRA will be supplemented by future regulations to be issued by a new privacy protection agency; however, the nature and the extent of the CPRA’s regulatory mandates far exceed those of the CCPA. Continue Reading

Podcast: AD-ttorneys@law: CBD Marketing: A Path Through the Legal Fog

Being the best means continually building knowledge and pushing forward. And in a world of digital disruption, consumer marketers can’t afford to stumble. To navigate today’s most complex issues, thousands of subscribers read BakerHostetler’s AD-ttorneys@law weekly newsletter and blog and appreciate how the firm’s renowned team of advertising, marketing and digital media lawyers distills issues and offers practical takeaways. Now that same team brings you AD-ttorneys@law, the podcast.

Our first podcast covers CBD Marketing. Cannabidiol, or CBD derived from hemp, is now legal under federal law, and is everywhere — CBD perfumes, facial oils, cosmetics, gummies, chocolates, lotions, slushies, candles. BakerHostetler attorneys Randy Shaheen and Jack Ferry explain the legal issues companies should think about before they hit the ground running to enter the burgeoning market.

Questions & Comments: rshaheen@bakerlaw.comjferry@bakerlaw.com

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Will FTC Penalties Under Section 5(m)(1)(B) Rise Again?

Federal Trade Commission Doorway SignAs we wait to see how the Supreme Court will rule on the FTC’s redress authority and whether the FTC will potentially be controlled by Republicans or Democrats for at least the next four years, it is worth noting that Commissioner Chopra and one of his attorney advisors has written an interesting draft paper advocating for increased use of the FTC’s penalty authority under Section 5(m)(1)(B). And what is that exactly, you ask? Well, to the authors, that is part of the problem, as they argue that the FTC has improperly neglected an important tool in its law enforcement toolbox. The paper itself is lengthy (40+ pages) and goes into far more detail than we can do justice to in a blog post, but below are some highlights.

While the Commission typically only obtains civil penalties against parties that violate their own existing consent orders, Section 5(m) allows the Commission to seek civil penalties against a party who engages in conduct it knows to have been determined unlawful in an adjudicated Commission order (in other words, not a consent order and not necessarily an order against that company.) Section 5(m) was last used in 2009 with respect to allegedly misleading claims that textile products were made from bamboo, when in reality they were made from a type of rayon, sourced from bamboo. The Commission sent letters to numerous retailers notifying them of a prior Commission order relating to this finding, effectively putting them on “notice” under Section 5(m). Thus, with the stroke of a pen or the mailing of an envelope, the Commission was able to make an entire industry subject to civil penalties. Several years later, that effort bore fruit as the Commission obtained civil penalties from several retailers that allegedly engaged in such misrepresentations.

Apart from the fact that Section 5(m) permits civil penalties against first-time violators (and is not at risk of being struck down by the Supreme Court), what other advantages do the authors see for Section 5(m) over consumer redress? The authors point to several. First, consumer redress by definition is capped at however many dollars the wrongdoer received from consumers. The authors argue that in at least some cases, this may not serve as a sufficient deterrent. For example, a consumer may have incurred collateral medical costs or may have taken out a loan or given up other opportunities to pursue a multilevel marketing opportunity. Continue Reading

FTC Enforcement: What Is Equitable Relief?

Federal Trade Commission Doorway SignAll eyes remain on the Supreme Court and what, if any, changes the Court may make to the Federal Trade Commission’s (FTC’s) authority to seek consumer redress. Will the Court strip the FTC of that authority entirely? The Third Circuit’s recent decision in an antitrust matter suggests so. The circuit court held Section 13(b) of the FTC Act does not allow for disgorgement. (By way of background, that section gives the FTC authority to seek preliminary and permanent injunctions. The FTC has traditionally interpreted this right to injunctive relief as also carrying the authority to seek equitable monetary relief. Some defendants, however, have argued this is too broad an interpretation of the law.)

At the same time, it is worth remembering that even if the FTC’s redress authority survives its Supreme Court challenge, it may not come through unscathed, and defendants and courts are subjecting the FTC’s redress requests to increasing scrutiny. One such example involves a recent Ninth Circuit decision, FTC v. OMICS Group Inc., No. 19-15738 (9th Cir. Sept. 11, 2020). The case itself is rather unusual. The FTC filed suit against OMICS Group in 2016, alleging that the defendant had misled researchers into submitting articles to it for publication by overstating the nature of the articles it had previously published and had misrepresented the nature of conferences it sponsored, which it charged participants to attend. Continue Reading

Beware of Dark Patterns

Yoda cautioned Luke Skywalker to beware of the Dark Side. In The Golden Compass, we were told to beware of dark materials. For those old enough to remember, the town of Collinsport was told to beware of Barnabas Collins, who lurked in Dark Shadows. And little kids in general are just plain scared of the dark. It is time now, apparently, for advertising lawyers to beware of dark patterns.

FTC Commissioner Chopra recently tweeted about “dark patterns,” writing:

Continue Reading

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