Nothing to See Here … Move Along. The Seventh Public Commission Meeting on Identity Theft

Yesterday’s sole topic for the monthly public Federal Trade Commission (FTC) meeting was identity theft. That’s it. No policy statements, no votes, no repeal of carefully crafted bipartisan policy documents, just identity theft, statistics about identity theft and the FTC’s resources about identity theft. It is unclear why we needed a meeting to discuss this since the FTC has had an excellent website dedicated to identity theft for many years and has been providing education and guidance about the issue for decades. These are great resources, and it is helpful to remind the public about them. It is difficult, however, to see the fierce sense of urgency for this meeting.

The seventh (and briefest) meeting kicked off with the public comment session and the closely monitored two-minute limit per commenter. A record low of three speakers showed up, starting with two franchisee owners, one of a gas station and one in the hospitality industry. (We did not have to wait long for the “who will be the first to be on mute” game to end, as the first speaker had the honor.) Both franchisee owners asked the FTC to look into actions of franchisors that made it difficult for the franchisees to succeed. Then we heard from someone who raised concerns about accessing WHOIS domain name registration information and the need for protection of children engaged in online financial activities.

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Made in USA, Part Two – How Far Back Do You Have to Look?

Prior to the new year, we blogged about how the Federal Trade Commission’s (Commission) decision to codify its Made in USA (MUSA) guidance into a rule – and the accompanying threat of civil penalties – makes it all the more important to clarify ambiguities and uncertainties with respect to MUSA. As we noted then, we believe that most companies want to comply with the law and the Commission’s rules, but if those rules are not well defined, compliance becomes a matter of guesswork. Further, out of an abundance of caution, companies may choose not to make certain claims that might otherwise be lawful and nondeceptive, which harms rather than benefits consumers.

Our first blog addressed the biggest ambiguity – how much domestic content there has to be to make an unqualified MUSA claim. Today we take on a smaller, yet still important, question: In calculating domestic cost and looking at components that went into manufacturing product, how far back in the manufacturing process does a company have to go?

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Brand NFT Advertising Basics, or One for All of Us Who Wanted a Pony Growing Up, Who Don’t Quite Get the NFT Buzz, and Who Really, Really Need a Vacation

This may be one of the best ads in recent memory – an ad promoting visiting Lexington, Kentucky, horse capital of the world. The ad promises to make kids’ holiday dreams come true with the opportunity to buy “Non Fungible Thoroughbreds” at VisitLEX. The horses have names like Ol’ Pixel Face, iHorse, OpenSea Biscuit, Notta Pony and Champing at the Bitcoin. They promise no feeding or grooming or upkeep. And “the only thing more precious than a child’s wish is a unique and noninterchangeable unit of data with limited usage rights stored in an online ledger.” Watch for a laugh here: https://www.youtube.com/watch?v=6ZOegq2E030. It may make you want to visit Lexington after omicron departs, hopefully blowing away soon like our old Christmas tree needles. And we might see you there!

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I’m a Lawyer . . . What Do You Mean I’m Being Named in an FTC Complaint? The FTC Act and Individual Liability

Last week, the Federal Trade Commission (FTC) released an interesting case against a lead generator (ITMedia) that purportedly collected sensitive information from consumers who were seeking loans and sold that information to entities that were not in the business of providing loans. The defendants settled charges that they violated both the FTC Act and the Fair Credit Reporting Act (FCRA) and agreed to pay $1.5 million as a civil penalty for the FCRA violations. It’s an interesting case on the merits, but for today, let’s focus less on the case and more on whom the FTC named individually. Today is all about individual liability and the awful realization that when the FTC starts investigating the company you work for, it may also start investigating you for your role in the challenged practices.

Individual liability is an important consideration at the FTC and will be evaluated in most, if not all, investigations. And it is not necessarily something that will fully surface until the latter portion of an investigation, after staff have had the chance to review emails and documents and take depositions. Ultimately, they will be seeking to better understand who was involved in the challenged practices, how involved they were and what role they played.

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Why Settle for Taco Tuesday When You Can Have Recurring Tacos – But Is Your Subscription Compliance Program Soft?

Subscription marketing is on the rise with some predicting the subscription industry will more than double by 2025. This prediction is fueled partly by the pandemic, no doubt linked to people seeking more streaming services to fill our entertainment needs and for home workout subscriptions to get our sweat on safely. Experts do not forecast this growth will taper off, as it is part of a larger trend of relationship-based marketing. We were quite intrigued by weekend headlines touting a Taco Bell subscription: For $10, one can get a taco a day for 30 days. The offer requires customers to first join the loyalty program and download the app before they can sign up for the taco subscription. What was really interesting to us was that unlike most subscription offers, this one does NOT automatically renew, but expires after 30 days. This makes sense considering that Taco Bell would lose money if everyone got a taco a day, though Taco Bell is likely assuming that, just as with Lay’s potato chips, nobody can eat just one a day. Increased visits from subscribing customers would drive additional sales. Or perhaps the goal was really to drive app download and loyalty signups. But the limited nature of this offer certainly relieves many headaches that marketers have over most subscription programs, which have the negative option feature. With the FTC’s recent Enforcement Policy Statement Regarding Negative Option Marketing and the myriad of state law updates, it is a good time to take a fresh look at how you add subscribers and how you implement your program. For example:

  • Make sure material terms are conspicuous and in immediate proximity to the consent mechanism.
  • Limit the material terms to what is critical to the negative option – that the charge recurs until it is cancelled, its term, its price, how to cancel. Do not include other disclosures here.
  • Use a checkbox or similar affirmative act that is separate from the consent to the transaction.
  • Place the disclosure and consent mechanism prior to where the customer enters billing information.
  • Make sure you offer means to cancel that mirror the means to sign up – typically this requires an easy online method of cancellation (e.g., a direct link or button prominently located in the user’s online account page).
  • Strip out save-a-sale efforts and allow customers to simply cancel.
  • Send reminder notices when required by state law – previously, this requirement primarily applied to annual contracts, but new state laws have broadened the scope. A good rule of thumb is to send a reminder notice 30 days prior to the renewal that will continue the subscription for more than a year.
  • In some states, programs that start with a free trial and convert to a paid program are required to send notice prior to the first billing with a link to cancel.

AdTech: Regulation, Compliance and Where We are Heading

Partners Fernando Bohorquez, Gerald Ferguson, Linda Goldstein and Jeewon Serrato, and Associate Justin Yedor served as panelists in a recent article published in the January 2022 issue of Financier Worldwide. In the article, they offer insights regarding key advertising technology regulation and compliance trends, including recent digital advertising efforts, benefits and insights, and current regulatory scrutiny.

Click here to read the article.

Understanding the FTC Penalty Box

Much like an artist looking for a muse, I keep up with consumer protection developments and ponder – is this blog-worthy? Well, the other day, the Federal Trade Commission (FTC) announced the annual updates to its civil penalty numbers. I yawned and returned to the task at hand. My colleague Amy, however, wisely thought that it might be helpful for me to shed some light on FTC civil penalty actions and how penalties are assessed. Thanks for the inspiration, muse! To simplify matters, I will focus on rule violations (as opposed to administrative order violations, which can be handled somewhat differently). There isn’t a great deal of FTC case law on this issue, so we will concentrate on the statutory language. But spoiler alert – it’s complicated, and there is no simple penalty formula.

Let’s start with some background that might explain the general dearth of case law. Although the FTC has had some civil penalty authority for many decades, in most cases, the FTC would defer seeking penalties and instead use Section 13(b) of the FTC Act to obtain consumer redress when appropriate. There was a general preference to get money to consumers rather than seeking penalties that go to the U.S. Treasury. The Supreme Court’s decision in AMG has changed that calculus, and the FTC going forward is more likely to seek penalties when it can. As an aside, it is worth noting that when the FTC is alleging certain rule violations, penalties are an option. But Section 19 of the FTC Act does allow the agency to also seek “the refund of money or return of property” as is “necessary to redress injury to consumers.” The law on this Section 19 provision is still developing, but a recent blog discussed a district court decision that was not particularly helpful for the agency in this regard.

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Bolstering Your Social Media Controls? We’ll Drink to That.

My smart colleague Daniel posted a terrific new year’s resolution blog yesterday. I have one more thing to add.

Many of us at some point have had to make an apology or two for comments made when we may have been, er, overserved. Andy Cohen did so after his annual CNN New Year’s Eve hosting gig with Anderson Cooper, during which he made digs at Ryan Seacrest. Less common is the need for a brand to apologize for social posts about drinking. So, this is a legal blog; some might say even a family blog. We do try not to offend. Even setting the stage here is a bit delicate. Lots of folks participate in Dry January (a challenging yet less rigorous approach than Whole30). Some alcohol companies will promote their nonalcoholic alternatives:

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Legal Marketing Resolutions for 2022 — Better Coffee for All

I made my last New Year’s resolution 10 years ago in 2012. Technically, it wasn’t a resolution; maybe it was more of a lifestyle choice. I vowed that I would no longer drink the coffee that was sold in the Federal Trade Commission’s (FTC) now-defunct Top of the Trade cafeteria. It was a great place for some items (such as spanakopita), but let’s just say the coffee and my stomach did not get along. Instead, I prefer suggesting resolutions to others, which makes me less than popular with some friends this time of year. So here goes for 2022 — my resolutions for you, my loyal readers.

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Auld Lang Syne 2021 – Significant Events of the Past Year

Another year has come and gone. There are many things one could reflect on, but this blog is about advertising and marketing law, so we’ll stick to that. To say it was an eventful year would be an understatement. So we asked four of our partners to each select two interesting developments from the year. And because every list has to have 10 items and four doesn’t go into 10 evenly, we’ve picked two to start off with that are sure to make everyone’s list.

  1. The Supreme Court’s AMG decision – It’s unusual for the Court to decide a case involving the Federal Trade Commission (FTC), it’s unusual for the Court to decide a case unanimously and, unusually, the Court reversed a practice by the FTC that dates back to the 1970s. For now, say goodbye to the FTC filing an initial complaint in federal court seeking not only injunctive relief but also consumer redress. What comes next is still hard to predict as the agency, Congress and the courts wrestle with numerous possibilities.
  2. Notice of Penalty Letters – Former Commissioner Rohit Chopra put the aggressive use of these letters on his wish list, and just like that, his wish was granted. It is the season of gift-giving after all. A previously obscure provision in the FTC Act gives the FTC authority to put companies on notice about conduct that had been found unlawful in litigated administrative decisions and subject them to civil penalties if they engage in similar conduct. In recent weeks, over a thousand companies have received these letters, which cover a variety of advertising and marketing practices, including endorsements, business opportunities and for-profit education claims. Sending them was easy, but it remains to be seen how easy the enforcement part will be.

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