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:

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NAD Clarifies Material Connection Disclosure Requirements for TikTok Videos Gone Viral

If you learned a new dance routine, tie-dyed clothing, made whipped coffee or took part in a “challenge” while staying safely at home during the COVID-19 pandemic, you probably have TikTok to thank. TikTok, which has more than 800 million active users, became the go-to social media platform to keep people engaged and entertained while stuck at home. Understandably, brands and their marketing teams quickly learned how to incorporate TikTok into their social strategies. As with any new platform, there was a bit of a learning curve to ensure compliance with the Federal Trade Commission (FTC)’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (the FTC Guides). A recent National Advertising Division (NAD) monitoring case, however, sheds some light on best practices when engaging influencers on TikTok.

NAD brought the monitoring case against a consumer goods company (the Advertiser) in relation to a TikTok influencer campaign for a line of paper towels. The influencers took part in a dance challenge using cleaning-themed music and featuring the Advertiser’s paper towels in the background of the video. Importantly, NAD found that the influencers adequately disclosed their material connection to the Advertiser through a #BrandPartner hashtag (“Put another way, consumers viewing the TikTok videos on TikTok would understand that the influencers are being compensated . . .”), as is required under the FTC Guides. The issue, interestingly, had nothing to do with sharing the videos on TikTok at all. Instead, NAD found that when these videos were shared on other social media platforms, the material connection disclosures were sometimes stripped from the videos because they were platform overlays and not embedded in the videos. Continue Reading

IAB Launches CCPA Benchmark Survey

The Interactive Advertising Bureau (IAB), a leading advertising industry organization, has launched a CCPA Benchmark Survey to assess how companies across the digital advertising ecosystem are approaching CCPA compliance. The survey provides an opportunity for companies to anonymously report on their handling of various CCPA matters, including to provide statistics relating to the number of access, deletion, and “Do Not Sell” requests organizations have received, and to weigh in on the vexing issue of whether and in what context the use of cookies and other tracking technologies constitute a “sale” of “personal information” as defined in the CCPA. Continue Reading

No More Blurry Searches: 1-800 Contacts Settles Class Action Lawsuit Alleging Search Term Restraints

Last week, mega-online retailer 1-800 Contacts settled claims brought by a class action suit in the Central District of Utah alleging that the company was the mastermind of a scheme to prevent competition in the online contact lens market. The plaintiffs, consumer purchasers of contact lenses, alleged that 1-800 Contacts coerced some of its competitors to implement negative keyword lists so that when a potential consumer typed “1-800 Contacts,” no links to other retailers would appear in the search results.

According to the complaint, 1-800 Contacts sent various cease-and-desist letters to any competitor that appeared in a search of “1-800 Contacts,” claiming trademark infringement (when there was alleged to be no basis for this accusation). The plaintiffs, who had already settled with the other defendants in the action – including Walgreens, Vision Direct and international conglomerate Luxottica – settled with 1-800 Contacts for $15.1 million. Continue Reading

Maryland and Other States Weighing Taxes on Digital Ads

On March 18, the Maryland General Assembly passed the first state gross revenue tax directed at digital advertising, which is broadly defined to encompass any advertising appearing on a website, mobile app or any similar digital platform (House Bill 732). The legislation’s status remains uncertain due to an expected gubernatorial veto and potential legislative override. Similar tax proposals are now being considered in states including New York, Nebraska and West Virginia. As currently drafted, these proposals could substantially increase the cost of digital advertising – costs that would likely be passed on to digital publishers that rely on digital advertising for revenue, and businesses that rely on digital advertising to reach customers. Ultimately, the residents of the states imposing the tax would likely bear the cost. Continue Reading

When Your ‘Looks’ Are Late: FTC Settles With Online Fashion Retailer Over Alleged Mail Order Rule Violations

Online retailers are well aware of how the promise of quick delivery can influence consumer purchasing decisions. Especially in times like these, when delivery times have slowed for many companies, marketers might be even more tempted to promise fast delivery as a way to entice consumers to place an order. A recent enforcement by the Federal Trade Commission (FTC) highlights the risks companies face if they promise delivery deadlines that they cannot reasonably expect to meet. Now more than ever, companies should familiarize themselves with the requirements of the FTC’s Mail, Internet, or Telephone Order Merchandise Rule (commonly known as the Mail Order Rule), because a pandemic will not excuse a violation of this rule and FTC scrutiny of false delivery promises may be heightened during this period.

Last month, the FTC announced a $9.3 million settlement with online retailer Fashion Nova for alleged violations of the Mail Order Rule. According to the FTC’s complaint, the brand ‒ which has over 18 million followers on Instagram ‒ promised shoppers they would receive their “looks” quickly, with claims such as “Fast Shipping,” “2-Day Shipping,” and “Expect Your Items Quick!” Not only did Fashion Nova fail to keep its promises, the FTC alleged that it also failed to provide its customers the remedies available to them under the Mail Order Rule. Continue Reading

FTC Case Against Rent to Own Company Airs Differences Over Redress, Individual Liability and ROSCA

Federal Trade Commission Doorway SignThe Rent to Own industry has been a frequent target of Federal Trade Commission (FTC or Commission) action. While the industry notes that it provides an ownership option for consumers who are unable to pay up front and who may not qualify for traditional credit, critics point to the fact that the final cost of a rent to own transaction is often far in excess of what a consumer would have paid even had she financed the purchase over time at traditional credit card interest rates. While a few states have begun strictly regulating the industry, many others have not – such that these industries continue to operate without some of the same requirements imposed on traditional credit arrangements. However, Section 5’s requirements regarding deceptive advertising and marketing still apply, and that’s where our story begins.

The FTC’s latest target is a company called Progressive Leasing. While companies in the Rent to Own industry have typically operated their own retail locations where consumers can shop, select merchandise and enter into a transaction, Progressive operates in numerous third-party big box stores, and through contractual arrangements, its rent to own program can be offered to consumers as an additional financing option. Continue Reading

Commissioner Wilson Weighs In on FTC Priorities

Federal Trade Commission Doorway SignWe have blogged quite a bit about efforts by one or both of the Federal Trade Commission’s (FTC or Commission) Democratic commissioners to push the Commission into a more enforcement-minded posture and to think creatively and expansively about the enforcement tools the Commission has at its disposal. Thus it seems appropriate to give equal time to an attempt by one of the Republican commissioners to push the Commission to narrow rather than broaden its focus.

In a recent partial concurrence and partial dissent, Commissioner Wilson laid out her views on when it is appropriate for the Commission to utilize its enforcement authority. The case involved a TENS device – a device that electrically stimulates the nerves and provides relief from pain. While the device had received Food and Drug Administration (FDA) clearance for some pain relief claims, the FTC alleged that the company’s claims deceptively exceeded the scope of its FDA clearance by, among other things, claiming that the device provided pain relief far away from the point at which the device was applied. Commissioner Wilson agreed that the company had failed to substantiate that its device could provide pain relief in all areas distant from the application site. However, she argued that the manufacturer had substantiated a claim that its device could provide some more limited, nonlocalized pain relief. Continue Reading

COVID-19 Update: Pricing During COVID-19 Without Gouging or Fixing

We recently blogged here about the FTC and states combating scams, price gouging and deceptive ads, and our antitrust group issued an alert on navigating antitrust issues in the wake of COVID-19. Today, we write to provide updates about the recent focus on price gouging and how you can set prices in these difficult times while avoiding exposure for price gouging, price fixing or other antitrust violations.

On March 23, 2020, President Trump signed Executive Order 13910 aimed at preventing price gouging and hoarding of crucial medical and health supplies needed to fight COVID-19.[1] The Executive Order invokes the Defense Production Act and for certain items designated by the U.S. Department of Health and Human Services, such as personal protective equipment (PPE) and ventilators, makes it a misdemeanor for individuals and companies to accumulate these items either (1) in excess of reasonable needs or (2) for the purpose of selling them in excess of prevailing market prices.[2] U.S. Attorney General William Barr has said that the government’s crackdown was aimed at “people hoarding these goods and materials on an industrial scale for the purpose of manipulating the market and ultimately driving windfall profits. If you have a big supply of toilet paper in your house, this is not something you have to worry about. But if you are sitting on a warehouse with masks, surgical masks, you will be hearing a knock on your door.”[3] It remains to be seen what “in excess of prevailing market prices” means in this context. Continue Reading

FTC Finally Strikes Gold With Made in USA Enforcement: Williams-Sonoma Agrees To Pay $1 Million in Consumer Redress

In the past few months, a minority of the commissioners have called for the Federal Trade Commission (FTC or Commission) to take the heretofore unprecedented step of seeking consumer redress in Made in USA (MUSA) cases. (In the past such cases only involved money when penalties were imposed for violating an existing order).  In a concurring statement in a series of Made in USA settlements announced in September 2018, Commissioner Slaughter and Chairman Simons noted the possibility that consumer redress could be an option for Made in USA enforcement when consumers paid a premium for the allegedly mislabeled products. In subsequent statements, both clarified that in their view a showing of a price premium, while an important factor, was not legally required for the Commission to obtain redress. Further, as noted in their initial concurring statement, both Commissioners emphasized the importance of the  Commission’s intended review of its approach to remedies and emphasized the need to have a forward-looking approach to the issue, including signaling to the public how the Commission intends to approach enforcement in this area. How to incentivize the right behavior was also a topic of discuss at the FTC’s Made in USA workshop last fall (which is worth watching in full if you have time on your hands available here. Continue Reading