Lead Generation Leads to FTC Settlement

There is nothing particularly new about the idea of lead generation in marketing. Companies have from the very beginning paid their own employees or paid others to help find prospects for their goods and services. However, in today’s digital world and with the myriad different ways in which consumer information is gathered, the use of third parties for lead generation has proliferated. Not surprisingly, so has the abuse of lead generation efforts.

The Federal Trade Commission (FTC) has brought several complaints against lead generators that have used, shall we say, less than forthright promises and claims in an effort to bolster the number of leads they generate. In turn, the FTC has cautioned companies that the use of lead generators is no different than the use of other third parties such as ad agencies or influencers to assist with marketing, and that advertisers bear some responsibility for the oversight of such entities as well as discipline if and when those entities engage in unlawful practices.

This week the FTC made that point more clearly as it brought what we believe is the first case against a company that allegedly failed to exercise adequate oversight of the third-party lead generators it contracted with. The FTC entered into a consent order, including payment of $30 million in consumer redress, with Career Education Corp., an operator of postsecondary and vocational schools. The FTC alleged that several of the lead generators used by the company misled consumers into thinking (1) that the schools were affiliated with or recommended by the military or (2) that consumers were providing their contact information for jobs or benefits assistance, as well as misleading consumers about the extent to which their personal information would be shared and calling individuals on the Do Not Call Registry. Further, at least three of the lead generators accused of engaging in such practices had previously been the subject of FTC enforcement actions, never a good sign when considering a vendor.

Perhaps of greatest interest, the FTC’s consent order provides a bit of a road map in terms of oversight of third party lead generators. The order requires the company to (1) review all materials used to generate leads, including any hyperlinks contained in such materials; (2) refuse payment to any lead generator for any leads resulting from misleading information; and (3) promptly investigate any complaints or other information suggesting that a lead generator is engaging in misrepresentations and refuse payment if the investigation finds that misrepresentations have occurred. So once again the FTC has reaffirmed its position that turning a blind eye to what third parties may be doing on your behalf is typically not the best compliance strategy.

California’s Law Regulating Online Bots, Effective July 1, 2019

California’s new “bot” law, Cal. Bus. & Prof. Code § 17940, et seq. (SB 1001) takes effect on July 1, 2019.  This means that any company or individual that uses bots online for solicitations of commercial transactions or to influence a vote in an election should ensure appropriate “clear, conspicuous, and reasonably designated” disclosures are made to inform persons with whom a bot communicates or interacts with that it is a bot and not a human. SB 1001 is not a ban of all bots, rather, it simply aims to foster transparency for California online users.

For more details see our blog post from October here.

FTC Nursery Guides Go Bye-Bye but Not Without a Fight

We have practiced in the consumer protection space collectively for more than 50 years and have not once had occasion to consult the Federal Trade Commission’s (FTC or Commission) Nursery Guides. Perhaps then it is no surprise that the FTC has decided that after 40 years it was time to say goodbye to the guides. Lest there be any confusion, “nursery” in this case refers to plants, not babies. The guides prohibited various misrepresentations about plants, including their age, hardiness, years to maturity, etc. In addition, the guides prohibited the use of names that misrepresent a plant’s true identity; the substitution of plants without notice; misrepresentations relating to size and grade or blooming or fruiting ability; failure to disclose whether plants were collected from the wild or misrepresenting the origin of a plant or bulb. (Now, you’re probably starting to realize why we’ve not counseled on this.) Unlike many of the more recent Commission guides, such as the Green Guides, the Nursery Guides typically do not provide examples of what a term or claim (e.g., “eco-friendly”) might imply. Continue Reading

Takeaways from FDA Hearing on CBD

On May 31, the Food and Drug Administration (FDA) held a hearing at its headquarters in Silver Spring, Maryland, to hear from the public about cannabidiol (CBD). The popularity of CBD was reflected in participation at the meeting, which took place in a jam-packed conference room and involved 120 speakers, selected from more than 400 applicants. CBD is a cannabinoid found in the cannabis plant and now also found in coffee shops, pharmacies and, of course, online. It’s sold in oils, pills, gummies, lollipops, coffee, shampoo, pain cream and dog treats, to name just a few items. Companies claim that these products treat a wide range of ailments, including stress, sleeplessness and pain. But despite its seeming ubiquity, CBD’s legal status is a work in progress. By way of background, CBD was prohibited by federal law until the 2018 Farm Bill removed hemp from the definition of marijuana. That action created a veritable gold rush as companies raced into the sector. But some states still prohibit the substance, and the FDA prohibits unsubstantiated claims related to CBD, as it does for anything else within its regulatory ambit. Additionally, because CBD was approved for use in a drug before being used in conventional foods or supplements, the FDA prohibits its use in those products without additional rulemaking. The hearing was an opportunity for the FDA to hear about these issues and more.  Continue Reading

Ad and Publishing Industries Confront CCPA Challenges While Congress Considers Privacy

The junior Senator from Missouri, Joshua Hawley (R), has introduced s 1578, which would require the Federal Trade Commission (FTC) to create and make available a “do not track” (DNT) signal that consumers can associate with their devices and require that online services look for the signal and, when indicated, not collect, use or share data beyond what is necessary to operate the service, and specifically not for Interest-based Advertising (IBA), and, further, require  third-party operators, including advertisers and adtech companies, not collect any data other than for the purpose of analyzing how or whether the user engaged with the operator’s program, and then only in a de-identified manner and without creating or contributing to a user profile.  The proposed law would prohibit publishers from denying service to users that enable a DNT signal or provide them with a different level of service.  That would ban charging a subscription fee for IBA-free access to make up for lost ad revenue (IBA commands higher prices than contextual or run of site ads), something that the California Consumer Privacy Protection Act (CCPA) does not prohibit.  The FTC, and state AGs, would be able to enforce the law and it gives the FTC authority to seek civil penalties of $50 per affected user for negligent violations and $1000 per user, and a minimum fine of $100,000, for reckless or willful violations.  There is no private right of action proposed and the bill does not preempt CCPA or other state law.  This may be an attempt to influence the federal privacy legislation being drafted by Congressional leadership in both chambers.  A coalition of advertising industry associations (https://www.privacyforamerica.com/about/) is working with the applicable committees in the House and Senate  to develop a paradigm that is based on preventing harm and prohibiting certain data practices that are overly intrusive or have a potential to cause harm to consumers, and would specifically not limit transfers of data for advertising purposes, including tracking and targeting, so long as sensitive data is not used and the use does not include making determinations on eligibility (e.g., credit, housing, employment). Regardless of what may come out of the nation’s capital, the more immediate issue for advertisers and publishers is preparing to implement to do not sell right under the CCPA, effective January 1, 2020, and being able to provide the required notices and honor the access, copy and deletion of information rights.  We have previously published more detailed information on what is required under that law available on our U.S. Consumer Privacy Resource Center.  And, as we have reported, other states are considering CCPA-like legislation.  NV, IL and NJ seem the most likely to pass CCPA-inspired legislation this year.  The proposals in WA and TX died.  Still under consideration are bills in AZ, HI, MD, MA (has a private right of action), MS, NM, NY, ND, OR, RI, and VA.  We will continue to update you on legislative challenges to digital advertising.

Read more on BakerHostetler’s Data Privacy Monitor >>

FTC MUSA Remedy Wars Continue

We recently wrote about the Federal Trade Commission’s (FTC’s) recent approval of a pair of Made in USA (MUSA) settlements. It is also worth noting that the approvals drew a statement and a dissent from the Commission’s Democrats and a concurrence from Chairman Simons. As is often now the case, the dispute made its way onto Twitter, and Commissioner Slaughter became something of a Twitter folk hero for declaring that comments filed in response to the proposed settlement had caused her to change her mind. (The folks who handle comments filed at the FTC may find themselves a bit busier going forward.) Continue Reading

Judge Rules That USDA’s Approval of “Natural” Label Claims Protects Same Claims Used in Advertising

On April 8, 2019, a judge in the Superior Court of the District of Columbia, Civil Division, granted summary judgment to Hormel Food Corporation (Hormel) in a case filed by the Animal Legal Defense Fund (ALDF) on the grounds of standing and pre-emption, confirming the rule established in jurisdictions across the country that the approval of “natural”-related claims by the United States Department of Agriculture (USDA) pre-empts state-law allegations of false and misleading advertising when the manufacturer has used the terms as approved. Continue Reading

20 Years Young: The Maturing of COPPA in a Privacy-Conscious Age

We cover children’s privacy and advertising weekly. However, in light of COPPA’s recent 20th anniversary, and in the wake of CARU’s biggest-yet West Coast CARU conference, ADLaw has enlisted CARU super lawyer Katie Goldsteinto help us recap the past 2.5 decades of KIDlaw.

1998: A Concern for Children’s Privacy Was Born

From the moment home computers had the capacity to connect to the Internet, or in other words about the time Al Gore invented the Internet, children had the ability to use these technologies to access websites and online services. In the 1990s, concerns about children’s privacy and safety online arose amid fears of pedophile creepers and abusive online marketing practices.

The Children’s Advertising Review Unit (CARU), founded in 1974, has always been on the forefront of the effort to safeguard children’s privacy. CARU is the self-regulatory arm of the children’s advertising industry, tasked with promoting truth in children’s advertising by reviewing and evaluating child-directed ads in all media to ensure they are truthful, accurate and appropriate. CARU also monitors online privacy practices as they affect children. Continue Reading

The Rise and Fall of Statistical Significance

Dealing with clinical studies can be one of the more challenging aspects of being an advertising/marketing lawyer, particularly if you are one of many lawyers who took the political science/econ route to law school. However, there’s one question that we all know to ask: Are the results clinically significant? If the answer is no, the conversation shuts down and the study is set aside. If the answer is yes, things are definitely looking up.

So why then are we writing a blog on statistical significance? Are we testing a cure for chronic insomnia? Bear with us if you can. We promise to try to make this interesting. And more importantly, the one thing you always thought was easy about dealing with clinical studies may be about to get hard.  Continue Reading

COPPA Safe Harbor Hit by Storm

Administrations come and administrations go, but the FTC and self-regulation have had a long-running love affair. But can there be too much of a good thing? The FTC has long been an enthusiastic cheerleader and active supporter of self-regulatory programs such as NAD. And the bloom doesn’t appear to be off that rose. However, a recent speech by Commissioner Chopra suggests there might be limits to the Commission’s appetite for self-regulation.

The object of Commissioner Chopra’s scrutiny is the safe harbor provision under the Children’s Online Privacy Protection Act (COPPA). The Safe Harbor program essentially outsources COPPA compliance and enforcement. Under the provision, an organization can seek approval from the FTC to run a COPPA Safe Harbor program. Operators of websites subject to COPPA can then pay a fee to have their COPPA compliance assessed and hopefully certified. Once the compliance is certified, operators are protected from being charged by the FTC with violating COPPA. Continue Reading