Dreaming of Ads for Sugarplums

Leading into the long holiday weekend, we on the BakerHostetler Advertising, Marketing & Digital Media team have lots to be thankful for. Our newest partner, Daniel, has really helped remind us how much we enjoy blogging. As we are pushing off the pandemic languishing, one of our resolutions is to commit to more consistent posts in the new year. But it’s Thursday, Christmas Eve eve. We could write about the CFPB probe into Buy Now Pay Later products or the drama brewing at the FDIC over CFPB actions. But I would rather talk about the holidays and food, as the seasonal spirit is beginning to take over and these things make me happy. It’s just that kind of a day.

As shoppers tentatively head back to in-person shopping, many are braving the grocery stores post-vaccine, claiming they enjoy the experience. Surprise and delight don’t seem to be limited just to fellow shoppers actually keeping their masks above their nostrils, at least not for some shoppers at Giant Eagle and Meijer. Stouffer’s has added singing stickers to some of its lasagna packages. You can “push me for holiday cheer” and enjoy Deck the Halls rewritten to “treat yourself to something cheesy, falalalala-lasagna.” This will probably not top my favorite Christmas ad, but it is singing stickers and lasagna. ’Nuf said.

I have also taken to starting my mornings by visiting Jonathan Graziano’s TikTok page to see if it is going to be a Bones or No Bones day, where whether the aging pug gets up for his walk (bones) or slumps back into his bed (no bones) tells us what kind of day it will be. Jonathan and his dry sidekick Noodle also do select sponsored content, such as this post from Grubhub.  Which, since this is an ad LAW blog, I should note has perfect material connection disclosure – starting the written post with #ad and ending with #GrubhubPartner, as well as a native disclosure in the video itself. Noodle is a star and any brand is lucky to land him.

But this British ad for upscale eatery Waitrose probably best sums up my feelings about the holidays and feasting. Enjoy some good cheer and raise a glass and a fork with friends and family as we close 2021. I might be back one Friday in January sharing my favorite weight loss and workout advertising trends. Maybe. Here’s to a happy and safe holiday for you and yours from AD-ttorneys Law Blog.

Why Everyone Is Talking About a Rarely Invoked Rule – the FTC’s Health Breach Notification Rule

Back in September, the Federal Trade Commission (FTC) issued (by a 3-2 vote) a policy statement (the Statement) regarding the oft-forgotten Health Breach Notification Rule (the Rule). I was at the FTC when the Statement was released and have since joined BakerHostetler. Around the time I joined BakerHostetler, my new colleague Melissa Hewitt published an informative blog about the Statement and what it could mean for non-HIPAA covered health apps. Now that the dust has settled, we thought it would be a good time to do a deeper dive into the Rule and provide some food for thought regarding compliance with it. Continue Reading

What Is a Rule-A-Palooza – Another Public Federal Trade Commission Meeting

I used to read a lot of TV show recaps that were touted as “We watch so you don’t have to.” Little did I know that same concept would apply to these new public meetings of the Federal Trade Commission (FTC) and that I would be the one recapping. The meetings aren’t quite must-see TV, but I keep coming back for more – much like at the Caesar’s Palace buffet.

So the theme for Episode Six – I mean the sixth public meeting – is imposters, which unfortunately has nothing to do with Among Us. But in the real world of consumer protection enforcement, imposters are a pretty important thing to consider. Law enforcement actions have challenged companies that allegedly falsely implied affiliation with the U.S. Citizenship and Immigration Services, with well-known tech companies and sometimes with the FTC itself. Imposters do real harm to consumers and also sully the good name of the entity they are impersonating. And for many years, the FTC and other law enforcement agencies have provided the public with really helpful information about avoiding imposter scams.

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Ambiguities in the FTC’s New Made in USA Rule, Part 1

The FTC (the Commission) has given us plenty to write about these days, particularly as it looks for ways to beef up its ability to obtain monetary relief in light of the Supreme Court’s unanimous AMG decision. We have written a lot recently about the FTC’s Notice of Penalty letters, but we would be remiss if we did not take time to also comment more extensively on the FTC’s adoption of a new rule regarding misleading Made in USA claims on product labeling and in mail-order catalogs and mail-order promotional materials. The latter, by the way, includes electronic mail, and caused a bit of a partisan spat among the FTC commissioners as to whether Congress intended for the Commission’s Made in USA rulemaking authority to extend that far.

In any event, the Commission codified its long-standing guidance that for an unqualified Made in USA claim, “all or virtually all” ingredients or components of the product must be made and sourced in the USA. The problem is that the FTC’s Made in USA enforcement policy is rife with vague standards that are, in practice, often hard to apply with any degree of certainty. Vagueness and ambiguity are one thing when a company is weighing whether its actions might violate Section 5 and subject it to a cease-and-desist order, but it is quite another thing when they characterize a rule, the violation of which subjects companies to potentially substantial per-violation civil penalties. If the FTC is going to promulgate rules and expect companies to abide by them, compliance shouldn’t involve having to guess how the rules apply, which, unfortunately, happens all too often the case with Made in USA. In this blog and others that will follow over the coming weeks, we will highlight some of the uncertainties surrounding the FTC’s Made in USA rule. Continue Reading

A Stumble out of the Section 19 FTC Gate

As many of our readers know, the U.S. Supreme Court decision in AMG dramatically changed things with respect to the ability of the Federal Trade Commission (FTC) to obtain certain monetary remedies. A lot has been written and theorized about the FTC’s post-AMG strategies, but certainly Section 19 of the FTC Act was lined up and ready for its Norma Desmond close-up. Section 19 provides that in many situations where the FTC alleges a rule violation, a federal court would have the authority to:

grant such relief as the court finds necessary to redress injury to consumers or other persons, partnerships, and corporations resulting from the rule violation or the unfair or deceptive act or practice, as the case may be. Such relief may include, but shall not be limited to, rescission or reformation of contracts, the refund of money or return of property, the payment of damages, and public notification respecting the rule violation or the unfair or deceptive act or practice, as the case may be; except that nothing in this subsection is intended to authorize the imposition of any exemplary or punitive damages.

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Dawn of the FTC Zombie Votes

Kudos to Commissioner Noah Phillips and Commissioner Christine Wilson for creating and/or popularizing the catchiest Federal Trade Commission (FTC or Commission) phrase of 2021 – zombie votes. But what are these zombie votes that are the latest FTC bone of contention, and do they relate to the traditional lumbering George Romero zombies or to the more modern, fast-moving creatures of “28 Days Later”? (And yes, I agree that those aren’t really zombies. Glad to discuss further.)

So let’s get away from the name for a bit and dissect the issue. Former FTC Commissioner Rohit Chopra’s last day as commissioner was Oct. 8, 2021, and a few weeks later (but not quite 28 days later), a 3-2 vote issued from the Commission announcing a Policy Statement on the use of prior approval provisions in merger orders. Phillips and Wilson dissented on policy and procedural grounds, stating, “Today, two sitting commissioners join forces with a zombie vote cast weeks ago by the sitting Director of the Consumer Financial Protection Bureau (CFPB) to launch yet another broadside at the market for corporate control in the United States.” The “zombie” term stuck, and Politico and other news outlets reported that Chopra voted on as many as 20 different matters on his last day at the agency. These votes had the potential to be highly significant, given the fact that upon his departure, the Commission would be evenly split with two Democrats and two Republicans. And given the increased acrimony at the agency, it is not a leap to presume that these votes were made in order to allow the Democrats to retain a majority on certain pending matters.

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Tallying Complaints: Don’t Count Your FTC Chickens Before They Hatch

I was an FTCer for many years, and one issue we would face every few years was how to objectively measure the success (or failure) of a law enforcement agency. It is an important issue that has to be addressed when crafting an agencywide strategic plan, a draft of which was released a few weeks ago. For many years, the key measure for the Federal Trade Commission’s (FTC) Bureau of Consumer Protection was how many orders were entered each year. And more recently, the key focus has been how much money the agency returned to consumers – a measure that could be more elusive given the AMG decision. But the raw number of cases filed per year has generally not been one of the agency’s strategic measures – and for good reasons, which we will discuss later.

Despite the agency’s lack of focus on counting cases, inevitably, the number of cases filed surfaces as a de facto measure of agency success in articles outside the building. Indeed, a 2019 USA Today story made that point and set forth a rather arbitrary means of counting cases filed – counting enforcement actions of $5,000 or more – and concluded that there was a decline in cases filed from one administration to the next. I remember wondering when the article came out where that $5,000 criterion came from and questioning many of the conclusions in the article.

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Taking a Break from the FTC Drama

The latest Federal Trade Commission (FTC or Commission) public meeting was notable for what did not happen – there were no 3-2 votes taken over the strong objections of the Republican commissioners. With former Commissioner Rohit Chopra’s departure to head the CFPB, for at least the next few weeks – or, more likely, months – we are in 2-2 territory at the agency. Until, of course, the Senate acts on the nomination of Alvaro Bedoya, the founding director of the Center on Privacy & Technology at Georgetown Law. (Note: His hearing was held earlier this week.) So let’s dive into a relatively tame Commission meeting.

For a dramatic change of pace, the Commission’s latest public meeting featured the consumer comment section upfront, and we heard from 15 different consumers raising issues ranging from supply chain challenges to a request for a study on franchise issues to surveillance marketing concerns. Chair Lina Khan kicked off this discussion by indicating that the FTC is making sure that the comments are heard and being integrated into the work that the agency is doing on the consumer protection and competition sides. That makes sense to me – but I continue to wonder how the agency will accomplish this, given the breadth and diversity and importance of issues being raised though this public comment section of the Commission meetings. (As an aside, the FTC’s press office director does such a good job at enforcing the two-minute speaking time limit that I may start a petition to have her assume responsibility for the Academy Award time limits.)

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Much Ado About Penalties

So we have been writing quite a lot about the recent deluge of FTC Notice of Penalty Offense letters. And as we have told you, at their core, the letters are a vehicle that would potentially allow the agency to seek significant civil penalties against companies with actual knowledge that their actions violate the principles described in the letters. My colleagues recently wrote a great blog discussing some of the limitations of this authority and raising questions about the legal underpinnings of aspects of this authority.

But there are other ways the FTC can seek to impose penalties. One way is through a company violating its own administrative order. Another is through Congress expressly giving the FTC penalty authority, and we have seen that in specific areas such as telemarketing and children’s privacy. But there is language afoot in current budget legislation that would dramatically change the landscape and allow the FTC to broadly seek civil penalties for initial violations of the FTC Act’s prohibitions on unfair or deceptive acts or practices. This would be a significant game changer if it becomes law. Longtime FTC watchers may recall that back in 2010, there was a somewhat similar move afoot to give the FTC this type of broad fining authority. It never happened.

After 23 years of living in D.C., I have learned to never predict what Congress will or will not do, but we will be watching this provision to see if it disappears or actually becomes law. For now, we aren’t running around screaming that the sky is falling, but this would be a very big deal if it actually happened. We will keep you posted on this and other FTC developments.

Less to the FTC’s Notice of Penalty Offenses Than Meets the Eye?

The FTC’s Notice of Penalty Offenses concerning endorsements and testimonials is barely a week old and it’s likely already had its intended effect. Hundreds, if not more, of consumer products companies are taking a second or third look at their practices when it comes to endorsements and testimonials and are beefing up their training and guidance materials. We blogged about the basics concerning the FTC’s notice when it first came out, but it is perhaps time to take a closer look at the extent to which the FTC has a legal basis to assert the right to civil penalties. Please, however, do not take our analysis of the FTC’s legal authority as an invitation to go back to not caring about how your company uses endorsements and testimonials; no one likely wants to find themselves in the position of having to argue to a court about whether the FTC’s notice is legally sufficient. However, given that this is a tool the FTC has begun using extensively and promises to utilize even more in the future (just today, the FTC announced an additional round of letters), we thought it worth a closer look at the legal underpinnings of the FTC’s actions.

As we previously wrote, Section 45(m)(1)(B) of the FTC Act permits the FTC to notify companies that certain acts or practices have been found in administrative decisions, other than consent orders, to be deceptive or unfair and, having put those companies on notice, it permits the FTC to impose civil penalties should the companies engage in the same acts or practices. A key question regarding the FTC’s authority in this regard is how close the fit has to be between the act or practice found unlawful in the administrative proceeding and the subsequent act or practice engaged in by the party that has been put on notice. For example, suppose the FTC prevailed in an administrative proceeding with regard to a deceptive weight-loss health claim; could it then send a letter to hundreds of companies notifying them of the decision’s finding that making health claims without adequate substantiation is deceptive and putting the companies on notice that they are liable for civil penalties if they too make health claims without adequate substantiation? How close must the facts of the decided case match the facts in the subsequent matter? Does the answer to that question depend on how much factual context informs the legal conclusion? Given that the premise of Section 45(m)(1)(B) is actual notice that the act or practice is deceptive or unfair, presumably broad characterizations of an act or practice as unlawful in a situation where facts are important (e.g., what connections are material) are too broad. In the above hypothetical, companies still will not have actual notice as to whether the substantiation they may have for a specific type of health claim other than weight-loss claims is or is not reasonable.

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