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:

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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