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.
- 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.
- 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.
- FTC Brain Drain – For most of my career, there has been remarkable continuity in senior FTC staff positions. In 2020, Mary Engle, longtime associate director of the FTC’s Division of Advertising Practices, left to join BBB National Programs, and in early 2021, she recruited long-time FTC Ad Practices attorney Mamie Kresses to run the Children’s Advertising Review Unit. Things really accelerated this year with the appointment of new political leadership at the FTC. Maneesha Mithal, associate director, Division of Privacy and Identity Protection, resigned, as did Frank Gorman, a 23-year veteran and most recently acting deputy director of the Bureau of Consumer Protection (BCP). Finally, another 23-year veteran, recent acting head of the BCP Daniel Kaufman, left to join us here at BakerHostetler. What does all this mean? Perhaps an FTC that is less predictable and less beholden to how the agency has operated in the past.
- Made in USA Rule – This fall, the agency turned its Made in USA guidance into a rule that now carries the potential for civil penalties if violated. If several commissioners get their way, this is only the first of many such rules to come as the agency looks for other ways to get monetary relief. However, creating rules may also shine a spotlight on ambiguities and vagaries in some of the commission’s existing guidance as, unlike a run-of-the-mill Section 5 violation, the commission must satisfy a scienter requirement to obtain civil penalties for a rule violation.
- Surprise Chairmanship – Things took a bit of a surprising turn in June 2021 when it was suddenly announced that in addition to being confirmed by a bipartisan Senate vote to be a commissioner, Lina Khan had also been elevated to the position of chair of the FTC. And thus began a series of new senior appointments at the agency and legions of competition and consumer protection attorneys carefully reviewing her writings. So far, the agency has been far more vocal about competition priorities, but that will likely change when and if the new fifth commissioner, Alvaro Bedoya, is confirmed.
- Public Commission Meetings – Much to the surprise of many, within weeks of confirmation, Khan instituted or revitalized a long dormant practice of public commission meetings. At that time, there was a full commission, and FTC watchers were taken aback by a series of party-line votes and substantial concerns being raised by the minority commissioners about process fouls as well as dramatic policy shifts. 2022 will likely see the continuation of the monthly FTC public meetings.
- New Tracks/New Tricks at the National Advertising Division (NAD) – In an effort to provide more options to national advertisers for challenging competitor ads, NAD has opened up a whole new area for companies to battle over and introduced new strategic considerations for lawyers when launching a self-regulatory challenge. In an effort to speed things up, NAD launched a quicker Fast-Track SWIFT last year to issue a decision within a month for cases filed with a single, well-defined issue. This year, BBB National Programs launched a new reduced-fee “lane” in Fast-Track SWIFT to focus on misleading disclosures, particularly for influencer and consumer review posts and use of dark patterns. BBB National Programs recently announced its first decisions from its more expensive Complex Track for cases heavy on science that have three NAD staff lawyers reviewing a file rather than one. These different vehicles have given competitors and their ad lawyers more food for thought about whether to streamline and move more quickly or whether a longer, more drawn-out fight makes more sense. It is more common than not for an advertiser to contest the track the challenger has selected, and we are already seeing more appeals and more referrals from these new tracks. Certainly, in the future, HOW you file will be almost as important as WHETHER you file.
- The New Green – Is it sustainable? In 2021, claiming carbon-neutral is not enough – now, consumers look for company commitments and timelines to be “climate positive.” And it is no longer enough to be recycled; “made with ocean plastic” now ups the game. Class action challenges over “plant based” vs. bio-based and “naturally derived” claims have proliferated. So have lawsuits over more general claims of a company’s commitment to sustainability. Fast fashion is out; renting apparel or buying upcycled goods is in. Moving into 2022, the FTC will be kicking off its review of the Environmental Marketing Guides. Associations are wasting no time coordinating FTC lobbying efforts for what the revised guides should cover. It seems like a lifetime ago when the FTC said in 2012 that consumers understood “sustainable” to mean “durable.” California has expanded its law, effective the first of the year, on claims that consumer products are biodegradable or compostable, adding to the federal vs. state patchwork quilt of laws and regs. Transparency and specificity remain critical to making green claims.
- Negative Option Marketing – While the trend toward a subscription-based economy continues to surge, with industries everywhere adopting subscription-based business models, the FTC has issued a new Policy Statement for Negative Option Marketing that puts these business models at substantial risk. The new policy statement covers every form of negative option marketing including automatic renewals, continuous service, continuity programs and any other arrangement under which the consumer is charged on a recurring basis unless he or she cancels. While negative option programs sold online have been subject to the Restore Online Shoppers’ Confidence Act (ROSCA) for years, this new policy statement goes well beyond what ROSCA requires and applies to negative options offered in all media channels. For example, the policy statement requires that the terms of the negative option be disclosed in immediate proximity to the consent mechanism in a stand-alone paragraph without any extraneous language, that consumers be allowed to cancel by the same means used to enroll and that consumers must be able to cancel without any unreasonable delay (i.e., save a sale offer). The new policy statement also requires that in certain cases consent to the negative option must be separate from consent to the entire transaction. Perhaps most alarming, the new policy statement confirms the FTC’s position that at least for online transactions, ROSCA is not limited to the presentation of the negative option offer but can be invoked if the advertising makes any false or misleading statement about the products or services being offered. This means that any ad containing a negative option feature is at risk of being subject to civil penalties if it contains any false or misleading statement. The issuance of this statement is a clear signal that increased enforcement is on the horizon. Marketers offering such plans should carefully review their current disclosure, consent and cancellation mechanisms and ensure that all claims in the ad are truthful and substantiated.
- Dark Patterns – The FTC has a new name for some very old tricks and some other marketing techniques commonly used in direct-to-consumer marketing: dark patterns. Dark patterns are broadly defined as techniques designed to manipulate consumers into taking certain actions, such as making a purchase or sharing personal data. The FTC’s new focus on dark patterns is significant because, unlike standard principles of deception, this analysis focuses on the user interface and consumer behavior rather than on what the consumer’s understanding or perception of the advertising is. Examples of dark patterns include “confirmshaming” (i.e., are you sure you don’t want to save money?), representations of urgency or scarcity (i.e., only two rooms left at this price or a clock ticking on a website) and all negative options. This new focus is also dangerous because, based on research presented at the workshop the FTC held on dark patterns, increased conversion rates may be considered evidence of the presence of a dark pattern. This raises the important question of how to draw the line between deceptive dark patterns and effective marketing. Dark patterns have already made their way into some of the enforcement actions we are currently defending, and we are likely to see more attention paid to dark patterns in the future, which will hopefully provide additional guidance on how the FTC will draw that important distinction.