Ad Law Access

Ad Law Access

Updates on consumer protection trends, issues, & developments

BBB Accountability Program Issues Warning to Online Interest-Based Advertisers

Posted in Advertising, Federal Trade Commission, Privacy and Information Security

Last Thursday, the BBB’s Online Interest-Based Advertising Accountability Program issued a compliance warning, reminding online advertisers that its privacy code applies across devices and platforms and that the Accountability Program will enforce the code’s principles irrespective of the technology the advertiser uses to collect consumer activity and serve interest-based ads.

In the warning, the Accountability Program acknowledges widespread use of new, cookie-less identification technologies that advertisers have developed in order to deliver interest-based ads across platforms and devices, due in part to the inability to use cookies on all platforms and devices. However, the Accountability Program strongly disagrees with the position that the novel privacy issues these technologies present cannot be addressed through existing regulations and self-regulatory programs. In support of its position, the Accountability Program points to its precedent – a 2012 decision against BlueCava, as well as the FTC and NAI enforcement actions against Epic Marketplace. In the BlueCava decision, the Accountability Program asked the company to clarify in its privacy policy that its opt-out was effective only on the device on which the consumer exercised the opt-out option, and to develop a cross-device opt-out for its new technology, noting “Companies’ commitment to applying the OBA Principles to their new technologies will ensure that the OBA Principles continue to evolve along with technological advances.” In 2013, the FTC entered into a settlement agreement with Epic Marketplace, resolving allegations that the company employed “history-sniffing” technology to collect consumers’ browser history, which included sensitive data, without their knowledge or consent. NAI, in 2011, had found this practice a violation of the NAI Code and NAI policies and, as a result, requires Epic to undergo annual audits.

Developed in 2009, by leading industry associations, the seven OBA Principles are intended to make online behavioral advertising more consumer-friendly, giving consumers knowledge of and control over the information collected about them. The Principles are (1) education, (2) transparency, (3) consumer control, (4) data security, (5) material changes, (6) sensitive data, and (7) accountability. It is important for advertisers engaged in online behavioral advertising to ensure compliance with these Principles, regardless of the technology and platform or device used.

Privacy and Data Security 15 Do’s and Don’ts: Tips for Avoiding FTC Enforcement

Posted in Federal Trade Commission, Privacy and Information Security

The FTC continues to remain focused on protecting consumers’ privacy and security online, offline, and in the mobile environment.  To date, the FTC has obtained more than 60 privacy settlements and brought over 50 data security cases (two of which are currently in litigation).  While nearly any company that financially benefits from the use of consumer personal data is a potential FTC target, to understand what particular practices the FTC views as unlawful can be challenging. To help navigate that task, Alysa Hutnik and Crystal Skelton authored an article for Bloomberg BNA’s Privacy and Security Law Report that summarizes 15 do’s and don’ts to consider when implementing privacy and data security practices.

To read the full article, please click here.

Suit Alleges Neiman Marcus Outlet Prices are Deceptive

Posted in Advertising Litigation, Retail

In February, we posted that four members of Congress sent a letter to the FTC expressing concerns that consumers are being deceived by pricing at outlet stores and asking the FTC to investigate. Although the FTC has been fairly quiet on this issue, so far, plaintiffs’ attorneys have started to take notice.

Last week, a plaintiff filed a class action against Neiman Marcus, alleging that the retailer’s outlet pricing violates California laws. Items in Neiman Marcus Last Call stores bear price tags with a sale price, the words “compared to,” and a higher price. According to the complaint, the “compared to” language gives the false impression that items were sold in Neiman Marcus stores at the higher price. In reality, the plaintiff alleges, the “Last Call clothing is actually not intended for the sale at the traditional Neiman Marcus stores . . . but rather strictly for the Last Call Store.”

The complaint seeks monetary damages and a permanent injunction that would prevent Neiman Marcus from continuing to engage in allegedly deceptive sales practices.

As we’ve noted before, there has been an increase in cases involving retail pricing in recent months. If you’re a retailer, you should pay close attention to recent cases and state pricing laws, particularly when you’re advertising discounts, sales, or other price reductions.

Smooth Sale-ing: Jos. A. Bank Wins Before Seventh Circuit

Posted in Advertising, Advertising Litigation, Class Action Litigation, Retail

Late last week, the Seventh Circuit affirmed the dismissal of a putative class action alleging that Jos. A. Bank advertises its normal retail prices as temporary price reductions, in violation the Illinois Consumer Fraud and Deceptive Business Practices Act. The company’s pricing practices, the plaintiff argued, constituted a “fraudulent sales technique.” Illinois law, like most state promotional pricing laws, requires that an advertised former price be equal to or below the price at which a seller made a substantial number of sales, or made a good faith attempt to sell the product, in the recent regular course of business.

According to the complaint, in July 2012, the plaintiff, Patrick Camasta purchased six shirts for $167 after seeing an ad publicizing “sales prices” in a JAB Illinois retail store. Pursuant to the terms of the promotion, he purchased one shirt for $87.50 and one shirt for $79.50, and received two free shirts with each purchase. Camasta alleged that he later learned that the sale was not a temporary price reduction, but was the normal retail price at which JAB offers the items and advertises them as “sales” to Illinois consumers.

In July 2013, the U.S. District Court for the Northern District of Illinois dismissed the lawsuit in its entirety, with prejudice, determining that Camasta failed to adequately plead the circumstances constituting the alleged fraud and to demonstrate that he had suffered actual pecuniary loss as a result of the transaction – i.e., that he paid more than the value of the shirts he purchased. The court concluded that the complaint was predicated on speculative statements about the allegedly deceptive ad and JAB’s pricing practices, and that Camasta would not have purchased the shirts had he known the “sale” price was actually the normal retail price. The Seventh Circuit agreed, noting that Camasta had neither satisfied Rule 9(b)’s heightened pleading requirements for claims of fraud nor pled facts sufficient to support his claims for actual damages. Furthermore, the court concluded, “[s]ince Camasta is now aware of JAB’s sales practices, he is not likely to be harmed by the practices in the future . . . [and] not entitled to injunctive relief.”

While Jos. A. Bank emerged from this fight victorious, other retailers have not been so lucky. Kohl’s, for example, was involved in a similar action in California, and, on appeal, the Ninth Circuit concluded that the plaintiff had adequately alleged economic injury under California law by claiming that the advertised discounts conveyed false information about the goods and that he would not have purchased them absent the misrepresentation. The Kohl’s case, and others, serve as a reminder that promotional pricing is a hot topic for class action plaintiffs, and we recommend that retailers review their sale policies to make sure they are in compliance with applicable state laws.

NAD Asks Postal Service to Disclose Restrictions on Ads

Posted in Advertising, NAD

Last week, the NAD asked the US Postal Service do a better job of disclosing the restrictions on its “$50 insurance included in Priority Mail service” offer. The case started as a complaint from a consumer, who claimed the Postal Service lost a package she had mailed using the Priority Mail service. When the consumer filed a claim, she was advised that her refund would be only $15, plus postage. The consumer complained that the Postal Service’s ads didn’t disclose any restrictions on the reimbursement.

After reviewing the Postal Service’s ads, the NAD sided with the consumer. Because the ads didn’t disclose that there were any restrictions or limitations on the coverage, the ads reasonably conveyed that a consumer would be reimbursed a full $50 for a lost shipment using the Priority Mail service — not “up to” $50. Accordingly, the NAD recommended that the Postal Service make various changes to its ads, including to more clearly and conspicuously disclose the restrictions and limitations.

Although most NAD cases are initiated by competitors, this case serves as a reminder that consumers can also file a challenge. The case also services as another reminder (in case you needed one) that advertisers must always disclose any material restrictions or limitations on their offers.

Capital One Settles Largest TCPA Class Action for $75M

Posted in Class Action Litigation, Telemarketing and Call Center Operations

Last week, a court preliminarily approved the largest class action settlement alleging violations of the Telephone Consumer Protection Act (TCPA).  Capitol One, along with three debt collection agencies, agreed to pay more than $75 million to settle a consolidated class action lawsuit alleging that the companies used an automatic telephone dialing system (ATDS) and/or artificial prerecorded voice to call consumers’ cellular telephones without the prior express consent of those called.  

Under the TCPA, prior express consent is required for any non-telemarketing call – such as a debt collection call – made to a mobile phone using an ATDS and/or an artificial prerecorded voice.  (A higher standard – prior WRITTEN express consent – is required to make calls to cell phones using an ATDS or a prerecorded voice for any telemarketing).

In addition to alleging that the companies never received prior express consent, certain plaintiffs alleged that (1) their cell phone was called concerning another person’s Capitol One account; (2) Capitol One was repeatedly asked to stop calling, but calls continued nonetheless; and (3) Capitol One obtained plaintiffs’ cell number from a third party via skip tracing. 

The settlement is a good reminder of the repercussions that may follow when a company has not closely reviewed and ascertained the sources from which it obtains phone numbers, whether any are cellular phone numbers and the likelihood that such numbers still belong to the customer (or have since been disconnected and reassigned), and are matched with the correct type of consent to be called.  Even slight oversights in this area are exposing a number of companies to claims of potential violations (and massive financial exposure) under the TCPA.

The FTC Has Announced a Weight Loss Settlement … But Wait, Keep Reading

Posted in Advertising, Federal Trade Commission, Food and Drug

That the FTC has announced another weight loss settlement is no news at all.  The FTC averages about six new weight loss orders per year.  The new settlement, nevertheless, is notable as a reminder of the following points.

The FTC has the power to impose bans.  The Order against the marketers of Double Shot diet pills “permanently restrain[s] and enjoin[s]” them from advertising or selling “any weight-loss product.”  The FTC does not frequently impose bans in weight loss cases, but bans have been used before in similar instances where extreme Gut Check claims (discussed below) have been made. 

Any FTC orders requiring “competent and reliable scientific evidence” will likely now include record-keeping provisions for clinical studies.  For any future health-related claims – other than weight loss claims – the Order requires the Double Shot marketers to possess “competent and reliable scientific evidence.”  The Order further requires the parties to obtain or maintain data and other records from any clinical study relied upon for claims.  A narrow exception is made only for certain “reliably reported” studies that were conducted independently of the parties.  This is the third FTC order to include such record-keeping provisions.  We discussed the first two orders here and here. Continue Reading

FTC Releases a Second Order Requiring Preservation of Records from Clinical Trials

Posted in Advertising, Federal Trade Commission, Food and Drug

The FTC recently announced a settlement with the makers of Nopalea, a fruit drink derived from Nopal or “prickly-pear” cactus. The FTC alleges that the company and two individuals disseminated unsubstantiated claims that Nopalea improves respiration, treats skin conditions, and reduces inflammation and pain, including pain associated with arthritis, fibromyalgia, and other conditions. The company and individuals agreed to follow the terms of a consent order and pay $3.5 million in consumer redress. 

For any future, similar claims to treat respiratory or skin conditions, or pain or inflammation, the consent order requires the named parties to possess “human clinical testing.” The exact number of clinical studies required is not specified, and presumably one could be enough. This is somewhat surprising given the relatively serious nature of the claims that were at issue. Other recent orders have typically required “at least two” clinical studies where claims for conditions, such as arthritis and diabetes, have been at issue. Generally, in the realm of diseases and health conditions, only one trial has been required only where claims were for less serious conditions, like head lice.  Continue Reading

Third Plastic Lumber Company Hammered by FTC Over “Green” Claims

Posted in Federal Trade Commission, Green Marketing

Last week, the FTC announced it had reached another settlement with a plastic lumber company regarding its green marketing claims.  This is the FTC’s third settlement in five months relating to environmental claims for plastic lumber products (the other cases involved N.E.W. Plastics Corp. and American Plastic Lumber, Inc.).

The FTC’s complaint alleges that Engineered Plastics Systems, LLC (“EPS”) marketed its plastic lumber products – including picnic tables and benches – as made of “recycled plastic,” made “entirely of recycled plastic lumber,” or having an “all recycled plastic design.”  The FTC alleges that while consumers would likely interpret the claims to mean that the products are made from all, or virtually all, recycled plastic, the products contained, on average, only about 72 percent recycled plastic.  The products also contained some non-recycled plastic and a mineral component.

The proposed consent order with EPS prohibits the company from misrepresenting the recycled content or environmental benefit of any product or package.  For any recycled-content claims, the company must substantiate the claims by demonstrating that the content of its product or package is composed of materials that have been recovered or otherwise diverted from the waste stream.  The FTC’s consent order will remain effective for 20 years.

FTC Updates COPPA FAQs on Parental Consent Mechanisms

Posted in Federal Trade Commission, Privacy and Information Security

This week, the Federal Trade Commission announced the latest revisions to its Frequently Asked Questions (“FAQs”) document to assist online operators as they work to comply with changes to the Children’s Online Privacy Protection (“COPPA”) Rule that went into effect on July 1, 2013. The updated FAQs provide the following expanded guidance on verifiable parental consent (“VPC”) mechanisms under the Rule:

  • Credit or Debit Card Number: The FTC revises FAQ H.5 to recognize that an operator may collect a credit or debit card number without engaging in a monetary transaction, if the method is “reasonably calculated” to ensure that consent is being provided by the parent. For example, an operator could supplement the request for credit card information with special questions to which only parents would know the answer and find supplemental ways to contact the parent.  This is a change from the FTC’s previous FAQ, which required all credit or debit card numbers to be coupled with a monetary transaction.
  • Reliance on Third Party Platforms to Obtain VPC:  The FTC revises FAQ H.10 to allow app developers to rely on VPC obtained by a third party, such as an app store, if the developer provides parents with a direct notice outlining its information collection practices before the parent provides consent.  The operator, however, must ensure that the third party is obtaining consent in a way that is reasonably calculated to ensure the person providing the consent is the parent.  Merely allowing a parent to enter an app store account number or password, however, would not be enough to guarantee that it is the parent, and not the child, entering the information. 
  • Third Party Platform Liability for Obtaining VPC:  In connection with FAQ H.10, the FTC provides a new FAQ H.16  for app stores providing a VPC mechanism for operators to use.  The FTC recognizes that, because app stores are not “operators” under COPPA, they will not be liable under COPPA for failing to investigate the privacy practices of the operators for whom they obtain consent.  The FTC cautions such third parties that they may nonetheless be liable under Section 5 of the FTC Act if, for example, they overstate the level of oversight provided for a child-directed app.

These updates are the latest in a series of recent updates to the COPPA FAQs (also see herehere, here, and here) to educate operators of websites and online services directed to children about their obligations under the amended COPPA Rule.