Ad Law Access : Washington D.C. Advertising Lawyer & Attorney : Kelley Drye & Warren Law Firm : New York, Chicago, Connecticut, New Jersey, Brussels

In previous posts, we’ve noted that sending SMS messages to consumers without their consent could violate the Telephone Consumer Protection Act (the “TCPA”). Similarly, it is generally unlawful to send fax advertisements to consumers without their consent. Our colleagues at the Telecom Law Monitor recently posted that the FCC may be planning to issue a number of forfeitures and proposed forfeitures for so-called "junk faxes” that were sent in violation of the TCPA. You can read the complete post here.

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This post was written by Dana Rosenfeld and Kristi Wolff.

The National Advertising Review Board (“NARB”) recently added fuel to a growing fire in the food and beverage industry regarding the meaning of “natural” claims. The NARB decided an appeal filed by Heartland Sweeteners, LLC (“Heartland”) regarding its Ideal sweetener product, which Heartland claimed was “more than 99% natural.” The National Advertising Division (“NAD”) previously recommended that Heartland modify or discontinue the “more than 99% natural” claim because although Ideal is 99% natural by ingredient weight, the majority of its sweetness is derived from sucralose, a high-intensity artificial sweetener that makes up about 1% of Ideal’s weight but supplies 80% of its sweetness.

The NARB shared NAD’s concern about implied claims conveyed by “more than 99% natural” insofar as consumers could understand it to mean that all or virtually all of Ideal’s sweetness comes from natural ingredients. The NARB’s decision, like NAD’s, relates the “natural” claim to the main product attribute, sweetness, rather than the natural or artificial classification of the ingredients that make up the finished product.

The FDA outlined its policy on use of “natural” in 1993 but has not officially defined the term. As use of “natural” claims have proliferated, scrutiny has increased as well. The makers of Snapple and AriZona Iced Tea have been the target of consumer class actions relating to claims that their products are “natural” despite containing high fructose corn syrup.

Advertisers need to be fully aware of the messages and risks created by use of the term “natural.” The Heartland decision demonstrates that the intended message is not always the only message. Further, advertisers can expect that a “natural” claim will draw not only the eyes of potential consumers but those of critics as well.

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A public relations agency hired by a video game developer agreed to settle FTC charges that it engaged in deceptive advertising by having employees pose as independent consumers and post favorable reviews of the games. When posting the reviews, the employees did not disclose that they worked for a firm that was hired by the developer.

Under the proposed settlement, the agency is required to remove previous posts that misrepresent the authors as independent consumers. The agreement also bars the agency from misrepresenting that an individual is an independent consumer in the future, and from making endorsements unless the authors disclose any relevant connections they have with the seller.

As we have noted in previous posts -- click here and here, for example -- endorsers are required to disclose any material connections to the companies whose products they endorse. Companies would be well-advised to establish written policies designed to ensure that their employees, bloggers, and other agents make the required disclosures. In addition, companies should closely monitor bloggers and take actions against those that do not comply with their policies.  

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On August 19, 2010, FTC staff closed an investigation into Limewire, LLC.  Limewire provides both a free and purchasable version of P2P software.  Based on the staff's closing letter, available here, the investigation focused on a security vulnerability in legacy versions of the P2P software that put users at risk of inadvertently sharing sensitive information stored on their computers.

FTC staff decided to voluntarily close the investigation. Among the factors considered as part of closing the investigation were:

• Limewire's incorporation of safeguards into the updated software's user interface to help users avoid the inadvertent sharing of sensitive documents;
• the high attrition rate for legacy versions of the software;
• Limewire's inability to force users to update to a newer software version; and
• users of some of the older software versions may have been able to avoid disclosure of sensitive PII (noting that an act/practice is not "unfair" under Section 5 unless it causes consumer injury that is not reasonably avoidable by consumers).

Given the staff's ongoing concern that consumers using the legacy software may remain at risk of PII disclosures, the staff stated its expectation that Limewire would continue to advise consumers to upgrade the software and participate in industry efforts to inform consumers about how best to avoid inadvertent sharing of sensitive documents.

This closing follows the FTC's press release earlier this year that it had notified nearly 100 organizations that their sensitive PII records were on P2P networks, and that it was investigating several organizations whose customer or employee information had been exposed on P2P networks. That press release is available here.
 

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This post was written by Alysa Hutnik and Megan Olsen. 

On August 10, 2010, Illinois enacted H.B. 4658, the Employee Credit Privacy Act, which governs the use of credit information for employment purposes. The new law makes it an unlawful employment practice for an employer to:

• Fail to hire or recruit, discharge, or otherwise discriminate against an individual because of the individual’s credit history;
• Inquire about an applicant’s or employee’s credit history; or
• Obtain an applicant’s or employee’s credit report from a consumer reporting agency.

Employers may still use credit history for employment decisions if satisfactory credit history is an established bona fide occupational requirement. Significantly, this exception includes situations where the employee has access to confidential information (e.g., personal or financial information), as well as where state or federal law requires bonding or other security cover an individual holding the position, the individual has unsupervised access to business assets valued over a certain amount, or the position is a managerial position that involves setting the direction or control of the company. The new law also allows employers to continue to conduct background investigations on employees or potential employees as long as that investigation does not involve information on credit history. 

Illinois’s law will go into effect on January 1, 2011, making it the fourth state to restrict employer’s use of an individual’s credit history for hiring decisions (Oregon enacted a law earlier this year, and Hawaii and Washington had previously enacted similar laws in 2009 and 2007 respectively).
 

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The FTC has announced proposed revisions to its model notices for consumers, users, and furnishers of information under the Fair Credit Reporting Act (FCRA). The changes are designed to reflect new rules promulgated under the Fair and Accurate Credit Transactions Act of 2003 (FACTA) and to make the notices more useful to recipients. Revisions have been proposed for: 1) the Summary of Rights for consumers; 2) the Notice of Furnisher Responsibilities; and 3) the Notice to Users. The FTC is accepting public comment on the proposed changes until September 21, 2010. The FTC’s news release, proposed notices, and Federal Register notice are available at: http://www.ftc.gov/opa/2010/08/fcra.shtm.

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In previous posts, we noted that the FTC's new Guides Concerning the Use of Endorsements and Testimonials in Advertising contain various provisions that apply to messages in social media, and that the FTC recently investigated whether Ann Taylor Stores violated Section 5 of the FTC Act in connection with a blogging promotion. eCommerce Law Report recently published an article that explains in more detail how the Guides apply in the context of social media, why the FTC closed its investigation into Ann Taylor's blogging promotion, and how companies can take steps to reduce the risks inherent in using social media. The article -- available here -- should prove useful for both markters and legal practitioners.

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On Thursday, August 12, 2010, the Payment Card Industry Security Standards Council (PCI SSC) released a document highlighting proposed revisions to the PCI Data Security Standard (PCI DSS) and Payment Application-Data Security Standard (PA-DSS).  These revisions will not include significant changes to the current standards, but seek to:

• Provide clarity on the requirements, scoping, and reporting;
• Improve flexibility for merchants to comply with the requirements;
• Address new and evolving risks;
• Incorporate industry best practices; and
• Eliminate redundancies.

The PCI SSC expects to provide a detailed summary of the changes and pre-release versions of the standards to internal participants in early September.  PCI DSS 2.0 and PA-DSS 2.0 should be released to the public on October 28, 2010, and will become effective on January 1, 2011.

Merchants, payment card processors, and payment application developers should continue to watch these developments to ensure that their services remain compliant with the standards.

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The emergence of privacy legislation from several committees in both chambers of Congress in the past months, combined with the ongoing FTC scrutiny of existing privacy practices of companies during the past year, reflect a growing concern for consumer privacy that may well lead to the establishment of standardized data security and data privacy regulations in the United States.

On Thursday, July 22, 2010, the House Energy and Commerce Committee’s Subcommittee on Commerce, Trade, and Consumer Protection, chaired by Representative Bobby Rush (D-IL), conducted a hearing to discuss the Chairman’s recently introduced H.R. 5777 – “Building Effective Strategies To Promote Responsibility Accountability Choice Transparency Innovation Consumer Expectations and Safeguards Act” (The Best Practices Act). Witnesses included key stakeholders on privacy policy – representatives from privacy advocacy organizations and private industry, and notably, David Vladeck, Director of the FTC’s Bureau of Consumer Protection.

The Senate Committee on Commerce, Science, and Transportation held their hearing regarding online privacy practices and the future of consumer privacy protection on Tuesday, July 27, 2010,. Witnesses included FTC Chairman Jon Leibowitz, FCC Chairman Julius Genachowski, as well as representatives from Google, Apple, and Facebook.

Click here to read more about the new direction of privacy regulation in the Kelley Drye client advisory.

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