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

This week, the Direct Marketing Association announced new changes to their Guidelines for Ethical Business Practice for endorsements and testimonials.

Among other things, the new Guidelines require marketers to do the following: (a) clearly and conspicuously disclose the generally expected results of an advertised product or service, if the results described in a testimonial are not typical; (b) disclose any material connections between marketers and their endorsers that a consumer would not expect; and (c) ensure that celebrity endorsers disclose their relationships with marketers when making endorsements outside the context of traditional ads. The DMA also clarified that the Guidelines apply not only to traditional of marketing, but also to marketing in social media, such as blogs and word-of-mouth marketing campaigns.

These amendments bring Guidelines into alignment with the Federal Trade Commission’s latest Guides Concerning the Use of Endorsements and Testimonials in Advertising. As we explained in a post last month, the FTC’s new Guides pose various challenges for many companies, particularly in the context of social media. Click here for an article (starting on page 19) that provides some tips for dealing with these challenges.
 

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It’s no surprise that in our current economic condition consumer spending is down.  A company's budget, and especially marketing dollars, have to work more efficiently than ever before.  While consumers may be watching their purse strings, “green” products are prevalent, and green marketing claims can be an effective way to break out of the clutter.  Marketers must ensure, however, that those claims do not overstate the “green” benefits or they could face regulatory investigations or challenges from competitors, which cause further budgetary strain. 

From Paris to Peoria, companies should carefully consider the messages they could be communicating when touting environmental attributes of their products.  Yesterday the International Chamber of Commerce ("ICC") announced its Framework for Responsible Environmental Marketing Communications -- guidelines for international marketers when making green marketing claims.  The framework includes a checklist that marketers can use when making green claims and a chart with cross references to the Consolidated ICC Code of Advertising and Marketing Communications, which sets forth general principles governing all marketing communications.  The ICC is the international association that coordinates and promotes self-regulation of advertising.  Countries particpate through local chapters like the U.S. Council for International Business ("USCIB").

In the United States, the Federal Trade Commission has published Guides for the Use of Environmental Marketing Claims ("Green Guides") and is currently reviewing the Green Guides for possible modification.  For more information, check out our recent article, Going Green Without Giving Up Your Greenbacks.

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The Italian government recently drafted a decree that would require owners of social media sites to review all videos posted on their sites in order to screen out any content that could be harmful to minors, including pornography and excessive violence. Internet providers would be required to shut down any site that does not comply with the decree, or face fines ranging from €150 to €150,000 (approximately $210 to $210,860 USD).

The decree inherently challenges the business models of social media sites such as YouTube that allow users to upload videos without any review by the site owners. Opponents of the decree say that it would erode freedom of expression and make it burdensome -- if not impossible -- to monitor what consumers post on the internet. Google and other companies are working with the government to change the scope of the decree.

Although the internet makes it easy for American companies to promote their brands across borders, stories like this one -- as well as recent news about internet censorship in China -- demonstrate that just because a promotion may be lawful in the United States does not mean that it will be lawful in other countries. Check with your legal counsel before running a promotion outside of the United States.

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On Tuesday, January 19, 2010, the Electronic Privacy Information Center (EPIC) publicly posted a copy of a letter from the Federal Trade Commission (FTC) that responds to a complaint filed by 10 privacy rights organizations regarding Facebook's changes to its privacy settings.  In the letter, David Vladeck, director or the FTC's Bureau of Consumer Protection, noted that the "complaint raises issues of particular interest for us at this time," and referenced the privacy roundtables that the FTC is hosting to explore consumer privacy protection challenges, existing fair information practices, and the creation of a new privacy regulatory framework.  A summary of the first privacy roundtable is available here.

While there is no indication as to whether the FTC is currently investigating Facebook, as any investigation would remain non-public until the FTC files a complaint or closes the investigation, this is not the first time Facebook has come under fire for its privacy practices.  In 2008, a class action complaint was filed against Facebook alleging violations of various federal privacy and computer fraud laws, as well as California consumer protection and computer crimes laws, arising out of Facebook's Beacon program.  It was alleged that under the Beacon program, information about Facebook users' online purchases with Facebook's partners was shared with the users' network without the users' consent and used in targeted advertising.  A $9.5 million settlement agreement is pending approval by the court.

If your company maintains information about your customers, check with your legal counsel before adjusting privacy practices that could result in new or different customer information being shared.

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Late Friday the Consumer Product Safety Commission ("Commission" or  "CPSC") sent to Congress a report with recommendations for improving the Consumer Product Safety Improvement Act ("CPSIA"):

• Provide greater flexibility in granting exclusions from Section 101(a) of the CPSIA.  The CPSA has already tried to reduce any unduly burdensome effects of Section 101(a) where Congress may not have intended to include certain products within the scope of the lead content limits, but needs additional flexibility to grant exclusions for certain products, inicluding youth ATVs and bicycles, sporting equipment, and ordinary books.
• Exclude ordinary children's books and other children's paper-based printed materials.  Although the Commission has provided some relief for newer ordinary children's books, the staff has determined that some books printed before 1985 contain highly illustrated pages with lead content above the strict lead ban.  Congress may not have intended for the CPSIA to cover those books.
• Apply the 100 ppm Lead Content Limits Prospectively Only, Not Retroactively.  Based on the CPSC's experience implementing the lead content limits retroactively, market disruption may occur if the 100 ppm lead content limits are applied retroactively.  The new tracking label requirements will help to ensure that products manufactured after the 100 ppm deadline becomes effective are compliant.
• Address Concerns of Low-Volume Manufacturers.  The Commission will continue to consider the concerns of small manufacturers and crafters as it develops the mandatory rule on testing and certification.  The Commission stated that it remains committed to working with Congress to explore other ways to reduce the burdens on those entities, but offered no specific recommendation to Congress.

Chairman Tenenbaum and Commissioners Nord, Adler, and Northup issued individual statements in connection with the report.  The Commission prepared the report in response to a request from the House and Senate Appropriates Committees, the House Energy and Commerce Committee, and the Senate Commerce, Science, and Transportation Committee.

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Skype, a service that lets consumers make phone calls online, agreed to settle a class action that challenged the company's policy of expiring credits that were older than 180 days. While Skype is free for consumers who call each other over the internet, there are fees associated with various additional features. To use these features, consumer can purchase “credits.” However, if a consumer’s account remains inactive for more than 180 days, the credit is wiped out.

The plaintiffs argued that the Skype credit is essentially a gift card, and that imposing an expiration date or inactivity fees violates laws in various states. As part of the settlement, Skype will pay $1.8 million toward a settlement fund, which will provide eligible class members with electronic vouchers for Skype credit of up to $4 each. Skype also agreed to do away with its 180-day expiration policy. More information about the settlement is available on this website.

If your company sells credits for your services, check with your legal counsel before imposing expiration dates on the credits or using any mechanism that could deplete the number of credits in a consumer’s account. Gift card laws in certain states may be broad enough to apply to your credits and could restrict your ability to deplete or expire the credits.
 

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Yesterday People for the Ethical Treatment of Animals ("PETA") announced that it will pull ads featuring the likeness of first lady Michelle Obama. The image was used without Michelle Obama's permission and created the impression that she endorses PETA. The ads also featured Oprah Winfrey, Carrie Underwood, and Tyra Banks and began appearing on New Year's Day in subway stations in Washington, DC, and on PETA's van and website.

PETA admitted that it did not have authorization, but thought that the first lady's announcement in June that she had sworn off fur justified including her in the campaign. PETA claims that it is not selling a product (or otherwise using the image for commercial purposes); rather, it is honoring beautiful women who do not wear fur.

As with Weatherproof's use of President Obama's image, PETA's predicament is a good reminder that organizations should evaluate the circumstances before using images of public figures or celebrities in ads.  An individual's statement that he or she uses a product (or, in this case, does not use a product) may not be a significant basis to use the individual's image or to imply that he or she endorses the product.
 

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On February 9, Kelley Drye will host the seminar, "A New Legal Frontier for Social Media," at our New York office.

The legal landscape for social media and user-generated content is changing. Make sure you understand the risks and rewards.  Companies engaged in blogs, social networking, and other types of interactive marketing campaigns face increased scrutiny in light of recent cases and sweeping changes to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising. These developments have increased the scope of activities and content for which advertisers may be liable.

Join the Association of Corporate Counsel and Kelley Drye for a discussion about the important legal issues and best practices for leveraging social media. Topics will include:

• Ways that companies are using social media in the form of sweepstakes, contests, blogs, wikis, and other promotions involving user-generated content;
• Legal risks and the impact of recent cases and the FTC Guides on your advertising and marketing campaigns; and
• Practical advice on how to minimize legal liability associated with social media websites and campaigns with user-generated content.

SPEAKERS:

David J. Ervin
Partner, Kelley Drye & Warren LLP
Advertising and Marketing Practice

Gonzalo E. Mon
Associate, Kelley Drye & Warren LLP
Advertising and Marketing Practice

Josephine Belli-Marinos
Associate General Counsel & Litigation Counsel
Combe Inc.

Reginald M. Rasch
General Counsel
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WHEN: February 9, 2010, from 3:00 - 5:00 PM

WHERE: Kelley Drye, 101 Park Avenue, 27th floor, New York, NY, 10178

REGISTER: email nycle@kelleydrye.com

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New privacy and data security laws took effect in Nevada and New Hampshire on January 1, 2010, continuing the trend of state governments acting to strengthen data security laws. Nevada’s law makes it the first state to mandate compliance with the entire Payment Card Industry Data Security Standard (PCI DSS) and imposes a requirement on businesses and government agencies to encrypt sensitive data transmitted or carried outside of the premises of the business or agency. New Hampshire’s law first sets forth restrictions regarding the use and disclosure of personal health information for marketing or fundraising purposes and then sets forth a disclosure requirement if there is unauthorized use or disclosure of protected health information in violation of New Hampshire law, even if the use or disclosure is allowed under federal law.

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Last week, the White House asked Weatherproof to remove a Times Square billboard that featured President Obama wearing a Weatherproof jacket in front of the Great Wall of China. According to the White House, the billboard was misleading because it suggested that the clothing was endorsed by the President and that the White House had approved the ad.

The photo was taken by a photographer from The Associated Press and Weatherproof subsequently purchased the right to use the photo from AP Images. According to The AP, their agreement with Weatherproof required the company to seek any necessary clearances before using the picture. The company's president, however, said he did not believe permission was necessary because the billboard did not explicitly say Obama endorses the jacket. News reports indicate that two newspapers and one magazine refused to publish the Weatherproof ad without evidence of the President's approval.

Be careful about using an image of an individual for advertising purposes unless you have permission from that individual. Simply having permission from the photographer is not enough. If you use the image of an individual in an ad without the individual's permission, you could face a lawsuit under right of publicity laws. Although the White House simply requested that Weatherproof remove the billboard for now , some companies have had to pay millions of dollars to settle these types of unauthorized or implied endorsement issues.

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On December 28, 2009, the Consumer Product Safety Commission (“CPSC” or “Commission”) issued a notice extending the stay of enforcement on lead-content testing and certification of certain children’s products pursuant to Section 102 of the Consumer Product Safety Improvement Act (“CPSIA”). The stay is for an additional year, to February 10, 2011^[1]. Chairman Inez Tenenbaum said in a statement, “The extension of the stay was needed in order to give the agency more time to promulgate rules important to the continued implementation of the CPSIA and for the agency to educate our stakeholders on the requirements of those new rules.” Although the Commission approved an extended stay on testing and certification for certain products, all products must continue to comply with applicable standards and bans.

Section 102 of the CPSIA and the CPSC’s related rule require every domestic manufacturer or importer of consumer products subject to any product safety rule under the CPSIA or similar rule, ban, standard, or regulation under any act enforced by the CPSC – and (1) imported for consumption and warehousing or (2) distributed in commerce – to issue certificates of conformity with the applicable standards. Those certificates must accompany all shipments of such products and be furnished to each distributor and retailer of the product. On February 9, 2009, the Commission announced a stay of enforcement for certain products that would remain in effect until February 10, 2010, when the Commission would vote on whether to terminate the stay. The stay only applied to the testing and certification requirements – the applicable mandatory safety requirements, such as the reduction in lead content and phthalates, continued to apply.

Since issuance of the stay, the Commission issued more than 20 Federal Register notices, statements of policy, guidance documents, proposed rules, interim final rules, and final rules pertaining to the CPSIA, and most of those documents related to testing and certification issues. Given that flurry of activity and the need for additional rulemaking and lab accreditation, the Commission in December announced the following phased-in approach of the testing and certification requirements.

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Last month, we posted an entry that discussed the new Promotions Guidelines issued by Facebook. The Promotions Guidelines specify what types of promotions can and cannot be run on the Facebook platform, as well as what types of activities will require companies to obtain prior written approval from Facebook.

This month, Metropolitan Corporate Counsel published an article by Gonzalo E. Mon, Christopher M. Loeffler, and David J. Ervin that discusses the Guidelines in more detail. Click here for a PDF copy of the article.

If your company wants to take advantage of Facebook to publicize or administer a promotion, you need to make sure that you comply with the Facebook Promotions Guidelines, as well as all applicable laws. Failure to do so can result in termination of your company’s rights on Facebook.
 

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