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

As children's product manufacturers and retailers have wondered whether the Consumer Product Safety Commission would take action specific to cadmium, California's Gov. Schwarzenegger has signed legislation that restricts cadmium levels in children's jewelry, following similar legislation in Connecticut, Illinois, and Minnesota.  The new California law prohibits manufacturing, shipping, or selling jewelry or jewelry components that contains more than 0.03 percent cadmium by weight starting January 1, 2012.  Cadmium can harm kidneys and bones and cause cancer.

With California now on the list, the ban could effectively become nationwide for manufacturers, distributors, and retailers of children’s jewelry that do not have (or do not want) state-specific distribution systems.  Such companies should review current practices to ensure compliance.

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Yesterday, the FTC testified before a Senate Subcommittee and recommended that proposed data security legislation introduced by Senators Pryor (D., AR) and Rockefeller (D., WV) be modified so that its requirements and the FTC’s enforcement authority there under be extended to telecommunications common carriers. See my recent article discussing FCC and FTC jurisdiction over broadband providers – which may or may not make telecom common carriers exempt from the FTC Act.

S.3742, The Data Security and Breach Notification Act of 2010 (one of several pieces of proposed data security legislation in play on the Hill), would require a broad array of commercial and nonprofit entities to (a) implement reasonable data security policies and procedures, and (b) notify consumers of a security breach involving electronic records. It also would require covered entities to offer credit reports and monitoring services to consumers impacted by a data breach. The proposed legislation, which would preempt state law, also would give general concurrent enforcement authority to the FTC and state attorneys general.

At yesterday’s hearing, subcommittee members and hearing witnesses discussed the proposed legislation’s “exemption” provision and the manner in which it might address potential redundancy with other federal data protection statutes such as HIPPA, FCRA and the Gramm-Leach-Bliley Act. Notably, in making its recommendation to extend the reach of the proposed legislation to telecommunications common carriers, the FTC made no mention of Section 222 of the Communications Act and the FCC’s related CPNI rules which require such entities to comply with complex data security requirements and also require breach notification to consumers, as well as to the FBI and Secret Service.

The FTC’s testimony is the latest in a series of FTC actions signaling the agency’s concern regarding the amount of personal information telecom common carriers handle and its ability – or inability – to take enforcement action against such carriers.

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This post was written by Sarah Roller and Raqiyyah R. Pippins.

The U.S. 8th Circuit Court of Appeals recently ruled that certain false advertising claims based on state consumer protection and anti-deception statutes were not preempted by the Organic Foods Production Act of 1990 (OFPA)— a federal Act that establishes national standards for the sale and labeling of organically produced agricultural products, and creates a certification program through which agricultural products may be certified to produce organic products. The court reversed and remanded the district court’s ruling that the false advertising claims were preempted by the OFPA, holding that, while claims challenging certification of a product as organic (e.g., alleging that a defendant’s products are falsely represented as organic when in fact the products were not organic), are preempted by the OFPA, false advertising claims challenging the facts underlying an organic certification (e.g., alleging that a defendant’s advertisements “misrepresent[] the manner in which its dairy cows were raised and fed,” and “suppress[ ] or omit[ ] material facts regarding the production of its ‘organic’ milk or milk products, specifically that . . . the dairy cows were not raised at pasture”) are not preempted by the OFPA.

As background, following a 2007 consent agreement between USDA and Aurora Dairy Corporation (Aurora) regarding Aurora’s violations of the OFPA and related implementing regulations, known as the National Organic Program (NOP), nineteen class action lawsuits were brought in federal district courts on behalf of organic milk consumers (class plaintiffs) against Aurora and various retailers, claiming violations of state law arising from Aurora’s alleged failure to comply with the OFFPA and the NOP. The U.S. Judicial Panel on Multi-District Litigation (JPMDL) consolidated these cases in the Eastern District of Missouri. In June 2009, the Eastern District court dismissed the case, finding the OFPA preempted all of the class plaintiffs claims.

The 8th Circuit’s decision distinguishes between “state law challenges to [organic] certification determination, itself, which conflict with the OFPA, and state law challenges to the facts underlying certification,” taking the position that state law “challenges to the underlying facts do not necessarily conflict with the OFPA’s purposes,” in a manner justifying preemption of such claims. A copy of the 8th Circuit’s decision is available here.

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This post was written by Christie L. Grymes and Kristin A. Hird.

On Friday, September 17, 2010, President Obama named Harvard Law Professor Elizabeth Warren as Assistant to the President & Special Adviser to the Secretary of the Treasury on the Consumer Financial Protection Bureau (CFPB). Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB will be established to regulate consumer financial products and services. Although the effect of Ms. Warren’s appointment is currently unclear, consumer advocates expect that the new position will give Ms. Warren considerable influence over the shape and direction of the new agency. Transfer of authority from the Treasury Department to the new agency is anticipated to occur in July 2011.

Click here to read more about Ms. Warren's appointment in the Kelley Drye client advisory.

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Increasingly, what's happening online is driving the evolution of privacy regulation. And increasingly, Americans are getting online via broadband connections.

The FCC, which is charged with spurring broadband deployment, adoption and innovation, recently concluded that privacy concerns are creating an impediment to these goals. A new article published in The Metropolitan Corporate Counsel provides an overview of the FCC's broadband privacy agenda and related jurisdictional issues, including shared jurisdiction with the FTC. The article also highlights initiatives by the Department of Commerce's Internet Task Force and the FTC regarding online privacy.

The article – available here – should prove useful for broadband providers and others in the Internet ecosystem looking for a quick read on how federal agencies, including those less obvious than the FTC, are engaging with respect to online privacy issues.

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With "green" products becoming more and more prevalent, marketers must ensure that their green marketing claims do not overstate the environmental benefits of their product or service, or they could face regulatory investigations or challenges from competitors. The Federal Trade Commission ("FTC") has established national standards for green marketing claims in the Guides for the Use of Environmental Marketing Claims, commonly called the Green Guides, which help reduce confusion among consumers and prevent false or misleading advertising claims.

The article, “Using ‘Green’ Marketing Claims? Make Them Clear,” discusses the Green Guides and provides helpful guidance for marketers. When it comes to promoting green products and their environmental benefits, the key is to make claims that are crystal clear.

The FTC is expected to issue revisions to the Green Guides any day, so marketers should also be on the lookout for updates that could affect the use of "biodegradable," "carbon neutral," and "recyclable" claims, carbon offsets, and third-party certifications.

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This afternoon, 32 states and the District of Columbia announced a stipulated supplemental judgment with Publishers Clearing House ("PCH") over how the company markets its sweepstakes. The judgment modifies the terms of earlier settlements over allegations that PCH advertised sweepstakes in a way that misled consumers into believing that purchases would increase their chances of winning prizes.

After reviewing recent consumer complaints and PCH mailings, the states determined that consumers could still be misled. According to the agreement, PCH will, among other things, have to: (a) pay $3.5 million to cover the cost of the states' investigation; (b) make significant changes to its mailings to avoid the implication that a purchase will increase chances of winning; and (c) increase consumer surveys to ensure that consumers understand that purchasing does not increase their chances of winning.

It is unlawful to require people to make a purchase to enter a sweepstakes. Moreover, laws in many states and on the federal level specifically require advertisers to clearly and conspicuously disclose that no purchase is necessary. Over the past few years, many companies have been challenged for advertising sweepstakes in a way that suggested a purchase was necessary or advantageous. Be careful to ensure that your ads do not create that impression.
 

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Yesterday, we posted that a window manufacturer had entered into a settlement with the Washington Attorney General’s office over allegedly unsubstantiated energy efficiency claims. Today, the FTC announced that it has sued a light bulb manufacturer and its principals to stop them from exaggerating the efficiency, light output, and life expectancy of its Light Emitting Diode (“LED”) bulbs.

Many of the ads claimed that the LED bulbs were more efficient than, and could save consumers money over, traditional bulbs. In its complaint, the FTC alleges that, in many instances, the company’s LED bulbs: (a) produced significantly less output than a typical incandescent bulb at the wattage represented in the ads; (b) produced significantly less lumens of light than the company represented in its ads; and (c) lasted less than the number of hours the company represented in its ads. The FTC is seeking a permanent injunction to stop the company’s allegedly illegal conduct, as well as monetary redress for consumers who bought the deceptively labeled products.

Advertisers must ensure they have adequate testing to support performance claims. In addition, when making comparative claims, advertisers must ensure that they make apples-to-apples comparisons, or else disclose the material differences between the products being compared.
 

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In a settlement with the Washington Attorney General’s Office, Great Lakes Window agreed not to make unsubstantiated energy efficiency claims. For five years, Great Lakes promised that consumers who purchased new windows and doors would save at least 40 percent in energy costs the first year, or be paid the difference. The promise was subject to a number of material terms and conditions.

According to the complaint, Great Lakes did not have a reasonable basis for making the 40% savings claim. Moreover, the AG alleged the energy savings realized as a result of replacing old windows varies greatly due to many energy-consumption factors, and that the actual energy savings that homeowners typically obtained was far less than the 40% savings Great Lakes promised.

Although Great Lakes denied the allegations, the company agreed not to engage in certain marketing practices and will set aside $50,000 for refunds for qualifying homeowners. The AG agreed to suspend $25,000 in civil penalties, provided Great Lakes abides with consumer protection laws in the future. The company will also pay $10,000 in attorneys’ fees and legal costs.

Advertisers should ensure they have adequate support for claims they make before they make the claims, even if they offer dissatisfied customers a mechanism to get some money back. Be particularly careful when making performance claims in cases where results can vary significantly.

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Evolving threats to payment card data security and recent payment card data compromises have prompted Visa to issue a set of best practices for payment application companies to help mitigate security issues that lead to data compromises. Visa has recommended that acquirers, merchants, and agents should review Visa’s best practices and insist that their payment application vendors, integrators, and resellers fully adopt the new standards. Visa’s best practices recommend that payment application companies:

• Perform background checks on new employees and contractors prior to hire, including conducting investigations regarding previous employment history, academic history, credit history, and reference checks;
• Maintain an internal and external software security training and certification curriculum;
• Adhere to industry guidelines for data field encryption, tokenization, and PAN elimination across payment applications that use these technologies to help reduce risks to cardholder data;
• Adhere to a common software development life cycle based on ISO 12207 across payment applications to ensure that software is being properly developed and managed;
• Ensure that newly released payment application programs are compliant with the Payment Application Data Security Standard (“PA-DSS”); and
• Conduct application vulnerability detection tests and code reviews against common vulnerabilities and weaknesses prior to sale or distribution of payment application products to help companies identify and fix problems before the product release.

Visa noted that it has provided these standards to increase awareness of the payment application industry’s best practices and stressed that all payment system participants should maintain compliance with the Payment Card Industry Data Security Standards (“PCI DSS”). The full list of Visa’s best practices can be found here.
 

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