Yesterday, our colleagues at the Telecom Law Monitor posted that the FCC had announced a $25 million settlement with Verizon Wireless over unauthorized billing of wireless data charges. The so-called "mystery fees" investigation stemmed from allegations that Verizon Wireless was charging customers $1.99 per megabyte usage charges for data sessions that consumers did not initiate or were not aware of. Click here to read the post.
This post was written by Sarah Roller and Raqiyyah R. Pippins.
On October 26, 2010, the Institute of Medicine held the first meeting of its Phase II “Examination of Front-of-Package Nutrition Rating Systems and Symbols.” As discussed in our client advisory regarding IOM’s Report on Phase I of the “Examination of Front-of- Package Nutrition Rating Systems and Symbols,” Phase II will focus on consumer understanding and use of front-of-package systems and symbols. IOM is charged with considering which icons are the most effective with consumer audiences, developing conclusions about the systems and icons that best promote health and how to maximize their use, and assessing the potential benefits of a single, standardized front-label food guidance system regulated by the Food and Drug Administration (FDA).
Continue Reading...Earlier today, the Florida Attorney General announced a settlement with Systemax and its subsidiaries, Tigerdirect and Onrebate, over allegations that the companies failed to pay rebates to consumers, as advertised. Consumers complained that the rebate program was difficult to navigate and that the companies often mailed the rebates late, or not at all.
As part of the settlements, the companies generally agreed to (a) ensure that outstanding complaints are resolved, (b) process rebates in the time advertised, and (c) initiate procedures that allow for the proper handling of rebate submissions. In addition, the companies will pay $200,000 in attorneys' fees and costs and donate $100,000 to the Florida Alliance of Boys and Girls Clubs.
Over the past few years, various states have passed new laws regulating rebates and, as a result, offers that were lawful a few years ago may now be unlawful. In addition, regulators have become more active in challenging companies who fail to follow these laws. Companies that issue rebates need to pay close attention to these developments to ensure that their practices comply with applicable laws.
Earlier this year, we posted that the Seventh Circuit Court of Appeals had ruled that the method by which the NCAA distributes Final Four tickets could constitute an unlawful lottery. This week, the Seventh Circuit vacated their previous opinion and certified three questions to the Indiana Supreme Court.
According to the complaint, each person who applied for tickets could submit an application with up to ten entries and a non-refundable handling fee. People who didn’t win tickets would give up the handling fees they had paid. (A more complete description of the process appears in our previous post.) Under Indiana law, an unlawful lottery consists of three elements: (1) prize; (2) chance; and (3) consideration. The Seventh Circuit held that the promotion was a lottery because plaintiffs allegedly paid a fee (consideration) to enter a random drawing (chance) in hopes of obtaining the tickets (a prize).
Following that decision, the NCAA filed a petition for rehearing arguing that the case involved issues of “exceptional importance” and that the decision conflicts with an Indiana Court of Appeals decision. Upon consideration of the NCAA’s petition, the Court of Appeals vacated its previous opinion and certified three questions for determination by the Indiana Supreme Court. How the Indiana Supreme Court answers the questions will determine whether the NCAA violated lottery laws. It could also determine whether other types of promotions that include fees are lawful.
This post was written by Sarah Roller and Raqiyyah R. Pippins.
In response to the disturbing rates of overweight, obesity, and diet-related chronic disease among Americans, Congress requested an Institute of Medicine (IOM) study that would examine “front-of-package” (FOP) nutrition labeling systems and symbols and the effects that FOP labeling could have on consumer food choices. With sponsorship from the Food and Drug Administration (FDA) and the Centers for Disease Control and Prevention (CDC), IOM launched the requested FOP labeling study to be conducted in two phases. On October 13, 2010, the results of the first phase of the IOM study (Phase I study) were published in a report entitled, “Examination of Front-of-Package Nutrition Rating Systems and Symbols: Phase I Report” (Phase I Report).
The report concluded, among other things, that for FOP labeling systems to be helpful to consumers in making food choices that are consistent with the Dietary Guidelines for Americans, FOP labeling should focus on conveying a limited set of information concerning the nutrients that are most strongly linked to significant diet-related disease risks that affect the greatest number of Americans.
For more information, please see our advisory regarding the IOM study and related report.
Earlier this year, we posted that the Florida Attorney General had sued a company over allegations the company enrolled consumers in a monthly subscription program without the consumers’ knowledge or consent. According to the AG, consumers who signed up for a “free trial” were automatically enrolled in the program. Today, the AG announced a settlement with another company over similar issues.
The AG claims the company offered free trials of books and magazines and billed consumers if they did not return the books or cancel the magazine subscriptions, and then enrolled the consumers in automatic renewals of magazines or automatically shipped books to them without specific consent. As part of the settlement, the company has agreed to (a) clearly and conspicuously disclose the terms of its offers, (b) provide refunds to certain consumers, and (c) pay up to $1.3 million to the AG’s Office for attorneys’ fees and costs and for future investigation and enforcement.
Companies that use trial offers must clearly and conspicuously disclose the terms of the offers before consumers sign up and incur costs. Among other things, a company must disclose whether there are any costs associated with the offers and whether a consumer has to cancel to avoid future charges. Failure to clearly disclose this information is certain to lead to complaints from consumers and challenges from regulators. These challenges can often result in costly settlements. For example, in addition to today’s settlement, the FTC recently imposed a $7.8 million penalty on a company that failed to adequately disclose the terms of its free trial.
Further to our post earlier in the week, the Consumer Product Safety Commission's new final interpretative rule defining "children's product" is published in today's Federal Register, making the new rule effective immediately.
The Consumer Product Safety Commission (“CPSC” or “Commission”) recently voted 3 to 2 to approve a final interpretive rule for the term “children’s products,” as that term is used in the Consumer Product Safety Improvement Act of 2008 (“CPSIA”). Given the wide range of products that could be covered by that term and the significant consequences if they are covered, manufacturers, distributors, and retailers had been anxiously awaiting guidance from the Commission. Many of those entities, however, may not have received the specific, bright line guidance they were seeking. The final rule is available on the CPSC’s website and becomes effective immediately upon its publication in the Federal Register.
For more details on the definition of "children's product" and an overview of the new interpretive rule, see the Kelley Drye client advisory.
This week, the FTC issued its proposed revisions to the "Guides for the Use of Environmental Marketing Claims" (the "Green Guides") and announced that it will be accepting public comment on the Proposed Guides until December 10, 2010. The Green Guides, first issued in 1992 and last revised in 1998, are designed to help businesses ensure that the environmental marketing claims they make are true and substantiated. Although the Green Guides are not legislative rules (and thus not directly enforceable regulations), they are instructive on how the FTC views certain types of environmental marketing claims, and the evidence necessary to support such claims to prevent them from being considered deceptive or unsubstantiated.
The proposed revisions update the existing Guides with respect to claims such as "degradable," "compostable," and "recyclable," and they propose new guidance for claims not currently addressed by the existing Guides. Popular recent environmental claims that receive specific guidance for the first time include "renewable" and "carbon offsets."
The Commission declined to propose definitions or specific guidance for other environmentally-friendly terms such as "sustainable," "natural," "organic," "life cycle assessment," and "biobased." The FTC's rationale for not giving these terms specific treatment was based in large part on lack of consumer perception data, along with deference to sister agencies' existing standards and definitions for these terms.
Click here for a summary of the FTC's changes to the existing Green Guides and its proposed revisions.
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