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

This afternoon, the FTC announced that the manufacturer of Rascal Scooters has agreed to pay $100,000 to settle charges that it illegally called millions of consumers whose phone numbers were on the national Do Not Call Registry.

The company asked consumers to provide their numbers on sweepstakes entry forms so that the company could contact them if they won. According to the FTC, however, the company also contacted non-winners with sales calls. Although the Telemarketing Sales Rule generally allows a company to call a consumer on the Do Not Call Registry for up to 18 months if it has an “established business relationship” with the consumer, the FTC has warned that companies may not rely on a sweepstakes entry form as the basis for that exception.

This case serves as a reminder that companies cannot misrepresent the reason for collecting phone numbers or assume that just because a consumer gives the company a phone number, the company can place a sales call to the consumer.  

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On April 13, 2011, Representatives Cliff Stearns (R-FL) and Jim Matheson (D-UT) introduced privacy legislation that seeks to ensure that consumers have greater control and are better informed on the collection and use of their personal information. The Consumer Privacy Protection Act of 2011 would provide consumers with control over certain uses of personal information collected online and offline. Protections under the bi-partisan Stearns-Matheson bill include consumer notice requirements and the ability for consumers to limit disclosures of personal information to third parties.

The bill contains many provisions consistent with the Commercial Privacy Bill of Rights Act of 2011, introduced in the Senate by Senators Kerry (D-MA) and McCain (R-AZ) on April 12, 2011. Both bills would be enforced by the Federal Trade Commission (FTC), include a self-regulatory ‘safe harbor’ framework, permit the FTC to seek civil penalties for violations, preempt similar state laws, and exclude a private right of action. Contrary to the Kerry-McCain bill, the Stearns-Matheson bill does not cover certain telecommunications providers within its scope. Additionally, civil penalties under the Stearns-Matheson bill are set at double the amount permitted under the FTC Act (for a total of $32,000 per violation) with a maximum civil penalty of $500,000. The potential civil penalties under the Stearns-Matheson bill are greater per violation, but less overall, than the civil penalties proposed in the Kerry-McCain bill.

Click here for more information regarding the bill's provisions, as well as a chart summarizing the various federal bills on point.

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Following weeks of anticipation, on April 12, 2011 Senators John Kerry (D-MA) and John McCain (R-AZ) introduced comprehensive bipartisan legislation intended to provide consumers with greater control over the collection and use of personal information accessible through online and offline channels. The Commercial Privacy Bill of Rights Act of 2011 sets forth baseline fair information practice protections for consumers similar to those outlined in the December 2010 Department of Commerce Privacy Green Paper. Such protections would include consumer notice prior to the collection of personal information, and opt-in or opt-out consent mechanisms depending on the type of personal information collected and its intended use. Notably, the bill does not contain a Do Not Track provision, which distinguishes it from FTC staff recommendations and other privacy legislation/proposals.

The bill's coverage is broad: nearly all online and offline businesses fall within scope. Notably, this includes telecommunications providers, as well as non-profits, and the FTC would be the lead enforcer against such entities for violations, with the ability to levy $16,500 up to $3 Million in civil penalties for violations. Similar state laws would be preempted. The bill does not provide for a private right of action.

By proposing a number of black letter requirements on privacy and data security practices, and setting forth significant monetary penalty provisions for violations, the bill is clearly intended to change the legal status quo in the privacy realm. Click here for a summary of the key proposed changes to privacy and data security requirements set forth in the legislation.

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This post was written by Gonzalo E. Mon and Christopher M. Loeffler.

A federal court in California recently held that messages sent by Facebook users to their Facebook friends’ walls, news feeds, or home pages can constitute “electronic mail messages” under the CAN-SPAM Act. The case was filed by Facebook against a company that allegedly engaged in a deceptive marketing campaign that affected a large number of Facebook users. In denying the defendant’s motion to dismiss, the court rejected the notion that CAN-SPAM applies only to messages that are sent to an address that contains a user name, followed by an @ symbol and a domain.

Based on the language of the statute, the court determined that the only requirement for a message to be considered an “electronic mail message” is a “destination . . . to which an electronic mail message can be sent.” Accordingly, messages posted to destinations such as another user’s Facebook wall, news feeds, or home pages can be covered by the statute. The court also noted that the messages involved “routing activity on the part of Facebook” and concluded that a broad interpretation was consistent with Congress’ intent to mitigate the number of misleading communications that overburden the internet.

CAN-SPAM requires, among other things, that commercial e-mail messages be identified as ads, and that the messages include a postal address and mechanism for opting out of future commercial messages. (Click here for more details about what CAN-SPAM requires.) As any Facebook user knows, including these thing on a Facebook post would be extremely burdensome. Although it is unlikely that Facebook or regulators would bring a suit against a Facebook marketing campaign that is not deceptive, companies with Facebook pages should pay close attention to this case as it develops.
 

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Yesterday, the FTC announced a $750,000 settlement with the makers of an air purifier and a vacuum cleaner that were intended to create a healthier household environment. The vacuum cleaner featured a HEPA filter and ultraviolet light, while the air purifier featured an electrostatic precipitator that was intended to attract and trap particles in the air. The FTC alleged that the company deceived consumers by advertising that the respective products, "through normal use," could "kill[] virtually all bacteria, viruses, germs, mold, and allergens" either "on carpets and other floor surfaces" or "in the air of an average-sized household room." The FTC further alleged that the company's advertising promoted the products for preventing or reducing the risk of flu, colds, asthma, allergy symptoms, and other ailments. The company had disseminated claims through "infomercials, traditional television ads, print ads, in-store displays, and ads [appearing] online." Additionally, according to the FTC, the company had provided its distributors the "means and instrumentalities" for deceiving consumers. Presumably, the company provided its distributors with marketing materials or sales scripts. In addition to requiring monetary redress, the resulting consent order bars the company from making or assisting others in making germ or disease-fighting claims or any other health benefit claims for any vacuum cleaner or air filter -- unless it possesses appropriate "competent and reliable scientific evidence."

This settlement is significant for at least two reasons. First, no matter the industry, if a company is making health-related claims, it should tread lightly and be sure its substantiation meets the FTC's competent and reliable scientific evidence standard. In recent years, the FTC has targeted health-related claims being made for foods, dietary supplements, and more exotic products, like "detox foot pads." This settlement shows that health-related claims for any type of product in the FTC's purview may become a target. Second, this settlement serves as a reminder that companies are ultimately responsible for the claims and marketing materials they send downstream. The companies in the best position are those with measures in place to ensure that compliance follows as products move through the stream of commerce and into the hands of consumers.
 

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We are pleased to announce that Kelley Drye is expanding its national presence by merging with White O'Connor Fink & Brenner LLP, a highly respected Los Angeles litigation firm best known for its success in complex business and entertainment industry litigation.

This merger returns Kelley Drye to California and adds a significant new expertise in the entertainment and media industry. White O’Connor’s attorneys strengthen Kelley Drye’s capabilities in several other key practice areas and bring a well-established record of trial victories. They have defended and prosecuted a wide range of cases, including entertainment, First Amendment, insurance recovery, media-related torts, real estate, copyright, trademark, antitrust, class actions, and other complicated commercial disputes.

To learn more, see our press release and review the practice group description on our website.

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On March 28, the Northern District of Illinois held that a single in-person sales pitch is not commercial advertising and therefore the speaker cannot be liable for a false advertising suit under the federal Lanham Act. Specifically, the court dismissed Oshkosh Corporation’s claim against Control Solutions LLC for representing to the U.S. Army that Control Solutions’ power door system was being used on All Terrain Vehicles that Oshkosh had begun making for the U.S. Army. Because the communication was targeted to a potential purchaser and thus was not made in an anonymous fashion, the court held that it was not a commercial advertisement.

This case serves as a reminder that some courts interpret federal false advertising law as applying only to a classic advertising campaign, in which a message is conveyed to many potential purchasers through a mass-marketing campaign by direct mail, television, radio, the internet, or other channels. However, other courts have held that communication to a “sufficient” portion of the purchasing public, regardless of anonymity or formality, can constitute commercial advertising under the Lanham Act.

Because courts apply flexible standards as to how much dissemination is “sufficient,” and the standard varies by industry, marketers should take the same care when they communicate with an individual as when they kick off a mass-marketing campaign. In addition, marketers should be mindful that their communications may also be governed by state laws whose standards may differ from federal standards.

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