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

Groupon recently made sweeping and material changes to its web-posted privacy statement, allowing the company to collect more information and share it more freely with other companies. The changes allow Groupon to collect more information, including location information for its app-driven Groupon Now! deals, and to share it more freely with others, such as Expedia for its Groupon Getaways product. The NextDailyDeal article, "Groupon Privacy Statement Revisions Reflect Rapid Changes in the Marketplace and an Evolving Legal and Regulatory Landscape," provides a quick take on the what and why with respect to the changes to Groupon’s privacy statement.

Groupon’s revised privacy statement brings it more in line with FTC guidance, key concepts in proposed legislation, and developing industry best practices. Now is a good time for all players in the online advertising ecosystem to take stock of their current privacy statements and decided what needs re-working to reflect their company’s current business model and the evolving legal and regulatory landscape.
 

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Posted by Sarah Roller and Raqiyyah Pippins

On August 18, 2011 the FTC issued a request for public comment and advance notice of proposed rulemaking (ANPR) as part of the Commission's review of the costs, benefits, necessity, and regulatory and economic implications of its “Retail Food Store Advertising and Marketing Practices” rule, commonly called the “Unavailability Rule,” 16 C.F.R. Part 424.

Currently, the Unavailability Rule states that it is an unfair or deceptive act or practice for “retail food stores” to advertise “food, grocery products or other merchandise” at a stated price if those stores do not have the advertised products in stock and readily available to consumers during the effective period of the advertisement. The Rule includes a provision that permits stores that do not have the advertised products in stock and readily available to comply with the Rule if “the advertisement clearly and adequately discloses that supplies of the advertised products are limited or the advertised products are available only at some outlets.” In addition, the rule provides that it would not be a rule violation if: (1) The store ordered the advertised products in adequate time for delivery in quantities sufficient to meet reasonably anticipated demand; (2) the store offers a “rain check” for the advertised products; (3) the store offers a comparable product at the advertised price reduction; or (4) the store offers other compensation at least equal to the advertised value.

According to the ANPR, “the Commission now solicits comments on, among other things, the economic impact of, and the continuing need for, the Unavailability Rule; the benefits of the Rule to consumers purchasing products at retail food stores; and the burdens the Rule places on firms subject to this requirement.”  The Commission also is considering whether to broaden the Rule to include stores not currently covered, such as drugstores, department stores, and electronic retailers. Comments can be filed online or on paper and must be received by the FTC on or before October 19, 2011.
 

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The FDA announced that it will host a public workshop on September 12th and 13th, 2011 to gather input on the agency’s recently issued draft guidance document, “Mobile Medical Applications.” The FDA issued the guidance last month to inform manufacturers, distributors, and other stakeholders about how the FDA intends to apply its medical device regulatory authority to software applications (“apps”) that are deployed on mobile devices.

Mobile apps increasingly are being used by individuals as a tool to manage personal health and wellness, as well as to help monitor and manage disease conditions. Mobile apps also are being used by healthcare professionals to assist them in providing medical care to individual patients. Certain apps, for example, allow a user to view radiological images or analyze electrocardiogram data on a mobile device, such as a smart phone or tablet computer, to facilitate a patient diagnosis. While the new FDA draft guidance recognizes that mobile medical apps can provide significant health benefits, mobile apps also may present certain health risks. In addition, the FDA guidance emphasizes that the same mobile medical app may pose additional or different risks depending on the particular mobile device, and features including screen size, contrast ratio, and the environmental conditions in which the device is used (e.g. uncontrolled ambient light).

The new FDA guidance defines a “mobile medical app” as a software application on a mobile platform that is “either (1) used as an accessory to a regulated medical device; or (2) transforms a mobile platform into a regulated medical device.” The “mobile medical app” must also meet the definition of “device” under Section 201(h) of the Federal Food, Drug, and Cosmetic Act, which includes an instrument, apparatus, machine, or a related article that is “intended for use in diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease” for humans or other animals.”

The planned FDA workshop is intended to provide a forum for public discussion on the FDA’s Mobile Medical Application draft guidance document. Specifically, the FDA is seeking the public’s perspective on how the agency should regulate mobile medical apps to reasonably ensure their safety and effectiveness, particularly those mobile medical apps that are accessories to other medical devices. The FDA is requesting discussion and comments on the following key issues:

• What factors should FDA consider in determining the risk classification of different types of software that provide clinical decision support (“CDS”) functionality?
• How should the FDA assess stand-alone software that provides CDS functionality to reasonably ensure its safety and effectiveness?
• Are there specific controls that manufacturers should implement that could change the risk classification or reduce the premarket data requirements for particular types of stand-alone software that provide CDS functionality?

Interested stakeholders can either make an oral presentation during the workshop or submit public comments for the record on these issues or any aspect of the draft guidance. The deadline to request an oral presentation during the workshop is September 9, 2011, and public comments must be submitted to the FDA by October 19, 2011. Interested parties can visit the FDA website for specific details on registering for the workshop or submitting public comments.
 

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On August 15, 2011, the FTC announced a settlement with W3 Innovations, LLC (“W3”) and its President over charges that the company violated the Children’s Online Privacy Protection Act (“COPPA”) when W3 allegedly collected and disclosed personal information from tens of thousands of children without their parents’ consent. The settlement requires W3 and its president to pay $50,000, and they must delete all personal information collected in violation of COPPA. The case marks the FTC’s first action against a mobile applications (“apps”) developer.

W3 Innovations, which does business as Broken Thumbs Apps, develops and distributes apps including Emily’s Girl World and Emily’s Runway High Fashion (the “Emily Apps”), which are sold through the “Games-Kids” section of Apple, Inc.’s App Store. According to the FTC Complaint, the Emily Apps encouraged children to submit emails, including messages to friends and requests for advice, that were then posted as publicly-available blog entries to the “Emily’s blog” feature available on all Emily Apps sites. Children also could submit comments in response to the blog entries using a standard comment form that required users to provide their name and email address.

The FTC’s COPPA Rule (16 C.F.R. Part 312) is triggered when companies collect online personal information about children under the age of 13. The Rule requires website operators to notify parents and obtain their express consent before they collect, use, or disclose such children’s personal information. The Rule also requires website operators to post a clear and conspicuous privacy policy at each area of an online site that collects personal information from children. The FTC alleged that W3 violated COPPA when it did not obtain parental consent before it (1) collected and maintained at least 30,000 email addresses from children who participated in the “Emily’s blog” feature; and (2) allowed children to publicly post information, including personal information, to the blog and comments section of the app.

As this case demonstrates, the FTC is following through on statements that it made earlier this year that it was actively investigating a number of privacy issues associated with mobile devices, including features targeting children. Given the FTC’s interest in this area, companies seeking to enter the mobile app market or engage a younger audience using games or other online features should be aware of the key considerations and best practices (see here and here) that can help reduce risks resulting from increased legal and regulatory scrutiny.

This post was written by Alysa Z. Hutnik and Matthew P. Sullivan.

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Earlier this week, a California plaintiff filed a class action lawsuit against NASCAR alleging that the company violated the Telephone Consumer Protection Act (the "TCPA") by sending unsolicited text messages. The plaintiff argues that although she never asked to receive text messages from NASCAR, the company sent her a message advertising a mobile app that would enable her to watch races on her phone.  The plaintiff seeks up to $1,500 in damages for each message in violation of the TCPA, which, when aggregated among a proposed class numbering tens of thousands, exceeds $5 million.

As we’ve noted before, courts have repeatedly held that companies must obtain express consent before they send text messages to consumers. Although it’s too early to tell whether NASCAR did anything wrong, this case serves as a reminder that failure to get consent is likely to lead to lawsuits. And once a company finds itself in one of these lawsuits, it can be very expensive to get out.
 

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On August 4, the United States Court of Appeals for the Third Circuit rendered its unanimous decision in Pernod Ricard USA, LLC v. Bacardi USA, Inc., holding that a consumer survey need not be considered when a label or other advertisement, on its face and taken as a whole, leaves no room for a reasonable consumer to be misled. The decision follows the Seventh Circuit's reasoning in Mead Johnson, stating that "never before has survey research been used to determine the meaning of words, or to set the standard to which objectively verifiable claims must be held."

This decision may indicate growing judicial skepticism of survey evidence and lead to a decline in the use of consumer surveys in false advertising cases. For more about this case, read the Kelley Drye client advisory.

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Effective today, the NAD has increased its filing fees for appeals and cross-appeals at the National Advertising Review Board to $12,000. This is the first increase in NARB filing fees since 2007. According to the NAD’s notice, “the increase is aimed at ensuring that a greater share of the actual cost of the appellate process is reflected in the filing fee so that we can maintain the high levels of timeliness and quality that participants in the self regulatory system expect.”

Click here to learn more about our team’s experience before the NAD. 

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Today the Consumer Product Safety Commission ("CPSC") announced that Black & Decker (U.S.) Inc. has agreed to pay a $960,000 civil penalty to settle allegations that the company failed to report safety issues with its Grasshog XP grass trimmers/edgers to the CPSC in a timely manner.  The CPSC also alleges that Black & Decker withheld information requested by the CPSC staff.

Section 15(b) of the Consumer Product Safety Act requires companies to report immediately to the CPSC if they have information that a product could create a "substantial product hazard" or create an unreasonable risk of serious injury or death.  The CPSC alleges that Black & Decker had received a large number (at least 80) of safety complaints and "hundreds" of warranty claims before reporting to the CPSC.  There is also an implication that the company may have conducted a "silent recall" in January 2006 without the CPSC.  Although the CPSC staff requested information from Black & Decker in May 2006, Black & Decker allegedly failed to provide information about certain defects.  The staff closed its file based on the information it received, but the closing letter included boilerplate language reminding the company that it must notify the staff if there was a different risk or additional information.  At the time of the letter, Black & Decker allegedly had received 216 safety complaints and approximately 14 injury reports, but "silently acquiesced in the file closure without revealing this information."  The company then provided the additional information in October 2006 and recalled the product in July 2007.

Although the CPSC now has authority to seek up to $15 million in penalties, this is one of the higher civil penalties the CPSC has obtained, particularly for a settlement involving only one product, no children's products, and no filing of a lawsuit.  This could signal a more aggressive CPSC, particularly if it thinks that the company has withheld information, received large numbers of incident reports, or conducted a silent recall.

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Who says the Federal Government is in a state of gridlock? While all eyes were focused yesterday on the vote in the U.S. House of Representatives on the debt ceiling deal, the House and Senate both passed a bipartisan bill (H.R. 2715, “A Bill to Provide the Consumer Product Safety Commission with Greater Authority and Discretion in Enforcing the Consumer Product Safety Laws, and for Other Purposes”) to amend the Consumer Product Safety Improvement Act (“CPSIA”). Although the new legislation does not address all of the concerns with the CPSIA, it attempts to provide some needed relief before the looming August 14th deadline regarding lead content. In just one day, H.R. 2715 was introduced, passed the House under suspension of the rules (421 yeas, 2 nays), and was sent to the Senate where it was passed by Unanimous Consent. President Obama is expected to sign the bill.

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