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

On August 19, 2010, FTC staff closed an investigation into Limewire, LLC.  Limewire provides both a free and purchasable version of P2P software.  Based on the staff's closing letter, available here, the investigation focused on a security vulnerability in legacy versions of the P2P software that put users at risk of inadvertently sharing sensitive information stored on their computers.

FTC staff decided to voluntarily close the investigation. Among the factors considered as part of closing the investigation were:

• Limewire's incorporation of safeguards into the updated software's user interface to help users avoid the inadvertent sharing of sensitive documents;
• the high attrition rate for legacy versions of the software;
• Limewire's inability to force users to update to a newer software version; and
• users of some of the older software versions may have been able to avoid disclosure of sensitive PII (noting that an act/practice is not "unfair" under Section 5 unless it causes consumer injury that is not reasonably avoidable by consumers).

Given the staff's ongoing concern that consumers using the legacy software may remain at risk of PII disclosures, the staff stated its expectation that Limewire would continue to advise consumers to upgrade the software and participate in industry efforts to inform consumers about how best to avoid inadvertent sharing of sensitive documents.

This closing follows the FTC's press release earlier this year that it had notified nearly 100 organizations that their sensitive PII records were on P2P networks, and that it was investigating several organizations whose customer or employee information had been exposed on P2P networks. That press release is available here.
 

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In October 2009, the Federal Trade Commission (“FTC”) introduced a revised version of its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Guides”). Key changes to the Guides include: (1) clarifying that the Guides apply to all advertising messages presented as the opinion or findings of a party other than the advertiser, regardless of the media that is used to disseminate the advertising message (e.g., blog, newspaper, infomercial, “word of mouth” marketing, talk show appearance); (2) elaborating on the types of situations involving new media (e.g., blogs, social networks) where the FTC will likely consider statements to be “advertising messages” sponsored by the advertiser; and (3) recommending that non-typical testimonials be accompanied by a clear and conspicuous disclosure of generally expected results.

On June 23, 2010, the FTC Bureau of Consumer Protection’s Division of Consumer and Business Education posted “The FTC’s Revised Endorsement Guides: What People Are Asking” (the “FAQs”), to help businesses and consumers better understand the FTC’s revisions to the Guides. The FTC’s FAQs address various questions the FTC has received since the revised Guides were introduced in October, including questions about when the revised Guides apply to endorsements in new media, how disclosures regarding a sponsored relationship or typical consumer results should be made, and how the Guides apply to affiliate and network marketing.

See the Kelley Drye client advisory for more details about the FAQs.

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This post was written by Sarah Roller and Megan L. Olsen.

On May 19, 2010, the Federal Trade Commission (FTC) approved a final settlement order with the Indoor Tanning Association charging that the association exaggerated the health benefits of indoor tanning and misrepresented that indoor tanning increases the risk of skin cancer. The settlement bars the Association from making misrepresentations about the health and safety of indoor tanning and requires that future advertisements from the association that make health or safety claims be accompanied by clear and prominent disclosures about the risks of indoor tanning. The Indoor Tanning Association represents tanning facilities and suppliers of tanning equipment.

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This post was written by Christopher M. Loeffler and Alysa Z. Hutnik.

On Tuesday, April 26, 2010, the Federal Trade Commission (FTC) announced that it intends to develop Internet privacy guidelines. The guidelines will examine social networking sites' data handling practices and create a framework to guide social networks and others going forward. Given the FTC's recently concluded Privacy Roundtables (see our posts here, here and here) and pending action items from the roundtables, the guidelines for social networks may provide a foundation for further FTC privacy guidance for businesses down the road.

The FTC's recent announcement follows complaints by US and international lawmakers and regulators regarding the privacy practices of several online companies. Senators Schumer (D-NY), Franken (D-MN), Bennet (D-CO), and Begich (D-AK) sent a letter to Facebook, expressing concern about the changes Facebook made to its privacy policy that make more user information publicly available, permit third parties to store users' information indefinitely, and allow for Facebook technology to be integrated with other websites. The Senators also called on the FTC to issue rules or guidance in this area. As noted previously, international regulators also recently sent a letter to Google expressing concern about its privacy practices.

While privacy laws have been in flux for some time, these events underscore how rapidly the regulatory environment for online businesses is changing, and a close watch on the FTC's actions and guidance will be critical to navigate the compliance road ahead.

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The Federal Trade Commission has launched a multi-media campaign through the website www.admongo.gov to educate children and teens, ages 8 to 12, about advertising. With “tweens” becoming a larger and more important part of the marketplace, the initiative seeks to raise kids’ awareness about advertising so they can make more informed decisions when they shop or play a role in family buying decisions.

The goal of the campaign is to boost advertising literacy by:

• Raising awareness of advertising and marketing messages
• Teaching critical thinking skills that will allow tweens to better analyze and interpret advertisements
• Demonstrating the benefits of being an informed consumer

In addition to an online game featured on Admongo.gov, other elements of the campaign include in-school curricula, sample ads that can be used at home and in the classroom, and teacher training videos. The FTC partnered with Scholastic in creating resources which have been distributed to elementary and middle school teachers nationwide.

In an interview on NBC's Today Show, Bureau of Consumer Protection Director David Vladeck explained that the program is designed to teach kids how to think critically about advertising messaging. He explained that while the FTC is not taking a position of whether ads are good or bad, the campaign gives kids the tools they need to "navigate through this very intensely commercial environment they live in."

As the tweens market is estimated at $200 billion in sales, advertisers should take note of these efforts to educate young consumers about how to distinguish between advertising and content, and consider how best to both inform and engage tweens with innovative messaging and product promotions.

For additional background on Director Vladeck's enforcement agenda, reference The Antitrust Source article, "Interview with David Vladeck, Director, FTC Bureau of Consumer Protection."
 

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In previous posts, we noted that the FTC's new Guides Concerning the Use of Endorsements and Testimonials in Advertising contain numerous provisions that apply to messages in social media, such as blogs, word-of-mouth marketing, and other promotions in which companies encourage consumers to speak on their behalf. Among other things, the Guides require bloggers to disclose if they have received a gift from, or have any other material connection to, a company whose products they write about. Although the companies themselves may be liable if bloggers fail to make the required disclosures, the FTC has suggested that the Commission would not hold a company liable if the company instructs bloggers about their requirements and takes steps to ensure the bloggers comply.

Earlier this week, the FTC announced that it was closing an investigation into whether Ann Taylor Stores violated Section 5 of the FTC Act in connection with a promotion in which the company provided gifts to bloggers who the company expected would blog about the company's LOFT division. According to the FTC's letter, some of the bloggers failed to disclose that they had received free gifts from LOFT, as required by law. After conducting an investigation, the FTC ultimately determined not to recommend enforcement action because, in part, "LOFT adopted a written policy . . . stating that LOFT will not issue any gift to any blogger without first telling the blogger that the blogger must disclose the gift in his or her blog." The FTC also noted that they expect the company to "monitor bloggers' compliance with the obligation to disclose gifts they receive from LOFT."

The FTC's investigation holds a number of important lessons for marketers. First, it is clear that the FTC is paying attention to whether bloggers and companies comply with the new Guides. Second, companies would be well-advised to establish written policies designed to ensure that their employees, bloggers, and other agents comply with the Guides. And, third, companies should closely monitor bloggers and take actions against those that do not comply with their policies. If companies fail to take these steps, they are more likely to be held liable for the actions of bloggers.

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The American Bar Association’s The Antitrust Source published an article, “Interview with David Vladeck, Director, FTC Bureau of Consumer Protection.” The in-depth interview examines Mr. Vladeck’s career as a litigator and professor and how his accomplishments and challenges are shaping his tenure at the Federal Trade Commission. The interview probes Mr. Vladeck’s views on topics including the commercial speech doctrine, social media, alternative remedies for data breaches, and a proposed Consumer Financial Protection Agency, among other subjects.

Click here to read a PDF of the article.
 

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On March 17, 2010, the Federal Trade Commission (FTC) held its third and final discussion from its roundtable series-Exploring Privacy. Panel topics focused on Internet Architecture and Privacy, Health Information, Addressing Sensitive Information, and Lessons Learned and Looking Forward.

The FTC intends to use the information gathered from these roundtables to restructure and guide its privacy agenda. Next steps for the FTC may include extending the application of fair information practices, increasing enforcement of unfair and deceptive privacy practices, and developing privacy models and frameworks to address new technologies and business models. FTC officials have stressed, however, that the Commission will review and analyze the information received through the roundtables and other channels before adopting any specific policies or initiatives.

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Late last night, the Senate unanimously confirmed Edith Ramirez and Julie Brill to fill the two vacant seats on the Federal Trade Commission (FTC).1 Ms. Ramirez will replace Republican Deborah Majoras, who stepped down from the Commission in March 2008, and Ms. Brill will replace Independent Pamela Jones Harbour, whose term ended in September 2009. Their positions start immediately upon confirmation. A brief background on each new Commissioner is provided below.

Julie Brill

Since February 2009, Ms. Brill has been a Senior Deputy Attorney General and Chief of the Consumer Protection and Antitrust Division for the North Carolina Department of Justice. Prior to joining North Carolina’s Department of Justice, Ms. Brill served as an Assistant Attorney General for the Vermont Attorney General’s Consumer Protection and Antitrust Divisions for over 20 years. Ms. Brill’s experience at the Vermont Attorney General’s office included a wide-variety of consumer protection litigation, legislative, and regulatory matters in the fields of privacy, credit reporting, financial services, tobacco, food, drugs and other health-related industries. As an Assistant Attorney General for the state of Vermont, Ms. Brill also testified before Congress regarding data security breach legislation and consumer privacy issues.

Ms. Brill has served as a Vice-Chair of the Consumer Protection Committee of the American Bar Association Antitrust Section since 2004 – the ABA committee chaired by John Villafranco (2002 to 2005) and August Horvath (2005-2009) of Kelley Drye. She has received several honors for her consumer protection and privacy work, including the National Association of Attorneys General Privacy Subcommittee Award in 2001 for drafting proposed privacy principles, Privacy International’s 2001 Brandies award for work on state and federal privacy issues, and the National Association of Attorneys General Marvin Award in 1995 for her “outstanding leadership, expertise, and achievement in advancing the goals of the association.” Additionally, she is also a Lecturer-in-Law at Columbia Law School.

Before beginning her career in law enforcement, Ms. Brill was an associate at Paul, Weiss, Rifkind, Wharton & Garrison in New York and she clerked for Vermont Federal District Court Judge Franklin S. Billings Jr. Ms. Brill is a graduate of New York University School of Law, where she received a Root-Tilden Scholarship for her commitment to public service. She received her bachelor’s degree from Princeton University.

Edith Ramirez

Ms. Ramirez is currently a partner in the Los Angeles office of Quinn Emanuel Urquhart Oliver & Hedges, LLP where she specializes in intellectual property and complex business litigation matters. She has represented a diverse range of clients in actions involving copyright and trademark infringement, antitrust and unfair competition claims, business tort, and other general business litigation cases. Notable litigation includes Hathaway Dinwiddie Construction Co. v. United Air Lines, Inc., where Ms. Ramirez successfully represented Hathaway Dinwiddie Construction on breach of contract claims, and Christian v. Mattel, Inc., where Ms. Ramirez helped obtain a $500,000 sanction against Mattel’s opposing counsel pursuant to Federal Rule of Civil Procedure 11 for filing a frivolous copyright infringement action against Mattel. Ms. Ramirez has also represented American Broadcasting Companies, The Walt Disney Company, The Scotts Company, and Northrop Grumman in a variety of intellectual property, antitrust, and contract litigation matters.

Ms. Ramirez is also involved with a number of community outreach activities. She has served as the Vice President on the Board of Commissioners for the Los Angeles Department of Water and Power, a member of the Board of Directors for Volunteers of America, and the California Deputy Political Director and Director of Latino Outreach for Obama for America.

Previously, Ms. Ramirez served as a law clerk to the Honorable Alfred T. Goodwin, United States Court of Appeals for the Ninth Circuit. She also worked as an associate at Gibson, Dunn & Crutcher, LLP. Ms. Ramirez attended Harvard Law School, where she was an editor for the Harvard Law Review, and she received her bachelor’s degree from Harvard-Radcliffe College.

1  http://senatus.wordpress.com/2010/03/03/nominations-confirmed-march-3/

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This post was written by Dana B. Rosenfeld and Christopher M. Loeffler.

On February 22, 2010, the Federal Trade Commission (“FTC”) announced that it notified nearly 100 organizations that personal information about the organizations’ customers or employees is available on peer-to-peer (“P2P”) file sharing networks. [1] Most recently, it notified nearly 100 businesses and governmental entities through an Internet-wide sweep, the FTC discovered that sensitive data such as health-related information, financial records, drivers’ license numbers, and Social Security numbers have been shared from organizations’ computer networks and are susceptible to those who may use the data for illegal practices such as fraud or identity theft. The Commission has not publicly identified which organizations were notified, but it stated that letters were sent to large and small private and public entities including schools and local governments.

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The law of comparative advertising covers advertising that compares alternative brands on price or other measurable attributes and expressly or impliedly identifies the alternative brand by name, illustration, or other distinctive information.

A new article in IP Litigator, “The Law of Comparative Advertising in the United States,” provides an overview, including the treatment of comparative advertising claims by the Federal Trade Commission and the National Advertising Division of the Council of Better Business Bureaus, Inc., and a discussion of some of the particular proof and burden-shifting issues triggered when comparative advertising claims are challenged under the Lanham Act. The article then provides practical guidance to in-house attorneys and outside counsel on strategies for challenging comparative advertising claims made by a competitor when the client contends that the claims cannot be substantiated.

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The Federal Trade Commission told the U.S. Senate Committee on Commerce, Science and Transportation on Thursday, February 4, 2010, that additional law enforcement powers would allow the agency to protect consumers more effectively.

While much of the testimony detailed the FTC’s efforts to protect consumers from financial fraud that has occurred in connection with the downturn in the economy, the additional powers sought by the FTC would enhance its ability to protect consumers for any violation of one of the laws that it enforces.  The agency encouraged Congress for authority:

1. to use more efficient rulemaking procedures to address consumer protection issues and enhance the agency’s ability to stop financial fraud;
2. to seek civil penalties for violations of the FTC Act rather than just rules or orders that have already been promulgated;
3. to act against those who assist others they know, or consciously avoid knowing, are engaged in unfair or deceptive practices under the FTC Act; and
4. to prosecute civil penalty cases in federal court in its own name so that it can bring cases more quickly and more effectively.

Interestingly, Commissioner Kovacic dissented from the Commission’s endorsement of authority to use, for promulgating all rules respecting unfair or deceptive acts or practices under the FTC Act, the notice and comment procedures of the Administrative Procedures Act (“APA”). While other agencies have the authority to issue significant rules following notice and comment procedures, Commissioner Kovacic stated that the Commission's rulemaking authority is unique in its range of subject matter (unfair or deceptive acts or practices) and sectors (reaching across the economy, except for specific, albeit significant, carve-outs). Except where Congress has given the Commission a more focused mandate to address particular problems, beyond the FTC Act's broad prohibition of unfair or deceptive acts or practices, Commissioner Kovacic believes it prudent to retain procedures beyond those encompassed in the APA. However, he supports sector-specific APA rulemaking to promulgate rules that set forth unfair or deceptive acts or practices relating to all financial services. Further, he would be willing to consider more generally whether all the procedures currently required to issue, repeal, or amend rules issued under the FTC Act are necessary.

Commissioner Kovacic also dissented from the Commission's endorsement of across-the-board civil penalty authority.  Commissioner Kovacic believes that the existing consequences attendant to a finding that an act or practice is unfair or deceptive under the FTC Act are generally appropriate remedies, and they are consistent with the goal of developing FTC law to develop new doctrine and to reach new and emerging problems. In his view, the routine availability of civil penalties, even if subject to a scienter requirement, would risk constraining the development of doctrine, much as judicial concerns about the availability of private litigation with mandatory treble damages appear to be constraining the development of antitrust doctrine.  Commissioner Kovacic would prefer that Congress grant more targeted authority to seek civil penalties, perhaps including civil penalty authority where financial services are involved, and particularly including civil penalty authority in matters where existing remedies are likely to be inadequate.

Regarding President Obama’s proposed Consumer Financial Protection Agency, the testimony expressed FTC support for the goal of making consumer financial protection more effective while ensuring that the FTC’s authority and ability to protect consumers remains uneroded and clear. The FTC told Congress that it should remain active and effective in policing financial and nonfinancial products and services.  Commissioner Kovacic and Commissioner Rosch recommended, perhaps as an alternative to creating a new agency to perform the federal banking agencies’ current consumer protection functions, that the Committee consider a model by which consumer protection with respect to banks and other depository institutions would be enhanced by providing the Commission with a role in protecting consumers of depository institutions. Such expansion of the Commission’s consumer protection role would require a concomitant increase in the Commission’s resources to ensure the continuing excellence of its enforcement record.

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