State Attorneys General

Most Popular Ad Law Access Posts of 2017

As reported in our Ad Law News and Views newsletter, Kelley Drye’s Advertising Law practice posted 106 updates on consumer protection trends, issues, and developments to this blog in 2017. Here are some of the most popular:

Ad Law News and Views is produced every two weeks to help you stay current on advertising law and privacy matters. You can subscribe to it and other Kelley Drye Publications here and the Ad Law Access blog by email or RSS feed.

2018 Advertising and Privacy Law Webinar Series 

Please join Kelley Drye in 2018 as we continue our well attended Advertising and Privacy Law Webinar Series. Like our in-person events, this series gives key updates and provides practical tips to address issues faced by counsel as well as CLE credit. This webinar series will start again in February 2018. Please revisit the 2017 webinars here.

New York Attorney General Eric T. Schneiderman and Vermont Attorney General TJ Donovan (“Attorneys General”) announced a settlement with Hilton Domestic Operating Company, Inc. (“Hilton”) resolving allegations that the company did not have reasonable data security practices in place and failed to provide timely notice after two security breaches involving payment card information. The settlement provides some valuable lessons to companies about the “most expedient time possible and without unreasonable delay” standard in state data breach laws, and how a data breach can uncover potentially deficient security standards that can raise exposure for companies. Continue Reading Hilton Settles NY and VT State AG Investigation into 2015 Data Breach; Pays $700,000 Civil Penalty

On July 5, bipartisan Attorneys General from 11 states filed an astonishing brief in the Third Circuit Court of Appeals, asking that court to reject the proposed class action settlement in In re Google Inc. Cookie Placement that would give settlement monies to non-profits rather than class members.

The plaintiffs in Google Cookie allege that Google circumvented the cookie-blocker settings in Microsoft’s Internet Explorer and Apple’s Safari browsers and placed advertising tracking cookies without user consent.  The putative class—theoretically, every user of those hugely popular browsers—obviously is massive.  The “damages” suffered by class members, however, if any, is vanishingly small.

In 2016, Google and the plaintiffs’ counsel reached a proposed $5.5 million class action settlement.  The plaintiffs’ counsel requested a $2.5 million fee, with the balance (after administrative costs) to be distributed to privacy rights non-profits such as the Berkman Center for Internet and Society at Harvard University and the Privacy Rights Clearinghouse.  Individual class members would receive nothing.

The Competitive Enterprise Institute’s Center for Class Action Fairness filed an objection to the settlement, arguing that if money cannot be distributed to class members, then the settlement class should not be certified at all.  The Delaware federal judge hearing the case disagreed and approved the settlement.  The objector took its arguments to the Third Circuit, and now 11 state Attorneys General have joined it.

The AG coalition brief, written by the office of the Arizona Attorney General, took no issue with the amount of the settlement and acknowledged that the settlement class is huge.  They contend, however, that “[d]irecting settlement funds to members of the class wherever feasible is important,” and that “there is a feasible path to distribution here.”  That “feasible path” is where the brief took an unprecedented turn for an AG objection.

“Claims rates in small-dollar cases are reliably in the very low single digits (if not below one percent),” the brief argued, citing cases with low claims rates.  “Even assuming a class in the tens of millions, such a claims rate would result in an economically meaningful” payment of “a few dollars to $15 or $20, if not more) to those lucky “one-percenters.”  That, these Attorneys General argued, “is preferable to making no distribution to any class members.”

In the years since the Class Action Fairness Act of 2005 required federal litigants to notify State AGs of proposed class action settlements, State AGs have taken a leading pro-consumer role in trying to limit the forms that settlements can take.  A multistate AG objection to a coupon settlement a decade ago, for example, has sharply curtailed the use of coupon settlements.  This is the first time, however, that AGs have argued it is better to direct small dollars to a tiny fraction of a large class than to pay millions of dollars to non-profits that ostensibly could advocate on behalf of the interests of the class as a whole. 

It will be very interesting to see how the Third Circuit responds to this argument.

Joining Arizona on the brief were the Attorneys General of Alaska, Arkansas, Louisiana, Mississippi, Missouri, Nevada, Oklahoma, Rhode Island, Tennessee, and Wisconsin.

BRIEF OF ELEVEN STATE ATTORNEYS GENERAL AS AMICI CURIAE IN SUPPORT OF OBJECTOR-APPELLANT AND REVERSAL

Earlier this month, the Massachusetts Attorney General announced that her office had reached a settlement with a digital advertising company, Copley Advertising, Inc. (Copley), prohibiting the company from using mobile geofencing technology to target women at or near Massachusetts healthcare facilities to infer the health status, medical condition, or medical treatment of an individual.

Geofencing technology, as the name implies, takes account of a mobile user’s geolocation and enables advertising companies to tag smartphones within a geographic virtual fence and push targeted messages to consumers. Mobile advertisers can place targeted ads within the apps and browsers of these tagged consumer smartphones when users are in the virtual fence and, in some cases, for up to a month after the user has left the virtual fence.

In the advertising campaign at issue, Copley set mobile geofences at or near healthcare facilities to “abortion-minded women” who were sitting in waiting rooms at health clinics in a number of cities around the country.  The potentially unwanted ads included prompts such as “Pregnancy Help,” “You Have Choices,” and “You’re Not Alone,” that, when clicked, took the consumer to a webpage with abortion alternatives. According to Copley’s representations, the advertising company had not yet engaged in geofencing campaigns near Massachusetts clinics.

The Assurance of Discontinuance resolves the Massachusetts Attorney General Office’s allegations that Copley’s advertising practices would violate consumer protection laws  by:

  • Tracking consumers’ geolocation near or within medical facilities,
  • Disclosing that information to third-party advertisers, and
  • Targeting consumers with potentially unwanted advertising based on inferences about a private and sensitive health condition without the consumer’s consent.

The settlement is a good reminder for both advertisers and ad tech to consider the privacy implications of targeted advertising, whether in geofencing or other digital marketing strategies, and how privacy and broader consumer protection laws may apply.

Western UnionLast week, California became the 50th state to join the multistate settlement with Western Union over its alleged complicity in fraud-induced wire transfers.  This followed Western Union’s $5 million agreement with 49 state and the District of Columbia for costs and fees in January, not to mention a whopping $586 million in settlement agreements with the United States DOJ and FTC.  While DOJ brought wire fraud and anti-money laundering charges against Western Union, and the FTC alleged violations of Section 5 of the FTC Act, and the Telemarketing Sales Rule, the states raised violations of their respective consumer protection laws.  California brought its complaint pursuant to the Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200-17209 (“UCL”), its analog to the FTC Act.

Some quick background on the UCL:

  • Traditionally, the UCL is thought to prohibit unfair competition, which includes unfair, deceptive, misleading, or false advertising.  § 17200; see Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496, 512 (2003) (whether “the ordinary consumer acting reasonably under the circumstances” is likely to be deceived).
  • But the UCL also forbids business activity unconnected with advertising when such activity constitutes an “unlawful” or “unfair” business practice that either violates another law or violates an established public policy.  § 17200; see e.g., In re Anthem Data Breach Litig., 162 F. Supp. 3d 953, 990 (N.D. Cal. 2016); Ballard v. Equifax Check Servs., Inc., 158 F. Supp. 2d 1163, 1176 (E.D. Cal. 2001).  Some common defenses to these claims include compliance with the underlying law, the practice is not unfair or is justified, and federal preemption.
  • The UCL provides private plaintiffs with the ability to bring claims for restitution and injunctive relief, while the government can also impose civil penalties of up to $2,500 per violation.  §§ 17203, 17206; see e.g., People v. JTH Tax, Inc., 212 Cal. App. 4th 1219, 1254 (2013) (“[T]he court could have imposed penalties of over $9 million, but only imposed penalties of $715,344 for these advertisements.”).

Here, the California Attorney General alleged that Western Union, during the course of its money transferring services, failed to scrutinize and stop complicit agents that did not comply with anti-money laundering policies, inadequately trained, vetted and reported agents, and overall did not “prevent fraudulent telemarketers, sellers, and con artists from using Western Union’s money transfer system to perpetrate their frauds.”  In other words, Western Union exposed its customers to fraud in violation of the UCL.

As part of the global settlement, Western Union agreed to implement a comprehensive anti-fraud program to detect and prevent future incidents.  California consumers who made a wire transfer through Western Union are entitled to a share of the DOJ restitution fund and may be eligible for more than $65 million in refunds.  The California Department of Justice also may recoup costs and fees from the $5 million multistate fund.

Bottom line: the UCL is a dynamic enforcement mechanism with the potential to curtail many different types of business activities that seemingly harm consumers, and provides the Attorney General with the ability to inflict stiff penalties for violations.

New York Attorney General Eric Schneiderman recently announced settlements with three mobile health app developers resolving allegations that they made deceptive advertisements and had irresponsible privacy practices. The Attorney General alleged that the developers sold and advertised mobile apps that purported to measure vital signs or other indicators of health using just a smartphone. The apps had over a million downloads, giving these concerns considerable consumer reach. The Attorney General’s office reportedly became aware of the apps through consumer complaints and reports to the Health Care Bureau.

Failure to Properly Substantiate Health Benefit Claims

The NY AG’s core concerns regarding the advertising claims were as follows:

  • Runtastic created “Heart Rate Monitor, Heartbeat & Pulse Tracker”. The NY AG alleged that Runtastic promoted its app as a product that purports to measure heart rate and cardiovascular performance under stress but had not tested the app with users engaged in vigorous exercise.
  • Cardiio created and sold the “Cardiio Heart Rate Monitor”. Cardiio allegedly also marketed its app as a means of monitoring heart rate following vigorous movement but had not tested the app under those conditions. In addition, the NY AG alleged that Cardiio’s representations that its product was endorsed by MIT were deceptive.

Representations Consistent with a Regulated Medical Device

  • Matis’s “My Baby’s Beat-Baby Heart Monitor App” raised slightly different concerns. Matis allegedly promoted the app with statements such as “Turn your smartphone into a fetal monitor with My Baby’s Beat app” and language that encouraged consumers to use the app as an alternative to more conventional fetal heart monitoring tools.  The app allegedly had not undergone proper review by the FDA to be marketed as such, however.

As readers of this blog and our sister blog, Food and Drug Law Access, know, the FDA has authority to regulate medical devices and has taken a risk-based approach to consumer-directed mobile health products.  The FTC has been even more active than the FDA in bringing health-related enforcement actions, as we have written about here, here, and here.  As these federal agencies transition into a new administration, the NY AG is making clear with these settlements that regulators are still watching for potentially misleading health claims.

The NY AG also alleged several problematic privacy practices, including the following:

  • Failing to disclose the risk that third parties could re-identify de-identified user information,
  • Issuing conflicting statements on data sharing under the Privacy Policy and under the Privacy Settings,
  • Failing to disclose that the company collected and provided to third parties consumer’s unique device identifiers,
  • Employing a practice of consent by default, where a consumer is deemed to have consented to a privacy policy just by using the website, and
  • Failing to disclose that protected health information collected, stored, and shared by the company may not be protected under the Health Insurance Portability and Accountability Act.

As we noted in a previous post on privacy and data security in mobile health apps, legal compliance is all too often an afterthought when it comes to app development. These allegations underscore the importance of understanding and reconciling data collection and use practices with the statements companies make to consumers.

Yesterday, the Virginia Attorney General announced that it reached a settlement with Hobby Lobby over the retailer’s price comparisons. According to the press release, Hobby Lobby advertised discounts compared to “other sellers,” but failed to disclose the basis of comparison, thus making it difficult for consumers to determine whether they were getting a good deal.

The Attorney General stated that “comparison price advertising only works if businesses are clear about their prices and how they compare to competitors.” As part of the settlement, Hobby Lobby is required to more clearly disclose the basis of its price comparisons, in accordance with Virginia’s Comparison Price Advertising Act. In addition, the company must pay $8,000.

Regulators in other countries are also focusing on these issues. For example, earlier this year, Canada’s Competition Bureau announced that Amazon had agreed to pay $1.1 Million to resolve an investigation into the company’s use of “list” prices. Amazon would frequently advertise a list price with a line through it, followed by the selling price and a savings claim. For example:

amazon

The Bureau picked a sample of 12 products and investigated the prices at which those products were sold by Amazon and its competitors over a two-year period. According to the Bureau, those items were rarely sold at the advertised list price. Amazon stated that it required its suppliers to provide accurate price information, and had relied on this information, without independently verifying it.

The Bureau noted that Amazon had initiated various changes to its pricing practices, including (a) suppressing the list prices of certain products, (b) adopting policies and procedures to ensure compliance with the requirements the Competition Act, and (c) including the requirement that list prices be set in good faith for all products offered for sale by Amazon for Amazon Retail.

Based on recent trends, we expect to see more of these types of investigations in 2017. Retailers need to pay close attention to these developments and pricing laws, particularly when they advertise discounts, sales, or other price reductions.

 

 

Did you know Kelley Drye’s Advertising Law practice produces a newsletter, Ad Law News and Views, every two weeks to help you stay current on ad law and privacy matters? Click here to access our Publication Sign Up and select Advertising and Marketing to subscribe. Find contents from the latest issue below:

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Recent News

Chairman Kaye Steps Down as CPSC Chair; Republican Buerkle Assumes Role of Acting Chair

CFSAN Director Anticipates “Tweaks,” Not Rollbacks Despite Administration’s De-Regulation Emphasis

Smart TV Manufacturer “Smarting” after $2.2 Million Privacy Enforcement

FTC Announces Changes at the Helm of the Bureau of Consumer Protection; Thomas Pahl to Take Over as Acting Bureau Director Following Jessica Rich’s Departure

Not a Passing Grade: FTC Settles with Company Over Alleged False Advertising for High School Diploma Program

EU Data Protection Authority Issues GDPR Action Plan, Swiss Sign Privacy Deal with U.S.

New FTC Acting Chair Maureen Ohlhausen Offers Insight into Consumer Protection Priorities

CIT Adds New Requirements for ‘Assembled in USA’ Claims Analysis

FTC Cries Foul On Breathometer Accuracy Claims

Spotlight On Our New Texas Offices

Kelley Drye & Warren LLP recently merged with Jackson Gilmour & Dobbs, P.C., a highly respected Texas law firm best known for success in environmental litigation matters. The team also brings substantial experience in sophisticated regulatory and commercial litigation matters. The merger strengthens Kelley Drye’s litigation and environmental practices, as well as extends our national presence.

The collective environmental practices broaden Kelley Drye’s nationwide capabilities in site remediation, cost recovery, natural resource damages, and related insurance litigation, creating a powerhouse firm for businesses contemplating sales and acquisitions, debt and equity financings, and real estate development and construction where environmental issues may be present.

Please read more about our Environmental Law and Environmental Litigation capabilities, as well as our new offices in Houston and Austin

Analysis 

Marketing in a Multi-Device World: Update on Cross Device Tracking

On January 25, Kelley Drye hosted a webinar on maintaining transparency and respecting consumer choice while achieving marketing objectives. Megan Cox, Attorney at the Federal Trade Commission, J. Jurgen Van Staden, Vice President, Policy & Technology at the Network Advertising Initiative, and partner Dana Rosenfeld discussed recent law enforcement activity, such as the FTC’s recent settlement with Turn Inc., as well as self-regulatory guidance and enforcement issues surrounding cross device information tracking and uses. For a copy of the slide deck, please click here.

Our next webinar will be on “Litigation is Inevitable: Update on Recent Advertising Class Actions” February 22. Please click here for more information and to register.

To sign up to receive future webinar invitations, please click here and sign up to receive communications from the Advertising and Marketing practice group.

Suing over Empty Space: Why Lawsuits over Slack Fill in Packaging Are Growing

Partner Kristi Wolff co-authored the Nutritional Outlook article “Suing over Empty Space: Why Lawsuits over Slack Fill in Packaging Are Growing.” The article discusses the rise in lawsuits regarding slack fill, or the difference between the capacity of a container and the volume of the product inside. Read more…

ABA Section of Antitrust Law Presidential Transition Report

Partner Bill MacLeod addressed the American Bar Association’s Section of Antitrust Law with an introductory note to the Section’s 2017 Presidential Transition Report. The American Bar Association Section of Antitrust Law released its 60-page eighth sequential Presidential Transition Report, which offers a retrospective of current state and federal antitrust and consumer protection law and policy, as well recommendations for ways the new Trump administration might consider further strengthening policy and enforcement to deal with new antitrust challenges on the horizon. Read more…

Has the Supreme Court’s Resolution of Spokeo Played Out as Expected?

Partner Lee S. Brenner co-authored the Bloomberg BNA article “Has the Supreme Court’s Resolution of Spokeo Played Out as Expected?” On May 16, 2016, the United States Supreme Court held in Spokeo Inc. v. Robins that a consumer cannot satisfy the injury-in-fact demands of Article III by alleging only a bare procedural violation of a statute, divorced from any concrete harm. The article examines the Spokeo decision and how that case impacted litigation in various contexts, including data privacy, the Truth in Lending Act (TILA), the Fair and Accurate Credit Reporting Act (FACTA), and the Telephone Consumer Protection Act (TCPA). Read more…

Fifty Countries and Counting, Sixty Sessions and More – at Spring Meeting: A Message From Bill MacLeod, Chair, Section of Antitrust Law

Partner William MacLeod authored his monthly address to the American Bar Association’s Section of Antitrust Law. This month’s message features The Spring Meeting of the Section of Antitrust Law. Read more…

Upcoming Events and Speeches

Toys for Sale: IoT Devices and Connected Kids
February 15, 2017 |WEBINAR
American Bar Association
Dana B. Rosenfeld

Litigation is Inevitable: Update on Recent Advertising Class Actions
February 22, 2017 | WEBINAR
Jeffrey S. Jacobson

Regulation of Cosmetics
March 3, 2017 | WASHINGTON, DC
Introduction to U.S. Food Law and Regulation
Kristi L. Wolff

Doing Data Right: Legal Best Practices for Making Your Data Work
March 16, 2017 |SAN JOSE, CA
Strata + Hadoop World 2017
Alysa Zeltzer Hutnik

Eyes on the 1-800 Prize: IP Restrictions and Online Competition
March 29, 2017 | WASHINGTON, DC
65th Antitrust Law Spring Meeting
David H. Evans

Multi-State Privacy/Security Investigations: Expert Roundtable
April 20, 2017 |WASHINGTON, DC
Global Privacy Summit 2017
Alysa Zeltzer Hutnik

Impact of the 2016 Election on Antitrust and Consumer Protection Class Actions
April 27, 2017 |SEATTLE, WA
Law Seminars International’s Litigating Class Actions
Jeffrey S. Jacobson

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Please join Kelley Drye in 2017 for the Advertising and Privacy Law Webinar Series. Like our annual in-person event, this series will provide engaging speakers with extensive experience and knowledge in the fields of advertising, privacy, and consumer protection. These webinars will give key updates and provide practical tips to address issues faced by counsel.

This webinar series will commence January 25 and continue the last Wednesday of each month, as outlined below.

January 25, 2017 | February 22, 2017 | March 29, 2017 | April 26, 2017 | June 28, 2017
July 26, 2017 | September 27, 2017 | October 25, 2017 | November 29, 2017

Kicking off the series will be a one-hour webinar on “Marketing in a Multi-Device World: Update on Cross Device Tracking” on January 25, 2017 at 12 PM ET. For more information and to register, please click here. CLE credit will be offered for this program.

Our colleague Bill MacLeod, chair of the Antitrust Section of the American Bar Association, and former director of the FTC’s Bureau of Consumer Protection, penned the following blog post on what we might expect at the FTC under the new administration.  The post focuses on antitrust issues, but the anticipated short term outlook and transitions are very similar for consumer protection issues.  Although historically Republican administrations have focused less on national advertising and marketing conducted by established brands, the FTC during the Bush administration overhauled the Telemarketing Sales Rule to include the National Do Not Call Registry, dramatically changing the way businesses engage with consumers, and kicked off its data security initiatives that were the foundation for current activity.  The campaign trail offered little insight into the mark Donald Trump might make on consumer protection, but consumer complaints presumably will continue to dictate the FTC’s priorities, with debt collection, fraud, and identity theft at the top of the list.  Keep watching our blog for updates.

The Antitrust Forecast – William C. MacLeod

It’s not that hard to predict. If you want to factor the antitrust forecast into your business plans, you have two weather patterns looming.  We can assess the first one quite accurately already.  And notwithstanding all the speculation, we can get a pretty good feel for the second front as well.

Forget about the first 100 days. The first phase of the new antitrust era will last a good six months, and could stretch out longer.  The immediate outlook?  More of the same.  If you are responding to an investigation, if you have a deal pending, the wind is hardly going to shift.  Your encounter next week or next month will remind you of your last meeting. If you have negotiated a deal with the staff, don’t expect them to change their mind.  And don’t expect them to postpone the proceeding.  Virtually all the officials who are looking at your matter today will be handling it this winter, and probably next spring.  That goes from bottom to top.

I’ve worked through the last five transitions at FTC and DOJ (inside the agencies during one), and I don’t recall a single administration that had its full antitrust team in place before the cherry blossoms staged their show. We may know who the new agency heads will be by next spring, but how they operate will remain to be seen.  New FTC Commissioners and Assistant Attorneys General must be nominated by the President and confirmed by the Senate.  (Of course, a sitting FTC Commissioner could be given the chair and an acting head could be named at DOJ’s Antitrust Division).  These decisions typically do not come in the first wave of appointments.

Once the new heads are announced, confirmed and sworn in, the first thing they will do is assemble their teams.  It takes time to recruit bureau directors, deputy assistant attorneys general and front office personnel.  It takes more time to coordinate and deploy them.  Meanwhile, the career civil servants, who occupy all but a few positions at the agencies, will continue to do the daily work of law enforcement.

Sometime next summer the second phase will probably begin, but we won’t notice it right away. We will hear about it in speeches, and some of us may experience it first-hand with investigative  requests, but it will take another year or two before most businesses feel its effects.  The reason is simple.  Every new administration inherits the pipeline of the last one, and right now at the antitrust agencies that pipeline is full.  It takes months for an agency to devise new strategies and much longer to convert them into enforcement initiatives.  We should not expect to see the results of new approaches until year two or three of the administration.

What might we see in the way of a course correction? Don’t expect a pirouette.  The history of transitions in the last three decades suggests that antitrust enforcement in the future will look remarkably like it does today.  The debate over enforcement today (and there was a debate in the campaign) does not portend the end of that history. Ironically, most of the criticism of current enforcement has come from advocates of more, not less, regulation than the current administration imposed.  By and large, there is consensus about the policies at FTC and DOJ.

One more factor suggests that the antitrust we know today is a good barometer of the antitrust we’ll face tomorrow. Antitrust is, after all, law enforcement.  The agencies don’t get to make the law they enforce.  It comes from century-old statutes that Congress is not likely to change.  The interpretation of those statutes is in the hands of federal judges, whose decisions have placed limits on the agencies’ options.  We know they are not going anywhere soon.

It is always fun to speculate about the storms that might sweep through antitrust. But we have no basis to predict abnormal weather patterns in the seasons ahead.  We know where the trouble is likely to arise, and we should be able to avoid it.  It makes perfect sense to plan now for an uneventful voyage.