FTC Issues Enforcement Policy on Collection and Use of Voice Recordings of Children Under COPPA

On Monday, the FTC issued an Enforcement Policy Statement stating that the Commission will not take action against operators that collect an audio file of a child’s voice as a replacement for written words, such as for translation into text, without first obtaining parental consent, provided the file is retained only for the brief time necessary for that purpose. However, the operator is still obligated to indicate in its privacy policy how it will collect and use children’s voice recordings, as well as its policy for deletion. The FTC reasons that, although COPPA applies to the collection online of files that contain children’s voices, even if they are immediately deleted after collection, the risk associated with such collection and immediate deletion is minimal.

There are some additional limitations on this policy. It does not apply when the operator requests personal information, such as a child’s name. Moreover, the operator may not use the recording for any use other than translation into text, such as behavioral targeting or identification purposes, before deleting it. If the operator does plan to collect other types of personal information, then it would be required to obtain parental consent.

Although the policy provides some clarification about the application of COPPA to voice-capture technologies, operators of child-directed services that collect children’s voices should ensure that their privacy policies and consent and notification procedures comply with COPPA requirements. Violators are liable for up to $40,654 in civil penalties per violation.

 

Associate Lauren Myers contributed to this post. She is practicing under the supervision of principals of the firm who are members of the D.C. Bar.

 

New Vacancy at CPSC as Commissioner Joe Mohorovic Departs for Dentons

Last week, CPSC Commissioner Joseph Mohorovic, one of the two Republicans on the five-person Commission, announced that he would be ending his term as Commissioner two years early to join the Federal Regulatory and Compliance practice at the law firm Dentons.  His last day at the Commission was October 20.  Mr. Mohorovic became a Commissioner in July 2014 and had commuted from Chicago during his tenure.  He cited a desire to spend more time with his family as the basis for his resignation.

In the short term, the Commission will have a 3-1 Democrat majority, but Dana Baiocco (R) has been nominated to fill the seat of Commissioner Marietta Robinson (D) as her term ends this month.  Once that nomination is confirmed, the Commissions would have two Republicans (Ms. Baoicco and Acting Chair Ann Marie Buerkle), two Democrats (Commissioners Robert Adler and Elliot Kaye), and one open slot.

Trump To Nominate Competition-Focused Simons for FTC Chair, CP-Focused Chopra for Commissioner; Reports of Philips for Additional Seat

After months of speculation among the consumer protection and antitrust bars, Trump announced today his intention to nominate former Director of the Bureau of Competition and current Paul Weiss partner Joseph Simons as Chairman of the Federal Trade Commission.  Trump also announced his plan to nominate Rohit Chopra, currently a senior fellow at the Consumer Federation of America and previously Assistant Director at the Consumer Financial Protection Bureau (CFPB), to one of two vacant commissioner seats.  News outlets also are reporting that Trump will soon nominate Noah Phillips, chief counsel for Senator John Cornyn (R.-Tex.), to an additional commissioner seat.

Assuming Simons is confirmed and appointed as Chair, Acting Chairman Maureen Ohlhausen would return to her position as Commissioner.  Her term is set to expire in September 2018.  Commissioner Terrell McSweeny also continues to serve on the Commission, although her term expired in September, and as reported by MLex.com, Simons’ confirmation would place him in the slot she currently occupies.  More information on each of the three nominations follows.

Joseph Simons.  Currently a partner and co-chair of the Antitrust Group at Paul, Weiss, Rifkind, Wharton & Garrison LLP, Simons has worked in private practice for the majority of his career and is likely to be welcomed by industry as a reasoned and qualified choice.  He also has experience in public service, having served at the FTC as Director of the Bureau of Competition from June 2001 to August 2003.  He also served as the Associate Director for Mergers and the Assistant Director for Evaluation at the FTC in the late 1980s.  Simons has worked on a number of high profile antitrust cases, including representing MasterCard Inc. in antitrust class actions over merchant fees, and representing a consortium including Microsoft, Ericsson, RIM and Sony in its $4.5 billion acquisition of the patent portfolio of Nortel Networks.

As a long-time antitrust practitioner with experience in private and public practice, Simons is likely to bring a thorough and deliberative approach to the Commission.  While Simons is unlikely to support enforcement that is not justified by a rigorous economic analysis of costs and benefits, he’s also unlikely to shy away from challenging deals and conduct that fail the economic test.  In short, economic effects and rule of reason will guide policy.  Simons notably has significant high tech and intellectual property experience, as well as merger experience, where economics predominates decision making.

On the consumer protection side, Simons’ experience will likely reinforce the policies announced by Acting Chairman Ohlhausen to put economic injury at the center of case selection.  The emphasis on fraud will likely continue, while actions and remedies that would regulate ordinary business practices will face the test of economic analysis.  If he’s confirmed as expected, Simons would serve a seven-year term that began on September 26, 2017.

Rohit Chopra.  While Simons’ experience comes primarily from the competition side, Chopra has concentrated on consumer protection issues.  Chopra is currently a senior fellow at the Consumer Federation of America where he focuses on consumer finance issues, particularly with regard to their impact on younger Americans.  Chopra was previously the Assistant Director of the CFPB where he led enforcement actions against student loan borrowers and helped establish a new student loan complaint system at the agency.  Chopra’s background and experience with consumer finance give him an expertise rare among commissioners and could translate into significant influence on hot topics such as credit reporting, debt collection, and big data.  He also may engage in advertising and privacy initiatives affecting children and younger Americans, given his prior interest in this area.

Chopra’s approach to competition could be influenced by longtime ally, Senator Elizabeth Warren (D.-Mass.), who has distinguished herself as a proponent of aggressive enforcement and new legislation.  Unlike most prior FTC commissioners, Chopra is not an attorney.  His background is in business and includes an MBA from the Wharton School at the University of Pennsylvania.  Trump indicated that Chopra would be appointed to the remainder of a seven-year term that would expire on September 25, 2019.

Noah Phillips.  While yet to be announced by the Trump Administration, media outlets are reporting that Phillips will be named to fill another vacancy at the Commission.  Philips is presently Chief Counsel to Senator Cornyn.  Phillips previously worked as an associate at Cravath, Swaine & Moore LLP and Steptoe & Johnson LLP, before leaving the private sector to serve as counsel to Cornyn.

Phillips would come to the Commission with significant law firm experience, as well as an understanding of the Hill.   Among others, Cornyn serves on the Senate Committee on Finance, which includes subcommittees on international trade and energy.  We would expect, therefore, to see Phillips take an active interest in international issues, as well as competition in the energy sector.

***

We will continue to monitor the appointment and confirmation process and post updates here.

“OK, Google. Send a Letter to the CPSC.”: Privacy Groups Request Recall of Google Home Mini

Last Friday, ten consumer and privacy advocacy groups, including the Electronic Privacy Information Center, Center for Digital Democracy, and Consumer Watchdog, sent a letter to Acting Chairman Ann Marie Buerkle, requesting that the CPSC recall the Google Home Mini smart speaker. The speaker was designed to respond to the voice commands, “OK, Google” and “Hey, Google,” as well as to a consumer pressing a small button on the top of the unit. Last week, the blog Android Police reported a glitch that caused the device to detect a touch even when a consumer was not pressing the button and remain “always on.” In response, Google issued a software update and completely disabled the button functionality.

The groups claim that this glitch resulted in Google intercepting and recording private conversations without consumers’ knowledge or consent, and that the device therefore poses a risk to consumer safety. Although they acknowledge that “the privacy concerns associated with Internet-connected devices appear different from traditional public safety concerns,” the groups call on the CPSC and its “broad mandate” to respond to such concerns, particularly in light of the “failure” of the FTC to investigate complaints involving Internet-connected devices.

Under the Consumer Product Safety Act, manufacturers, importers, distributors, and retailers have an obligation to immediately report to the CPSC when they obtain information that reasonably supports the conclusion that a consumer product contains a defect that could create a substantial product hazard, or creates an unreasonable risk of serious injury or death. While the groups note that the CPSC recently announced a recall of Internet-connected devices, the cited recall involved a product that posed an actual injury to consumers. CPSC action based on a non-physical injury, such as invasion of privacy, would be breaking new ground, but manufacturers, distributors, and retailers of IoT and other connected products should continue to watch for new developments and consider the potential safety issues associated with the products.

FTC’s “Made in USA” Enforcement On Pace With Prior Years

In a keynote address at the National Advertising Division conference earlier this month, Mary Engle, Associate Director in the Advertising Practices Division of the FTC, included “Made in USA” as among the agency’s current enforcement priorities.   The FTC’s interest in U.S. origin claims is nothing new, but these claims have garnered considerable regulatory attention in recent years, as we have written about here.  With manufacturers and retailers increasingly eager to highlight their domestic operations, we took a look at how the FTC’s “Made in USA” enforcement this year stacks up to prior years.

For 2017 year to date, the FTC has issued 15 closing letters and has settled one case (Block Division).  By comparison, for calendar years 2014-2016, the FTC issued 56 closing letters and settled one case (Chemence, Inc.)  This suggests that “Made in USA” enforcement is roughly on pace with the prior three years.

Enforcement year to date also spans a considerable number of industries and products, involving advertising on household items like pillows, coffeemakers, and lawn mowers, to office and industrial equipment such as ice machines, standing desks, data security products, scales, cell phone signal boosters, air purifiers, and LED tubes.   Common remedial measures noted in closing letters include discontinuation of the claims at issue and replacement with qualified claims, packaging modifications, coordinating corrective measures with vendors, and monitoring and correcting third-party marketers.

Given that “Made in USA” claims will remain a priority from the foreseeable future, claim substantiation is a key consideration for advertisers.  If you are new to making country of origin claims or just need a refresher, check out our webinar, originally offered in May 2017, called “Buy American, Hire American: Is Your (Or Your Competitor’s) Product Really ‘Made in the USA’?,” for an overview on the substantiation requirements for advertising and the “Buy American” standard that applies to government procurement.

 

Moonlight Slumber Says “Goodnight” to Misleading and Unsubstantiated “Organic” Advertising Claims After Settlement with FTC

In its first case challenging “organic” claims, the FTC announced a settlement with Moonlight Slumber, LLC  resolving charges that the company misrepresented or could not support a variety of environmental and health-related claims about its baby mattresses.

Misleading and Unsubstantiated Claims. The FTC’s complaint asserts that Moonlight advertised its baby mattresses as “organic,” “natural,” “hypoallergenic,” and “eco-friendly.” Moonlight also indicated that the mattresses were made with “BabySafe Natural Materials” and “eco-friendly plant-based foam.” According to the FTC, the company’s products were made of a majority of non-organic materials. For instance, the cores and fire barriers of the company’s Starlight Simplicity and Little Star mattresses did not contain any organic material, and 70% of the cotton cover of these mattresses was non-organic material. The Little Star mattress core was made of a synthetic latex material, rather than the “natural latex” the company advertised, and for both the Starlight Simplicity and Little Star mattresses, only the mattress ribbon itself contained solely organic materials. According to the FTC, most of the company’s mattresses were made of polyurethane, either wholly or substantially, and the foams in these mattresses were comprised of “little or no plant-based material.”

Continue Reading

Love Is a Many-Splendored Thing, but It’s Not an Ingredient

The Food and Drug Administration has made the news lately for disapproving a Massachusetts bakery’s inclusion of “love” among the listed ingredients in its granola products.  Nashoba Brook Bakery produces breads and granolas that are sold in independent markets and fine-food stores in Massachusetts and New Hampshire.  As the FDA primly put it, “‘Love’ is not a common or usual name of an ingredient, and is considered to be intervening material because it is not part of the common or usual name of the ingredient.”  The concern with such “intervening material” is that it may distract from the mandatory listing of ingredients in the order of redominance.

In fairness to the FDA, objecting to the listing of love as an ingredient was not the main point of its warning letter.  The FDA conducted an inspection of Nashoba Brook’s plant, and the bulk of the letter lists sanitary and food-storage violations of the Current Good Manufacturing Practice.  Obtaining and reviewing product labels is a typical part of such inspection visits, and this resulted in the FDA’s detection of the love ingredient violation.

The moral here is simple.  There are a lot of places on your packaging where you can be cute, but the FDA mandated facts panel and ingredient statement are not among them.

 

One More Step Forward: Senate Committee Approves Nomination of Ann Marie Buerkle as CPSC Chairman

The Senate Committee on Commerce, Science and Transportation approved Acting Chairman Ann Marie Buerkle’s nomination to become CPSC Chairman last Thursday in a 14-13 vote along party lines. She is expected to be confirmed by the full Senate, and would then be able to move forward with staff appointments. Buerkle has served as Acting Chairman since February, and was nominated to become Chairman in July. For more information about Acting Chairman Buerkle’s priorities at the CPSC, please view our previous blog posts here and here.

Associate Lauren Myers contributed to this post. She is practicing under the supervision of principals of the firm who are members of the D.C. Bar.

NJ Supreme Court Disapproves Class Certification In Landmark TCCWNA Case

Today, the New Jersey Supreme Court drove a stake into the many class actions alleging claims under New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”).  That law provides for $100 in damages whenever an “aggrieved consumer” demonstrates that a contract or other document contains provisions that violate any “clearly established legal right.”  The Supreme Court’s new decision construed both of those statutory limitations in a manner that should preclude virtually all the pending class action cases. 

The decision in Dugan v. TGI Fridays, Inc. and Bozzi v. OSI Restaurant Partners concerned those restaurants’ alleged practice of not printing drink prices on their menus.  The plaintiffs alleged that keeping consumers in the dark about those prices until they received their checks allowed the restaurants to inflate drink prices by a dollar or two each.  They sued under New Jersey’s Consumer Fraud Act, and because they also contended that the menus were “notices” that violated a “clearly established right” to see prices, they sued under the TCCWNA.  An appellate court found that the claims could not proceed on a class basis because the plaintiffs’ issues were too individualized, and the Supreme Court today affirmed that holding. 

The Supreme Court began by rejecting the plaintiffs’ consumer fraud class action theories, holding that whether any person was “overcharged” and by how much could only be decided person-by-person.  The Court then engaged in an extensive discussion of the TCCWNA, laying waste to the theories under which so many plaintiffs recently have sued online and brick-and-mortar retailers for TCCWNA violations.  Continue Reading

Case Dismissed in FTC v. Quincy Bioscience

On Thursday, a federal court in New York dismissed an FTC and New York Attorney General action against Quincy Bioscience, which sells the dietary supplement, Prevagen.  Quincy bases claims for its product on research that includes a randomized, controlled clinical study.  The court observed that the parties agreed that this “gold standard” study followed “normal well-accepted procedures” and showed statistically significant results in a subgroup of healthy, aging adults, although not the experimental group overall. 

The court acknowledged the regulators’ arguments that data analyses revealing the subgroup results were subject to an increased risk of false positives.  The court, however, concluded that the regulators failed to allege that “any actual errors occurred” or that “that reliance on the subgroup data ‘is likely to mislead consumers acting reasonably under the circumstances.’”  The court observed that “the subgroup concept” is “widely used in the interpretation of data in the dietary supplement field.” 

Kelley Drye represented Quincy Bioscience in the matter. 

 

LexBlog