So you may be aware by now that the FTC does not like trade or professional associations setting rules limiting the way that association members compete, particularly when those rules limit the ability of the members to provide useful and non-deceptive information to consumers. They really do not like it. Since last Spring alone, there have been nearly a half dozen different complaints by the FTC where the FTC describes the allegedly anticompetitive rules (often termed “ethics rules”) in association industries as far apart as music teaching, legal support professionals in California, electricians who specialize in commercial lighting and electrical sign installation and maintenance and coaches for ice skating. And now there is even more evidence that the FTC doesn’t like associations setting the rules limiting how its members compete. But this time it has to do with rules limiting the ability of members of an association to do comparative advertising or price based advertising. And also it has to do with AI. That’s right – artificial insemination. Continue Reading
Bayer made the following express claims for PCH: “To promote Overall Digestive Health” and “Helps Defend against Occasional Constipation, Diarrhea, Gas and Bloating.” The FTC argued that these express claims also implied a claim that PCH can help prevent, treat or cure, constipation, diarrhea, gas, and bloating. Continue Reading
On Monday, September 21st the Federal Trade Commission (“FTC”) held a workshop entitled Homeopathic Medicine & Advertising (“workshop”). The workshop consisted of three panels: one discussing the homeopathic industry parameters generally, one discussing the science of homeopathic medicine, and the last discussing the legal and regulatory issues surrounding the marketing of homeopathic medicines. Continue Reading
As most of our readers likely know, the FTC and FDA share jurisdiction over claims for foods, cosmetics and OTC drugs. The two agencies have in place a written protocol which sets forth where each should defer to the other, for example, FDA has primary jurisdiction over food labeling while it defers to the FTC on food advertising. For the most part the two agencies co-exist in relative harmony and it’s tempting to think if you’ve checked off one agency box you can check off the other agency box as well, but it’s not always that simple.
A recent warning letter sent by FDA to several tobacco manufacturers is a great example of how advertisers can sometimes get whipsawed between the two agencies. In 1999 the FTC entered into a consent order with R.J. Reynolds regarding its advertising for its Winston “no additives” cigarettes. (A similar order was subsequently signed by what was then the Santa Fe Natural Tobacco Company). While RJR made no express claims that its “no additives” cigarettes were safer the FTC alleged in its complaint that such a message was implied. The consent order required that RJR include in its advertising for its product a prominent disclaimer that “No additives in our tobacco does NOT mean a safer cigarette.” The FTC Bureau Director at the time was quoted in the Agency’s press release as stating “Reynolds’ disclosure should clear up any misconception that cigarettes without additives are safer to smoke than other cigarettes . . . .”
As we continue to blog from the NAD/CARU Annual Advertising Law Conference, there was big news about significant changes to the NAD challenge and review process, which will be reflected in changes to their existing procedures. The changes arise from a review of the self-regulatory process and a resulting report done through the ABA Antitrust Section and its Consumer Protection and Alternative Disputes and Litigation Committees. While the report overwhelmingly concluded that the NAD process generally works very well, there were some findings and recommendations for change. A summary of the changes is below, and they are far more than modest tweaks to the process: Continue Reading
Huddled in front of a digital hearth on the third and final morning of the NAD Annual Conference, FTC Commissioner Terrell McSweeny participated in a cozy fireside chat about children’s marketing with ASRC President and CEO, C. Lee Peeler. The newest FTC Commissioner reported (or warned!) that she is closely following the evolution of marketing and advertising to children on social media and began her chat by touching on some of the same themes that Commissioner Brill raised in her keynote address two days earlier. Namely, Commissioner McSweeny underscored the continuing relevance of the foundational consumer protection principles underlying the FTC’s endorsement and testimonial guides. She emphasized that children deserve special protections when it comes to their consumption of endorsements, particularly in new and digital formats. Accordingly, the Commissioner encouraged all marketers, including those using non-traditional media, to continue to ask themselves, “would a child really understand that [an endorser has an association with the advertised product]” and “would a child really see that [on the screen]” and “is that language really clear to a child”?
Commissioner McSweeny’s fireside comments revealed that she is especially interested in children’s apps and the “internet of (children’s) things”. Regarding apps, the Commissioner expressed doubt about the ability of children to discern the line between virtual and real currency, particularly when making in-app purchases, and stated that in-app purchases can lead to very high dollar amounts charged to a parent’s credit card in a short amount of time. She stated that, when children are making in-app purchases, just as in a brick-and-mortar store, parents are entitled to notice, choice and control over what is purchased with their credit card. If such notice, choice and control doesn’t exist, the parent should have a way to get their money back. The Commissioner did, however, appear encouraged by app providers’ attempts to improve notification to parents about their children’s’ spending.
Regarding the “internet of things”, which the Commissioner referred to as “all the [connected] stuff that isn’t smartphones”, Commissioner McSweeny was decidedly suspicious. Because the networked use of interactive toys and wearables potentially results in a child’s protected information being collected and shared, the Children’s Online Privacy Protection Act, or “COPPA”, essentially requires parental consent in order to unlock item functionality. When an audience member raised the issue of interconnected toys requiring parents to take burdensome additional steps to provide consents, Commissioner McSweeny was not sympathetic. She said the methods parents currently use to provide consent are “not unworkable”, and reiterated her concern about the privacy implications of the internet of children’s things, and about the security of products that collect children’s information. Commissioner McSweeny also explained that, perhaps because she attends hacker conferences, she is troubled by supply chain vulnerabilities that could potentially leak or otherwise expose vast amounts of data about children.
The remainder of Commissioner McSweeny’s chat spanned a variety of topics ranging from children’s food advertising (she receives angry letters demanding the FTC do more! And less!), to coordination between the FTC and state Attorney Generals on COPPA-related issues (she reported lots of coordination, especially at the staff levels), to whether COPPA 3.0 is in the works (not yet, that she’s aware of), and developments in the U.S.-E.U. Safe Harbor Framework litigation at the European Court of Justice (the Commissioner had “no comment”, but suggested the audience look out for the opinion next week).
In a presentation titled “Tiny Screens, Big Distractions: How Reliable is Your Online Consumer Perception Survey?”, David Bernstein of Debevoise & Plimpton, Kevin Goldberg of Nestlé Nutrition, Hal Poret of ORC International, and Annie Ugurlayan of NAD traced the history of survey evidence before the courts. In the 1960s, surveys were treated with extreme skepticism by judges, with the number used in Lanham Act litigation before 1975 stuck in the single digits. With the additional consideration given to expert testimony by the revised Federal Rules of Evidence in the 1970s, Bernstein explained, judges became more comfortable with surveys, eventually elevating them to the position of influence they hold today. Continue Reading
If there is one takeaway from yesterday’s panel on native advertising, it’s that sponsored content is not going anywhere in the foreseeable future. Although NAD has talked about it before, the FTC has held a workshop to address it, and of course, we’ve blogged on it, native advertising is still a hot topic. Native advertising, a form of sponsored content, is a fast-growing method for promoting products.
As explained by Diedre Sullivan, Senior Counsel to the New York Times Company, one of the threshold questions in sponsored content is whether the piece is, in fact, commercial speech. Under the umbrella of sponsored content are a number of types of native advertising, such as content written and provided exclusively by the advertiser, versus content created by the publication with subjects of interest to the advertiser but without the advertiser’s direct input (branded content), or content written jointly by the advertiser and the publication (sponsored content). If the content is exclusively editorial, it is afforded higher protection than commercial speech. However, the question for advertisers is not generally whether the piece is an ad but instead how to disclose.
More, almost live blogging, from the NAD conference. During the mid-morning hours yesterday, the conference group focused on strategies to get their claim substantiation right. The panel of Kat Dunnigan (NAD); Rebecca Bliebaum (Tragon Corporation); Jay Goldring (Boots Retail USA, Inc); Spring C. Potoczak (Novartis Consumer Health, Inc.); and moderated by David Mallen (Loeb & Loeb, LLP) focused on the sufficiency of different types of claim substantiation.
The panel started the conversation by discussing how much substantiation is needed for a given claim. In other words, what constitutes competent and reliable scientific evidence. The panel said that randomized controlled trials (RCT) are generally thought of as the gold standard of support for advertising claims. However, the panel noted that RCTs are not required in all cases. In fact, David Mallen noted that the DC Circuit has said that RCTs are not necessarily the standard for advertising claim support. The NAD confirmed that it does not require any one type of test, reiterating that its standards for claim substantiation are flexible. RCTs are certainly accepted at NAD, but are not required. The NAD’s focus is on whether the advertiser’s support is sufficient and reliable. The NAD encouraged advertisers to simply provide the best evidence supporting the advertising claim, whether that evidence is a RCT or not.
There is one phrase that sums up yesterday’s panel on puffery—puffery is f@#$*&% great. The panel started with a bang by jumping right into a video advertisement for dollar shave club where CEO and panelist Michael Dubin informed the audience (and the world) that the blades offered by dollar shave club are not good, they are f@#$*&% great. The panel’s energy did not stop there.
The panel dove into the age old question, how does one know when an advertising claim is a puff? The starting place for the panel was of course black letter law. The moderator, Terri Seligman from Frankfurt Kurnit, provided a thorough black letter definition of puffery—“an obviously exaggerated representation that is not objectively provable and that ordinary consumers would not rely upon in making a purchasing decision.” The panel consisting of Michael Dubin (Dollar Shave Club); Gabriel Martinez (Clorox); Ndidi Oriji (NBC Universal); and Laura Brett (NAD), then gave their impressions of puffery—especially, what they consider NOT to be puffery.
The first observation is that if the claim is measurable, it is not puffery. The panel discussed by way of example a Tropicana NAD case where Tropicana claimed its juice was the “World’s Best” juice. The NAD found that this claim was puffery because “World’s Best” was a general, non-measurable claim of superiority. The panel compared this case to a case where the claim “World’s Best Cat Litter” (Kent Nutrition Group, Inc. #5301) was challenged by Clorox. The NAD held that the claim was not puffery because it was made in conjunction with multiple measurable claims (ends odor the best, lasts longer, clumps the best, as green as green can be, you can eat the cat litter because it’s made from corn, among others). These claims are measurable and took what could have been a puffing claim and turned it into something that requires substantiation. The panel also noted that the advertiser did not participate in the NAD process in the Kent case and the advertiser was referred to the FTC, resulting in a closing letter.