Recent Opinion Highlights – The Risk of Unhealthy Telemarketing Practices

Last month, the U.S. District Court for the Southern District of Florida issued an opinion that serves as a powerful reminder of the risks of not taking telemarketing compliance seriously. In August 2014, the FTC sued the Partners in Health Care Association (“PIHC”), its principal Gary Kieper, and others for deceptively telemarketing medical discount cards.  According to the FTC, the defendants misled consumers into thinking the discount card was actually health insurance.  In last month’s decision, the court granted the FTC’s motion for summary judgment and entered judgment against Kieper in the amount of $8.7 million.

Relying on consumer complaints and FTC undercover calls, the Court found that PIHC and the telemarketers it hired had deceived consumers by telling them that the discount cards were, in fact, health insurance cards.  The court found Kieper was well aware of the deceptions based on several state investigations into the telemarketing, numerous BBB complaints, and internal documents.  The court rejected a variety of arguments raised by Kieper as to why the calls were not deceptive or that summary judgment should not be granted.  Continue Reading

Keep Calm and Carry On: Data Protection Post Brexit

Keep Calm and Carry OnBrexit is likely to cause years of future uncertainty around data protection, including the legal mechanisms for data transfer to countries outside of the United Kingdom (“U.K.”). In the short term, there will be little to no impact on existing data transfer solutions implemented by companies that rely on the U.K. as an entry point into the European Union (“EU”). In the mid-term, with the scheduled implementation of the EU-U.S. Privacy Shield (“Privacy Shield”) in 2016 and the EU’s General Data Protection Regulation (“GDPR”) in 2018, the U.K. will either continue to be subject to EU laws by extending its membership in the European Economic Area (“EEA”) or it will create its own national data protection legislation. Although companies may have to rethink data transfer agreements, this will be part of a long term process as the future of U.K. data protection continues to unfold.

Short Term—What to Expect in the Next 12 Months  Continue Reading

“UP TO” NO GOOD

By Okram (Own work) [CC BY-SA 3.0], via Wikimedia Commons

A recent NAD decision provided an opportunity for NAD to once again opine on the standard for performance-related “up to” claims – this time related to energy efficiency.  As even infrequent readers of the blog are aware, this is a popular topic and one we’re prepared to talk about more often than Disney releases a Star Wars movie.

In this case, the North American Insulation Manufacturers Association (NAIMA) challenged several claims that Applegate made about its cellulose insulation.  Among other things, NAIMA challenged Applegate’s energy savings claims. Although the FTC in a similar case involving window energy efficiency claims applied a strict standard — that the majority of consumers using the product under ordinary operating conditions achieve the maximum touted results —  the NAD in response said it would not vary from its standard of an “appreciable number” of consumers achieving the touted results.  This case arguably put that pronouncement to the test as it involved claims virtually identical to those addressed by the FTC.  Nevertheless, NAD stuck to its guns and applied the “appreciable number” test, which raises the possibility that an advertiser, particularly one advertising energy savings claims might satisfy the NAD but still face FTC regulatory scrutiny. Continue Reading

Going for the Gold this Summer: Brands Beware!

As excitement builds for the 2016 Olympics and Paralympics in Rio, companies and organizations, big and small, will be tempted to use the “Games” or the “Olympics” to promote their products, services and agendas. But, they must beware of getting too caught up in the Olympic spirit. Although Olympic and Paralympic trademarks such as the interlocking rings, “Rio 2016,” and “Faster Higher Stronger” may be ubiquitous, especially this summer, an unauthorized use of such trademarks could bring a lot of legal headaches to the user.

Some background:  Continue Reading

Fake Seals and Phony Websites Promoting Dietary Supplements Equals FTC Lawsuit

DoctorThree things the Federal Trade Commission (FTC) really doesn’t like: deceptive claims about dietary supplements; deceptive certification or seal programs; and websites that look like editorial content, but are actually advertisements. Put them all together and what do you get? If you guessed a lawsuit by the FTC, you are correct!

On June 16, the FTC sued SmartClick Media and its principal, Robert Vozkecky, alleging that the company’s “Doctor Trusted” seal and advertorial websites were deceptive. Both were used to market dietary supplements.

According to the complaint, defendants marketed a “Doctor Trusted” seal that frequently used a photo of a doctor with a stethoscope in a lab coat. If you clicked on the seal, a pop-up window appeared stating that the website had been carefully reviewed by a doctor who had reviewed the claims on the site and concluded the site to be trustworthy, based on reasonable science, with ethical pricing and billing policies. Defendants marketed and sold the seal program to 800 sellers of dietary supplements, including at least two companies that were sued by and settled with the FTC.

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FTC Wins First Jury Verdict in Telemarketing Case

telephoneNo, that headline wasn’t a typo. The Federal Trade Commission (FTC), or more accurately the Department of Justice (DOJ) acting on behalf of the FTC, recently won a jury verdict in a case challenging a variety of telemarketing activity by three Utah-based firms and their owner. The jury found that the defendants made more than 117 million calls violating different provisions of the Telemarketing Sales Rule (TSR). The case provides a useful insight into the different options available to the FTC in challenging conduct and also highlights the significant risks if telemarketing is found to violate the TSR.

As many readers know, a jury trial is not available in most FTC cases. What made this case different?

In most of the cases that it files in federal court, the FTC sues on its own behalf under Section 13(b) of the FTC Act seeking injunctive relief aimed at stopping the alleged illegal conduct as well as equitable monetary relief in the form of disgorgement or restitution. Because these are “equitable” forms of relief, a jury trial is not available, and the FTC routinely successfully strikes efforts by defendants to obtain a jury trial. See here and here for prior blog posts about the contours of equitable monetary relief available to the FTC when it proceeds directly.

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Marketplace Lending Under the FTC Microscope

FinTech remains a hot topic for government regulators. The Federal Trade Commission (FTC) threw its hat into the ring yesterday with a half-day discussion of marketplace lending and its implications for consumers. The forum included panels on the current state of marketplace lending, potential future consumer protection issues as the market evolves, and a presentation on marketplace lending websites. The forum comes on the heels of the Treasury Department’s white paper on marketplace and online lending, and outreach to industry participants by California and New York financial services regulators.

Although it is difficult to forecast specific actions the FTC may take in the online lending space, we note a few key takeaway from the discussion:

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TCPA Plaintiffs Must “Actually Receive” a Rule 68 Offer

See page for author [Public domain], via Wikimedia Commons

In the first federal appellate decision addressing Rule 68 offers of judgment for TCPA claims under the Federal Rule of Civil Procedure since the Supreme Court issued its decision in Campbell-Ewald v. Gomez, the Ninth Circuit has evaluated the potential avenues for defendants to moot a case by making a Rule 68 offer.  In Chen v. Allstate Insurance Co., No. 13-16816, 2016 WL 1425869 (9th Cir. Apr. 12, 2016), the court held that a plaintiff’s individual claims are not moot until the plaintiff actually receives relief, and merely depositing the offered funds into an escrow account for the plaintiff will not satisfy this standard.

The plaintiff’s claims stemmed from alleged violations of the TCPA when Allstate made automated calls to the plaintiff’s phone.  Before any motion for class certification had been made, Allstate made an offer of judgment to the plaintiff under Rule 68.  The funds, totaling the plaintiff’s claims plus reasonable attorneys’ fees and costs, were deposited in an escrow account payable to the plaintiff pending entry of a final district court order that directed the escrow agent to pay the tendered funds, required Allstate to stop contacting the plaintiff, and dismissed the action as moot.  The plaintiff did not accept the offer, and Allstate decided to leave the offer open until the plaintiff accepted.

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Coast-to-Coast Harmony over Browsewrap Agreements

By Wikidata (www.wikidata.org) [CC BY-SA 3.0], via Wikimedia Commons

Website disclosures are a hot topic these days, and are not new. And yet, you should still be paying attention to the law as it evolves around this important component of your website. There are nuances to consider, and, in California, we now have some clarity on how to analyze a browsewrap agreement.

In Long v. Provide Commerce, Inc., 245 Cal. App. 4th 855 (Cal. Ct. App. Mar. 17, 2016), the California Court of Appeal considered a trial court’s denial of a motion to compel arbitration. Defendant sought to compel arbitration based on a provision in the website’s terms of use, which provision was viewable via a hyperlink at the bottom of each page of the operative website (i.e., the “browsewrap agreement”). Plaintiff opposed the motion to compel arbitration. The trial court denied the motion and the court of appeal affirmed. Ultimately, the courts concluded that the terms of use were too inconspicuous to impose constructive knowledge on Plaintiff.

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The CFPB’s Proposed Rule Will End Mandatory Arbitration Clauses

Any company that is regulated and examined by the Consumer Financial Protection Bureau (CFPB) knows how expansive the Bureau’s reach is. Despite challenges in the Congress and the courts, the CFPB is not slowing down. On May 5, 2016, the CFPB released a notice of proposed rulemaking that would ban consumer financial companies from using mandatory pre-dispute arbitration clauses in consumer financial contracts (see our more detailed discussion here).

Members of Venable’s CFPB practice group will host a complimentary webinar on June 15, 2016 to discuss the current state of the rulemaking process and outline what your company will need to know about what’s ahead. Sign up to attend the webinar here.

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