FTC Says Companies Have a Fat Chance of Getting Away With Deceptive Online Marketing in First ROSCA Case

A free trial of a weight loss pill is the best of both worlds, right?  Not according to the FTC, which recently brought its first Restore Online Shoppers’ Confidence Act (ROSCA) case against a group of marketers who advertised exactly that.

Weight loss substantiation is old territory for the Commission.  ROSCA, however, is not.  The FTC’s first ROSCA case, filed in Nevada district court, alleges that health companies made unsubstantiated claims that their dietary supplements would lead to weight loss, muscle building, virility, and improved skin.  More significantly, however, are the allegations surrounding the marketers’ “free trial” and “buy-one-get-one free” offers.  According to the FTC, the companies collected customers’ debit and credit card information in order to enroll customers in a negative option (subscription) program.  While there is certainly nothing wrong with subscription programs on their face, the FTC alleges that the companies here inadequately disclosed the nature of the program – they never clearly told customers their accounts would be charged each month.  ROSCA prohibits marketers from charging customers in an Internet transaction unless the marketer has clearly disclosed all of the material terms of the transaction and obtained customers’ express informed consent. In this case, according to the FTC, the marketers did not provide the required disclosures for a negative-option program before accepting payment; failed to disclose material facts about their refund and cancellation policy, among other facts; and didn’t give customers a simple, effective way to stop the automatic charges.

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FTC Warns Companies That “Oxodegradable” Claims May Break Down

“Paper or plastic?”  The age-old question, complicated by the creation of biodegradable plastic, has been broken down more.  Many people’s misgivings about using plastic bags were alleviated with the advent of plastic bags that can carry more weight with less guilt.  However, after this week, there is no question that the FTC is serious about deceptive claims surrounding biodegradable products.

On Tuesday, the FTC issued warning letters to fifteen marketers of “oxodegradable” plastic bags.  Oxodegradable plastic is made with an additive intended to cause it to degrade in the presence of oxygen.  The problem, according to the FTC, is that oxodegradable products will biodegrade, but not in landfills, where there may not be enough oxygen for the oxodegradable bags to degrade in the time expected.  Under the FTC’s Green Guides, products that are labeled “biodegradable” must degrade under conditions of customary disposal within a “reasonably short period of time.” The 2012 revisions to the Green Guides specifically cautioned that unqualified “degradable” or “biodegradable” claims for items customarily disposed of in landfills, incinerators, and recycling facilities are deceptive, because the locations do not present conditions in which complete decomposition would occur within one year.

This isn’t the first time the FTC has addressed the issue, and if the past is any indicator, it probably won’t be the last.  The warning letters follow five enforcement actions involving plastic biodegradability claims that the Commission brought last year.  The enforcement actions were brought as part of a program to ensure compliance with the agency’s Green Guides, and, given this week’s warning letters, it appears the FTC may have more targets in sight.

The companies who received warning letters must either stop making the oxodegradable claims, or produce reliable scientific evidence that their claims – unlike their bags – will not erode.  The Commission also warned that companies who did not receive warning letters should not assume that the FTC has given them the green light, and their claims might be subject to scrutiny in the future.

As we have said before, “Green Claims” – and particularly claims about biodegradable products – are a priority for the FTC.  The FTC has shown that it will continue to aggressively enforce its Green Guides and pursue claims with the violating companies.  As more “green” products enter the market, companies advertising and marketing products with recycled content should carefully review the FTC’s “Green Guides.”  Otherwise, your claims might disintegrate.

Keeping Watch Over the FTC’s Consumer Sentinel: How Businesses Can Use FOIA to Look Inside the FTC’s Hidden Complaint Database

Consumer complaints are a fact of life for even the most scrupulous businesses.  When companies deal with consumers in a uniform yet large-scale manner, occasional lapses that generate ill-will are inevitable.  Upset customers can lead to lost sales and diminished reputation, but they can also affect more than just the bottom line.  Over the past decade, American businesses have seen an up-swell in consumer-driven class actions.  At the same time, federal and state regulatory agencies have aggressively pursued companies of all sizes and industry backgrounds for unfair and deceptive trade practices.  In many instances, businesses targeted by these lawsuits or regulatory investigations could have avoided them all together by more carefully monitoring what was upsetting their customers.

Today it is easier than ever for companies to track consumer sentiment beyond what they learn through phone calls, emails, and letters received directly from customers.  Organizations like the Better Business Bureau, Yelp, and Angie’s List solicit consumer feedback and make it widely available on the Internet for public consumption.  However, not all businesses are aware that the Federal Trade Commission—the nation’s top consumer protection watchdog—also maintains an enormous consumer complaint database known as the FTC Consumer Sentinel Network.  This secure online repository contains roughly 20 million consumer complaints, which the FTC uses to identify unlawful business practices and to build evidence for litigation.  The FTC carefully guards the contents of its Consumer Sentinel database, which it has long refused to make publicly available.  But a recent decision by the U.S. District Court for the District of Columbia suggests that businesses who want to peak into the FTC’s consumer complaint files may have an avenue for doing so via a carefully tailored Freedom of Information Act request.

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NAD Streaks Through Comparative Claims Where Basis of Comparison is Hazy

A recent NAD decision serves as a good reminder of the basics of clearly defining your comparative claims. Are you comparing to your own previous generation product? To a competitor’s line or specific product? ‎ To other leading brands? Or the whole market? The broader the claim, the more powerful it may be seen by consumers. Some companies think it is riskier to name a specific competing product but as long as you have the right support for the claim, better to get specific than face a recommendation to discontinue an unintentionally broad claim. Claiming superiority (or parity) to “those other brands” likely means you have to prove your performance bests (or meets) at least 85% of the market. Of late, NAD has been suggesting that the basis of the comparison be called out clearly within the main claim itself and not reserved for the smaller print disclaimers.  So toot your own horn (with the right substantiation of course) but do it with specificity.

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Time to Get Cognizant About the Basics for Brain Claims

As we blogged from the NAD conference, (or at least we think we did) FTC Chairwoman Edith Ramirez named cognitive claims as an area of national advertising enforcement priority for the FTC.  These can be claims from foods or dietary supplements or learning products to boost the brain power in adults or kids.  This is not a new but a continued trend we have blogged about before.  Just last week the FTC announced a settlement with Word Smart requiring that in future the company have competent and reliable scientific evidence before making claims that its programs will help kids get better grades or improved SAT and ACT scores.  The definition in the order of what constitutes such evidence is the more general requirement that substantiation be based on well designed and well conducted tests or other analyses by experts in the field with results that are not outliers but generally agreed upon by the relevant scientific community.  Earlier this summer, the FTC entered into a settlement with the makers of a supplement for adults, Brain Strong, that promised improved memory, but in that case the order did require randomized controlled clinical trials of the product to support future claims.  While the state of the FTC’s expected definition of competent and reliable evidence is up in the air, perhaps it is fair to say that for dietary supplements the FTC expects at least one RCT of the product at issue while for other products or plans, some lesser form of evidence may be acceptable if it is reasonable and reliable.

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From Art Gallery to Billboard – The Game-Changing Presence of Promoted Pins on Pinterest®


Pinterest®, since it first appeared on the scene in 2010, has been the darling of crafty do-it-yourselfers (DIYs), ambitious brides-to-be, fitness aficionados, foodies, and anyone else interested in creating their own little portfolio of images carefully curated from sites around the Internet.  Pinterest has consistently presented itself as a tool that could be used by consumers for a natural, authentic experience, giving users full artistic and creative reign as they pinned images and designed boards.  In fact, Pinterest has been notorious for cracking down on advertisers who use its offerings in any sort of spammy way, including now prohibited “Pin It to Win It” contests.  The site has also received considerable attention for the thorny legal issues that are implicated by its “pin anything you want” philosophy, including copyright, trademark and right of publicity issues.

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Duke U. Scores Win Against The Duke

We reported on July 16, 2014 that John Wayne Enterprises, LLC (“JWE”), the entity owning the rights to the name, image, and likeness of John Wayne, a.k.a. The Duke, had sued Duke University in California federal court to protect JWE’s right to market alcohol products with the mark “Duke” or “Duke John Wayne.”  Duke University had opposed JWE’s trademark applications before the Trademark Trial and Appeal Board (“TTAB”) in Virginia on the basis of potential deceptiveness, likelihood of confusion, and dilution of the university’s “Duke” marks.

On September 30, 2014, the California federal court handed Duke University a victory, by dismissing the suit of  JWE for lack of personal jurisdiction and denying as moot JWE’s attempt to disqualify Duke’s counsel.  JWE tried to argue that Duke’s opposition to JWE’s trademark application in Virginia was somehow enough to hale Duke into court in California.  The California court said it was not so—Duke’s knowledge that JWE is a California corporation is not enough to show Duke purposefully directed activities at California or availed itself of California’s laws.  The takeaway may be that while plaintiffs often seek a home-field advantage by filing in their own state, they need to think about whether the defendant can be forced to play there in the first place.

The case, now dismissed, is John Wayne Enterprises, LLC v. Duke University, et al., No. 14 Civ. 1020 (C.D. Cal.).

The Fred Meyer Guides: It Turns Out That Things Haven’t Changed Much From 1990 After All

In late November 2012, the FTC issued a notice that it was considering how to update its “Fred Meyer Guides.” Also at issue in that notice was whether the Guides were necessary at all. All of these questions were raised by the Commission as a result of changes in law (like the Supreme Court’s decision in Volvo Trucks v. Reeder-Simco), and in the economy (like, well, the Internet) since the last update to the Guides in 1990. We discussed the notice when it came out in December of 2012, so take a look at that for a trip down memory lane, a brief discussion of Sections 2(d) and 2(e) of the Robinson-Patman Act, and a nice picture of Mr. Fred Meyer himself. But, by way of background, those sections of the Act apply when suppliers, like manufacturers, provide different promotional payments or services to different resellers. In contrast, the main section of the Act, Section 2(a), relates to differences in prices to those resellers.

As a result of the notice, the Commission received seven sets of comments from a fairly wide range of organizations and practitioners including the Antitrust Section of the ABA, the American Antitrust Institute, the Food Marketing Institute, and the National Automobile Dealers Association among others. The easiest question turned out to be whether the Guides were needed at all – all of the commenters agreed that there was a continuing need for the Guides. Also, none recommended that the Guides be overhauled as a result of changes in the law or the economy. As a result, the Commission concluded that the Guides should remain substantially the same.

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Live (almost) from New York, It’s the NAD Annual Conference

We are close to live blogging from the annual NAD Advertising Law Conference and for those who could not join us, we wanted to share highlights from its opening — keynote speaker FTC Chairwoman Edith Ramirez.  The FTC typically uses this conference to lay out its enforcement priorities relevant to national advertisers and gives us all a peek into the crystal ball for the coming year.  So here’s what we heard. Continue Reading

Is the Disclosure Going the Way of the Dodo?

Edwards' DodoThe fine print disclosure is as iconic as the Yankees, Mom and Apple Pie.  But pity the poor disclosure as it’s had a rough time of late.  First, the FTC came out with its revised Dot.com disclosures (read about those here)  In general they advocated clearer and more prominent disclaimers and also asked advertisers to think hard about whether the information should be in the body of the claim itself rather than in a disclosure.

Now the FTC has turned its attention to disclosures on television and print advertising.  “Operation Full Disclosure” resulted in warning letters being sent to 20 of the largest 100 advertisers in the country (and 60 companies overall) alerting them to the fact that the FTC believes they failed to make adequate disclosures in their TV and print ads.  The letters also asked them to notify the FTC about their response to the letter.  (The FTC has indicated that the response has been “extremely positive.”)  Continue Reading