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Upcoming Panel: "Countdown to the New COPPA"

The Clock Is Ticking – Is COPPA Compliance a “Mission Impossible”?

On July 1, 2013, sweeping new regulations for marketing to children take effect. In updating the Children's Online Privacy Protection Act (COPPA) Rule, the Federal Trade Commission (FTC) has extended its reach to new businesses and new information.

In this upcoming session presented by the Direct Marketing Association, panelists including Venable's Stu Ingis and Julia Kernochan Tama will walk through the COPPA Rule changes, take a deep dive into the FTC's "Complying with COPPA" FAQs, and answer your questions about how to stay on the right side of the regulators. DMA's Jerry Cerasale, Senior Vice President for Government Affairs will also present.

May 30, 2013
2:00 PM – 3:00 PM ET
Click here to register.

NAD Not Shaving "Up To" Claims

There was a lot of upheaval in the advertising community when the FTC announced its window settlements and published its consumer survey regarding takeaways of "up to" claims (see here, here, and here for our prior blogs on the topic).  The FTC warned advertisers that it should test consumer understanding before using "up to" performance claims because, in its view, consumers believed such a claim promised the maximum stated performance was the result all or almost all consumers would experience.  In speeches, NAD staff said without survey evidence in a specific context NAD did not intend to change the standard it had used for many years. This being the standard that the FTC had previously articulated that an "up to" claim should not be an outlier and a benefit that an appreciable number of consumers would enjoy. 

And the NAD made good on this in a recent case brought by the Gillette Company challenging Energizer Personal Care Schick Hydro Silk Razors.  We will not delve into the detailed discussion of substantiation for moisturization provided by shaving (but needless to say NAD has developed quite a body of precedent on the topic for those who are interested).  The issue in this case was whether Energizer was able to substantiate its promise that its razor "moisturizes for up to two hours after shaving".  In examining the evidence, the NAD said they would expect "that advertisers making "up to" claims should be able to demonstrate that a substantial percentage of consumers are likely to acheive maximim results promised under normal circumstances".   The NAD found this claim supported by lab testing.  Unfortunately NAD also found that the television ads depicting women engaged in activities like jump roping and playing volleyball where the rope or ball transforms into water splashing on their legs conveys a reasonable message that the moisturizing benefit lasts longer than two hours, a claim for which there was not support. 

But this is good news for advertisers who have been concerned about a sea change in how "up to" claims are reviewed.  The FTC has not brought additional cases and NAD is holding to prior precedent, at least when it needs to interpret claims without the benefit of sound surveys.

Amy Mudge and Randy Shaheen

FTC Calls Stakeholders Together for Roundtable on Mobile Cramming

The FTC has taken an increased interest in mobile cramming (the placement of unauthorized third-party charges, such as for ringtones, on consumers’ mobile telephone bills) in the past few months.  Despite industry self-regulation through the Mobile Marketing Association’s U.S. Consumer Best Practices Guidelines, which establish industry-wide standards to protect consumers (such as requiring that consumers twice consent to charges), some believe mobile cramming is on the rise. 

Most recently, on May 8, the FTC hosted a roundtable on the topic, gathering consumer advocates, government regulators, and industry representatives to explore how mobile cramming occurs and current and possible strategies to reduce the problem.  Among the points of disagreement that emerged between the panelists were the scope of mobile cramming and how to measure the problem, as well as the need for government-imposed regulation.  The lack of consensus on the former issue is particularly significant because how one thinks the problem is “solved” is determined largely by how one measures and views the scope of the problem. 

Various panelists representing consumers and government entities expressed concern about the scope of mobile cramming, including that individuals do not understand that they can be charged for third-party goods and services on their mobile telephone bills and that charges appear on bills without consumer authorization.  The Senior Vice President and General Counsel of CTIA, an organization that represents the wireless communications industry, countered the evidence that was cited, stating that he had not seen “a spike or a trend in complaints” to certain agencies which reflects that mobile cramming is a “growing problem,” even with the increased adoption of smartphones. 

An Assistant Attorney General at the Office of the Vermont Attorney General expressed concern about using complaints and refund rates to measure the scope of the problem.  The General Counsel of CTIA also expressed concern with the use of refund rates to reduce the problem, but for another reason: carriers may be very generous with providing refunds and extending refunds over a period of months, thereby increasing their refund rate.  Another panelist criticized the use of refund rates to reduce mobile cramming as premature.

Another interesting, yet expected, topic of disagreement was the need for government-mandated regulation.  The mobile business is fast-changing and continually evolving, counseling caution in imposing rigid rules that solve today’s problem but not future unforeseen problems.  The General Counsel of the Mobile Marketing Association and the General Counsel of CTIA generally expressed these concerns.  Other panelists, though, indicated that government-imposed rules are necessary and that self-regulation has proven insufficient.

While the panelists did not agree on every topic of discussion, one thing was clear.  As stated by the General Counsel of CTIA, “Nobody wants unhappy consumers, consumers who have been misled, [or consumers] who haven’t consented to the services that they receive and are charged for.”  Agreeing on that proposition is easy; figuring out the means and methods to achieve those things is hard.

The FTC concluded the workshop by announcing that they will write a report on the workshop (as they did for a recent workshop on mobile payments) and continue to monitor developments in the area and to bring enforcement along the lines of the case it recently filed against Wise Media, LLC.

Maggie Grace and Amy Mudge

Old (Spock) vs. New (Spock)

*An earlier version of this post included an embedded video of the commercial but not a link for email users. Our apologies.

Consumer products companies are constantly working to improve their products and often they want to communicate those improvements to consumers.  That’s a good thing and helps spur companies to innovate and improve their products.  But the FTC has brought actions against companies that have touted their products as “new” for too long with some “grace” allowed for time products may have spent in test markets.  The networks have similar standards; ABC, for example, permits such claims for up to a year after a product has achieved substantial distribution. NAD has also cautioned companies against making “improvement” claims that do not provide meaningful benefits and or against products that are no longer available.
 
Of course, older doesn’t always mean worse, as Coke was reminded when it introduced “New Coke;” as we constantly remind our kids and as a luxury brand auto maker reminds us in this commercial pitting Old Spock against New Spock.

Randy Shaheen and Amy Mudge

Claim Interpretation Can Sometimes Depend Upon How You Look At It

From a marketing standpoint companies always want to know who the target audience is for the advertising, but sometimes it becomes important from a legal standpoint as well.  In some instances arguments regarding the target audience can be helpful.  Claims are usually interpreted with regard to the “reasonable consumer” but in some instances claims that might mislead the reasonable consumer may not be misleading because they are intended for a more knowledgeable or sophisticated audience.  The FTC’s Policy Statement on Deception provides the example of a prescription drug advertisement to doctors and notes that such advertising should be judged “in light of the knowledge and sophistication of that group.”  More often, though, arguments about target audience can be a source of difficulty.  The Policy Statement also cites examples of ads targeted to more vulnerable groups, such as marketing a cure for cancer to terminally ill patients.  In other cases, advertising or marketing to certain groups is either not permitted or companies have made voluntary commitments not to do so.  Most often this involves children.  Alcohol, tobacco, certain types of entertainment, some prescription drugs and some foods fall into this category. 

It’s not always easy to tell who is the “target audience” for an advertisement.  Many years ago RJ Reynolds was embroiled in a dispute with the FTC over whether its use of a Joe Camel cartoon character to promote its Camel brand of cigarettes was targeted to minors.  When it comes to television or print advertising companies often avoid “targeting” children by placing ads only on shows or periodicals that have adult demographics above a certain threshold. 

A billboard in Spain regarding child abuse provides a new option.  The ad uses lenticular image (if you’re like us and had no idea what this means, click here) to display a slightly different message for adults and children (or at least adults and children of average height.)  Anyone taller than 4’5” sees the message “sometimes child abuse is only visible to the child suffering it.”  Anyone shorter than that sees a picture of a child with bruises and a different message – “if somebody hurts you, phone us and we’ll help you" alongside the foundation's phone number.  The idea is to allow abused children to see the message and not their abuser who may be there with them.  So technology may make it easier, in some instances, to determine who an ad is targeted to.  However, the use of such technology can raise problems as well.  For example, what’s the value of a disclosure like “batteries not included” in a toy advertisement that only children can see if the child doesn’t read very well.  And suppose the technology allows you to target certain groups but not with 100% certainty; for example, some adults are shorter than 4’6”.  In such instances at what point does the technology work so imprecisely that a company can no longer claim it “targets” certain groups.  No doubt these questions will be sorted out as targeting technologies are targeted and utilized.  And the fact that, like most technology, it may be used both well and poorly means that lawyers and regulators will undoubtedly be busy keeping up with a rapidly evolving marketplace.

Randy Shaheen and Amy Mudge

FTC Announces Staff Report on Mail or Telephone Order Merchandise Rule

On April 30, the Federal Trade Commission released a staff report on proposed amendments to the Mail or Telephone Order Merchandise Rule (MTOR) and called for interested parties to comment on the changes proposed in the report.

MTOR, which was issued in 1975, requires marketers who solicit customers via mail or telephone to have a reasonable basis for expecting that the sellers can ship within the advertised time frame, such as “allow 2-4 weeks for delivery.”  If no time frame is specified, marketers must be able to ship the merchandise within 30 days.  If sellers cannot ship within the promised time, they must obtain the buyer’s consent to delay.  The FTC last sought comments on MTOR in 2007.  Based on those comments, the Commission proposed amendments in 2011 to clarify:

• That MTOR covers orders placed over the Internet;
• That sellers may provide refunds and refund notices to buyers by any means at least as fast and reliable as first-class mail;
• Sellers’ obligations when buyers use payment methods, such as debit or pre-paid gift cards, that are not spelled out in MTOR; and
• How refunds are made to consumers who pay with third-party credit products, such as Visa or MasterCard cards, and credit products where the seller is the creditor.

The report details these recommendations that the Commission revise MTOR to respond to new methods of accessing the Internet and making payments and refunds.  The FTC will accept comments on the report until July 15, 2013.

Click here to read the FTC’s press release, access a copy of the FTC’s staff report, and learn how to submit comments on the report.

Amy Mudge and Randy Shaheen

FTC Chairwoman to Advertisers: "Keep a Spotless Reputation"

At this week’s meeting of the American Advertising Federation, FTC Chairwoman Edith Ramirez remarked on the Commission's approach to advertising, commenting on topics du jour at the FTC.  This is one of her first series of remarks related to advertising since taking the top FTC spot.  And in honor of the 449th anniversary of William Shakespeare’s birth, her remarks were intertwined with references to the Bard’s greatest works as she applied them to today’s advertising challenges.

Riffing on a Richard II reference, Chairwoman Ramirez quoted Shakespeare’s “spotless reputation” phrase, noting that “as advertisers, your reputation – your brand – is everything.” Ramirez said that the FTC’s work to promote truthful advertising and protect consumer privacy is aligned with the advertiser’s mission to promote the “spotless reputations” of its clients and firms.  When someone engages in a deceptive practice, the harm done to advertiser’s reputation can be so severe that the brand doesn’t ever recover.  Consumers can also lose faith in an entire industry if advertising frequently misleads people or if companies routinely hide information, she added.   Ramirez encouraged businesses to be “above-board” in their advertising and privacy practices, in order to maintain that “spotless reputation.”

Then giving a nod to the famous balcony scene in Romeo and Juliet, Ramirez spoke on the future of mobile and how the FTC is adapting to an increasingly digital world.  She referenced the FTC’s recent best practices report on privacy disclosures as well as the updated Dot Com Disclosures for digital advertising.  She spoke about how the FTC’s green guides can help marketers ensure that their environmental and renewable energy claims are not deceptive.

On the subject of Do Not Track, Ramirez noted that consumer data is the currency of the Web.  She also encouraged all players in the online advertising ecosystem to dive into the World Wide Web Consortium process in order to help develop a self-regulatory Do Not Track standard that meets the needs of consumers and advertisers alike.

In short, Ramirez spoke about how the FTC and advertisers are on the same page because advertisers know that honesty and transparency are essential to maintaining a positive brand.  Though Ramirez’s remarks did not include the Bard’s famous line from All’s Well that Ends Well, Shakespeare’s words serve as a succinct message to advertisers: “No legacy is so rich as honesty.”

Maura Marcheski

Top 3 FTC Consumer Protection Priorities

At the annual ABA Antitrust Section meeting one of the highlights of the last day is the breakfast with the FTC Bureau Directors.  Acting BCP Director Chuck Harwood detailed the priorities of his bureau.  Chairwoman Ramirez will be selecting the new bureau directors and if there is a new BCP head these priorities, of course, could change.  However, we would be surprised to see any dramatic changes.

Chuck said his top three enforcement priorities are (1) preventing scams and fraud (2) protecting consumers on the electronic marketplace including protection from identify theft and (3) with regard to advertising, policing advertising of unfair and overhyped health claims by dietary supplement and food marketers.  He then said he had two additional priorities -- monitoring telemarketing activities and green or environmental claims. 

The FTC also released today a report detailing its accomplishments in the last 12 months -- a report it issues every year during the ABA Antitrust Section Spring Meeting.  On the consumer protection side the FTC highlighted its efforts to protect consumer privacy, protect kids online and ensure adequate claim substantiation.

Amy Mudge and Randy Shaheen

FTC Wants Marketers to Get In Line with Online Disclosures: Revisions to Dot.Com Guidelines (and Your Chance for FTC Q&A)

The FTC issued revised guidance for .com disclosures earlier this week and while the agency didn’t particularly break any dramatic new ground they did continue a trend of offering more specific guidance and examples.

The new guides focus on several key points.  While this would no longer be a blog if we discussed them all here, there are a few we wanted to highlight (and we will likely blog on more things to ponder in the guides in future).  First, the FTC asks marketers to consider whether key information can be included in the main claim itself rather than through a disclosure.  This is easier said than done in many cases, but we agree it is better to start with trying to disclose all consumers need to know right up front.  Second, they expand upon earlier guidance regarding the placement of disclosures.  The new guides repeat the advice that a “disclosure is more effective if it is placed near the claim it qualifies or other relevant information.”  And while the guides state that it is more likely consumers will notice the disclosure if it is “placed next to the information, product or service to which it relates,” the guides also conclude more generally that a “disclosure is more likely to be effective if consumers view the disclosure and the claim that raises the need for disclosure . . . together on the same screen.” Most of the subsequent discussion, and many of the helpful illustrations, then relates to how to make a disclosure noticeable even when scrolling is required.

The new guides also discuss the use of hyperlinks (which this blog and most other blogs are prolific users of).  While the guides discourage the use of hyperlinks to disclose integral information or information relating to health and safety, they recognize that hyperlinks can be particularly useful for lengthy disclosures or disclosures that must be made repeatedly.  The guides repeat the earlier admonition that hyperlinks must be noticeable and labeled in such a way to convey the importance of the information for which the link is provided.  The guides discourage the use of underlining or symbols or icons as hyperlinks because some consumers may not recognize their significance.  Further, advertisers are urged to avoid using vague labels for hyperlinks such as “disclaimer,” “more information,” “details,” “fine print” or even “important information.”  As with disclosures generally, hyperlinks should be proximate to the triggering claim or other relevant information and format, color or graphics can be used to help increase the visibility of hyperlinks.  Thus, one of the examples criticizes the use of a hyperlink that states “more details on the jewelry you are purchasing” because it is unclear what those details relate to.

The new guides also caution that disclosures on the checkout page may not suffice.  They emphasize that disclosures should be provided before the consumer orders the product or adds it to his or her cart.  In addition, the guides caution that in some instances consumers may shop for a product online but make the actual purchase at a brick and mortar store and thus never see important information that is conveyed only at online checkout.

The new guides also address whether disclosures must be made on space-constrained ads such as banner ads.  In general the guides suggest that this depends upon a number of factors including the importance of the information, how easily the information could be disclosed and whether the product can be bought elsewhere.  If the product can be bought elsewhere then consumers may never “click through” to the website to purchase the product and see the relevant disclosures.  In addition, if the ad is a “teaser” ad that does not identify the product then having the disclosure on the “click-through” is likely permissible.

Finally, at least two other points are worth a mention here.  First, the guides emphasize that disclosures must be clear and conspicuous on all devices and platforms on which the ads appear.  If a disclosure can’t be made clear and conspicuous on a particular device or platform, then the ad shouldn’t appear there.  Second, the guides note that disclosures that are less directly relevant to the product or service being advertised are less likely to be expected by consumers and so should be given particular prominence.  The guides note in particular disclosures relating to the use of a negative option program in connection with the sale of a product or service.

If you have questions you are pondering, the ABA Antitrust Section is sponsoring a free panel discussion on Wednesday, March 20 at 1:30 pm eastern that Randy will moderate with FTC and NAD staff to review the changes and what they mean for marketers.  We hope you will register here to join us.

Randy Shaheen and Amy Mudge

"Paper, Plastic... or Mobile?": FTC Issues Staff Report on Mobile Payments

On Friday the FTC issued a staff report titled “Paper, Plastic . . . or Mobile?: An FTC Workshop on Mobile Payments” addressing mobile payments and its effects on consumers and highlighting potential areas of concern.  The staff report follows a workshop held last year on the same issues.

The report discusses the benefits that mobile payments offer consumers, including the ease and convenience of purchasing goods and services, the potential to lower transaction costs, and the ability to provide underserved communities with greater access to alternative payment systems.  Despite the benefits, the report notes three primary areas of concern for consumers: dispute resolution, data security, and privacy.

The report urges companies both to develop clear policies on resolving disputes over unauthorized and fraudulent charges and to educate consumers about the same.  Consumers fund mobile purchases through various sources—credit or debit card, bank account, or mobile phone account—that offer varying levels of protection, some statutory, some not.  Thus, the report encourages, companies should develop these policies and convey them to consumers.

The report highlights special concerns regarding mobile carrier billing; currently, there are no federal statutory protections for disputes about unauthorized or fraudulent charges placed on mobile carrier bills.  The report offers various consumer protection policies, including giving consumers the option to block all third-party charges and vetting third-party merchants upfront.  The report notes that FTC staff is currently organizing a separate roundtable on the issue in May.

The report also discusses the security of sensitive financial information and points out that technological advances offer the potential for heightened data security in this context.  The report identifies ways in which data can be kept secure, including the use of dynamic data utilization (so that, for each transaction, a unique set of payment information is generated) and encourages mobile payment providers to urge all companies in the mobile payment transaction to use strong security measures.

The report notes the privacy issues involved with mobile payments given the number of companies and the large amount of data involved.  The report reinforces earlier suggestions that companies think about and address privacy at every stage of product development, allow consumers to make choices regarding data collection and use, and be transparent about data practices.

The report also briefly discusses international mobile payment issues and highlights a few examples of the work being conducted by governments and international organizations on consumer protection issues related to mobile payments. 

The vote to issue the report was 4-0-1.  Former Chairman Jon Leibowitz did not participate.

Maggie Grace and Amy Mudge