FCC Tackles “Slamming and Cramming”

“Slamming and cramming” might sound more appropriate in professional wrestling than telecommunications, but it’s the Federal Communications Commission and not the WWE that’s making moves in this area. On June 7, the Commission approved new rules aimed at stopping both slamming and cramming by telecommunications carriers, which we’ve summarized below. On August 16, these new rules will go into effect.

“Slamming” refers to a change being made in a consumer’s telephone service provider without the consumer’s permission. According to the new standard, slamming can happen whenever there is a “material misrepresentation,” which could be the result of false information in a sales call or the falsification of a consumer’s verification. The FCC is concerned that telephone companies use falsified confirmations to satisfy the third-party verification system, which is one of the approved mechanisms by which a company can establish the consumer’s switch. Some companies have done this by recording affirmative language from a consumer in one phone call and playing that same sound bite in the call establishing third-party verification, all without the consumer’s consent or knowledge. To further discourage that specific practice, companies that misuse the third-party verification system are now subject to a five-year suspension from its use. The new rule also codifies procedural hurdles leveled against companies accused of slamming. Once a consumer claims a misrepresentation occurred, then the burden is on the telephone company to prove its absence. And if a material misrepresentation on a call has been established, then even evidence of consumer authorization will not change this determination. “Cramming” is more straightforward – it’s when phone companies add charges to a bill for services that were never authorized by the consumer.

Slamming and cramming were not permitted practices before this action, but through this order the FCC is expressly prohibiting them. This rule bans material misrepresentations that cause a consumer to switch providers, i.e. slamming, and adding unauthorized charges to a consumer’s telephone bill, i.e. cramming. By explicitly banning these practices, the FCC hopes to provide greater clarity to these issues and deter non-compliant industry action. The FCC also continues to further that same goal through enforcement action. For example, in April the Commission proposed a $5,323,322 penalty on a phone company for slamming and cramming, as well as providing false evidence. Considering the upcoming implementation of the final rule as well as recent enforcement in this area, we recommend that you ensure your current practices are compliant.

Transparency Coming to a Campaign Ad Near You!

The Federal Election Commission recently held a public hearing to discuss its March 2018 proposed rule aimed at providing voters with more information about who pays for or sponsors online political advertisements. The private sector has adopted a solution to the issue.

On May 22, 2018, the Digital Advertising Alliance (DAA) took the first step to alter the status quo by unveiling a new, industry-wide PoliticalAds transparency initiative designed to bring greater transparency and accountability to the realm of political advertising.

Similar to the DAA’s YourAdChoice program, which provides consumers with easily accessible information via the familiar blue triangle that accompanies interest-based ads, the PoliticalAds initiative will require certain political advertisements to supply information and a comparable purple icon.

Political Ad Icon

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The Department of Justice Has a New Consumer Task Force – What Does It Mean for You?

Deputy Attorney General Rod Rosenstein – the second-highest-ranking official at the Department of Justice – recently announced the formation of the Task Force on Market Integrity and Consumer Fraud. The announcement came at a widely publicized press conference, a signal that the Task Force ranks high on the list of the Department’s law enforcement priorities. Given the prominence of the Task Force, all businesses would be well served by understanding what it is and what it seeks to accomplish.

The Task Force has a strikingly broad mandate. According to the Presidential Executive Order that created it, the Task Force is to aid in the “investigation and prosecution of cases involving fraud on the government, the financial markets, and consumers, including cyber-fraud and other fraud targeting the elderly, service members and veterans, and other members of the public; procurement and grant fraud; securities and commodities fraud, as well as other corporate fraud, with particular attention to fraud affecting the general public; digital currency fraud; money laundering, including the recovery of proceeds; health care fraud; tax fraud; and other financial crimes.”

The membership of the Task Force further highlights the breadth of its mandate – and the importance that the Department places on it. The Task Force comprises a wide array of government officials from numerous government bodies. Its Chair is the Deputy Attorney General; its Vice Chair is the Associate Attorney General, the third-highest-ranking official at the Department. Other Department officials on the Task Force are the Assistant Attorneys General for the Criminal, Civil, Tax, and Antitrust Divisions; the Director of the FBI; and designated U.S. Attorneys. What’s more, the Task Force is to invite the participation of no fewer than eight Cabinet Secretaries, the Director of the Bureau of Consumer Financial Protection, the Chairman of the Federal Trade Commission, the Chairman of the Securities and Exchange Commission, and more than 10 other agencies, commissions, and boards.

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Second Circuit Says Multi-State Consumer Class Actions Might Not Be All-Natural

Consumer class actions predicated on state laws alleging deceptive claims are one of the scourges of modern marketing. In a recent decision, the Second Circuit laid out some important guidance on whether and how putative class actions based on laws of different states can move forward.

In Langan v. Johnson & Johnson Consumer Companies, Inc., Langan, a Connecticut resident, sued J&J for violating the Connecticut Unfair Trade Practices Act (CUTPA), alleging that two Aveeno Baby washes were deceptively marketed as containing “natural oat formula” when they allegedly only contained 1% natural ingredients. Langan sought class certification on behalf of Connecticut consumers and consumers in 17 other states who purchased the two baby washes under those states’ “mini-FTC Acts”.

A Connecticut federal district judge certified a class of consumers who had purchased the products in 18 states—rejecting J&J’s arguments that the Plaintiff lacked Article III standing to bring a class action under multiple state laws and that the state consumer protection laws were too varied to satisfy the predominance requirement of Rule 23.

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Predictive Dialer Prediction Comes True: Court Rules that ACA International Vacated Previous FCC Predictive Dialer Decisions and Holds that Predictive Dialers are Not Autodialers Under the TCPA

Technology is present in nearly everything we do and not only in the form of a smartphone. Now, when people brush their teeth, turn on the car, or tune an instrument, there’s likely some form of digital technology at work. With all of these activities, it can be unclear when the user is manually performing the action versus when it’s become automated. Courts have struggled with this same issue while applying the Telephone Consumer Protection Act (TCPA) after the D.C. Circuit set aside the FCC’s interpretation of an automatic telephone dialing system (ATDS) in ACA International v. FCC, 885 F.3d 687 (D.C. Cir. 2018). As we’ve outlined in previous blogs, ACA International clearly invalidated the ATDS standard from the FCC’s 2015 TCPA Order, but, since that decision, district courts have grappled with the validity of the FCC’s 2003 and 2008 predictive dialer rulings, which concluded that predictive dialers that dial from set lists of specific telephone numbers are autodialers.

While several courts have ruled on this issue, there still isn’t a consensus on the proper approach. Last week, however, the Northern District of Illinois issued a well-reasoned and detailed decision that may help guide that debate – Pinkus v. Sirius XM Radio, Inc., No. 1:16-cv-10858 (N.D. Ill. July 26, 2018). The court in Pinkus had to wrestle with the exact set of circumstances that ACA International has thrown into confusion: namely, whether predictive dialing technology qualifies as an ATDS if it does not randomly or sequentially generate the phone numbers to be called. The 2015 FCC Order that was struck down in ACA International, as well as previous FCC orders, included this type of technology under the definition of ATDS.

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Recent NAD Decision Largely Rejects Puffery Defenses and Consumer Testimonials that Disparage Competition

It seems like we (and the NAD) can’t get enough of “best.” In a recent case, the National Advertising Division (NAD) ruled that the advertiser, Mahindra USA, Inc., could not claim its products were superior without reasonable evidence.

Deere & Company, Inc. challenged Mahindra’s tractor advertisements as unsubstantiated superiority claims. Mahindra’s ads included “Best” claims such as: best-selling, best value, best warranty, best performance, “toughest tractors,” and superior engine oil. Additionally, Mahindra advertised consumer testimonials that expressed disappointment in the quality of John Deere tractors compared to Mahindra tractors.

Of course, context is king and “Best” advertisements can either be substantive claims, or considered mere “puffery.” (See here for a discussion on NAD and “best” claims). For some of the challenges in this case, Mahindra conceded its ads were substantive claims and argued that they were factually supported. For instance, Mahindra argued its best-selling claims were based on unbiased data. NAD agreed that a reasonable basis existed for the claims (although additional disclosures were necessary). For the majority of the challenged advertisements, however, Mahindra argued its statements were puffery. NAD rejected this defense in all but one instance and recommended discontinuation of the ads.

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New Website Accessibility Guidelines: W3C Publishes WCAG 2.1

Any organization with a publicly-facing website—in other words, virtually any organization—should be aware that the World Wide Web Consortium (W3C) recently published its most recent update to the Web Content Accessibility Guidelines (WCAG) 2.0, titled WCAG 2.1. The W3C is a private organization that develops website accessibility standards.

As you may now know, in recent years, the WCAG 2.0 has become the widely accepted industry standard of technical requirements for making websites, mobile apps, and other digital content accessible to persons with disabilities. Although the Department of Justice (DOJ) has yet to adopt the WCAG 2.0 as the applicable standard for the private sector, governmental and private plaintiffs increasingly urge adopting WCAG 2.0 AA as the standard by which to measure a website’s accessibility—and more and more courts and agencies do so.

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Simply the Best, Better Than all the Rest: Superiority Claims and Substantiation

Do you have the best wireless provider? If so, best in what sense—the best contract, the best devices, the best connectivity, the best value? That was the issue NAD recently addressed when it recommended that T-Mobile discontinue its “Best Unlimited Network” claim. AT&T challenged T-Mobile’s tagline in a recent NAD case, arguing that it was an unqualified superiority claim that T-Mobile couldn’t substantiate.

Now, the advertising world is no stranger to the word “best,” which we discussed in an earlier post on The Absolute Best Puffery Panel Ever. The problem arises when “best” is meant as a measurable claim, including its use here in connection with the phrase “unlimited network.” As NAD pointed out in this T-Mobile decision, wireless service providers should be able to tout the advantages that their innovations provide, but their claims must be substantiated to avoid misleading consumers. NAD reiterated in the T-Mobile decision that broad superiority claims (like “best” or “largest”) must be supported by reliable market data.

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#SaferProductsForAll – Global Developments in Product Safety

On June 25, 2018, four major online retailers, Alibaba (for AliExpress), Amazon, eBay, Rakuten-France, and the European Commission signed a Product Safety Pledge to remove dangerous products in which they committed to the following for the benefit of European consumer safety:

  • “React within two working days to authorities’ notices made to the companies’ contact points to remove listings offering unsafe products. Companies should follow up and inform the authorities on the action taken.
  • Provide a clear way for customers to notify dangerous product listings. Such notices are treated expeditiously and appropriate response is given within five working days.
  • Consult information on recalled/dangerous products available on the EU Rapid Alert System for dangerous non-food products and also from other sources, such as from enforcement authorities and take appropriate action with respect to the products concerned, when they can be identified.
  • Provide specific single contact points for EU Member State authorities for the notifications on dangerous products and for the facilitation of communication on product safety issues.
  • Take measures aimed at preventing the reappearance of dangerous product listings already removed.
  • Provide information/training to sellers on compliance with EU product safety legislation, require sellers to comply with the law, and provide sellers with the link to the list of EU product safety legislation.”

See the full European Commission press release here.

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Slimming Down: Second and Third Circuits Construe TCPA Autodialer Definition Narrowly But Still Grapple With Its Contours

gavel and question markLate June was busy in the Telephone Consumer Protection Act (TCPA) litigation world, with the U.S. Courts of Appeals for the Second and Third Circuits weighing in on an issue that arises all the time with the TCPA – what is and is not an autodialer. As readers of this blog know, earlier this year in ACA Int’l v. FCC, 885 F.3d 687 (D.C. Cir. 2018), the D.C. Circuit set aside the FCC’s interpretation of “automatic telephone dialing system” (ATDS) as it was defined in the FCC’s 2015 TCPA Order, however, the court left open the issue of how to define an ATDS. Now, two other Circuits have jumped into the mix, with opinions showing that defining what constitutes an ATDS is easier said than done.

In King v. Time Warner Cable, Case No. 15-2474-cv, 2018 U.S. App. LEXIS 17880 (2d Cir. June 29, 2018), the plaintiff received 153 collection calls from Time Warner Cable through its “interactive voice response” calling system, which automatically identified customers whose accounts were 30 days past due, called their telephone numbers, and left prerecorded messages if there were no answers. There was no dispute that the defendant’s calling lists were not created by a human; in fact, there was no human involvement at any stage of the customer selection, list compilation, or dialing processes.

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