NAD Okays Use of Non-Industry Standard Test

video projectorMany of you are no doubt familiar with ANSI testing, which is often touted as the gold standard in assessing product performance. However, other types of third-party tests exist, even if they have not risen to the level of being an “industry standard.” A recent NAD decision sheds some light on when and how advertisers can use such tests in their advertising.

Epson America, Inc. was challenged by Texas Instruments, Inc. (TI) for advertising its 3-chip 3LCD projectors as superior to TI’s 1-chip DLP imagers. 3LCD and 1-chip DLP are the two leading types of projectors and compete based on a number of attributes. TI alleged that Epson improperly relied upon Color Light Output (CLO) as a measure of brightness performance. (CLO is a relatively new method of assessing the brightness of individual colors which can then be compared to the overall lumens, or white brightness of a projector. (Still with us?)). TI also alleged that Epson made overall image superiority claims even though it only tested specific performance attributes. Finally, TI also alleged that Epson inadequately disclosed its affiliation with native advertising websites.

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FTC and House Start Working Together to Address CPSC-related Connected Technology Issues – Stakeholders Should Prepare for Future Government-Wide Cooperation

Internet connected devicesRobust conversations about IoT, smart technology, and product safety continue across the federal government. On May 16, 2018, the Consumer Product Safety Commission (CPSC) held a public hearing on the Internet of Things (IoT) and consumer product hazards. (See previous related blog posts here and here about the hearing.)

On June 13, the House Energy and Commerce Committee’s Subcommittee on Digital Commerce and Consumer Protection (SDCCP) voted to send H.R. 6032, the State of Modern Application, Research, and Trends of IoT Act (SMART IoT Act), to the full committee for consideration. The SMART IoT Act directs the Secretary of Commerce to conduct a study on the state of the internet-connected devices industry and is authored by SDCCP Chairman Latta and Rep. Peter Welch. It will be interesting to see whether or how quickly the SMART IoT Act actually becomes a law. Smart IoT technology is one of the hottest topics these days other than blockchain and bitcoin. Many different stakeholders have vested interests in how the government chooses to engage on this issue. The SMART IoT Act is a first step for Congress to actively engage and survey the federal government on this issue.

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11th Circuit’s LabMD Decision has Implications Outside of Just Privacy

Practitioners have been waiting for quite some time for the 11th Circuit’s decision in the LabMD case. LabMD, Inc. v. Fed. Trade Comm’n, No. 16-16-270 (11th Cir. June 6, 2018). In particular, there was a great deal of interest as to how the court might resolve the issue of whether the “substantial injury” requirement under the unfairness prong of Section 5(a) of the FTC Act was satisfied by a data breach in 2008 involving approximately 9000 consumers and with little evidence of actual consumer monetary injury.

Well, the 11th Circuit published its decision this week but the issue regarding the meaning of “substantial injury” will have to wait for another day as the Court declined to address that question, instead ruling that the Federal Trade Commission’s order as drafted is unenforceable. In doing so, the 11th Circuit likely surprised a lot of folks and created a great deal of uncertainty regarding FTC orders in general.

The Court noted that for the most part the FTC’s complaint against LabMD was premised not upon certain affirmative acts taken by the company but rather by their failure to act in particular ways. In other words, the company had been negligent in establishing a reasonable data security program. The Court assumed for the sake of argument that the FTC could base an unfairness complaint upon a negligent failure to act but then went on to find the order unenforceable because the order set forth an indefinite “reasonableness” standard with respect to the Company’s future obligations in establishing data security measures. The relevant order language read as follows:

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The Internet of Things, Product Safety, and Product Liability: A Risky Combination

Internet connected devicesOn May 16, 2018, the Consumer Product Safety Commission held a public hearing to receive testimony on the Internet of Things (IoT) and issues related to product safety (IoT Hearing). Thirteen diverse stakeholders presented at the IoT Hearing. Of the thirteen presenters, there were three representatives of consumer organizations, one academic, one security expert and researcher, one representative from a testing lab coalition, one representative from a testing and voluntary consensus standards organization, two representatives from international interests, and three representatives from industry trade associations or coalitions. While each presenter had his/her own agenda, there was some agreement: There are potential significant safety, privacy, and product liability issues associated with emerging IoT technologies. At the hearing, the CPSC learned there are currently 8.4 BILLION connected things, and 5 BILLION consumer applications—numbers allegedly on track to double by the year 2020.

How can the CPSC address the related safety issues?

The consumer activists described the situation as “urgent” and pressed the Commissioners to provide a certification process for IoT devices and stronger mandatory regulations for manufacturers that incorporate software technologies into their products. The industry trade associations/coalitions advocated for a voluntary consensus-based, industry-led approach—which they have already started to address. They argued that their approach would be the most cost-efficient and efficient way to implement the most up-to-date technologies to address the growing problem.

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FCC Seeks Comments on TCPA After D.C. Circuit Ruling

CommentsThe FCC is going back to the drawing board—and it wants some help.

Earlier this week, the Commission announced that it is seeking comments “on several issues related to interpretation and implementation of the Telephone Consumer Protection Act (TCPA), following the recent decision” of the U.S. Court of Appeals for the D.C. Circuit in ACA International v. FCC, 885 F.3d 687 (D.C. Cir. 2018).

As we have written previously, in March the D.C. Circuit issued its long-awaited ruling on the FCC’s 2015 Omnibus Telephone Consumer Protection Act Order (2015 Order) in which the Commission set out to resolve 21 requests for clarification about the TCPA and related rules and orders. The D.C. Circuit’s decision dealt a partial blow to the 2015 Order, setting aside the FCC’s interpretation of “automatic telephone dialing system” (“autodialer” or “ATDS”) as overly broad and vacating the agency’s approach to calling reassigned numbers—i.e., restrictions on calls made to a phone number previously assigned to a person who had given consent but since reassigned to another (nonconsenting) person. The D.C. Circuit vacated in particular the FCC’s reading of the statute to permit a one-call safe harbor for callers to determine whether a number had been reassigned to a nonconsenting person. The court, however, did uphold the FCC’s conclusion that parties may revoke their consent through any “reasonable means” clearly expressing a desire to receive no further messages from the caller. It also upheld the scope of the Commission’s exemption for time-sensitive, healthcare-related calls.

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Court to Agency: Is That Your Final Answer on Soundboard Technology?

telemarketing lawsIn a blow to the soundboard industry, the D.C. Circuit recently ruled in Soundboard Association v. FTC, No. 1:17-cv-00150 (D.C. Cir. Apr. 27, 2018) that the Federal Trade Commission’s November 2016 opinion letter, which reclassified soundboard technology as “robocalls” under the Telemarketing Sales Rule (TSR), is not subject to judicial review. We previously blogged about the underlying litigation and FTC’s November 2016 opinion letter here. Soundboard technology allows telemarketers to communicate in real-time, dynamic, two-way conversations utilizing pre-recorded audio clips­­­­. These differ from the type of pre-recorded message contemplated by the drafters of the TSR in that there is a live agent monitoring the call and selecting the appropriate clip depending on the situation. The FTC’s 2016 opinion letter rescinds a 2009 letter that concluded that calls made with soundboard technology are not subject to the same restrictions as robocalls under the TSR.

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New Commission Is in the News

to be continuedThe FTC has been back at full capacity for little more than two weeks but is already making news on the consumer protection front. On the staffing side, the Consumer Protection Bureau is currently being run on an acting basis by long time FTC staffer Reilly Dolan. Numerous media outlets were reporting that Andrew Smith, a partner at Covington & Burling, would shortly be appointed as the permanent Bureau Director. Mr. Smith has represented numerous companies on consumer data issues, which according to the New York Times, include Facebook, Uber and Equifax, all of which have been or are under FTC investigation.

Of course, the need for recusals is not surprising for big law firm lawyers who first make the switch to public service, but in this case Mr. Smith’s client representations have caught the eye of three U.S. senators. On Monday Senators Warren, Blumenthal and Schatz wrote a letter to Chairman Simons asking him to delay a vote on Mr. Smith while they probe further into his background. The letter stated, “While Mr. Smith has every right to represent corporations that have harmed consumers, and those companies have every right to be represented by Mr. Smith, it is impossible to believe that the best candidate [to head consumer protection] is someone with a long record of representing companies that have been accused of hurting consumers.” Notwithstanding this letter, the Commission voted 3-2 yesterday in favor of Mr. Smith’s appointment. The Chairman and each of the two Democratic Commissioners issued separate statements in support of and in opposition to the appointment. (here, here and here). This is the first time we can remember a Bureau Director appointment attracting such attention, but perhaps it is not surprising in an era where virtually everything that happens in DC has political implications.

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Walking the Line with Influencers: How to Satisfy the FTC without Your Influencers Becoming Employees in California

Social Media AppsIn light of a new California decision interpreting California’s wage and hour law, brand companies should take a careful look at their influencer compliance programs not only for FTC compliance, but also potential employment law consequences. How a company establishes and maintains influencer compliance can potentially convert the influencer from an independent contractor to an employee.

We know the FTC’s view is that it takes a village to ensure influencers disclose any material connection to a brand company with which they have a relationship and that the Commission will hold brands, agencies, influencer networks, and influencers all responsible for compliance lapses. The basic expectation is that brands will train their influencers on the rules of the road, monitor for compliance, and enforce consequences for noncompliance. The consent orders in cases like CSGOLotto, Inc. lay out more detail as to what the FTC expects, including:

  1. Providing each influencer with a clear statement of responsibilities for including clear and conspicuous material connection disclosures and obtaining signed statements from each influencer acknowledging receipt and consent;
  2. Establishing, implementing, and maintaining a system to monitor and review influencer posts; and
  3. Immediately terminating and ceasing payment to any noncompliant endorser.

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North American Product Safety Summit: The real deal? That’s up to stakeholders.

In February 2018, at the International Consumer Product Health and Safety Organization’s (ICPHSO) Annual Meeting, the U.S. Consumer Product Safety Commission (CPSC), the Department of Health of Canada (Health Canada), and the Consumer Protection Federal Agency of the United Mexican States (PROFECO) signed a trilateral Memorandum of Understanding (MOU) committing to increasing cross-border cooperation. The MOU was “intended to memorialize cooperative efforts already underway, as well as to facilitate future joint activities,” all with the goal of advancing the flow of consumer products throughout North America.

As a follow-up to the MOU signing at ICPHSO, the CPSC hosted the 4th North America Consumer Product Safety Summit (Summit) on May 3 and 4, 2018, at CSPC headquarters in Bethesda. Previous summits were held in 2011 at the CPSC, 2013 in Ottawa, and 2015 in Mexico. The goal of the 2018 Summit was to build on the momentum of trilateral cooperation among the three product safety regulators. On May 3, closed-door meetings were held between the government representatives of the three nations, while the meetings on May 4 were open to the public. The May 4th public Agenda included sessions on: North American regulatory cooperation; e-commerce challenges and opportunities; updates on high-energy Lithium-Ion battery hazards and risks; and a final panel soliciting feedback from North American stakeholders. Presenters included: various representatives from the CPSC, Health Canada and PROFECO, as well as industry representatives.

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Guest Blog: Ad Standards Introduces New Influencer Disclosure Guidelines

Our Canadian partner in the Global Advertising Lawyers Alliance (GALA) wrote this post about influencer disclosure practices in Canada that we wanted to share with you.

On March 28, 2018, Ad Standards introduced new Disclosure Guidelines (the “Guidelines”). Developed with the cooperation of influencers and advertisers, the Guidelines are intended to provide suggested best practices for when, and how, to disclose any material connection between an advertiser or brand and the influencer.

The Guidelines inform an Interpretation Guideline under the Canadian Code of Advertising Standards (the “Code”), issued in October 2016, requiring that any “material connection” between an influencer and a brand be “clearly and prominently disclosed in close proximity to the representation about the product or service.” The Interpretation Guideline says what to do, but suggested looking to other sources including the FTC’s Guide to Testimonials & Endorsements for how to do it. The new Guidelines provide a Canadian resource, with illustrative examples of “dos” and “don’ts” to assist industry in complying with the Code.

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