Insurance Coverage for “Advertising Injury” May Still Leave Businesses on the Hook for False Advertising Claims

capsulesMany businesses acquire commercial liability insurance coverage to protect against “advertising injury” resulting from their marketing practices. But while the term “advertising injury” on its face may sound comprehensive, its definition in the insurance policy may be narrower than you think. As a result, some businesses have received a rude awakening after learning: (1) they are being sued for false advertising; and (2) their insurance company is not going to pay for it.

Vitamin Health faced this exact situation after it was sued by Bausch & Lomb based on advertising that promoted the health benefits of its Viteyes® supplements for eye health. Vitamin Health’s ad campaign promoted the supplements as “AREDS 2-Compliant,” which means they contained a combination of vitamins recommended by the National Eye Institute’s Age-Related Eye Disease Study (AREDS). Bausch & Lomb filed suit against Vitamin Health for patent infringement, but later amended its complaint to add a false advertising claim after Vitamin Health “change[d] the formulation” of its eye supplement so that it was no longer AREDS-2 Compliant. According to Bausch & Lomb, Vitamin Health reduced the level of zinc in Viteyes® from the AREDS-recommended 80 mg to 25 mg, rendering the product no longer compliant with AREDS 2.

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The End of Non-Marketing Calls to Cell Phones? Petition Before the FCC Would Drastically Change the Consent Standard for Non-Solicitation Calls

smartphone lawOn January 22, 2017, serial Telephone Consumer Protection Act and Fair Debt Collection Practices Act plaintiffs, Craig Moskowitz and Craig Cunningham, filed a petition for rulemaking and declaratory rulings before the Federal Communications Commission (FCC), requesting that the FCC issue a rule that, if passed, would eliminate the “prior express consent” standard for non-solicitation calls to cell phones using an autodialer or pre-recorded message. Instead, the proposed rule would require the same standard that solicitation calls require, that is, “prior express written consent.” The new rule may have a crippling effect to businesses relying on the current rule, such as debt collectors. The FCC has issued a public notice seeking comments by March 10, 2017.

Breathalyzer Claims Are Not Puffery

breathalyzerBreathalyzer accuracy is serious business. While the instructions may indicate “blow here,” that instruction does not apply to marketers of the device.  The Federal Trade Commission (“FTC”) drove this point home in a recent settlement with the marketer of an app-supported breathalyzer device that no doubt left the marketer feeling a bit hungover.  The settlement also serves as a reminder that the FTC maintains broad unfairness authority which in this case applied to degradation of product performance over time.  The settlement is also part of the FTC’s continuing focus on the burgeoning smartphone app marketplace.

The FTC in its complaint alleged that in advertising its “Original” and “Breeze” breathalyzer device variants, Breathometer falsely stated that the products were proven, through rigorous government lab-grade tests, to accurately measure consumers’ Blood-Alcohol-Content (“BAC”). Breathometer also claimed that its Original device was as accurate as other high-end breathalyzers, and that its Breeze variant was more accurate than other high-end breathalyzers and was a “law-enforcement grade product.”

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Annual Big Game Ad Review

football refereeIt’s our favorite time of year, when we get to see the best, boldest, and bravest duke it out. Oh sure, there’s the football, but we’re talking about the ads! It’s one of the busiest nights of the year for ad lawyers, enjoying ads we worked on come to life (and seeing the disclaimers we lovingly and painstakingly crafted) and responding in real time to “can we tweet this?” We blog every year about our favorites (see here and here and here and here) and trends. We were happy with a game in overtime, as it meant – that’s right – MORE ADS! And we understand social media was up over last year but did not exceed 2015’s record numbers. But still, 27.6M tweets, 240M Facebook interactions, and 150M Instagram interactions is pretty big stuff.

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Chairman Ohlhausen Announces a Whale of an Agenda for Consumer Protection

beluga whalesFrom the ABA Antitrust Section bi-annual Consumer Protection Conference in Atlanta, Acting FTC Chairman Maureen Ohlhausen made her first keynote address in her newly elevated roll. To the backdrop of playful beluga whales in the ballroom of the Atlanta Aquarium, she outlined three consumer protection priorities she will put in force during her time in the driver’s seat. All will likely be welcome news to our readers and some may even jump and twist for joy like these guys:

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Who Says Cease and Desist Letters Have To Be Dull

Everyone dealing with advertising substantiation has been on the sending or receiving end of a demand letter that challenges the basis for an advertising claim. These letters usually follow the same format. The letter will identify the advertising claim at issue, explains the problem with the claim, and provides a reasoned explanation for the sender’s position. These letters also generally end with the dreaded “or else” statement (please modify the advertising claim by date certain, or else). Effective? Yes. Boring? Absolutely.

But sometimes, the sender of these types of letters decides to have a little fun. And why not? We are all a part of the small world that is advertising law. We should be able to have fun with our colleagues in the industry, even if we are on opposing sides of an issue. Well the General Counsel of Harry’s (an online male grooming company specializing in men’s razors) decided to do just that when he sent a letter to a major consumer products company about an advertising claim which stated: “Most guys leave Harry’s after trying it.” The claim was an invitation for consumers to return to the consumer products company after the consumers were presumably dissatisfied with Harry’s products and services.

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Soundboard Industry Sounds the Alarm Against FTC Changes to Telemarketing Sales Rule

call centerIn a development that many telemarketers will want to follow closely, the Soundboard Association (SBA) recently filed a complaint against the Federal Trade Commission (FTC) in the U.S. District Court for the District of Columbia. The SBA simultaneously asked the court to issue an injunction blocking the FTC from expanding the Telemarketing Sales Rule’s (TSR) prerecorded message restrictions to outbound calls that utilize soundboard technology. In a November 2016 letter, FTC staff indicated that it planned to do just that – effective May 2017 – in what was a reversal of the Commission’s previously stated views about whether soundboard technology is subject to the TSR’s prerecorded call provisions. This lawsuit is a significant challenge to FTC action that was not vetted by public stakeholders during a notice and comment period and, if left to stand, will have potentially dire consequences for telemarketers who use soundboard to facilitate outbound sales calls or calls seeking charitable donations.

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What’s Next for Advertisers of Consumer Financial Services? Webinar: “Consumer Financial Services 2017 Outlook: Post-Inauguration Day Insights”

financial lawAdvertisers and marketers of consumer financial services have been asking, “What’s next?” As the CFPB works its way through court challenges, and an evolving legal and political landscape unfolds, companies have been waiting for signs from the CFPB, Congress, and the President of what to expect in 2017. Members of Venable’s Consumer Financial Services Practice recently presented “Consumer Financial Services 2017 Outlook: Post-Inauguration Day Insights,” a Venable Webinar.

The webinar reviewed the current state of federal and state consumer financial protection law and policy and discussed what what’s ahead. The speakers share their experiences from the front lines and offer strategies to help companies navigate the evolving legal and regulatory landscape.

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Is the FTC’s Administrative Adjudication Process Biased?

As most of you know, when the FTC votes to issue a complaint, the agency can proceed in federal court or through the administrative law process (there are pros and cons to both, but that’s for another day). When the FTC proceeds through the administrative law process (Part 3), staff prosecutes the case in front of an Administrative Law Judge (known affectionately as the ALJ), who at the conclusion of the hearing issues findings of fact and findings of law. The ALJ’s decision is then appealable to the Commissioners and then, after that, to federal courts. Some have criticized this process, arguing that the Commission cannot – in an unbiased fashion – hear an appeal of a case they voted to bring in the first place.

A new article by Commissioner Maureen Ohlhausen (currently the only Republican commissioner) evaluates this argument by looking at 30 years of Commission Part 3 decisions (145 cases, to be precise). Along the way, Commissioner Ohlhausen also makes an interesting observation concerning the nonpartisanship of the Commission. While we highly recommend that you read the article yourself, we present some highlights below.

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FTC Wish List – Our Final Wish

Inauguration Porta-PottiesFor those of you not living or working in or near Washington DC, the moving trucks have arrived at the White House, the porta potties, security barriers and bleachers are in place. The transfer of power is about to take place. And we have one more item on our wish list for the new FTC.

The FTC creates educational materials that are second to none (and if you’ve ever tried to read an IRS Tax Publication you know what we are talking about.) On the business side, we love the FTC’s blog and we sometimes wonder whether the various business guides won’t eventually turn outside counsel into potted plants. On the consumer side there are an abundance of resources, including consumer friendly guides, videos and Spanish language materials. Yet, every year millions of Americans fall prey to outright fraud or marketing schemes that they should realize are too good to be true, and the FTC devotes time and energy to putting these folks out of business. We staff a local consumer law resource center once a month and we hear lots of these stories first hand. No doubt many of these individuals are part of the most vulnerable populations and probably don’t check out potential vendors online or even realize that other online resources are available.

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