All About Advertising Law

Regulatory & Litigation Developments for Advertisers and Marketers

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

By Randy Shaheen on June 8, 2018

Practitioners have been waiting for quite some time for the 11^th 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 11^th 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 11^th 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:

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

By Heather Bramble and Thomasina Poirot on May 23, 2018

Internet connected devices On 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.

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

By Daniel S. Blynn, Stephen R. Freeland and Brian Tengel on May 21, 2018

Comments The 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.

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

By Daniel S. Blynn on May 18, 2018

In 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.

New Commission Is in the News

By Amy Mudge on May 17, 2018

to be continued The 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.

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

By Amy Mudge, Melissa Landau Steinman and Daniel Hoffer on May 16, 2018

Social Media Apps In 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:

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;
Establishing, implementing, and maintaining a system to monitor and review influencer posts; and
Immediately terminating and ceasing payment to any noncompliant endorser.

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

By Heather Bramble and Jeff Weiss on May 8, 2018

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.

Guest Blog: Ad Standards Introduces New Influencer Disclosure Guidelines

By Catherine Bate on May 7, 2018

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.

New Sheriffs in Town

By Amy Mudge and Randy Shaheen on May 3, 2018

In the last week, four new commissioners were sworn in to their role as agency heads at the Federal Trade Commission, giving the FTC a full slate of commissioners for the first time in several years. The new commissioners – Republicans Noah Phillips and Chairman Joseph Simons; Democrats Rebecca Slaughter and Rohit Chopra – join Maureen Olhausen to fill all five seats atop the FTC. The fifth nominee by President Trump, Republican Christine Wilson, will take Maureen Olhausen’s seat pending Ms. Olhausen’s move to a judicial post at the Court of Federal Claims. The commissioners bring a diverse set of experiences to the agency, but with the exception of Rohit Chopra, their specialty is primarily in antitrust law. As a result, it will be interesting to see what kind of consumer protection agenda the new Commission sets. For more information on the new commissioners’ backgrounds, you can check out our previous blog post here.

Additionally, Tara Koslov has been appointed interim Chief of Staff. Ms. Koslov joined the Commission 1997 as a staff attorney in the Bureau of Competition, and since then she has served as an attorney advisor to three Commissioners. Ms. Koslov moves to her new appointment from the position of Acting Director of the Office of Policy Planning. Other changes are also likely in the coming weeks among senior FTC staff including the likely naming of a new Consumer Protection Bureau Director.

CPSC’s Revision of Age Determination Guidelines: Updates, New Technology, Enforcement, and Possible International Consequences

By Heather Bramble on April 20, 2018

kids and laptops Last week the International Consumer Product Health and Safety Organization (ICPHSO) and ASTM International held a workshop to discuss the recently-updated age determination guidelines from the Consumer Product Safety Commission (CPSC). The age determination guidelines are a resource provided by the Commission to help manufacturers and consumers understand the age ratings on children’s products and toys and to ensure that products are properly labeled. CPSC staff perform age determinations on toy samples to determine the age group for whom the product is commonly recognized. The Commission then devises a categorical list of recommended age ratings. The recommended ratings are used by manufacturers and help determine the type and severity of tests products undergo to detect hazards prior to market release.

The workshop featured remarks from Acting Chairwoman Buerkle as well as other leadership from the Commission and key industry stakeholders. In her opening remarks, Acting Chairwoman Buerkle stressed the importance of receiving comments on the draft guidelines from the public and particularly from those engaged in the marketing and/or manufacture of children’s products and toys. These statements underscore the Chairwoman’s commitment to increasing CPSC’s engagement with the broad stakeholder community.