All About Advertising Law

Regulatory & Litigation Developments for Advertisers and Marketers

Court Sets Important Limits on Ability of FTC to Challenge Past Conduct

By Leonard Gordon and Mary Gardner on October 17, 2018

Believe it or not, the FTC’s power is not limitless. We wrote previously on an antitrust decision (FTC v. Shire ViroPharma) limiting the FTC’s ability to proceed in federal court to challenge past violations of the FTC Act. This week a judge extended that reasoning to the FTC’s consumer protection enforcement authority. In FTC v. Hornbeam Special Services, Judge Timothy C. Batten Sr. held that when the FTC proceeds in federal court pursuant to Section 13(b) of the FTC Act, the FTC must plead facts indicating that each defendant is violating or about to violate a law enforced by the FTC. Having found the FTC had thus far failed to do so, Judge Batten will allow the FTC the opportunity to amend its complaint to add such facts.

Section 13(b) provides:

Whenever the Commission has reason to believe (1) that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced the Federal Trade Commission . . . the Commission by any of its attorneys may bring suit to enjoin any such act or practice.

See our past post on the history surrounding this statute here.

Insights into the FTC’s Bureau of Consumer Protection

By Jonathan Pompan and Helen Chen on October 12, 2018

The Federal Trade Commission (FTC) plays a significant role in regulating consumer financial services providers and vendors, including advertisers and marketers. A recent webinar from the Consumer Financial Services Committee of the American Bar Association featured an interview with Andrew Smith, director of the FTC’s Bureau of Consumer Protection (BCP). Mr. Smith, who was confirmed in May 2018, shared his personal views of his role at the FTC, the FTC’s development, and enforcement trends and focus in the consumer financial services sector. Below we highlight the main areas of focus that Mr. Smith touched upon that in our view are relevant to the consumer financial services sector.

Because of the nature of the webinar, this summary is not intended to be a complete transcript, does not reflect the views of the FTC, and does not necessarily reflect the views of Mr. Smith or any individual at the FTC.

Insights into the FTC and the Utah Department of Commerce: Consumer Fraud and Business Symposium

By Alexandra Megaris and Elliot Kelly on October 8, 2018

On September 20, 2018, the FTC and Utah Department of Commerce held a symposium in Salt Lake City, Utah, discussing, among other things, how the two work together to combat consumer fraud in various areas. The panels provided a unique insight into how law enforcement agencies coordinate and their respective priorities. Below are two key takeaways from the various panels.

State and Federal Agencies Are Working Together

Although it may seem like no one is getting along these days, there continues to be a significant degree of coordination and cooperation between the federal government and state counterparts to achieve the common goal of battling consumer fraud. Agencies are forming partnerships to better understand vulnerable areas for consumers and better situate themselves to obtain the most consumer redress. Some groups, such as the Investment Fraud Working Group, which comprises both federal and state agencies, meet formally every quarter to discuss strategic plans. For example, as a panelist noted, depending on the size of a given case and whether it involves activities crossing state lines, the Utah Department of Commerce may refer a case to the FTC because it can cross state borders and can obtain asset freezes and temporary restraining orders.

Demystifying the NAD Referral Process

By Randy Shaheen and Matthew Renick on October 4, 2018

What does it mean when the National Advertising Division refers a case to the Federal Trade Commission? At this year’s NAD Annual Conference, Mary K. Engle, the associate director of the FTC’s Division of Advertising Practices, and NAD director Laura Brett sorted fact from fiction about NAD referrals and shared their perspectives from both sides of the process. Read on to learn more about the referral process and the key takeaways from their discussion.

To start, Ms. Brett acknowledged that in an ideal world, parties would voluntarily participate in and comply with the NAD review process, which would eliminate the need for referrals to the FTC. Although referrals constitute a small percentage of the work the NAD does, Ms. Brett views referrals as a failure of the self-regulatory process. Ms. Brett went on to explain that referrals arise from one of two main scenarios: (1) failure to file a substantive written response or (2) failure to comply with a NAD or NARB decision. That latter category can be further broken down into situations where (a) the advertiser has not agreed to comply with a decision, or (b) the advertiser has not complied by failing to make a bona fide attempt to bring its advertising into compliance with NAD/NARB recommendations after a reasonable amount of time. Once a decision has been made to refer the case to the FTC, the NAD packages up the case file and sends it to the Advertising Practices Division (the “Division”).

The Definition of Autodialer Under the TCPA: A Tale of Two Courts

By Daniel S. Blynn and Stephen R. Freeland on October 3, 2018

What is an autodialer under the TCPA? That’s a good question and one with which courts across the country are struggling as much as Charles Darnay struggled with his aristocratic heritage leading up to the French Revolution. My memory of the CliffsNotes to the Dickens classic aside, fortunately, the Federal Communications Commission (“FCC”) is, as its Chairman recently described it, “poised” to provide clarity on what types of devices fall within the definition as part of an ongoing declaratory ruling proceeding. Nonetheless, several courts recently have issued divergent decisions regarding technology that constitutes an autodialer under the statute.

The Best of Times: On September 21, 2018, the U.S. District Court for the District of New Jersey held, in Fleming v. Assoc. Credit Servs., Inc., No. 16-3382, 2018 WL 4562460 (D.N.J. Sept. 21, 2018), that that the defendant’s calling platform (LiveVox’s Human Call Initiator (“HCI”)), which “dials numbers from a list that was not randomly or sequentially generated when the list was created” does not qualify as an “automatic telephone dialing system” (“ATDS” or autodialer) under the TCPA based on the statutory definition. In other words, because HCI did not randomly or sequentially generate the numbers that ultimately were contained on the list of numbers called, the platform did not fit the ATDS definition. Specifically, the court explained: “The phrase ‘using a random or sequential number generator,’ I believe, applies to the manner in which the numbers make their way onto the list – not to the manner in which the numbers are dialed once they are on the list.”

“Money, It’s a Gas” – Bureau Director Smith Makes NAD Debut

By Randy Shaheen and Matthew Renick on September 28, 2018

To kick off this year’s National Advertising Division Annual Conference, Andrew Smith—the FTC’s new Director of the Consumer Protection Bureau—discussed his views on the Commission’s priorities with respect to remedies, privacy and data security, and national advertising cases. Given the backgrounds of the new Commissioners, Director Smith acknowledged that some of them may be re-thinking—or just thinking—deeply about consumer protection remedies. According to the Director, the Commission has revived the Remedies Task Force to answer the following question: what is the right way to redress a particular harm the Commission highlights? Although this appears to be a particularly tough question in non-fraud cases, when it comes to remedies, the Commissioners have their minds on the money and the money on their minds.

The FTC considers monetary remedies as providing not only some measure of redress for consumers, but also respect for the agency more broadly. While we recently hinted at the Commission’s remedies reexamination, Director Smith made it clear that the Commission has had many discussions about money and proposed settlements sent to the Commissioners invariably come back with either the question of “why is there no money” or “why isn’t there more money?” In fraud cases, the monetary remedy is straightforward—companies would simply give the money back. In non-fraud cases, however, while the FTC under at least some court decisions might be able to seek full redress, the agency is considering a range of remedies in an effort to seek some sort of less drastic and presumably fairer monetary recompense. For example, the Commission may consider any premiums a consumer would pay for a product, such as when it is “Made in the USA.” Similarly, the FTC may examine whether there were increased sales, assuming sufficient comparative sales data is available. In short, he echoed what we have said previously which is that when it comes to FTC settlements and remedies, it is definitely not business as usual.

Director Smith closed his remarks with a few words on what’s coming down the pipeline. He anticipates even more “Made in the USA” cases and stated that, although some have speculated to the contrary, from what he can tell, there is no hostility by this Republican-leaning Commission to National Advertising cases. In fact, he noted that some National Advertising cases are currently in the works. We will certainly be keeping track of these cases and more as the Commission wraps up 2018 and looks ahead to its first full calendar year under new leadership.

USPS Proposal May Cause Direct Mail Advertisers To ‘Go Postal’

By David M. Levy, Matthew Field, Eric S. Berman and Ian Volner on September 20, 2018

Readers of this blog often learn how the government regulates modern instruments for customer engagement – social media, texting campaigns, e-commerce sites, the use of influencers, and more. Old habits die hard, however, and many marketers continue to use the U.S. Postal Service to connect with consumers. When those mailers want to reach a large audience, Marketing Mail (formerly known as Standard Mail) may be the answer. Mailers use USPS Marketing Mail to deliver catalogues, circulars, flyers, advertising, and both printed and non-printed merchandise designed to enhance the tactile experience of opening the mail and create a positive association with the sender.

Learn the Answers About Consumer Surveys

By Randy Shaheen on September 18, 2018

Consumer surveys play an increasingly important role in advertising law, whether it’s a Lanham Act case, a regulatory or self-regulatory matter, or internal counseling. Yet consumer surveys can also be a trap for the unwary. On Thursday, September 20, join Venable’s Randy Shaheen, as well as Jacqueline Chorn and Jason Och, experts from Applied Marketing Science, for a webinar that will unpack some of the mysteries surrounding the design and implementation of consumer surveys.

Webinar Details:

Thursday, September 20, 2018
2:00 p.m. – 3:00 p.m. ET
Register

FTC Remedy Wars – Part Deux

By Randy Shaheen and Amy Mudge on September 13, 2018

The ink was barely dry on our Monday blog when a new skirmish broke out (both on Twitter and in official records) in the FTC’s long-brewing remedy wars. This time the battle took place in another unlikely location – three Made in USA settlements.

First to set the scene. The FTC generals announced that they had accepted surrenders from three combatants who were attempting to sell products allegedly mislabeled as Made in USA. In one instance there were hockey pucks, “Patriot Pucks” that were patriotic if you happened to be a citizen of China and that were marketed as “The Only American-Made Hockey Puck.” In another instance, mattresses that were wholly imported from China were labeled as “designed and assembled in the USA.” And finally, backpacks and wallets were sold on websites that claimed to feature “American-Made Products” and the wallets were specifically promoted as “American Made.”

Internet Vendors Need to Pay Attention to these States After U.S. Supreme Court Alters Sales Tax Collection Standard

By Walter Calvert and Tammara Langlieb on September 12, 2018

Venable clients that engage in selling goods and/or services over the internet should evaluate whether the recent Supreme Court decision in South Dakota v. Wayfair will now require them to begin collecting sales and use taxes in states where they have not previously done so. In the Wayfair Case the Court held that a state can require a remote vendor to collect its sales/use tax based merely on “economic nexus” with the state. The prior law standard requiring a remote vendor to have physical presence in a state has been overturned. Under the South Dakota law at issue in Wayfair, an internet retailer is required to collect South Dakota sales tax if it has more than $100,000 of sales into the state or more than 200 sales transactions in the state over the course of a year.

Our chart below lists the states that currently have authorized an economic nexus standard similar to that approved in Wayfair and lists the threshold requirements for each state. This list can be expected to grow as states without economic nexus laws for sales tax purposes rush to alter their existing standards to take advantage of Wayfair’s liberalization of the sales tax nexus rules.