All About Advertising Law

Regulatory & Litigation Developments for Advertisers and Marketers

Of Specificity and Shotgun Pleadings: Southern District of New York and Southern District of Florida Toss Claims Lacking Sufficient Specificity and Clarity

By Leonard L. Gordon, Allyson B. Baker and Daniel D. Lynch on September 19, 2019

In two recent decisions, federal district courts have dismissed at least some of the claims brought by federal and state authorities, finding the complaints insufficiently specific in alleging that a defendant’s conduct met the relevant statutory requirements and/or insufficiently clear regarding their allegations as a whole. These rulings may provide a useful roadmap for future challenges to complaints brought by federal and state regulatory agencies and/or attorneys general.

Federal Trade Commission and People of the State of New York, by James, v. Quincy

We’ve blogged previously about the FTC and State of New York’s challenge to the advertising for cognitive supplement Prevagen. If your memory is good, you will recall that Judge Stanton dismissed the case, but the Second Circuit reversed on the issue of whether the studies Prevagen mentions in its ads support the claims in its ads. In addition to the product manufacturer and marketer, Quincy Bioscience, LLC, Prevagen, Inc., and Quincy Bioscience Manufacturing, LLC, the government also named as defendants Quincy’s co-founders and two largest shareholders, Mark Underwood and Michael Beaman.

When Skiptracing + Autodialing = $267 Million

By Alexandra Megaris on September 17, 2019

Last week, companies engaged in debt collection were not-so-gently reminded that making calls using an automated dialer to any number other than the one provided by the consumer is incredibly risky—and in Rash Curtis & Associates’ case, a $267 million risk.

Calls made to phone numbers with the consumer’s prior express consent are not prohibited by the TCPA. The FCC and courts have long considered phone numbers provided by consumers in a transaction (such as opening a credit card account) as “in bounds,” reasoning that consumers implicitly give consent to be reached on those telephone numbers in connection with the transaction or account. However, this does not extend to phone numbers obtained through other means, including “skip tracing,” commonly used by third-party collectors and debt buyers who often touch the accounts after many months or even years after the original transaction.

Following a May jury verdict in favor of the plaintiffs in a class action brought against a debt collection firm, a judge last week entered a judgment against the firm for $267 million ($500 per illegal call made).

I’ll leave it to my colleagues Dan Blynn and Stephen Freeland to opine on the TCPA and class action implications here, but as someone who advises debt collectors on regulatory issues, this case is a stark reminder that trying to get a hold of hard-to-reach consumers continues to be fraught with risk because of the multi-layered regulatory and statutory schemes governing debt collection. It also is a cautionary tale of how the use of technology to optimize collections must be carefully analyzed for first, second, and third order effects. And while the CFPB’s upcoming rulemaking, which is seven years in the making, should modernize the Fair Debt Collection Practices Act and provide some clarity on consumer contact, it will not supersede conflicting state laws and certainly will not address the 800-pound gorilla in the room, the TCPA. For that, we continue to look to the FCC with our fingers crossed.

Eleventh Circuit Holds That A Single Text Message Does Not Satisfy Injury In Fact Requirement for Standing Under the TCPA

By Daniel S. Blynn on September 16, 2019

Many children, including myself, were taught the childhood mantra: “Sticks and stones may break my bones, but words will never hurt me.” The chant intended to be a retort to name calling—a declaration that you were above the insults. But what about text messages? Could a single text message hurt me in a way that could amount to the harm required to sustain a Telephone Consumer Protection Act (TCPA) claim? On August 28, 2019, the Eleventh Circuit answered this question in the negative with its decision in Salcedo v. Hanna, — F. 3d –, 2019 U.S. App. LEXIS 25967 (11th Cir. Aug. 28, 2019). With Salcedo, the Eleventh Circuit created a potential circuit split by finding that a plaintiff could not rely on a single text message to amount an injury in fact necessary to establish Article III standing for a TCPA action.

The plaintiff filed a TCPA suit after having received a single multimedia text message from his former attorney and that attorneys’ law firm offering a ten percent discount on future services. The Plaintiff alleged this lone message caused him harm by (1) wasting his time during which both he and his phone “were unavailable for otherwise legitimate pursuits,” and (2)”resulted in an invasion of [his] privacy and right to enjoy the full utility of his cellular device.” The Eleventh Circuit rejected both arguments.

Venable Launches Close-Ups Entertainment and Media Blog

By Leonard L. Gordon on September 12, 2019

Venable’s dynamic Entertainment and Media Group is pleased to launch Close-Ups, a blog aimed at providing insider commentary on legal and business issues, trends, and headlines in Hollywood and beyond. As a reader of our All About Advertising Law blog, you recognize the value of timely legal analysis and commentary on the issues surrounding your business. The team of writers and editors producing Close-Ups embraces the same innovative and creative approach to their analysis of the entertainment and media industries as they do to their counseling of major studios, agencies, talent, management, and more. Read the inaugural edition and subscribe to Close-Ups at www.closeupsblog.com.

A Day Late and $1.2M Short: NY AG Fines Dollar Store Chains for Selling Expired Medicines and Obsolete Motor Oil, Violating Bottle Deposit Law

By Kathleen K. Sheridan on September 3, 2019

Dollar General, Dollar Tree and Family Dollar will pay $1.2 million in fines and restitution to the New York Attorney General to resolve allegations that they routinely sold expired medicines and failed to comply with New York’s bottle deposit law. The bulk of the penalty – $1.1 million – will be paid by Dollar General, which is accused of selling two types of motor oil that have been obsolete for almost 30 and 90 years, respectively.

Investigators began secretly shopping at the discount chains in March 2016, inspecting shelves for expired products. At stores throughout the state of New York, they found over-the-counter medicines for sale months past their expiration dates. At Dollar General stores, they also found at least two types of store-brand motor oil that is not suitable for most modern car engines. One type of motor oil has been obsolete since 1988, and the other since 1930. These motor oils were placed on store shelves next to, and used packaging with the same or similar descriptors as, brand-name motor oils that are suitable for modern engines. There were no signs or other indicators to warn customers that they should be used only on antique vehicles.

Things Are Buzzing in the Beehive State

By Leonard L. Gordon, Alexandra Megaris and Elliot Kelly on August 28, 2019

Utah traditionally has been a hive of activity in the telemarketing and “how to make money” education verticals. The Utah Consumer Protection Division (the “Division”) and the Division’s lawyers at the Office of the Attorney General appear to be trying to change that. Industry participants have been watching closely a lawsuit filed by the attorney general on behalf of the Division in federal court in Utah. Last week, that lawsuit was thrown out on jurisdictional grounds. The lawsuit and the court decision shed light on the aggressive approach the Division is taking to this type of business activity and the limits on the authority of states to use the remedial tools available to the FTC.

Under 15 U.S.C § 6103(a), an attorney general of any state can bring suit in federal district court, as parens patriae, when the state has reason to believe that telemarketing violations are adversely affecting its residents. The district court here concluded that the Division did not have parens patriae standing, because no Utah resident had been injured—REW did not sell its services to Utah residents.

Anti-Robocall Principles Agreed to by Carriers and State AGs

By Jonathan L. Pompan, Daniel S. Blynn and Stephen R. Freeland on August 27, 2019

A bipartisan, public/private coalition of 51 attorneys general and 12 phone companies have agreed to create the “Anti-Robocall Principles,” a set of eight principles to fight “illegal robocalls” that the phone companies have voluntarily agreed to adopt by incorporation, or continued incorporation into their business practices. The principles are available here and press release is here.

Why it matters: “Illegal and unwanted robocalls continue to harm and hassle people every day. Consumer fraud often originates with an illegal call, and robocalls regularly interrupt our daily lives. Robocalls and telemarketing calls are the number one source of consumer complaints at many state Attorneys General offices, as well as at both the Federal Communications Commission and the Federal Trade Commission. State Attorneys General are on the front lines of enforcing do-not-call laws and helping people who are scammed and harassed by these calls.” according to the principles.

The coalition of companies includes twelve major carriers.

No Restitution for the Weary: Seventh Circuit Limits FTC’s Ability to Seek Restitution

By Annie H. Lee and Leonard L. Gordon on August 23, 2019

The Seventh Circuit issued a decision this week that guts a key part of the FTC’s enforcement arsenal – the ability to obtain equitable monetary relief from defendants when the FTC challenges conduct in federal court under Section 13(b) of the FTC Act. We’ve written previously—here, here, here, and here—regarding the limits courts have placed on the FTC’s ability to invoke Section 13(b) and this case brings those issues to a head.

The case in question, FTC v. Credit Bureau Center, involves a credit-monitoring service that allegedly violated several consumer protection statutes by automatically enrolling consumers in a $29.94 monthly subscription without proper notice. The FTC sued the company and its owner, Michael Brown, under Section 13(b) of the FTC Act and sought a permanent injunction and restitution. The district court judge granted both requests, and Brown was ordered to pay more than $5 million in restitution. On appeal, the Seventh Circuit affirmed the district court’s judgment – except for the restitution award, which, in a surprising about-face, the court vacated.

FTC Gathers Video Game Industry to Talk Loot Boxes

By Christopher S. Crook and Calvin R. Nelson on August 14, 2019

On August 7, 2019, the Federal Trade Commission (FTC) held a workshop examining consumer protection issues related to “loot boxes” in video games in Washington, DC. Loot boxes are digital containers of virtual goods that a user can purchase in-game using real-world currency or earn based on meeting certain in-game milestones. A user does not know what is in the loot box before purchasing. It may contain digital goods (such as character skins, tools, weapons, etc.) that the user can use in the game. Importantly, the user cannot choose the contents of the loot box. The box could contain an extremely rare/sought-after item, or the contents could be a collection of items already owned by the user (or somewhere in between).

Loot boxes are a form of micro-transaction that video game manufactures rely upon to offset the cost of game development, which, as explained in the workshop, has risen from tens of thousands of dollars to, in some cases, hundreds of millions of dollars. However, the FTC and other consumer groups are concerned that these transactions may come as a surprise to consumers (especially parents of small children) if they are not properly and clearly disclosed.

Exactly How Long is the Long Arm of the Law? The FTC Seeks to Extend its Reach to Offshore Payment Processors

By Leonard L. Gordon, Mary M. Gardner and Matthew S. Renick on July 25, 2019

We frequently hear about the “long arm of the law,” but, in the case of the Federal Trade Commission, just how far does that arm actually reach? The FTC recently filed an amended complaint in the U.S. District Court for the Central District of California adding SIA Transact Pro, a Latvian payment processor, and its CEO as additional defendants in its case against Apex Capital Group, LLC and other parties. The amended complaint alleges that Apex Capital defrauded consumers, and that the newly added foreign-based payment processor helped its merchant, Apex Capital, avoid detection by consumers and law enforcement.

Specifically, according to the FTC, Apex Capital offered “free” trials of personal care products and dietary supplements for just the cost of shipping and handling—$4.95. However, approximately two weeks after a consumer ordered a “free” trial, the FTC alleges that Apex Capital would charge that consumer’s credit or debit card the full price of the product ($90) and enroll the consumer in an automatic renewal option—all without that consumer’s knowledge or consent.