Background

Advertisers, e-commerce websites, affiliate networks, and publishers each play a large role in the development of the Internet. One reason they have been able to do so is Section 230 of the Communications Decency Act of 1996 (CDA), which immunizes online interactive services from liability arising from third-party content on their platforms. The CDA does so in twenty-six words:

“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

Through this immunity, the CDA allows online services to host the speech of others, without assuming responsibility for what those users may say or do. No one disputes the premise that Section 230 fosters free expression and the creation of vibrant marketplaces for advertisers and merchants to efficiently and effectively reach consumers. Recently, however, confusion and controversy have arisen as to exactly who and what Section 230 does and does not protect, leading to divisions among court decisions and to calls for legislative “overhaul.” A quick review for merchants, advertisers, agencies, and affiliate networks seems desirable.

Continue Reading An Advertiser’s Guide to Section 230 of the Communications Decency Act

This week, the Federal Trade Commission (FTC) announced a proposed settlement with MoviePass to resolve allegations that the company offered an automatically renewing movie subscription program but blocked paid subscribers from using the advertised services, and failed to adequately secure subscribers’ personal data.

The FTC brought the case against MoviePass under the Restore Online Shoppers Confidence Act (ROSCA), the federal statute governing online negative option programs. The statute requires sellers to clearly and conspicuously disclose all “material terms of the transaction” and obtain consumers’ express informed consent before charging them for online negative option features.

However, the FTC’s complaint did not take issue with the company’s billing disclosures or consent mechanism. Instead, it asserted that the company’s failure to disclose its deceptive tactics that prevented subscribers from accessing all of the advertised benefits violated ROSCA. In the complaint the FTC alleged that MoviePass, Inc deceptively marketed a MoviePass subscription service that allowed customers to view movies at local theaters for a monthly fee. However, once customers purchased a subscription, MoviePass allegedly used various methods to prevent subscribers from accessing the advertised service. For example, to limit the movies that customers could view, MoviePass allegedly blocked account access by invalidating subscriber passwords under the guise of “suspicious activity or potential fraud.” The FTC asserted that resetting a password was cumbersome and often failed, precluding subscribers from regaining access. Next, the FTC alleged that MoviePass’s operators implemented a ticket verification program that required users to submit pictures of their physical movie ticket stubs for approval through the app within a certain time frame after purchase. Users who failed to submit their ticket stubs would be blocked from viewing future movies and could risk subscription termination. Third, MoviePass allegedly used “trip wires” to block certain groups of subscribers—heavy users who viewed more than three movies per month—from using the service to purchase more tickets. These allegations seem to echo statements from the FTC’s Dark Patterns workshop (we blogged about the workshop here), which discussed ways the FTC should address websites and apps that impair consumers’ autonomy, decision making, and choice.

Continue Reading Lights, Camera, Action! FTC Settlement Signals Novel Use of ROSCA

On May 26, 2021, the U.S. Court of Appeals for the Fifth Circuit issued an opinion in Cranor v. 5 Star Nutrition, LLC, holding that the receipt of a single text message is a sufficient injury to convey standing under the Telephone Consumer Protection Act (“TCPA”). This creates a circuit split with the Eleventh Circuit’s 2019 opinion entered in Salcedo v. Hanna, which we previously blogged about.

Cranor made its way to the Fifth Circuit after the district court dismissed the case on grounds that a single text message doesn’t “involve [the same] intrusion into the privacy of the home” as a call to a residential landline. In its opinion, the Fifth Circuit looked to the (1) congressional purpose of the TCPA, and (2) traditional basis for actionable, intangible harm in holding that the receipt of a single text message constitutes an injury under the TCPA.

Continue Reading Singled Out: One Text Message Conveys TCPA Standing in the Fifth Circuit

Spring 2021 Edition: Not a Symposium, but a Virtual Ad Law CLE Bonanza

In a recent series of webinars, members of Venable’s advertising law practice, Reed Freeman, Len Gordon, and Shahin Rothermel, along with some leading industry figures, explored and addressed key issues of concern to companies in the advertising space.

Our attorneys along with Panelists Mary Engle and Laura Brett from BBB National Programs, which administers the National Advertising Division (NAD), the investigative unit of the industry’s system of self-regulation; Lou Mastria from the Digital Advertising Alliance (DAA); and Daniel Kaufman from the Federal Trade Commission (FTC) also answered some audience questions. Below are some highlights from each session.

Session #1: NAD at 50 Years: Regulation and Self-Regulation Over the Past 50 Years

Q: To what extent does the NAD support the work of the FTC in enforcing self-regulation?

A: There has always been a strong relationship between the FTC and the NAD in supporting self-regulation. The FTC has limited resources, and it considers the NAD to be another cop on the street. There are always going to be cases that the FTC will want to pursue, regardless—for example, when it’s important to get money back to consumers. But anytime the NAD can define advertising as misleading and cause an advertiser to modify or discontinue the advertising, it frees up resources for the FTC. To show its support, the FTC prioritizes referrals from the NAD (as opposed to letters from competitors sent directly to the FTC). Similarly, after cases are referred to the FTC, it encourages the advertiser to participate in the NAD process and comply with the NAD’s decisions. So broadly speaking, the FTC really believes in the NAD’s role in encouraging self-regulation and in promoting truthful and non-misleading advertising.

Continue Reading You Asked. We Answered.

On April 29, 2021, the Federal Trade Commission (“FTC”) held a virtual workshop, Bringing Dark Patterns to Light, which discussed the use of “dark patterns,” how they impact consumers, and ways the FTC can combat these methods.

What are dark patterns?

The FTC has defined “dark patterns” as website design features or interfaces which are used to deceive, steer, and manipulate users into behavior that is profitable for the website owner but detrimental to consumers. The panelists agreed that while the term “dark patterns” is useful as a general characterization, it does not adequately convey the term’s meaning from a legal standpoint. According to the panelists, dark patterns are also difficult to identify because many are intentionally designed to be covert.

Although many of the panelists used terms like “manipulative tactics” or “deceptive practices” to describe dark patterns, one of the most comprehensive definitions came from Arunesh Mathur, a Postdoctoral Research Fellow at Princeton University, who described six attributes that make up dark patterns:

Continue Reading FTC Holds Workshop on “Dark Patterns” and Seeks Public Comments

Earlier today, the United States Supreme Court issued a unanimous opinion in AMG Capital Management v. Federal Trade Commission, holding that Congress, by enacting Section 13(b) of the Federal Trade Commission Act, did not grant the Commission authority to obtain equitable monetary relief when it proceeds in federal district courts under that section.

Specifically, Section 13(b) of the Federal Trade Commission Act gives the Commission authority to bring suit in federal district court against those it believes are “violating” or “about to violate” the FTC Act, in order to “enjoin any such act or practice.” In such cases, Section 13(b) further provides courts with the authority to issue a “permanent injunction.” Since the late 1970s, the FTC has taken the position, accepted by courts, that this grant of authority included the ability to obtain equitable monetary relief. The Supreme Court today said not so.

In reaching its conclusion, the Court first looked to the plain language of 13(b). It recognized that the statute only allows for injunctions. The Court stated, plainly, that “an injunction is not the same as an award of equitable monetary relief.”

Continue Reading Disgorgement [Supremely] Denied: Supreme Court Unanimously Curtails the FTC’s Authority in <em>AMG Capital Management v. FTC</em>

On April 20, 2021, Acting Chairwoman Rebecca Kelly Slaughter and Commissioners Rohit Chopra, Noah Phillips, and Christine Wilson testified before the Senate Committee on Commerce, Science, and Transportation and provided an overview of the FTC’s consumer protection priorities. In addition, the hearing addressed the Commission’s imperiled consumer redress authority under Section 13(b) of the FTC Act and the agency’s continuous efforts to combat COVID-19-related scams.

As we have previously written, the Supreme Court is set to decide the scope of FTC’s Section 13(b) authority to obtain a permanent injunction and equitable monetary relief. At the hearing, the Commission emphasized that Section 13(b) authority is the FTC’s “bread and butter” and requested that Congress clarify that authority. Chair Maria Cantwell (D-WA) and Ranking Member Roger Wicker (R-MS) showed an interest to move quickly with a legislative fix if the Supreme Court decides against the FTC. Specifically, Senator Cantwell gave two examples of how the FTC has used its Section 13(b) power to get consumer redress. In 2019, the FTC returned more than $34 million to consumers who were allegedly tricked into buying computer repair products and services, and the FTC sent settlement payments of nearly $50 million to students allegedly lured by a university’s deceptive advertisements that it worked with reputable companies to create job opportunities.

Continue Reading The Uncertainty Continues: Compromised Section 13(b) Authority, COVID-19 Scams, and the FTC’s Plans for Consumer Protection

The FTC has filed its first lawsuit under the COVID-19 Consumer Protection Act, charging St. Louis-based chiropractor Eric Anthony Nepute and his company, Quickwork LLC, with violating the Act by deceptively marketing nutritional supplements as scientifically proven to treat or prevent COVID-19.

According to the FTC, despite its May 2020 warning letter to Nepute regarding unsubstantiated COVID-19 efficacy claims he made in connection with other products, the defendants continued marketing their vitamin and mineral products—namely, their “Wellness Warrior” vitamin D and zinc supplements—as proven immunity boosters that effectively treat or prevent COVID-19. The FTC also accuses the defendants of routinely dismissing public health guidance and falsely representing that their products provide protection against the disease that is equal to or better than that provided by available vaccines. The FTC’s complaint seeks both monetary penalties and broad injunctive relief.

Continue Reading FTC Files First Action Under COVID-19 Consumer Protection Act

Yesterday, the Supreme Court issued a 9-0 unanimous decision authored by Justice Sotomayor (with Justice Alito writing a concurring opinion) in Facebook, Inc. v. Duguid, resolving the circuit split on what constitutes a prohibited “automatic telephone dialing system” (more often referred to as an “autodialer” or “ATDS”) and adopting a narrow definition of ATDS. Yesterday’s ruling likely provides welcome relief to those subject to the TCPA—at least for the time being. More on that below.

Specifically, the Court favored the Third, Seventh, and Eleventh Circuits’ autodialer definitions and held that, in order to be an ATDS, “a device must have the capacity either to store a telephone number using a random or sequential generator or to produce a telephone number using a random or sequential number generator.” In other words, a telephone number must essentially be pulled out of thin air and then called or texted; that is what “random or sequential” number generation means. That type of technology was commonly used in the early 1990s when the TCPA was enacted, but virtually no one uses it anymore. Now, companies typically dial from stored lists of specific telephone numbers. The Supreme Court’s concern was that, if it accepted the alternative ATDS definition—that dialing from a cultivated list of telephone numbers constitutes autodialing—such interpretation “would capture virtually all modern cell phones . . . The TCPA’s liability provisions, then, could affect ordinary cell phone owners in the course of commonplace usage, such as speed dialing or sending automated text message responses.” Notably, during oral argument last December, Justice Sotomayor foreshadowed her and the other justices’ doubts in questioning to Bryan Garner, Duguid’s counsel:

Continue Reading Message Received: Supreme Court Narrowly Construes Autodialer Definition

On March 29, 2021, the FTC announced a settlement with Beam Financial Inc. (Beam) and its founder and CEO, Yinan Du, over allegations that the mobile banking app company deceived consumers about their access to funds and interest rates. The settlement included a far-reaching conduct ban. As the non-bank financial services continue to grow, the action and settlement underscore the role the FTC seeks to play in policing that sector.

By way of background, on November 18, 2020, the FTC filed a complaint against Beam, alleging that Beam and Mr. Du falsely promised users of their banking app that they would earn high interest rates on the funds maintained in their Beam accounts and have “24/7 access” to their funds. Beam was not a bank; rather, it promised to place funds at banks and provide consumers access to those funds through the app. The FTC alleged that Beam promised users would receive “the industry’s best possible rate”—at least 0.2% or 1%—when users actually received a much lower rate of 0.04% and stopped earning interest entirely after requesting that Beam return their funds. The FTC’s complaint also alleged that Beam misrepresented that consumers could easily move funds into and out of their accounts and that they would receive their requested funds within three to five business days. According to the FTC, users reported that their emails, texts, and phone calls to the company went unanswered; some users even allegedly waited weeks or months to receive their money, while others never received it. The FTC alleged that this was particularly difficult for consumers experiencing serious financial hardship during the COVID-19 pandemic.

Continue Reading FTC Settlement Leads to a 24/7 Shutdown of a Mobile Banking App