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

For those who follow the Federal Trade Commission and are anxiously awaiting the Supreme Court’s decision in AMG Capital Management v. FTC, several recent developments at the Commission may foreshadow the enforcement road that lies ahead. In many ways, the future may look a lot like the past, especially the 1960s and 1970s, when the FTC pumped out rules regulating many aspects of economic activity, including frosted cocktail glasses.

First, earlier this month, President Biden nominated Lina Khan, an associate professor of law at Columbia Law School, to replace departing Commissioner Rohit Chopra, who has been nominated to lead the CFPB. At 32 years of age, Khan would be the youngest FTC commissioner in the agency’s history.

Continue Reading Setting Some Ground Rules: Commissioner Nominee and a New Working Group May Steer the FTC Down a New (Actually an Old) Road

Trademark holders face a common dilemma in deciding whether and how to respond when their marks are used for comic effect, particularly when the humor is done at their expense for another’s commercial gain. Instinctively, trademark holders want to protect their marks, often with an aggressive legal response. But that approach is not always wise and is now less likely to succeed, at least in one appellate Circuit, following a recent case involving the well-known Jack Daniel’s brand.

The case involves Arizona-based VIP Products, which makes and sells dog chew toys with branding that plays on well-known alcoholic beverage and soda brands. According to VIP, its dog toys reflect “on the humanization of the dog in our lives” and comment on “corporations that take themselves very seriously.”

In July 2014, VIP introduced the “Bad Spaniels” toy, pictured below, which mimics the Jack Daniel’s whiskey bottle with some bathroom humor: “Old No. 2 on your Tennessee Carpet,” “43% POO BY VOL,” and “100% SMELLY.”

Continue Reading Mona Lisa or Dog Doo? Humor Avoids Trademark Liability

The laws and regulations surrounding subscription-based offers continue to change on a regular basis. Federal and state regulators and private plaintiffs continue to lodge challenges against companies selling products and services on a recurring basis. Moreover, new cases and law enforcement activity offer evolving interpretations on how to comply. Given the substantial developments, companies offering products or services on an automatically renewing basis should take heed.

The primary federal regulator of autorenewal programs, the Federal Trade Commission (FTC), remains as active as ever in enforcing the Restore Online Shoppers’ Confidence Act (ROSCA), the federal statute governing online negative option programs. The FTC has filed multiple new lawsuits against companies selling products and services on a negative option basis and continues to litigate cases that it has filed.

The district attorneys in the California Automatic Renewal Task Force have also continued to bring actions at a furious pace, demonstrating their clear intention to pick up where the FTC has left off. In fact, the task force recently filed a lawsuit in California state court against Match.com, even though the FTC had already filed a lawsuit against the company. The California district attorneys also announced settlements with Classmates.com, Home Chef, CheckPeople.com, and Care.com, among other companies, and the consent decrees have imposed increasingly stringent requirements on the settling businesses.

Continue Reading Automatic Renewal Programs: Latest Updates

We’re sorry not to be meeting up with you in person, but we hope you can join us for our spring 2021 edition of “Not a Symposium, but a Virtual Ad Law CLE Bonanza.” Combining the experience and thought leadership of one of the nation’s largest advertising law practices with key figures in advertising regulation, these three CLE-packed sessions are designed to educate and innovate. Topics will cover broad trends and anticipated developments, as well as industry-specific hurdles, highlights, and more.

Register today for any or all sessions!

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

On February 12, 2021, the Maryland General Assembly voted to override Governor Larry Hogan’s veto of House Bill 732, which carried over from the close of last year’s legislative session and enacts the nation’s first gross receipts tax on digital advertising targeted at Maryland consumers. The tax takes effect on March 14, 2021 and applies to all taxable years beginning after December 31, 2020. Legal challenges to the tax have already begun in the Maryland courts.

Overview of Digital Advertising Tax

House Bill 732 passed both the Maryland House and Senate with more than three-fifths support in March 2020, as the legislature rushed to consider legislation before adjourning for 2020 due to COVID-19 concerns. Governor Hogan vetoed the bill, leaving it in limbo until the legislature reconvened in 2021. The legislature’s override of the governor’s veto leaves companies with little time to determine their compliance obligations.

Continue Reading Maryland Passes First-of-Its-Kind Digital Advertising Tax

Last week the FTC announced it had settled with Chemence, Inc. (“Chemence”) and the company’s president over deceptive “Made in USA” claims. The company was required to pay $1.2 million to the FTC, which amounts to the highest monetary judgment ever for a Made in USA case.

By way of background, unqualified Made in USA claims require that all or virtually all of the product is made in the United States. Previous FTC guidance stemmed from a 1997 Enforcement Policy Statement, but last year the FTC announced a Notice of Proposed Rulemaking for the Made in USA Labeling Rule, which would codify much of the Enforcement Policy. Notably, the proposed Rule would allow the FTC to seek civil penalties for each violation. The Rule has not yet been made final, but the opportunity to comment ended in September 2020.

Continue Reading Superglue Manufacturer Stuck with $1.2 Million Judgment for Made in USA Violations

We are pleased to share with you the ninth edition of Venable’s popular Advertising Law Tool Kit. This annual resource compiles a broad spectrum of marketing-related topics, background information, and checklists into an easy-to-access guide, authored by some of the most experienced attorneys in the industry. Download this year’s Tool Kit or bookmark the link to our e-book for quick access to these industry best practices.

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While we anxiously await the Supreme Court’s decision on whether the FTC can obtain equitable monetary relief pursuant to Section 13(b) of the FTC Act in the AMG case, a defendant’s challenge to the FTC administrative litigation process appears to be struggling. As administrative litigation may be used more frequently by the FTC if it loses the AMG case, the case is worth following.

Axon Enterprises makes body cameras for police use and in May 2018 purchased one of its competitors. The FTC investigated the consummated merger and had concerns that the merger reduced competition. In January 2020, Axon filed a lawsuit in the District of Arizona, and on the same day the FTC filed a complaint against Axon. In its complaint, Axon argued that the FTC’s in-house litigation procedure violates due process and equal protection rights because the FTC controls all aspects of the proceeding, effectively making the FTC judge, attorney, and jury in these cases. Additionally, the complaint disparaged the FTC for the clearance process by which the FTC and Department of Justice decide which agency should handle a merger, claiming that the process lacks transparency. In support of its claim that these proceedings violate constitutional rights, Axon alleged that the FTC has not lost a single case in its in-house proceedings in 25 years. The FTC did not contest this statistic.

Continue Reading Ninth Circuit Rejects Challenge to FTC Administrative Proceedings