It’s a Small World After All

Internet connected devicesIf you think the Federal Trade Commission (FTC) is the only regulator paying attention to online endorsements and reviews, guess again.

According to a recent FTC press release, 10 of the 60 countries that participate in the International Consumer Protection and Enforcement Network (ICPEN) have taken actions in the year since the Network released the ICPEN Roadmap in June 2016.

The Roadmap is actually a series of three documents intended to help influencers, marketers, and review program administrators understand global compliance obligations and spot potentially problematic issues.

To commemorate the Roadmap’s first birthday, ICPEN published a chart outlining the group’s initiatives and detailing actions taken by consumer protection enforcers around the world that were consistent with the Roadmap’s goals and guidance.

Domestic highlights that made ICPEN’s list include the FTC’s influencer sweep, and passage of the Consumer Review Fairness Act of 2016.

Lather, Rinse, Repeat, FTC Continues To Pursue Entities Engaged in Credit Card Laundering

financial crime

“Credit card laundering” or “factoring” refers to the practice of processing credit card transactions for one company through the merchant processing account of another company. In recent years, the FTC has sued several companies for engaging in this practice or assisting allegedly fraudulent merchants to launder card payments through multiple processing accounts. On July 28, 2017, the FTC filed a complaint against an ISO called Electronic Payment Systems, LLC (EPS), its own ISOs and sales agent companies, and certain of its officers and sales agents in their individual capacities. The complaint serves as a strong reminder that, whatever else has changed in Washington, the FTC continues to pursue fraudulent merchants and those that assist them in getting access to the payments system.

The FTC’s complaint alleges that EPS approved 23 merchant account applications for a deceptive telemarketing scam called Money Now Funding, which the FTC sued in 2013. Among the red flags that the FTC cites in its complaint against EPS:

  • High-Risk Marketing: EPS’ marketing allegedly advertised its ability to obtain merchant processing services for “High-Risk Merchants” including through the use of “special partnerships with internal banks overseas” and “offshore merchant accounts.”
  • Criminal History of Sales Agent: EPS allegedly maintained a sales agent relationship with one of the individual defendants, both before and after his 57-month sentence on a federal bank fraud conviction. This individual allegedly submitted the 23 merchant applications to EPS.
  • Acquiring Bank Warnings: EPS allegedly persevered in efforts to obtain merchant accounts for fraudsters despite several warnings from its acquiring bank. EPS was allegedly undaunted by alerts from the bank’s risk officer related to high levels of chargebacks among the accounts, load-balancing concerns, and re-submission of applications for merchants that the bank previously rejected.
  • Fraud-Monitoring Evasion: Visa considers telemarketing businesses to be higher-risk merchants and requires ISOs to assign specific Merchant Classification Codes (MCC) to such businesses. EPS allegedly used other MCCs to avoid the merchant accounts being identified as high-risk telemarketing accounts subject to heightened monitoring.

While there has been legislation introduced in Congress to stop Operation Choke Point, the FTC seems set on its course of pursuing payment processors it believes knowingly help alleged fraudsters gain access to the payments system. Payment processors, ISOs, and sales agents wishing to avoid FTC scrutiny need to continue to take necessary steps to underwrite merchants, monitor for suspicious transactions, and pursue appropriate action after identifying red flags.

Summer of Sequels: The FTC Joins the FCC in Releasing Consumer Complaints Regarding Purported Robocalls and Do Not Call Violations

to be continuedSummer 2017 has seen and will see some well-publicized releases of sequels, remakes, and reboots: Ridley Scott’s Alien Covenant; Johnny Depp back in his starring role as Captain Jack Sparrow in the Pirates of the Caribbean franchise; Stephen King’s It; and the latest installments in The Mummy, Transformers, and Spider Man series, to name a few. Even Baywatch got a big screen makeover.

Not to be left out, on August 1, 2017, the Federal Trade Commission (FTC) announced that, as the Federal Communications Commission (FCC) had done in October 2015, it would be releasing robocall and do not call consumer complaint information. However, the FTC releases such information on a daily basis, whereas the FCC’s release of complaint data is done weekly. According to the FTC’s press release announcing the initiative, “the robocaller phone numbers consumers provide will be released each day to telecommunications carriers and other industry partners that are implementing call-blocking solutions.” An example of the type of complaint information that the FTC releases is below.

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Are You Prepared for the Legal Issues of Augmented Reality?

Virtual DataVirtual reality (VR) and augmented reality (AR) are now considered mainstream technologies, and if your company is not yet using them, it will be.

AR has the ability to blur the lines between reality and computer-generated information, whereas VR is further along the spectrum of computer-generated content and involves the creation of an immersive, wholly computer-generated environment.

Both are known primarily for their use in recreation, most notably video games, though the technologies are also being incorporated into other industry sectors. Some argue AR will change the way we work, for example architects in various locations around the world may be able to, in real time and in 3D, manipulate the designs of buildings. And VR is already being used to train people in various industries, such as the military and medicine. Indeed, some experts believe that AR and VR will achieve widespread adoption in commercial applications well before either receives widespread consumer adoption for recreational purposes.

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Made in America Day/Week

The White House proclaimed July 17th as Made in America Day and last week as Made in America Week. As part of these events, the administration showcased “Made in America” products from each of the 50 states. For the complete list click here. Apparently the District of Columbia didn’t make the cut, which we’re a little bitter about (we know you’re thinking that nothing gets made in DC, but that’s not actually true.) The showcased products were displayed along with a sign that unambiguously proclaimed that the products were “Made in America.”

All of which leads us to wonder, did anyone check with the FTC?

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Change Starts Within: FTC Process Reforms Address CID Practices

financial lawBack in February we blogged about Acting Chair Ohlhausen’s first keynote address in which she outlined her three consumer protection priorities. Consistent with those priorities, in April, the Federal Trade Commission (FTC) announced its agenda to eliminate wasteful, unnecessary regulations and processes. Within the FTC’s Bureau of Consumer Protection, the FTC’s goals included an effort to streamline demands for information in investigations and improve transparency in its investigations.

Last week, the FTC announced process reforms following up on the Ohlhausen agenda. In a press release, the FTC described Bureau of Consumer Protection (BCP) process reforms addressing the use of Civil Investigative Demands (CIDs)—which are administrative subpoenas used to collect information and documentation in investigations. These reforms, designed to minimize burden and increase transparency, include:

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Continuity Plans Receive Renewed State Scrutiny

Risk-free trialContinuity, or “negative option,” marketing is a popular and convenient way for consumers to subscribe to products and/or services, receive new issues, receive product replenishment, or continue a service by making automatic payments at predetermined times. From skincare to dietary supplements, to groceries and periodicals, the popularity of continuity-based marketing with consumers is soaring. However, a proposed amendment to Section 17602 of the California Business and Professions Code that passed the California State Senate and is now winding its way through the state Assembly could leave marketers who use continuity-based offers feeling like they have recurring nightmares.

Senate Bill 313 (SB313) takes direct aim at continuity marketing that offers a free trial period or incentivizes consumers with free gifts when it results in an automatic enrollment of the consumer into a continuity program.

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FTC’s Warning on Green Paint Claims Required a Second Coat

paint cansAs we previously blogged, the FTC went after several paint companies (Benjamin Moore, ICP, YOLO and Imperial Paints) for advertising that their paints were VOC-free when that claim was true only before colors were added to the paint. Time and technology march on, and several manufacturers thought they had solved this problem, proclaiming boldly that their colored paint offers “zero emissions,” “zero VOCs” and “no harsh fumes” with lots of pictures of cute babies and/or pregnant women.

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Golden Rules: The Rule 40 Deadline is Nearing the (Slalom) Gate; Advertisers Cannot Just (Figure) Skate Over the Regulation

Olympic Bobsled TeamSummer may just be heating up, but advertisers should already be thinking about and planning for the 2018 PyeongChang Winter Olympic Games because the “Rule 40” deadline is fast approaching. The opening ceremony of the PyeongChang Olympics isn’t until February 9th of next year, but advertisers that are not official Team USA sponsors but want to include Team USA members in campaigns that run during the PyeongChang Olympics must act by August 1, 2017.

As we discussed in our previous blog post titled Golden Rules: Diving Into Rule 40, Rule 40 restricts participants in the Olympic Games from allowing their “person, name, picture or sports performances to be used for advertising during the Olympic Games.” This restriction, which is contained in a bye-law to the International Olympic Committee (IOC) Charter, is administered by each country’s Olympic authority and was relaxed somewhat in 2015 to permit Olympic participants to be featured in so-called “generic” advertising during the Olympic Games.

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Arla’s Dairy Campaign Goes Sour After Court Enjoins Ad Claims Attacking rbST

DNA StrandEighty-eight percent of consumers are willing to pay more for healthier foods. Manufacturers have responded by focusing marketing campaigns on the health and safety benefits of their products, often at the expense of their competitors. But when Arla Foods portrayed a seven-year old girl defining a common hormone used to increase milk production in cows as “weird stuff” akin to a “six-eyed monster” with “razor sharp teeth” and electric fur, a Wisconsin federal judge decided the ad went too far and would likely mislead consumers. Despite Arla’s reliance on a small disclaimer and “scientific debate” over the health and safety of dairy products made from cows treated with rbST, the Court enjoined Arla’s campaign, finding it was likely to mislead consumers into thinking rbST was unsafe, unhealthy, weird, and “altogether something you should not feel good about feeding your family.”

On April 25, 2017 Arla launched a $30 million advertising campaign targeting “ingredient savvy” U.S. consumers seeking more information about the products they are eating and feeing their families. The centerpiece of the campaign is a 30-second commercial titled, “Arla Cheese Asked Kids: What is rbST?”

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