The Joint (And Several Liability) is Jumpin’

We wrote previously that for payment processors the death of Operation Choke Point was greatly exaggerated.  We also noted that a prior challenge to the FTC’s ability to impose joint and several liability on an executive for his former employer’s actions had failed. A recent appellate victory for the FTC reinforces both these points.  In FTC v. Universal Processing Services, 11th Circuit affirmed the district court’s imposition of joint and several liability on a payment processor for substantially assisting the Telemarketing Sales Rule (TSR) violations of its merchants.

Simply put, the court’s ruling affirmed that a payment processor can be held responsible for the total volume of sales processed for a merchant when the processor’s conduct amounts and unfair or deceptive practice under the Federal Trade Commission Act (FTC Act).  A violation of the TSR constitutes a violation of the FTC Act, which allows for penalties including equitable monetary relief.

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FDA Harshes the Vibe of CBD Makers, Warns Them to Stop Making Drug Claims

While there are many questions surrounding the regulation of marijuana and related products, the FDA has made it clear where it stands on at least one issue.  For the third year in a row, the FDA has issued a rash of warning letters to the makers of products containing cannabidiol (“CBD”) for marketing unapproved new drugs. CBD is a non-psychoactive compound derived from marijuana, which we’ve heard is used by many to treat symptoms including pain, anxiety, depression and insomnia.[1] The FDA letters assert that each of the companies’ claims regarding their CBD products cause them to be considered drugs, because they purport to be intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or because they are intended to affect the structure or any function of the body. Such claims are a trap for the unwary because a sloppy marketer can inadvertently cause a relatively innocuous product to be subject to strict regulation as a drug. In this case, however, even a novice would conclude that the companies’ claims were disease related:

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Sex, Golf, and the FTC

Opting OutWhat do golf and sex have in common? According to the old joke: They’re two things you don’t have to be good at to enjoy. Similarly, some men – ok, most men – tend to exaggerate their prowess at both. You can add one more common trait: The FTC scrutinizes online continuity offers for the accessories associated with both, as the FTC last week settled a case involving lingerie and we blogged previously about the FTC’s golf ball ROSCA case, which settled recently. One final note on the connectivity between golf and lingerie: Supermodel and actress Kelly Rohrbach appeared in lingerie on the AdoreMe site and played college golf.

On November 20th, the FTC filed suit in New York against an online seller of lingerie for violating the FTC Act and Section 5 of the Restore Online Shoppers’ Confidence Act (ROSCA). According to the complaint, AdoreMe generates most of its revenue from its “VIP members.” For $39.95 a month, VIP members receive discounted prices, but are not charged if they buy apparel within the first five days of each month or affirmatively click a button to skip that month. If a consumer forgets to click the button or buy something within the first five days, the amount becomes store credit that supposedly can be used at any time. However, according to the FTC, many consumers were surprised to learn that the store credit could not be used at any time. The FTC alleged that AdoreMe failed to disclose that if a consumer cancelled their VIP membership, their store credit would be forfeited. The FTC sought $1.3 million for the forfeited store credit.

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Venable Joins GALA

We are pleased to announce that Venable has been accepted as a member of GALA (Global Advertising Lawyers Alliance). GALA is an alliance of lawyers located throughout the world with particular expertise and experience in advertising, marketing and promotion law. (Click here to go to the GALA website.) Being a GALA member will help us better serve our many clients whose marketing efforts now span the globe. Firms participating in GALA represent nearly 100 countries ranging literally from A (Anguilla) to Z (Zimbabwe). While most countries have only one member firm, the United States, given the size of its economy, has three member firms. GALA members meet periodically around the globe. Next week members from the Americas will be meeting in Panama and our own Melissa Steinman and Amy Mudge will be among the featured speakers. Venable is honored to have been invited to participate in GALA and we look forward to discussing its many benefits further with our clients.

Global Advertising Lawyers Alliance

One Vote for a TCPA Violation? Campaign Robocalls During Recent Elections Draw Ire

The midterm elections are just around the corner, and with them could come a host of potential Telephone Consumer Protection Act (“TCPA”) concerns if recent history is any indication.  The TCPA places restrictions on, among other things, robocalls and automated text messages, both of which often are used by political campaigns seeking votes or donations.  Less clear is whether the TCPA actually applies to political campaigns’ calling and texting operations.

The FCC has asserted that the TCPA covers campaign calls according to the Act’s plain language.  But the FCC’s guidance isn’t necessarily heeded by campaigns, as shown by the different treatment of the issue in two recent articles.  One describes the proliferation of robocalls in NYC elections and depicts political campaigns’ actions as politically protected speech that is exempt from the TCPA, directly contradicting the FCC’s stance on the matter.  The other concerns the same scenario in Hickory, NC’s mayoral election, but acknowledges that a campaign’s robocalls may have been TCPA violations, with officials blaming North Carolina election law for the lack of guidance. Continue Reading

CFPB Director Cordray Announces Departure to Bureau Staff

In an internal email to CFPB staff, Director Cordray announced that he will be stepping down by the end of the month. Industry participants and observers have long speculated that Director Cordray might leave office prior to the expiration of his five-year term (July 2018) to run for governor of Ohio.

Upon his departure, Director Cordray will be succeeded by the Bureau’s acting deputy director, David Silberman. The Administration is likely, however, to appoint a new acting director pursuant to the Federal Vacancies Reform Act. We have discussed—in the context of the now-defunct Arbitration Rule—how some of the various scenarios could play out. The Administration could select an acting director from three categories:

  • The CFPB’s Acting Deputy Director;
  • An officer of another agency who has been confirmed by the Senate, with the most likely choice being a Treasury official; or
  • A lower-ranking, non-confirmed CFPB official.

Some have speculated that Treasury Secretary Mnuchin could be chosen for the role, and delegate the authority of the director to another person under Section 1012(b) of the Dodd-Frank Act. A permanent new director would need to be nominated by the President and confirmed by the Senate.

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FTC Cleans Up “Free” B2B Marketing

Risk-free trialThe FTC is no stranger to cracking down on businesses offering so-called “free” products, only to charge the consumer for them later on. It wasn’t long ago that we wrote about that exact issue. But a recent FTC complaint shows that the FTC is not only cleaning up businesses selling directly to consumers, but also businesses selling to other businesses.

On October 30th, the FTC filed suit in Illinois against a number of cleaning product suppliers for violating the FTC Act, the FTC’s Telemarketing Sales Rule, and the Unordered Merchandise Statute. The complaint alleged that defendants, who sell office and cleaning supplies, called small businesses, hotels, municipalities, and charitable organizations, purporting to offer a free sample of their products. However, the samples were not free. Regardless of whether the consumer wanted the sample or not, the defendants would send one, and following not too far behind would be an invoice for that free sample.

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The FTC Sees Red Over 1-800 Contacts’ Advertising Agreements with Competitors

contact lensUsually this blog focuses on the FTC’s Bureau of Consumer Protection challenging unfair or deceptive advertising. Not so today. Instead, we write about the Bureau of Competition’s challenge to agreements 1-800 Contacts entered with its competitors concerning how they would advertise. The case provides useful insight into the nuts and bolts of Internet advertising as well as important reminders about how not to deal with your competitors, but it isn’t the first time the Commission has gone after competitors who have agreed to advertising restraints. Bottom line: While agreements to limit advertising competition are not per se illegal, if you are thinking of coming to this sort of agreement, you had better have a really good (i.e., pro-competitive) reason for it.

Background

On August 8, 2016, the FTC alleged in an administrative complaint that 1-800 Contacts, one of the largest online retailers of contact lenses, engaged in anti-competitive practices through its agreements with competitors settling trademark suits. The agreements restricted competitors from showing up when consumers searched for 1-800 Contacts. Last week, Chief Administrative Law Judge D. Michael Chappell upheld the FTC’s complaint and ordered 1-800 Contacts to cease and desist enforcing anti-competitive provisions from the settlement agreements, among other remedies.

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Will FDA Be Forced To Eat Menu Labeling?

jelly donutThe Affordable Care Act (ACA) gave our nation “Obamacare.” The ACA also gave the FDA the obligation to adopt regulations requiring “a restaurant or similar retail food establishment that is part of a chain with 20 or more locations doing business under the same name” to disclose the calories contained in “standard menu” items. This largely ignored ACA requirement, except by the chain restaurant industry, has yet to be implemented. It may never be.

The public health premise of requiring calorie disclosure is that it will affect positively consumer choice. Consumers will, so the theory goes, be less likely to eat what is “bad” for them (or more likely to eat what is “good” for them) if they are told that a jelly donut with a dollop of whipped cream on top is so loaded with calories that eating it will far exceed one’s daily calorie requirements.

The public health need for trying to influence consumers (restaurant eaters) to choose lower calorie items is clear. FDA’s Commissioner Dr. Scott Gottlieb wrote recently that “more than a third of U.S. adults are obese.” The question is not the need, but the practical feasibility, of addressing obesity and related health issues through a national system of menu labeling.

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Raise the Green Bar Summit

We’re excited to plug an event that our client Made Safe is hosting next week (November 8) in New York City with the Good Housekeeping Institute. Made Safe, which works with companies to certify that their products do not contain ingredients known or suspected to harm human health, is partnering with Good Housekeeping for a daylong summit focused on how brands can maximize their sustainability efforts. Speakers include a number of policy and scientific experts, industry trailblazers, yours truly, and Dr. Oz. A full agenda and registration information can be found here. If you reach out to us we may be able to extend to you a discount. We hope to see some of you there.

Raising the Green Bar

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