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The first rule of comparative advertising has always been that you can say pretty much whatever you want so long as you don’t lie.  But there is a new wrinkle—don’t threaten or stalk the competition.  A recent Ninth Circuit decision in Thunder Studios v. Kazal, has shed new light on the extent of protection afforded by the First Amendment to reprehensible and confrontational speech.  The case is quirky in that the individuals protected by the First Amendment were not US Citizens and were not themselves in the US when the “protests” occurred, but the case is a cautionary tale as to the limits of First Amendment protection of comparative claims.  Importantly, however, the case cannot—and should not—be read to provide for an open invitation for competitors to promote or otherwise engage in extraterritorial smear campaigns with impunity.  Indeed, there is nothing in the Ninth Circuit’s opinion to suggest that it should be read to preclude or immunize parties from claims of defamation, product disparagement, or even invasion of privacy torts arising out of similar behavior.  Nor would it likely protect a party from liability from organizing a secondary boycott.  The case is pending en banc review by the Ninth Circuit so stay tuned.

Following the souring of a multimillion-dollar business deal between Australian citizens Roderick David, on the one side and Charif Kazal, Adam Kazal, and Tony Kazal on the other, the Kazals undertook an international campaign to inform the citizens of Los Angeles, California about the “despicable crimes” allegedly committed by David (then a resident of Los Angeles).  The Kazals sent hundreds of emails to David and his employees, hired protesters to picket and distribute flyers near his residence and business—Thunder Studios Inc., in Los Angeles—and had vans emblazoned with their message driven around the city.  Leaflets and signs held by protesters described David as a “corporate thief” and a “fraudster” who “robbed his business partners of $180 million.”Continue Reading Sticks and Stones May Break Your Competitor, But Protests May Be Protected

Just days after the FTC announced that it was resurrecting its Penalty Offense Authority to crack down on for-profit higher education institutions’ false promises about graduates’ career opportunities and earnings prospects, the FTC is invoking this authority to “blanket[] industry with a clear message” about fake online reviews and other deceptive endorsements.

The FTC has revived this dormant authority—the latest example of its creative use of different enforcement tools to obtain monetary relief in the wake of the Supreme Court’s AMG opinion—to hold companies accountable, via significant financial penalties, for unfair and deceptive business practices.

As we previously wrote, former FTC Commissioner Rohit Chopra had championed the use of this authority and identified for-profit colleges as one possible industry for use of this enforcement tool, while identifying other targets like multilevel marketing programs, gig economy networks, and fake review and influencer fraud.

The FTC now has quickly turned its attention to fake online reviews and other deceptive endorsements, sending a Notice of Penalty Offenses to more than 700 companies, representing an array of leading retailers, consumer product companies, and ad agencies. In doing so, the Commission advises recipients of significant potential civil penalties—up to $43,792 per violation—they could incur if they use endorsements in ways that were found to be illegal in FTC administrative decisions rendered in the 1940s through the 1980s. Under Section 5(m) of the FTC Act, the FTC can obtain penalties against other entities not party to the original proceeding if it can show the entity had actual knowledge that the act had been found to be unfair or deceptive. However, the FTC points out that a company’s inclusion on the list of recipients is not an indication the company has acted illegally.Continue Reading FTC “Blankets Industry” with Notice of Penalty Offenses Concerning Deceptive Reviews and Endorsements

In the latest example of its creative use of different enforcement tools to obtain monetary relief in the wake of the Supreme Court’s AMG opinion, the FTC has resurrected a dormant authority to hold companies accountable, via significant financial penalties, for unfair and deceptive business practices.

This week the FTC announced that it has put 70 for-profit higher education institutions—including some of the largest for-profit colleges and vocational schools across the country—on notice that the agency is scrutinizing false promises made about graduates’ job opportunities, earnings prospects, and other career outcomes.

The FTC is resurrecting its Penalty Offense Authority, found in Section 5(m) of the FTC Act, “to deter wrongdoing and hold accountable bad actors who abuse students and taxpayers,” according to FTC Chair Lina M. Khan. Under this section of the statute, the FTC can obtain penalties against other entities not party to the original proceeding if it can show the entity had actual knowledge that the act had been found to be unfair or deceptive.Continue Reading FTC Invokes Penalty Offense Authority to Crack Down on For-Profit Education Industry

Three weeks ago, we informed you that the Louisiana Public Service Commission (PSC) had declared a state of emergency in light of Hurricane Ida, which meant that callers could not place any “telephonic solicitations” into the state, regardless of whether the calls were with the recipients’ prior express written consent, pursuant to an established business…

On July 22, 2021, the Third Circuit ruled against the FTC in its case against Innovative Designs, a company that manufactures and sells a product called Insultex House Wrap, a weather-resistant barrier used in building construction. As we discussed last year, the FTC has targeted companies that produce insulation or building materials and make claims that these materials have more insulating power than they actually do. The court’s rejection of the FTC’s view on what constitutes reliable testing for purposes of substantiation underscores that courts often are more flexible than the FTC in determining whether an advertiser has a reasonable basis for a claim.

Originally, the FTC filed a complaint in the District Court for the Western District of Pennsylvania stating that Innovative Designs falsely claims that its products have a higher R-value than they do. An R-value is a measure of the product’s ability to restrict the flow of heat. So, the higher the R-value, the higher the product’s insulation power. According to the FTC a misleading R-value could prompt customers to purchase a product that will not perform in the way it was advertised. Furthermore, the FTC claimed that Innovative Designs did not use the proper standardized testing, ASTM C518, to make its claims about the product’s R-value.Continue Reading FTC Put to the Test on Inadequate Testing Claims

Yes, I know, Shakespeare was English (which is about all I remember about him from the CliffsNotes I relied upon in high school), and Louisiana has French origins. But it’s Friday afternoon and I’m tired. This is about as creative as it gets right now.

Today, the Louisiana Public Service Commission (PSC) declared a state of emergency and announced, pursuant to its Do Not Call Program General Order, in no unclear terms, that “NO telephonic solicitor shall engage in ANY form of telephonic solicitation” is permitted during the state of emergency (at least while the Office of Homeland Security and Emergency Preparedness requires the PSC to report to the Emergency Operations Center). The PSC is not kidding around about this, as the emphasis in the announcement is its own. The state of emergency extends from August 26 through September 27, 2021, unless it is terminated sooner.

I have received a number of calls and emails from clients over the past few hours about what the PSC’s announcement actually means: are calls with the consumer’s prior express written consent permitted? What about calls pursuant to an established business relationship? And how about debt collection calls to Louisiana residents—are those allowed to be placed? The answer is no, no, and still no. Here’s why.Continue Reading To Call, or Not to Call, in Louisiana During a State of Emergency: That Is the Question

State attorneys general nationwide have continued to be aggressive consumer protection law enforcers. In the wake of April’s unanimous Supreme Court decision curtailing the Federal Trade Commission’s (FTC) ability to recoup equitable monetary relief from businesses accused of fraudulent or deceptive practices, state-level enforcement activity and state-federal coordination are expected to increase. In fact, just days after our recent webinar a coalition of state AGs wrote to Congress supporting legislation that would restore the FTC’s authority, while noting that “the states’ own enforcement efforts are fortified through collaboration with the FTC.” In that webinar, Venable partners Eric Berman, of our Advertising and Marketing Group, and Erik Jones, of our eCommerce, Privacy, and Cybersecurity Group, addressed state AG enforcement trends and strategies for responding to a state AG investigation.

Q: How do state AGs become aware of the issues or complaints that might drive an investigation?

A: Consumer complaints drive regulatory investigations, and state AGs may become aware of these complaints in a variety of ways. Consumers can file complaints directly with a state AG office, either online, via telephone hotline, or via “snail mail.” State AG staff may access the FTC’s Consumer Sentinel, a consumer complaint database that is free and available to any federal, state, or local law enforcement agency. State AG lawyers and non-lawyer investigators scour the Better Business Bureau (BBB) websites and so-called “gripe” sites, and may pose as consumers themselves to “secret shop” a targeted business. Finally, state AGs might become aware of your marketing practices through disgruntled former employees (or board members), competitor complaints, national and local media coverage, or referrals from other law enforcers.Continue Reading You Asked, We Answered – State AGs and Consumer Protection: An Update and Outlook

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