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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

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

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

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

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