Since updating its Endorsement Guides in 2015 to keep pace with the meteoric rise of social media and influencers in marketing, the FTC has placed a significant emphasis on the need to disclose material connections between advertisers and endorsers. Through its Guides, informal business guidance, blog posts, warning letters, and multiple enforcement

In the iconic words of DJ Khaled: “Another one.” That’s right, folks. Another round of celebrities have fallen on the wrong side of the federal government’s enforcement of its advertising disclosure rules. Recently, the SEC announced that it settled charges against Floyd Mayweather (professional boxer) and DJ Khaled (entertainer and music producer) for failing to tell their social media followers that they received money for promoting investments in Initial Coin Offerings (“ICOs”). This case is especially noteworthy, considering that this is the first time the SEC brought an action against a paid celebrity endorser involving ICOs.

In Mayweather’s case, he received a $300,000 payment for ICO tweets like this one: “starts in a few hours. Get yours before they sell out, I got mine…”

Likewise, DJ Khaled received a $50,000 payment for this tweet: “I just received my titanium centra debit card. The Centra Card & Centra Wallet app is the ultimate winner in Cryptocurrency debit cards powered by CTR tokens! Use your bitcoins, ethereum, and more cryptocurrencies in real time across the globe. This is a Game changer here. Get your CTR tokens now!”

Continue Reading All I Do is Win, Win, Win?: SEC Settles Charges with Floyd Mayweather and DJ Khaled

The FTC has been waging a steady war against advertisers that use introductory offers that turn into subscription agreements. With the FTC threatening to seek full consumer redress and to impose joint and several liability, most companies and their principals cannot afford to litigate such cases and are forced to settle. In March 2015, the FTC sued DIRECTV, alleging that DIRECTV failed to properly disclose material terms of its introductory offer and its subscription agreements. DIRECTV chose to fight. Last August the case went to a bench trial. After the close of the FTC’s case, the judge suspended the trial so that DIRECTV could move for a judgment in its favor. Last week, the judge granted DIRECTV’s motion in part, tossing out large parts of the FTC’s case. The opinion provides insightful guidance on how to structure continuity offers and illustrates the difference between alleging something is deceptive and proving it.

In its complaint, the FTC alleged that DIRECTV failed adequately to disclose that: (1) introductory prices were limited to the first 12 months of 24-month subscriptions; (2) the subscriber is subject to a 24-month commitment; (3) early termination fees would apply if subscriptions were cancelled early; and (4) premium channels were free for three months and then would be automatically charged at the regular rate unless the subscriber called to cancel. The FTC alleged these deceptive statements were made in print, TV, and banner advertisements as well as the directv.com website. Based on these allegations, the FTC sought restitution of $3.95 billion based on DIRECTV’S alleged unjust gains from the deception.

Continue Reading A Victory for Introductory Offer and Subscription Advertisers: FTC Fails to Prove Deception Against DIRECTV

The Federal Election Commission recently held a public hearing to discuss its March 2018 proposed rule aimed at providing voters with more information about who pays for or sponsors online political advertisements. The private sector has adopted a solution to the issue.

On May 22, 2018, the Digital Advertising Alliance (DAA) took the first step to alter the status quo by unveiling a new, industry-wide PoliticalAds transparency initiative designed to bring greater transparency and accountability to the realm of political advertising.

Similar to the DAA’s YourAdChoice program, which provides consumers with easily accessible information via the familiar blue triangle that accompanies interest-based ads, the PoliticalAds initiative will require certain political advertisements to supply information and a comparable purple icon.

Political Ad Icon

Continue Reading Transparency Coming to a Campaign Ad Near You!

Our Canadian partner in the Global Advertising Lawyers Alliance (GALA) wrote this post about influencer disclosure practices in Canada that we wanted to share with you.

On March 28, 2018, Ad Standards introduced new Disclosure Guidelines (the “Guidelines”). Developed with the cooperation of influencers and advertisers, the Guidelines are intended to provide suggested best practices for when, and how, to disclose any material connection between an advertiser or brand and the influencer.

The Guidelines inform an Interpretation Guideline under the Canadian Code of Advertising Standards (the “Code”), issued in October 2016, requiring that any “material connection” between an influencer and a brand be “clearly and prominently disclosed in close proximity to the representation about the product or service.” The Interpretation Guideline says what to do, but suggested looking to other sources including the FTC’s Guide to Testimonials & Endorsements for how to do it. The new Guidelines provide a Canadian resource, with illustrative examples of “dos” and “don’ts” to assist industry in complying with the Code.

Continue Reading Guest Blog: Ad Standards Introduces New Influencer Disclosure Guidelines

football and foam fingersThis may have been the first year we were more into the game than the ads as it was a well-matched nail biter right to the end, but this is advertising’s biggest night of the year as well as football’s and we were once again not disappointed. While views is likely the best measure of an ad’s success, here is the annual “All about Advertising Law Round Up”.

Our favorite campaign was the Australian Tourism ad featuring Chris Hemsworth and Danny McBride. The campaign encouraged tourism under the rubric of filming of a Crocodile Dundee sequel. The movie has its own IMDb page and related Twitter hype. But there is no movie. It is all part of the tourism ad campaign. This is fake news without the political baggage, creating buzz and interest for the product offering. Well played!

Continue Reading Big Game Fun Includes Viking Disclaimers and Fake News

The FCC’s Sponsorship Identification Rule is a close, perhaps neglected cousin of the FTC’s Enforcement Policy Statement on Deceptively Formatted Advertisements, i.e., its Native Advertising Guide. Nevertheless, the FCC’s latest enforcement action demonstrates how failure to follow the rule can result in penalties far larger than any imposed to date by the FTC. It also hints at the possibility that a single ad can result in dual liability for advertisers and broadcasters.

The Sponsorship ID Rule is fairly straightforward: if a broadcast station charges or accepts (or is promised) any money, service, or other valuable consideration in exchange for airing a piece of programming, then the broadcaster must disclose – at the time of the broadcast: (1) that the programming is “sponsored,” “paid,” or “furnished,” and (2) the identity of the sponsor. The Rule contains additional disclosure requirements for political ads, as well as “beneficial owner”-type provisions that require disclosure of the true sponsor in interest, rather than the name of any agent or middleman used to furnish the payment. A corollary to the Sponsorship ID Rule imposes a similar burden on sponsors to disclose to broadcasters when they have provided money, services or other consideration in exchange for the broadcast. 47 U.S.C. § 508.

Continue Reading FCC Revives Its Own Native Advertising Rule: Sponsorship Identification

financial lawMany time-strapped consumers count on household subscription services to simplify life. One quick purchase agreement with automatically renewing payments, and consumers can receive uninterrupted access to the latest streaming shows, months of lifestyle subscription boxes, or online cloud storage to back up all the family vacation photos. But sometimes consumers aren’t clear on how to unsubscribe or exactly what price they’ll pay after a discounted or free trial period. Thus, many states are enacting or updating their Automatic Renewal Laws (“ARLs”) to ensure consumer protection.

On the heels of increased class action filings under California’s current ARL (see e.g., Kruger v. Hulu; Wahl v. Yahoo! Inc.), the state continues to tighten the reins on automatic renewals and continuous service providers with newly enacted Senate Bill 313. California’s expiring ARL was enacted in 2010. It requires auto-renewing consumer contracts to clearly and conspicuously disclose terms, obtain affirmative consumer consent before imposing a charge, and provide an acknowledgment that contains the terms, the cancellation policy, and a simple cancellation method. California’s 2010 ARL was already broader and more specific than the federal Restore Online Shoppers’ Confidence Act, commonly known as ROSCA and enforced by the FTC. (Read more about ROSCA here.)

Continue Reading California Tightens Auto-Renewal Requirements

computer moneySavvy consumers are generally aware that new computers often include pre-installed software. However, most consumers do not realize that lurking behind their screens is software that computer manufacturers include to pad profit margins. And, because such pre-installed software is often harmless (if obnoxious), it is often called bundled software, bloatware or – the most vulgar reference – crapware. However, in 2014, as part of its standard pre-installed software packages on its laptops, Lenovo included VisualDiscovery, an advertising software developed by Superfish, Inc. Among many things, the software delivered pop-up ads from Superfish’s retail partners’ products whenever a consumer’s cursor hovered over a similar-looking product. To make those pop-up ads possible, the software meddled in the interaction between browsers and websites in, as the Federal Trade Commission (FTC) called it in its complaint against Lenovo, a “man-in-the-middle” role.

Earlier this week, the FTC and 32 state attorneys general announced that they settled complaints against Lenovo. The FTC’s complaint included three FTC Act violations. Under count one, the FTC alleged that Lenovo’s failure to disclose that the software would act as a man-in-the-middle between consumers and all websites, including encrypted websites, was a deceptive act or practice. In count two, the FTC alleged that Lenovo committed an unfair act by not adequately disclosing, or obtaining informed consent from the consumer, that the pre-installed software could cause substantial injury to consumers by leaving a user’s sensitive personal information vulnerable to hackers in certain situations. Finally, under count three, the FTC alleged that Lenovo’s failure to take reasonable measures to address the security risks created by the software constituted unfair security practices.

Continue Reading Don’t Hide the Ball from Consumers: FTC’s Lenovo Settlement Sheds Light on FTC’s Disagreement Over Its Deceptive Omission Authority

hashtagWe previously blogged a few weeks ago about the FTC’s sweep of influencers and warning letters being sent regarding whether material connections are disclosed, and if so, if they are done clearly and conspicuously. The FTC has issued a press release with more detail. We now know there were over 9‎0 such letters sent. For