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

cash and credit cardsOn March 29, 2017 the Supreme Court of the United States held that a New York law prohibiting retailers from disclosing credit card surcharges, while allowing discounts for cash purchases (effectively eliminating the surcharge), regulates speech and not just conduct. The Court, however, passed on evaluating whether the statute violates the First Amendment. Instead, the Court remanded the case, Expressions Hair Design et al. v. Schneiderman et al., No. 15-1391, back to the Second Circuit for review under the First Amendment.

At issue in this case was New York’s “single sticker” requirement in General Business Law Section 518. In the Court’s Opinion, Chief Justice Roberts, explained that “[m]erchants who wish to employ differential pricing may do so in two ways relevant here: impose a surcharge for the use of a credit card, or offer a discount for the use of cash. In N.Y. Gen. Bus. Law §518, New York has banned the former practice.”


Continue Reading Supreme Court Rules New York Law Prohibiting Disclosure of Surcharges Regulates Speech, Sends Case to Second Circuit for First Amendment Analysis

teeing offWe love golf, cooking, and the Restore Online Shoppers’ Confidence Act (“ROSCA”), so when the FTC brings a case involving all of this, we are compelled to blog. As it is almost Masters time, please feel free to put on your green jacket and read on.

On March 24th, the FTC filed suit in California against a group of online marketers for violating the FTC Act and ROSCA based on the defendants’ free trial/negative option marketing for golf-related products and cooking gadgets. According to the Complaint, the defendants’ websites, TV infomercials, and emails deceive consumers into believing that the products and services advertised are free by failing to clearly and conspicuously disclose that consumers would be charged if they did not cancel the “free trial” or return the “free” product. For instance, according to the Complaint, the Tour Z Golf Balls’ website’s first page makes a prominent claim that consumers can try the golf ball for free. See below.


Continue Reading There is No Such Thing as “Free Golf Balls”: The FTC Continues Crackdowns on Negative Option Marketers

Note: We have revised the description of the terms of the settlement in our recent blog post on the Carribean Cruise Line TCPA matter. Click here to read the corrected post.

paperworkHaving trouble sleeping and need something to read? Lucky for you the Consumer Financial Protection Bureau (the Bureau) recently released its 1700+ page final rule for prepaid accounts under the Electronic Fund Transfer Act and the Truth in Lending Act. On the other hand, if you’d rather spend your wakeless nights watching playoff baseball, we’ve got you covered with a brief summary of the rule and some implications for the prepaid industry.

What are the types of prepaid accounts subject to the rule? The final rule defines prepaid accounts to encompass a diverse group of products, including traditional general-purpose reloadable cards; non-reloadable prepaid cards; payroll cards; student financial aid disbursement cards; tax refund cards; government benefit cards; mobile wallets; person-to-person payment products; and other electronic prepaid accounts that can store funds. The rule excludes from coverage gift cards and gift certificates; accounts used for savings or reimbursements related to certain health, dependent care, and transit or parking expenses; and certain limited government program accounts.


Continue Reading Sweeping New Federal Regulations for the Prepaid Industry

WorkshopThe Federal Trade Commission (FTC) just released its agenda for its September 15th workshop, “Putting Disclosures to the Test,” a full-day event aimed at improving the testing of disclosures by industry, academics, and the FTC.

The workshop will review testing methodologies and examine how consumers perceive disclosures. Information will also be presented on how to test disclosure effectiveness and what types of testing are most appropriate for a given disclosure type or medium. There will also be discussion on the costs and benefits of disclosure testing.

The full agenda can be viewed here.


Continue Reading FTC Aims To Understand Disclosures Through Consumer Testing – Announces Workshop Agenda

DJ Khaled’s Snapchat account has quickly risen in profile over the past year, with his continuous snaps about meals, music, and the keys to success. But the tone of many celebrity social media posts, including Snapchat, may soon need to change. In recent days, the FTC has made clear that it will begin to more vigorously enforce celebrity endorsements where there was insufficient disclosure that the influencer was paid to post.

But, given the prevalence of these influencers with hundreds of thousands of followers, aren’t consumers starting to realize that they are being subjected to ads? Not according to the FTC. Unlike traditional media such as television, where the audience is likely to understand that the content is an advertisement, celebrities’ and influencers’ persistent tweets and snapchats may not be understood by consumers to be marketing content that the author was paid to post. In the case of many celebrities the line between personal and professional is not always so clear. For example, DJ Khaled often snaps his healthy meals and shoe collection, thus blurring the line between those products he was paid to endorse versus those that he simply wants to share with his audience, no strings tied.


Continue Reading FTC Looks to Influence Disclosures

We’ve blogged several times about the need to disclose when social media posts by endorsers, particularly celebrities, have been paid for. And there has been lots of guidance and discussion about how best to do that, particularly in shorter form media such as Twitter. For example, “The FTC’s Endorsement Guides: What People Are Asking” provides broad direction. While the FTC does not mandate specific disclosure language, it suggests directing influencers to use “#sponsored,” “#promoted,” “#paidad,” or “#ad,” which eat up as few as 3 of your 140 characters. The FTC’s goal is for companies to provide clear and conspicuous disclosure of sufficient information for consumers to evaluate the true source of sponsored native advertising content.

Leave it to the Kardashian clan, however, to come up with an even more novel way of complying with the FTC’s disclosure requirements. This social media post by Scott Disick, the father of Kourtney Kardashian’s children caught our eye and we couldn’t resist blogging about it.


Continue Reading Celebrity Endorsement Disclosures on Social Media