Mr. Smith Goes to New York: Takeaways from the Keynote Address of the FTC’s Director of the Bureau of Consumer Protection at the NAD Annual Conference

The National Advertising Division (“NAD”) held its Annual Conference in New York yesterday. Andrew Smith, the head of the Bureau of Consumer Protection for the FTC, delivered the keynote address and provided attendees with an excellent overview of the past year’s landmark decisions in FTC jurisprudence. For those who frequent this blog, it comes as no surprise that the hottest discussions focused on the recent trend among courts to question the FTC’s broad interpretation of its enforcement authority under Section 13(b), concentrating on rulings in the Shire ViroPharma decision from the Third Circuit, the LabMD decision from the Eleventh Circuit, and the recent Seventh Circuit decision in Credit Bureau Center.

In Shire ViroPharma, the Third Circuit ruled that, pursuant to the plain language of Section 13(b), to obtain an injunction under Section 13(b), the FTC must plead facts sufficient to show that a defendant “is” violating or “is about to” violate the law. Essentially, the Shire decision means that the FTC cannot use Section 13(b) to address wholly concluded past harm—a profound finding that could dramatically affect how the FTC pursues cases. For more analysis, see our past blogs on both the district court‘s and Third Circuit’s opinions. The FTC chose not to seek Supreme Court review of the Shire ViroPharma decision and instead appears to be trying to limit that case to its facts.

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A Morning Cup of COPPA From the NAD Annual Conference

The National Advertising Division Annual Conference kicked off with Andrew Smith, the Director of the FTC’s Bureau of Consumer Protection, as the keynote speaker. Near the close of his remarks, Director Smith announced that the FTC will hold a workshop on the Children’s Online Privacy Protection Act (“COPPA”). For a refresher, COPPA is designed to protect the privacy of children by establishing certain requirements for websites that market to children. The FTC operates under the assumption that if children are the target demographic for a website, the website must assume that the person accessing the website is a child, and proper consent must be obtained. This assumption exists even if the website did not start with children as the target audience.

To illustrate this point, Director Smith discussed TikTok, a social media app that allows users to create and share short-form videos, which purchased Musical.ly, an app that allowed its users to post videos of themselves lip synching to songs. Musical.ly originally marketed to adults. However, as the website grew in popularity, it became clear that children used the website and that Musical.ly knew that children used the website. On February 27, 2019, the FTC brought a Complaint against Musical.ly alleging that Musical.ly collected information about children, but did not obtain the required parental consent to collect that information. In fact, child predators began using the website to obtain the location of children, though luckily, no child was hurt. As a result, TikTok agreed to pay $5.7 million to settle the FTC allegations.

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Alzheimer’s and Cancer? FTC Announcement Shows That FDA Is Not the Only Agency That Is “Serious”

Last week, the Federal Trade Commission issued a press release announcing that it had issued warning letters to three unnamed sellers of cannabidiol (CBD) products who marketed everything from gummies to creams with bold claims that the products could treat a wide variety of the most serious diseases known to man. This follows an earlier wave of letters that it issued jointly with the U.S. Food and Drug Administration (FDA) last March, which warned other CBD marketers of misbranding and introducing an unapproved new drug without prior approval, and of making unsupported claims about their CBD products’ ability to treat and cure serious diseases such as cancer and Alzheimer’s, among other medical conditions.

In the latest press release, the FTC reaffirms its interest in monitoring health-related advertising claims in the budding CBD industry. The FTC did not disclose the recipients of the warning letters, but the Commission quoted several problematic claims made by the undisclosed CBD companies. Examples of claims that the FTC appears focused on include 1) assertions that CBD products have been “clinically proven” to treat cancer, Alzheimer’s disease, or other serious medical diseases; 2) claims that CBD products are effective in relieving various types of pain; and 3) references to the amount of research companies have acquired to support these claims.

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Of Specificity and Shotgun Pleadings: Southern District of New York and Southern District of Florida Toss Claims Lacking Sufficient Specificity and Clarity

In two recent decisions, federal district courts have dismissed at least some of the claims brought by federal and state authorities, finding the complaints insufficiently specific in alleging that a defendant’s conduct met the relevant statutory requirements and/or insufficiently clear regarding their allegations as a whole. These rulings may provide a useful roadmap for future challenges to complaints brought by federal and state regulatory agencies and/or attorneys general.

Federal Trade Commission and People of the State of New York, by James, v. Quincy

We’ve blogged previously about the FTC and State of New York’s challenge to the advertising for cognitive supplement Prevagen. If your memory is good, you will recall that Judge Stanton dismissed the case, but the Second Circuit reversed on the issue of whether the studies Prevagen mentions in its ads support the claims in its ads. In addition to the product manufacturer and marketer, Quincy Bioscience, LLC, Prevagen, Inc., and Quincy Bioscience Manufacturing, LLC, the government also named as defendants Quincy’s co-founders and two largest shareholders, Mark Underwood and Michael Beaman.

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When Skiptracing + Autodialing = $267 Million

Last week, companies engaged in debt collection were not-so-gently reminded that making calls using an automated dialer to any number other than the one provided by the consumer is incredibly risky—and in Rash Curtis & Associates’ case, a $267 million risk.

Calls made to phone numbers with the consumer’s prior express consent are not prohibited by the TCPA. The FCC and courts have long considered phone numbers provided by consumers in a transaction (such as opening a credit card account) as “in bounds,” reasoning that consumers implicitly give consent to be reached on those telephone numbers in connection with the transaction or account. However, this does not extend to phone numbers obtained through other means, including “skip tracing,” commonly used by third-party collectors and debt buyers who often touch the accounts after many months or even years after the original transaction.

Following a May jury verdict in favor of the plaintiffs in a class action brought against a debt collection firm, a judge last week entered a judgment against the firm for $267 million ($500 per illegal call made).

I’ll leave it to my colleagues Dan Blynn and Stephen Freeland to opine on the TCPA and class action implications here, but as someone who advises debt collectors on regulatory issues, this case is a stark reminder that trying to get a hold of hard-to-reach consumers continues to be fraught with risk because of the multi-layered regulatory and statutory schemes governing debt collection. It also is a cautionary tale of how the use of technology to optimize collections must be carefully analyzed for first, second, and third order effects. And while the CFPB’s upcoming rulemaking, which is seven years in the making, should modernize the Fair Debt Collection Practices Act and provide some clarity on consumer contact, it will not supersede conflicting state laws and certainly will not address the 800-pound gorilla in the room, the TCPA. For that, we continue to look to the FCC with our fingers crossed.

Eleventh Circuit Holds That A Single Text Message Does Not Satisfy Injury In Fact Requirement for Standing Under the TCPA

Many children, including myself, were taught the childhood mantra: “Sticks and stones may break my bones, but words will never hurt me.” The chant intended to be a retort to name calling—a declaration that you were above the insults. But what about text messages? Could a single text message hurt me in a way that could amount to the harm required to sustain a Telephone Consumer Protection Act (TCPA) claim? On August 28, 2019, the Eleventh Circuit answered this question in the negative with its decision in Salcedo v. Hanna, — F. 3d –, 2019 U.S. App. LEXIS 25967 (11th Cir. Aug. 28, 2019). With Salcedo, the Eleventh Circuit created a potential circuit split by finding that a plaintiff could not rely on a single text message to amount an injury in fact necessary to establish Article III standing for a TCPA action.

The plaintiff filed a TCPA suit after having received a single multimedia text message from his former attorney and that attorneys’ law firm offering a ten percent discount on future services. The Plaintiff alleged this lone message caused him harm by (1) wasting his time during which both he and his phone “were unavailable for otherwise legitimate pursuits,” and (2)”resulted in an invasion of [his] privacy and right to enjoy the full utility of his cellular device.” The Eleventh Circuit rejected both arguments.

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Venable Launches Close-Ups Entertainment and Media Blog

Venable’s dynamic Entertainment and Media Group is pleased to launch Close-Ups, a blog aimed at providing insider commentary on legal and business issues, trends, and headlines in Hollywood and beyond. As a reader of our All About Advertising Law blog, you recognize the value of timely legal analysis and commentary on the issues surrounding your business. The team of writers and editors producing Close-Ups embraces the same innovative and creative approach to their analysis of the entertainment and media industries as they do to their counseling of major studios, agencies, talent, management, and more. Read the inaugural edition and subscribe to Close-Ups at www.closeupsblog.com.

A Day Late and $1.2M Short: NY AG Fines Dollar Store Chains for Selling Expired Medicines and Obsolete Motor Oil, Violating Bottle Deposit Law

Dollar General, Dollar Tree and Family Dollar will pay $1.2 million in fines and restitution to the New York Attorney General to resolve allegations that they routinely sold expired medicines and failed to comply with New York’s bottle deposit law. The bulk of the penalty – $1.1 million – will be paid by Dollar General, which is accused of selling two types of motor oil that have been obsolete for almost 30 and 90 years, respectively.

Investigators began secretly shopping at the discount chains in March 2016, inspecting shelves for expired products. At stores throughout the state of New York, they found over-the-counter medicines for sale months past their expiration dates. At Dollar General stores, they also found at least two types of store-brand motor oil that is not suitable for most modern car engines. One type of motor oil has been obsolete since 1988, and the other since 1930. These motor oils were placed on store shelves next to, and used packaging with the same or similar descriptors as, brand-name motor oils that are suitable for modern engines. There were no signs or other indicators to warn customers that they should be used only on antique vehicles.

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Things Are Buzzing in the Beehive State

Utah traditionally has been a hive of activity in the telemarketing and “how to make money” education verticals.  The Utah Consumer Protection Division (the “Division”) and the Division’s lawyers at the Office of the Attorney General appear to be trying to change that.  Industry participants have been watching closely a lawsuit filed by the attorney general on behalf of the Division in federal court in Utah.  Last week, that lawsuit was thrown out on jurisdictional grounds.  The lawsuit and the court decision shed light on the aggressive approach the Division is taking to this type of business activity and the limits on the authority of states to use the remedial tools available to the FTC.

Under 15 U.S.C § 6103(a), an attorney general of any state can bring suit in federal district court, as parens patriae, when the state has reason to believe that telemarketing violations are adversely affecting its residents.  The district court here concluded that the Division did not have parens patriae standing, because no Utah resident had been injured—REW did not sell its services to Utah residents.

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Anti-Robocall Principles Agreed to by Carriers and State AGs

A bipartisan, public/private coalition of 51 attorneys general and 12 phone companies have agreed to create the “Anti-Robocall Principles,” a set of eight principles to fight “illegal robocalls” that the phone companies have voluntarily agreed to adopt by incorporation, or continued incorporation into their business practices.  The principles are available here and press release is here.

Why it matters:  “Illegal and unwanted robocalls continue to harm and hassle people every day. Consumer fraud often originates with an illegal call, and robocalls regularly interrupt our daily lives.  Robocalls and telemarketing calls are the number one source of consumer complaints at many state Attorneys General offices, as well as at both the Federal Communications Commission and the Federal Trade Commission.  State Attorneys General are on the front lines of enforcing do-not-call laws and helping people who are scammed and harassed by these calls.” according to the principles.

The coalition of companies includes twelve major carriers.

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