From the ABA Antitrust Section bi-annual Consumer Protection Conference in Atlanta, Acting FTC Chairman Maureen Ohlhausen made her first keynote address in her newly elevated roll. To the backdrop of playful beluga whales in the ballroom of the Atlanta Aquarium, she outlined three consumer protection priorities she will put in force during her time in the driver’s seat. All will likely be welcome news to our readers and some may even jump and twist for joy like these guys:
Everyone dealing with advertising substantiation has been on the sending or receiving end of a demand letter that challenges the basis for an advertising claim. These letters usually follow the same format. The letter will identify the advertising claim at issue, explains the problem with the claim, and provides a reasoned explanation for the sender’s position. These letters also generally end with the dreaded “or else” statement (please modify the advertising claim by date certain, or else). Effective? Yes. Boring? Absolutely.
But sometimes, the sender of these types of letters decides to have a little fun. And why not? We are all a part of the small world that is advertising law. We should be able to have fun with our colleagues in the industry, even if we are on opposing sides of an issue. Well the General Counsel of Harry’s (an online male grooming company specializing in men’s razors) decided to do just that when he sent a letter to a major consumer products company about an advertising claim which stated: “Most guys leave Harry’s after trying it.” The claim was an invitation for consumers to return to the consumer products company after the consumers were presumably dissatisfied with Harry’s products and services.
In a development that many telemarketers will want to follow closely, the Soundboard Association (SBA) recently filed a complaint against the Federal Trade Commission (FTC) in the U.S. District Court for the District of Columbia. The SBA simultaneously asked the court to issue an injunction blocking the FTC from expanding the Telemarketing Sales Rule’s (TSR) prerecorded message restrictions to outbound calls that utilize soundboard technology. In a November 2016 letter, FTC staff indicated that it planned to do just that – effective May 2017 – in what was a reversal of the Commission’s previously stated views about whether soundboard technology is subject to the TSR’s prerecorded call provisions. This lawsuit is a significant challenge to FTC action that was not vetted by public stakeholders during a notice and comment period and, if left to stand, will have potentially dire consequences for telemarketers who use soundboard to facilitate outbound sales calls or calls seeking charitable donations.
Advertisers and marketers of consumer financial services have been asking, “What’s next?” As the CFPB works its way through court challenges, and an evolving legal and political landscape unfolds, companies have been waiting for signs from the CFPB, Congress, and the President of what to expect in 2017. Members of Venable’s Consumer Financial Services Practice recently presented “Consumer Financial Services 2017 Outlook: Post-Inauguration Day Insights,” a Venable Webinar.
The webinar reviewed the current state of federal and state consumer financial protection law and policy and discussed what what’s ahead. The speakers share their experiences from the front lines and offer strategies to help companies navigate the evolving legal and regulatory landscape.
As most of you know, when the FTC votes to issue a complaint, the agency can proceed in federal court or through the administrative law process (there are pros and cons to both, but that’s for another day). When the FTC proceeds through the administrative law process (Part 3), staff prosecutes the case in front of an Administrative Law Judge (known affectionately as the ALJ), who at the conclusion of the hearing issues findings of fact and findings of law. The ALJ’s decision is then appealable to the Commissioners and then, after that, to federal courts. Some have criticized this process, arguing that the Commission cannot – in an unbiased fashion – hear an appeal of a case they voted to bring in the first place.
A new article by Commissioner Maureen Ohlhausen (currently the only Republican commissioner) evaluates this argument by looking at 30 years of Commission Part 3 decisions (145 cases, to be precise). Along the way, Commissioner Ohlhausen also makes an interesting observation concerning the nonpartisanship of the Commission. While we highly recommend that you read the article yourself, we present some highlights below.
For those of you not living or working in or near Washington DC, the moving trucks have arrived at the White House, the porta potties, security barriers and bleachers are in place. The transfer of power is about to take place. And we have one more item on our wish list for the new FTC.
The FTC creates educational materials that are second to none (and if you’ve ever tried to read an IRS Tax Publication you know what we are talking about.) On the business side, we love the FTC’s blog and we sometimes wonder whether the various business guides won’t eventually turn outside counsel into potted plants. On the consumer side there are an abundance of resources, including consumer friendly guides, videos and Spanish language materials. Yet, every year millions of Americans fall prey to outright fraud or marketing schemes that they should realize are too good to be true, and the FTC devotes time and energy to putting these folks out of business. We staff a local consumer law resource center once a month and we hear lots of these stories first hand. No doubt many of these individuals are part of the most vulnerable populations and probably don’t check out potential vendors online or even realize that other online resources are available.
Last March, after Commissioner Brill stepped down from the FTC, we blogged about the almost unprecedented situation where the FTC is down to three sitting Commissioners. Notwithstanding the unusual situation the Commission found itself in, it seems to have done well with just three Commissioners over the past 10 months. Today, however, Chairwoman Ramirez announced her resignation, effective February 10. Unless the incoming administration quickly nominates individuals to fill one or more of the now three vacancies and the Senate confirms them, the FTC will truly be in unchartered territory with just two Commissioners.
The rules, however, remain the same. And while the possibility of a deadlocked Commission is greater, as Commissioner Ohlhausen (one of the last two members of the tribe left on the island) recently pointed out in an article, most of the FTC’s decisions are unanimous and bipartisan. And what are the rules? The Commission can act as long as a majority of sitting and not recused Commissioners participate – in this case two, although if one of the two Commissioners recuses herself, then a single Commissioner would constitute a quorum (and the FTC starts to look a whole lot more like the CFPB). You can actually see this principle in action if you look at the Commission’s decision in the Prevagen case that we blogged about earlier this week where one of the three current Commissioners recused herself.
And in case you’re wondering, the remaining two Commissioners’ terms expire in September 2017 (Comm. McSweeny) and September 2018 (Comm. Ohlhausen) (Commissioner terms are 7 years but those terms start and stop on a fixed date rather than when the Commissioner is sworn in. Often Commissioners are appointed to fill out the remaining term of a Commissioner who resigned, so Commission terms don’t necessarily expire in the order they arrived). Presumably Congress and the President-elect will act to fill the three vacancies quickly so that we don’t have to blog (and do the abstract math required) about what constitutes a quorum of zero.
Have you seen an ad like this (we have, more times than we can remember): “Ever walk into a room and forget why? Spend extra time looking for your car keys or purse? Have trouble remembering names or faces?”
If the answer is yes, the dietary supplement Prevagen may be just what the doctor ordered.
That’s because Prevagen contains the active ingredient apoaequorin, a dietary protein originally derived from a species of jellyfish living in the Puget Sound. (Don’t worry—no jellyfish are harmed in the making of Prevagen.) According to Prevagen’s marketers, this dietary protein can help reduce common memory problems—now you remember where you put those car keys—that we begin to encounter all too often as we age.
Or maybe not.
As we begin to wind down for the year (and we hope that holds true for you), we wanted to take a moment to thank each of you for your support and to wish you and your loved ones a joyous holiday season and a terrific 2017. We know that – in this era of increased regulatory scrutiny of disclaimers – many of you struggle with convincing your marketers to make their disclosures clear and conspicuous. And so we present below our holiday gift to each of you. We recently saw this great example of what a disclaimer looks like when the marketers affirmatively want the viewer to see it. Keep it handy the next time you find yourself in a debate over disclaimers.
Amy and Randy
Last week, the Southern District of New York dismissed with prejudice a putative consumer class action alleging that containers for Muscle Milk protein powder violated New York consumer protection laws because they were approximately one-third empty at the time of purchase. More specifically, the plaintiff’s Amended Complaint contended that “Defendant CytoSport, Inc. intentionally packaged its Muscle Milk powder products . . . in large, opaque containers that contain approximately 30% or more of empty space” and that “[c]onsumers, in reliance on the size of the containers, paid a premium price for [the products] which they would not have purchased had they known the containers were substantially empty.”
This case involves a challenge to what is known in the legal vernacular as food container “slack-fill,” which is the empty space in a food product container (usually the space between the food itself and the container’s opening; think of a bag of potato chips). More technically, the FDA defines slack-fill as “the difference between the actual capacity of the container and the volume of the product contained therein.” Under the federal Food, Drug and Cosmetic Act (FDCA) and FDA regulations implemented thereunder, a food product is considered misbranded “[i]f its container is so made, formed or filled as to be misleading.” Similarly, a container is misleading under FDA regulations if its contents cannot be fully viewed and it contains “nonfunctional slack fill.” So unless you are using clear plastic packaging or some other form of packaging where consumers can easily see exactly how much is inside, you need to look at how much slack-fill is present and why.