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winner-1445797_640The next issue in our series of blog posts about the Olympics considers “Rule 40,” which can get both advertisers and athletes into trouble. We think Rule 40 deserves a gold medal for generating buzz in the advertising world, and a silver for generating confusion.

Rule 40 restricts participants in the Olympic Games (i.e., competitors, coaches, trainers, and officials) from allowing their “person, name, picture or sports performances to be used for advertising during the Olympic Games.” The advertising blackout period for the Rio 2016 Olympics is from July 27th through August 28th, which is from 9 days prior to the Opening Ceremony until  3 days after the Closing Ceremony. 
Continue Reading Golden Rules: Diving Into Rule 40

Design Lab Asymmetrical DressBaseball season is just around the corner, and the FTC’s native advertising case against retailer Lord & Taylor illustrates the baseball rule of “Three strikes and you’re out!”  In its first native advertising case since releasing its Enforcement Policy Statement Addressing Native Advertising and Deceptively Formatted Advertising, the FTC reminds advertisers that those guidelines will be enforced.

According to the complaint, Lord & Taylor launched a new Design Lab collection in the fall of 2014.  As part of its marketing campaign, Lord & Taylor included a comprehensive social media campaign (“product bomb”) for the end of March 2015.  The campaign consisted of Lord & Taylor-branded social media posts and the use of a team of “influencers,” all focused on one article of clothing—the Design Lab Asymmetrical Dress.Continue Reading Three Strikes and You’re Out!: The FTC’s Native Advertising Case Against Lord & Taylor

The Federal Trade Commission (“FTC”) has just released its Annual Summary of Consumer Complaints, and debt collection (29%), identity theft (16%), and imposter scams (11%) top the list of the most common categories of consumer complaints.

The Consumer Sentinel Network Data Book is produced every year from complaints received by the FTC’s Consumer Sentinel Network, including consumer complaints and complaints forwarded from state and federal law enforcement agencies, national consumer protection organizations, and non-governmental organizations. While the data book consists of unverified complaints, it is a useful tool for tracking developments and issues important to consumers.

The FTC’s summary overall shows little change from last year.  There were a few categories that changed places; for example debt collection complaints traded places with identity theft to claim the top spot, but the FTC also noted that the spike in debt collection complaints was due in large part to one data contributor employing a new mobile app to collect such complaints.  Internet Services, which had been number 10 fell out of the top ten to be replaced by Credit Bureaus, information furnishers and report users.
Continue Reading Debt Collection Tops 2015 List of Most Common Consumer Complaints

On February 11, 2016, New York Attorney General Eric T. Schneiderman announced four independent settlements related to the use of allegedly deceptive online testimonials and reviews.  These cases reflect continuing concern by the New York Attorney General’s office over “astroturfing” (the posting of fake or otherwise biased reviews).  We wrote about theses enforcement actions previously here.  Even if a company has its own strong policy in place against the use of such reviews, many companies commonly use third parties to facilitate their use of reviews and endorsements. Thus companies should carefully scrutinize what these affiliates do on their behalf. 
Continue Reading New York AG Targets “Deceptive” Online Endorsements

The days of on-air fast-talking contest announcements are coming to an end.  Last Thursday, the FCC adopted revised rules that allow broadcasters to disclose contest rules on an Internet website, as opposed to reading them over the air.  Prior to this rule change, under the FCC’s “Contest Rule” (47 C.F.R. Section 73.1216), broadcasters that advertised a contest on-air were required to fully disclose the “material terms” of the contest and then conduct the contest substantially as announced or advertised – a requirement that was adopted almost four decades ago, and which the FCC now acknowledges is inconsistent with the way Americans obtain information today.

Those that want to take advantage of the new Internet website option must comply with the requirements that the FCC lays out in the Report and Order, including: 
Continue Reading Hear! Hear! FCC Modernizes Contest Rules for Broadcasters

Picture by methodshop .com (CC BY 2.0)
Picture by methodshop .com (CC BY 2.0)

The crowdfunding world got a bit more crowded this week–from a legal perspective, at least–when the Federal Trade Commission entered the fray with its first crowdfunding case against a project creator and his allegedly deceptive Kickstarter® Campaign.  The FTC announced Monday on its website that it took action under Section 5 of the FTC Act against Forking Path, Co. and Erik Chevalier, alleging that Chevalier had promised to produce a board game called “The Doom that Came to Atlantic City” with the funds that consumers provided to fund his campaign, but instead used most of the $122,000 that he raised on himself.

According to the FTC, Erik Chevalier misled consumers donating to his Kickstarter project to develop a board game called “The Doom that Came to Atlantic City,” when he represented to backers that if he raised $35,000, they would get certain rewards, such as a copy of the game or specially-designed pewter game figurines. The project garnered a lot of support, and Chevalier ended up raising more than $122,000 from backers, most of whom pledged more than $75 in a bid to obtain those (apparently highly desirable) figurines. For a number of reasons, Chevalier was unable to produce the game, and announced after 14 months that he was cancelling the project.  He promised his backers refunds, but then failed to provide them—which triggered multiple complaints.  Instead, Chevalier used the money raised on unrelated personal expenses such as rent, moving himself to Oregon, personal equipment and other projects.
Continue Reading Don’t Doom Your Crowdfunding Project with the FTC: Keep Your Promises

IronmanSweepstakes and contests seem like they’re a dime a dozen these days, and social media sites like Facebook and Twitter have made the administration of giveaways more accessible and user-friendly for even small business users.  We find that some businesses downplay the complexity of the rules and regulations governing these valuable promotional tools while others don’t even know such laws exist.  A case brought recently by the U.S. Department of Justice (“DOJ”) against the World Triathlon Corporation (best known for running Ironman® Competitions), however, should serve as a warning to think twice before running a sweepstakes or contest without conducting proper legal due diligence.

On May 12, 2015, the DOJ filed a complaint alleging that the World Triathlon Corporation (“WTC”) should forfeit $2,761,901 it obtained in entrance fees from various sweepstakes it conducted from 2013 to 2015.  According to the complaint, the WTC has run the “Ironman Lottery” (the “Lottery”) since 1983 as a means to provide athletes with an opportunity to compete in the Ironman World Championship if they did not otherwise qualify.  In 2015, the fee to enter the Lottery was $50, and participants had the option of purchasing “membership” in the Passport Club for an additional $50, which afforded them an increased chance of being selected in the Lottery.  Winners of the Lottery were selected in a random chance drawing and given the “prize” of participating in the Ironman World Championship.
Continue Reading Running a Compliant Sweepstakes Ain’t No Game: U.S. Department of Justice Claims $2.7 Million in Illegally Obtained Sweepstakes Entrance Fees

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When preparing to run advertising that includes endorsements, our clients frequently ask whether any “magic words” are necessary and how disclosures should be made on space-constrained forums such as Twitter.  On May 29, 2015, the Federal Trade Commission (“FTC”) staff announced it had addressed some of these questions by updating the FAQs to its Guides Concerning Use of Endorsements and Testimonials in Advertising (“Endorsement Guide”), providing some much needed clarity on a variety of endorsement-related issues, including special wording, Twitter disclosures, social media “like” buttons, affiliate marketing, employee endorsements, uploading videos, and more.  
Continue Reading FAQ Series 1: FTC Issues New Guidance on Endorsements and Related Online Disclosures

We love a good March Madness legal blog (see here and here and here)  and NAD gave us some great fodder this month deciding a case between two large daily fantasy sports league websites.   This one wasn’t exactly an upset like so many of the games this year leading to the Sweet 16.   DraftKings claimed it was the “largest US-based destination for daily fantasy sports.”  FanDuel cried foul.  There was no dispute that FanDuel is larger by a significant margin.  The issue was whether the company was US or non-US based, the key factor which would render the claim either literally true or literally false.  This case is a riff on Made in USA analysis.  Instead of focusing on where a good is manufactured, including its component parts, this case looked to the right definition for determining where a corporation is based.  The NAD noted that consumers “often care very much about the domestic nature of products that they purchase, and such sentiments are likely to also be felt about services that they patronize.  For example, for consumers concerned about unemployment in the United States, the fact that a competing company’s labor force resides in another country may be quite important when deciding which company’s website to patronize.”  As an aside, we are not so sure there are consumers who would base a purchase decision on where key executives sit or where key corporate decision are made, as opposed to where a company’s employees reside.  That said, there is certainly an advantage in claiming to be the largest or No. 1, as it may well convey a message that a company has passed the test by rising to the top in terms of market share.   And it is not unusual for a company to try to create a category in which it can be the champion.  NAD said such a claim is particularly impactful in this case because “consumers are attracted to ‘larger’ daily fantasy sports websites because they have larger pools of players and prizes.”
Continue Reading Fantasy League Competitors Battle on the NAD Court for Decision Over Who Can Claim “Largest US-Based Website”

pinterest

Pinterest®, since it first appeared on the scene in 2010, has been the darling of crafty do-it-yourselfers (DIYs), ambitious brides-to-be, fitness aficionados, foodies, and anyone else interested in creating their own little portfolio of images carefully curated from sites around the Internet.  Pinterest has consistently presented itself as a tool that could be used by consumers for a natural, authentic experience, giving users full artistic and creative reign as they pinned images and designed boards.  In fact, Pinterest has been notorious for cracking down on advertisers who use its offerings in any sort of spammy way, including now prohibited “Pin It to Win It” contests.  The site has also received considerable attention for the thorny legal issues that are implicated by its “pin anything you want” philosophy, including copyright, trademark and right of publicity issues.Continue Reading From Art Gallery to Billboard – The Game-Changing Presence of Promoted Pins on Pinterest®