Ad Law Access https://www.kelleydrye.com/viewpoints/blogs/ad-law-access Updates on advertising law and privacy law trends, issues, and developments Sun, 16 Feb 2025 05:40:28 -0500 60 hourly 1 Amazon Pays $2 Million to Settle Reference Price Allegations https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/amazon-pays-2-million-to-settle-reference-price-allegations https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/amazon-pays-2-million-to-settle-reference-price-allegations Sun, 11 Apr 2021 09:31:31 -0400 Shortly after the state of California filed a lawsuit against Amazon alleging deceptive prices, Amazon agreed to pay $2 million in penalties and restitution.

Under the stipulated judgment, Amazon is restrained from using an advertised reference price based on a formula, algorithm, or other method that produces misleading or false results until April 1, 2024. Amazon cannot advertise a reference price unless it provides:

(1) a clear and conspicuous hyperlink to a clear and exact definition of the term; and,

(2) the definition includes a statement that the reference price may not be the prevailing market price or regular retail price.

Amazon is required to pay $100,00 in cy pres restitution, $1,700,000 in civil penalties, and $200,000 to the Riverside County District Attorney’s Office. Amazon’s settlement is a good indication for what state enforcers are interested in when it comes to reference prices. Under California law, reference prices must reflect the prevailing market price as defined within three months of the advertised prices.

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FDA and FTC Joint Warning Letters Target Amazon Affiliates Making False COVID-19 Claims https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/fda-and-ftc-joint-warning-letters-target-amazon-affiliates-making-false-covid-19-claims https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/fda-and-ftc-joint-warning-letters-target-amazon-affiliates-making-false-covid-19-claims Fri, 29 May 2020 10:44:25 -0400 FDA and FTC Joint Warning Letters Target Amazon Affiliates Making False COVID-19 Claims

Earlier this week, federal regulators continued their efforts to combat the spread of products featuring allegedly false and misleading claims that products can diagnose, treat, cure, or prevent COVID-19. In warning letters issued to CBD Gaze, Alternavita, Musthavemom.com, and Careful Cents LLC, the agencies identify the respective recipients as participants in the Amazon Affiliate program. Amazon Affiliates are marketers who earn commissions by promoting products sold on Amazon. The letters state that the products at issue, which include essential oils, grapefruit seed extracts, cod liver oil, and others, feature false treatment and prevention claims such as the following:

  • CBD Gaze: “Find the best CBD Oil to help fight Coronavirus.”
  • Alternavita: “4 Proven Ways To Protect Yourself Against Coronavirus,” you represent that “Everyone is concerned about Coronavirus and looking for ways to protect themselves,” and then state the following:

“Grapefruit Seed Extract If you want a little extra daily protection GSE is a safe antibiotic . . . [Amazon associate link].”

  • Musthavemom.com: “NATURAL REMEDIES FOR CORONAVIRUS. . .There are plenty of things you can do to boost your immune system and fight off any virus including coronavirus. Here are a few!” … “2. Vitamin D . . . This important vitamin plays a crucial role in immune health. Being deficient in Vitamin D can increase your risk of infection. I recommend this brand of Vitamin D [Amazon associates link] and starting at a minimum dose of 5,000 IU.” [from your website https://musthavemom.com/coronavirus-prevention-treatment-plan/]
  • Careful Cents LLC: “How to Boost Your Immune System Naturally With Essential Oils to Fight Coronavirus” you state: “Can you use essential oils to boost your immune system and fight coronavirus? Yes! Essential oils are one of the best tools to strengthen your immune system naturally . . .”

The letters state that the products are unapproved new drugs and misbranded pursuant to the Food Drug and Cosmetic Act. Causing the introduction or delivery for introduction of these products into interstate commerce is prohibited under sections 301(a) and (d) of the FD&C Act, 21 U.S.C. § 331(a) and (d). The letters also state that “it is unlawful under the FTC Act, 15 U.S.C. 41 et seq., to advertise that a product can prevent, treat, or cure human disease unless you possess competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies, substantiating that the claims are true at the time they are made. For COVID-19, no such study is currently known to exist for the product identified above. Thus, any coronavirus-related prevention or treatment claims regarding such product are not supported by competent and reliable scientific evidence.”

What’s the lesson? The difference between these letters and the warning letters that FDA and the FTC issued earlier this year is that these are targeted not to the company making the product or even the retail platform on which they are sold. They were sent to the middleman marketer, who likely does not produce or possess the product, but who is promoting and profiting from its sale. This is consistent with the FTC’s letters to product influencers in other marketing contexts but is a departure from FDA’s typical enforcement approach. Although we have seen FDA pursue retailers (particularly online ones), FDA has not made pursuit of marketing affiliates a priority. Clearly, regulators want affiliate marketers (Amazon or otherwise) to understand that they are not immune from enforcement if they are making aggressive or unsubstantiated health claims.

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Update: White House Identifies Amazon Foreign Domains as “Notorious Markets” for Counterfeit Goods https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/update-white-house-identifies-amazon-foreign-domains-as-notorious-markets-for-counterfeit-goods https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/update-white-house-identifies-amazon-foreign-domains-as-notorious-markets-for-counterfeit-goods Thu, 07 May 2020 12:44:23 -0400

As we have previously advised, the Trump Administration is targeting the sale of counterfeit goods on e-commerce platforms. Early this year, the Department of Homeland Security issued its report to the White House on “Combating Trafficking in Counterfeit and Pirated Goods,” in response to which the White House entered its Executive Order aimed at blocking the sale of contraband and counterfeit goods online to U.S. customers.

In its latest move, on Wednesday, April 29, the Administration’s Office of the United States Trade Representative (the “USTR”) released its 2019 Review of Notorious Markets for Counterfeiting and Piracy (the “Notorious Markets Review”) including Amazon’s marketplace domains in Canada, the U.K., Germany, France, and India. This is the first time that the foreign domains of a U.S.-based e-commerce platform have been included in the USTR’s annual Notorious Markets Review.

According to the Notorious Markets Review, submissions by IP rights owners highlighted the challenges they face with high levels of counterfeit goods being sold through the Amazon foreign domains. For example, rights owners expressed concerns Amazon does not sufficiently vet sellers on its platforms and that seller information displayed by Amazon is often misleading and therefore creates difficulty for consumers and rights owners in determining who is selling the goods. Rights owners also expressed frustration with Amazon’s counterfeit removal processes, commenting that they were long and burdensome even for those enrolled in Amazon’s brand protection programs.

In their submissions, IP rights owners requested that Amazon take additional steps to improve the efficacy of its brand protection programs. In particular, rights owners request that Amazon collect sufficient information from sellers to prevent repeat infringers from creating multiple storefronts; provide detailed and accurate seller information to consumers and rights owners; be more responsive to complaints of IP violations, and generally be more proactive in preventing counterfeit goods from being sold on the platform.

While inclusion on the USTR’s list does not carry any legal penalty, there is a public relations concern for Amazon in being identified alongside various other e-commerce platforms and physical markets where counterfeit goods are sold. Indeed, Amazon responded to the Notorious Markets Review by proclaiming that its inclusion on the list is “wrongful” and accusing the administration of advancing a “personal vendetta” against the company and its CEO.

We will continue to monitor developments in this area and keep you updated.

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Federal Court Finds Amazon Liable for Kids’ In-App Purchases https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/federal-court-finds-amazon-liable-for-kids-in-app-purchases https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/federal-court-finds-amazon-liable-for-kids-in-app-purchases Thu, 28 Apr 2016 11:40:45 -0400 Amazon AppsYesterday, a federal judge ruled that Amazon is liable for permitting unauthorized in-app purchases incurred by children. Amazon is the last in a series of actions brought by the FTC against third-party platforms related to kids’ in-app charges (we previously blogged about the other two actions against Apple and Google here and here, which resulted in refunds to consumers totaling over $50 million).

FTC Allegations

The FTC first filed its complaint against Amazon in district court in July 2014, alleging that the billing of parents and other account holders for in-app purchases incurred by children “without having obtained the account holders’ express informed consent” violated Section 5 of the FTC Act. Many of the apps offering in-app purchases were geared towards children and offered as “free” with no indication of in-app purchases. These in-app charges generally ranged from $0.99 to $99.99, but could be incurred in unlimited amounts. The FTC alleged that, while the app developers set the price for apps and in-app purchases, Amazon retained 30% of the revenue from every in-app sale.

In app purchaseThe complaint alleged that when Amazon first introduced in-app charges in November 2011, the default setting initially permitted in-app purchases without a passcode, unless this setting had been enabled by the user in the parental controls. Following a firestorm of complaints by parents surprised to find these in-app charges, Amazon introduced a password prompt feature for in-app charges of $20 or more in March 2012. This initial step, however, did not include charges that, in combination, exceeded $20. In August 2012, the FTC notified Amazon that it was investigating its in-app billing practices.

Amazon began to require password prompts more frequently beginning in February 2013, only if the purchase initiated was over $20, a second in-app purchase was attempted within five minutes of the first, or when parental controls were enabled. Even so, once a password was entered, in-app purchases were often authorized for the next hour. Amazon continued to refine its in-app purchase process over the next few months, identifying that “In-App Purchasing” was available on an app’s description page, and adding a password requirement for all first-time in-app purchases, among other things.

The Court’s Order

The FTC moved for summary judgement in February 2016. In it April 27 order, the court granted the FTC’s summary judgement motion finding that: (1) the FTC applied the proper three-prong legal test for determining unfair business practices (e.g., a substantial injury that is not reasonable to consumers, and not otherwise outweighed by countervailing benefits); (2) the FTC’s witness used to calculate money damages was timely disclosed, even though she was identified after the discovery cut-off date since the FTC made its intentions to seek monetary relief known from the beginning; and (3) Amazon’s business practices around in-app purchases violated Section 5.

First, the court (in its heavily-redacted order) reasoned that there was substantial injury to consumers due to the significant number of in-app purchases. Even though Amazon provided refunds to consumers, the court concluded that many customers were never aware they had made an in-app purchase, and those who were aware spent significant time contesting the charges.

Second, the court also found that the injury was not reasonably avoidable by consumers, because consumers were generally unaware of the possibility of in-app purchases until June 2014, since notices were not conspicuously placed in the app’s description page, and even when passwords became required for certain in-app purchases these prompts did not indicate that users could make multiple charges within a given timeframe. Lastly, the court found that Amazon’s billing practices around in-app purchases did not benefit consumers or competition.

The court is requiring further briefing to determine the extent of damages and how much in refunds should be provided to consumers. Nonetheless, the FTC’s initial complaint identified that Amazon received tens of millions of dollars from its cut of the in-app purchases.

The Bottom Linein-app-purchase-amazon

The court’s analysis is significant in that it imputes third-party liability on a company when such company knew or should have known of the challenged conduct, financially benefited from such conduct, and failed to take appropriate or prompt steps to address consumer concerns. We have seen this analysis in previous FTC actions, and will likely continue to see them in the future.

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