Ad Law Access https://www.kelleydrye.com/viewpoints/blogs/ad-law-access Updates on advertising law and privacy law trends, issues, and developments Tue, 16 Jul 2024 03:06:30 -0400 60 hourly 1 Court Considers Vodka Influencers’ Posts https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/court-considers-vodka-influencers-posts https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/court-considers-vodka-influencers-posts Tue, 09 Jul 2024 08:30:00 -0400 Two men – we’ll call them Mario and Alin – purchased Blue Ice Vodka based, in part, on social media posts in which various influencers suggested that the vodka was a “healthy product” that can help with personal fitness and weight management. “After conducting some research,” both men discovered that Blue Ice Vodka “does not have any health benefits.” They also discovered that the influencers were paid to promote the vodka.

Feeling betrayed, Mario and Alin filed a lawsuit against 21st Century Spirits (the makers of Blue Ice Vodka) alleging – among many other things we won’t cover in this post – that 21st Century Spirits and its influencers had made misleading health claims about the vodka and that the influencers hadn’t disclosed that they were being paid by the company to promote the vodka, as they are required to do under the FTC’s Endorsement Guides.

21st Century Spirits argued that they hadn’t made any health claims. An Illinois federal court rejected that argument, citing a post in which an influencer stated: “I make fit-friendly cocktails that have fewer calories than an apple.” The court noted that some consumers would surely interpret this to mean that the vodka is healthy, but that whether that interpretation is reasonable shouldn’t be decided by a judge at the motion to dismiss stage.

With respect to the plaintiffs’ arguments that the influencers didn’t comply with the Endorsement Guides, 21st Century Spirits countered that the Guides are “not law” but merely “advisory in nature.” The court noted that although the Guides are not the source of per se violations of statutes like Florida’s false advertising law, even “interpretations” under the FTC Act are entitled to “due consideration and great weight” when analyzing whether something is deceptive under the law.

21st Century Spirits argued that the influencer posts weren’t “endorsements” under the Endorsement Guides because the influencers merely mentioned the vodka. The court rejected that argument, noting that many influencers overtly promoted the vodka. For example, one influencer posted that “there’s nothing better than relaxing with a smooth @blueicevodkausa cocktail in hand after a long day,” that the vodka “can definitely help you stay fit during quarantine,” and that consumers should have some delivered.

21st Century Spirits also argued that, even if the posts were endorsements, a disclosure wasn’t necessary because a “reasonable consumer” wouldn’t interpret the posts as “honest consumer advice.” The court reframed the argument in a better way, suggesting the company meant that because consumers would reasonably expect that the influencers were paid, a disclosure wasn’t necessary. The court still rejected that argument because it’s not clear whether consumers would have that expectation.

This case isn’t over yet, but there are still some lessons you can learn at this stage. First, to save you the time Mario and Alin spent researching the issue, we’ll tell you that although it’s fine to enjoy vodka periodically, vodka probably shouldn’t form the foundation of your health and fitness plans. (If you remember this post from 2016, you may recall that gin shouldn’t either.) But we’re not just here to give you health tips – we’re here to give you some legal tips, too.

To save you the time that 21st Century Spirits has spent fighting this issue, you need to pay close attention to your influencer campaigns. You need to ensure that your influencers don’t make claims about your products that you can’t support. And you need to ensure that your influencers clearly disclose their connections to your company. Although courts may not interpret the Endorsement Guides as strictly as the FTC will, they’ll likely give some weight to the FTC’s interpretations.

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NAD Recommends More Prominent Disclosures on Influencer Posts https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-recommends-more-prominent-disclosures-on-influencer-posts https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-recommends-more-prominent-disclosures-on-influencer-posts Tue, 16 Apr 2024 09:00:00 -0400 Crème Fatale is a drag artist who is famous for her baby-doll looks and pastel-colored skin. See the picture below. I tend to go for a more natural look myself, so I can’t imagine how long it takes to apply that makeup or how long it takes to remove it, but I bet the numbers are high on both sides of the project. Luckily, Fenty Skin makes a product that makes the removal phase a little easier.

Ms. Fatale posted a video on Instagram demonstrating how the product works and used the platform’s “Paid Partnership” tool, along with “#ad” and “#sponsored,” to indicate that she was working with Fenty Skin. In a recent inquiry, NAD determined that the post did not meet the FTC’s requirement that influencers “clearly and conspicuously” disclose when they are working with a brand.

NAD explained that the FTC has cautioned companies against relying on social media platforms’ disclosure tools and has stated that those tools should be used in conjunction with other disclosures. Although the post did include “#ad” and “#sponsored,” NAD noted that the hashtags appear on the fourth line of the post’s description and that consumers wouldn’t see them unless they clicked to expand the post.

NAD recommended that Fenty Skin require Ms. Fatale to “modify the challenged post to include a clear and conspicuous material connection disclosure in the video demonstration itself.” This is consistent with guidance the FTC provided in warning letters to influencers last year in which staff suggested that the influencers superimpose a disclosure in “much larger text over the videos.”

As part of the same inquiry, NAD found that another influencer – Sarah Novio – had posted a video about the product on her Instagram and TikTok accounts. Ms. Novio wasn’t paid for the posts, but she did receive the product for free. Although she included a “gifted” disclosure on TikTok, she neglected to do so on Instagram, and when Fenty Skin re-posted the video on their account, they didn’t include any disclosure.

During the course of the inquiry, Fenty Skin advised NAD that it asked Ms. Novio to update her Instagram post to include a clear disclosure that she had received the product for free. In addition, Fenty Skin removed the post from its own Instagram page and promised NAD that it would only re-post it if and when Ms. Novio adds the disclosure.

When it comes to applying makeup, you can go for a subtle barely-there look or you can go for something more bold. We won’t judge. But when it comes to influencer disclosures, the barely-there look isn’t going to be enough. FTC and NAD want those to bold and prominent. Yes, some might call that garish and unattractive but, ironically, that will help you avoid unwanted attention.

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NAD Decision Addresses Expert Recommendations https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-decision-addresses-expert-recommendations https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-decision-addresses-expert-recommendations Mon, 01 Apr 2024 14:30:00 -0400 Does Hyaluronic Acid Help to Fight Signs of Aging? At Ad Law Access, we are known just as much for the naturally youthful appearance of our writers as we are known for the quality of our content, so we don’t have any personal experience in this area. But this very question prompted a new NAD decision that involves a number of areas where we do have relevant experience.

Naked & Thriving, a family-owned skincare business, also runs The Bare Beauty Babes blog. One post on that blog started, much like this one does, with the question of whether hyaluronic acid can fight signs of aging. Unlike this post, though, that one included an answer to the question. In that post, a dermatologist claimed that she had “tested hundreds of hyaluronic acid serums” and found “5 that actually work.” A Naked & Thriving product came in first.

NAD wrote that endorsements from experts “must be supported by an actual exercise of the expertise that the expert is represented as possessing” in evaluating features which are relevant to an ordinary consumer’s use of a product. NAD requested information about the dermatologist’s expertise and the methodology she used to evaluate the “hundreds” of serums. Apparently, the advertiser didn’t provide it because NAD noted that there was “no evidence in the record” on either point.

The same claims that appeared on the blog also appeared in social media posts which were labelled as “sponsored.” Echoing concerns similar to ones FTC staff expressed in warning letters last year, NAD noted that a “sponsored” disclosure “might be insufficient if the viewer does not know who is the sponsor of the post. That is particularly true where, as here, a health professional is posting and endorsing a product.” The posts should have been more clear that Naked & Thriving was the sponsor.

On a related note, at the start of NAD’s inquiry, the bottom of each page of The Bare Beauty Babes blog included a disclosure in “very small print” stating: “The content on this site is sponsored and The Bare Beauty Babes may earn a portion of sales from products that are purchased through our site as part of our Affiliate Partnerships.” During the course of the inquiry, Naked & Thriving added a more prominent disclosure to the top of each page stating that it owned the blog. It also stopped recommending products.

If you asked us about how to fight signs of aging, we might give you some tips, but we’d probably direct you to consult a reputable health care professional. If you asked a reputable health care professional how to advertise an expert endorsement, they’d probably just direct you to consult us. In that case, we’d be happy to talk to you at length. For now, though, we’ll highlight two lessons you should take away from this decision.

  • First, this decision demonstrates why it’s important to document the expertise your experts have and the methodology behind their recommendations. Simply saying that an expert is a doctor, for example, may not be enough.
  • Second, this is the latest in growing line of cases in which NAD, FTC, and even competitors are challenging how endorsers (or influencers) disclose that they are working with the companies whose products they promote. Take a look at how your disclosure practices match up with these recent cases.

Keep visiting our blog for the latest in advertising and privacy tips (with occasional beauty tips thrown in for free).

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Company Complies with NARB Decision on Review Disclosures After FTC Intervenes https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/company-complies-with-narb-decision-on-review-disclosures-after-ftc-intervenes https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/company-complies-with-narb-decision-on-review-disclosures-after-ftc-intervenes Fri, 22 Mar 2024 08:30:00 -0400 Smile Prep operates a website that provides reviews of clear aligners (or ​“invisible braces”) based on an ​“extensive five-point analysis.” Because Smile Prep’s sole source of revenue consists of commissions from some of the companies it reviews, Smile Direct Club (or ​“SDC”) filed an NAD challenge suggesting that the company ​“slants its rankings and reviews to favor those companies that make payments to it at the relative expense of those companies that don’t.”

In December 2022, NAD recommended (among other things) that Smile Prep ​“avoid conveying the message that Smile Prep does not give preferential treatment” to its affiliate partners and that it ​“clearly and conspicuously disclose that Smile Prep’s rankings, reviews, and product information of the clear aligners of its affiliate partners are advertising.” Smile Prep appealed the decision, an NARB panel affirmed the decision in March 2023, and the panel opened a compliance inquiry later that year.

Smile Prep made a number of changes to its site in an attempt to comply with the NAD and NARB decisions. For example, with respect to the issues we’re focusing on in this post, Smile Prep included a box at the top of each clear aligner review page on the website that begins with the words ​“Advertising Disclosure” in bold and then explains that: ​“When you buy products and services through our links, we may earn commissions.”

NARB determined that the ​“disclosure is neither clear nor conspicuous.” Among other things, NARB was concerned that ​“by having the disclosure appear on each page of the website, Smile Prep has obscured the fact that the disclosure is meant to apply to references to affiliate partners and their products.” Moreover, it worried that consumers may not understand the disclosure to communicate that the rankings, reviews, and other information about Smile Prep’s affiliate partners are ​“advertising.”

Smile Prep advised NARB that it believed that it was already in compliance with the NAD and NARB decisions and with applicable law, and that it was not willing to make further changes. It further stated that, ​“in the event of a referral, it looked forward to working with the FTC to craft a meaningful and fair approach to the regulation of all affiliate review sites.” Most companies wouldn’t look forward to that, especially after the FTC’s recent update to the Endorsement Guides.

This month, the FTC released a letter in which it noted that “after FTC staff explained the reason for NARB’s referral and its potential consequences, the company agreed to re-engage with NARB and NAD.” The company subsequently took additional steps to comply with the original decisions, including by adding a prominent disclosure explaining that it has an economic motivation for its recommendations. NARB subsequently closed the inquiry.

This case demonstrates that how companies disclose incentivized reviews (including through affiliate review sites) continues to be a hot topic for regulators, NAD, and even competitors. The updated Endorsement Guides include more granular requirements on what it means for a disclosure to be ​“clear and conspicuous” and companies will be evaluated against those requirements. The case also demonstrates the potential consequences of ignoring an NAD or NARB decision.

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NAD Decision Addresses Influencer Disclosures https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-decision-addresses-influencer-disclosures https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-decision-addresses-influencer-disclosures Sun, 17 Mar 2024 09:00:00 -0400 Last week, NAD announced a decision involving a challenge that a competitor brought against Wonderbelly involving (among other things) an influencer campaign.

Wonderbelly engaged a number of influencers to promote its Wonderbelly Antacids on social media. The challenger argued that many of these influencers failed to properly disclose their material connection to Wonderbelly and that even when the influencers did make the necessary disclosures, they were buried among other hashtags or “below the fold” such that consumers would have to click a link to see them.

In response, Wonderbelly agreed to revise its influencer agreements to comply with the FTC’s Endorsement Guides. More specifically, the company will require influencers to include hashtags such as #ad or #WonderbellyPartner at the beginning of each post. The company also promised to require its influencers to verbally disclose their connection to Wonderbelly in video posts. NAD was happy with these changes.

The challenger complained about a post by Demi Moore promoting Wonderbelly which she stated was “not an ad” and failed to disclose that she is an investor in the company. Wonderbelly responded that Ms. Moore almost always discloses that she is an investor in her posts, and that it had advised her to ensure she does that in every post going forward. NAD was happy with that, too, although it cautioned that Ms. Moore should not claim that a post is “not an ad.”

The challenger also complained that when Wonderbelly reposted influencer posts, the original disclosures weren’t carried over to the repost. Wonderbelly argued that the reposts did not require a disclosure, but NAD disagreed. In fact, in the revised Endorsement Guides, the FTC has stated that when reposting material from a paid influencer, an advertiser must clearly and conspicuously disclose its relationship to the influencer in the repost.

There’s nothing surprising in this decision, but it’s worth noting that the challenge was brought by a competitor, rather than having been initiated by the FTC. Companies that take shortcuts hoping that they will stay under the FTC’s radar should remember that competitors have their own radars. And companies that find their competitors aren’t complying with the law should remember that NAD provides a forum to address that.

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When a “Sponsored” Disclosure May not be EnoughNAD recently reviewed posts promoting Cariuma sneakers that appeared on the Facebook and Instagram accounts of Travel + Leisure, US Weekly, and The Quality Edit. The posts claimed that various celebrities wore the sneakers, encouraged consumers… https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/when-a-sponsored-disclosure-may-not-be-enough https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/when-a-sponsored-disclosure-may-not-be-enough Thu, 11 Jan 2024 10:30:00 -0500 NAD recently reviewed posts promoting Cariuma sneakers that appeared on the Facebook and Instagram accounts of Travel + Leisure, US Weekly, and The Quality Edit. The posts claimed that various celebrities wore the sneakers, encouraged consumers to buy the sneakers before they sold out, and included links to make a purchase or learn more. Each post was labeled as “sponsored.”

NAD assessed whether the posts were ads or editorial content and concluded that they fell into the former category. If you want to learn more about how NAD came to that conclusion, you can read the decision. In this post, we’re going to focus on the “sponsored” label. Although advertisers have long thought that to be a “safe” option for a disclosure, this decisions demonstrates that’s not always the case.

Here, NAD was concerned that “while the posts were labeled ‘Sponsored,’ it is not clear whether the posts are sponsored by the publisher or by Cariuma, the brand promoted in the posts.” NAD noted that recent FTC guidance suggests that a “Sponsored” disclosure may not always be enough and in some cases “it would be clearer if the post identified the brand that sponsored the social media post.”

FTC echoed that guidance in November when it sent warning letters to two trade associations and 12 influencers over their posts. Some of the letters expressed concern that although posts were labeled as “sponsored,” it wasn’t clear who sponsored them. “Without knowing who the sponsor of the post is, viewers might not be able to adequately evaluate the weight and credibility to give [the] endorsement.”

In many influencer campaigns, it should be obvious who is sponsoring a post, so it’s likely that a “sponsored” label will be sufficient. But this case demonstrates that using “sponsored” isn’t a “safe harbor,” as some have thought. It needs to be clear who is behind the post. This case also demonstrates that advertisers don’t just have to worry about the FTC – the NAD is focused on this issue, as well.

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Lessons from an Italian Christmas Scandal https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/lessons-from-an-italian-christmas-scandal https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/lessons-from-an-italian-christmas-scandal Tue, 02 Jan 2024 15:00:00 -0500 Chiara Ferragni is an Italian influencer with almost 30 million followers on Instagram. At last count, that’s more than the number of followers we have at Ad Law Access, so she must be doing something right. But a recent scandal that caught the attention of Italian authorities, including the Prime Minister, suggests that she may have also done a few things wrong.

In 2022, Ferragni announced that she had partnered with Italian pastry company Balocco to create a limited edition pandoro – a traditional Italian Christmas dessert similar to a panettone – and launch a campaign to “support a research project for new therapeutic treatments for children suffering from Osteosarcoma and Ewing Sarcoma” at the Regina Margherita Hospital in Turin.

Last month, the Italian Competition Authority (or “AGCM”) announced that it had concluded that social media posts and press releases promoting the campaign misled consumers by suggesting that purchasing the limited-edition pandoro for around €9 – instead of the non-branded pandoro for around €4 – would result in a charitable donation. In reality, although Balocco had made a fixed donation to the hospital in 2022, proceeds of the sales did not benefit the hospital.

AGCM announced that it would fine Balocco €420,000 and Ferragni’s companies over €1 million over the misleading campaign. Ferragni announced that she is appealing the fine as disproportionate and unfair, but she also acknowledged that she had made “un errore di comunicazione” – a communication error – and promised to donate €1 million to the Regina Margherita Hospital.

This case unfolded in Italy, but the results could have been similar in the US. As we’ve noted before, charitable campaigns – including commercial co-ventures, in which companies suggest that the purchase of a product will benefit a charity – are highly-regulated, and companies can face regulatory scrutiny for getting things wrong. Make sure you ads are clear so that you avoid any communications errors.

Also remember the FTC has noted that anyone who plays a role in disseminating misleading messages could be held liable for those messages. For example, the FTC recently sent warning letters to two associations and their influencers reminding the recipients – including the influencers – that they are ​“on notice that engaging in conduct described therein could subject you to civil penalties of up to $50,120 per violation.”

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Top Advertising Law Developments in 2023 https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/top-advertising-law-developments-in-2023 https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/top-advertising-law-developments-in-2023 Fri, 22 Dec 2023 12:30:00 -0500 If you follow our blog, you already know that there have been a number of significant developments in the world of advertising law over the past 12 months. In this post, we highlight ten of those developments and consider what they might mean for the future.

  • Regulators’ Favorite Shade – Dark Patterns: Following the FTC’s 2022 Dark Patterns Report and high profile enforcement action against Epic Games, regulators including the FTC, CFPB, and state AGs continued to bring enforcement and provide guidance on perceived “dark patterns” – primarily related to automatic renewal and continuous service options, but also as to chat bots, disclosures, and marketing practices more broadly. In January, the CFPB released guidance focused on dark patterns in negative option marketing. In March, the NAD joined the discussion in a decision highlighting potential issues with Pier 1’s advertising of discounted pricing only available with a paid subscription and its use of a pre-checked box for enrollment with that same subscription. The FTC continued to lead the charge – with dark patterns allegations playing a key role in a number of enforcement actions, including against Publishers Clearing House, Amazon, and fintech provider Brigit.
  • Beyoncé and Taylor Swift Concerts Lead to War on Junk Fees: Okay, the war against junk fees may have predated the fees associated with the pop stars’ mega tours, but it continued in earnest throughout the year. As with dark patterns, the FTC, CFPB and state AGs all took on junk fees at various times. Most notably, the FTC proposed a far-reaching rule that could fundamentally alter how prices and fees are disclosed in businesses across the country. The comment period was just extended until February 7, 2024 for the proposed rule. Not to be outdone, California passed new legislation banning hidden fees and the Massachusetts AG issued draft regulations that would prohibit hidden “junk fees,” enhance transparency in various transactions, and make it easy for consumers to cancel subscriptions.
  • Endorsement Guides: In June, the FTC released its long-awaited update to the Endorsement Guides. We noted that the Guides include some significant changes, including new examples of what constitutes an “endorsement,” details about what constitutes a “clear and conspicuous” disclosure, and an increased focus on consumer ratings and reviews. We also examined how the revisions could affect influencer campaigns. In November, we reported that the FTC had sent warning letters to two trade associations and 12 influencers over their posts, giving us a glimpse of enforcement to come. Meanwhile, NAD has also been active in this space and even referred a case to FTC for enforcement. Expect this to be a priority for both FTC and NAD in 2024.
  • Green Guides: The FTC’s Green Guides review progressed this year with an initial comment period closing in April, followed by an FTC workshop on “recyclable claims,” which we attended and highlighted here. With its history of hosting several workshops on hot green topics, we expect to hear of more workshops in the new year. California has been active as well with the governor signing a new law in October that aims to regulate carbon claims and make businesses more transparent about their carbon reduction efforts by requiring certain website disclosures (see our summary of the law here). The effective date is the first of the new year, but according to a recent letter from the bill’s sponsor, we expect that California will defer enforcement until January 1, 2025 to give companies time to comply (see here). With ESG efforts continuing to be front and center for most companies, consumers and regulators are holding companies accountable for those claims by questioning messaging about their efforts, aspirations for the future, and basis for the claims (see, for example, here, here, and here).
  • Children’s Privacy: Congress, regulators, and advocates focused time and energy on children’s privacy issues in 2023. The House and Senate held hearings focused on children’s safety and privacy. Although the Senate Commerce Committee advanced the Kids Online Safety Act, it never received a floor vote; Senators Markey and Cassidy continued to advocate for approval of the Children and Teens’ Online Privacy Protection Act (COPPA 2.0). The FTC reached settlements with companies about practices it alleged violated the Children’s Online Privacy Protection Act (COPPA) on the Xbox and Alexa platforms and with edtech provider, Edmondo. In September, the FTC released a ​“Staff Perspective” on digital advertising to children, which included recommendations on how to protect kids from the harms of “stealth advertising.” Also in September, a federal court agreed with industry advocates that California’s Age Appropriate Design Act, which imposes a variety of obligations on businesses that provide online services “likely to be accessed by children,” violated the First Amendment. California is appealing the decision, and regulators, including a number of Attorneys General and FTC Commissioner Alvaro Bedoya, have joined the state as amici. One of the most anticipated developments occurred with just 11 days left in the year, when the FTC proposed revisions to the COPPA Rule—more than four years after initiating its review process. Among other things, the proposed Rule would require new, additional consents for third-party disclosures and could affect operators’ approach to “internal operations.” Online services with children’s audiences have lots to consider in 2024 and beyond. Stay tuned for further updates.
  • State AG: State Attorneys General continued to make their presence felt in 2023. State AGs continued to go after companies for using fake reviews and false endorsements, enforced and proposed new price gouging rules, pursued telehealth companies for deceptive practices, supported the FTC’s Negative Option Rulemaking while bringing their own auto-renewal actions, continued to impose significant penalties against companies for data breaches, pursued companies for misleading consumer financial practices, and focused efforts on so-called “junk fees.” But two topics continue to be the highest priority of AGs – the impact of developments in AI (which we’ve written about here, here, and here – just to name a few) and protecting the most vulnerable consumers – especially our nation’s youth. The incoming president of the National Association of Attorneys General president, Oregon Attorney General Ellen Rosenblum, has already made protecting youth, especially teens, this year’s presidential initiative. Look for AGs to continue to this focus well into 2024.
  • Automatic Renewal: While auto-renewal service sign-up flows remain important, this year, we have seen a transition to cancellation processes being the hottest topic as states enforce their specific requirements and the FTC has drawn attention to “click to cancel” through its proposed rule. But we shouldn’t forget all of the FTC’s other proposals under the negative option rule NPRM, including expanding the scope, requiring more specific disclosures, separate consent for negative option, consent for save offers, and expanded notice requirements. Regardless of whether a federal rule formally comes into play in 2024, as referenced above certainly states have agreed are on board with FTC’s proposals, and they also resolved a multistate investigation this year requiring checkbox consent, online cancellation, and limiting save attempts. And don’t forget Massachusetts is working on its own rulemaking involving online cancellation.
  • NAD: This year, NAD issued number of decisions that caught our attention. For example, a decision in February narrows the scope of what claims may be considered puffery. NAD later elaborated on what it thinks advertisers must do in order to substantiate aspirational claims about future goals. NAD also issued a number of decisions involving endorsements – including employee endorsements and disclosure requirements – and even referred a case to FTC for enforcement. In August, NAD held that emojis could convey claims, though NARB later disagreed with how NAD had applied that principle. As always, NAD plays a big role in the advertising law landscape, so companies will want to continue to watch what NAD does in 2024.
  • Same Product/Different Label Litigation: We chronicled a Connecticut district court’s denial of a motion to dismiss in a case in which the plaintiff alleged that Beiersdorf, maker of Coppertone sunscreens, engaged in false advertising by selling the same sunscreen formula in two different packages, one of which was labeled as “FACE” and sold in a smaller tube at twice the price of the regular Coppertone Sport Mineral sunscreen. That case is one to watch but it is not the only one of its kind. In fact, 2023 saw several similar cases involving allegedly the same formula marketed as different products with varying price points, such that the plaintiffs alleged that they were misled into purchasing the more expensive item because they believed it was uniquely suited to their needs when, in fact, it was the same as the lower-priced item. These cases involved a range of products, such as baby/adult lotions, infant/children’s acetaminophen, children’s/adult cold remedies, to name a few. So far, decisions are mixed, with some courts being more willing than others to find that the differing prices were justified. Marketers of food and personal care brands that merchandise the same formula in varying iterations will want to remain mindful of these cases as they update packaging and claims.

Keep following us in 2024, and we’ll keep you posted on how these trends develop. In the meantime, have a great holiday!

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NARB Gives FTC an Opportunity to Apply New Endorsement Guides https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/narb-gives-ftc-an-opportunity-to-apply-new-endorsement-guides https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/narb-gives-ftc-an-opportunity-to-apply-new-endorsement-guides Tue, 03 Oct 2023 07:30:00 -0400 Smile Prep operates a website that provides reviews of clear aligners (otherwise known as “invisible braces”) based on an “extensive five-point analysis.” Because Smile Prep’s sole source of revenue consists of commissions from some of the companies it reviews, Smile Direct Club (or “SDC”) filed an NAD challenge suggesting that the company “slants its rankings and reviews to favor those companies that make payments to it at the relative expense of those companies that don’t.”

Last December, NAD recommended (among other things) that Smile Prep “avoid conveying the message that Smile Prep does not give preferential treatment” to its affiliate partners and that it “clearly and conspicuously disclose that Smile Prep’s rankings, reviews, and product information of the clear aligners of its affiliate partners are advertising.” Smile Prep appealed the decision, an NARB panel affirmed the decision this spring, and the panel opened a compliance inquiry this summer.

Smile Prep made a number of changes to its site in an attempt to comply with the NAD and NARB decisions. For example, with respect to the issues we’re focusing on in this post, Smile Prep included a box at the top of each clear aligner review page on the website that begins with the words “Advertising Disclosure” in bold and then explains that: “When you buy products and services through our links, we may earn commissions.”

NARB determined that the “disclosure is neither clear nor conspicuous.” Among other things, NARB was concerned that “by having the disclosure appear on each page of the website, Smile Prep has obscured the fact that the disclosure is meant to apply to references to affiliate partners and their products.” Moreover, it worried that consumers may not understand the disclosure to communicate that the rankings, reviews, and other information about Smile Prep’s affiliate partners are “advertising.”

Smile Prep advised NARB that it believed that it was already in compliance with the NAD and NARB decisions and with applicable law, and that it is not willing to make further changes. It further stated that, “in the event of a referral, it looked forward to working with the FTC to craft a meaningful and fair approach to the regulation of all affiliate review sites.” Most companies wouldn’t look forward to that, especially after the FTC’s recent update to the Endorsement Guides.

The updated Endorsement Guides include more granular requirements on what it means for a disclosure to be “clear and conspicuous” and the FTC reminds advertisers: “Just remember that what’s clear to you may not be clear to everyone visiting your site, and the FTC evaluates ads from the perspective of reasonable consumers.” It will be interesting to what the FTC determines in this case and, if determines that Smile Prep needs to change its disclosures, how that will impact other affiliate review sites.

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How the FTC’s Revised Endorsement Guides Will Affect Influencer Campaigns https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/how-the-ftcs-revised-endorsement-guides-will-affect-influencer-campaigns https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/how-the-ftcs-revised-endorsement-guides-will-affect-influencer-campaigns Fri, 14 Jul 2023 00:00:00 -0400 On June 29, 2023, the FTC released the long-awaited updates to the Guides Concerning the Use of Endorsements and Testimonials in Advertising – more commonly known as the Endorsement Guides – along with an updated FAQ entitled What People Are Asking. We summarized some of the key changes in our post the same day.

The Guides and the FAQ both cover a lot of ground, but people who work with influencers may know them best for the ground rules they establish for influencer campaigns, including the requirement that influencers clearly disclose any connections to the companies they endorse. Although that requirement may not be controversial, reasonable minds can disagree about how to comply, and many questions that attorneys who practice in this space get on a regular basis don’t have clear answers. The FTC’s updates address some of those questions, but many marketers won’t like the answers.

In this article for Law360, I highlight some of the most significant updates to the Guides and FAQs that will impact influencer campaigns, including what the FTC thinks about when a disclosure is required, how a disclosure should be presented, and how companies should manage influencer campaigns.

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FTC’s Proposed Rule on “Fake Reviews” Covers Much More; Provides Clarity on Some Issues, Uncertainty on Others https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/ftcs-proposed-rule-on-fake-reviews-covers-much-more-provides-clarity-on-some-issues-uncertainty-on-others https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/ftcs-proposed-rule-on-fake-reviews-covers-much-more-provides-clarity-on-some-issues-uncertainty-on-others Thu, 13 Jul 2023 00:00:00 -0400 On the Friday before a long 4th of July weekend, the FTC delivered some light beach reading in the form of a 100-page notice of proposed rulemaking (NPRM) “banning fake reviews and testimonials.” While banning fake reviews and testimonials seems uncontroversial, the proposed rule would actually do much more, including authorizing civil penalties for businesses that procure or disseminate deceptive (not just “fake”) reviews when they “knew or should have known” the review was deceptive and where the review fails to disclose the testimonialist’s relationship with the business or product.

The proposed rule came just one day after the FTC’s release of updated Endorsement Guides, which we reviewed here. As currently drafted, the proposed rule would prohibit:

  • Fake or false reviews and testimonials, which are defined to include reviews by reviewers who do not exist, did not use the product or service, or that materially misrepresent their experience with the product or service;
  • Repurposing consumer reviews written for one product so that they appear for a “substantially different” product;
  • Compensating or otherwise incentivizing or conditioning consumer reviews, whether positive or negative;
  • Posting reviews by employees or “insiders” without disclosures regarding their material connection to the company;
  • Creating seemingly “independent” review websites that are in fact controlled by the company and are not truly independent;
  • Suppressing negative reviews, including by “unjustified” legal threats or “false accusations” or by declining to post negative reviews for a product or service unless for a specified reason unrelated to the negative nature of the review; and
  • Selling, distributing, purchasing, or procuring “fake indicators” that misrepresent social media influence.

Many of these practices are already addressed in the FTC’s recently updated Endorsement Guides. Many are also listed in the Commission’s Notice of Penalty Offense letters on endorsements sent to over 700 companies last year, which we discussed here. For those practices that have long been considered deceptive, the proposed rule is clearly intended to open a path to consumer redress and civil penalties.

In other ways, however, the FTC is not just looking to authorize new remedies but also to substantively move the needle on the current legal standard. These efforts raise a host of issues and questions ripe for comment by interested parties, including:

  • Should companies be liable for civil penalties based on a negligence theory and is the FTC authorized to do so under their Magnuson-Moss rulemaking authority? The proposed rule draws on concepts of negligence and third-party liability to propose that businesses will be liable directly if they disseminate or cause to be disseminated deceptive reviews (e.g., ones that materially misrepresent the testimonialist’s experience or that fail to disclose the relationship between the business and the testimonialist) if they “knew or should have known” of the facts giving rise to the deception. This new standard raises a number of important questions, which the FTC to its credit specifically seeks input on. Even assuming the FTC is authorized to seek civil penalties based on such a standard, what would this mean in practice for companies when they oversee and review reviews, and how would they show that they “should not have known” about a particular fact.
  • What is a “substantially different” product for the purposes of the rule’s prohibition against “review repurposing”? Under the proposed rule, companies may not repurpose consumer reviews from one product and apply it to a “substantially different” product, which is defined as one that “differs from another product in one or more material attributes other than color, size, count, or flavor.” But the proposed rule does not specify which attributes might not be “material” for purposes of review repurposing other than color, size, count or flavor, nor does it consider that other product attributes – similar to flavor – could hinge on consumers’ subjective preferences. For example, what about a cleaning spray that comes in different fragrances? Or the same exact shirt featuring a V-neck and a boat neck? What about a supplement that comes in gummy form and tablet form, where all active ingredients are the same? The agency also does not take into account the benefit consumers experience when viewing different product options listed on the same product page.
  • How far-reaching is the prohibition against characterizing reviews as “independent” on company-controlled websites? Proposed section 465.6 would authorize civil penalties where a business “represent[s], expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions about a category of businesses, products, or services including the business or one or more of its products or services.” While staff’s intent appears to be to prohibit companies from misrepresenting the purported independence of a company-controlled review site, in practice, the language of the proposed rule would prohibit companies from representing that any consumer reviews or opinions featured on their own sites are independent, even if they are.

In addition to these specific issues related to proposed requirements, there are the general questions as to whether a rule is necessary in the first place. As many will remember, the NPRM was preceded by an ANPR in October 2022, in which the agency announced its intent to explore rulemaking in this space. At that time, former Commissioner Wilson – the sole “no” vote on issuing the ANPR – noted that “the harm that results from the deception at issue is speculative in nature” and opined that “the Commission already has a multi-pronged strategy in place to combat [deceptive endorsements or fake reviews].” In her view, “churning out another proposed rule” downplays the impact of other enforcement tools and unnecessarily diverts already-strained staff resources.

The comment period for the NPRM will run for 60 days following the publication of the proposed rule in the Federal Register, and we encourage stakeholders to submit comments addressing the above-mentioned topics and any other areas of concern.

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New Endorsement Guides Include Big Changes, But Few Surprises https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/new-endorsement-guides-include-big-changes-but-few-surprises https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/new-endorsement-guides-include-big-changes-but-few-surprises Thu, 29 Jun 2023 18:44:15 -0400 In May 2022, the FTC proposed changes to its Endorsement Guides. Among other things, those changes created more prescriptive disclosure requirements for endorsements, imposed various requirements for consumer reviews, and clarified that all parties involved in a marketing campaign could be held liable for lapses. At that time, we analyzed the FTC’s proposed changes and examined how they might impact advertising practices and influencer marketing.

This morning, the FTC announced the final version of the Guides. The final version largely mirrors the version proposed last year, with minor modifications that generally serve to further constrain the discretion that companies have when working with endorsements and reviews.

Here are the key changes appearing in the new Guides:

“Clear and Conspicuous” Definition

Unlike the 2009 Guides, the new Guides include a strict definition of what constitutes a “clear and conspicuous” disclosure. Among other things, the FTC wants disclosures to be “unavoidable.” In the examples, the Guides clarify that disclosures at the bottom of a social media post, where consumers have to click “more” in order to see them, are not unavoidable. (This mirrors the position the FTC has taken in recent settlements.) The Guides further caution companies against simply relying on a social media platform’s built-in disclosure tools if those tools are not sufficiently prominent, legible, or unavoidable. (FTC staff has previously cast doubt on those tools.)

The revised definition also provides that a disclosure must appear through the same means as the triggering claim – i.e., if the triggering claim is made both visually and audibly, then the disclosure must also appear both ways. (We’ve seen the NAD take similar positions in recent cases.)

Express Liability for Endorsers and Intermediaries

While it’s obvious that advertisers can be on the hook for deceptive endorsement practices, the new Guides clarify that all parties in an advertising transaction could share liability for problematic conduct. Intermediaries – such as advertising agencies, public relations firms, and reputation management companies – may be liable for their roles in creating or disseminating what they knew or should have known were deceptive endorsements. And endorsers (such as influencers) themselves can be liable for their representations. (See, for example, the FTC’s recent order against two real estate celebrity endorsers.)

Focus on Consumer Ratings and Reviews

The new Guides focus extensively on companies’ practices surrounding procuring, suppressing, boosting, organizing, editing, and publishing consumer ratings and reviews. Specifically, companies may not treat reviews in any way that distorts or misrepresents consumers’ opinions. Examples of misleading conduct include deleting or suppressing negative reviews, offering incentives in exchange for positive reviews, review gating (i.e., encouraging positive reviews and discouraging negative reviews), and falsely reporting negative consumer reviews as “fake” on a third-party platform without substantiation.

Companies may edit unlawful, harassing, abusive, obscene, vulgar, or sexually explicit content from consumer reviews, but such editing criteria must be applied uniformly to both negative and positive reviews.

In addition, if a company incentivizes consumers to provide numerical/star ratings and then includes those incentivized ratings in the average ratings, such inclusion could be deceptive if the incentivized ratings materially increase the average rating. In such a situation, the company will likely need to provide a clear and conspicuous disclosure regarding the incentivized ratings.

Although the FTC acknowledges that companies generally aren’t responsible for reviews written by ordinary consumers without any connection to the company, companies can be responsible for those reviews if they feature, highlight, repost, retweet, share, or otherwise adopt the reviews as part of their own marketing efforts. In those cases, a review becomes an endorsement and must follow all endorsement requirements. For example, they must be truthful, claims must be substantiated, and the reviews must include any necessary disclosures.

Expanded Disclosure Requirements for Atypical Results

The new Guides add additional guidance regarding atypical results disclosures, specifying that the disclosure used to qualify an atypical result should not itself misrepresent what consumers can expect. The new Guides also include new and revised examples, which reflect more stringent expectations related to disclosures of results that consumers can generally expect.

For example, the FTC uses a hypothetical testimonial in which a consumer claims to have lost 50 pounds in six month. The company adds a disclosure stating: “The typical weight loss of QRS Weight-Loss users who stick with the program for 6 months is 35 pounds.” However, in the FTC’s scenario, only one-fifth of consumers who start the program stick it for six months. Accordingly, “disclosure is inadequate because it does not communicate what the typical outcome is for users who start the program.”

The new Guides also strengthen the FTC’s view that “Results not typical” types of disclaimers are unlikely to be effective in conveying what consumers may generally expect to receive. Specifically, the new Guides delete a previous reference in a footnote stating that “the Commission cannot rule out the possibility that a strong disclaimer of typicality could be effective in the context of a particular advertisement.” The modification sends a clear signal that general disclaimers that do not tell consumer what results they can generally expect to receive are likely to be viewed as insufficient.

Additionally, the new Guides clarify that in order to be effective, disclosures for atypical results “must alter the net impression of an advertisement so it is not misleading.”

Expanded Definition of “Endorsement”

The new Guides expand the definition of “endorsement” to clarify that simply tagging a brand could constitute an endorsement (though the FTC acknowledges that isn’t always the case). In addition, the new Guides specify that a “fake” positive review is considered an endorsement.

Additional Examples for Influencer and Affiliate Marketing

While the Guides have long specified that material connections must be clearly and conspicuously disclosed, the revised provisions include new examples of material connections that necessitate disclosure, including the provision of free or discounted products or the possibility of winning a prize, of being paid, or earning money through affiliate links. Even things with no monetary value – such as the opportunity to appear on television or in media promotions – could constitute a material connection that requires a disclosure.

Increased Scrutiny of “Independent” Review Sites

The new Guides address so-called “independent review sites” that have material connections to various companies, or that offer a pay-to-play ranking system of products or services. The Guides are clear that sites connected to a company cannot be described as “independent” and that sites purporting to rank products or services based on objective criteria must ensure that a company’s payment does not influence its rank. Indeed, the Guides states that marketers could be liable if they pay to advance in the rankings of such purportedly “objective” ranking sites.

Statement of Special Concern Regarding Child-Directed Endorsements

The new Guides include a new section addressing endorsements in advertisements addressed to children. The section states that “[p]ractices that would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” The Guides don’t provide further insight on how such endorsements might be questioned or evaluated, but the FTC claims it is “exploring next steps.”

***

The FTC has also updated its guidance document, “FTC’s Endorsement Guides: What People Are Asking” to respond to additional questions related to the new Guides.

Although the new version of the Guides includes some big changes compared to the previous version, we’ve seen most of this in enforcement actions, warning letters, and various types of business guidance in recent years, including in the proposed edits the FTC announced last year. (One surprise is a new example involving “dog influencers,” which has some of us considering additional revenue streams, but that’s a topic for another day.)

If you’ve been following our tips on this topic, you may already be on your way to compliance with the new Guides. If not, now is the time to evaluate your practices before the FTC does.

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NAD Takes Strict Position on Employee “Endorsements” https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-takes-strict-position-on-employee-endorsements https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-takes-strict-position-on-employee-endorsements Thu, 08 Jun 2023 10:07:23 -0400 In 2019, the FTC announced a settlement with a retailer over allegations that it had encouraged employees to write favorable reviews of its products without disclosing they worked for the company. Most observers weren’t surprised that the FTC found that conduct to be problematic or that the terms of the settlement required the company to instruct employees to clearly disclose that worked for the company when reviewing its products. But employee reviews often involve more subtle issues, and a recent NAD decision on some of those issues may surprise some readers.

Renue By Science sells products with NMN, a supplement that is thought to slow the aging process. Ad Law Access is known for the quality of its content and the youthfulness of its writers, so we don’t have personal experience with the supplement, but some people swear by it. One of those people is an employee of Renue By Science that posts informative YouTube videos on various health topics. In one of the videos, she discusses the current regulatory status of NMN and speaks positively about the supplement, in general. Notably, though, she doesn’t promote any particular brand.

Reasonable minds can disagree over whether a video that discusses a product category without promoting a particular brand constitutes an “endorsement” that would trigger a disclosure requirement under the FTC’s Endorsement Guides. NAD seems to conclude – without much explanation – that it does. One sentence in the decision mentions that the video description included links to sites where the company’s products were sold. It’s likely that impacted NAD’s analysis, but it’s not clear to what extent or whether the conclusion would have been different if the description didn’t have those links.

NAD acknowledged that a written disclosure identifying the speaker as an employee of the company appeared in the video description, above the “show more” link. However, that wasn’t enough to satisfy NAD. Instead, NAD recommended that the company “inform the employee of their obligation to clearly and conspicuously disclose in the video itself that the speaker is an employee.” This recommendation is arguably more stringent than what is required by the FTC’s Endorsement Guides and what appears to be common practice with many influencer campaigns.

NAD’s discussion of the video is contained in one short paragraph of the decision – and it doesn’t seem like the advertiser debated the issues of whether the video constituted an endorsement or whether the disclosure was sufficient – so we don’t have a lot go on. What we do have, though, suggests that NAD is taking a strict position on what employees must do when they promote products that are sold by their companies, even if the company’s products aren’t mentioned specifically. Now may be a good time to look through your employee policies to see if they address these types of issues.

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Google to Pay $8 M to Settle with Texas Over DJ Endorsements https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/google-to-pay-8-m-to-settle-with-texas-over-dj-endorsements https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/google-to-pay-8-m-to-settle-with-texas-over-dj-endorsements Tue, 16 May 2023 06:00:00 -0400 In January 2022, the Texas Attorney General filed a lawsuit against Google alleging that the company engaged iHeartMedia DJs to provide endorsements for its Pixel 4 phone, even though they had never used it. In November 2022, the FTC and several state attorneys general announced settlements with Google and iHeartMedia over the same conduct. Although Texas settled with iHeartMedia, it continued to separately pursue its case against Google. Last week, the parties agreed to a settlement.

According to the FTC and states, Google hired iHeartMedia and other radio networks in 2019 to have DJs read ads for the Pixel 4 phone. GooglePixel 4 provided scripts that included endorsements written in the first-person. For example: “It’s my favorite phone camera out there, especially in low light, thanks to Night Sight Mode;” “I’ve been taking studio-like photos of everything;” and “It’s also great at helping me get stuff done, thanks to the new voice activated Google Assistant that can handle multiple tasks at once.”

Despite the first-person endorsements, the AG alleged that most of the DJs who made these statements had never used a Pixel 4 phone. Apparently, iHeartMedia recognized the problem and asked Google to provide phones for its DJs. According to the AG’s press release, “When confronted with the reality that Google’s ad campaign violated the law, rather than take corrective action, Google continued its deceptive advertising, prioritizing profits over truthfulness.” The ads were played more than 2,400 times in Dallas, Fort Worth, and Houston.

A notable aspect of the Texas settlement is the monetary payment by Google -- $8 million is going to Texas alone, compared to the combined $9 million Google paid when settling with the FTC and the states of Arizona, California, Georgia, Illinois, Massachusetts, and New York last November. Given the coordination of all the states and FTC on the settlement with iHeartMedia, it is notable that when it came to Google, Texas went at it alone, first by filing suit separate from the multistate effort and then reaching a separate settlement that included significantly more money for Texas than the other states received.

The phenomena of a state holding out from a multistate settlement to obtain a better result, especially when that state is currently in litigation, is not new. In rare situations (most recently in opioid and vaping settlements), Attorneys General have been persuaded to use “most favored nation” clauses in their multistate settlements to help discourage a state from holding out for more money later, but these have been few and far between. This is because ultimately each state is a sovereign entity – a fact that can sometimes be easily overlooked during the course of a multistate negotiation where a small group of states may seemingly be speaking for the whole. At the end of the day, each state will do what is in the best interest of their office and their constituents, which may vary.

Here, Texas’ motivation for holding out may be part of AG Paxton’s efforts to reign in “Big Tech.” While all states are actively engaged in the space, Texas has been a leader in these efforts. Indeed, the Texas AG website has a page devoted to “Big Tech,” which explains why people should be concerned about big technology companies and what the AG is doing about it. And although it settled with Google over these endorsements, it still has at least three other pending lawsuits against Google – challenging its dominance in the adtech chain, accusing it of violating the state’s biometrics laws, and alleging deceptive practices related to location tracking (another example where Texas sat out on a multistate settlement).

When faced with an investigation by multiple Attorneys General, it is critical to understand the objectives and priorities of each office involved, and recognize they may change from state to state. While getting true global peace may be an impossible challenge in some instances, having a deep understanding of each office involved is the best way to find a path to resolution.

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Top Advertising Law Developments in 2022 https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/top-advertising-law-developments-in-2022 https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/top-advertising-law-developments-in-2022 Wed, 14 Dec 2022 13:30:46 -0500 If you follow our blog, you already know that there have been a number of significant developments in the world of advertising law over the past 12 months. In this post, we highlight ten of those developments and consider what they might mean for the future.

  • Dark Patterns: Any practices that could manipulate or mislead consumers into taking actions they wouldn’t otherwise take will continue to receive maximum scrutiny from the FTC and state AGs. Over the past year, we saw a new FTC staff report on “dark patterns,” as well as enforcement actions against Vonage and Fareportal. Private plaintiffs (see here and here) as well as consumer advocates are taking note. Companies should give serious consideration in their product interfaces, disclosure and notice design, purchase flows, cancellation methods, auto-renewals, and other consumer communications to any “nudge” activities that could be interpreted as problematic “dark patterns.”
  • Individual Liability: The FTC isn’t backing down from its commitment to hold individuals liable in its cases, and did so in numerous matters in 2022 (Drizly, Passport Auto, Napleton, Electrowarmth, Roomster). At the same time, it’s worth noting the absence of individual liability in several recent high-profile cases (Twitter, Facebook, Google, Vonage), suggesting, perhaps, that the agency recognizes there are some challenges and trade-offs to inclusion in certain cases. In any case, given Chair Khan’s repeated remarks emphasizing the need for executive accountability (see here and here), we expect to see a continued effort to include individuals in FTC complaints and orders. This same theme has been echoed by the CFPB, with Director Chopra recently outlining his vision for increased individual accountability and encouraging State Attorneys General to take the same approach.
  • Post-AMG Money Woes. The FTC continues to scramble for dollars post-AMG. Some creative initiatives include using its penalty offense authority to extract civil penalties for practices it claims are covered by prior administrative orders (Walmart, Kohl’s, DK Automation). The agency is also turning to Section 19 where possible and has initiated several new Mag-Moss rulemakings to codify certain unfair or deceptive practices (more on that in a separate bullet). In addition, the FTC is partnering with states to obtain monetary relief using state statutes (Google). We can expect to see more creative avenues for obtaining monetary penalties or relief in the new year.
  • Green Claims: As more companies develop Environmental, Social, and Governance (“ESG”) goals and advertise their progress towards those goals, we’re starting to see more challenges to those ads. Although defendants have scored some notable victories this year (such as these), NAD often looks at green claims with a more critical eye. (Click here, for example.) We expect this trend to continue in 2023, though the biggest development may be the FTC’s long-awaited update to its Green Guides.
  • Automatic Renewals: Programs that automatically renew have been under a lot of scrutiny. Much of the focus has been on the sign-up process and whether companies have used deception or “dark patterns” (see above) when enrolling consumers in recurring billing. Lately, regulators and plaintiffs’ attorneys have also been paying attention to how people cancel. (Click here, for example.) Some regulators have indicated this will be an enforcement priority next year. And big settlements in class actions suggest more of those will be on the way.
  • Endorsements and Reviews: This year, the FTC announced its first case involving the failure to post negative reviews. Since then, they have announced proposed updates to the Endorsement Guides, a proposed rule to combat fake reviews, and teamed up with states to challenge misleading endorsements and reviews. (Click here, for example.) Meanwhile, NAD has also focused on how companies advertise reviews. (Click here, for example.) We expect these trends to continue in 2023.
  • Mag-Moss Rulemakings: Undeterred by the cumbersome Mag-Moss process, the FTC announced several new ANPRs in 2022: commercial surveillance, earnings claims, reviews and endorsements, and junk fees. New rules may benefit industry by providing clarity and certainty, but they may also do more harm if they turn out to be very prescriptive or unclear (see, for example, our recent write-up regarding the pitfalls of the proposed impersonation scam rule). We’ll be watching to see how much progress the agency is able to make on this ambitious effort in 2023.
  • State Attorneys General: While State AGs have always been a major player in advertising enforcement, they continue to gain attention and prominence as part of the post-AMG fallout as the primary regulator who can seek significant monetary remedies for violations of state unfair and deceptive trade practice laws. AGs have collaborated throughout 2022 in pursuing some of the priorities otherwise identified in this list, notably in settling with Google over allegations of dark patterns in its collection of geolocation information, and settlements with Google and iHeartMedia over the use of misleading endorsements for the Pixel mobile phone. But looming in the background is ongoing criticism, largely from Republican Attorneys General, about the National Association of Attorneys General and multistate enforcement generally, that may result in less coordinated multistate activity and more individual state action in 2023. That said, we still predict bipartisan efforts to dominate AG enforcement in particular with high profile consumer protection initiatives, but we will continue to monitor developments in and out of NAAG for any changes in trends.
  • Right to Repair: The FTC is focused on ensuring that consumers have options when it comes to repairing products. In 2019, they held a workshop to discuss manufacturer restrictions on repair rights, including provisions that void a warranty if the consumer uses third-party parts or independent service centers. In a 2021 report, they concluded there was “scant evidence to support manufacturers’ justifications for repair restrictions.” After that, they issued a Policy Statement calling for more aggressive enforcement against manufacturers that impose these restrictions. Since then, they entered into three settlements over this issue. While the FTC took action under existing law, federal and state legislatures continue efforts to pass legislation specific to right to repair. Expect these efforts to continue in 2023.
  • NAD Jurisdiction: Following a move from CARU, NAD announced that it would expand its jurisdiction to include “resolving complaints or questions concerning national advertising that is misleading or inaccurate due to its encouragement of harmful social stereotyping, prejudice, or discrimination.” So far, we haven’t seen any decisions involving this provision. It will be interesting to see what standards NAD applies and what will happen if advertisers decide not to comply with NAD’s recommendations.

Keep following us in 2023, and we’ll keep you posted on how these trends develop.

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Lawsuit Over Crypto Promotion Targets Celebrity Endorsements https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/lawsuit-over-crypto-promotion-targets-celebrity-endorsements https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/lawsuit-over-crypto-promotion-targets-celebrity-endorsements Tue, 13 Dec 2022 10:17:16 -0500 Imagine a “vast scheme between a blockchain start-up company,” a “highly-connected Hollywood talent agent,” and a “front operation,” who all united “for the purpose of promoting and selling a suite of digital assets.” No, that’s not the plot of a Hollywood movie – at least not yet – but it is the plot of a lawsuit that was filed against Yuga Labs (the company), Guy Oseary (the agent), MoonPay (the front operation), and over a dozen celebrities (including Jimmy Fallon and Post Malone).

One of the central themes in the 94-page complaint involves an alleged plot in which Yuga Labs and Oseary engaged celebrities to promote Yuga Labs’ Bored Ape Yacht Club NFTs without disclosing their connection to the company. For example, on a November 11, 2021 episode of the Tonight Show, Jimmy Fallon announced that he “did his homework” on how to purchase an NFT and found MoonPay, which was “like the PayPal of crypto.” Using MoonPay, he “bought an ape.”

Later that day, MoonPay posted a clip from the show on Twitter, suggesting that it was surprised by Fallon’s on-air announcement. Over the next few days, Fallon tweeted about his NFT and MoonPay’s CEO responded, congratulating Fallon on his purchase. The plaintiffs argue that although these exchanges were designed to look spontaneous, Fallon was actually compensated for his promotion. Nevertheless, neither he, MoonPay, or YugaLabs disclosed that.

https://twitter.com/moonpay/status/1458761049075769351?s=20&t=ntA_vzg_M2poZo2ADKag7g

The complaint includes examples of collaborations with other celebrities. For example, the plaintiffs allege that a wallet owned by Post Malone received over $1.4M in ether cryptocurrency from MoonPay, in addition to a Bored Ape Yacht Club NFT, around the same time Malone released a music video that included a clip of him using the MoonPay app phone to purchase an NFT. Again, MoonPay tweeted its surprise. Neither the video nor the tweet mentioned that the video was sponsored.

The plaintiffs claim, among other things, that they wouldn’t have purchased Bored Ape Yacht Club NFTs had they known that the celebrity endorsements were sponsored, “as opposed to being the result of an organic and genuine interest.” Although the complaint doesn’t mention the FTC’s Endorsement Guides, it certainly echoes themes that are central to the Guides, including the idea that influencers should disclose the connections they have to the companies whose products they promote.

This case covers a lot of ground – ranging from alleged violations of consumer protection laws to alleged violations of securities laws – and it will be interesting to see how it plays out. For now, it’s worth noting that although the FTC, state AGs, and other regulators have taken the lead in ensuring that companies and influencers comply with the Endorsement Guides, plaintiffs’ attorneys are also paying attention to paid promotions that are disguised as “organic and genuine interest.”

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FTC and States Settle with Google and iHeartMedia Over Misleading Endorsements https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/ftc-and-states-settle-with-google-and-iheartmedia-over-misleading-endorsements https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/ftc-and-states-settle-with-google-and-iheartmedia-over-misleading-endorsements Wed, 30 Nov 2022 06:00:26 -0500 In January, we reported that the Texas Attorney General had filed a lawsuit against Google alleging that the company engaged iHeartMedia DJs to provide endorsements for its Pixel 4 phone, even though they had never used it. This week, the FTC and several state attorneys general announced settlements with Google and iHeartMedia over the same conduct. The complaints provide more insights into what may have happened behind the scenes.

According to the FTC and states, Google hired iHeartMedia and other radio networks in 2019 to have DJs read ads for the Pixel 4 phone. Google provided scripts that included endorsements written in the first-person. For example: “It’s my favorite phone camera out there, especially in low light, thanks to Night Sight Mode;” “I’ve been taking studio-like photos of everything;” and “It’s also great at helping me get stuff done, thanks to the new voice activated Google Assistant that can handle multiple tasks at once.”

Pixel 4

Despite the first-person endorsements, the FTC and states allege that most of the DJs who made these statements had never used a Pixel 4 phone. Apparently, iHeartMedia recognized the problem and asked Google to provide phones for its DJs. Google responded that it couldn’t provide the phones, and instead provided a link to a webpage about the phone’s features. Although Google ultimately provided five phones, more than 40 DJs recorded endorsements using Google’s scripts.

The proposed FTC orders and the state settlements with Google and iHeartMedia bar both companies from misrepresenting that an endorser has owned or used a product and from misrepresenting their experience with certain products. In addition, the settlements impose ongoing recordkeeping, cooperation, compliance monitoring and recordkeeping on the companies. Collectively the settlements also require the companies to pay $9.4 million in penalties. Texas settled with iHeartMedia, but their case against Google seems to be ongoing.

This case holds valuable lessons for companies using influencers or other endorsers. It’s common for companies to provide talking points for their endorsers. There’s nothing inherently wrong with that – in fact, it can help companies and endorsers steer clear of misleading claims. But keep in mind that endorsements must reflect an endorser’s honest opinions, beliefs, or experiences with the products, so you need to avoid scripting those too much.

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Breaking Up with Celebrities https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/morals-clauses-generally-give-companies-the-right-to-terminate-an-agreement-if-a-celebrity-commits-an-act-that-falls-within-the-scope-of-the-clause https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/morals-clauses-generally-give-companies-the-right-to-terminate-an-agreement-if-a-celebrity-commits-an-act-that-falls-within-the-scope-of-the-clause Thu, 27 Oct 2022 06:00:13 -0400 We all know a person that can be unpredictable and erratic. It can be fun to hang out with that person occasionally, because you’ll likely have funny stories to share with your friends the next morning, but you probably wouldn’t want to be married to them, because those same stories are less funny when you share them with your divorce lawyer. The same is probably true with relationships between brands and some celebrities.

In 2013, Adidas entered into a relationship with Kanye West to create Yeezy-branded shoe and clothing collections. Although it was a lucrative relationship, Kanye has said and done some things in the years since then that must have had the brand cringing. After Kanye made a series of anti-Semitic tweets and comments, Adidas decided it had had enough and called its divorce lawyers. The relationship officially ended this week.

Although we don’t know the details about how the relationship ended, it’s possible that Adidas had to rely on a morals clause in its agreement with Kanye. Morals clauses generally give companies the right to terminate an agreement, if a celebrity commits an act that falls within the scope of the clause. Given what’s at stake, the scope of that clause can be one of the most-negotiated provisions in these agreements.

Celebrities naturally want the clauses to be as narrow and specific as possible. (For example, a clause might only kick in if a celebrity is convicted of, or pleads guilty to, a felony.) This type of clause, though, won’t necessarily help if a celebrity just makes offensive statements. Thus, companies want more flexibility. (For example, they may push for a clause that allows termination if the endorser’s actions would reflect negatively on the company.)

Although these type of clauses can be helpful in cases when you want to break up with a celebrity, it’s better to avoid that situation. Think carefully before you get into bed with a celebrity, so to speak. Check them out on social media; get the scoop from their previous partners; know what you’re getting into. Hopefully, when the relationship ends, you’ll look back fondly at the good times and you won’t feel the need to go back and cut that celebrity out of all the pictures you took together.

Morals clauses generally give companies the right to terminate an agreement if a celebrity commits an act that falls within the scope of the clause

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NAD Addresses Disclosure Requirements for Paid Studies https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-addresses-disclosure-requirements-for-paid-studies https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/nad-addresses-disclosure-requirements-for-paid-studies Tue, 12 Jul 2022 06:00:22 -0400 Liberty Mobile Puerto Rico advertised that it has the “best network” and the “best coverage” in Puerto Rico and disclosed that the claims were based on an “independent study” conducted by Global Wireless Solutions (or “GWS”). Although T-Mobile didn’t challenge the results of the study, it argued that because Liberty had paid GWS to conduct the study, the connection between the two companies should be clearly disclosed, in accordance with the FTC’s Endorsement Guides.

Liberty argued that GWS provides similar services to other wireless providers and that it didn’t have a close working relationship with GWS. Although NAD acknowledged that there was “nothing unusual about the relationship between Liberty and GWS,” it determined that consumers “should be made aware of that relationship through a clear and conspicuous disclosure as it may affect the credibility and weight consumers give to the claim if they are aware that Liberty paid GWS for the study.”

During the course of the challenge, Liberty stopped using the term “independent study” and started to use a disclosure which stated, in part, that the study was “paid for by Liberty.” Although NAD was OK with the language, it had several concerns with how it was presented. NAD recommended that Liberty (a) use some mechanism to direct consumers’ attention to the disclosure; (b) place the language at the beginning of the disclosure, rather than at the end; and (c) ensure that the disclosure was large enough to be readable.

Many companies fund studies and use the results to support their claims. As NAD noted, there’s nothing unusual or problematic about this type of relationship, but it will frequently require a disclosure. We’ve often posted about these types of disclosure requirements in the context of influencers and other endorsers, but this case serves as a good reminder that the requirements apply more broadly and can encompass these types of relationships, as well.

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TINA.org Urges Investigation into Hello Fresh https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/tina-org-urges-investigation-into-hello-fresh https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/tina-org-urges-investigation-into-hello-fresh Wed, 29 Jun 2022 06:00:35 -0400 TINA.org recently announced that it had filed complaints with the FTC and the Connecticut Department of Consumer Protection, urging them to investigate Hello Fresh’s marketing practices related to a campaign advertising “free” meals in order to encourage consumers to sign up for a subscription. The complaints touch on a number of issues we post about frequently, including automatic renewals, “dark patterns,” and the use of influencers. Here are some of the highlights.

TINA argues that although Hello Fresh prominently advertises “free” meals, it doesn’t actually provide consumers with free meals. Instead, HelloFresh merely provides consumers with a discount on a set number of meals over time. Notably, the marketing materials TINA attaches to the complaint include a disclosure explaining how the number of “free” meals is calculated. It will be interesting to see whether the regulators find that disclosure to be sufficient.

TINA alleges that the automatic renewal disclosures are not sufficiently clear or conspicuous. For example, they note that terms are included on the back of cards glued to mailers advertising the offer. Moreover, when consumers redeem the offer online, TINA alleges that HelloFresh only provides an abbreviated summary of the automatic renewal terms after the company has collected credit card information, in violation of the Restore Online Shoppers’ Confidence Act (or “ROSCA”).

TINA alleges that Hello Fresh employs “dark patterns” to pressure consumers into signing up for the offer. For example, when consumers start to redeem the offer online, they find a five-minute timer with the text “expiring in” that counts down and suggests that consumers will not be able to redeem the offer after the clock runs out. In reality, this just creates a “false sense of urgency” because the offer does not expire when the clock runs out.

TINA argues that Hello Fresh’s attempts to present consumers with other options when they try to cancel is also a “dark pattern” called “confirmshaming” – in other words, “guilting consumers into taking actions they had not intended.” Although various state laws require companies to make it easy for consumers to cancel subscriptions, TINA seems to take the position that even offering consumers options to change their subscriptions or obtain information about their reasons for cancelling violates ROSCA.

TINA takes issue with the way Hello Fresh’s influencers disclose their relationship to the company. Although the influencers use the #hellofreshparter hashtag, the majority of posts TINA found included that disclosure “below the fold.” In other words, consumers had to click on “more” in order to see it. The FTC has taken the position – both in a recent settlement and in their proposed edits to the Endorsement Guides – that these disclosures need to be visible without consumers having to click on anything.

It will be interesting to see whether the FTC or the Connecticut Department of Consumer Protection take action based on these complaints. Regardless of what happens in this instance, though, we’re likely to see these types of allegations repeated in many other cases over the coming year.

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