Recently, the FTC updated its “Dot Com Disclosures” guidance document relating to online advertising, to account for social media and constrained screen space. The purpose of the update concerns the FTC’s “clear and conspicuous” online disclosures, and how they can effectively be made in the age of evolving technology. With regard to online advertisements, basic principles of advertising law apply: (1) advertising must be truthful and not misleading; (2) advertisers must have evidence to back up their claims, known as “substantiation;” and (3) advertisements cannot be unfair. However, as the FTC points out, the unique features of online advertising affect the way required disclosures are evaluated.

The “clear and conspicuous” disclosure requirement varies depending on the advertisement’s nature and the type of information that must be provided. Some of the considerations that the FTC provides in determining whether a disclosure meets the requirement are:

“the placement of the disclosure in the advertisement and its proximity to the claim it is qualifying; the prominence of the disclosure; whether the disclosure is unavoidable; the extent to which items in other parts of the advertisement might distract attention from the disclosure; whether the disclosure needs to be repeated several times in order to be effectively communicated, or because consumers may enter the site at different locations or travel through the site on paths that cause them to miss the disclosure; whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration; and whether the language of the disclosure is understandable to the intended audience.”

While these considerations apply across the broad range of advertisements, the FTC recognizes the particular challenges of online advertising in evaluating whether a disclosure is “clear and conspicuous.” Below, I will present some of the FTC’s key points covered in the updated “Dot Com Disclosures” guidance document.

In evaluating proximity, it is best when a disclosure is viewed on the same screen as the claim that requires it. The limited screen size of mobile devices may cause consumers to scroll in order to reach a disclosure, which may be an issue. In this instance, the FTC recommends that advertisers use text or visual cues that encourage scrolling (and to avoid using formats that inhibit scrolling). Hyperlinking to disclosures is discouraged in many situations. Disclosures that are an integral part of a claim—such as basic cost information and health and safety disclosures—should not be hyperlinked.  However, to use the FTC’s example, a disclosure about “additional fees are too complex to describe adjacent to [a] price claim,” a hyperlink that appears adjacent to the claim may be appropriate.

With regard to prominence, the size, color, and graphics of the disclosure should be comparable to the claim and other text and images on the screen. In the mobile age, advertisers should take into consideration the type of devices consumers use to access the advertisement. For example, on a standard website a disclosure may be deemed “clear and conspicuous” but if accessed on a mobile device where the text of the disclosure cannot be enlarged, it would not be deemed “conspicuous.”

In the online advertising age, claims are made in audio, written, and visual formats. The disclosures for each should be in the same format as the claim: “for audio claims, use audio disclosures…for written claims, use written disclosures…display visual disclosures for a sufficient duration.”

This new guidance document is helpful for advertisers using mobile platforms. One likely outcome of these new guidelines is that it will be more costly for advertisers, who in addition to designing clear and conspicuous disclosures for standard websites will now have to design specifically for mobile platforms as well. I recommend checking out one of my previous articles here on Ad Nauseam that pertains to the FTC’s Guidelines on Mobile Privacy Disclosures, a closely related topic. For more information and to view the “Dot Com Disclosures,” click the Source link below.

For more updates, follow me on Twitter: @truestark

Source: http://www.ftc.gov/os/2013/03/130312dotcomdisclosures.pdf

Advertising is all about capturing consumers’ attention in an entertaining, informative way to garner interest in a product or service – the success of which is measured in increased sales figures.  But some campaigns are too successful, attracting not only consumers but competitors and regulators.  In the worst-case scenario, that campaign could be front page news as the subject of the latest advertising consumer class action.

As the class action bar grows, so do advertisers’ questions:  What types of claims are most likely to result in class action suits?   Could a campaign be subject to a regulatory action AND a class action suit?  What are some successful techniques and strategies to protect against this situation?

These questions and more were the subject of a recent Davis & Gilbert LLP webinar, “False Advertising and Deceptive Marketing Practices:  Trends in Consumer Class Actions and Government Enforcement Actions.”  D&G is a leading marketing communications and intellectual property firm based in New York City, and developed this presentation to respond to client concerns regarding which advertising claims would attract attention from government agencies, what triggers an FTC investigation, and how to respond to and defend against false advertising and unfair competition claims.  Two D&G attorneys in the Intellectual Property group and an FTC staff attorney gave a comprehensive, complete perspective of the issues at hand.

Beginning with a brief overview of the FTC’s authority to regulate “unfair or deceptive acts and practices in or affecting interstate commerce,” under Section 5 of the FTC Act, the presentation focused on an oft-missed point:  consumers do not have standing to pursue a claim under the FTC Act.  Only the FTC, in its regulatory capacity, may investigate, adjudicate and hold liable advertisers deemed to have violated Section 5.  So then, how can other aggrieved parties pursue a claim?  Using state law equivalents to Section 5 (aka “Baby FTC Acts”), consumers, state Attorney Generals or some combination of them may seek redress.  Depending on the state, there may be an adoption of the Uniform Deceptive Trade Practices Act or Uniform Consumer Sales Practices Act that provide additional remedies to consumers.

The FTC has always reviewed advertisers’ claims and campaigns, and upon the FTC’s ruling, the issue was a done deal.  However, in recent years there has been a wave of so-called “piggyback” class action lawsuits filed after FTC investigation.  Regulators have become more aggressive as campaigns are staged on a national scale, and thus the potential class could be in the millions.  Consumers, state AGs and plaintiffs’ attorneys closely monitor the FTC findings – if the FTC determines there has been a violation, or that terms of a consent order were violated, it will file suit in federal court or with an FTC administrative judge in Washington, DC.  This regulatory action is fodder for the piggyback class action, and both come with great risks to the advertisers involved.  Civil penalties can range from the thousands to the millions of dollars, and can include partial or full refunds to the aggrieved consumers, on top of regulatory cease-and-desist or consent agreements, or corrective advertising measures – in short, that ad might end up costing much more than you bargained for.

However, if an advertiser should find themselves in this unfortunate position, there are strategies to minimize the damages, both pecuniary and potential piggyback.  One such tactic is to consider the discoverability of information provided to regulators – is there a chance that piggyback plaintiffs would be able to access it?  While the FTC will keep some information confidential, state AGs follow the Freedom of Information Laws (FOILs), which differ considerably among the states.  For example, in New York if there is a request made pursuant to the FOIL for your company’s information, you will get a notification; while in New Hampshire the information can be released without any notice.  Another strategy to employ is to avoid anything resembling an assertion of liability in regulator settlement proceedings.  This extends to refunds, should they be offered – it is important to include language that limits or waives the right to further redress should the refund be accepted.  Along these lines, advertisers impacted by regulatory or piggyback suits can control their perception with careful marketing and press releases to minimize negative exposure.  While there are normally no joint releases by the FTC, careful timing and control of the message goes a long way to repairing reputation.  Finally, ensure that the settlement documents are narrowly tailored to curtail any unforeseen consequences – for example, specify which practices are to be impacted (like all practices versus solely online practices), but include flexibility to incorporate technological advances (like online versus mobile platforms).

I hope that you found this summary as insightful and helpful as I did!  If you’re interested, the entire Davis & Gilbert LLP presentation can be found here.

The advertising law group

The event was a huge success (again)! We’d especially like to thank our panelists, the IILP at New York Law School, and the catering staff.

We hope you enjoyed it! Please continue to follow us here on adnauseamblog.org for more insight into the world of advertising and media law.

- The Advertising Law Group

Recently, the Center has been focusing on natural claims. Natural claims are advertisements that state that the product in question is all natural, pure, or organic. Thus, it would not contain any chemicals, or altered ingredients. However, companies may claim that their products are all natural when in fact, the product contains a trace amount of corn syrup, or red dye number 40. When this occurs, the Center takes it upon itself to threaten litigation on the company in question. Past letters have been sent to Ben and Jerry’s, Cadburry-Schweppes, and Nature Valley. With respect to Ben and Jerry’s, the Center stated that the “all-natural” products contained alkalized cocoa, corn syrup, and partially hydrogenated soybean oil. Additionally, even if the company has all natural products in its ice cream, such as cream, the Center States that “this main ingredient is still artery clogging.” Each of these companies upon receipt of the Center’s disdain for the “un-natural” use of its claims, changed their advertisements to avoid litigation. Yet, there are some companies who have decided to fight the claims of this watch dog, but they proved to be unsuccessful in the end.

The Center joined a class-action suit against General Mills, claiming that its fruit roll-up fruit snacks are deceptive to consumers. The box states that the fruit candies are “made with real fruit,” with a picture of a strawberry or orange adjacent to the claim. The Center argued that this is an un-natural claim since the list of ingredients include: “pears from concentrate, corn syrup, dried corn syrup, sugar, partially hydrogenated cottonseed oil, citric acid, acetylated monoglycerides, fruit pectin, dextrose, malic acid, Vitamin C (ascorbic acid), unspecified “natural flavor,” and Red 40, Yellow 5, Yellow 6, and Blue 1.” The Center then goes on to argue the non-health benefits of these ingredients. General Mills acquiesced to the Center, and has agreed to add real strawberries to the fruit snacks in order to include the “made with real fruit” tagline on its boxes by 2014. Should there have been an agreement though?

One could argue that the company was not being deceptive because there are pears from concentrate in the product. Additionally, the snack is flavored to taste like strawberries, so isn’t it logical for there to be a strawberry on the box. Consumers are visual, and without the strawberry how would they differentiate the product from other flavors on the shelf. They would have to take more time to figure out which flavor is which, and becomes the antithesis to the main principles of trademarks. Further, how does the non-health benefits affect the “made with real fruit” claim? A person eating a fruit roll up could easily eat a granola bar instead to get more fiber his or her diet. It has nothing to do with the fruit content of the snack.

Thus, what is the Center’s real policy? To improve the health of society by promoting the benefits to consumers’ health, or to police companies?

This month the FTC released an update to its 2000 guidelines on dot-com disclosures in mobile and social media advertising.  These updates provide guidance on how to effectively make disclosures clear and conspicuous so as to avoid any deception for the consumer.   Some of the guidance is the same but other areas have changed.  For instance, the 2000 guide advised that advertisers should place disclosures, “near, and when possible, on the same screen” as the relevant claim, while the 2013 updates state that a disclosure should be placed “as close as possible to the relevant claim.”  The updates also explain that if a disclosure cannot be made clear and conspicuous and without a disclosure the ad would be deceptive or unfair then that ad should not be disseminated.  This also applies to platforms as a whole that might inhibit disclosures.  Twitter is one such platform that could be difficult to provide clear and conspicuous disclosures on due to the word limit.  Some things were continued from the original guidelines.  One such example was that advertisers should avoid using hyperlinks for disclosures that involve pricing information or certain health and safety issues.  These determinative factors should be present in the ads main text and should not be hidden in a disclosure.   The new guidelines also provide useful mock ads to illustrate the updated principals.  To see the full updated guidelines please follow this link: http://www.ftc.gov/os/2013/03/130312dotcomdisclosures.pdf

For more on privacy issues come register for AdNauseaum.org Presents: Advertising Trends in Class Actions on April 2^nd.  There will be panels on Privacy: the Large Scale Issues and Deciphering Natural Claims as well as The Class Action Demystified.  You can register here: www.nyls.edu/adlaw

Facebook Custom Audience[1]

Facebook’s “custom audience” feature lets marketers find and target advertising toward specific individuals among Facebook’s users. Marketers use e-mail addresses, phone numbers or Facebook User ID’s to match up with Facebook users in order to generate a “custom audience” created from data they already have. To generate the “custom audience,” the marketer uses a tool called the “power editor” to input an email or phone list representing their “segments” (groups of customers they’d like to target—may be current customers, prospects, loyalty club members…etc.). To protect the data, Facebook never receives the customer list. The list of emails or phone numbers is “hashed” on their own computer when using the power editor. Hashing is a method of securing information. Unlike encryption (another method of securing information), hashing summarizes text into a short fingerprint that can’t be decrypted.

Does this feature comport with the TCPA and the Consumer Privacy Bill of Rights?

Do Facebook Custom Audiences Run Afoul of the TCPA?

The Telephone Consumer Protection Act of 1991 (TCPA) was enacted to restrict telephone solicitation (i.e., telemarketing) and the use of automated telephone equipment. The TCPA limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages, and fax machines. In recent cases, a text message has been interpreted as fitting within the definition of a “call” within the statute[2], however courts have split on the issue of how to deal with phone numbers provided by consumers to businesses.

Can it be said that Facebook Advertising may be similar to a text message, putting the “custom audience” feature within the domain of the TCPA? I see many problems with this application. A person receiving a text message or phone call is much more invasive than viewing a simple advertisement on Facebook. Also, while “call” is ambiguous, I think that a court could not rationally say that an advertisement fits the definition.

Are Facebook’s Custom Audiences Consistent with Obama’s Proposed “Consumer Privacy Bill of Rights?”

In February 2012, President Obama announced the “Consumer Privacy Bill of Rights” (CPBR) and urged Congress to make the principles it contains law. In his introduction, Obama wrote,

These rights give consumers clear guidance on what they should expect from those who handle their personal information, and set expectations for companies that use personal data. I call on these companies to begin immediately working with privacy advocates, consumer protection enforcement agencies, and others to implement these principles in enforceable codes of conduct. My Administration will work to advance these principles and work with Congress to put them into law.[3]

Since its announcement, the CPBR has (predictably) received little attention in Congress.

The CPBR applies to “personal data,” defined as any data linkable to a specific individual. Seven principles are to be encompassed by future legislation regarding handling personal data:

INDIVIDUAL CONTROL: Consumers have a right to exercise control over what personal data companies collect from them and how they use it.

TRANSPARENCY: Consumers have a right to easily understandable and accessible information about privacy and security practices.

RESPECT FOR CONTEXT: Consumers have a right to expect that companies will collect, use, and disclose personal data in ways that are consistent with the context in which consumers provide the data.

SECURITY: Consumers have a right to secure and responsible handling of personal data.

ACCESS AND ACCURACY: Consumers have a right to access and correct personal data in usable formats, in a manner that is appropriate to the sensitivity of the data and the risk of adverse consequences to consumers if the data is inaccurate.

FOCUSED COLLECTION: Consumers have a right to reasonable limits on the personal data that companies collect and retain.

ACCOUNTABILITY: Consumers have a right to have personal data handled by companies with appropriate measures in place to assure they adhere to the Consumer Privacy Bill of Rights.[4]

I believe that if Congress takes action and legislates pursuant to these principles, Facebook will have to narrowly tailor use of the “custom audience” feature. Currently, marketers are able to target consumers on Facebook by inputting current e-mail lists and phone numbers into the “power editor,” thereby using customer data in a way that they likely would not have anticipated when providing their information. The CPBR focuses on consumer control, which is not just a trend, it is the future of laws regulating online advertising.

Importantly, under the revised definitions, advertising networks and plug-ins now fall under the umbrella of COPPA. The COPPA revisions have expanded the definitions of an “operator” and a “website or online service directed to children” to take today’s Internet-landscape into consideration. The definitions now include a child-directed site or service that integrates outside services that collects or maintains personal information from its visitors.  This rule governs entities that have an agent or service provider collect or maintain personal information from its visitors, or an entity that benefits from allowing third parties to collect personal information from the viewers. Put simply: if you own the child-oriented website, then the use of that website by third parties is your responsibility.

But what about the third party service that is placed onto a child-oriented website? The expanded definition states that a third-party service that collects personal information directly from users of a child-directed site or service will be liable for complying with COPPA only when the third party has actual knowledge that the site is child-directed. The FTC explains that a third party service may obtain actual knowledge when: (1) a child-directed content provider expressly communicates the child-directed nature of its content, or (2) a representative of the online service recognizes the child-directed nature of its content.

URL’s present an interesting issue to “actual knowledge.” An easy assumption is that a URL will indicate whether the website you are placing the ad on is child-oriented. However, the Internet is a multi-layered and complicated network, and each layer collects different information. As a result, a third-party may not be able to discern whether or not a website is a “child-directed site” simply by viewing the URL. As a result, a URL may not be a proper indicator that a website has child-directed content, and could leave a third-party at risk for liability under COPPA.

The FTC’s Chief Technologist, Steve Bellovin, recently published a blog post which provides some suggestions as to how to resolve this issue of actual knowledge.  The first suggestion was explicit signaling from the child-oriented website to the third-party advertisement. This type of signaling has already been used by advertising networks when they include how to request advertisements. In this type of signaling, a news article might contain a long link, and when you click on a word, it indicates how to place the advertisement in your article. Furthermore, the advertising network is being passed along information about the website it is placed on.

Bellovin explains that this technique can be tailored to include a “COPPA-covered site” flag, to give third parties actual notice that the website is child-oriented. This flag could be placed into the URL, so that the browser will understand and pass the information on to the third party. Also, it would be possible to configure the system so that embedded content that embeds content from another source, will have to pass along information about the COPPA flag.

At this time a standard “signaling” system has not been put into place to resolve the issue of actual notice, but Bellovin suggests that it could be with accomplished with the joint effort of the industry. Until this is implemented, it is important for advertising networks and plug-ins to be cognizant of the fact that if their services are placed on a child-directed site and they have notice of this fact, they could be held liable for COPPA violations under the revised rule.

Like baseball and apple pie, television is among the classic all-American pastimes.  Who can’t relate to the anticipation of waiting for a favorite show to premiere, and then dissecting every detail with fellow fans?  While the favorite shows always change over time, now the ways to watch them have too.  Traditionally, you would wait for the specific date and time to see your show, but with recording devices like TiVo and cable On-Demand and sites like Netflix and HBOGo, viewership is anything but traditional.  Instead of being limited to only the show’s current season or time constraints, you can catch up with entire seasons at the push of a button, and see current episodes in their from your computer or tablet just minutes after the live broadcast.  With these monumental shifts in viewing habits, it comes as a surprise that media ratings agencies have been slow to consider these new practices when compiling their ratings statistics.

But finally, Nielsen Company, the media company that monitors and compiles TV viewership to create TV ratings, has revised its sampling methodology.  On February 21, 2013, Nielsen announced that it would begin counting TVs connected to the Internet as “television households,” therefore including those Americans that have dropped their cable or satellite providers and watch TV exclusively via the Internet.  This change marks the conclusion of two years’ consideration of the plan, which Nielsen announced it was considering after TV ownership figures dropped in 2011.  In conjunction, Nielsen will start monitoring the use of iPads, Playstations and other mobile devices in an attempt to create a more accurate picture of total viewership, and the use of streaming services like Amazon and Netflix (because these services are either ad-free or contain different ads than the original broadcast, they were not included in Nielsen data).  Similarly, the move comes just a day after the Billboard 100 announced that it will include Youtube streams in compiling its song rating data.

TV executives, among others, are praising the long-awaited shift in ratings compilation, because they have long (and likely correctly) complained the new viewership avenues are not adequately reflected in ratings data.  Nielsen’s position acknowledges the shift from traditional viewing mediums, and is an important first step in reflecting America’s media consumption in the digital age.

For press releases and articles detailing Nielsen’s announcement, see here and here.

On February 1, the Federal Trade Commission (FTC) issued a staff report entitled Mobile Privacy Disclosures: Building Trust Through Transparency. By releasing this report, the FTC’s goal was to put in place “best practices” for mobile privacy disclosures. The FTC recognized several key themes arising from issues surrounding mobile privacy:

The lack of consumer awareness and understanding relating to “current information collection and use practices occurring on mobile devices.”

The importance of design of privacy disclosures to address the limitations of small screens.

The key role of platforms in deciding how information is conveyed to consumers and control they have over application developers.

The FTC organized their best practice recommendations by industry participant—platforms, app developers, third parties, and app trade associations—which is the order in which I will summarize the findings here.

Platforms:

A mobile platform, also called a mobile OS (mobile operating system), is the virtual base on which mobile devices operate. As the FTC states, “platforms such as Apple, Google, Amazon, Microsoft, and Blackberry are gatekeepers to the app marketplace and possess the greatest ability to effectuate change with respect to improving mobile privacy disclosures.” In this report, the FTC advanced four recommendations for consideration by platforms:

-Platforms have developed individual API’s (application programming interfaces), which allow applications to “access standard categories of content on a mobile device,” and put platforms in a position to easily allow for consistent disclosures across apps. The FTC further recommends that the disclosures should be made at multiple points in time:

Platforms should provide “Just-in-Time Disclosures” and obtain affirmative express consent from consumers. A “Just-in-Time” disclosure would occur just before the time when the information would be collected by the application.

Platforms should provide a “Privacy Dashboard” to allow consumers to determine “which apps have access to which data and to revisit the choices they initially made about apps.”

Platforms should explore the use of icons, so that consumers can clearly see when data is being collected.

-Platforms should oversee the privacy practices of applications. The FTC recommends adding “provisions to their contracts with app developers requiring them to provide just-in-time disclosures and obtain affirmative express consent before collecting or sharing sensitive data,” and reasonably enforcing these provisions.

-Platforms should disclose to consumers the review process an application undergoes before it is available in the application store.

-Platforms should provide a DNT (Do Not Track) option for consumers so that the decision does not have to be made on an “app-by-app basis.”

App Developers:

The FTC provides an outline of recommendations for application developers as follows:

-All applications should have a privacy policy available through the platform’s application store.

-Application developers should provide “just-in-time” disclosures and obtain affirmative express consent when collecting “sensitive information outside the platform’s API.”

-Application developers “should improve coordination with ad networks and other third parties that provide services for apps” in order to provide consumers with more accurate and truthful disclosures.

-Application developers “should consider participating in self-regulatory programs” and other like organizations, so that uniform short-form privacy disclosures can be drafted.

Advertising Networks and Other Third Parties:

The FTC points out that advertising networks and other third parties that provide services for applications need to work with the developers in order to provide consumers with more accurate disclosures.

App Trade Associations:

The FTC believes that application trade associations can serve to promote transparency within the field of mobile privacy. The recommendations here include:

-Developing standardized icons to depict application privacy practices.

-Work on developing “badges” (or short standard disclosures, in general) that can appear within advertisements for applications or the application itself.

-Develop “ways to have more standardization within app privacy policies.”

The FTC recognizes that the mobile technology field is rapidly expanding, and with this expansion comes risks to consumer privacy. In my opinion, these guidelines have an overarching theme: standardization. I believe that the FTC’s emphasis on standardization within mobile industry will soon allow consumers to make more educated decisions regarding the information they provide (willingly or not) on their mobile devices.

Source: http://ftc.gov/os/2013/02/130201mobileprivacyreport.pdf