Advertising Law - April 2016 #3

by Manatt, Phelps & Phillips, LLP
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In This Issue:

  • SPECIAL FOCUS: #Twitter at Ten: Ten Times Twitter Made Ad Law History
  • Non-Olympic Sponsors Can Go for Advertising Gold in 2016
  • Regulator Calls for Removal of Ad Featuring "Unhealthily Thin" Model
  • California DAs Put the Brakes on Uber With $25M Fine

SPECIAL FOCUS: #Twitter at Ten: Ten Times Twitter Made Ad Law History

By Linda Goldstein

Ten years ago the world was introduced to Twitter, a microblogging site offering users the chance to express themselves just 140 characters at a time. The social media platform quickly exploded to become a part of everyday life for an estimated 320 million active users. Not surprisingly, Twitter has also had a major impact on the law. Below, a hit list of Twitter's biggest moments in advertising law.

1. #Copyright: Early on, Twitter intersected with copyright law. A 2010 lawsuit left the site in the middle when a photographer filed an infringement suit against Getty Images and Agence France-Presse, claiming the wire services made unauthorized use of photos he posted on Twitter of the devastating earthquake in Haiti. The dispute created law—with a federal district court declaring that Twitter's terms of service did not constitute a defense to copyright infringement—and yielded a $1.2 million jury verdict in favor of the photographer. The verdict highlighted the risk of appropriating material from social media sources such as Twitter, and reiterated that while content on such sites is arguably meant to be shared, it does not outweigh respect for content ownership.

2. #Child-DirectedContent: As advertisers began to engage with consumers via Twitter, many added links from their sites and apps to their Twitter feeds. But one company ran into a problem when it linked from a child-directed website to the social media platform. Stuffed teddy bear retailer Build-A-Bear, Inc., featured a yellow blimp reading "Follow Us!" with hyperlinks to Twitter and other networking sites. In a self-regulatory proceeding, the Children's Advertising Review Unit recommended that the links be removed, and expressed concern that the links could be used before a visitor was appropriately age-gated. Build-A-Bear agreed to remove the links and advertisers learned an important lesson.

3. #FTCTrendsetter: Against which social networking service did the Federal Trade Commission (FTC) bring its first case? That's right, Twitter. In March 2011 the agency charged the company with lapses in data security and the failure to protect users' personal information. These errors allegedly resulted in unauthorized access on two occasions, when an intruder was able to obtain an employee's administrative password and then reset user passwords and send unauthorized tweets. In one famous example, the intruder hacked then President-elect Barack Obama's Twitter account to tweet his followers about an offer to win $500 in free gasoline. To settle the charges, Twitter agreed to a 20-year prohibition on misleading consumers about its security and privacy, and to establish and maintain a comprehensive information security program.

4. #Twibel: Almost single-handedly, Courtney Love created a new cause of action involving Twitter. Twibel, or libel on Twitter (also referred to as Twitter defamation), first appeared in 2010 when Love referred to a clothing designer as a "total scumbag, lying ripoff" and a prostitute in a Twitter rant. The designer responded with a defamation suit, which settled just prior to trial for $430,000. Love was again accused of Twibel in a second suit, this time by her former attorney after Love tweeted that she was "devastated" the lawyer was "bought off." That case made it all the way to trial, where a jury sided with Love. A California appellate panel affirmed the verdict earlier this year. The cases both serve as a reminder that despite its character limit, there is still room for potential liability on Twitter for defamation.

5. #Hashtag: The term "hashtag" entered the popular lexicon thanks to Twitter, and the term has become so popular that it has increasingly appeared in trademark filings, as companies and brands seek to protect their intellectual property. According to a new study by Thomson Reuters' CompuMark, 1,390 applications for trademark-specific hashtags were filed globally last year, up from just 7 in 2010. The majority of hashtag applications can be found in the United States (1,042), followed by Brazil with 321 and France with 159.

6. #Sponsorship: Could a hashtag cause a sponsorship deal to go sour? Actress Octavia Spencer answered in the affirmative in her lawsuit against Sensa Products seeking the remainder of payments under her $1.25 million agreement with the company. Spencer claimed she signed on to promote the weight-loss product and did so in compliance with the applicable FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising. Her tweets included "Just had the best breakfast meatless sausage, banana pancakes, sensa! @Sensa Weightloss!!!!! #spon." In her complaint, Spencer described five occasions where Sensa executives allegedly requested that she remove the "#spon" from her tweets. She refused and Sensa eventually terminated the contract claiming poor sales. Spencer won a $940,000 default judgment against the company, but her suit highlighted the Catch-22 of complying with the Guides: while advertisers and their endorsers are required to designate paid tweets, consumers may be less apt to be engaged or interested in such communications.

7. #PublicityRights: According to actress Katherine Heigl, a single tweet is worth $6 million. At least that is how much she requested in damages in her Lanham Act and right of privacy and publicity lawsuit in New York federal court against Duane Reade. The pharmacy chain tweeted: "Love a quick #DuaneReade run? Even @KatieHeigl can't resist shopping #NYC's favorite drugstore," which included an image of Heigl leaving a Duane Reade store carrying store-branded bags. When the retailer failed to remove the post at her request, Heigl sued over the "exploitation" of her "carefully and deliberately protected" professional name, likeness, and persona. The suit ultimately settled but provided a valuable reminder about respecting the privacy and publicity rights of celebrities in social media marketing.

8. #Ownership: Who owns a Twitter account—the employee who operates the account or the company named in the handle? Noah Kravitz, a product reviewer and video blogger for website PhoneDog, signed up for a Twitter account with the handle "@PhoneDog_Noah." By the time he left the company, the account had more than 17,000 followers. Kravitz changed the handle and then began working for a competitor. PhoneDog sued, arguing that Kravitz misappropriated trade secrets because the Twitter followers were the equivalent of a stolen customer list. The parties ultimately reached a confidential settlement, but not before a federal district court denied Kravitz's motion to dismiss, ruling that PhoneDog had sufficiently alleged that its economic relationships suffered due to Kravitz's actions. The former employee's conduct resulted in diminished traffic to the PhoneDog website via the Twitter account, which in turn decreased the number of page views and discouraged advertisers from paying for ad inventory.

9. #BrandVigilance: As the number of Twitter users grew exponentially, so did the number of Twitter imposters. Brands faced the proliferation of unauthorized Twitter feeds using the names and likenesses of well-known mascots such as the Pillsbury Doughboy and Tony the Tiger. And while General Mills tweeted about frozen vegetables from @GreenGiant, a marijuana dispensary (@420jollygreen) shared less wholesome social media messages. The lesson: Be vigilant and police Twitter activity that could tarnish a brand.

10. #PRNightmare: Advertising in social media took on a different meaning after one flyer used a new approach to complain about a company's service. Hasan Syed purchased a promoted tweet in the New York City and United Kingdom markets to complain after British Airways lost his father's luggage, with messages such as "Don't fly @BritishAirways. Their customer service is horrendous." Syed's tweets—and the airline's less-than-stellar response, claiming it couldn't message him directly—were picked up by various news outlets which compounded British Airways' customer service problems. Every airline loses luggage, but the story reiterates that advertisers must keep their social media knowledge and skills sharp to avoid a high-profile brand embarrassment.

Non-Olympic Sponsors Can Go for Advertising Gold in 2016

Advertisers that are not official sponsors may take part in the 2016 Summer Olympics for the first time pursuant to a rule change by the International Olympic Committee (IOC).

Previously Rule 40 of the Olympic Charter prohibited nonofficial sponsors from running ads featuring Olympic athletes during a defined blackout period that typically lasted from a few days prior to the opening ceremonies through the end of the games. Lobbying by athletes helped persuade the IOC to change Rule 40 last June. The new rule will allow nonofficial sponsors to feature ads using Olympic athletes during the games upon receiving approval from the IOC, provided that nonsponsors run such advertising continuously starting no later than March 27.

To be eligible to run advertising under the new rule, nonofficial sponsors were required to apply for approval from the IOC by submitting their advertising campaigns with accompanying media schedules by January 27, 2016. While initial submissions did not require a complete list of proposed tactics, the revised rule underscored that "each and every final tactic will require a waiver." The time period allows the U.S. Olympic Committee (USOC) to approve the ads, ask for changes if necessary, or deny their use.

Despite the rule change, detailed restrictions still apply and the advertisements must be "generic" without language or images that directly associate the brand with the games. The rule bans the use of the word "Olympics" as well as terms such as "summer," "victory," and "effort" in certain contexts. Nonofficial sponsors may describe their athletes as Olympians because such information is biographical, but reference to participation in the games should be "balanced with non-Olympic achievements."

That deadline explains why Under Armour chose to run an already aired commercial featuring members of the women's gymnastics team and why General Mills aired a Wheaties ad with swimmer Missy Franklin and sprinter Allyson Felix. Dozens of other companies have applied to use the waiver, including Adidas AG, Brooks Running, Gatorade, GoPro, and Speedo.

Chief Marketing Officer for the U.S. Olympic Committee Lisa Baird told Reuters that the new rule allows athletes "to continue their long-term promotional relationships with brands, and helps to curtail ambush of our partners." The USOC will be monitoring the nonofficial sponsors for compliance with the changes to Rule 40. "It's a new process, but a process we believe is fair to all parties," Baird added.

To read the IOC's Rule 40 Guidelines, click here.

Why it matters: Talk about a win-win. The updated Rule 40 benefits not just advertisers, but Olympic athletes, the majority of whom are not professional athletes and need the income from endorsement deals, as well as the network airing the 2016 Summer Games (selling even more ads) and the IOC itself. By requiring the ad campaigns to launch four months before the events begin in Rio de Janeiro, the Olympics get the advanced hype courtesy of the nonofficial sponsors, which could in turn result in higher ratings for the games.

Regulator Calls for Removal of Ad Featuring "Unhealthily Thin" Model

The United Kingdom's advertising regulator ruled that a model appearing in a Gucci ad was "unhealthily thin," and ordered the advertiser to remove a still photograph that appeared in an online video posted last December.

Based on a complaint, the Advertising Standards Authority (ASA) investigated the video, which appeared on The Times of London website in December 2015. Several models danced to a soundtrack in the beginning of the video, which ended with still photos of individual models. One of the images at issue featured a thin woman "leaning with her back to a wall…wearing a long dress which covered her body from the neck down to her mid-calves including her arms." The second image at issue depicted a thin model seated on a sofa, wearing a high-necked jacket and skirt that covered her down to her mid-thighs.

In response to the investigation, Gucci told the regulator that the ads were part of a video that portrayed a dance party, aimed at "an older, sophisticated audience," the target population of the Times readership. The advertiser also contended that "it was, to some extent, a subjective issue as to whether a model looked unhealthily thin" but that Gucci did not believe either of the models presented such an appearance.

Both models had "slim builds," Gucci argued, and nowhere in the ads were any of their bones visible. Lighting in the ad was warm "to ensure there were no hollows caused by shadows" and their clothing was not revealing, the advertiser said.

But the ASA found the ad violated Section 3.1 of the Committee of Advertising Practice's Code, which states: "Marketing communications must be prepared with a sense of responsibility to consumers and to society."

While the model seated on the sofa did not appear to be excessively slender or underweight, the model leaning against the wall had "quite slender" arms and torso, which "appeared to be out of proportion with her head and lower body," according to the regulator's decision. Her pose added to the problem by elongating her torso and accentuating her waist "so that it appeared very small," the ASA said.

"We also considered that her somber facial expression and dark make up, particularly around her eyes, made her face look gaunt," the regulator wrote. "For those reasons, we considered that the model leaning against the wall appeared to be unhealthily thin in the image, and therefore concluded that the ad was irresponsible."

The "ad must not appear again in its current form," the ASA ordered, instructing Gucci to ensure that the images in its advertising are "prepared responsibly."

To read the ASA's decision, click here.

Why it matters: The UK regulator's decision takes a stand in the ongoing debate over weight in the modeling industry. Some countries have enacted laws to ensure that models are not underweight or unhealthy out of concern for the images presented to young women. The ASA has waded into the debate before, having ruled against another high-fashion company last year after concluding that a print ad featured an "unhealthily underweight model" with thin legs and a visible rib cage.

California DAs Put the Brakes on Uber With $25M Fine

To settle allegations of deceptive advertising and unlawful business practices in violation of California's consumer protection laws, Uber has agreed to pay $25 million to the counties of Los Angeles and San Francisco.

In December 2014, the DA Offices in Los Angeles County and San Francisco commenced enforcement action against Uber, challenging advertising that touted the ride-sharing company's method of background checks. Uber used a private, outside entity to screen prospective drivers in a process that it characterized as the "best" in the industry.

The DAs took issue with the claim, alleging that the company did not go above and beyond state and local requirements in the jurisdictions in which it operated. For example, Uber did not require drivers to submit their fingerprints for a background check. "You are not using an industry-leading background process if you are not fingerprinting your drivers," said San Francisco DA George Gascón at a press conference when the suits were announced.

Uber also allegedly violated California's consumer protection law by operating at airports without authorization and charging customers fees for nonexistent airport "tolls" and fees that in part covered the background-check process, according to the District Attorneys.

To settle the suit, Uber agreed not to operate at California airports without permission from the airport authority and to pay $1.8 million in restitution to settle the charges over airport toll fees. In addition, the stipulated judgment filed in state court subjects the company to a permanent injunction prohibiting misleading statements regarding the safety of its transportation services or the background checks of its drivers.

The $25 million civil penalty may be reduced upon good behavior. The two counties accepted $10 million from Uber (divided evenly) and said payment of the remaining $15 million will be waived at the end of two years if the company complies with all of the terms of the permanent injunction.

To read the Los Angeles County DA's press release about the deal, click here.

To read the San Francisco DA's press release, click here.

Why it matters: "The result we achieved today goes well beyond its impact on Uber," San Francisco District Attorney George Gascón said in a press release about the agreement. "It sends a clear message to all businesses and to startups in particular, that in the quest to quickly obtain market share, laws designed to protect consumers cannot be ignored. If a business acts like it is above the law, it will pay a heavy price." His comment is certainly true in the case of Uber, which also faces consumer class actions involving similar allegations of exaggerated claims regarding background checks. Uber reached a deal with the nationwide class totaling $28.5 million, but a federal court judge has yet to sign off on the agreement.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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