Advertising Law - April 2017 #4

by Manatt, Phelps & Phillips, LLP
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Manatt, Phelps & Phillips, LLP

In This Issue:
  • Massachusetts AG Fences off Geofencing Ad Campaign
  • TRUSTe Will Pay $100,000 in Deal Over COPPA Violations
  • Dunkin' Donuts Settles Over Margarine False Ad Claims
  • Dish Soap, Potato Chips, Coffee Drinks: Slack Fill Lawsuits Fill up the Courts
  • Touchdown for Buccaneers With $19.5M TCPA Settlement

Massachusetts AG Fences off Geofencing Ad Campaign

In what appears to be the first time a consumer protection law was used to object to a company engaging in GPS-based ad targeting, Copley Advertising settled with Massachusetts Attorney General (AG) Martha Healey after she challenged the company's targeting of women near health clinics.

Massachusetts-based Copley was hired by a Christian organization in the spring of 2015 to send antiabortion ads to the smartphones of "abortion-minded women" who were either close to or had entered the waiting rooms of women's health clinics, the AG alleged. Ads featured text such as "You Have Choices," "Pregnancy Help" and "You're Not Alone" that, if clicked on, provided recipients with information about abortion alternatives and an opportunity to engage in a mobile chat with a "pregnancy support specialist."

Copley's use of geofencing—creating a virtual fence around a specified location that is tripped when an individual enters the area with a mobile device—was set at or near reproductive health centers and methadone clinics in Columbus, New York City, Pittsburgh, Richmond and St. Louis, and continued to send targeted ads for up to 30 days.

Although Copley had yet to engage in geofencing campaigns within Massachusetts, the company had the ability to do so and the AG alleged that such a targeted ad campaign would run afoul of Massachusetts's consumer protection law by "tracking a consumer's physical location near or within medical facilities, disclosing that location to third-party advertisers, and targeting the consumer with potentially unwanted advertising based on inferences about his or her private, sensitive, and intimate medical or physical condition, all without the consumer's knowing consent."

To settle the suit, Copley agreed to refrain from using geofencing technology at or near Massachusetts healthcare facilities to infer the health status, medical condition or medical treatment of any individual, according to the Assurance of Discontinuance. However, the company denied any wrongdoing.

"The Massachusetts Attorney General's office singled out Copley Advertising to challenge what we believe was an exercise of free speech under the First Amendment," Copley's owner John Flynn said in a statement. "Although we have not violated any laws, we made an agreement with the AG's office so we can devote our time and resources to working for our clients. Their right to free speech should not be marginalized because government officials do not agree with the message of their advertisement."

To read the Assurance of Discontinuance in In the Matter of Copley Advertising, click here.

Why it matters: "While geofencing can have positive benefits for consumers, it is also a technology that has the potential to digitally harass people and interfere with health privacy," AG Healey said in a statement. "Consumers are entitled to privacy in their medical decisions and conditions. This settlement will help ensure that consumers in Massachusetts do not have to worry about being targeted by advertisers when they seek medical care." The action also sends a message to advertisers to use caution when considering a geofencing ad campaign.

TRUSTe Will Pay $100,000 in Deal Over COPPA Violations

For charges of failing to adequately evaluate whether sites operated by its customers complied with the Children's Online Privacy Protection Act (COPPA), True Ultimate Standards Everywhere Inc. (TRUSTe) will pay $100,000 to the New York Attorney General's (AG) Office and change its policies.

The action began with AG Eric Schneiderman's investigation into the COPPA practices of customers who made use of TRUSTe's certification program to signify compliance with the statute. After discovering that several TRUSTe customers permitted third-party tracking technologies on their child-directed websites that were not in compliance with COPPA the AG turned its sights on TRUSTe.

As the operator of a Federal Trade Commission-approved safe harbor program, the company was required to conduct a comprehensive review of its Web site policies, practices and representations at least once per year to assess compliance with COPPA, the AG explained. But according to the AG, the reviews were lacking in several regards.

Despite conducting electronic scans of customers' Web sites for third-party tracking technology, TRUSTe omitted most or all of the children's websites from its scans "in many cases," Schneiderman alleged, which left TRUSTe unable to determine whether unexpected third-party tracking technologies were present on these websites.

In addition, since TRUSTe failed to provide customers with relevant results from its electronic scans, they did not have the opportunity to analyze the results, the AG said, and instead of making an independent determination, they simply accepted customers' representations that third-party tracking technologies found on their children's websites did not violate COPPA.

As a result, COPPA violations were allowed to continue on the children's websites of TRUSTe's customers, the AG alleged.

TRUSTe agreed to pay $100,000 to the AG's Office and implement a more rigorous privacy assessment process for its COPPA safe-harbor program. Specifically, the company will conduct electronic scans of "a substantial portion" of each of its customers' children's websites for tracking technologies prohibited by COPPA. Such scans can only be conducted by "dedicated employees with expertise and experience", who must also verify that each scan was conducted properly.

Every third-party tracking technology must be identified through TRUSTe's scans to its customers, while customers must provide information about the third parties operating on their children's websites (including the types of information collected and how such information is used by each third party). TRUSTe promised to review the information provided by customers to determine if it violates COPPA and to maintain a database of third-party tracking technologies to help it determine whether they violate the statute.

To read the New York AG Office press release about the decision, click here.

Why it matters: AG Schneiderman noted that the case against TRUSTe was the second in connection with "Operation Child Tracker," the Office's ongoing investigation into the illegal tracking of children's online activity by marketers and advertising companies, among others. The first case targeted popular children's websites that contained third-party tracking technology in violation of COPPA, in which four companies paid a total of $835,000 and adopted reforms on dozens of websites.

Dunkin' Donuts Settles Over Margarine False Ad Claims

Butter or margarine? For one Massachusetts customer of Dunkin' Donuts, the answer was important enough to sue 23 stores and reach a deal ensuring they provide butter to customers who ask and provide them with vouchers for free baked goods.

Jan Polanik was "shocked" to discover that, despite paying 25 cents for butter to use on his baked goods he received margarine or another type of butter substitute instead, according to a pair of class actions he filed in state court. He sued the owners of 23 Dunkin' Donuts stores in Massachusetts under the state consumer protection law, asserting that he and other customers were deceived because they were not notified that they were receiving margarine instead of butter between June 2012 and June 2016.

The defendants agreed to settle actions and provide a total of 1,400 vouchers that can be used for the purchase of up to three baked goods (defined as "bagels, muffins, or other baked goods offered") at the store. Notice will be posted at the relevant Dunkin' Donuts stores—both at the cash register and the drive-through window—and vouchers that have not been claimed 60 days after final approval of the deal will be donated to a homeless shelter or food bank.

Polanik will receive $500 as class representative, with $90,000 slated for his attorneys.

Further, the defendants will provide butter to those customers who request it for a one-year period. When the year ends, the defendants may offer butter substitutes as long as the store menu and notice boards indicate that a substitute is being offered.

Why it matters: Polanik's lawyer acknowledged that the dollar amount at issue was minimal, but told The New York Times that his client "really just prefers butter for a number of reasons" and wanted the practice of substitution without notification changed. "It's the basic principle that if something is misrepresented to you, it should be corrected," he said. "The main thrust of the case, really, is to get the stores, and hopefully Dunkin' Donuts generally, to change that practice and not deceive people."

Dish Soap, Potato Chips, Coffee Drinks: Slack Fill Lawsuits Fill up the Courts

They may be based on empty air, but slack fill lawsuits are filling up the courts, with new cases challenging everything from dish soap to potato chips to coffee drinks.

Alleging The Honest Co. was less than truthful, Chelsea Grey filed suit in California federal court over the ten percent difference in dish soap found in the company's packaging as compared to the label statement.

Although the bottles state they contain 26.5 fluid ounces, the Wall Street Journal reported in March that the bottles actually contain just 24 fluid ounces, according to the complaint. Spokeswoman for the company tolf the publication that "[t]he company is rolling out new dish soap in revised packaging with labels stating the bottles contain 24-fluid ounce[s] … to eliminate a small inconsistency between physical fill volume and labeled fill volume."

Grey seeks to certify a nationwide class of consumers who purchased the allegedly underfilled containers over the last several years at "a price premium," as well as a corrective advertising campaign, and compensatory, statutory and punitive damages.

Similar allegations were levied against Wise Foods Inc. regarding the company's potato chips. A pair of consumers asserted that the company uses larger bags with more slack fill than competitors to trick consumers into thinking they are getting more than they actually are.

Just one-third of the space available in the Wise bags is actually used, the New York federal court complaint stated, with slack fill accounting for between 58 to 75 percent of its products. Even recognizing the need for some slack fill, a sizable percentage is nonfunctional, the plaintiffs told the court, as demonstrated by the fact that Wise products have "significantly greater" slack fill than the packaging of competitors, even those using smaller product bags.

"The real explanation lies in Defendant's desire to mislead consumers about how much product they are actually purchasing and thus increase sales and profits," according to the complaint. "The packaging of the Products is uniformly made out of non-transparent wrappings so that consumers cannot see the slack-fill therein, thus giving Plaintiffs and the Class the false impression that there are more chips inside than there actually is."

In addition to injunctive relief, the suit seeks compensatory and punitive damages.

And in Oregon federal court, J. Podawiltz claimed that, "[l]ike its eponymous name, Rockstar Inc. thinks it can get away with anything," including cheating purchasers out of six percent of the advertised volume of its energy coffee drinks. Despite the label's stated 473 mL of beverage, the defendant's cans were short about 30 mL, the plaintiff claimed, as revealed in a recent study by a food laboratory that discovered the discrepancy on Rockstar products while finding that similar drinks from Starbucks and Monster contained the amount of beverage advertised on their cans.

Requesting an injunction to stop the alleged volume misrepresentations (for a class of Oregon consumers dating back to March 26, 2016), Podawiltz also seeks actual damages or $200 statutory damages under the state's consumer protection law, as well as punitive damages.

To read the complaint in Grey v. The Honest Company, click here.

To read the complaint in ALCE v. Wise Foods, Inc., click here.

To read the complaint in Podawiltz v. Rockstar, Inc., click here.

Why it matters: As demonstrated by the lawsuits filed in states across the country against a range of different products—from dish soap to potato chips to energy coffee drinks—slack fill litigation continues to fill the courts.

Touchdown for Buccaneers With $19.5M TCPA Settlement

A Florida judge granted preliminary approval to a $19.5 million deal in a Telephone Consumer Protection Act (TCPA) suit brought against the Tampa Bay Buccaneers, alleging that the National Football League (NFL) team sent unsolicited fax advertisements for tickets to games.

The dispute began in June 2013 when Cin-Q Automobiles initiated an action against the Buccaneers, alleging that the team sent unsolicited fax ads in 2009 and 2010 offering tickets to NFL games that failed to provide the proper opt-out notice required by the TCPA. Over the course of three years, the parties engaged in extensive discovery, motion practice and mediation conferences with no result.

After progress stalled, Technology Training Associates (TTA) filed its own class action in May 2016 based on the same allegations and covering the same time period. Based in large part on the efforts made in the Cin-Q litigation, TTA and the Buccaneers reached a settlement agreement. Concurrently, the Cin-Q plaintiffs sought to intervene in the later suit and a third suit was filed between the attorneys involved in the cases.

U.S. District Court Judge Anthony E. Porcelli then considered Cin-Q's motions to consolidate the cases and intervene in the TTA action, as well as the unopposed motion for class certification and preliminary approval of the settlement deal between TTA and the Buccaneers.

The court first granted the motion to certify the TTA class and preliminarily approved the settlement agreement. The deal provides a settlement fund of up to $19.5 million for the upwards of 343,000 faxes allegedly sent to more than 131,000 unique fax numbers, with payments of up to $350 for the first facsimile and up to $565 total for up to five faxes to class members who submit claims.

Also covered by the fund: incentive awards, notice and administration costs, and fees, costs and attorneys' fees not to exceed 25% of the total fund. The Buccaneers further agreed not to send any unsolicited fax advertisements in violation of the TCPA going forward.

"Solely for purposes of preliminary approval, such terms appear fair, adequate, and reasonable," Judge Porcelli wrote. "Namely, though the potential recovery may exceed the agreed-upon amounts recoverable, the Settlement is either on par with or greatly exceeds prior TCPA settlements, both in the total amount in the Settlement Fund and in the amount awarded to each class member."

The court cited "the lengthy and detailed procedural history" of the Cin-Q action in support of granting approval, noting that the parties "can reasonably anticipate similar procedural hurdles, a lengthy duration, and great expense to both parties if they are forced to litigate the issues present in this action."

As for the Cin-Q plaintiffs, the court denied the motion to intervene as well as the motion to consolidate the cases. Any concerns presented by the Cin-Q plaintiffs may be addressed through the objection process pursuant to Federal Rule of Civil Procedure 23, the court explained, even the argument that the settlement agreement was the product of a "reverse auction."

These rulings did not foreclose the possibility of potential incentive awards to Cin-Q plaintiffs or possible attorneys' fee awards to their counsel, Judge Porcelli noted. He sent a final hearing date on the deal for October 2017.

To read the order in Technology Training Associates v. Buccaneers Limited Partnership, click here.

Why it matters: Although the court granted preliminary approval to the deal, a final stamp of approval will require that court decide the objections from the Cin-Q plaintiffs, who argued to the court the TTA case was the result of a "reverse auction," where the Buccaneers "negotiated with ineffectual lawyers and a plaintiff with the weakest claim to obtain a settlement in the hope that the Court will approve a weak settlement that will preclude other claims" against the defendant.

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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