Advertising Law -- Nov 01, 2013

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In This Issue:

When Dental Hygiene Meets False Advertising Suits

Dental hygiene related class action settlements made news recently, when a federal judge in New Jersey granted final approval in one case and a second settlement faced a hiccup after a watchdog group filed an objection.

In New Jersey, U.S. District Court Judge Jose L. Linares approved a deal between Procter & Gamble and five consolidated class actions alleging that the company falsely advertised the relief provided by its Crest Sensitivity Treatment & Protection toothpaste. He found that the class members raised common contentions capable of classwide resolution – and that they were all exposed to the same challenged representations located on the front and back of the product packaging.

Crest promised “Relief Within Minutes” and touted the toothpaste as a new product, neither of which was accurate, the plaintiffs charged. Sensitivity Treatment & Protection was really the same as Crest’s Pro-Health product, just with new packaging and color – and $3 more expensive.

Under the terms of the agreement, each class member (estimated to be in the hundreds of thousands) will receive $4. Class counsel will receive up to $700,000 and named plaintiffs will get $1,500 each. A second dental-related settlement may not fair as well.

According to a class action suit filed in California federal court, Philips Oral Health Care, Inc. deceptively advertised its Sonicare AirFloss plaque removal product by claiming that the AirFloss was better at removing plaque from teeth than traditional floss.

A federal court judge gave preliminary approval to a settlement in July, pursuant to which class members would be eligible for vouchers of $33, $23, and $7, depending on the amount of their purchases.

But last week watchdog group Truth in Advertising Inc. (TINA) requested leave to file an amicus brief in the case to object to the terms of the deal. TINA argued that the proposed terms fail to provide meaningful or adequate compensation for the class. Because the vouchers must be used toward the purchase of future Philips products, “the only party to the settlement receiving any meaningful benefit is Philips,” according to the brief.

“Class members, who are the victims of deceptive marketing, will not receive any compensation whatsoever from the settlement unless they purchase another product from Philips,” TINA wrote. “To make matters worse, the de minimis value of the already small vouchers is significantly decreased by the fact that they will come with a time restriction – class members must use their vouchers within one year.”

A hearing addressing final approval of the settlement is set for November.

To read the court’s order granting final approval in Rossi v. Procter & Gamble, click here.

To read Truth in Advertising’s amicus brief in Perkins v. Philips Oral Health Care, Inc., click here

Why it matters: Rossi and Perkins present different perspectives on false advertising consumer class action settlements in the context of oral hygiene products. Already having faced a decision from the National Advertising Division over claims for its Sensitivity Treatment & Protection toothpaste, P&G managed to reach a deal in the consumer class actions for $4 per class member and $700,000 in counsel fees. Philips faces a challenge to its settlement, however, by electing to avoid cash payment and award class members vouchers instead. As courts continue to become more involved in the class action settlement process, both plaintiffs and defendants will need to consider whether their proposed settlement terms will pass judicial muster.

Future Unclear for W3C and DNT

The struggle to establish a standard for Do Not Track continues, with even the World Wide Web Consortium at a loss about what to do next.

In July the W3C Tracking Protection Working Group (“TPWG”) failed to meet its deadline to establish an international DNT standard. The Group took a break for the rest of the summer, got a new cochair – Justin Brookman of the Center for Democracy and Technology – and then faced the question, what now?

Provided with a questionnaire, the 100+ members of the TPWG still couldn’t reach a consensus on whether to continue their work or disband. Group members were given five options, including “Go on with proposed plan,” a “No confidence” or “Stop work” option, and a choice to finalize definitions and compliance.

The first option received the lowest tally of yes votes and highest number of no votes (16 and 26, respectively), while the second option received 17 yes votes and 22 no votes. The third course of action was the most popular, with 21 votes for and just 15 against.

But Brookman said he is “unsure” of the next step for the Group, given the close results and some of the comments added by members, such as Jeffrey Chester at the Center for Digital Democracy, who wrote, “This proceeding is so flawed – it’s a farce.” Consumer Watchdog’s John Simpson agreed, writing, “It is crystal clear that this Working Group cannot reach a meaningful consensus on a Do-Not-Track Compliance Standard. The Working Group should be disbanded.”

Others remained optimistic, such as Jeff Jaffe, the CEO of the W3C, who said, “I believe that the broad stakeholders of the Web community require a DNT standard. I know of no other venue where that might take place.” And Amy Colando of Microsoft indicated the company would like to continue the process, writing, “A final, meaningful DNT standard will help build greater trust across the Internet ecosystem, and we look forward to continuing to work together to achieve this goal.”

Advertising industry members fell on the side of stopping work. The Direct Marketing Association’s Rachel Thomas wrote, “Unfortunately, the W3C TPWG process now seems unlikely to result in anything more than an academic, intellectual exercise. However, DMA will continue to participate in that process in good faith for the foreseeable future in order to ensure that the interests of DMA members are represented should the TPWG continue its work.”

Lou Mastria of the Digital Advertising Alliance said his group plans to redirect its efforts. “Rather than continue to work in a forum that has failed, we intend to commit our resources and time in participating in efforts that can achieve results while enhancing the consumer digital experience,” he wrote. “The DAA will immediately convene a process to evaluate how browser-based signals can be used to meaningfully address consumer privacy. The DAA looks forward to working with browsers, consumer groups, advertisers, marketers, agencies, and technologists. This DAA-led process will be a more practical use of our resources than to continue to participate at the W3C.”

To read the Working Group’s votes and comments, click here

Why it matters: Without a clear majority position from the voting – and with 66 members of the TPWG yet to vote – Brookman and W3C director Tim Berners-Lee will need to make the call on what happens next, according to a statement from W3C communications head Ian Jacobs. “The chairs will review the results, including comments, and suggest actions – including proposals for the director. I don’t have a timeframe yet, but I assume it will be soon.”

Tracking Consumers Across Multiple Devices Requires FTC Investigation, Says Sen. Markey

Expressing concern about technology that can track individuals across multiple devices – like smartphones, tablets, and computers – Sen. Ed Markey (D-Mass.) wrote to the Federal Trade Commission, requesting an investigation.

“Such persistent and pervasive tracking raises a number of important privacy concerns for all Americans,” he wrote. “Such tracking envelops users in a digital environment where marketers know their preferences and personal information no matter which device they use, while consumers are kept largely in the dark.”

Sen. Markey indicated that his letter was in response to a recent article in The New York Times, which explained how online data brokers and marketers can connect a single individual’s cell phone, work computer, and home computer – even if the devices are in no way connected.

For example, if “ ‘someone regularly checks a news app on a phone in bed each morning, browses the same news site from a laptop in the kitchen, visits from that laptop at an office an hour later and returns that night on a tablet in the same home,’ a company can conclude all the devices belong to the same person,” Sen. Markey wrote, quoting the NYT.

The article noted that large advertisers, many of them Fortune 500 brands, are already making use of the new mobile tracking methods. One company discussed by the NYT, Drawbridge, said it has matched 1.5 billion devices and assigned the users an anonymous identifier by employing “statistical modelling to determine the probability that several devices have the same owner.”

“The implications of this capability are alarming,” read Sen. Markey’s letter to FTC Chairwoman Edith Ramirez.

With the new technology, “companies can monitor behavioral patterns and use statistical modelling to determine that different devices and computers belong to the same person even as consumers are unaware that their online activity on one device is being paired with their activities on other devices to create a personalized digital mosaic for marketing and other potential purposes,” he wrote.

To read Sen. Markey’s letter to the FTC, click here

Why it matters: The article and Sen. Markey’s request for an FTC investigation is further evidence that data brokers and the collection of consumer data remain the focus of congressional and FTC concern. “I look forward to hearing the Commission’s views and plans to address this serious privacy matter,” Sen. Markey wrote to Chairwoman Ramirez, who has expressed her own concerns about consumer privacy in the context of multiple devices and the Internet of Things.

OBA Releases First-Ever Compliance Warning

Issuing its first-ever Compliance Warning, the Online Interest-Based Advertising Accountability Program, part of the industry Digital Advertising Alliance (DAA), cautioned Web site operators that they must provide real-time, enhanced notice to consumers when third parties collect information for online behavioral advertising (OBA).

While conducting compliance monitoring activities, the Accountability Program noted “a significant minority” of Web site operators that were otherwise in compliance with the OBA Principles but had failed to meet the enhanced notice requirement.

Section II.B of the Transparency Principle requires operators to provide notice of third- party OBA through a “clear, meaningful, and prominent link” provided by the operator on each “Web page where data is collected” for OBA.

“This link, known as the ‘enhanced notice link,’ should take the consumer directly to the website operator’s disclosure of third-party OBA activity that either points to an industry-developed Web page such as the [Digital Advertising Alliance’s] Consumer Choice Page (www.aboutads.info/choices) or individually lists all the third parties engaged in OBA on its website and provides links to each of their respective choice mechanisms,” according to the Compliance Warning.

“Either way, a clear, prominent link to the website operator’s disclosure (usually placed in the footer of the website or along a sidebar) must be separate from the link that takes the consumer to the website operator’s privacy policy,” the Warning explained.

“It is this link that affords just-in-time enhanced notice and ensures that consumers are taken directly to a place where they can learn more about interest-based ads and decide whether they wish to participate. By these means, explanations of third-party data collection and use become readily available, rather than buried in an obscure corner of a lengthy privacy policy.”

Although the Compliance Warning primarily addressed enhanced notice in the context of third-party collection for OBA on a particular Web site, the Accountability Program also reminded operators that the Principles apply to a first party’s collection of data from its own Web site when used to deliver tailored ads on the Web sites of non-Affiliate entities. “Therefore, the sale, transfer or use of first-party data for OBA purposes to unaffiliated third parties constitutes OBA and triggers the enhanced notice obligation typically required when a third party is engaged in OBA collection or use on a particular website.”

Along with the warning, the Accountability Program also released a notice that it had administratively closed seven formal inquiries of first parties that failed to provide the required enhanced notice. The identities of the parties were not released, but the Accountability Program said they were among the “significant number” of companies that promptly responded to the investigation and had a long-standing history of compliance with OBA requirements, but were confused by the enhanced notice requirements.

Such administrative closures “will be rare,” the Accountability Program added.

To read the Compliance Warning, click here.

Why it matters: Web site operators that collect and share information about consumers who visit their sites and allow third parties to collect such information should consider themselves on notice. “The Accountability Program expects all covered entities to review their current practices rigorously and ensure that they are meeting the requirements set out above, as well as all other requirements of the Principles,” according to the Warning. While the Accountability Program, and by extension the DAA, has no actual enforcement authority, operations that do not comply will be referred to the FTC. Whether the FTC acts on these referrals is another story, as the Program rules are not law and failure to comply does not constitute any illegal act.

Most Read Stories

In case you missed any, here are our top 10 most widely read stories in September:

1. “Actress Claims Sponsorship Deal Soured Over ‘#spon’

2. “Julia Child Foundation Whips Up Lawsuit Against Williams-Sonoma

3. “#PRnightmare – Flyer Buys Promoted Tweets to Bash British Airways

4. “E-Cigarettes Increase Presence With Traditional Tobacco Advertising – Will Regulation Follow?

5. “References to Fungi, E. coli Result in NAD Action

6. “It’s All About the First Amendment: Lance Armstrong Wins Dismissal in False Ad Suit Over Books

7. “FTC Members Speak Out About Data Brokers, Big Data

8. “Missouri AG Sues Walgreens Over Deceptive Advertising, Sales Prices

9. “California Legislation on DNT Notice, Minors on Social Media

10. “FTC False Ad Suit Against Car Dealers Settles"

Topics:  Advertising, Class Action, Compliance, Do Not Track, FTC, Mobile Devices, Native Advertising, Settlement, W3C

Published In: Antitrust & Trade Regulation Updates, Communications & Media Updates, Consumer Protection Updates, Privacy Updates, Science, Computers & Technology Updates

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.

© Manatt, Phelps & Phillips, LLP | Attorney Advertising

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