AD-ttorneys@law - August 2022 #2

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BakerHostetlerFCC Slams American Scammers for 8 Billion Robocalls

With too many calls to document, carriers are ordered to pull the switch on traffic

One Robo to Call Them All

What sort of activity earns a court order, a public notice AND a press release from the Federal Communications Commission?

Hint: It’s not our brother-in-law’s constant phone calls asking us for the $250 needed to trick out his ATV. [Quick aside: Dale, we’re not paying for your camo decal wrap; stop asking.]

No, it’s much worse than our brother-in-law’s 3 a.m. ramblings and incoherent voicemails. We’re talking about 8 billion robocalls. That’s one call to every person on planet Earth; even these folks should have heard the phone ring by now.

You may (must?) be familiar with the content of the call by now—auto warranty offers that, according to the FCC, were placed by individuals named Roy Cox and Aaron Michael Jones, their companies, and international associates.

Are there even 8 billion cars?

The Takeaway

Cox, Jones and company allegedly used “neighbor spoofing” techniques to appear to be placing calls from companies in the same area code as the recipients, lending their automated pitches something of an authentic flavor.

Through the order, the Commission is mandating that all carriers investigate calls coming from the defendants and mitigate the traffic—meaning, implement an outright ban. It even waived reporting obligations in anticipation of the enormous amount of paperwork required to document a ban on 8 billion phone calls (in fact, the carriers are only required to file with the FCC if they fail to mitigate Cox’s calls). Eight service providers that carried Cox’s traffic got hit with cease-and-desist letters.

So, there you have it—muscle flexing from the FCC. The Commission chalks it up as a success of its Robocall Response Team, which is either a 2022 enforcement working group that “pulls together expertise from across the agency to leverage the talents of enforcers, attorneys, policy makers, engineers, economists, and outreach experts to combat the unyielding menace of illegal spoofed, scam, robocalls,” or a strike force modeled on a long-forgotten team of heroes from a ’70s sci-fi action flick starring Yul Brynner and James Brolin.

We know which one we want to write about.

FTC, 17 State AGs Shut Down Harris Jewelry Veteran Scam

Jeweler folds after settling an unsettling case

How Low Can You Go?

Well, we’re talking low. Like, The Wire’s State Senator Clay Davis low. Paul Reiser in Aliens low. Benedict Arnold low.

That last example is apt for more than one reason.

The Federal Trade Commission, in concert with 17 state attorneys general, brought a case against national jewelry retailer Harris Jewelry in July accusing the company of outlandish scams that were aimed specifically at military service members and veterans. Like a well-cut jewel, the scams were multifaceted.

According to their joint complaint, Harris and its related defendants sell “military-themed gifts, jewelry, and watches” at retail locations in the U.S.—locations that are on or near military bases. In order to honor service members, the company extends credit to “active duty service members with more than nine months remaining before their discharge date, National Guardsmen, Reservists, and medically discharged service members.”

So far, so good, right?

BOLO

According to the plaintiffs, the mainspring of Harris’ pitch is that “purchasing from them on credit will, regardless of service members’ credit history or subsequent borrowing or payment activity, improve service members’ credit scores, setting service members up to save thousands of dollars on car loans and obtain military promotions” with a special emphasis on appealing “to young service members in basic training at the lowest military pay grade.”

None of this is true, according to the Commission and the state AGs. “Without knowing a service members’ current score, accurate credit history, and information on what financial choices a service member may make going forward”—information that Harris does not collect—“Defendants cannot accurately represent whether, or how much, a certain consumer’s credit score would improve, or what impact a change in credit score may have on interest rates for future credit purchases.”

If that weren’t bad enough, New York Attorney General Leticia James claims that the company added insult to injury by tricking service members “into obtaining high-interest loans on overpriced, poor-quality jewelry that saddled them with thousands of dollars of debt and worsened their credit.” [For the record, we don’t see these charges reflected in the original joint complaint.]

The Takeaway

As with most cases brought by the Federal Trade Commission, this one settled in short order. For unfair and deceptive practices leading to violations of the FTC Act, Truth in Lending Act, Electronic Fund Transfer Act and a boatload of state laws, Harris Jewelry agreed to stop collections, fork over $10 million-plus to repay protection plan fees, refund overpayments and assist in the deletion of negative credit line items its marketing practices caused. Oh yes—it is also required “to complete its shutdown of operations and to dissolve pursuant to applicable state laws, once it meets the obligations of the order.”

The case represented the first time the FTC has brought charges under the Military Lending Act, a point underscored by a recent New York Times article on the case: “Predatory lending to members of the military is an area of growing concern for regulators and watchdogs; soldiers’ steady paychecks—and the financial naïveté of many young recruits—are a potent lure for hucksters.” [You know you’re quoting the Times when you get the diacriticals right.]

The lessons here? “Make kindness and honesty your default settings” and “respect the people who sacrifice to protect you” are good starters.

ANA Develops Guidebook to Rescue Influencer Marketers from Perdition

It’s a good start, but more work will be needed to reach paradise

Abandon All Hope ...

Limiting marketing value to advertisers, hamstringing growth and obfuscating return on investment (ROI)? What punishments do such horrible crimes demand?

We actually have an answer.

We turn to the circles of Dante Alighieri’s Inferno. First, those who limit marketing value to advertisers might end up in Ptolomaea, the circle of those who betray their guests (punishment is burial in ice). Those who hamstring growth might better be placed in Purgatorio’s fourth terrace, which punishes the slothful—who are impelled to run around their habitat with great speed and zeal.

But obfuscating ROI? Is there a worse sin? Perhaps they will find themselves in the eighth circle, where thievery is punished, and be forced to turn from humans into reptiles and back again for all eternity.

We’re open to the idea that we’re overreacting here.

Salvation!

But these three lapses are sins, at least within the organic influencer marketplace, an arena that Dante didn’t really have to worry about (and as Dante may be considered Western culture’s supreme moralist, his ghost may be grateful he is not with us today).

The Association of National Advertisers is not one to swoon in response to marketing offenses, and in its capacity as watchdog it recently released Influencer Marketing Measurement Guidelines, a guidebook it hopes will provide standardization, consistency and transparency for advertisers that are watching every single dollar. Consider it a guide for avoiding marketing hell.

The report is a direct response to feedback engendered by ANA’s 2020 State of Influence report. Marketers identified measurement as the key challenge to implementing influencer marketing, and ANA took up the gauntlet.

The Takeaway

We’re happy that the guide exists, make no mistake—we want all our influencer friends to enjoy the same sort of insight that paid advertisers have had access to for quite a while now. But, as ANA notes, it really is a starting point.

It’s quite short—12 pages in all. It contains useful but brief summaries of awareness, engagement and conversion metrics; various measures under each category; and, in the most specific and helpful section, formulae for calculating engagement for all of the major platforms, developed, according to the ANA, with their cooperation and input.

The final takeaway in the report asks marketers to “share the guidelines with your agency partners and align on the use of the guidelines’ definitions and calculations for organic campaign measurement and reporting.” Here, in the cauldrons of actual campaign development, is where the real work will take place. We hope that any of our readers who avail themselves of the guidelines will provide feedback to the ANA after taking the initial steps.

The direct link to the guidelines is here.

H&M Targeted in ‘Greenwashing’ Class Action

Plaintiff claims company adds false info to its marketing

Bias Cut

We’re not fashionable.

Hold on: Let us restate. Some of us are not fashionable. Consider the rest of this piece as coming from the minds of those among our ad-law attorneys who don’t know the difference between prêt-à-couture and haute porter.

Reviewing the incidents involved in this current case was something of an education for us, then—it involves H&M Hennes & Mauritz LP, which those in the know will understand as a quite successful fast fashion brand. Fast fashion, we learned from one source, is “a design, manufacturing, and marketing method focused on rapidly producing high volumes of clothing. Fast fashion garment production leverages trend replication and low-quality materials (like synthetic fabrics) in order to bring inexpensive styles to the end consumer.”

If you knew this already, please don’t roll your eyes at us the way our colleagues did. It hurts. This is America, and we assume there are more of us than there are of you.

So there.

Fashion Backward?

Lately, fast fashion brands have been soaking in hot water—criticized by numerous outlets and opinion makers for their negative environmental impact. Take this New York Times article, which lays out the critique in horrifying detail: Because most fast fashion clothes are meant to be produced cheaply and en masse, companies use synthetic fibers to manufacture their clothing—fibers that will not biodegrade in whatever landfill or ocean they might wind up getting dumped in.

There are additional complaints about worker safety, pay and rights, and about how the byproducts created by the manufacturing and dying processes are harmful for the earth.

Whether you agree with them or not, these arguments provide helpful background for the class action against H&M, which was filed in the Southern District of New York at the end of July.

The Takeaway

Empire State resident Chelsea Commodore is taking H&M to task for “greenwashing” environmentally damaging products. She focuses on one of those marketing tags that seems like a good idea when everyone agrees to adopt it, but later serves as an incitement to sue. The tags are called “Sustainability Profiles,” and they are based on something called “The Higg Index”—“a suite of tools for the standardized measurement of value chain sustainability,” according to the Sustainable Apparel Coalition, which offers the index on its website.

Commodore claims that H&M’s sustainability profiles, which H&M says “share environmental performance scores for materials and [are] based on independently verified environmental impact data,” make for good marketing—they draw in consumers eager to pay a premium to buy sustainable products—but the tags are loaded with misinformation.

For instance, she cites an investigation by Quartz claiming that “H&M used falsified information in its scorecards. … [O]ne Sustainability Profile reported by Quartz stated that a dress used 20% less water to manufacture, when its actual water score indicated that it used 20% more water to manufacture.”

There are other examples, but you know the script: Consumers paid a premium for sustainable products that prove to be bad for the environment. They’re entitled to damages for the deception under New York State law.

Let’s see if the green washes out of H&M’s marketing or if its claims keep their color.

In a Messy Divorce, Who Gets the Instagram?

Bridal designer and employer put social media accounts through tug-of-war

Wedding Vows

Bridal fashion designer Hayley Paige Gutman signed away a lot when she joined up with wedding-fashion giant JLM Couture in 2011. According to the company’s original complaint, filed against Gutman in New York’s Southern District back in 2020, the designer’s employment agreement granted JLM the “exclusive world-wide right and license to use her name ‘Hayley’, ‘Paige’, ‘Hayley Paige Gutman’, ‘Hayley Gutman’, ‘Hayley Paige’ or any derivative thereof” in connection with her design work.

Covers all the bases, doesn’t it?

Not quite. The agreement, which is still in effect after numerous extensions, also granted “a temporary or permanent injunction against breach by her by any court ... prohibiting her from violating any provision of [the Employment Agreement].” JLM claims the designer subsequently transferred all trademark rights in the names to JLM, which began filing trademark registrations of various flavors of “Hayley Paige.” You know what followed—JLM created social media accounts, websites, the works, all under the “Hayley Paige” moniker.

The Hitch

JLM alleges that Gutman got antsy eight years later and started up a Tik Tok account as “misshayleypaige” and posted videos to it that “did not properly represent the HP brands.” She also allegedly locked JLM out of the misshayleypaige Instagram account, removed references to JLM and reclassified it as a “Personal & Creative account”—and then proceeded to post personal photos to the stream. She even promoted third-party goods on the account such as beer and olive oil—just the products that one associates with a classy wedding.

After some back-and-forth drama over the possible extension of her employment agreement, JLM decided to sue Gutman for trademark dilution, false designation of origin, unfair competition, conversion, and unlawful trespass to chattels, and breach of contract and fiduciary duty.

The Takeaway

In March 2021, the Southern District weighed in with an opinion granting a preliminary injunction barring Gutman from using her own name for commercial purposes. “[The employment contract] provision unambiguously transfers to Plaintiff the exclusive right to use the name Hayley Paige,” the court noted, “and any derivatives in connection with bridal goods that Defendant substantially participated in designing or creating during her employment.”

While continuing to advance the likelihood of JLM’s success on the contract claims, the court recently followed up on the case by tweaking the injunction to address the conversion and trespass claims—that Gutman had wrongfully taken control of the social media accounts and that her use of them inflicted harm on JLM. Both categories of claims, in this case, raise “novel” issues regarding the ownership of a social media account. Who owns the account—the person whose name it bears or the company that used that name for commerce?

The court favored JLM, noting instructive criteria that any company should keep in mind when it enters into an arrangement similar to that between Gutman and JLM. The analysis includes:

(1) whether the account handle reflects the business or entity name; (2) how the account describes itself; (3) whether the account was promoted on the entity’s advertisements or publicity materials; (4) whether the account includes links to other internet platforms of the entity; (5) the purpose for which the account was used, including whether it was tied to promotional or mission-oriented activities of the entity; and (6) whether employees or members of the entity had access to the account and participated in its management.

After marching through these factors, the court concluded that JLM was likely to succeed in its claims and therefore extended the timeline to bar Gutman from making changes to the social media accounts or attempting to take control of them at all.

The Fashion Law, one of our favorite blogs, contains an in-depth discussion of the case, going back to the original filing in 2020. See here, here and here.

Check Out Our Latest Blog Posts

Advertising and Regulation of CBD Products

If you have been to any kind of spa, beauty supply store or health food store in the past four years, chances are you have seen, if not purchased, a product with cannabidiol (CBD). The 2018 passage of the Farm Bill removed hemp-deprived products, like CBD, from the Controlled Substances Act, leading to a flood of CBD products to the consumer marketplace that boast a wide variety of health and beauty claims, from relieved pain to lessened anxiety, among many others.

$62 Million Is Something to Write Home About – the Opendoor Case

A recent Federal Trade Commission (FTC) lawsuit and settlement with Opendoor Labs Inc. (Opendoor) is a must-read even if you are not in the real estate business. But if you don’t want to actually read it, we’ve got you covered. The case raises a range of issues regarding how savings claims are made to consumers and provides some insights on when representations may cross the proverbial line into deception. For most consumers, selling a home is the most significant commercial transaction they’ll make, and the FTC action challenges a range of different representations being made during the process.

3 Things to Address in Digital Media Agreements

The ad creative has been produced and approved. The media plan has been crafted. Now it’s time to execute on the plan, and that involves buying the media – i.e., purchasing ad space to place your ads on different media channels (television, print, websites, etc.) so people can see them. Or maybe you’re a publisher looking to monetize your available ad space by selling it to advertisers.

Not Every Payment Processing Case Is the Same – the Latest FTC Case Provides Some Helpful Reminders

Most of the Federal Trade Commission’s (FTC) law enforcement actions involving payment processors have exclusively focused on allegations that processors did not do sufficient due diligence before onboarding questionable merchants. The latest payment processing case, however, has a bit of a novel twist and focuses instead on alleged deceptions aimed at the merchants that were using the defendant processor. Indeed, the case is a bit of a surprise, much like how I felt the other morning when I remembered that Renaissance had finally dropped. It (the case, not Renaissance) also provides some helpful reminders about three areas of interest to the FTC – small businesses, online disclosures and marketing in different languages.

[View source.]

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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