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In This Issue:

  • Eunice Shin Joins Manatt Digital Media as Director in Los Angeles

  • COPPA + State Law = Privacy Protection for Teens

  • NARB: Use of Lash Inserts Not “Literally False” Per Se

  • Strengthen FTC’s Data Security Powers, Chairwoman Asks Senators

  • Court Stays Case, Waiting for FDA to Take a Stance on “Evaporated Cane Juice”

Eunice Shin Joins Manatt Digital Media as Director in Los Angeles

Manatt Digital Media welcomed Eunice Shin as a director in the Los Angeles office earlier this month.

With more than 17 years of experience and relationships in the digital technology and entertainment sectors, Shin provides business strategy consulting to new and existing Manatt Digital Media clients, with a focus on social media, consumer insights and customer relationship management. She also analyzes and assesses potential digital media and technology investment opportunities for Manatt Venture Fund, an investment fund that focuses on early-stage participation in promising companies in the digital media space.

COPPA + State Law = Privacy Protection for Teens

How does the Children’s Online Privacy Protection Act (COPPA) interact with state law privacy protections for teens?

According to amicus briefs filed by both the Federal Trade Commission and California Attorney General Kamala Harris, state law plays an important role in protecting minors aged 13 to 18, and is not preempted by COPPA.

The regulators weighed in on the issue by filing amicus briefs in a class action against Facebook that had reached a settlement. The Facebook suit stemmed from allegations that the social networking site violated the privacy rights of minor users with its “Sponsored Stories” feature, where users’ names and images were allegedly used for advertising purposes without their consent.

Although a federal district court judge signed off on the deal, some class members objected, arguing that the settlement does not bar conduct that allegedly violates various California state laws. The settlement would not ensure compliance with California Civil Code Section 3344, which requires parental consent for the use of images of minors under 18. The district court judge ruled, however, that COPPA “may well” preempt state privacy laws not just for those under age 13 but all minors up to age 18.

The FTC and Harris unequivocally disagreed with the district court’s finding.

The Court of Appeals for the Ninth Circuit is currently reviewing the $20 million settlement agreement between the parties.

“Nothing in COPPA’s language, structure, or legislative history indicates that Congress intended for that law to preempt state law privacy protections for people outside of COPPA’s coverage, including teenagers,” the FTC wrote.

Calling the district court’s interpretation “patently wrong,” the FTC noted that COPPA specifically defines a “child” as “an individual under the age of 13.” Therefore, COPPA’s express preemption provision for state law protections does not address the online activities of teenagers who fall outside the scope of the statute.

“COPPA was enacted in the shadow of state privacy laws – including state protections that are particular to minors – that had existed for nearly a century,” the FTC told the court.

Harris, expressing “concern” about the possible preemption of state law, voiced a similar sentiment.

“Especially when regulating in a field that has already been pervasively occupied by state law, Congress would have spoken far more plainly if it intended any broad displacement of consistent or supplementary state regulation,” she wrote. “Congress’s decision in COPPA to bar only ‘inconsistent’ state law establishes that the federal act’s provisions are intended to provide a floor, not a ceiling.”

Therefore, the court had “no basis” to depart from COPPA’s text, “which preempts only state regulation that is ‘inconsistent’ with federal law,” according to AG Harris’s brief, and “does not bar state enforcement of complementary or supplemental protections such as those provided [by California state law].”

To read the FTC’s amicus brief in Fraley v. Facebook, click here

To read the California AG’s amicus brief, click here.

Why it matters: Notably, neither Harris nor the FTC took a position on the underlying litigation or the merits of the settlement itself. Although the court may permissibly reach a decision on the settlement without addressing preemption, the regulators are concerned that if the court does consider preemption it should not hold or suggest that federal law preempts the state law protections afforded to teens.

NARB: Use of Lash Inserts Not “Literally False” Per Se

Addressing a controversial issue for the cosmetics industry, the National Advertising Review Board concluded that L’Oreal’s mascara ads featuring a model wearing lash inserts are not “literally false” if the use of inserts is appropriately disclosed to consumers.

The Board’s decision reversed an earlier ruling from the National Advertising Division, which recommended that the advertiser stop the use of eyelash inserts as they constituted a false demonstration.

The case stems from the NAD’s investigation of ads for two different L’Oreal products: the Maybelline Rocket Volum’ Express Mascara (Rocket) and Paris Telescopic Shocking Extensions Mascara (Telescopic).

The NAD ruling concluded that the Rocket advertisement was “literally false” because ads used images of a model wearing the mascara with the statement “lashes styled with lash inserts” appearing in small print below the tagline. The NAD found that the picture was not an accurate depiction of the volume that can be achieved solely by applying the mascara and recommended that L’Oreal discontinue the use of lash inserts or include a statement about their use in the main message of the ad.

Although the NARB agreed that consumers could reasonably take away a message that the Rocket model’s eyelashes show the degree to which the mascara can increase volume and thickness, it found the ad itself was not literally false. “While there is a question as to whether the lash insert disclaimer is clear and conspicuous,” according to the decision, “the panel does not believe that the photograph is ‘literally false’ if use of lash inserts is appropriately disclosed and the photograph accurately shows the effect of the advertised mascara on the model’s lashes (both real and inserted).”

L’Oreal should make its disclaimer clearer and more conspicuous, the NARB said, but declined to rule that a lash insert disclaimer must necessarily be part of the main message or main claim of an advertisement. “L’Oreal should have discretion to determine where and how such information is included in the advertisement as long as the result is that the information is clear and conspicuous to consumers.”

The NAD had determined that the Telescopic ad accurately depicted the mascara’s performance, since artificial enhancers were not used. Nevertheless, it cautioned against using artificial lashes in future advertisements without a clear disclosure. The panel refused to set out a hard-and-fast rule “eliminating the possibility that a clear and conspicuous disclaimer could be used to inform consumers that a model’s eyelashes have been enhanced with inserts. Consideration of the messages reasonably conveyed by a model’s photograph would necessarily need to be made in the context of the entire advertisement in which the model’s photograph appears.”

To read the NARB’s press release about the case, click here

Why it matters: In a rare victory for the advertiser at the NARB, the panel allowed L’Oreal the discretion to determine how to clearly and conspicuously disclose that models’ lashes are “styled with lash inserts.” Similarly, the self-regulatory body declined to make recommendations for hypothetical future ads, instead noting that a determination of the messages conveyed by a model’s photograph featuring lash inserts would need to be made in the context of the entire advertisement.

Strengthen FTC’s Data Security Powers, Chairwoman Asks Senators

Testifying before the Senate Committee on Commerce, Science, and Transportation, FTC Chairwoman Edith Ramirez encouraged lawmakers to enact data security legislation, particularly in light of recent breaches at major retailers.

“Never has the need for legislation been greater,” she said. “Consumers’ data is at risk.”

Although Ramirez documented the agency’s efforts in the realm of data security – noting 50 cases the Commission has settled on the issue – she also suggested that Congress should “strengthen” the FTC’s authority regarding data security. Currently, the agency bases its data security claims on select statutes such as the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act, and COPPA, as well as the prohibition on unfair or deceptive acts in violation of Section 5 of the FTC Act. The FTC only has the authority to seek civil penalties under COPPA or the FCRA.

But a definitive grant of authority to the agency to regulate data security and breach notification would provide greater protections for consumers, Ramirez said.

Federal legislation covering data security and breach notification “should give the FTC the ability to seek civil penalties to help deter unlawful conduct, jurisdiction over non-profits, and rulemaking authority under the Administrative Procedure Act,” she testified. “To help ensure effective deterrence, we urge Congress to allow the FTC to seek civil penalties for all data security and breach notice violations in appropriate circumstances. Likewise, enabling the FTC to bring cases against non-profits would help ensure that whenever personal information is collected from consumers, entities that maintain such data adequately protect it.” Although nonprofits are generally outside the FTC’s jurisdiction, a substantial number of data breaches have included nonprofit universities and health systems.

Rulemaking authority under the APA “would enable the FTC in implementing the legislation to respond to changes in technology,” Ramirez added, and “allow the Commission to ensure that as technology changes and the risks from the use of certain types of information evolve, companies would be required to give adequate protection to such data.”

To read the Chairwoman’s prepared remarks, click here

Why it matters: “With reports of data breaches on the rise, and with a significant number of Americans suffering from identity theft, Congress must act,” Ramirez told the Committee. Several data security and breach notification bills are currently pending in Congress, but have made little progress through the legislature to date. It will be interesting to see whether the FTC can expand the scope of its enforcement authority in this area or whether future legislation will usher a new sheriff into town.

Court Stays Case, Waiting for FDA to Take a Stance on “Evaporated Cane Juice”

Will the Food and Drug Administration finally take a stance on the term “evaporated cane juice”?

One federal court in California thinks so and has stayed litigation accusing Odwalla of false advertising by using the terms “evaporated cane juice” or “organic evaporated cane juice” in lieu of sugar or cane syrup on product labels for the company’s juices and snacks.

Plaintiff Robin Reese alleged the term violates California’s Sherman Law, as well as the state’s false advertising and unfair competition laws, by misbranding Odwalla products (such as a chocolate protein monster drink and a strawberry pomegranate superfood bar) with the term “evaporated cane juice” instead of sugar or cane syrup. Odwalla responded with a motion to dismiss.

The court granted the motion to dismiss in part and stayed the case pending guidance from the FDA, which recently revived its efforts to regulate the term. On March 5, 2014, the agency published a Notice that reopened the comment period on its October 2009 draft guidance for evaporated cane juice. The 2009 guidance suggested that “evaporated cane juice” was not a “common or usual name for any type of sweetener” and therefore should not be used. However, the FDA also stated that the guidance “should only be viewed as recommendations,” was nonbinding, and was not legally enforceable.

Among the questions posed in the notice are: “How is ‘evaporated cane juice’ manufactured?” and “Does the name ‘evaporated cane juice’ adequately convey the basic nature of the food and its characterizing properties or ingredients?”

The comment period ends May 5, after which the FDA intends to revise the draft guidance, if appropriate, and issue it in final form. Accordingly, U.S. District Court Judge Yvonne Gonzalez Rogers invoked the FDA’s primary jurisdiction doctrine to stay proceedings on this issue until August 1 so the court can review the FDA’s action and rule appropriately.

To read the order in Reese v. Odwalla, click here.

To read the FDA’s Federal Register notice, click here

Why it matters: The rationale for staying the litigation was twofold: (i) the FDA has comprehensive regulatory authority in this area, and (ii) the FDA clearly intends to exercise its authority in the area. If the FDA makes changes to the 2009 guidance, the landscape for litigation over food labeling could be dramatically altered

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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