Advertising Law - December 2015 #2

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In This Issue:

  • Game's Over: Jordan, Grocers Settle Publicity Rights Suits
  • FDA: "Non-GMO" Could Be Deceptive Advertising
  • Groups Call on FTC to Investigate Food Ads on Kids' Site—Again
  • FTC, FCC Sign Memorandum of Understanding on Consumer Protection

Game's Over: Jordan, Grocers Settle Publicity Rights Suits

To avoid a second trial in litigation initiated by Michael Jordan challenging the use of his likeness in a commemorative issue of Sports Illustrated, the basketball legend announced a deal with the defendants.

In 2009, the sports magazine published a special issue in recognition of Jordan's induction into the Basketball Hall of Fame. Two different grocery chains—Dominick's and Jewel—took out ads in the publication that resulted in lawsuits from His Royal Airness.

The Jewel ad appeared on the inside back cover featuring a picture of the grocer's logo and text reading, "Jewel-Osco salutes #23 on his many accomplishments as we honor a fellow Chicagoan who was 'just around the corner' for so many years," a play on Jewel's slogan "good things are just around the corner."

In the Dominick's advertisement, the grocery chain included a coupon for $2 off steak underneath an image of a pair of basketball shoes in Chicago Bulls colors with the statement, "Michael Jordan … you're a cut above" in addition to its logo.

Jordan claimed both the ads violated his rights under the Illinois Right of Publicity Act and sought $10 million against each defendant. After several years of legal wrangling, the suit against Dominick's went to trial this summer. Because a federal court judge had already determined the advertisement violated the state statute, the jury was tasked with simply deciding the amount of damages.

After Jordan's team presented evidence that despite his 2003 retirement, he still earns about $100 million per year in endorsement income, jurors deliberated roughly six hours before awarding him $8.9 million.

A trial in the case against Jewel was scheduled for later this month. That case has already created case law after the district court dismissed the suit on the grounds that the ad was noncommercial speech and entitled to full constitutional protection. The Seventh Circuit Court of Appeals reversed, finding the ad to be commercial speech and therefore subject to the Illinois statute as well as the Lanham Act.

Now, both suits have settled.

While the terms of the agreement are confidential, the parties said they were satisfied with the deal. "The terms of the agreement are confidential, but we are pleased to have reached a resolution of these matters," a Safeway spokesperson said, while a representative for Jordan agreed that he was pleased.

Why it matters: The high profile and long running litigation has come to an end and certainly provides a cautionary tale for advertisers about the dangers of using a celebrity's identity in advertising without permission. Jordan did not hesitate to enforce his publicity rights and jurors awarded him almost $9 million over a single page advertisement in a commemorative magazine with limited distribution. And case law was made in the process, when the Seventh Circuit recognized that modern commercial advertising is "enormously varied in form and style," and acknowledged the value of using "appealing images and subtle messages" to build goodwill for a brand.

FDA: "Non-GMO" Could Be Deceptive Advertising

Labels describing food products as "Non-GMO" are a no-go for the Food and Drug Administration pursuant to new guidance released on labeling food with or without genetically altered plant ingredients.

Although most headlines discussed the agency's grant of its first approval for a genetically engineered animal intended for food, the AquAdvantage Salmon, the FDA also released two guidances: draft guidance for labeling of genetically engineered Atlantic salmon and final guidance for manufacturers wishing to voluntarily label their products as containing genetically engineered (GE) or non-GE sources.

Importantly, the agency did not mandate that manufacturers disclose the use of genetically modified ingredients, and held to its position that GE products are not materially different from non-engineered foods. Instead, it emphasized that its main concern "is that such voluntary labeling be truthful and not misleading."

The agency did set forth certain rules regarding terminology. The term "Non-GMO," short for non-genetically modified organisms, conveys an overly broad and inaccurate meaning when applied to food products, the FDA said, as most foods do not contain entire organisms. Instead, the agency pushed for the use of label terminology such as "Not bioengineered" or "This oil is made from soybeans that were not genetically engineered."

"In general, an accurate statement about whether a food was not produced using bioengineering is one that provides information in a context that clearly refers to bioengineering technology," the FDA explained.

The agency provided examples of potentially misleading labeling. A statement could be deceptive when evaluated in the context of the entire label, such as a claim that the product "does not contain bioengineered soybean oil" for a product that is made largely of flour derived from GE corn and a small amount of non-GE soybean oil. Such a statement may require a careful qualification "in order to ensure that consumers understand its significance," the FDA cautioned.

Also problematic are claims such as "None of the ingredients in this food are genetically engineered" when some of the ingredients, like salt, are incapable of being processed through genetic engineering. Similarly, a statement that suggests or implies that a food product or ingredient is "safer, more nutritious, or otherwise has different attributes" than comparable foods because it was not GE may be false or misleading, the FDA said.

"For example, the labeling of a bag of specific type of frozen vegetables that states they were 'not produced through modern biotechnology' could be misleading if, in addition to this statement, the labeling contains statements or vignettes that suggest or imply that, as a result of not being produced through modern biotechnology, such vegetables are safer, more nutritious, or have different attributes than other foods solely because the food was not produced using modern biotechnology," the agency wrote.

As for products that contain both GE and non-GE ingredients, the FDA said accurate labels should provide information in a context that refers to bioengineering technology, such as "Genetically engineered." Where a multi-ingredient food contains a bioengineered ingredient, claims should be worded to address the ingredient and not the food as a whole, the agency added. It suggested a statement like "This product contains laurate canola from bioengineered canola that may be used as an alternative to palm kernel oil."

The FDA said it has no plans to take action against labels making use of the "GMO" terminology, but cautioned advertisers that the use of terms like "GMO free" or "Non-GMO" could face false advertising challenges from consumers. It recommended that "manufacturers not use food labeling claims that indicate that a food is 'free' of ingredients derived through the use of biotechnology."

To read the FDA guidance, click here.

Why it matters: The FDA's guidance leaves manufacturers with a choice: they can decide not to disclose the use of genetically engineered ingredients in their products and avoid the headache of using the proper labeling terminology. Or they can opt for voluntary labeling and take a careful read of the final guidance to ensure their claims are not false or misleading.

Groups Call on FTC to Investigate Food Ads on Kids' Site—Again

In two new complaints filed with the Federal Trade Commission, the Center for Digital Democracy (CDD) and Campaign for a Commercial-Free Childhood (CCFC) requested that the agency pursue an investigation into junk food ads on child-directed video sites like YouTube Kids (YTK) and the sites' relationships with food, beverage, and toy companies and its "unboxing" video partners.

The complaints follow an earlier missive from the groups to the agency about potential deceptive and unfair advertising practices on the video site. Despite that April complaint, "Young children watching YTK are still being exposed to a large amount of deceptive and unfair commercial matter," the CDD and CCFC told the agency. "It is essential that the FTC complete its investigation and use its enforcement power to stop these deceptive and unfair practices on YTK."

In the new complaint, the groups argued that members of the Children's Food and Beverage Advertising Initiative (CFBAI) deceptively claim that they comply with their pledge not to advertise to children under the age of 12 even though its members produce hundreds of commercials and videos promoting food and beverage products from CFBAI members.

The CFBAI pledge applies to advertising, including ads on the Internet, product placements, and ads directed to children under age 12 on cellphones, smartphones, and other digital devices. Despite the promise not to market to this audience, the groups said they found products from 16 of 18 CFBAI members during a search process between May and June 2015.

A total of roughly 600 videos were found on the YouTube Kids channel consisting of commercials that previously aired on television, promotional videos that were created by the companies for their brands and products, and product placements and endorsements that they included.

The groups also expressed concern about videos that appear to have been made and uploaded by third parties that discuss a specific branded product. "While we lack the ability to determine for certain that the product placements and endorsements were paid for or actively sought out by the CFBAI members, the high production values and the large number of such videos featuring the same hosts, suggest that they were not the result of individuals acting on their own without any incentives from the brands," according to the complaint.

Citing a YouTube channel featuring a child television actress with videos of her reviewing various products, the groups told the FTC that "[i]t is highly unlikely that this well-known actress would be reviewing food products on her own accord," and her endorsements suggest that she has undisclosed contracts for endorsements with CFBAI members or their advertising agencies. "The use of a popular child actress to endorse a product is no different than host-selling on child-directed television programming, which is not allowed because it is deceptive and unfair to children," the groups wrote.

If the FTC finds that CFBAI members have been complicit in getting their promotional content on YouTube Kids, the CDD and CCFC argued that the companies should face an enforcement action for engaging in deceptive marketing practices by misrepresenting their compliance with self-regulatory principles in violation of Section 5 of the Federal Trade Commission Act.

The second complaint follows up on the April complaint and contains additional information about the relationships between YouTube and paid advertisers and their various intermediaries, including agencies that specialize in "influencer" marketing. "Because these relationships are not disclosed on YouTube Kids as required by the FTC's Endorsement Guide, CCFC and CDD call on the FTC to investigate the contractual and other business connections between Google and its YouTube commercial partners and affiliates," the groups wrote.

To read the complaint and request for investigation with regard to CFBAI members, click here.

To read the follow-up complaint, click here.

Why it matters: With the new complaints, the groups continue to focus attention on the issue of child-directed advertising on video sites and increase the pressure on the FTC to look into the issue. Jessica Rich, Director of the FTC's Bureau of Consumer Protection, would not confirm that the agency was investigating the earlier complaint and what—if anything—it would do about the new complaint. "We welcome and we review carefully all such complaints submitted to us," she told The New York Times.

FTC, FCC Sign Memorandum of Understanding on Consumer Protection

In a display of holiday-appropriate collaboration, the Federal Trade Commission and the Federal Communications Commission signed a memorandum of understanding "to further the agencies' ongoing cooperation on consumer protection matters."

The agreement is intended to formalize existing cooperation between the agencies, the FTC said in a press release, and provides an outline of how the two Commissions will coordinate their efforts, with an eye toward avoiding "duplicative, redundant or inconsistent oversight."

Each agency recognized the other's respective abilities, with the FCC acknowledging "the importance of the FTC's expertise and leadership on matters of consumer protection," and the FTC responding in kind to "the importance of the FCC's expertise and leadership with regard to consumer protection as applied to telecommunications services."

The Commissions agreed to coordinate on agency initiatives where one agency's action will have a "significant effect" on the other's authority or programs and to consult on investigations or actions that implicate the jurisdiction of the other agency. In addition, the FTC and FCC will conduct regular coordination meetings to review current marketplace practices and each other's work on matters of common interest that impact consumers and to exchange their respective learning about the evolution of communication markets.

The agencies will share relevant investigative techniques and tools, intelligence, technical and legal expertise, and best practices in response to reasonable requests for such assistance. They will also share data regarding consumer complaints, and will collaborate on consumer and industry outreach and education efforts as appropriate.

The scope of the common carrier exemption found in the Federal Trade Commission Act does not preclude the FTC from addressing non-common carrier activities engaged in by common carriers, the agencies agreed. To the extent that existing law permits both the FTC and the FCC to address the same conduct, the agencies will follow the memorandum to "ensure that their activities efficiently protect consumers and serve the public interest."

"[N]o exercise of enforcement authority by the FTC should be taken to be a limitation on authority otherwise available to the FCC, including FCC authority over activities engaged in by common carriers and by non-common carriers for and in connection with common carriers services; likewise, no exercise of enforcement authority by the FCC should be taken to be a limitation on authority otherwise available to the FTC," the agencies said.

To read the Memorandum of Understanding, click here.

Why it matters: The MOU comes after a busy year of consumer protection efforts on the part of the FCC (such as the recent $595,000 fine issued by the agency regarding a cable operator's data breach and speculation that the FTC resented the FCC appearance on its turf. With the understanding in place, businesses should recognize that they may be facing joint enforcement efforts in the future.

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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