Advertising Law - January 2017

by Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP

In This Issue:

  • SPECIAL FOCUS: Memories Light the Corners of Regulators' Minds
  • Ad Groups Seek Reconsideration of FCC Privacy Rule
  • Pyramid Scheme Shut Down by FTC
  • FTC Settles With Turn, Inc., Over Privacy Controls

SPECIAL FOCUS: Memories Light the Corners of Regulators' Minds

By Richard Lawson

The Federal Trade Commission and the Attorney General for the State of New York (NY AG) recently filed a joint lawsuit against Wisconsin based Quincy Bioscience, marketers of a product called Prevagen. While the heart of the complaint centers on the substantiation of claims that Prevagen alleviates memory loss, it's worth noting that the FTC and NY AG jointly filed this case.

As previously reported, the FTC has pursued several actions involving health and wellness claims. This case is part of that effort, as the FTC and NY AG allege significant shortcomings in the testing for the product's capabilities. For example, the lawsuit alleges that the tests failed to show that consumer memories meaningfully improve after they used the product and that the body does not process the key ingredient in a way that obtains the best benefits. The complaint further alleges that Quincy omitted test data in a chart used to market the product. The chart provided data from 8, 30 and 90 days of use. According to the complaint, had the results from 60 days been included, they would have shown a decline in user memory from 30 to 60 days.

While claims substantiation has been a core issue for the FTC for almost as long as it has existed, joint efforts between the FTC and state attorneys general have been a particular focus of the past few years. Previously, I was the Director of the Florida Attorney General's Consumer Protection Division, and while I was there the Directors of the FTC's Bureau of Consumer Protection made concerted efforts to work in close collaboration with state attorneys general. Florida, in particular, worked with the FTC on many matters quite closely and was awarded the inaugural FTC partnership award for its close collaboration. The FTC has gone on to similarly recognize its relationships with the New York and Colorado attorneys general, and the Los Angeles County Department of Consumer and Business Affairs.

The advantages of close collaboration are manifold. First and foremost, it's a force multiplier. State AGs can offer boots on the ground assistance by interviewing witnesses and conducting investigations that the FTC's D.C. or field offices can't easily undertake. Similarly, when FTC and state AG attorneys work on the case jointly, resources for processing discovery and formulating theories are doubled out of the box. From a managerial perspective, these serve two purposes: one, enforcement agencies can double the resources without increasing any financial expenditures; and two, the staff love the work. Low pay is a constant complaint among all enforcement attorneys, so when state AG and FTC attorneys share their investigative and litigation theories, they expand their professional networks and knowledge. And for state AGs, who normally appear only in state court, a chance to appear in federal court provides an opportunity for professional growth.

Collaborations are born for various reasons. FTC and state AG staff frequently attend the same conferences, where they make connections and learn about their colleagues' respective expertise, which often leads to a mutual effort. Further, there are some areas where the FTC has considerable knowledge and expertise, say, for example, in health claims substantiation, that state AGs may not possess. Lastly, settlement negotiations can have an extra sense of power and urgency when a team of state assistant attorneys general and FTC lawyers are arrayed across from the subject business's team of counsel.

The NY AG and the FTC may have teamed up in this case for some of the reasons set forth above, or perhaps for reasons completely unrelated. Whatever the motive, it seems highly likely that the FTC will continue its strong tradition of outreach and collaboration with state attorneys general in the years to come.

Ad Groups Seek Reconsideration of FCC Privacy Rule

Making good on their promise to challenge the Federal Communications Commission's proposed privacy rule, a coalition of ad industry groups filed a petition formally requesting that the agency reconsider its order.

Passed in a 3-2 vote by the Commission in November, the new rule requires ISPs to obtain opt-in consent before sensitive data (defined to include browsing and app usage history) can be collected and used for ad targeting purposes.

Members of the industry immediately spoke out against the rule, arguing that it was bad for the economy, would stifle innovation, make it harder to deliver relevant and useful advertising messages, and cause confusion because the FCC's broad interpretation of sensitive data is at odds with existing standards.

Now the industry has taken the next step by filing a petition for reconsideration with the agency over its "fundamentally flawed" order adopting the rule.

The Association of National Advertisers, American Association of Advertising Agencies, American Advertising Federation, Data & Marketing Association, Interactive Advertising Bureau, and Network Advertising Initiative told the FCC that it acted in an arbitrary and capricious manner inconsistent with congressional intent by relying on a general purpose statement of the Communications Act for its authority, that it failed to adopt less restrictive proposals, and that it did not provide sufficient time for interested parties to offer comments.

The FCC relied upon Section 222(a) of the Act, which is labeled a "General Statement" and "is clearly governed by the more detailed subsections that follow it," the groups told the Commission. "If, as the FCC now attempts to mandate, Section 222(a) were read to make all customer proprietary information confidential, the later and more specific statutory provisions clearly would be unnecessary," a conclusion that runs counter to all methods of statutory interpretation.

Further, although the Commission based its authority to promulgate the rules on Section 222, it had not done so in the prior 18 years, the groups added.

As "[t]he creation, analysis, and transfer of consumer data for marketing purposes constitutes speech," the rule raises First Amendment concerns, the ad industry cautioned the FCC. Non-misleading commercial speech regarding a lawful activity is protected under the First Amendment and requires the Commission to adopt regulations in a narrowly tailored manner that is no more restrictive of speech than necessary.

The Commission had a less restrictive, alternative proposal right in front of it, the groups said: the industry's own self-regulatory framework. The ecosystem has "functioned well for years under an enforceable self-regulatory framework" developed by the Digital Advertising Alliance that "offers consumers transparency about online data collection and a way to control the use of their online data by DAA members while allowing data-driven innovation to flourish." Opt-in consent would also signal a change in the standard for advertising and marketing uses of data, which historically has relied on opt-out mechanisms.

Finally, the groups complained that the order was adopted less than a month after the Commission issued a four-page fact sheet "outlining a drastic change in its approach" to the initial notice of proposed rulemaking. Interested parties were not given a reasonable amount of time or sufficient details to assess the modified proposal and provide comments, the industry argued.

Given all of these problems, the ANA, 4As, AAF, DMA, IAB, and NAI "respectfully request that the FCC reconsider its decision to adopt the Order regarding the use and disclosure of data by broadband providers."

To read the petition for reconsideration, click here.

Why it matters: The ad groups may have timed their petition perfectly. With the order's primary backer, FCC Chairman Tom Wheeler, set to exit the agency on January 20 as the administration changes hands, the industry may be successful in achieving an about-face by the Commission.

Pyramid Scheme Shut Down by FTC

A pyramid scheme was the subject of a deal with the Federal Trade Commission after the agency charged Vemma Nutrition Company with running an illegal multilevel marketing operation.

Vemma used a network of distributors to sell health and wellness drinks to take advantage of college students and other young adults. The advertising materials presented the company as a profitable alternative to traditional employment through a "Young People Revolution" campaign, the FTC said. Ads depicted Vemma affiliates enjoying "conspicuous displays of wealth" such as yachts and luxury cars.

But the Arizona-based company failed to disclose that its program operated in a manner that precluded most participants from earning a substantial income, the agency alleged in its complaint. It functioned as a pyramid scheme that provided compensation for recruiting new members and not legitimate retail sales. Participants were encouraged to qualify for bonuses by buying products themselves and recruiting others to do the same, the FTC said.

After Vemma expanded throughout the country and across international borders and accumulated more than $200 million in revenue in 2013 and 2014, the FTC filed a federal court complaint against the company in 2015.

Pursuant to a stipulated final order, Vemma and Benson K. Boreyko, the company's CEO, are banned from making deceptive income and unsubstantiated health claims, paying compensation for recruiting new participants to a business venture, tying a participant's compensation to his or her purchases, paying compensation unless the majority of the revenue generated by the participant came from sales to non-participants, and otherwise participating in a pyramid, Ponzi, or chain marketing scheme.

A $238 million judgment was partially suspended upon payment of approximately $470,000 and the surrender of various assets.

To read the complaint and stipulated final order in FTC v. Vemma Nutrition Company, click here.

Why it matters: "Unfortunately, extravagant income claims and compensation plans that reward recruiting over sales continue to plague the [multilevel marketing] industry," Jessica Rich, Director of the FTC's Bureau of Consumer Protection, said in a statement. "MLM companies must ensure that their promotional materials aren't misleading, and that their compensation programs focus on selling goods or services to customers who really want them, not on recruiting more distributors."

FTC Settles With Turn, Inc., Over Privacy Controls

A California-based digital advertising company must allow consumers to control their online tracking as a result of a settlement agreement with the Federal Trade Commission.

Turn, Inc.'s privacy policy represented that consumers could block targeted advertising by using their browser's settings to block or limit cookies. But the agency accused the company of using unique identifiers to track millions of consumers, even after they blocked or deleted cookies from websites. By injecting headers (50-character alphanumeric strings) into the unencrypted mobile traffic of Verizon Wireless users, Turn was able to compile profiles of users and serve them targeted ads, the FTC said.

In addition, the agency alleged that Turn misrepresented the scope of its opt-out mechanism, which was limited to mobile browsers and did not block tailored ads on mobile apps.

"Turn tracked millions of consumers online and through mobile apps even if they had taken steps to block or limit tracking," Director of the FTC's Bureau of Consumer Protection Jessica Rich said in a statement. "The FTC's order will ensure the company honors consumers' privacy choices."

The two-count administrative complaint charged Turn with violating Section 5 of the Federal Trade Commission Act by falsely claiming that consumers could block or limit cookies to restrict the company's ability to track consumers and misleading consumers to believe they could use Turn's opt-out mechanism to avoid tailored ads on mobile apps.

To settle the charges, Turn agreed that it will no longer misrepresent the extent of its online tracking or the ability of users to limit or control company use of their data. The company must provide an effective opt-out for consumers who do not want their information used for targeted advertising, and place a "prominent" hyperlink on its home page taking consumers to a disclosure about targeted advertising.

To read the complaint and consent order in In the Matter of Turn, Inc., click here.

Why it matters: The FTC offered the ad industry two takeaways from the action: first, live up to express and implied claims about consumer privacy, and second, respect consumer choice.

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

Written by:

Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.