Advertising Law - Mar 07, 2014

Manatt, Phelps & Phillips, LLP

In This Issue:

  • Jesse Brody Joins Manatt’s Advertising, Marketing and Media Practice in Los Angeles

  • Marc Roth Invited to Speak on Privacy Issues at PACE Annual Conference

  • Site Allows Consumers to Stop Mobile Tracking

  • FCC Head Promises New, Improved Net Neutrality Rules

  • Plaintiffs’ Second Bite at Apple Falls Short

  • WARNING: This Label Could Appear on Your Soft Drink

Jesse Brody Joins Manatt’s Advertising, Marketing and Media Practice in Los Angeles

Manatt is pleased to welcome Jesse Brody as a partner in the Advertising, Marketing and Media practice, based in the firm’s Los Angeles office. His practice focuses on legal and regulatory issues impacting the areas of entertainment, technology, advertising and privacy.

Mr. Brody’s experience includes advising with respect to traditional television and film, advertising, interactive games and new media matters, such as privacy policies, terms of use, user-generated content, social networks, downloadable software and commercial text messages. He regularly assists clients with bringing their traditional and digital advertising and promotional campaigns from concept to execution. As a certified information privacy professional by the International Association of Privacy Professionals, Mr. Brody offers strategic compliance counseling on cutting-edge privacy issues, such as the collection of consumer data through mobile apps, compliance with the Children's Online Privacy Protection Act, big data, Do Not Track, and behavioral advertising.

Marc Roth Invited to Speak on Privacy Issues at PACE Annual Conference

At the National Convention & Expo hosted by the Professional Association for Customer Engagement (PACE), attendees will hear from leading customer engagement brands and thought leaders on strategies and best practices to improve the customer experience at the point of engagement and ultimately grow their businesses.

Marc Roth, Co-Chair of Manatt’s TCPA Compliance and Class Action Defense Group, has been asked to participate in a session titled “Why Privacy Matters,” in which he and co-presenter Andrea Arias (Attorney, FTC’s Division of Privacy & Identity Protection), will help to educate attendees on the relevance and importance of addressing privacy issues in the operation of their businesses and relationships with customers and vendors, particularly in the era of “big data.” The presentation will cover FTC privacy reports and cases, state laws and actions in this area, privacy class actions, recent data breaches and transactional considerations when hiring vendors and servicing customers.

The conference will be held on April 2-5, 2014, at The Westin Diplomat in Hollywood, Florida. For more information or to register for this event, click here.

Site Allows Consumers to Stop Mobile Tracking

Don’t want to be tracked by retail stores while physically shopping? There’s a site for that.

Retailers use tracking information to collect data about how shoppers navigate the aisles and how much time is spent looking at specific merchandise or displays. In response, the Future of Privacy Forum launched, that offers consumers a method to opt out of location tracking by entering their 12-digit WiFi or Bluetooth access control address. Names are not required.

The Privacy Forum worked with Sen. Charles Schumer (D-N.Y.), a vocal critic of companies that track consumers while shopping. In a letter to the Federal Trade Commission last year, Sen. Schumer called for an investigation of the tracking, which he said could be an unfair or deceptive practice if businesses “fail to notify shoppers that their movements are being tracked in a store or to give them an opportunity to opt out of this type of tracking before it begins.”

Eleven mobile location analytics firms –Aislelabs, Brickstream, Euclid, iInside, Measurence, Mexia Interactive, Path Intelligence, Radius Networks, ReadMe Systems, SOLOMO Technology, and Turnstyle Solutions – have already signed the code of conduct and stated their intent to respect the choice of consumers registering on the site.

After a consumer registers his or her access control number, the companies will stop associating location data with that wireless device. An FAQ page on the site explains that consumers may change their mind and allow companies to collect their information, even after opting out.

Although the new site went live in mid-February, it will take 30 days for the opt-outs to take effect.

To visit the opt-out site, click here.

Why it matters: The new Web site is another step toward addressing mobile tracking. The FTC recently held a seminar on the issue, and the Privacy Forum has also called on retailers and other business owners that track consumers to post signage informing customers about the opt-out program.

FCC Head Promises New, Improved Net Neutrality Rules

Just weeks after the D.C. Circuit Court of Appeals struck down the Federal Communications Commission’s net neutrality rules, agency Chairman Tom Wheeler vowed the agency will come up with new standards for an open Internet.

In 2010, the FCC, by a narrow vote of three commissioners to two, promulgated an order, In re Preserving the Open Internet, which became colloquially known as the “net neutrality” rules. The agency imposed disclosure, antidiscrimination, and antiblocking requirements on broadband providers out of concern that providers could prevent end-user subscribers from accessing other providers or degrading the quality of access to certain content providers.

In a challenge brought by a carrier, the D.C. Circuit held in January that while the FCC had not overstepped its jurisdictional bounds by issuing the order, the antidiscrimination and antiblocking provisions exceeded the scope of its authority.

In response to the decision, Wheeler said the agency has decided not to appeal. Instead, the chairman said he will work with his fellow commissioners to create a new set of rules that will comply with the federal appellate court’s opinion.

“Preserving the Internet as an open platform for innovation and expression, while providing certainty and predictability in the marketplace, is an important responsibility of this agency,” Wheeler said in his statement. Specifically, he plans to propose “rules that will meet the court’s test for preventing improper blocking of and discrimination among Internet traffic, ensuring genuine transparency in how Internet Service Providers manage traffic, and enhancing competition.”

In that regard, one option the FCC is considering is to base the new rules on Section 706 of the Telecommunications Act and create new standards and guidance for broadband providers. In that scenario, the FCC would consider three issues: “(1) setting an enforceable legal standard that provides guidance and predictability to edge providers, consumers, and broadband providers alike; (2) evaluating on a case-by-case basis whether that standard is met; and (3) identifying key behaviors by broadband providers that the Commission would view with particular skepticism.”

Wheeler also indicated that the agency can reclassify Internet access under the Communications Act as a telecommunications service. (In 2002, the FCC classified broadband providers as an “information” service that was not subject to common carrier rules, which include a prohibition on discrimination.) “As long as Title II – with the ability to reclassify Internet access service as a telecommunications service – remains a part of the Communications Act, the commission has the ability to utilize it if warranted,” Wheeler noted.

To read Wheeler’s statement, click here

Why it matters: In addition to Wheeler’s statement setting out the FCC’s plans for a do-over on the net neutrality rules, the agency opened a new docket for public comment on the issue. The “Protecting and Promoting the Open Internet” docket will focus on issues raised by the D.C. Circuit opinion, Wheeler said, and he plans to recommend that the Commission seek input through formal rulemaking that includes public comment. If a second iteration of the rules moves forward, it could again be a split decision; of the four other commissioners, two issued statements in support of advancing new rules while two others expressed skepticism and concern.

Plaintiffs’ Second Bite at Apple Falls Short

A federal court judge recently dismissed with prejudice consolidated lawsuits alleging that Apple falsely advertised the abilities of Siri, the voice-activated feature on the iPhone 4S.

Multiple suits were filed against the tech giant in 2012 after the launch of the 4S model. Apple distinguished the 4S – which cost at least $100 more than prior iterations of the iPhone – in part by the inclusion of Siri. The company called Siri “the coolest feature of the new iPhone 4S” and featured Siri in its marketing campaign that included e-mails and with videos showcasing her abilities (seven of the ten commercials marketing the 4S focused solely on Siri).

The plaintiffs claimed that the marketing campaign gave consumers a false expectation that Siri could perform the basic tasks depicted, such as making appointments, finding restaurants, or crafting text messages, on a consistent basis. In reality, according to the complaint, Siri cannot consistently complete such tasks.

Despite the hype surrounding Siri, Apple noted that the company cautioned consumers that the function was still in beta mode and included a disclaimer at the end of each commercial stating “sequences shortened.” U.S. District Court Judge Claudia Wilken granted Apple’s motion to dismiss with leave to amend in May 2012.

But the plaintiffs’ second pleading attempt did not fare any better. “Plaintiffs still fail to isolate the particular statements at issue and explain each statement’s false and misleading nature,” Judge Wilken wrote in the February opinion. Although the amended complaint described the advertisements viewed by each individual plaintiff, “this is not equivalent to what the court required, which is to identify the specific statements within those advertisements that were false and misleading.”

A description of the ad accompanied by a statement that the plaintiff was misled “does not give Apple sufficient notice of which representations caused the deception alleged,” the court stated. “Apple would be hard-pressed to defend against an allegation that the overall impact of these commercials and advertisements misled plaintiffs.”

The few statements identified by the plaintiffs – descriptions of Siri as “this amazing assistant,” “breakthrough,” and “the coolest feature” – were mere puffery, the court added, and not actionable.

Judge Wilken reminded the plaintiffs that in her prior dismissal order, she suggested they try to give an estimate of how often they expected Siri to perform correctly, perhaps expressed as a percentage. Plaintiffs failed to do so, and “Apple and the court are left to guess whether plaintiffs expected Siri to operate without fail, or more often than not, or at any other level below perfection.”

Apple made no promises that Siri would operate without fail, the court said, and the plaintiffs cannot show that a reasonable consumer would expect such a level of performance based on the advertisements at issue.

Dismissing the case for a second time, Judge Wilken did so with prejudice, as the plaintiffs’ allegations “are either non-actionable puffery or inadequately plead.”

To read the order in In re iPhone 4S Consumer Litigation, click here.

Why it matters: Judge Wilken’s decision emphasized that plaintiffs must plead false advertising claims with particularity. General descriptions of commercials or press releases without more would require the defendants to justify the entire ad.

WARNING: This Label Could Appear on Your Soft Drink

California could become the first state in the nation to require warning labels on sodas and other sugar-sweetened drinks if it passes a new bill introduced in the state Senate.

Backed by several health advocacy groups, the Sugar-Sweetened Beverage Safety Warning Act was sponsored by Sen. Bill Monning (D-Carmel), who has previously introduced legislation to tax sugary drinks.

The proposed law would require all beverage containers that contain beverages with added sweeteners that have 75 calories or more per 12 ounces to feature a label reading: “STATE OF CALIFORNIA SAFETY WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes and tooth decay."

In addition, restaurants or other businesses with a vending or beverage dispensing machine selling such drinks would also be required to display a safety warning on the machine or in view of customers. Violations of the law – which would take effect on July 1, 2015 – would result in a civil penalty of at least $50 but not greater than $500.

“When the science is this conclusive, the state of California has a responsibility to take steps to protect consumers,” Sen. Monning said in a statement, in which he analogized the labels to warnings on alcohol and tobacco products.

In an interview with Reuters, he also acknowledged that passage of the bill will likely be an uphill battle. “I think there will still be opposition from industry, but we’ll probably have stronger support in the legislature,” Sen. Monning said.

Beverage groups – including the California branch of the American Beverage Association – have already spoken out against the legislation. “It is misleading to suggest that soft drink consumption is uniquely responsible for weight gain,” the group said in a statement.

To read SB 1000, click here

Why it matters: The battle over sugary beverages has made it to the West Coast. While California could become the first state in the nation to include warning labels on sodas and similar drinks, New York is still struggling with former Mayor Michael Bloomberg’s attempt at regulation. With the backing of the Mayor, the New York City Board of Health passed a ban on “giant soda” in 2012, prohibiting the sale of 16-ounce or larger beverages “sweetened with sugar or another caloric sweetener that contain more than 25 calories per 8 fluid ounces.” Industry groups successfully challenged the law, which was enjoined by an appellate court as an “impermissible[] trespass[] on legislative jurisdiction,” a ruling that is now on appeal to the state’s highest court.


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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