Advertising Law - May 08, 2014

by Manatt, Phelps & Phillips, LLP
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In This Issue:

  • Linda Goldstein Invited to Speak at ERSP 10-Year Anniversary Seminar

  • Defendant Agrees To Telemarketing, Robocalling Ban In FTC Deal

  • Has The FTC Created A Common Law of Privacy?

  • Lawmakers Ask Advertisers To Fight Online Piracy

  • FCC’s New Net Neutrality Regs Feature “Fast Lanes”

  • Noted and Quoted . . . AdvertisingAge Seeks Insight from Goldstein and Wasserman on Pom, Coca-Cola Case

Linda Goldstein Invited to Speak at ERSP 10-Year Anniversary Seminar

On May 20-21, 2014, the Electronic Retailing Association (ERA) – the trade association representing the more than $300-billion direct-to-consumer marketplace – will host its annual Government Affairs Fly-In in Washington, D.C. This year also marks the 10-year anniversary of the Electronic Retailing Self-Regulation Program (ERSP), and ERA will celebrate this milestone with a special ERSP Seminar and Reception held in conjunction with the Government Affairs Fly-In.

In recognition of her instrumental role in helping to develop the ERSP, Linda Goldstein, Chair of Manatt’s Advertising, Marketing & Media Division, was asked to participate in a panel discussion focusing on the origins of ERSP and the enormous impact it has had on the direct response industry over the past 10 years. The co-panelists are ERA members who have supported ERSP along its journey and fostered its success, including Julie Coons, President and CEO of the Electronic Retailing Association.

The events will be held at Washington SunTrust headquarters. For more information or to register, click here.

Defendant Agrees To Telemarketing, Robocalling Ban In FTC Deal

A defendant agreed to a permanent ban from telemarketing and robocalling in a deal with the Federal Trade Commission, by settling allegations he had helped his clients call numbers on the Do Not Call Registry, to hide information from Caller IDs, and to make illegal robocalls.

The FTC referred charges to the Department of Justice, which filed a complaint against Joseph Turpel in California federal court for allegedly violating the Telemarketing Sales Rule. According to the agency, Turpel provided services to telemarketers and either knew or consciously avoided knowledge about his clients’ illegal activities.

Turpel’s clients contacted consumers about services like home security systems and grant procurement programs. Turpel assisted their efforts by concealing the client’s true identity so that a call recipient’s Caller ID displayed titles like “SERVICE MESSAGE” or “SERVICE ANNOUNCEMENT.” He also helped clients with illegal robocalls, the agency said.

To settle the suit Turpel agreed to a permanent ban from telemarketing and robocalling. The stipulated final order filed with the court also includes a suspended $395,000 civil penalty, because of his inability to pay.

To read the stipulated final order in U.S. v. Turpel, click here

Why it matters: The settlement with Turpel serves as a reminder that a person could be liable if he provides “substantial assistance or support” to a seller or telemarketer when he knows or consciously avoids knowing that the seller or telemarketer is engaged in violations of the Telemarketing Sales Rule.

Has The FTC Created A Common Law of Privacy?

A new paper published in the Columbia Law Review argues that after more than a decade of enforcement actions, the Federal Trade Commission has created a body of common law privacy.

“The agency has spent 15 years enforcing companies’ privacy policies through its authority to police unfair and deceptive trade practices,” authors Daniel J. Solove and Woodrow Hertzog explained. The agency has filed 170 privacy-related complaints since 1997, which averages to about 10 each year. But the numbers are deceiving, as the complaints have ramped up dramatically in recent years from just nine complaints in 2002 to 24 in 2012.

While the vast majority of these actions have resulted in settlement agreements, “companies look to these agreements to guide their privacy practices,” and “in practice, FTC privacy jurisprudence has become the broadest and most influential regulating force on information privacy in the United States – more so than nearly any privacy statute or any common law tort,” the authors wrote in “The FTC and the New Common Law of Privacy.”

The paper disputes the viewpoint that the agency’s privacy decisions are focused simply on enforcing specific privacy settlement agreements. Instead, “a deeper look at the principles that emerge from FTC privacy ‘common law’ demonstrates that the FTC’s privacy jurisprudence is quite thick,” the authors said. “The FTC has codified certain norms and best practices and has developed some baseline privacy protections. Standards have become so specific they resemble rules.”

Although other terms of service crafted by companies are enforced pursuant to contract law, the FTC came to “dominate” the enforcement of privacy policies because its power was gradually extended by laws like the Children’s Online Privacy Protection Act and the Gramm-Leach-Bliley Act, as well as the grant of enforcement authority under the E.U.-U.S. Safe Harbor Agreement.

While the FTC’s authority developed in “a fragmented fashion,” creating a “sectoral” regime with different law for different industries and economic sectors, today the agency has “sprawling jurisdiction.” And over the last 15 years, the agency’s enforcement actions have followed predictable patterns from general to more specific standards, much in the manner of common law development.

Lawyers consult and analyze the agency’s settlements as they would a judicial decision, the authors note. The consent agreements are made public and used by privacy attorneys to advise companies on how to avoid a similar FTC action. “FTC settlements are thus like the common law because they are treated in practice like the common law,” according to the article. It further notes that the agency has added to its enforcement decisions, “soft law,” such as guidelines, press releases, workshops, and white papers.

As for the jurisprudence itself, the authors explain that the FTC not only includes broken privacy and security promises in its scope of deceptive practices as its extends the scope to include the collection of personal information through deception practices and the failure to provide adequate notice of privacy-invasive activities. The authors identified five different examples in the unfairness realm: “retroactive policy changes, deceitful data collection, improper use of data, unfair design, and unfair information security practices.”

To read the “The FTC and the New Common Law of Privacy,” click here

Why it matters: The article not only summarized the FTC’s privacy jurisprudence over the last 15 years, but it also predicted the direction in which the agency will move. Building from the foundation of settlement agreements, guidelines and white papers, the FTC “can push more toward focusing on consumer expectations than on broken promises, move beyond the four corners of privacy policies into design elements and other facets of a company’s relationship with consumers, and develop and establish even more substantive standards,” the authors wrote.

Lawmakers Ask Advertisers To Fight Online Piracy

The advertising industry needs to do more to combat online piracy, at least according to the Congressional International Anti-Piracy Caucus.

In a letter to the Association of National Advertisers, the American Association of Advertising Agencies, and the Interactive Advertising Bureau, four lawmakers urged advertisers to step up their efforts to keep ads from appearing on piracy sites, which generated $227 million in advertising last year.

“Best practices are useful, but greater specificity is needed around preventative measures that participants in the digital advertising ecosystem can, and should, take to avoid the placement of ads on piracy sites, as well as the development of metrics to measure the effectiveness of these steps,” the bipartisan lawmakers wrote.

Reps. Adam Schiff (D-Calif.) and Bob Goodlatte (R-Va.) and Sens. Sheldon Whitehouse (D-R.I.) and Orrin Hatch (R-Utah) expressed appreciation for the efforts made to date, “but note that much remains to be done to operationalize the commitments made and to make them effective in preventing the appearance of legitimate ads on pirate sites, rather than simply responding once they are placed.”

Two years ago, members of the industry pledged to keep their ads off pirate sites. In conjunction with the IAB, the ANA and 4As released a statement of best practices with recommendations for agencies and marketers, such as including specific language in media placement contracts to prevent ads from appearing on illegal sites.

Since then, improved technology allows advertisers to do more, the letter stated. “Marketplace solutions are emerging, and the time is ripe for stakeholders to come together with a renewed focus on developing and implementing a more effective preventive regime,” the legislators wrote.

Advertisers should also remember the mobile ecosystem, the lawmakers noted, “which represents a significant and growing share of online advertising revenues, both for legitimate and pirate sites.”

Why it matters: Response from the industry was positive. “The advertising community is increasingly concerned about how their business practices are being undermined and damaged by piracy and click fraud, which could be as much as a third of what people are spending. The dollars are enormous,” Dan Jaffe, executive vice president of the ANA, told AdWeek. “We have tremendous financial incentives to resolve these issues. As a group, we’ve made this a priority.”

FCC’s New Net Neutrality Regs Feature “Fast Lanes”

The Federal Communications Commission is currently considering new net neutrality regulations with the inclusion of “fast lanes,” a significant change from the earlier version adopted by the agency.

In January the D.C. Circuit Court of Appeals struck down net neutrality regulations promulgated by the FCC in 2010. Although the federal appellate panel found that the agency had not overstepped its jurisdictional bounds by issuing the rules, the antidiscrimination and antiblocking provisions exceeded the scope of its authority.

FCC Chairman Tom Wheeler promised the agency would begin work on new standards for an open Internet that would comply with the court’s opinion. The new proposal includes a controversial provision that would allow Internet service providers to afford certain companies “preferential treatment” by paying extra for faster service.

Under the proposal, the extra access would need to be “commercially reasonable” and the FCC would monitor such deals on a case-by-case basis. ISPs would not be permitted to discriminate against or shut out specific Web sites.

Consumer groups immediately voiced their displeasure, arguing that start-ups and smaller content companies will be stifled and unable to compete with larger, wealthier, and more established companies. As one advocate told The New York Times, “Americans were promised, and deserve, an Internet that is free of toll roads, fast lanes and censorship – corporate or governmental.”

Wheeler defended the new rules, which have been circulated to fellow commissioners and will be released for public comment on May 15. The proposal “does not change the underlying goals of transparency, no blocking of lawful content, and no unreasonable discrimination among users established by the 2010 Rule,” he wrote in a blog post. He added that the rules would “establish a high bar for what is ‘commercially reasonable,’” and requested comment, ideas, or other approaches to achieve an open Internet.

To read Chairman Wheeler’s blog post about the new rules, click here

Why it matters: The net neutrality battle has already raged for more than a decade and with the FCC’s controversy surrounding the new proposal, looks to continue for the foreseeable future.

Noted and Quoted . . . AdvertisingAge Seeks Insight from Goldstein and Wasserman on Pom, Coca-Cola Case

AdvertisingAge featured comments from Manatt partners Linda Goldstein and Ivan Wasserman in two articles examining the FDA’s regulation of beverage labeling and whether it preempts the ability of a private party to bring a false advertising lawsuit, the issue at hand in Pom Wonderful v. Coca-Cola, currently before the U.S. Supreme Court.

In an article published on April 21, Goldstein noted that the case is “monumental” for the food and beverage industry. “Where I think the real action is, is the broader question of whether . . . FDA regulations preempt private claims,” she said. “The industry has been besieged by a barrage of consumer class actions essentially claiming that labeling for food and beverage products are misleading to consumers even when they comply with FDA regulations.”

The following day, AdvertisingAge spoke with Wasserman about FDA labeling compliance in connection with the case. If the court rules in favor of Pom, companies that have complied with FDA labeling requirements will no longer be shielded from liability, Wasserman noted in the article. “Many food and beverage companies struggle on a daily basis with trying to ensure their labels aren’t misleading,” he said.

To read the April 21 article, click here.

To read the April 22 article, click here

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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