Advertising Law - May 2014

by Manatt, Phelps & Phillips, LLP

In This Issue:

  • Schwarzenegger Sues Over Publicity Rights
  • Vermont Passes GMO Labeling Law
  • OBA Accountability Program Makes First Governmental Referral
  • California Data Broker Bill Advances

Schwarzenegger Sues Over Publicity Rights

The Governator has filed a $10 million suit alleging that Nevada-based Arnold Nutrition Group “brazenly stole[] and exploited” his likeness to market its products in violation of his right of publicity.

According to the complaint, Arnold Schwarzenegger “would never endorse or affiliate himself with any fitness or nutritional product without first undertaking rigorous research, testing and due diligence to ensure that the product is healthy and helpful to athletes and the general public.”

Schwarzenegger was never contacted by the company, he claimed, which has engaged in “shameful conduct” and “is committing a fraud on the public.”

The former governor and Mr. Universe filed his complaint in California state court claiming unfair competition and a violation of his publicity rights, seeking $10 million in damages.

Why it matters: While governor, Schwarzenegger signed into law an expansion of publicity rights for celebrities in the state. He has also sued to enforce his rights when a bobblehead doll version of himself, complete with machine gun, was put on the market. That case settled.

Vermont Passes GMO Labeling Law

Vermont became the first state to enact labeling legislation for genetically modified organisms. The labeling requirement will take effect on July 1, 2016.

Although Connecticut and Maine previously enacted GMO labeling requirements, the laws in those states are not triggered until a specific number of neighboring states have enacted similar legislation.

Pursuant to Vermont’s law, fresh produce and processed foods offered for retail sale in the state must include special labeling if they are entirely or partially produced by genetic engineering. Fresh produce that contains ingredients enhanced by genetic engineering must carry a label designating them as “produced with genetic engineering.” Processed foods that contain one or more genetically engineered ingredients must include “partially produced with genetic engineering” or “may be produced with genetic engineering” or “produced with genetic engineering.”

In addition to mandating the genetic engineering label, the bill also prohibits GMO foods from concurrently using labels like “natural,” “naturally made,” “naturally grown,” or “any words of similar import that would have a tendency to mislead a consumer.”

Excluded from the law’s coverage: meat or dairy products made from animals that were fed with genetically engineered ingredients or consumed genetically engineered feed. Restaurants are also exempt.

The state’s Attorney General has the authority to promulgate regulations and enforce the law. Violations of the law could lead to fines of up to $1,000 per day, per product.

Anticipating a legal challenge from the food industry, Vermont legislators built a $1.5 million legal fund into the law to pay for any “costs or liabilities” related to the legislation.

To read Vermont’s law, click here

Why it matters: Now that Vermont has taken the leap and enacted legislation without a triggering event, will other states follow? GMO labeling laws are currently pending in 23 other states, including California and New York. Other states may take a wait-and-see approach, as the food industry has vowed to challenge the law in court.

OBA Accountability Program Makes First Governmental Referral

The Online Interest-Based Advertising Accountability Program made its first referral to a government agency, by passing along information to the Consumer Financial Protection Bureau about SunTrust Bank’s refusal to participate in the Program.

Launched in 2011, the Accountability Program enforces the ad industry’s Self-Regulatory Principles for Online Behavioral Advertising. The OBA principles – developed by an industry coalition – require companies to provide consumers with notice and an opt-out mechanism when a third party collects their information and when an ad is based on that data.

While examining the Web site for SunTrust Bank Inc., the Accountability Program observed “what appeared to be third parties known to be engaged in collecting consumers’ web browsing activity in order to serve them interest-based ads.” However, the site was not providing real-time notice to consumers of the data collection or providing a way to opt out.

The Accountability Program sent SunTrust a letter of inquiry. But the Bank “declined repeatedly” to participate in the inquiry, writing, “Our institution is monitored by a sizeable number of both federal and state agencies and is subject to regulatory exams and reviews on an ongoing basis. Complying with these demands consumes all of our allocated resources.”

The Accountability Program then referred the Bank to the CFPB. “Pursuant to its policies and procedures, the Accountability Program has discretion to refer any company that refuses to participate to the appropriate government agency, in this case the Consumer Financial Protection Bureau,” the regulatory group said.

To read the Program’s press release about the referral, click here.

Why it matters: During its three years of enforcement, the Accountability Program has concluded 32 inquiries, all of which until now, were closed with 100 percent industry compliance. The referral of SunTrust Bank marks the first time that the CFPB has been notified.

California Data Broker Bill Advances

Could California beat federal lawmakers to the punch when it comes to regulating data brokers?

Although federal lawmakers have spent months investigating, issuing reports, and discussing possible data broker related legislation, the California Senate recently approved a bill requiring online data brokers who sell consumer information to provide an opt-out mechanism and consumer access to the data.

S.B. 1348 would give California consumers the right to review the information owned by a data broker and request that it be permanently removed within 10 days. Once removed, the information could not be reposted or sold to a third party.

The proposal passed the Senate in a 24-to-8 vote and now moves to the State Assembly for consideration.

The proposed law – which would cover data collected as of Jan. 1, 2015 – includes a private right of action with damages of $1,000 per violation, plus attorneys’ fees.

Backed by privacy rights groups, the bill faces opposition from entities such as the California Chamber of Commerce and the Direct Marketing Association.

To read S.B. 1348, click here

Why it matters: Data brokers have been in the spotlight and have faced potential regulation for several months. After conducting a yearlong investigation, Sen. Jay Rockefeller (D-W.Va.) released a report, in which he claimed to be “revolted” by some of the industry’s practices. A second report from the Government Accountability Office recently recommended that federal legislation be passed to create baseline privacy rules for data collection, sale, and use, which has led many to speculate that regulation of the industry is a matter of when, not if. But with no actual movement by Congress, California could step in with its own law.


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

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Manatt, Phelps & Phillips, LLP

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