Advertising Law -- Nov 18, 2013

Manatt, Phelps & Phillips, LLP

In This Issue:

C May Now Be For Celery or Carrots

Thanks to a deal brokered by First Lady Michelle Obama and her Partnership for a Healthier America, Sesame Street characters will soon appear in the produce department.

In a two-year agreement, the company behind Big Bird, Bert, and Ernie agreed to waive its license fee to members of the Produce Marketing Association to use Sesame Street characters to promote produce. As long as the product being marketed is fresh, with no added sugar and does not pose a choking hazard, there are no limitations on marketing, PMA President Bryan Silbermann explained. The Sesame Street characters could appear as early as mid-2014.

“Just imagine what will happen when we take our kids to the grocery store, and they see Elmo and Rosita and the other Sesame Street Muppets they love up and down the produce aisle,” Mrs. Obama said in a statement about the deal. “Imagine what it will be like to have our kids begging us to buy them fruits and vegetables instead of cookies, candy, and chips.”

The deal fulfills a recent request by the First Lady. In September, Mrs. Obama sponsored a summit at the White House addressing food marketing. Speaking to executives of the media and entertainment industry as well as food and beverage companies, she asked attendees at the inaugural White House Convening on Food Marketing to Children to not just cut back on advertising unhealthy foods, but to also use their power of marketing to push kids towards healthy foods.

Announcing the Sesame Street partnership, Mrs. Obama noted a recent Cornell University study published in the Archives of Pediatrics and Adolescent Medicine about the power of Elmo. When given the choice between a cookie and an apple, children picked the cookie. But when faced with a cookie and an apple featuring an Elmo sticker, almost twice as many kids picked the apple.

“That’s what this new collaboration between Sesame Workshop and the Produce Marketing Association is all about – showing our kids that healthy food can be fun and that fruits and vegetables don’t just make us feel good, they taste good too,” Mrs. Obama said.

The deal also presents a powerful marketing opportunity for produce marketers, typically underdogs in food marketing. “One of the key challenges we face is competing for share of mind and share of plate. Other food marketers, companies who have seemingly endless budgets enabling them to position and sell their products, especially to kids, are steep competition,” said Jan deLyser, the vice president of marketing for the California Avocado Commission and immediate past chairman of PMA’s board of directors, in a statement. “The power of the Sesame Street brand is undeniable, especially given the trust parents have in it.”

Why it matters: The two-year deal represents the latest effort by the First Lady to impact the marketing of food to children as part of her efforts to combat childhood obesity. In addition to her Let’s Move Campaign (which the Partnership for a Healthier America is part of), Mrs. Obama has praised participating companies, such as the Walt Disney Company, which announced a phase-out of junk food ads from its theme parks, Web sites, and media channels. She has also recognized the efforts of the 17 companies that have signed on to the Children’s Food and Beverage Advertising Initiative, adopting standards for child-directed marketing.

The NAD and Native Advertising on Blogs, Pinterest, and More

Addressing the intersection between editorial and sponsored content, the National Advertising Division recommended that eSalon modify or discontinue certain social media practices “to avoid confusion” for consumers.

eSalon, the maker and seller of an at-home hair-color product, exclusively advertises its product online. In addition to its Web site, the company operates a blog at, has pages on Facebook and Pinterest, and runs a Twitter feed. Any references to eSalon products are promoted through these networks via links, with the company reposting or re-Tweeting positive third-party reviews about the product.

Express claims made by the advertiser for its product (like “Salon-grade Color crafted for you by experts, as if you’re in their chair.” and “Individual color made just for you, not the masses. The perfect match….”) were sufficiently supported, the NAD said.

More complicated: eSalon’s implied claims on social media.

eSalon posts tips on hair color, hair styles, and other hair-related issues on its blog. But each blog post includes an eSalon promotion and the only disclaimer is found in small print at the bottom of the page, the NAD said. The self-regulatory body referenced the Federal Trade Commission’s recently updated Dot Com Disclosures to remind advertisers about the need for effective disclosures, as it found eSalon’s to be insufficient.

In its decision, the NAD recommended additional disclosures, and it emphasized the obligation of advertisers “to advise consumers when there is a connection between the advertiser and content that directly or indirectly promotes the advertiser’s product.”

“NAD recommended that the advertiser disclose that it maintains the blog clearly and conspicuously on the top of the landing page of the blog, where it will be easy to notice, read and understand by readers of the blog, as well as on each page or blog post, so consumers are aware of the connection between the blog and eSalon products that are promoted on the blog, whether they visit the landing page or arrive on the blog via a link to a blog post.”

The NAD also expressed concern about third parties blogging and Tweeting about eSalon products. Tweets like one written by Layne@mamaQBlogsIt (“Trips to the salon can be time-consuming and really expensive! I love this great option from eSalon! You can save….”) are retweeted and promoted by eSalon.

Although eSalon told the NAD that it was not responsible for the content of such third-party posts, the NAD took the opportunity to recommend that advertisers make a practice of advising reviewers of the disclosure obligations pursuant to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising.

“The advertiser is responsible for disclosing a material connection between itself and an endorser of its product when it uses such endorsements in its own advertising, including re-posting the endorsements on social media,” the self-regulatory body wrote. eSalon should “discontinue its re-posting of reviews or endorsements on social media or modify such re-postings to disclose clearly and conspicuously any incentives eSalon provided for reviewing or promoting its products.”

eSalon’s Pinterest page also posed problems. A “Users and Reviews” page includes links to eSalon’s blog, and the company should add a clear and conspicuous disclosure that it maintains the blog, the NAD recommended, particularly as the link is next to links for editorial content found in The Wall Street Journal and Good Housekeeping.

The NAD also reviewed eSalon’s practice of posting photographs of celebrities on its social media pages – including Facebook and Pinterest – with comments like “Hair Colors We Love.” eSalon argued that the pictures were only meant as praise for the celebrity’s choice of hair color, but the NAD said the posts were an implied endorsement claim running afoul of the FTC’s guides.

Therefore, “NAD recommended that the advertiser discontinue its use of celebrity likenesses on its website unless the celebrities have actually endorsed the product.”

To read the NAD’s press release about the decision, click here

Why it matters: The NAD noted that eSalon’s social media practices are not uncommon. “In fact, advertisers are increasingly looking to market their products through social media and content marketing, as advertisers search for alternative, more cost-effective ways to reach and interact with consumers,” according to the decision. “The new context in which advertising appears poses challenges related to the obligation of advertisers to inform consumers when content posted online is advertising.” The NAD’s decision stressed the importance of following FTC guidance as well as the general principle that advertisers “are required to identify a message as advertising when it appears in a context that consumers may reasonably understand to be editorial content.” The case is the second time the NAD has faced native advertising. In September the self-regulatory body took its first stab at the issue, reviewing Qualcomm’s sponsorship of a series of tech-related articles featured on Acknowledging that “[a]dvertising in non-traditional formats, including sponsoring a series of articles in an online news source, poses some new challenges,” the NAD determined that Qualcomm had appropriately disclosed itself as the sponsor of the article series.

Do Not Track Kids Bill Makes a Comeback

Sen. Ed Markey (D-Mass.) and Rep. Joe Barton (R-Texas) have announced their plans to reintroduce the Do Not Track Kids Act.

The bill would amend the Children’s Online Privacy Protection Act of 1998 to eliminate targeted advertising to those under the age of 16 and give minors an “erase” button with the ability to delete their social networking profiles. The legislation was previously introduced in the 2011 congressional session but didn’t progress out of committee.

“The Do Not Track Kids legislation would update COPPA for this new Internet ecosystem, establish new protections for the personal information of children and teens and ensure that parents have the tools they need to protect their children’s privacy,” Sen. Markey and Rep. Barton said in a statement.

The lawmakers said the impetus behind bringing the bill back was a recently released study by Common Sense Media, which found that even toddlers are using tablets. According to the study, 72 percent of children under the age of eight have accessed media using a tablet, smartphone, or other mobile device; 38 percent of those under the age of two have already done so.

“Increasing use of mobile devices by very young children coupled with rapid change in technological development makes it more important than ever to put federal legislation on the books that provides parents with the tools to protect their children online,” the legislators said.

The concept of the “erase” button was the basis for a recently enacted California law. In September Gov. Jerry Brown signed SB 568, a bill that allowed those under the age of 18 to delete material posted online to social media sites such as Facebook. The new law, which takes effect Jan. 1, 2015, also prohibits sites from compiling the personal information of minors to market products or services they cannot otherwise legally purchase or use, such as alcohol and tobacco.

To read the lawmakers’ statement, click here

To read the Do Not Track Kids Act of 2011, click here

Why it matters: The Do Not Track Kids Act faces an uphill road to passage. Despite the child-friendly nature of the legislation and the bipartisan sponsors, the bill made little progress in its last appearance and the concept of Do Not Track has generally received little enthusiasm recently.

FTC Takes Action Against Environmental Marketers

Allegedly unsubstantiated environmental claims are the basis of six enforcement actions recently filed by the Federal Trade Commission, including five suits challenging claims of biodegradable plastic products.

The common thread among all six actions: enforcement of the agency’s Guides for the Use of Environmental Marketing Claims, better known as the Green Guides.

Four of the cases target the advertisers of plastic products. American Plastic Manufacturing, CHAMP, Clear Choice Housewares, Inc., and Carnie Cap, Inc., all sold various products that were advertised as biodegradable, biodegradable in a landfill, or biodegradable within a certain period of time – all claims that lacked substantiation, the agency alleged.

Clear Choice, for example, said its food storage containers featured an additive that made them “quickly biodegradable in landfills.” Illinois-based Carnie Cap made an unqualified claim that its plastic rebar cap covers were “100% biodegradable.”

All four defendants entered into proposed consent orders with the FTC, under which they are prohibited from future biodegradability claims unless they can back up the marketing with competent and reliable scientific evidence.

To comply with the Green Guides, the companies must have evidence that the entire plastic product being advertised will completely decompose into elements found in nature within one year after customary disposal (like a landfill, incinerator, or recycling facility) to support an unqualified biodegradable claim. If a qualified claim of biodegradability is made, then the defendants must state the amount of time required for complete biodegradation in the relevant disposal environment.

In addition, the proposed consent orders clarify that ASTM D5511 results alone are not sufficient to substantiate unqualified biodegradability claims. Any testing protocol used by an advertiser for substantiation purposes must simulate the conditions found in the stated disposal environment, the FTC noted.

A fifth case also involved plastics. A complaint filed against ECM Biofilms, Inc., alleged that the company marketed MasterBatch Pellets as an additive to make plastic products biodegradable (fellow defendants American Plastic Manufacturing and CHAMP both used the product). The FTC said ECM even issued “Certificates of Biodegradability of Plastic Products” to purchasers to convince them of the additive’s abilities.

ECM lacked substantiation for its claims, such as “plastic products made with [its] additives will break down in approximately nine months to five years in nearly all landfills or wherever else they may end up.” In actuality, the plastics do not biodegrade within a reasonably short period of time after landfill disposal, the FTC said.

In the final case, the agency returned to a prior action. In 1994, AJM Packaging Corporation agreed to a consent order with the Commission under which it was banned from claiming its products were degradable, biodegradable, or photodegradable absent competent and reliable scientific evidence as support.

According to the FTC’s new enforcement action, AJM made “biodegradable” and “compostable” claims about its paper products – like paper plates, cups, bowls, napkins, and bags – without sufficient evidence, despite the consent order.

AJM will pay a $450,000 civil penalty as a result. Under a new consent decree – featuring updated terminology in line with the Green Guides – the company again faces a ban on unsubstantiated claims that products are biodegradable, compostable, recyclable, or offer an environmental benefit.

To read the complaints and orders in the six cases, click here

Why it matters: Environmental claims remain a priority for the FTC, and advertisers relying upon green marketing should be prepared to substantiate their ads. “It’s no secret that consumers want products that are environmentally friendly, and that companies are trying to meet that need,” Jessica Rich, Director of the agency’s Bureau of Consumer Protection, said in a press release. “But companies that don’t have evidence to support the environmental claims they make about their products erode consumer confidence and undermine those companies that are playing by the rules.” Advertisers should ensure compliance with the Green Guides to avoid regulatory action.

Noted and Quoted . . . Manatt Partners Provide Insight to New York Law Journal, Tech Zulu and Natural Products Insider on Outlook for Respective Industries

On November 14, 2013, Manatt partner Marc Roth teamed up with Edward Kabak, the Chief Legal Officer of the Brand Activation Association (BAA, formerly the Promotion Marketing Association), to coauthor an article for the New York Law Journal focused on “Developments in Advertising and Marketing Law” over the past year. The article discussed some of the most significant developments impacting these industries, including those related to privacy and data security, advertising disclosures, native advertising, the “Internet of Things,” Telephone Consumer Protection Act, Fair Debt Collection Practices Act and green claims.

The article was prepared in advance of the BAA’s 35th Annual Marketing Law Conference, to be held November 18-20, 2013 in Chicago, at which Marc, Manatt’s Advertising, Marketing & Media Division Chair Linda Goldstein, and Manatt attorney Lauren Aronson have been invited to speak on related legal and regulatory issues in three sessions at the conference.

On November 12, 2013, Hale Boggs, a partner with Manatt, Phelps & Phillips, LLP and chairman of Manatt Digital Media (MDM), was featured in an article published in Tech Zulu, “Digital Media Investments and The Future of Los Angeles Startups with Manatt Digital Media.”

In the article, Hale described the services of MDM, which launched earlier this year and provides a full-service platform that blends comprehensive legal, business consulting and financing services for digital media clients – from start-ups to Fortune 500 companies. Throughout the piece, Hale shed light on what’s to come for start-ups in the southern California market and where he believes digital media is headed. According to Hale, “everything is going to mobile. . . Every major brand has a digital marketing strategy. . . That data is increasingly showing that mobile marketing works and the most effective target, because it’s real-time.”

To read the full article, click here.

Natural Products Insider recently sought Manatt partner Ivan Wasserman’s insight following his presentation at the Council for Responsible Nutrition’s Annual Dietary Supplement Conference on “Marketing and Advertising Claims: The Top Five Claims-Related Issues That Can Cause Consumers to Sue You.”

In an exclusive interview with Insider, Ivan provided tips to help dietary supplement and functional food companies to protect themselves against the threat of class actions and highlighted the types of claims that are likely to catch the attention of class action attorneys. According to Ivan, “we are seeing a rash of piggyback lawsuits where lawyers will take the findings from the [National Advertising Division] and regulators and use them as a road map to bring class actions on those claims.”

To view the full interview, 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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