Advertising Law - October 2015

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

  • Commercials Pulled After Endorser Admits 9/11 Lies
  • A Reminder to Advertisers: Use Manners and Ask First
  • FTC Starts with Security
  • Volkswagen’s Legal Woes Mount as Senator Calls for FTC Action

Commercials Pulled After Endorser Admits 9/11 Lies

The revelation that an endorser lied about his whereabouts on September 11 led a national sports-themed restaurant chain to stop airing commercials where the actor uttered the line, “But don’t just take my word for it.”

Actor Steven Rannazzisi spoke on multiple occasions about how his experience on September 11, 2001, changed his life. In more than one interview, he said he was an account manager at Merrill Lynch working on the 54th floor of the South Tower when the first plane hit. He said “we were like jostled all over the place,” and that he still has “dreams of like, you know, those falling dreams” Because of his experience, Rannazzisi said he quit his job and took up his true love of comedy and acting.

But on the fourteenth anniversary of the attack, Rannazzisi admitted that his story was a lie after The New York Times confronted him with evidence that he was in Midtown when the attack occurred and had never worked for Merrill Lynch. “I was not at the Trade Center on that day,” he said in a statement. “I don’t know why I said this. This was inexcusable. I am truly, truly sorry.”

The fabrication not only impacted Rannazzisi, but also forced the sports-themed national chain, for which he appeared in an advertising campaign, to abandon his commercials just as the restaurant reached its busiest time of year—football season. In the commercials, Rannazzisi sings the praises of the restaurant (from the snacks to multiple TVs that display more than one game at a time) and concludes with, “But don’t just take my word for it, take someone else’s word for it,” before Hall of Fame running back Emmitt Smith appears.

The national chain pulled the ads, stating that “upon careful review, we have decided to discontinue airing our current television commercials featuring Steve Rannazzisi.”

Why it matters: The story is just the latest example of the risk brands take by associating themselves with a celebrity endorser. From Rannazzisi’s lies to Jared Fogle’s recent guilty plea on charges related to child pornography to one company’s run-in with the Food and Drug Administration over a Kim Kardashian tweet, companies must carefully consider the pros and cons of a relationship with celebrities.

A Reminder to Advertisers: Use Manners and Ask First

Marketers considering the use of consumer-generated pictures as a way to engage on social media might want to think twice.

Some companies have picked up images that contain their products from sites such as Instagram or Pinterest, and used the pictures for advertising purposes without obtaining the consent of the individual who posted the photo. Consumers may have copyright and publicity rights in the images, and if a child under the age of 13 is depicted, the Children’s Online Privacy Protection Act requires that parental consent must first be obtained.

In addition to legal concerns, the effort to connect with consumers through the use of their personal images can also backfire. Reaction to having their pictures used runs the gamut: some consumers may be completely unaware that their image is featured in marketing, others may be unhappy about the use but are unwilling to spend the time and money to file a lawsuit, others may file a lawsuit, while some consumers are pleased by the publicity.

The New York Times recently considered the situation, and offered examples of the different responses. For example, Shereen Way posted a photo of her four-year-old daughter on Instagram wearing a pair of Crocs sandals that was identified with a hashtag, and had no idea the company used the image in a gallery of photographs on its website until a Times reporter contacted her.

On the other end of the spectrum, 23-year-old Liza Day Penney told the newspaper that she is “always really excited” when her pictures appear on American Eagle Outfitters’ website, in part because the company once gave her a $25 gift card. “That was one of the things … that really encouraged me to continue to post and continue to tag and hashtag them as I wear the clothes,” she said.

For advertisers, obtaining consent is the best path toward avoiding potential conflict. In the example of Crocs, the company said it has a policy to get permission before making use of consumer-generated photos, typically by posting a comment such as, “We love your pic! In fact, we love to share photos like yours in our marketing, including social media, e-mail, in our stores and in print. Please reply with #CrocsOK to signify your understanding and acceptance to our terms.” The company also acknowledged that mistakes are made, as in the case of Way’s image, which was used before such a request was made, let alone accepted.

Why it matters: The situation will only become more complicated as social media continues to proliferate and brands seek out new and creative ways to connect with consumers. Advertisers seeking to avoid conflict should err on the side of caution and obtain consent prior to using consumer-generated pictures.

FTC Starts with Security

At the Federal Trade Commission’s first “Start with Security” event recently held in California, the agency emphasized the importance of including data security considerations from the inception of any business.

Targeting tech startups and small- and medium-sized businesses, the FTC presented speakers and hosted panel discussions to explain that the concept of “security by design” is cheaper and easier in the long run, with Chairwoman Edith Ramirez recommending the use of encryption (particularly while data is in transit).

At least one individual should be identified as the person primarily accountable for data security, speakers said, with additional members added to the team depending on the size and technological needs of the company. Some panelists suggested that all engineers receive at least baseline training in security issues.

Data security is not static, attendees were told. Since a business’s needs will constantly evolve and change, companies must constantly monitor and tweak systems and policies, incorporate periodic testing, and identify and fix security vulnerabilities throughout the life cycle of the technology.

Taking advantage of the existing security community and third-party resources was also suggested, as was the implementation of “bug bounty” programs that reward those who report vulnerabilities. Such programs may be a challenge for a small start-ups, but larger companies should consider creating incentives that would encourage employees to find security problems.

To read more about the FTC’s Start with Security event, click here.

Why it matters: The FTC continues to flex its data security regulatory muscles in the wake of the Third Circuit Court of Appeals’ September decision that the agency has the power to enforce unfair or deceptive acts or practices in the corporate cybersecurity space. A second Start with Security event is slated for November in Texas.

Volkswagen’s Legal Woes Mount as Senator Calls for FTC Action

Calling on the agency to take action, U.S. Senator Bill Nelson (D-Fla.) requested that the Federal Trade Commission investigate Volkswagen’s advertising claims for its “clean diesel” vehicles.

In September, the Environmental Protection Agency and California’s Air Resources Board issued press releases which revealed that approximately 482,000 Volkswagen and Audi diesel cars contained software that was intentionally designed to cheat on emissions tests to circumvent environmental standards for air pollutants. The software could detect when a test was under way and reduce emissions, but return to normal operation in daily use (in some cases, with up to 40 times the standard emissions).

Within days, Volkswagen’s CEO resigned, the EPA and Department of Justice announced civil and criminal investigations, a securities class action was filed in Virginia federal court, multiple state Attorneys General announced their own investigations, and dozens of class actions were filed by owners of the affected cars.

Sen. Nelson acknowledged the efforts of the EPA and the DOJ, but told Chairwoman Edith Ramirez that the FTC “also has an appropriate role in investigating the company’s actions,” to enforce Section 5 of the Federal Trade Commission Act’s prohibition against unfair or deceptive acts or practices.

“Volkswagen advertised their diesel cars as ‘clean diesel’ and as otherwise environmentally friendly,” Sen. Nelson wrote. “Yet, contrary to these express claims, Volkswagen’s and Audi’s diesel vehicles, by design, were neither clean nor environmentally friendly, and they failed to comply with federal environmental laws.”

The FTC is “uniquely positioned” to represent the interests of consumers, the lawmaker added, and the agency should make use of its powers under Section 5 to explore possible remedies such as consumer redress as well as “a full panoply of equitable remedies,” including forcing VW “to launch a comprehensive corrective marketing campaign that would cure the deception and inform consumers about their remedial options.”

Declaring himself “outraged” that Volkswagen would “cheat its customers by deceiving them into buying a car that wasn’t what was advertised,” Sen. Nelson urged the Commission “to exercise all of its authority on behalf of the American public.”

To read Sen. Nelson’s letter to the FTC, click here.

Why it matters: “Volkswagen’s transgressions demonstrate the importance of having multiple ‘cops on the beat’ when it comes to consumer protection,” Sen. Nelson wrote. “The EPA and the DOJ have very important law enforcement and remedial roles to play when faced with the kinds of behavior at issue here. In establishing the FTC Act, however, Congress did not contemplate a bystander role for the agency in the face of galling and unmitigated consumer deception. As an independent agency of Congress, the FTC has a key role to play—in cooperation with the EPA and DOJ—as one of the cops on the beat to make sure consumers are protected.”

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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