Advertising Law - Feb 13, 2014

by Manatt, Phelps & Phillips, LLP

In This Issue:

  • Entertainment Litigator John Gatti Joins Manatt’s Los Angeles Office
  • FTC Drives Car-Related False Ad Suit to Settlement
  • Spam E-Mails Tricked Consumers About Affordable Care Act, Says FTC
  • Time to Get Generic

Entertainment Litigator John Gatti Joins Manatt’s Los Angeles Office

Manatt is pleased to welcome John Gatti as a partner in the Litigation Division, who will serve as co-chair of the firm’s national Entertainment Litigation practice. Considered one of the nation’s leading entertainment litigators, Mr. Gatti has been named to The Hollywood Reporter’s “Power Lawyers: Top 100 Influential Attorneys in Entertainment” list for the past six consecutive years.

Mr. Gatti has more than 25 years of commercial litigation experience, with an emphasis on representing clients in the entertainment, media, sports, Internet and gaming industries, including studios, television networks, film financiers, talent, gaming and sports entities, and independent entertainment production companies.

FTC Drives Car-Related False Ad Suit to Settlement

The Federal Trade Commission recently settled charges with Nissan North America and its advertising agency over deceptive advertising for the Nissan Frontier pickup truck.

The 2011 “Hill Climb” ad depicted a dune buggy stalled on a steep sand hill until the Frontier arrived and pushed the buggy to the top. Although the truck saved the day, the FTC said the rescue wasn’t exactly reality.

Instead, the Frontier and the dune buggy were dragged to the top of the hill by cables, the FTC said, and the hill itself was made to look “significantly steeper” than it really was. The style of the advertisement – shot as if a spectator were watching the event on her phone while onlookers raved, “Whoa, man. No way!” and “Maniac!” and “Did you guys see that?” – added to the message that the ad was an accurate representation of the powers of the Nissan truck.

Because an actual, unaltered Nissan Frontier cannot perform the feat depicted, the agency charged that Nissan and TWBA knew or should have known that the overall message of the ad was deceptive and violated Section 5 of the Federal Trade Commission Act, despite the inclusion of a fleeting on-screen disclaimer that read “Fictionalization. Do not attempt.” during the first three seconds of the ad.

To settle the charges, both companies agreed to refrain from future misrepresentations about “any material quality or feature of a pickup truck through the depiction of a test, experiment, or demonstration.” The proposed agreement would allow Nissan and TBWA to make use of special effects and other production techniques – as long as they do not misrepresent a material quality or feature of a pickup truck.

The proposed consent orders are open for public comment until Feb. 24.

To read the FTC’s complaints and proposed consent orders, click here

Why it matters: In addition to reinforcing the FTC’s recent attention to car advertisements (following a nationwide sweep against 10 dealers allegedly engaged in deceptive advertising), this action provides a valuable reminder to advertisers and their agencies that they must truthfully advertise their products.

Spam E-Mails Tricked Consumers About Affordable Care Act, Says FTC

The Affordable Care Act made headlines again, but this time there was a new twist. The FTC says one company sent misleading and deceptive intended-to-scare spam e-mails to frighten consumers into purchasing insurance.

Kobeni, Inc., and company president Yair Shale, sent messages over a four-month period with subject lines like “Final Warning – Your [sic] Breaking a Federal Law If You Don’t Have Coverage” and text reading: “Today is the deadline to make your election or be in violation of federal law. . . . Why is this mandatory? New Federal Law signed by the President made it mandatory for all U.S. residents to have active coverage. You will be in violation and face penalties if you do not elect. You Must Select One of These 5 Options.”

In the agency’s first suit alleging fraud related to the Affordable Care Act, the FTC alleged in a Florida federal court that the unsolicited commercial messages misled consumers into believing they must immediately enroll in an insurance plan.

The e-mails also included a link that took consumers to Web sites with ads for insurance. According to the FTC’s complaint, the defendants received a fee from the operators of the Web sites for each consumer who landed on the page via the e-mails. The agency noted that the insurance companies did not authorize the e-mail messages.

The complaint also alleged that the defendants violated CAN-SPAM by failing to provide the required opt-out notice and the physical address of the sender. The agency seeks injunctive relief as well as monetary damages for consumer redress.

To read the complaint in FTC v. Kobeni, Inc., click here.

Why it matters: According to the FTC, a new law – and the confusion surrounding its requirements – has provided a new opportunity to trick consumers. The agency’s first complaint alleging ACA-related fraud allegations will not likely be its last.

Time to Get Generic

The rollout of new generic top-level domain names has begun, with the first seven live as of January 29.

The first gTLDs – .bike, .clothing, .guru, .holdings, .plumbing, .singles, and .ventures – were followed by the launch of the next seven (.camera, .equipment, .estate, .gallery, .graphics, .lighting, and .photography).

The Internet Corporation for Assigned Names and Numbers (ICANN) announced last summer that it had received a total of 1,930 applications for new gTLDs, ranging from “.home” to “.inc.” Previously, just 22 top-level domains existed.

“There are now almost five times more generic top-level domains than there were only a few months ago and that translates to greater consumer choice,” ICANN president Akram Atallah told Adweek. “We are as eager as everyone else to see what type of innovation these new domains will usher into the online world.”

Not all parties are as enthusiastic about the creation of new Internet domain names. Trademark holders have expressed concern about the cost of protecting their brands against cybersquatting or the misuse of terms. An application costs $185,000, with annual renewal rates of $25,000.

Regulators have also shared their worries about the change, with FTC’s Julie Brill noting in remarks last year that “this is one case where it’s not clear that more is better.” At a conference of the Association of National Advertisers, Brill said she “remained concerned – as I have been since ICANN first announced its plans – that the expansion could create opportunities for scammers to defraud consumers online, shrink law enforcement’s ability to catch scam artists, and divert the resources of legitimate businesses into litigating and protecting their own good names.”

Dan Jaffe, executive vice president of the ANA, did not express optimism about the new domains as they went live. “While [ICANN] made some changes in providing more protections, we felt they were far from sufficient or adequate,” he told Adweek. “It’s premature to assume we won’t be facing some very severe problems. We’ll cross our fingers and pray.”

Why it matters: As the new gTLDs work their way through the approval process and roll out to the public, brand owners must decide whether, and in what form, they will take part in the new domain name regime

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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