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NEWSLETTER: Advertising, Marketing & Promotions, Winter 2011

Fall 2011

Dear Clients, Colleagues and Friends,

Welcome to our winter newsletter. Is it still winter? Well, the clocks may have changed and the snow in New York has melted, but yes, it is still technically winter.

In addition to lots of snow, there have been a number of important developments this season. These include on the federal level, the enactment of the Restore Online Shoppers Protection Act and the introduction of two privacy bills. On the state level, a little noticed ban on billing fees in New York goes into effect and states continue to grapple with Internet taxation issues. The FTC has continued its path towards expanding substantiation obligations and jurisdiction over health claims. Private plaintiffs are focusing on challenging new marketing practices, including the popular Groupon business model. These, and other timely topics, are discussed in this newsletter.

As always, if you would like to discuss any of these developments, have concerns about their impact on your business or marketing campaign, or have any questions about the legal aspects of advertising and promotional marketing, please feel free to give us a call.


IN THIS ISSUE

Federal Privacy Bills Introduced

FTC Dannon Settlement Expands Substantiation Requirements

Zip Codes Are Personally Identifiable Information

New York Bans Paper Billing Fees

Groupon Lawsuits Expose Risk In Pre-Paid Offers

Mobile Marketer Outlook 2011 - Legal Analysis

FTC To Host Forum On "Cramming"

Online Retail Tax Law Developments In Illinois, South Dakota and Colorado

Reminder: Restore Online Shoppers' Confidence Act Now In Effect

Iowa Attorney General Sues Trilegiant Buying Club

Facebook Changes Approval Requirement

FCC v. AT&T.: The Lack Of Personal Privacy For Corporations

Alibaba Resignations Expose Fraud On Popular Wholesaler Website

FTC Releases List Of Top Consumer Complaints In 2010 - Identity Theft Tops The List Again

California Ruling Assists Plaintiffs In Class Action Over Unwanted Cell Phone Calls

Southern District Of New York Throws Out Case Against Snapple For Lack Of Evidence

OLSHAN BUZZ

UPCOMING PRESENTATION ON COMPLIANCE AND REGULATION

Andrew Lustigman will speak at the Networking DM Panel on Compliance and Regulatory Issues to take place in Whistler, British Columbia on May 3, 2011. Topics scheduled to be discussed include compliance and regulatory issues, such as legal opinions, copy writing, product regulation, recent enforcement actions and predictions for the future of direct marketing.

Networking DM is an event that seeks to promote new ideas, partnerships, and face-to-face meetings between members of the direct mail business. The event will allow industry members to speak with each other about developments, growth, and profit without the distraction of outside agendas.

We hope that you will have the opportunity to join us at this important industry event. If you are planning on attending please drop us a note to set up a time to meet.

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FEDERAL PRIVACY BILLS INTRODUCED

Two important privacy bills were recently introduced in the House. The Best Practices Act (H.R. 611) is legislation that seeks to establish a set of ground rules and privacy minimums to assist consumers in protecting their personal information, particularly as they engage in Internet-based commerce and entertainment. The Do Not Track Me Online Act of 2011 (H.R. 654) seeks to give consumers the ability to prevent the collection and use of data on their online activities. Details of the two pending bills can be found here.

FTC DANNON SETTLEMENT EXPANDS SUBSTANTIATION REQUIREMENTS

As we have previously reported in connection with the FTC's settlement with Nestle and Iovate as well as the POM Wonderful lawsuits, the FTC continues to expand its enforcement of health claims to makers of food and dietary supplements. In this instance, the FTC settlement with The Dannon Company resolves claims the company made with respect to certain health claims for Activia Yogurt and DanActive dairy drink that contain probiotics. The settlement, which took effect on February 3, 2011, is consistent with recent expansive FTC settlements and further expands the substantiation requirement for essentially equivalent products.

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ZIP CODES ARE PERSONALLY IDENTIFIABLE INFORMATION (AT LEAST IN CALIFORNIA)

With limited exceptions, the Song Beverly Credit Card Act significantly restricts brick-and-mortar retailers' ability to request or record personal identification information in connection with processing credit card transactions. Now, the California Supreme Court has ruled in Pineda v. Williams-Sonoma Stores, Inc., that ZIP codes are also "personally identifiable information" for purposes of the Act, thereby creating new liabilities for retailers.

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NEW YORK BANS PAPER BILLING FEES

Businesses that charge consumers for paper copies of bills need to carefully examine their practices in New York. Effective April 18, 2011, companies that bill New York customers are prohibited from charging a consumer an additional fee or charging a different rate when a customer requests to receive a paper billing statement or chooses to pay by mail. An amendment to the General Business Law, does not prohibit offering consumers a credit or other incentive to elect a specific payment or billing option.

GROUPON LAWSUITS EXPOSE RISK IN PRE-PAID OFFERS

A class action lawsuit brought against Groupon and Nordstrom illustrates the risks in offering pre-paid discounts for a limited period of time. The case Ferreira v. Groupon, Inc., brought in federal court in California, challenges Groupon's sale of coupons for discounts at a pre-paid price containing short expiration dates. The plaintiff in this case argues that Groupon's deals constitute gift certificates and that the short expiration dates violate California and federal laws governing the sale of gift certificates. The case is noteworthy because Groupon permits consumers to utilize the funds expended to purchase the discount in a manner consistent with gift certificates (i.e., five-year expiration dating) even though the discount aspect may only be available for a limited time. A number of additional cases have now been filed in Illinois, Minnesota, and other federal courts.

The Mobile Marketer article "Does Groupon Lawsuit Threaten All Mobile Coupon Apps" features analysis by Andrew Lustigman on the expiration dating issue.

MOBILE MARKETER OUTLOOK 2011 - LEGAL ANALYSIS

Andrew Lustigman's analysis of the legal outlook facing the mobile marketing industry appears in Mobile Marketer's Outlook 2011. The article entitled "Governing by Putting a Square Peg into a Round Hole" provides an analysis of recent legal developments and predictions as to future enforcement.

FTC TO HOST FORUM ON "CRAMMING"

On May 11, 2011 the FTC will host a forum in Washington D.C. to examine how the government, businesses, and consumer protection organizations can work together to prevent consumers from being hit with unauthorized third-party charges on their phone bills, a practice known as "cramming." The FTC is inviting government agencies, consumer advocates, and industry representatives to participate in the forum to discuss ways to reduce cramming through business practices, law enforcement and possible legislation.

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ONLINE RETAIL TAX LAW DEVELOPMENTS IN ILLINOIS, SOUTH DAKOTA AND COLORADO

There have been recent and important changes in three states with regard to the sales/use tax laws covering online and mail-order retailers marketing those states. First, South Dakota's legislature has passed and sent for signature SB 146, which requires all retailers that do not currently collect and remit sales taxes on purchases made by South Dakota residents to provide specific notices to those residents on and after the transaction. For online retailers, the notices (or links to them) are to be put on the transaction page, order confirmation and/or checkout page; catalog sellers need to put the notice on a supplemental page (with a specific reference on a product page) and the purchase confirmation document(s). There is also a prohibition on stating or implying that no tax is due on a purchase. This South Dakota bill is similar to an Oklahoma law passed last year (see our blog entry on that law). The Direct Marketing Association is urging a veto of this and another sales tax-related law, SB 147, which would disregard certain corporate structures in order to expand the number of companies required to collect and remit sales tax.

In Colorado, the DMA has successfully obtained a preliminary injunction against enforcement of another, broader sales tax law impacting online retailers, about which we blogged last year.

Illinois became the latest state to enact such laws, when Governor Pat Quinn signed HB 3659. The new Illinois law follows the model that New York State set with its so-called Amazon Tax (currently in the midst of a court challenge): it extends the definition of "nexus," presence for sales tax liability purposes, to include in-state members of a retailer's affiliate program. As with New York, there are exemptions for retailers who have sales below $10,000 per quarter over the previous four quarters.

REMINDER: RESTORE ONLINE SHOPPERS' CONFIDENCE ACT NOW IN EFFECT

The Restore Online Shoppers' Confidence Act ("ROSCA"), the product of the Senate Commerce Committee's investigation into online "data pass" and advanced consent (negative option) marketing is now in effect. The law was signed by President Obama on December 29, 2010, governs both post-transaction offers by third-party sellers and online negative option offers.

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IOWA ATTORNEY GENERAL SUES TRILEGIANT BUYING CLUB

Iowa Attorney General filed a consumer fraud lawsuit against Trilegiant Corporation, alleging that the company unfairly and deceptively charged Iowans for memberships in discount buying clubs or other programs, in many cases without consumers' knowledge. The lawsuit, filed in Polk County District Court, alleges that Trilegiant violated Iowa's Buying Club Memberships Act and Iowa's Consumer Fraud Act. The lawsuit seeks a civil penalty of up to $40,000 for each separate violation of law, in addition to unspecified monetary judgments. The lawsuit also alleges that violators of the Consumer Fraud Act violations were committed against elderly Iowans and qualify for additional civil penalties provided by Iowa law.

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FACEBOOK CHANGES APPROVAL REQUIREMENT

Facebook announced significant revisions to its Promotions Guidelines that may potentially expand the ability of advertisers to utilize this important marketing channel to conduct promotions. While there are still critical restrictions on the use of the Facebook platform, under the new Guidelines, companies no longer need written permission from Facebook before administering a promotion on the Facebook platform.

Under the new guidelines, a promotion cannot be administered through Facebook, except through an application on the Facebook Platform. Administration is broadly defined and includes the operation of any element of the promotion, such as collecting entries, conducting a drawing, judging entries, or notifying winners.

The Facebook Promotions Guidelines can be found here and are summarized here.

FCC v. AT&T, INC.: THE LACK OF PERSONAL PRIVACY FOR CORPORATIONS

The Supreme Court's March 1, 2011 decision in Federal Communications Commission et al. v. AT&T, Inc., may significantly limit a corporation's right to assert privacy protections relating to its affairs. While the decision was limited to the "personal privacy" exemption for Freedom of Information Act requests, the Court's harsh criticism of the corporate position may not bode well for future corporate protections.

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ALIBABA RESIGNATIONS EXPOSE FRAUD ON POPULAR WHOLESALER WEBSITE

Alibaba, a Hong Kong-based business-to-business global commerce website, long criticized for facilitating the sale of counterfeit merchandise on a wholesale basis, is facing new scrutiny in the wake of an internal investigation which revealed that employees helped cover up fraudulent practices on the ecommerce website.

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FTC RELEASES LIST OF TOP CONSUMER COMPLAINTS IN 2010 - IDENTITY THEFT TOPS THE LIST AGAIN

The Federal Trade Commission has released its list of top consumer complaints received by the agency in 2010. The list showed that for the 11th year in a row, identity theft was the number one consumer complaint category. Of 1,339,265 complaints received in 2010, 250,854 - or 19 percent - were related to identity theft. Debt collection complaints were in second place, with 144,159 complaints. Many of the categories also related to imposter and counterfeit check scams.

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CALIFORNIA RULING ASSISTS PLAINTIFFS IN CLASS ACTION OVER UNWANTED CELL PHONE CALLS

Gutierrez v. Barclays Group is a class action filed in federal court in the Southern District of California under the Telephone Consumer Protection Act. The plaintiffs, a husband and wife, failed to pay their credit card debt and then filed suit over collection calls made to their cell phones. A recent ruling on defendants' summary judgment motion could open the door for more TCPA class Actions.

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SOUTHERN DISTRICT OF NEW YORK THROWS OUT CASE AGAINST SNAPPLE FOR LACK OF EVIDENCE

The Southern District of New York recently granted summary judgment in favor of Snapple Beverage Corp in a case that challenged Snapple's use of the phrase "all natural" on the labeling for its beverages. Snapple was granted summary judgment on the grounds that plaintiff failed to offer any evidence showing that they were injured as a result of the labeling.

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We strive to stay on top of all relevant legal issues to provide our clients with the most effective and efficient legal advice. If you find any legal marketing news of interest, send it to us!

Please pass this newsletter on to your friends and colleagues and invite them to join our mailing list. As always, please feel free to contact us with any comments, questions or recommendations. Also, please follow us on Twitter.

Sheldon S. Lustigman
Andrew B. Lustigman
Scott A. Shaffer
Adam Z. Solomon
Jonathan I. Ezor

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This newsletter is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

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© 2011 Olshan Frome Wolosky

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Originally published by The Lustigman Firm, P.C. and has been re-branded and edited to conform and to correct certain references.

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