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Olshan Advertising and Branding Law Groups' Key Issues in 2022

Happy holidays! We hope you are safe and healthy. As we enter the new year, Olshan’s Advertising and Branding law groups shares their list of hot topics that look to be on the horizon for 2022. If you have any questions on these or other issues, please reach out to us. 

Has the FTC found a loophole to address its lack of authority to seek monetary penalties?

By: Andrew Lustigman

The Federal Trade Commission (“FTC”) is attempting an end-run around the Supreme Court’s AMG Capital Management LLC v. FTC holding that the FTC’s claims for equitable relief brought under Section 13(b) of the FTC Acts do not permit a recovery for monetary restitution. In recent months, the FTC has been blanketing certain industries with warning letters relating to endorsements, reviews, and earnings claims (over 2,000!) in an attempt to expand its penalty offense authority. The Supreme Court decision did not overrule the FTC’s penalty authority, particularly where a defendant is accused of violating a prior FTC administrative order. While these companies have not necessarily been the subject of a prior administrative order, these warning letters, which include a Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct around Endorsements and Testimonials, are intended to serve as notice that the conduct has been found to be unlawful in a previous FTC administrative order, as opposed to a previous consent order. The issue we expect to be litigated is whether a company can be held liable for violating conduct in an administrative order to which it is not a party. This would seem to be quite a stretch and raises significant due process concerns.

Automatic Renewals Continue to Garner Scrutiny

By: Morgan Spina

2021 was bookended by significant developments in the automatic renewal space. New York’s new automatic renewal law took effect in February, with New York joining California as the two states with the most comprehensive automatic renewal laws. Notably, both states require online cancellation options for automatic renewal agreements that are entered into online. Then, in late October, the FTC released a new enforcement policy statement regarding negative option marketing. Reflecting the most significant shift from existing federal guidance on this issue, the FTC also addressed online cancellation methods, stating that in order to meet a standard of simple, reasonable cancellation of negative options plans, marketers “should provide cancellation mechanisms that are at least as easy to use as the method the consumer used to initiate the negative option feature” and that marketers “should provide their cancellation mechanisms at least through the same medium (such as website or mobile application) the consumer used to consent to the negative option feature.”

Looking to 2022, this trend under state law and now FTC guidance to require online cancellation options for transactions that are completed online looks poised to continue. Both Colorado and Delaware have laws on the books that are set to take effect in 2022, with both laws addressing online cancellation methods. Marketers that utilize automatic renewal programs should continue to keep apprised of the continuously developing federal and state legal landscape.

Telephone Consumer Protection Act – How will plaintiffs pivot?

By: Scott Shaffer

In the annals of the history of the Telephone Consumer Protection Act, 2021 will go down as the year in which, much to the chagrin of the plaintiffs’ bar, the Supreme Court significantly scaled back the telemarketing statute. The decision in Facebook v. Duguid ruined many potential class actions by redefining the term “automatic telephone dialing system.” Fewer technologies qualifying as automatic telephone dialing systems means fewer class actions over lack of prior express consent for the calls.

So where does that leave us for 2022? Expect the plaintiffs’ bar to shift its attention to violations of the Do Not Call list. The Do Not Call section of the TCPA was unaffected by the Facebook v. Duguid decision because a violation of this provision makes no distinction for the dialing technology used. Also, Do Not Call violations offer the same $500 per call violation that makes the TCPA so attractive to class action litigation. 

Photographer Copyright Infringement Lawsuits Continue

By: Mary Grieco

For the last several years, photographers and photographic agencies have been sending demand letters and filing lawsuits alleging copyright infringement for the unauthorized use of photographs online. Many celebrities have been sued for copyright infringement for posting paparazzi photos of themselves on their social media pages, but it is not only celebrities who have been subjected to such claims. All businesses are seeing a rise in demand letters and lawsuits as a result of using photographs without a proper license. While technically such actions may be copyright infringement, the photographers and agencies may demand exorbitant “damages” or “license fees” for such usage, and rather than engage in costly litigation, many companies and celebrities seem willing to pay large amounts in settlement – amounts which are often significantly higher than a reasonable license fee would have been.

One such case worth noting is a recent one filed against actress Lina Rinna by a photographic agency. The agency is seeking over $1 million in damages for social media posts made by Rinna that included photographs taken by the agency’s client. Rinna has decided to fight back, claiming that the agency has “weaponized” the Copyright Act by using such lawsuits and threats of lawsuits as a means of generating income rather than as a remedy for any actual harm. Given the rise in these cases and the willingness for companies and celebrities to settle rather than engage in costly litigation, it will be notable if others start to raise similar types of defenses in these actions.

Nonetheless, marketers should continue to be diligent in making sure ALL photographs used in any type of marketing – whether on websites, social media, or other types of media – are used with proper authorization.

NFT Boom Projected to Continue in 2022

By: Tamara Carmichael

NFTs (non-fungible tokens) were increasingly used in 2021 by brand owners, talent, athletes, influencers, artists and others to increase awareness through content creation and consumer engagement.   NFT sales rose to $10.7 billion in Q3 of 2021, an eightfold increase from the previous quarter, as tracked by DappRadar and reported by Reuters.  2021 saw use of NFTs to expand brand recognition and product offerings.  In October, Mattel announced its launch of a Hot Wheels NFT Garage, releasing 40 new NFT designs for fans and collectors.  The Hot Wheels NFT collectables allowed fans and collectors access to rare digital art, and offered the chance to own limited, real, die-cast vehicles when certain NFTs are collected.  Brands also increasingly used NFTs to promote products while simultaneously engaging in purpose driven marketing and giving back to their communities, including Taco Bell’s sale of NFTs depicting art of its Spicy Potato Soft Tacos.  Taco Bell donated the profits from those NFT sales to the Taco Bell Foundation which empowers youth to discover and pursue career and educational pathways.  More recently, in December 2021, NFTs were used by winemaker Robert Mondavi to authenticate a limited series of wine sold to collectors, while also providing art depicting the wine bottle itself. 

NFTs can be used to surprise consumers and to create cachet and suspense around product launches and to give back to customers and communities.  NFTs offer consumers and buyers transparency and security in the ownership and acquisition of NFT rights.  When applicable, brand owners that mint and then sell NFTs can embed royalty structures in NFT technology, ensuring recurring delivery of royalties and monetary return each time the NFT is sold.  NFTs can also enable expanded generation of revenue by turning elements of more traditional advertising into NFTs.  The spectrum of uses of NFTs will only grow in 2022, and continue to become more mainstream. 

As use of NFTs grows, advertisers are cautioned to ensure that their intellectual property rights underlying their NFTs are protected and that NFTs are properly minted through smart contracts embedded in the NFTs that will assign NFT rights as to ownership and transferability.

Wishing you a happy, healthy and joyous holiday season!  We look forward to working with you in 2022!

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