Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group, and Branding Department associate Morgan Spina published an article in New York Law Journal entitled “The FTC's Evolution During Trump’s Second Term.”
As part of its routine monitoring program, the National Advertising Division of the Better Business Bureau (“NAD”) initiated an inquiry into the relationship between popular online clothing store Revolve Group, Inc. (“Revolve”), and certain influencers that tagged Revolve in their posts on social media, namely Georgia Hassarati and Alyssa Nicole Nelson. Specifically, NAD inquired regarding the influencers’ relationship to Revolve, and what measures were being undertaken by Revolve to ensure that the influencers it engages with comply with the Federal Trade Commission’s (“FTC”) Endorsement and Testimonial Guides (“Endorsement Guides”).
Chair of the firm's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group Andrew Lustigman will participate in a panel entitled “A New Era of Endorsements, Testimonials, and Consumer Reviews: Navigating the FTC’s Final Rule and Emerging Areas of Risk for Enforcement and Penalties” as part of ACI’s 8th Annual Legal, Regulatory, and Compliance Forum on Advertising Claims Substantiation today at 1:00 P.M. at the New York City Bar Association in NYC.
Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group, Chair of Olshan’s Intellectual Property Law Group and Co-Chair of the firm’s Brand Management & Protection Group Mary Grieco and associate Morgan Spina published an article in Bloomberg Law entitled “New FTC Chair Likely to Keep Up Enforcement on Auto-Renewals”
Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group, published an article in New York Law Journal entitled “What Businesses Need to Know About Anticipated FTC Leadership Changes”
Given consumers' increasing reliance on customer reviews for online purchases combined with the increasing use of AI, we can expect more regulatory (and likely plaintiff’s attorney) enforcement combating false or manipulated consumer reviews. Recognizing these trends, the FTC’s recently-effective Final Rule on the Use of Consumer Reviews and Testimonials focuses heavily on fake reviews and negative review suppression. Indeed, the Final Rule explicitly bans publishing reviews and testimonials from someone who does not exist, such as AI-generated reviews, fictional people and those with no actual experience with a business’s products or services. The rule also bars businesses from suppressing negative reviews or misrepresenting that the reviews represent all or most of the reviews submitted if negative reviews have been suppressed.
As the world awaits the next term of Donald Trump, marketers and advertisers are contemplating the potential changes in consumer protection regulations. While certain aspects of federal regulation and enforcement may have been relaxed during Trump’s first term, the Federal Trade Commission’s (“FTC”) consumer protection enforcement mandate is expected to remain a significant priority, although the pathways may differ significantly from the Kahn Commission.
2024 has been another huge year for automatic renewal laws and rules, both on the state and federal levels. A number of states, including Utah, Virginia, South Carolina, Tennessee, Minnesota, Illinois, and California, have introduced new laws or updated existing ones to include a range of different requirements, including those related to automatic renewal enrollment and cancellation pathways. These new and updated states laws, some of which go into effect in 2025, have added to the ever-evolving web of state laws that govern automatic renewals for residents of those specific states.
On November 15, 2024, the Federal Trade Commission (“FTC”) published its amendments to its Negative Option Rule, retitled as the Rule Concerning Recurring Subscriptions and Other Negative Option Programs (the “Final Rule”) in the Federal Register.
Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group, and associate Morgan Spina published an article in New York Law Journal entitled “FTC's New 'Click To Cancel' Rule Is Here, But Will It Survive Judicial Challenge?.” In the article, Andy and Morgan discuss how automatic renewals for services—or “negative options”—continue to face amended laws. However, this has resulted in a patchwork of various regulations at the state and federal level, making absolute compliance a difficult proposition for companies.
Highlighting the increasing regulatory focus on paid subscription cancellation, the Federal Trade Commission has taken action against Care.com, alleging that the company systematically deceived users as to the wages and jobs information they could access on Care.com, and failed to provide a simple method for users to cancel their paid memberships. As part of its settlement, Care has agreed to pay $8.5 million to the FTC.
Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group, and associate Morgan Spina published an article in Bloomberg Law entitled “FTC’s Focus on Subscriptions Protects Consumers: Legal Insight.” In the article, Andy and Morgan provide a comprehensive overview of the complexities surrounding automatic renewal subscriptions, a payment model increasingly used by e-commerce businesses. The article offers critical advice for companies looking to navigate the evolving regulatory landscape, particularly in light of recent state and federal developments. Andy and Morgan highlight key areas of focus, including the importance of clear enrollment terms, streamlined cancellation processes and the implications of the FTC’s recent actions against major players like Amazon and Adobe. "Companies should ensure customers aren’t forced to reject a barrage of offers before the cancellation request is processed or are somehow taken out of the cancellation path if they are considering a save offer," they advise. Andy and Morgan emphasize that businesses must stay ahead of regulatory changes to avoid costly litigation and maintain consumer trust.
Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group, and associate Morgan Spina published an article in Attorney at Law Magazine entitled “FTC and States Continue to Prioritize Automatic Renewal Regulation and Enforcement.” In the article, Andy and Morgan discuss the recent regulations impacting subscription paths and payment models. “Because consumers are charged until they affirmatively cancel,” they note, “the regulatory scrutiny of these programs has continued to increase, both on the federal and state levels.” In light of the Biden administration's recently announced proposals regarding cancellations, this topic continues to be at the top of consumers' minds. Staying compliant requires vigilance and adaptation to evolving legal landscapes. Andy and Morgan write, “As active litigation unfolds ahead of the 2025 trial, attorneys should be mindful of the FTC’s position on automatic renewal programs and the newfound emphasis on transparent user experiences for consumers.”
On August 14, 2024, the Federal Trade Commission (“FTC”) announced and published a final rule banning fake reviews and testimonials. Although unfair or deceptive acts and practices are already generally unlawful, the new rule will enable the FTC to more easily go to court and seek civil penalties against knowing violators. The rule, published at 16 CFR Part 465, takes effect this October 13th.
Automatic renewal programs and frictionless cancellation processes continue to garner significant regulatory scrutiny. Now, the Federal Trade Commission (“FTC”) is taking action against the software company, Adobe, and two of the company’s executives, Maninder Sawhney and David Wadhwani, regarding the company’s automatic renewal subscription practices, particularly as such practices relate to the company’s subscription enrollment and cancellation pathways. After investigating the company’s subscription practices, the FTC referred the matter to the United States Department of Justice, who in turn filed a complaint in federal court in the Northern District of California.
The failure to comply with National Advertising Division (“NAD”) review processes typically results in a referral to the Federal Trade Commission (“FTC”). This strong enforcement deterrent results in a reported 97% compliance rate with NAD decisions. Recently, NAD has been expanding the agencies to which it refers advertisers that have failed to comply with its rulings or participate in its processes. As discussed below, NAD recently referred the advertising claims of a crisis pregnancy center to the Massachusetts Attorney General for possible enforcement action. In addition, NAD has developed a referral relationship with leading social media platforms, such as Meta, resulting in prompt enforcement of NAD’s recommendations.
The Federal Trade Commission (“FTC”) has filed a complaint against Doxo, Inc. (“Doxo”), a bill payment company, and its co-founders, alleging that the company utilized misleading ads to imitate consumers’ billers, as well as deceptive practices to mislead consumers into paying millions of dollars in junk fees. As demonstrated by this latest enforcement action, the FTC is continuing to focus on manipulative marketing techniques known as “dark patterns.” This should serve as a reminder to marketers that the use of such practices may result in enforcement actions.
The Federal Trade Commission (“FTC”) has amended the Telemarketing Sales Rule (“TSR”). The simplest change is the expansion of the TSR to explicitly cover all business-to-business (“B2B”) telemarketing and artificial intelligence-enabled calls, which takes effect on May 16, 2024. Oddly, the only B2B calls previously covered by the TSR were those selling office and cleaning supplies.
Random sample method used to calculate damages
In the case of Federal Trade Commission v. Jonathan Braun, decided on February 6, 2024 in the Southern District of New York after a jury trial, a federal court entered a judgment requiring merchant cash advance company owner Jonathan Braun to pay $20.3 million in monetary relief and civil penalties for misleading small businesses and unlawfully seizing their assets. Braun was found guilty of deceiving business owners about how much money he would advance to them and how much they would have to pay back.
Chair of the firm's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group Andrew Lustigman will speak on the panel “Shining a Light on ‘Dark Patterns’: What All Companies Must Know About this Rising Area of FTC Advertising Enforcement” as part of ACI’s 7th Annual Legal, Regulatory, and Compliance Forum on Advertising Claims Substantiation on February 9, 2024, at 9:45 a.m. The panel will explore how the Federal Trade Commission (FTC) and other enforcers are rapidly increasing their focus on “dark patterns” in advertisement designs, which are practices that regulators believe can trick or manipulate consumers into buying products or giving up their privacy. In addition, the Commission also just released a new proposed rule governing subscription offerings/negative options. Topics to be considered will include: specific website design and advertising practices that are currently triggering enforcement activity; the types of allegations being brought by the FTC in cases where dark advertising patterns are alleged; how companies can avoid being the next target in this rising wave of deceptive advertising enforcement; restoring your product’s reputation after it falls prey to a dark pattern; and the FTC’s latest amendments to the rules governing subscription offerings/negative options and junk fees.
Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group, published an article in Bloomberg Law entitled “New Laws, Consumer Actions Will Help Us Say Goodbye to Junk Fees.” In the article, Andy discusses the increasing significance of surcharges and undisclosed fees impacting consumer purchasing decisions.
2024 is poised to be a year that the FTC increases its authority over the abuse of artificial intelligence in advertising. FTC chair Lina M. Khan wrote in a New York Times opinion piece, “As companies race to deploy and monetize A.I., the FTC is taking a close look at how we can best achieve our dual mandate to promote fair competition and to protect Americans from unfair or deceptive practices.” In late November, the FTC authorized its staff members to begin issuing non-public subpoena-like information demands for products and services that use or claim to be produced using AI. One of the FTC’s main concerns will be how AI uses consumer data. For example, in 2023, Amazon was accused of, and settled charges, that its Alexa software indefinitely kept recordings of children in order to perfect its voice recognition algorithm.
Significant developments in the FTC’s treatment of endorsements and reviews occurred this year. In June, the FTC finalized its revised Endorsement Guides. In addition to adding a definition of “clear and conspicuous,” explaining the potential liability advertisers, endorsers and intermediaries, and highlighting child-directed advertising as an area of specific concern, the revised guides include a new principle regarding procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, or editing consumer reviews that can alter how consumers interpret a product. In addition to the revised Endorsement Guides, the FTC has proposed a new rule that would specifically address deceptive practices involving consumer reviews. Further, it has continued to pursue enforcement actions against advertisers that utilize such consumer reviews in what the FTC purports to be a deceptive manner. For example, this year the FTC reached a settlement with room and roommate-finder platform, Roomster, in relation to charges that the company bought fake reviews to encourage consumers to pay for the platform. The FTC’s rulemaking process will continue into 2024, and we expect that the FTC will continue to prioritize this issue through both the rulemaking process and potential enforcement efforts.
Both federal and state legislators and regulators continue to focus on auto-renewal/continuous service programs, particularly emphasizing the necessity of online cancellation for orders initiated via the Internet. In March 2023, the FTC aimed to modernize its “negative option rule,” aligning it with state laws and increasingly common continuity programs. The proposed FTC Rule Concerning Recurring Subscriptions and Other Negative Option Plans would mandate disclosure of continuity program terms and cancellation processes before acquiring a consumer's billing ...
Alleged “dark patterns” now in play in at least four separate actions
Last year, this blog reported about Dorobiala v. Amazon.com, a private class action pending in federal court in the Western District of Washington against Amazon over the "dark patterns” Amazon used to hamper consumers from canceling their subscriptions to the Amazon Prime program. As described in a recent blog post, the Federal Trade Commission (“FTC”) upped the ante in June by filing suit against Amazon in the same court.
Meanwhile, not only is Dorobiala is still pending, there are at least two other ...
Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotion's Group and Co-Chair of the firm’s Brand Management & Protection Group, will speak on the panel “Food Marketing, Advertising and Promotion Essentials: Ensuring Claims Compliancy and Meeting Substantiation Standards Relative to Health, Nutrition, Structure and Function” as part of ACI’s Food Law and Regulation Boot Camp virtual conference on July 19, 2023, at 1:45pm (CT). The panel will explore the relationship between food product labels and advertising and promotion, how to distinguish ...
The Federal Trade Commission (“FTC”) has filed a complaint against Amazon.com, Inc. (“Amazon”), asserting that the online retail giant “knowingly duped millions of consumers into unknowingly enrolling in its Amazon Prime service.” Specifically, the FTC alleges that Amazon has used “dark patterns” to trick consumers into enrolling in automatically-renewing Prime subscriptions, and made it incredibly difficult for consumers to cancel those subscriptions.
The complaint, filed in the District Court for the Western District of Washington on June 21, 2023, is ...
For late-shipped goods, Court deducts the value of benefits received by consumers
Olshan partner Andrew Lustigman, Chair of the firm's Advertising, Marketing, and Promotion's Practice and Co-Chair of the Brand Management & Protection Practice, and associate Morgan Spina published an article on April 21 in Sports Litigation Alert (subscription required) focusing on how services such as MLB's Apple TV+ arrangement must adhere to compliance obligations in a rapidly changing regulatory environment.
On April 13, 2023, the Federal Trade Commission (FTC) issued Notices of Penalty Offenses (NPOs) to approximately 670 companies in order to ensure that the companies are aware of the FTC’s standards for product claim substantiation. The Notices were sent to companies marketing over-the-counter drugs, homeopathic products, dietary supplements, and functional foods.
FTC’s Proposed New Rules for Businesses Selling Subscriptions Heighten Compliance Obligations, published in The New York Law Journal
The National Advertising Division’s (“NAD”) streamlined Fast-Track SWIFT (Single Well-Defined Issue Fast Track) process is an expedited process by which single-issue truth in advertising claims in national advertising may be reviewed and assessed. The popularity of SWIFT challenges, which are structured to resolve designated challenges expeditiously, has been continuing to grow as competitors take advantage of the streamlined process.
The Federal Trade Commission (“FTC”) has been interested in pursuing amendments to the Negative Option Rule for several years. In 2019, the FTC published an Advance Notice of Proposed Rulemaking (“ANPR”), soliciting public comment on certain issues related to negative options and automatic renewal contracts, including disclosures, consent, and cancellation. Following receipt of such comments, the FTC issued an Enforcement Policy Statement Regarding Negative Option Marketing in 2021. Now, in its latest and potentially most impactful effort, the FTC has issued a Notice of Proposed Rulemaking (“NPRM”), proposing several specific changes to the Negative Option Rule, as the existing rule was woefully out of date.
Happy New Year! As we begin 2023, Olshan’s Advertising and Branding law groups share their list of hot topics that look to be on the horizon this year and should be of particular interest to you.
Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotion's Group and Co-Chair of the firm’s Brand Management & Protection Group, was quoted in Law360 (subscription required) on the Federal Trade Commission’s (“FTC”) consumer protection rulemaking and enforcement efforts in 2023. The agency’s focus on pricing disclosures—specifically its October 2022 proposed rulemaking on addressing “junk fees,” unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value to consumers—will potentially affect “a wide array of industries,” Andy commented. “Similar rulemaking has been proposed by the U.S. Department of Transportation relating to airline pricing and ancillaries like baggage fees,” he added. Additionally, the FTC is expected to continue focusing on advertisers’ use of endorsements and testimonials that consumers increasingly rely on in digital commerce.
* Taylor Lodise is a law clerk in the Litigation practice group.
On November 9, 2022, amidst ongoing investigations by the FTC regarding “dark patterns” that Amazon allegedly employed to discourage subscribers from canceling their Amazon Prime memberships, a class-action lawsuit named Amazon as a defendant. The lawsuit was filed in United States District Court for the Western District of Washington and is styled Dorobiala v. Amazon.com, Inc.
On October 20, 2022, the Federal Trade Commission issued an advance notice of proposed rulemaking for a rule that would seek to address so called “junk fees” – unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value to consumers.
Internet phone service provider, Vonage, has agreed to pay $100 million to settle the Federal Trade Commission’s charges that it imposed fees and made it difficult for subscribers to cancel their service. Specifically, the FTC alleged that Vonage implemented “dark patterns” to create obstacles for subscribers looking to cancel their services, often resulting in consumers being charged even after they had requested cancellation. This settlement highlights the FTC’s continued focus on “dark pattern” marketing techniques, particularly as they are applied to cancellation of automatically renewing subscription arrangements.
* Rachel Gold is a law clerk in the Corporate/Securities Law practice group.
Following up on its action against other celebrities who have promoted crypto investments without disclosing their compensation interest, the Securities and Exchange Commissions (“SEC”) announced “unlawful touting” charges and Order against reality star Kim Kardashian for promoting a cryptocurrency on social media without acknowledging that she was being compensated for the post. This enforcement action is a reminder that it is not just the Federal Trade Commission (“FTC”) who is enforcing compensation disclosures on social media.
The Federal Trade Commission (“FTC”), along with six states, filed a lawsuit against housing rental listing platform, Roomster Corp. (“Roomster”), its co-founders, John Shriber and Roman Zaks, and the principal of a related app that provided allegedly fake reviews, Jonathan Martinez. The lawsuit, filed in the Southern District of New York, alleges that the defendants used fake reviews to entice consumers to join and pay for access to its platform. The lawsuit is a reminder that federal and state regulators are increasingly focused on the legitimacy of consumer reviews, particularly given their impact on purchasing decisions.
The Federal Trade Commission (“FTC”) is set to issue updates to both its Endorsement Guides and .com Disclosure Guidance. The proposed updates to both guidance documents signifies the FTC’s ongoing attention to online and social media advertising, as the regulator takes steps to bring its guidance into focus with contemporary advertising issues.
FTC likely to eliminate the exemption
The Federal Trade Commission (“FTC”) is considering a proposed amendment to the Telemarketing Sales Rule (“TSR”) that would broaden the rule’s scope by prohibiting material misrepresentations and false or misleading statements in business-to-business (“B2B”) transactions.
FTC's recent actions regarding earnings claims makes clear that the agency is focused on challenging earnings claims, particularly those that are atypical.
Fashion retailer agrees to $4.2 million settlement with the FTC and the issuance of guidance regarding consumer reviews
Andrew Lustigman, Chair of the firm's Advertising, Marketing and Promotion's Group and Co-Chair of Brand Management & Protection Group, was quoted in Law360 (subscription required).
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.
FTC trying to recover the right to seek disgorgement of unjust enrichment in federal court
Court allows FTC to withdraw disgorgement claims with eye towards possible reinstatement.
FTC can no longer go straight to court to recover monetary damages
Dark patterns, an increasingly popular ecommerce marketing technique, seek to encourage users to make a particular purchasing decision. They are also the subject of increasing regulatory scrutiny, including the FTC’s ABC Mouse enforcement action.
The change in the Presidential administrations also brings a change at the Commissioner and senior staffing levels at the Federal Trade Commission (FTC), as well as other agencies.
Olshan Advertising attorneys Andrew Lustigman, Scott Shaffer, Mary Grieco and Morgan Spina presented a webinar for the Consumer Protection Monthly Update hosted by the American Bar Association Antitrust Law Section.
Andrew Lustigman, head of Olshan’s Advertising, Marketing & Promotions Practice Group, was quoted in Law360 on major upcoming U.S. Supreme Court fights concerning consumer protection, namely, the Federal Trade Commission’s (FTC) ability to seek monetary restitution for bad marketplace behavior under Section 13(b) of the Federal Trade Commission Act. Specifically, the Court’s arguments scheduled for January 13 in AMG Capital Management LLC et al. v. FTC challenge allegations that payday loan companies engaged in predatory loan practices. Mr. Lustigman described disgorgement as an “enormous hammer” for the FTC, as a monetary fine equal to sales of a targeted product neglects to take into account a company's other expenses, like taxes and advertising. "There's no setoff," he explained. "They're saying you have to give up everything you took in."
The Legal 500 published a Q&A authored by attorneys Andrew Lustigman and Morgan Spina, entitled “United States: Pharmaceutical Advertising”
Court reverses award of $448 million in ill-gotten gains
The Court of Appeals for the Third Circuit rejected a district court’s award of $448 million against a pharmaceutical company in a lawsuit brought by the Federal Trade Commission (FTC). In an antitrust case styled FTC v. AbbVie, Inc. (decided on September 30, 2020), the Third Circuit ruled that district courts lack the power to order disgorgement under the FTC Act. While the Third Circuit ruled in favor of the FTC on other issues in this case, the reversal of the disgorgement award the FTC is the focus of this blog entry.
Online children’s education company Age of Learning, Inc., also doing business as ABCmouse, has agreed to pay $10 million to settle the FTC’s charges that it made it difficult and confusing for subscribers to cancel their memberships. The settlement highlights the importance of a compliant subscription enrollment pathway, including readily-accessible cancellation processes. It also highlights a growing focus by regulators and others on “dark patterns” online marketing techniques.
As we have previously reported, like other regulators, the FTC has been quick to take action against companies that it believes are seeking to take advantage of the coronavirus pandemic. The FTC has sent warning letters to approximately 300 companies that it has alleged were making unsubstantiated or potentially misleading claims about products related to the coronavirus. Recently, the FTC has taken decisive action against a company to which it has previously sent a warning letter, alleging that such company has continued to make deceptive and misleading advertising claims in spite of the FTC’s warning.
The importance of timely delivery remains a top priority, particularly when making enhanced delivery promises. In light of the impact of the COVID-19 pandemic, the FTC has filed complaints against three online merchandisers it believes have failed to deliver on quick shipping promises in contravention of the FTC’s Mail, Internet and Telephone Order Rule, commonly known as the Mail Order Sales Rule.
In the context of the coronavirus pandemic, many companies have turned to online sweepstakes and promotions as a means of both promoting their brand and showing support to coronavirus relief efforts. Certainly, sweepstakes and promotions can be an effective way to achieve these dual purposes. As we previously reported, brands that have hastily run promotions without thinking through the consequences of various events have run into a firestorm of negative publicity as well as potential class actions. Making sure that the promotion incorporates the items below can help ensure that a promotion is legal, properly structured, and contains appropriate protections for the brand.
Andrew Lustigman, head of Olshan’s Advertising, Marketing & Promotions Practice Group, was featured in a Companies Digest article comprising assessments by leading business law attorneys.
Advertising, Marketing & Promotions practice chair Andrew Lustigman, Intellectual Property/Privacy partner Mary Grieco, AMP partner Scott Shaffer, and associate Morgan Spina authored four Guidance Notes on direct marketing in California recently published in the prestigious OneTrust DataGuidance (subscription required). The first, entitled “California – Emarketing,” covers both the state and federal legislation, as well as regulatory guidance from the Federal Trade Commission, concerning emarketing. In the second, “California – Telemarketing,” the authors examine the numerous pieces of state and federal legislation governing telemarketing, including the “Automatic Dialing Law” and the “Unwanted Calls Law.” The third, entitled “California – SMS/MMS Marketing,” discusses various state and federal laws on SMS/MMS, including the Telephone Consumer Protection Act, and the consent requirements that advertisers must follow when using these services. In the fourth, “California – Postal Marketing,” the authors explore various state and federal laws on postal marketing, such as California’s “Mail Solicitation Law” and the federal “Deceptive Mail Act.”
The U.S. Securities and Exchange Commission (the “SEC”) filed enforcement actions on May 14, 2020, against two unrelated companies, Turbo Global Partners, Inc. (“Turbo”) and Applied BioSciences Corp. (“APPB”). The SEC charged both companies with securities fraud based on alleged materially misleading statements that the companies were offering and shipping products to combat the coronavirus (COVID-19). These actions taken by the SEC are consistent with approaches taken by other regulators, including the Federal Trade Commission and Food and Drug Administration (the “FDA”), with regard to misleading statements made in connection with coronavirus-related products. On the whole, regulators appear to be particularly cognizant of businesses and individuals seeking to take improper advantage of the circumstances created by the global pandemic, and as such are taking action against such companies and individuals.
Andrew Lustigman, head of Olshan’s Advertising, Marketing & Promotions Practice Group, was quoted in a Bloomberg Law article on the coordinated attack on coronavirus scams led by The Justice Department (“DOJ”), the Federal Trade Commission (“FTC”), and the Food and Drug Administration (“FDA”). All three agencies have filed charges against and have sent warning letters to people and companies for advertising unapproved COVID-19 treatments or preventatives. Given the import that these efforts have to public health during the pandemic, the agencies’ attention is intensely focused on preventing coronavirus fraud, so while the DOJ is investigating a wide range of fraudulent activity, the FTC and the FDA are evaluating false claims about treatments and cures. “That intensity is shown by how quickly the agencies are taking cases to court and asking for orders to stop the fraudsters,” said Mr. Lustigman. Wasting no time, the DOJ has filed at least four civil lawsuits against people allegedly selling fraudulent cures/treatments, obtaining temporary restraining orders against three of the defendants. The FTC and FDA, meanwhile, have sent warning letters both to sellers of unapproved treatments and to multi-level marketing companies for unsubstantiated claims made by their independent distributors.
Online fast fashion retailer, Fashion Nova, has agreed to pay $9.3 million to settle FTC charges that it failed to properly notify consumers and give them a chance to cancel their orders that were not shipped in a timely manner. The FTC also alleged that Fashion Nova used gift cards to compensate consumers for unshipped merchandise instead of providing refunds, as required.
The FTC has reached a settlement with Teami, LLC (“Teami”), a tea and skincare company that allegedly used deceptive health claims and a bevy of undisclosed social media influencer endorsements to promote its products. This settlement, comprised in part of a significant monetary judgment, comes on the heels of the FTC seeking public comment on its Endorsement Guides in light of the changing social media advertising landscape. The FTC’s recent policy and enforcement actions seem focused on online influencer advertising campaigns.
The FDA and FTC have issued joint warning letters to companies selling products that they claim are able to treat or prevent coronavirus. The regulators sent the first set of such warning letters to several companies on March 6, 2020 and have continued to send such warning letters since.
FTC Chairman Joe Simons has released a statement addressing the FTC’s ongoing efforts to enforce consumer protections laws during the coronavirus pandemic.
As part of a periodic review of its rules and guidance, the Federal Trade Commission is seeking public comment as to whether changes should be made to its Endorsement Guides, which provide insight as to the agency’s thinking on influencer marketing and testimonials/endorsements. Initially published in 1980, the Guides were most recently revised in 2009 to provide guidance on a wide array of internet marketing techniques. Since 2009, social media and the use of influencer marketing has become an integral part of many companies’ advertising and marketing portfolio and has grown significantly. Against this backdrop, the FTC is seeking public comments to determine if and how it should revise the Guides to reflect this continually evolving landscape of social media and online advertising.
In the current fight over the enforcement authority of the Federal Trade Commission (“FTC”) – see previous Olshan blog posts here for background – Complete Merchant Solutions, LLC (“CMS”), an independent sales organization (“ISO”) that serves as an intermediary between merchants interested in processing credit card transactions and credit card payment networks, is the latest challenger.
Happy holidays! As we enter a new year, Olshan’s Advertising & Branding groups share their list of current hot topics in advertising law. In no particular order (drum roll please), here is our top 10 list:
Influencer marketing is one of the most popular marketing tools for companies in today’s market. Influencers can make substantial sums of money for just one post. While this is a great way for influencers to earn a living and for companies to get their message across to today’s consumers, there are risks involved with social media marketing if not executed properly. The Federal Trade Commission (“FTC”), among other responsibilities, works to stop deceptive advertising. As we have previously reported, everyone involved in social media marketing needs to be sure that influencers comply with the FTC’s Enforcement Guidelines (the “Guidelines”).
Liu v. SEC will also likely affect Federal Trade Commission’s powers
The Federal Trade Commission (“FTC”) announced that it is seeking public comment on ways to improve its existing regulations for negative option marketing, namely, the need for amendments to its Rule Concerning the Use of Prenotification Negative Option Plans (the “Negative Option Rule” or “Rule”).
Focusing on its use of warning letters to crack down on impermissible health claims, the FTC recently sent warning letters to three companies that sell a variety of CBD products, including those taking the form of “oils, tinctures, capsules, gummies, and creams.” In its Press Release announcing the issuance of the warning letters, the FTC noted that it had cautioned the companies against advertising that products, including those containing CBD, can “prevent, treat, or cure human disease” in the absence of “competent and reliable scientific evidence to support such claims.”
On September 4, 2019, the Federal Trade Commission (“FTC”) announced that YouTube and its parent company, Google, agreed to pay a record-breaking $170 million fine to settle claims by the FTC and New York Attorney General (“NYAG”) that YouTube violated children’s privacy laws.
As we have discussed previously, the Federal Trade Commission (“FTC”) has consistently relied on Section 13(b) of the FTC Act (15 U.S.C. §53(b)) for authority to initiate and maintain federal court challenges against defendants it believes have violated the FTC Act. Section 13(b) states that when the FTC has “reason to believe” that an individual or corporate entity “is violating, or is about to violate” a law enforced by the FTC, it may bring suit in federal court “to enjoin such acts or practices.” Moreover, the statute states that “in proper cases, the Commission may seek, and after proper proof, the court may issue, a permanent injunction.”
Andrew Lustigman, head of Olshan’s Advertising, Marketing & Promotions Practice Group, was quoted in a Law360 (subscription required) article titled "Kids' Data Again In spotlight as FTC Revisits Privacy Rule"
Disgorgement Avoided Even Though Liability Established
As we have discussed in a prior post, the FTC and FDA have been involved in a joint effort to curb non-compliant labeling and/or advertising of e-liquids for use in e-cigarettes. For the most part, the agencies have been focused on protecting children and young people from the dangers of nicotine and tobacco products by cautioning manufacturers, distributors and retailers of e-liquid products against using labeling, packaging and/or advertising that resembles children’s food products, like juice boxes, candies or cookies.
Olshan’s Advertising, Marketing & Promotions Practice Group chair Andrew Lustigman and associate Morgan Spina authored an article for the ABA’s Spring 2019 What’s In Store newsletter titled “Are FTC Enforcement Powers Being Reined In?”
As we have discussed previously, the prevalence of Internet usage in everyday life has led to an e-commerce market whereby consumers are able to post online reviews of a vast range of products and services. For the most part, such reviews are made public without regard to the relevant expertise of the reviewers, and with little to no oversight as to the legitimacy of such reviews. You can see our prior articles on this topic here and here. Against this backdrop, the Federal Trade Commission (“FTC”) has brought a claim against a marketer for the deceptive use of fake, paid-for reviews on an independent retail website for the first time. The FTC’s enforcement efforts in this regard should signal to marketers that the FTC is taking such actions seriously.
The Food and Drug Administration (“FDA”) and Federal Trade Commission (“FTC”) have issued joint warning letters focusing on disease claims being made by dietary supplement marketers. In addition, the FDA announced new steps it is undertaking with a goal toward protecting the public from potentially harmful products and unapproved claims.
FTC must react to Eleventh Circuit’s LabMD ruling
The FTC heavily relies upon its statutory authority to seek injunctive relief in federal court. The FTC has broadly interpreted these powers to seek not just injunctive relief enjoining a particular practice, but monetary relief in the form of disgorgement. Moreover, the FTC has taken the position that defendants in such actions are not entitled to a jury trial, because the relief being sought is merely equitable.
The FDA and FTC together have recently issued 13 warning letters to manufacturers, distributors, and retailers, cautioning against the sale of e-liquids for use in e-cigarettes using labeling and/or advertising that is similar to that which is found on children’s food products, like juice boxes, candies, or cookies. The warning letters were sent in furtherance of the FDA and FTC’s efforts to protect young people from the dangers of nicotine and tobacco products.
The Federal Trade Commission (“FTC”) has approved revisions to its Jewelry Guides. The FTC’s Jewelry Guides aim to help marketers in the jewelry industry avoid consumer deception, while simultaneously interpreting how Section 5 of the FTC Act applies to certain practices in the industry. Section 5 of the FTC Act declares unlawful any “unfair or deceptive practices in or affecting commerce.” The FTC has released other similar industry-specific reports and guidelines including, for example, reports and guidelines related to the clothing and textiles industry, finance industry, and tobacco industry. As the jewelry industry evolved, it became clear to the FTC that a revision of its Jewelry Guides was warranted. As such, these recent revisions seek to encompass and address new issues facing the industry.
The FTC recently announced that it has given final approval to a settlement with PayPal, Inc. over allegations that Venmo, its peer-to-peer payment service, misled consumers about their ability to transfer funds to external bank accounts and control the privacy of their transactions.
On April 26, 2018, the Senate unanimously confirmed all its nominees to the Federal Trade Commission (“FTC”), allowing the FTC to regain full strength for the first time since President Trump took office. In the months since President Trump’s inauguration, the FTC has been operating with just two Commissioners.
Andrew Lustigman and Morgan Spina published an article in BNA Big Law Business entitled “Understanding Advertising Disclosure Obligations Within Virtual Reality.”
Even though products that are Made in the USA are sometimes more expensive than imported products, many American consumers prefer to buy Made in the USA products, especially in today’s climate. Products that are Made in the USA help to provide jobs to Americans, promote American independence, and presumes a better quality product. Companies should be warned that if they make a claim that their products are Made in the USA, the claim needs to be true so that consumers are not deceived.
Over the last several years, the use of social media as a vehicle for advertising has grown exponentially. As discussed in prior blog posts, examples of which you can find here and here, the Federal Trade Commission (“FTC”) has released guidelines pertaining to such paid social media posts, requiring that any material connections between advertisers/brands and those social media users posting the content is clearly and conspicuously disclosed.
The Federal Trade Commission recently filed a complaint in the United States District Court for the District of Utah against three defendants who purchase hotel room inventory through online travel agencies (“OTAs”) and then market those hotel rooms to consumers on the internet through search engine marketing such as Google.