NEWSLETTER: Advertising, Marketing & Promotions, Fall 2009

Client Alert

Dear Clients, Colleagues and Friends,

We have just returned from attending the DMA show in San Diego. While attendance and exhibitors were markedly down this year from prior shows, the consensus from those with whom we spoke was that in-person meetings and other interactions were more productive than in the past. Those who attended clearly had business on their mind. We hope to see you next year in San Francisco!

Since our last newsletter, there have been a number of important and interesting developments in the area of advertising and promotional marketing law. Without a doubt, the most important development is the FTC’s release of the revised endorsement and testimonial guides. Effective December 1, 2009, the revised guides are a significant change in the standards governing the advertising of health and other products that rely heavily on testimonials. While we have a short summary below of the changes, we are planning a webinar in November which will further explain the changes and answer questions marketers want to know. You will receive a complimentary invitation in the near future. As always, if you would like to discuss any of these developments or have concerns about their impact on your business or marketing campaign, give us a call.

FTC Publishes Final Guides Governing Endorsements,Testimonials
The Federal Trade Commission announced that it has approved final revisions to the FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising, which will be effective December 1, 2009. While some changes simply clarify existing FTC policy, other portions of the guides significantly modify the standards advertisers must follow when using testimonials. Our firm participated in the comment process on behalf of a major industry trade association which sought modifications to the proposed revisions.

Most importantly, the revised guides take away the safe harbor disclaimer of typicality when utilizing an atypical consumer testimonial. The guides also increase disclosure and compliance obligations with respect to the use of new media (such as blogging) and other social media marketing practices, as well as utilization of endorsers.

Understanding these changes is very important to marketers as the FTC will undoubtedly vigorously enforce them. We urge those that utilize endorsements and testimonials to re-evaluate their existing and future advertising now to make sure that they comply with the new standards.

FTC Slams MoneyGram for $18 million for Aiding Telemarketing Fraud
MoneyGram International will pay $18 million in consumer redress to settle FTC charges that the company allowed its money transfer system to be used by fraudulent telemarketers to bilk U.S. consumers out of millions of dollars. The settlement comes as part of the FTC’s continuing campaign to hold legitimate companies such as payment processors, list brokers, and others responsible if they help facilitate telemarketing wrongdoing.

Under the Telemarketing Sales Rule, persons who provide goods or services to telemarketers have an affirmative obligation to use due diligence to assure that the promotion that they are assisting is reasonably compliant. Otherwise, they can be held responsible for the underlying wrongdoing. See our prior article here.

Here, MoneyGram was charged with knowing or avoiding knowing that its facilities were being used to have payments sent to Canada for allegedly phony lottery or prize schemes in which consumers were told that they had won thousands of dollars and just had to pay a fee for “taxes” “customs” or “insurance” to get their winnings. In other instances, consumers were told that they had been awarded loans and had to forward necessary fees, but received nothing in return. The FTC charged that MoneyGram had been alerted to the fact that various frauds were being perpetrated, but ignored the warnings because proposals to deal with the problem were too costly or “were not their problem”. Marketers and those who provide goods and services to telemarketers are learning the hard way that it is indeed their problem.

In settling the FTC action, in addition to paying $18 million, MoneyGram is barred from knowingly providing substantial help or support to any sellers or telemarketers that are violating the Telemarketing Sales Rule. The court order requires the company to implement a comprehensive anti-fraud program. Under the anti-fraud program, MoneyGram must conduct background checks on prospective agents; educate and train its employees about consumer fraud; institute agent monitoring; and discipline agents who fail to comply with the rules. The order also requires MoneyGram to provide a clear and conspicuous fraud warning on the front of all its money transfer forms. The order’s conduct provisions apply to all MoneyGram money transfers sent worldwide from either the United States or Canada. MoneyGram is also required to develop and maintain a system for receiving consumer complaints and data, and to provide that information to the FTC upon re quest. MoneyGram also must take all reasonable steps to identify agents that are involved in fraud. It must review its transaction data to identify any unusual or suspicious activity by its agents and fire any agent who it believes may be participating in fraudulent activities. It also must fire or suspend any agent who has not taken appropriate steps to stop fraudulent money transfers.

The FCC Mobile Marketing Inquiry
The Federal Communications Commission has launched a sweeping inquiry into the mobile industry and its practices that could result in new regulations impacting the wireless marketplace. The FCC inquiries, which currently are in the public comment stage, are focused on three areas: research and development with regards to innovation, competition in the wireless industry and consumer protection with an emphasis on truth-in-billing. Andrew Lustigman participated in Mobile Marketer's webinar which addressed how the FCC three-prong inquiries could impact mobile marketing. This is an important development to marketers as the FCC will likely be creating new regulations regarding the billing of services to mobile devices, standards which until now have been left to the states and the FTC. Continue Reading

The FTC's Red Flags Rule: Last Chance to Learn and Comply
The FTC recently announced that it was postponing implementation of the Red Flags Rule until November 1, 2009. In conjunction with this announcement, the FTC also launched a business education initiative designed to help companies understand the Red Flags Rule is as well as proper compliance. Many businesses have not even heard of the Red Flags Rule, which govern nearly any business that extend credit, but whether they know about them or not, they will be subject to compliance as of November 1st. A good place for information on the Red Flags Rule is the FTC's site, There, you will find a guide for businesses discussing the Red Flags Rule, including how to determine if your business or organization is subject to it. Continue Reading

FTC Bars Pre-Recorded Voice Telemarketing Sales Calls
Telemarketers utilizing pre-recorded voice messaging should remember that the FTC's new enforcement policy prohibiting telemarketing sales calls delivering pre-recorded voice messages without a previously signed written agreement is now in effect. The FTC will permit sellers to obtain the required permission for prerecorded messages calls from a consumer in any manner permitted by the E-Sign Act. Continue Reading

Maine Agrees Not to Enforce Predatory Marketing Law
In a significant victory for marketers, the Maine Attorney General will not enforce the state's recently-enacted Predatory Marketing Law. Enforcement of the law would have created virtually impossible compliance standards and exposed businesses to private plaintiff actions for alleged violations. According to an order dismissing a legal challenge, the state agreed that the law as written was overbroad and a violation of First Amendment rights. As part of the dismissal, private plaintiffs were warned that the statute faced significant constitutional infirmities. Continue Reading

Dell Settles with NY AG and Agrees to Pay $4 Million for Defrauding NY Consumers
Highlighting increased scrutiny on rebate and finance practices, the New York Attorney General and Dell reached a settlement whereby Dell agreed to pay $4 million in restitution, penalties and costs to resolve charges of fraudulent and deceptive business practices across New York State. The lawsuit charged Dell with bait and switch advertising with respect to its "no interest" financing promotions, misleading consumers into believe they had qualified for promotional financing, failing to adequately disclose the terms of its "next day" service contracts and failing to provide consumers with warranty service and promised rebates. Along with the $4 million payment, the settlement requires Dell to make sweeping changes to its advertising, sales and financing practices. Continue Reading

ValueClick Settles Investor Liability over Deceptive Advertising Allegations
ValueClick, the California-based online advertising company, agreed to pay $10,000,000 to settle a false advertising lawsuit. Highlighting the risk publicly-traded marketing companies face, the payments are not earmarked for aggrieved consumers, but instead will go to investors who bought stock in the company from June 2005 through July 2007. According to the allegations in the lawsuit, ValueClick knowingly concealed from its shareholders its "willful and ongoing violations of federal law governing the conduct of the advertising and promotion business that lie at the heart of ValueClick's business operation." The notice of settlement informed shareholders that the $10,000,000 settlement resolves allegations that the company "knowingly or recklessly misled investors about, among other things, ValueClick's compliance with laws and standards applicable to its business. Continue Reading

Veoh Not Liable for Copyright Infringement and Protected by DMCA Safe Harbor...for a Second Time
A second federal judge has ruled that Veoh Networks Inc., a web-video host, is entitled to safe harbor under the Digital Millennium Copyright Act . The court found that Veoh was not liable for monetary or injunctive relief to members of Universal Music Group, which sued Veoh for copyright infringement. The suit alleged that Veoh's business was based on the infringing use of copyrighted works of others, notably from Universal's viewpoint, musical groups and artists. The court however granted Veoh's motion for summary judgment resolving the allegations against it. This is the second federal court ruling to find Veoh protected under the DMCA. A similar lawsuit brought by Io Group, an adult entertainment company, was also decided in favor of Veoh. You can read our report on the Io Group v. Veoh Networks, Inc. decision here . These decisions are important because the DMCA offers companies that host social media significant protections, assuming they meet the criteria required to take advantage of the safe harbor. Continue Reading

Internet Radio Services Win Legal Victory Over Record Companies
The U.S. Court of Appeals for the Second Circuit recently considered Yahoo!'s LAUNCHcast, an Internet radio station that provides listeners with individualized webcasting, and ruled that LAUNCHcast was not an "interactive service" under the Digital Millennium Copyright Act. The ruling allowed the company to pay only the statutory license fee set by the Copyright Royalty Board instead of having to negotiate a more costly licensing structure. Broadcasters of interactive services are required to pay specific fees to the copyright owner of each sound recording played. The Second Circuit is the first appellate court to rule on such a matter, and its opinion discussed possible ways in which Internet radio providers may avoid being deemed an "interactive service." Continue Reading

Seinfeld Prevails in Cookbook Copyright Lawsuit
This time it appears Jessica Seinfeld, wife of comic Jerry Seinfeld, is getting the last laugh. All federal copyright, trademark and unfair competition claims that had been filed against Seinfeld by fellow author Missy Chase Lapine alleging Seinfeld's "Deceptively Delicious" cookbook copied her own tome, "The Sneaky Chef," both of which discuss ways in which parents can camouflage nutritious foods in their children's meals were dismissed by the federal court in Manhattan. Continue Reading

Privacy Policies: Not Just Cookie Cutter
One of the biggest concerns among visitors to Web sites is how personal information is going to be used. This is not a new development; back in March of 2000, BusinessWeek did a cover story on Internet privacy, including a survey showing that the vast majority of users were either “very concerned” or “somewhat concerned” about how their information would be used. Remember to make sure that your privacy policy is up to date and accurately reflects how your company handles the data it collects. Continue Reading

Culture and Authenticity: Lessons from 140: The Twitter Conference
The recent 140: Twitter Conference in Los Angeles focused on many business aspects of Twitter, and speakers included Levar Burton, Tony Robbins, Tony Hawk, and Olshan's special counsel Jonathan Ezor. The panels covered entertainment, comedy, brand management, customer relationships, and software development. A common theme of respecting the culture of Twitter and authenticity ran through the presentations. These themes have particular relevance for advertising and marketing efforts using the Twitter service, which lends itself to certain focused types of marketing efforts, especially prize promotions and competitions. Before launching a Twitter-based promotion remember that traditional sweepstakes laws still apply to a Twitter-based sweepstakes. Continue Reading

Olshan Attorneys Named to SuperLawyers - 2009
Andrew Lustigman and Sheldon Lustigman have been selected for inclusion into the current edition of New York Super Lawyers - Metro Edition 2009 -- in their respective practice areas. Super Lawyers is a comprehensive and diverse listing of outstanding attorneys, representing a wide range of practice areas, firm sizes and geographic locations. Only 5 percent of the lawyers in each state or region are named to a Super Lawyers listing after passing a comprehensive screening process. Continue Reading

Andrew Lustigman and Adam Solomon Speaking at this Year's PMA Law Conference
Andrew Lustigman and Adam Solomon will be speaking at the 31 st Annual Promotion Marketing Law Conference in Chicago, IL held on November 5-6, 2009. Andrew will moderate a session on Direct Marketing, The Rise of Restrictions and Adam will host a roundtable discussing the latest developments in telemarketing law. PMA's Annual Promotion Marketing Law Conference is a state of the art event with a complete and indepth explanation of what you need to know to comply with the fast changing world of promotion and advertising laws, regulations and litigation. If you are planning to be at the conference, please contact us so we can see you in person! Continue Reading

ACI Advertising Law Conference
Andrew Lustigman is proud to be a speaker on mobile marketing law developments at the American Conference Institute (ACI) Advertising Law Conference on January 26 and 27, 2010 in New York. If you would like to take advantage of a special discounted rate if you sign up October 31, 2009, please let us know.

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As always, we strive to stay on top of all of this to provide our clients with the most relevant and efficient legal advice. If you find any legal marketing news of interest, please feel free to send it to us!

Please feel free to 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.

We hope for continued prosperity to all our friends and colleagues in these challenging times.

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

This newsletter is a publication of Olshan, a law firm with offices in New York and New Jersey. This newsletter and the referenced articles are intended to provide a general overview of legal issues. It is not intended to cover all laws or to serve as legal advice or as a replacement for specific advice of counsel. The views, opinions, statements, analysis and information contained in this outline do not necessarily reflect the views of Olshan or any of its past, present and future clients. © MMVIII by Olshan.

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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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