NEWSLETTER: Advertising, Marketing & Promotions, Fall 2008

Dear Clients and Friends:

While current economic conditions are challenging to us all, marketers are using this period as an opportunity to test new and creative techniques designed to motivate consumer purchases and other behavior. We have been monitoring a number of recent important legal developments in the advertising arena, and therefore are pleased to send you this quarterly newsletter highlighting recent developments in advertising and promotional marketing law.

Please feel free to pass this newsletter on to your friends and colleagues and invite them to join our mailing list. As always, we appreciate your comments and recommendations.

Legal Developments

FTC Establishes Significant Limitations on Pre-Recorded Calls

The Federal Trade Commission recently announced two important amendments to the Telemarketing Sales Rule. One amendment harmonizes the FTC’s definition of an abandoned call with the definition employed by the Federal Communications Commission. The second amendment dramatically limits the FTC’s current policy for pre-recorded voice calls. Our overview of the amendments can be found here.

Green False Advertising Cases Developing

Last week the National Law Journal reported that an increase in claims about “green” products and services will likely lead to more enforcement and litigation in this area. Andrew Lustigman was featured in this article discussing recent challenges involving environmentally friendly or “green” claims.

Opt-in Aspect of California Sweepstakes Legislation Eliminated

The California State Assembly and Senate recently passed a bill to amend existing state law by adding numerous disclosure requirements for sweepstakes materials, rules that are generally in line with other states’ laws. As Adam Solomon writes, California Senate Bill 1400, originally required opt-in consent for the selling or sharing of information about sweepstakes participants, but it was substantially modified before it was put into final form. The Bill awaits the governor’s signature.

Website Host of User-Generated Content Not Liable for Copyright Infringement

A recent important decision by a federal court in California has potential implications for websites hosting user-supplied content and as well as copyrighted materials placed by others on such websites. Jill Abitbol’s analysis of the decision can be found here.

New York Affiliate Tax Developments

The State of New York recently passed legislation expanding the definition of “nexus” – the connection to the state necessary for sales tax liability – to include many Internet-based affiliate marketing programs. Under the new law, all marketers with New York-based affiliates that generate at least $10,000 in sales during the previous year are presumed to be obligated to collect and pay sales tax for all New York-shipped sales. However, it is possible to defeat that presumption under certain circumstance. Andrew Lustigman’s and Jonathan Ezor’s recent Mobile Marketer article explores the new law, the official guidance, and potential exemptions.

New York Attorney General Settles with H&R Block and Auto Dealer Regarding Deceptive Advertising Tactics in Sweepstakes Programs

The New York Attorney General reached a settlement with H&R Block over charges that two sweepstakes promoted by the company improperly induced consumers to purchase tax preparation services. In both games, consumers could win prizes from scratch-off cards given only to customers who purchased H&R Block tax preparation services. Adam Solomon’s analysis of the settlement can be found here. Also, as Adam discusses here, a Long Island auto dealer settled with the Attorney General over allegations of using misleading promotions intended to lure consumers into the dealership.

First Amendment Rights Upheld In Commercial Speech Case

As Jill Abitbol’s discusses in her article, the Court of Appeals for the Second Circuit has affirmed the dismissal of a disgruntled dieter’s claim for negligent misrepresentation, product liability, and state unfair competition against Atkins where the claims were based on noncommercial speech, and offered views on health, diet, and nutrition. The ruling is important because it demonstrates that courts are willing to give at least certain commercial website content First Amendment free speech protection.

Seller of Sexual Enhancement Product Gets 25 Years in Fraud Case

Exemplifying the risks of marketing without proper substantiation, Steve Warshak of Berkeley Premium Nutraceuticals was convicted of defrauding customers seeking sexual enhancement products and a variety of other dietary herbal supplements. As Sheldon Lustigman’s article discusses, the CEO was sentenced to 25 years in federal prison and eight other former executives and employees received prison sentences ranging from one month to one year for their roles in assisting the fraud.

News and Events

Direct Marketing Association – What happens in Vegas…

Attorneys from Olshan will once again be in attendance at the annual Direct Marketing Association Conference which will be held this year in Las Vegas. The annual conference is a great opportunity to catch up, network, and learn about the latest in direct marketing. If you are planning to be there from October 12-14, please drop us a line to set up an appointment.

Andrew Lustigman named to 2008 New York Super Lawyers

We are pleased to report that Andrew Lustigman has been selected for inclusion in Super Lawyers – New York Metro 2008 in his practice area of Media and Advertising. Super Lawyers is a listing of outstanding professionals from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement.

“Hot Topics in Advertising and Marketing” – New York, NY

On October 22, 2008, Andrew Lustigman will speak at The Association of the Bar of the City of New York’s annual CLE “HOT TOPICS IN ADVERTISING & MARKETING-2008.” Included in his presentation on direct marketing legal developments, will be a discussion on the New York affiliate taxation issues and opt-in issues.

Annual Promotion Marketing Association Law Conference – Chicago, IL

Andrew Lustigman and Adam Solomon will be presenting at the 30th Annual Promotion Marketing Association Law Conference in Chicago on November 20-21, 2008. Andrew will speak about legal issues involved in affiliate-driven, direct marketing programs. Adam will present a roundtable discussion entitled “Overcoming the ‘Do Not’ Obstacles in the World of Direct Marketing.”

Trends and Issues in Online Behavioral and Other Technology-Driven Advertising

Seattle, WA: Andrew Lustigman will be presenting on online promotional marketing issues at the Law Seminars International’s 17th Annual Seattle Conference on New Developments in Technology Law. In his December 11, 2008 presentation, Andrew will discuss legal issues involving online sweepstakes and promotions, rules and business risk considerations, as well as provide an update on the SMS promotion litigation.

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.