NEWSLETTER: Advertising, Marketing & Promotions, Winter 2012
Dear Clients, Colleagues and Friends,
We are pleased to send you Olshan's Advertising, Marketing and Promotions Group's Winter 2012 Newsletter.
There have been a number of important developments and activities of interest to those involved in advertising and promotional marketing matters. Below we have summarized the developments that we believe to be of particular importance.
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 contact us.
IN THIS ISSUE
SUPREME COURT CONTINUES TO ENFORCE ARBITRATION CLAUSE
The Supreme Court has ruled that the Federal Arbitration Act trumps the Credit Repair Organizations Act, and consumers who agree to terms containing an arbitration clause have waived their right to sue in court. In Compucredit Corp. v Greenwood , consumers brought a class-action lawsuit against a credit card marketer and the card's issuing bank, alleging the fees they were charged for the Aspire Visa credit card were illegal. The credit card application completed by the consumers contained a provision that read, "Any claim, dispute or controversy (whether in contract, tort, or otherwise) at any time arising from or relating to your Account, any transferred balances or this Agreement, upon the election of you or us, will be resolved by binding arbitration." The consumers filed suit in California federal court, and the defendants sought to have the case dismissed and the arbitration clause enforced. The trial court and the appellate court ruled that the arbitration clause could not be enforced because Congress never intended for claims under the Credit Repair Organizations Act to be subject to arbitration. The Supreme Court, however, ruled that the arbitration clause applied.
Moreover, a California federal court has gone a little further: if a lawsuit was started before the Concepcion decision was issued in 2011, a company can ask a court to retroactively apply the arbitration clause by dismissing the lawsuit and belatedly applying the arbitration clause.
NAD SCRUTINIZES PRICE SAVINGS COMPARISONS
The National Advertising Division (NAD) of the Council of Better Business Bureaus recommended that a retailer discontinue its pricing comparisons to suggested retail prices (SRP). HH Gregg, the Indianapolis-based appliance and electronics seller, like many retailers, compared its own prices to manufacturers' suggested retail prices, as opposed to the actual price at which the product was being sold. For example, if Sony listed a television's standard retail price as $1000 and HH Gregg sold it for $799, HH Gregg's advertisements would read "SRP $1000, save $201, final price $799."
Home Depot was unhappy with HH Gregg's practice and filed a challenge with the NAD. Home Depot complained that SRPs are typically inflated by manufacturers and when a particular product is routinely sold for less than the suggested retail price, HH Gregg's advertisements were misleading because they promised savings to consumers that were not bona fide.
DOJ OPINION ON INTERSTATE WIRE ACT MAY OPEN INTERNET TO LEGALIZED ONLINE GAMING
An interesting opinion letter issued by the United States Department of Justice's Office of Legal Counsel may pave the way for legalized online gaming in the United States. The letter concludes that the Interstate Wire Act (18 USC 1804) applies only to prohibit "the transmission of communications related to bets or wagers on sporting events or contests." While the opinion was written in the context of whether New York or Illinois could sell lottery tickets to their respective residents online, its conclusions would seem to encourage additional lawful uses of the Internet for state-authorized online (non-sports book) gaming.
COURT INVALIDATES TRADEMARK REGISTRATIONS WHERE APPLICANT DID NOT HAVE A BONA FIDE INTENT TO USE THE TRADEMARK IN CONNECTION WITH ALL THE GOODS LISTED IN THE INITIAL APPLICATION
In the United States, if a trademark is not in use, an applicant can still apply for a federal trademark application based on a bona fide intent to use the trademark in commerce. However, in a recent decision in the District of Oregon, Bobosky v. Adidas AG, the court invalidated two trademark registrations because Bobosky lacked the requisite bona fide intent to use the trademarks on all of the items set forth in his initial intent to use trademark applications. Therefore, caution should be used when filing an intent to use trademark applications. The description of goods and services should be limited to those for which the applicant has a bona fide intent to use.
COURT IN CALIFORNIA CONSIDERS OWNERSHIP OF TWITTER ACCOUNT BY FORMER EMPLOYEE
Many companies now have Twitter, Facebook and Linkedin accounts that are used by their employees to post information regarding the goods and services of the company. What happens when an employee amasses numerous "followers" on Twitter, but leaves the company and begins "tweeting" for a competitor? Can the employee take the Twitter account with him? Who owns the rights to the "followers"? These issues are being decided by a court in the Northern District of California in a matter entitled PhoneDog v. Kravitz. There are no clear-cut answers to these questions yet, but there appears to be a number of actions an employer can take to protect itself; actions that were seemingly not taken by PhoneDog.
THE FTC AND THE CONSUMER FINANCIAL PROTECTION BUREAU ISSUE MEMORANDUM OF UNDERSTANDING
Similar to the agreement by the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) over forty years ago concerning the advertising and labeling of foods, drugs, devices and cosmetics, the FTC and the Consumer Financial Protection Bureau (CFPB) have now entered into their own Memorandum of Understanding. On January 20, 2012, the CFPB, an organization born out of the recent financial system overhaul, and the FTC signed a Memorandum of Understanding outlining how the agencies plan to collaborate with each other to regulate the non-bank financial sector. The memorandum sets forth a variety of procedures the FTC and the CFPB plan to carry out to protect consumers and businesses from harmful acts within consumer financial products or services. The memorandum seeks to avoid the future duplication of regulatory efforts, as well as prevent unnecessary burdens on businesses and ensure consistent enforcement of consumer financial laws.
FEDERAL COURTS NOW AUTHORIZED TO HEAR TCPA CASES
The Chief Justice of the United States Supreme Court, John Roberts, remarked, "this is the strangest statute I have ever seen." He was talking about the Telephone Consumer Protection Act ("TCPA"). The Supreme Court held oral arguments in the case of Mims v. Arrow Financial Services, LLC on November 28, 2011 in order to decide whether plaintiffs can choose between filing lawsuits in state or federal court, or will be limited to state courts when the amount in controversy is less than $75,000. The normal rules of diversity allow federal jurisdiction if the amount being sought is more than $75,000, and the defendant is from a different state than the plaintiff. Diversity jurisdiction is not at issue in Mims.
The Chief Justice was confused because when Congress passed the TCPA, it included enigmatic language governing a plaintiff's choice of court systems that was either never thought through or was left intentionally vague for courts to decide later.
This all changed on January 18, 2012, when the Supreme Court decided Mims less than two months after oral arguments. In a rare unanimous decision, the Supreme Court ruled that, despite the unusual language of the TCPA, a plaintiff has the right to choose between state and federal courts as the forum of choice: "We hold, therefore, that federal and state courts have concurrent jurisdiction over private suits arising under the TCPA." The doors of federal courthouses are now fully open to anyone wishing to sue telemarketers under the TCPA.
FTC BUSINESS OPPORTUNITY RULE POSES NEW CHALLENGES FOR MARKETERS
The FTC has approved a new Business Opportunity Rule that is effective March 1, 2012. The Rule is intended to replace the original 1978 Trade Regulation Rule. While there are a number of important components to the new Rule, a key component simplifies and reduces the number of required disclosures from about 20 items to one single page-specific form labeled "Disclosure of Important Information about Business Opportunity." Although this may at first glance appear to be beneficial to marketers, in fact, the new Rule will likely destroy the ability of many marketers to close a sale, especially where telemarketing is involved.
FACEBOOK REACHES A SETTLEMENT WITH THE FTC REGARDING ITS PRIVACY POLICIES
Facebook settled FTC claims that it deceived consumers by telling them they could keep their information on Facebook private, and then repeatedly allowing the information to be shared publicly. The settlement shows the FTC's intentions to enforce its privacy mandate in the social media world. The FTC charges stemmed from changes Facebook made to its privacy settings in December 2009 to make aspects of users' profiles public by default, despite the fact that users had deliberately programmed their privacy settings to confine that information to a specific group of friends or family. The settlement bars Facebook from making any further deceptive privacy claims, requires consumers' express consent before it changes the way it shares their data, requires that it prevent anyone from accessing a user's material more than 30 days after the user has deleted his or her account, requires that it establish and maintain a comprehensive privacy program, and requires a third-party privacy audit every two years for the next 20 years.
NLRB ISSUES REPORT ON SOCIAL MEDIA
The General Counsel of the National Labor Relations Board ("NLRB") released a report on January 24, 2012 summarizing its decisions in recent unfair labor practice cases involving employer responses to employee use of social media. The report provides useful guidance on drafting social media policies and disciplining employees without violating the National Labor Relations Act ("NLRA").
The NLRB noted that the two main points of the report are (i) employer policies should not be so sweeping that they prohibit the kinds of activity protected by federal labor law, such as the discussion of wages or working conditions among employees; and (ii) an employee's comments on social media are generally not protected if they are mere gripes not made in relation to group activity among employees.
NAD APPROVES OF USING PROMOTIONS TO SOLICIT FACEBOOK "LIKES" AND RECOMMENDS THAT "FREE CLAIM" BE MODIFIED
In response to a challenge by 1-800 Contacts, Inc., the National Advertising Division (NAD) of the Council of Better Business Bureaus has recommended that Coastal Contacts, Inc. discontinue an "up to 70 percent" savings claim and modify advertising that promoted "free" products so that the material terms are clearly and conspicuously disclosed at the outset of the offer. Perhaps more importantly, the NAD ruled that marketers can legitimately entice consumers into "liking" pages on Facebook by offering discounts, promotions or free merchandise without triggering social media endorsement requirements. While the ruling is a positive one for marketers relying on social media promotions to develop brand awareness and consumer interaction, marketers still need to be sure that they also consider the standard rules of disclosure. In addition, marketers need to be careful that consumer interaction is not overstated as an endorsement.
BUZZ AT THE ADVERTISING, MARKETING & PROMOTIONS LAW GROUP
Sheldon Lustigman will be attending the Electronic Retailing Association Great Ideas Summit 2012 at the Fontainebleau in Miami on February 27 through February 29, 2012. Please let us know if you are planning on attending.
Join Andrew Lustigman at the Networking DM event to take place in Whistler, British Columbia between April 29, 2012 through May 3, 2012. 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 attend this important industry event. If you are planning on attending please drop us a note to set up a time to meet.
Receive CLE credit for viewing a lecture by Andrew Lustigman and Adam Solomon , Rolling the Dice: Legal Issues Related to Sweepstakes and Promotions, which is now available online at LawLine.com . The lecture examines the legal aspects of sweepstakes, and how to comply with the rules governing the advertising of them. The course also explains a number of relevant, significant and recent cases, including one involving the television show Deal or No Deal's "Play At Home" game. In addition, the course focuses on how social media and other evolving technologies relate to sweepstakes law and its future.
On December 7, 2011, Olshan presented a complimentary webinar focusing on legal issues involving social media. The program discussed issues concerning advertising and marketing, intellectual property, employment practices and social media in general. This webinar is still available on our online university and you can still receive CLE credit.
NEWS AT OLSHAN
On January 6, 2012, Olshan announced that Andrew M. Freedman, Activist Practice Group; Mary L. Grieco , Intellectual Property Group; Ellen V. Holloman, Litigation Group; Jason S. Saltsberg, Corporate Group; and Howard J. Smith, Litigation Group, have been named partners.
Olshan attorneys contributed to development of a new legal resource launched by LexisNexis. Lexis Practice Advisor will deliver content from leading practitioners via the Internet to help attorneys handle transactional matters more confidently and negotiate and draft effective documents for clients more efficiently. Kenneth M. Silverman and Martin S. Cooper lead the efforts with respect to New York Corporate law and Thomas D. Kearns supervised the Real Estate materials. Contributions were also made by Dov B. Brandstatter, Camielle N. Green, Jonathan H. Deblinger, Nina Krauthamer, Keith J. Pollock and Ryan S. Replogle.
Steven R. Gursky is among the authors in a new book from Aspatore, publishing arm of Thomson Reuters. His chapter "Succeeding in Fashion Law: A Mix of Good Fortune, Hard Work, and Skill" appears in Navigating Fashion Law: Leading Lawyers on Exploring the Trends, Cases and Strategies of Fashion Law. This book is available for purchase here .
Aliza F. Herzberg was quoted in the January issue of InsideCounsel on best ways to deal with employee misdeeds in an article about the way the Penn State scandal was handled. Aliza notes that "... investigating promptly and taking action when necessary is your best defense in these situations. In-house counsel should not approach these issues with fear. Deal with them head-on."
STAY IN TOUCH
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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!
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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.