AD-ttorneys@law – January 20, 2022

Alerts / January 20, 2022

In This Issue:

FTC Wants Input on Impersonation

COVID-19 era sees flood of fakery, but why?


It’s a common theory that the COVID-19 pandemic accelerated changes that were already bubbling beneath the surface of our lives — the decoupling of worker and workplace and the rise of à la carte, IP-driven entertainment being the most celebrated examples.

The country shut down, so more people worked from home and were entertained at home. Makes sense.

But there are other, less obvious trends that COVID-19 seems to have boosted as well. During the same period, for instance, more scammers impersonated government officials and trusted businesses, stealing millions of dollars from citizens across the land.

Why? Is it easier to scam from home, in your pajamas?

False Pocketing

The Federal Trade Commission (FTC or Commission) has an explanation. Sort of. “The COVID-19 pandemic has spurred a sharp spike in impersonation fraud,” the Commission writes in a new rule-making announcement, “as scammers capitalize on confusion and concerns around shifts in the economy stemming from the pandemic.”

But the summary of misbehavior that follows seems like a typical pre-pandemic smorgasbord: scammers impersonating “a lottery official, a government official or employee, or a representative from a well-known business or charity” to “[phish] for information they can use to commit identity theft or seek monetary payment, often requesting funds via wire transfer, gift cards, or increasingly cryptocurrency.”

These scams sound very pre-2020. Was there a COVID-19-era spin on each of them? The FTC doesn’t say, but it would be an interesting subject to explore.

The Takeaway

Because impersonation scams have been with us forever, it seems unlikely that COVID-19-related considerations will feature prominently in the new rulemaking process announced by the Commission, even if much of the public comment will discuss it. It’s just what we are worried about now; scammers will always seize on the anxiety du jour.

In any case, the FTC is issuing some tough talk about impersonation scams; however, a rulemaking process can take many years to complete. “The FTC is prepared to use every tool in our toolbox to deter government and business impersonation fraud, penalize wrongdoers, and return money to those harmed,” says Samuel Levine, director of the FTC’s Bureau of Consumer Protection.

We’re eager to hear how they’ll tackle an old problem in a new era.

FTC Orders Walmart and Others to Reveal Supply-Chain Information

New order may presage regulatory attention on retail checkout experience

In Triplicate, Please

The global supply chain crisis has led to endless think, worry and panic pieces appearing in every conceivable news outlet. Until the omicron variant reared its ugly head, it seemed that supply-chain tragedy was going to be the next unavoidable, dominant news narrative.

While the supply-chain migraine seemed to fade a bit, it remained a real concern — real enough for the FTC to demand “detailed information” from major retailers, wholesalers and suppliers to get to the bottom of how their practices may be contributing to the ongoing disruptions. The Commission’s order requests an excruciating level of detail that’s sure to give any number of chief operating officers agita. Take this query, for example:

“Produce all documents prepared by or submitted to senior management relating to supply chain disruptions, including documents relating to the sources of those disruptions, the products and regions affected by those disruptions, your efforts to mitigate those disruptions, and the impact of such disruptions.…”

Other Duties as Assigned

That’s just one out of 12 requested specifications. Fun.

Additionally, the whole enterprise bears a whiff of impending regulatory oversight: “In addition to better understanding the reasons behind the disruptions,” the Commission writes, “the study will examine whether supply chain disruptions are leading to specific bottlenecks, shortages, anti-competitive practices, or contributing to rising consumer prices.” The FTC points out straightaway that these questions don’t normally fall into its portfolio, but it’s starting to develop an interest: “The FTC has a long history of pursuing market studies to deepen our understanding of economic conditions and business conduct, and we should continue to make nimble and timely use of these information-gathering tools and authorities.”

So, the agency is gathering information and taking notes. It’s interesting to ponder how it will conceive its own role in preserving the health of the supply chain.

So what’s all this have to do with marketing?

The Takeaway

The Center for Science in the Public Interest (CSPI) claims that it inspired the FTC to add certain inquiries to the order.

CSPI has been hot and bothered over retail marketing agreements — the contracts hammered out between manufacturers and retailers that determine precisely where all those products that are coursing through the supply chain are placed on the shelves of our neighborhood stores. CSPI is concerned about the health implications of product placement — namely, how “Big Food and Big Soda place ultra-processed, sugar-laden products in multiple, prominent places throughout stores like ends of aisles, checkout lanes, and displays at the front of the store, tempting customers to purchase unhealthy products.”

CSPI is also concerned about the underlying business arrangements that create the checkout experience for consumers — in its words, the “backroom deals between stores and food manufacturers also shape today’s supermarket.”

Whether or not CSPI inspired the Commission, there are several points in the Commission’s order that address CSPI’s concerns, including inquiries about display promotions and how certain companies pay to dominate checkout displays.

So, retailers and suppliers alike take heed: The FTC has identified the checkout aisle as the final delicate capillary of the global supply chain, and its attitude may develop into more than mere curiosity.

NYAG Office Spanks COVID-19 Testers

Alleges companies failed to deliver results in promised time

Snapshots from Hell

The COVID-19 pandemic produced all sorts of vivid impressions — the wail of ambulance sirens in city canyons, deserted streets in broad daylight and the glorious nightly racket produced by separated neighbors hanging out in windows and balconies.

The latest chapter of the pandemic — the omicron variant — is producing its own iconic symbol.

The more contagious version of the virus has spurred droves of concerned citizens to get tested, vaccinated and boosted, and perhaps omicron’s allegedly milder symptoms are making people more comfortable with waiting in line.

In any case, the image of the omicron line — long, disorganized, crowded, possibly unsafe — has taken its place among the iconic images of our common disaster.

Pencils Down, Please

It should come as no surprise that the desperate need for testing that produced these lines has generated further drama. And the world of advertising is not untouched.

New York Attorney General (NYAG) Letitia James has delivered warning letters to six of the countless testing companies that have set up shop in the Empire State “for not meeting promised turnaround times for test results.”

The companies promised results anywhere between 24 and 72 hours after the tests were administered, but they failed to deliver, the NYAG office claims. The companies are required to update all their signage with accurate turnaround times, email test recipients who were waiting with updated delivery windows and ask workers to share accurate turnaround estimates.

The Takeaway

We can’t look into the hearts of each of these companies and opine on why they misled their customers — the extraordinary demand created by omicron may have taken them by surprise.

But there’s the takeaway — whether it’s something as serious as COVID-19 test results or a more mundane service offering common to your business, make smart choices about your turnaround claims. Anticipate surges in need that might send you to the principal’s office.

Be Careful About Your Unbeatable Claims

S.C. Johnson accused of defining “unbeatable” too narrowly

Public Service

We’re going to share with you, dear reader, a glimpse into the soul of the marketing copywriter.

There they sit in their cubicle, head in hands, somehow simultaneously rumpled and wired. They’re staring at their notepad, or tablet, or computer screen. Their left leg jiggles up and down unconsciously. They might reach for a pencil to chew pensively or munch distractedly on some funions from the snack machine in the hall. They’re over-caffeinated, under deadline and at an impasse.

In this particular narrative, they’ve been stymied by writer’s block brought on by ... restrictions.

How to sell the product when it’s one among many? How to come up with the right words right now? How to avoid going back to graduate school?

There are a number of words and phrases at hand that can add an impressive aura to a product without necessarily triggering angina in the legal department. “Unparalleled.” “Unmatched.” “Unequaled.” Or “unbeatable.”

Such claims sound great, but they may suffer less scrutiny than other claims do. At least, they used to.

Consider Brown. v. S. C. Johnson & Son Inc., a class action recently filed in the Northern District of Illinois. The proposed class is accusing S.C. Johnson, maker of Ziploc plastic bags and around 5 gazillion other products, of making deceptive claims.

At the center of the case are two tags — “unbeatable protection” and “unbeatable freshness” — both used to describe various plastic bag offerings.

The plaintiffs argue that the first tag is referenced by other packaging text meant to qualify the “protection” offered by the product, because it limits the claims to “punctures and tears” and not other types of damage or vulnerability. “Consumers will expect the Product to be made with the most resilient plastic, contain the strongest seal possible, will expand the most, and keep out all air,” the complaint states.

Likewise with the “unbeatable freshness” tag, which the plaintiffs claim was based solely on a “moisture loss test” to determine its unbeatability. But just one successful test does not freshness prove, they argue. “Storage variables beyond moisture loss which affect the freshness of food include oxygen, humidity, temperature (freeze/thaw), light, handling, and oxidation,” the complaint notes, beyond moisture loss; likewise, “some foods are not positively impacted by complete prevention of moisture loss.”

Plaintiffs are suing under the Illinois Consumer Fraud and Deceptive Business Practices Act’s Consumer Protection Statute, and for fraud, negligent misrepresentation and unjust enrichment under various state laws.

The Takeaway

Claims like the two referenced in this class action don’t always attract the same scrutiny as other claims. But the argument here is interesting — are such claims insupportable if they cannot apply to the many variables that define the claim?

We’ll see what happens as this action progresses.

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Made in USA, Part Two – How Far Back Do You Have to Look?

Prior to the new year, we blogged about how the Federal Trade Commission’s (Commission) decision to codify its Made in USA (MUSA) guidance into a rule – and the accompanying threat of civil penalties – makes it all the more important to clarify ambiguities and uncertainties with respect to MUSA. As we noted then, we believe that most companies want to comply with the law and the Commission’s rules, but if those rules are not well defined, compliance becomes a matter of guesswork. Further, out of an abundance of caution, companies may choose not to make certain claims that might otherwise be lawful and nondeceptive, which harms rather than benefits consumers.

Brand NFT Advertising Basics, or One for All of Us Who Wanted a Pony Growing Up, Who Don’t Quite Get the NFT Buzz, and Who Really, Really Need a Vacation

This may be one of the best ads in recent memory – an ad promoting visiting Lexington, Kentucky, horse capital of the world. The ad promises to make kids’ holiday dreams come true with the opportunity to buy “Non Fungible Thoroughbreds” at VisitLEX. The horses have names like Ol’ Pixel Face, iHorse, OpenSea Biscuit, Notta Pony and Champing at the Bitcoin. They promise no feeding or grooming or upkeep. And “the only thing more precious than a child’s wish is a unique and noninterchangeable unit of data with limited usage rights stored in an online ledger.” It may make you want to visit Lexington after omicron departs, hopefully blowing away soon like our old Christmas tree needles. And we might see you there!

I’m a Lawyer . . . What Do You Mean I’m Being Named in an FTC Complaint? The FTC Act and Individual Liability

Last week, the Federal Trade Commission (FTC) released an interesting case against a lead generator (ITMedia) that purportedly collected sensitive information from consumers who were seeking loans and sold that information to entities that were not in the business of providing loans. The defendants settled charges that they violated both the FTC Act and the Fair Credit Reporting Act (FCRA) and agreed to pay $1.5 million as a civil penalty for the FCRA violations. It’s an interesting case on the merits, but for today, let’s focus less on the case and more on whom the FTC named individually. Today is all about individual liability and the awful realization that when the FTC starts investigating the company you work for, it may also start investigating you for your role in the challenged practices.

Why Settle for Taco Tuesday When You Can Have Recurring Tacos – But Is Your Subscription Compliance Program Soft?

Subscription marketing is on the rise with some predicting the subscription industry will more than double by 2025. This prediction is fueled partly by the pandemic, no doubt linked to people seeking more streaming services to fill our entertainment needs and for home workout subscriptions to get our sweat on safely. Experts do not forecast this growth will taper off, as it is part of a larger trend of relationship-based marketing. We were quite intrigued by weekend headlines touting a Taco Bell subscription: For $10, one can get a taco a day for 30 days.

Understanding the FTC Penalty Box

Much like an artist looking for a muse, I keep up with consumer protection developments and ponder – is this blog-worthy? Well, the other day, the Federal Trade Commission (FTC) announced the annual updates to its civil penalty numbers. I yawned and returned to the task at hand. My colleague Amy, however, wisely thought that it might be helpful for me to shed some light on FTC civil penalty actions and how penalties are assessed. Thanks for the inspiration, muse! To simplify matters, I will focus on rule violations (as opposed to administrative order violations, which can be handled somewhat differently). There isn’t a great deal of FTC case law on this issue, so we will concentrate on the statutory language. But spoiler alert – it’s complicated, and there is no simple penalty formula.

Bolstering Your Social Media Controls? We’ll Drink to That.

Many of us at some point have had to make an apology or two for comments made when we may have been, er, overserved. Andy Cohen did so after his annual CNN New Year’s Eve hosting gig with Anderson Cooper, during which he made digs at Ryan Seacrest. Less common is the need for a brand to apologize for social posts about drinking.

Legal Marketing Resolutions for 2022 — Better Coffee for All

I made my last New Year’s resolution 10 years ago in 2012. Technically, it wasn’t a resolution; maybe it was more of a lifestyle choice. I vowed that I would no longer drink the coffee that was sold in the Federal Trade Commission’s (FTC) now-defunct Top of the Trade cafeteria. It was a great place for some items (such as spanakopita), but let’s just say the coffee and my stomach did not get along. Instead, I prefer suggesting resolutions to others, which makes me less than popular with some friends this time of year. So here goes for 2022 — my resolutions for you, my loyal readers.

Auld Lang Syne 2021 – Significant Events of the Past Year

Another year has come and gone. There are many things one could reflect on, but this blog is about advertising and marketing law, so we’ll stick to that. To say it was an eventful year would be an understatement. So we asked four of our partners to each select two interesting developments from the year. And because every list has to have 10 items and four doesn’t go into 10 evenly, we’ve picked two to start off with that are sure to make everyone’s list.


AD-ttorneys@Law Episode 6: Insider's Predictions for the FTC

New BakerHostetler Partner Daniel Kaufman shares an insider’s predictions for the FTC.


AdTech: Regulation, Compliance and Where We are Heading

BakerHostetler served on a panel in a recent article published in the January 2022 issue of Financier Worldwide. In the article, we offer insights regarding key advertising technology regulation and compliance trends, including recent digital advertising efforts, benefits and insights, and current regulatory scrutiny.

Dark Patterns or Savvy Marketing – Where is the FTC’s Focus on Dark Patterns Taking Us?

Randy Shaheen and Amy Mudge co-authored an article in the American Bar Association's December 2021 issue of Antitrust Magazine Online. The article covers the origin of the term “dark patterns,” the types of practices being scrutinized, and recent regulatory and legislative developments. It also suggests three key areas where enforcers should provide guidance.

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.