Alerts

AD-ttorneys@law – December 11, 2019

Alerts / December 11, 2019

In This Issue:

Privacy for America Sends Letter to Congressional Leadership

But aside from a federal law, what do they want?

Organizational Growth?

Back when Privacy for America (PFA) – an ad industry group comprising the 4A’s, the Association of National Advertisers, the Digital Advertising Alliance, the Interactive Advertising Bureau, the Network Advertising Initiative and other associations – announced its kickoff in April of this year, we were hungry for details. The group planned to “work with Congress to support enactment of groundbreaking comprehensive federal consumer data privacy and security legislation.”

But aside from hints that PFA would shy away from the harsher consumer opt-out provisions for non-sensitive data sharing that some privacy activists demand, and clear calls for a federal law that would respond to and replace state legislative efforts such as the California Consumer Privacy Act (CCPA), there wasn’t much substance to the announcement.

Which probably makes sense, since specific recommendations wouldn’t be meaningful without the context of a general federal effort.

But still ….

Mumblecore

PFA’s latest missive, sent on Nov. 21 to House and Senate leaders from both parties, runs to three pages, but it doesn’t really add much to the previous announcement.

Complaints about state legislatures creating a patchwork of inconsistent online ad regulation that demand a federal reply? Yes, we’ve heard that before. Calls for “a legislative framework that does not put the onus on consumers to sort through myriad onerous privacy notices in an effort to protect their privacy”? Sounds familiar.

Consider the following passage:

“… companies should not be allowed to use someone’s personal information, unless specifically permitted by federal or state law, to deny them a job, credit, insurance or health care. Similarly, the practice of digital redlining – using data about a person’s race, color or religion in setting prices for products or services – should be outlawed."

“The law must also make clear that the most sensitive types of personal information – data like medical, financial or biometric information – must not be used or collected unless a company has a person’s explicit permission. And companies should be barred from sharing someone’s personal information with third parties, unless they have enforceable contracts ensuring that the other party will secure the data and use it lawfully.”

Sorry for the long quote. But we include it here to address a persistent cloudiness from PFA regarding data protection. Protection for medical information, as well as anti-discrimination legislation for members of a race or religion, is already expected and invoked by Americans. Biometric and financial information already enjoys disclosure protections – so strengthening and clarifying those measures online is surely not all that bold a proposal.

The Takeaway

But the rubber meets the road in the last sentence:

“… companies should be barred from sharing someone’s personal information with third parties, unless they have enforceable contracts ensuring that the other party will secure the data and use it lawfully.”

Questions abound. What does PFA mean by “personal information”? What is the difference between “medical, financial or biometric information” and personal information? Are they mutually exclusive sets? Or is there significant overlap?

It’s fine to complain about the vagaries of the CCPA or the EU’s General Data Protection Regulation, and to demand a comprehensive legislative alternative from the federal government.

But the request is meaningful only when the people making the demand define their categories and the desired guardrails. The CCPA train has left the station, and any chance of rerouting it will require a compelling alternative. For more information on what the CCPA will require of advertisers as of Jan. 1, 2020, and its impact on digital advertising, see our CCPA Resource Center.

Congressman Unveils Act to Define ‘Natural’ Cosmetics

Rep. Sean Maloney offers first major change to cosmetics regulations in 80 years

First Blush

“Natural” cosmetics are still a tiny fraction of the overall consumer market: One source claims that only $15 billion of the $500 billion global cosmetics market pitches itself as “natural,” or in other, similar terms. But the market share of such products is growing, with revenues expected to hit $48 billion in five years.

And when market share goes up, so does regulatory scrutiny.

Of course, what is and what is not “natural” is a question that is being raised with mounting frequency as wholesome, eco-friendly products become popular across consumer sectors. But cosmetics are different from other product groups in one important way: On the federal level, nothing has been done to address so-called natural cosmetics claims.

No Foundation

Little has been done to update cosmetics regulations at all. In fact, the cosmetics market was brought under the aegis of the Food and Drug Administration by the 1938 Federal Food, Drug, and Cosmetic Act (FFDCA), but in the intervening eight decades, no major changes have been made to the FFDCA’s cosmetics provisions.

Enter Rep. Sean Patrick Maloney, democrat from New York’s 18th District, which includes the state’s bucolic Hudson Valley region. As every dismissive yet secretly jealous New York City resident knows, the Hudson Valley is overrun with the type of consumers who are obsessed with such things as “natural living.” Eye roll.

So it makes sense that New York’s Maloney is championing the first attempt to define what “natural” means for the cosmetics section of the FFDCA.

The Takeaway

Maloney’s bill, The Natural Cosmetics Act (HR5017), sets up some strict definitions. For starters, “[c]osmetic products sold, labeled, or represented as ‘natural’ … must contain at least 70 percent natural substances, excluding water, to use the term.”

There is also a slew of verboten unnatural product ingredients established by the new act, from the mundane (mercury) to the “wha?” (alkoxylation). Moreover, record-keeping provisions would require companies to test each ingredient in their products with carbon-14 testing. (The bill doesn’t say precisely what that means, but it sounds cool).

So, for the first time since Max Factor broke into the business, cosmetics may be getting a natural makeover. We’ll be following the progress of Maloney’s proposal with interest.

Skin Care Scam Update: Checks Are on Their Way

Federal Trade Commission wraps up prosecution of alleged negative-opinion makeup makers

Skin- or Devil-May-Care?

Back in July 2018, we featured a story about a battle between the Federal Trade Commission (FTC) and upward of 30 companies and individuals who (putatively) were in the business of advertising, marketing, selling and distributing skin care products with well-known names such as Dellure, LéOR Skincare and Auravie. Nothing wrong with that, right?

Well, the FTC accused the defendants of taking things a little bit too far. According to the FTC, the accused offered free samples, asked for credit card numbers to cover the shipping and then signed up the duped customers for regular shipments and recurring monthly charges of up to $100 a month.

The Takeaway

In 2015, the FTC slapped the makeup malefactors with violations of the FTC Act, including failure to disclose the subscription, false claims and faking their positive Better Business Bureau rating. Restore Online Shoppers’ Confidence Act’s (ROSCA) negative option charges were added to the mix.

Over the intervening four years, the FTC cut down the defendant list through court orders, settlements and default judgments. The case wrapped up through a settlement agreement with the last two defendants this past summer.

Checks started flowing forth from the settlement administrator at the end of November. The various orders and settlements resolved into an average consumer payment of $22.95 in the form of checks with a 60-day shelf life.

ROSCA and the many state laws of similar affect, but with differing requirements, are a field of landmines for the uniformed direct sales business. It is important to follow the notice and easy termination mandates, or else you may be writing checks too!

Old Navy Accusers Sue, Then Jump Ship

Ubiquitous retailer allegedly indulged in false reference price scheme

Mayday!

Back in July, Anastasha Barba and Brenda Tripicchio, plaintiffs with pretty much the coolest names ever, opened a class action against retail megabrand Old Navy in San Francisco Superior Court. The case was moved to the Northern District of California in October.

What, exactly, were they accusing the mariners of doing?

As befits Old Navy – that’s “$7.2 billion in annual sales” Old Navy – the accusations were capacious. “For years,” the pair wrote in their amended complaint, “Old Navy has perpetrated a massive false discount advertising scheme across nearly all of its Old Navy-branded products, across all of its sales channels (i.e., in all of its brick-and-mortar Old Navy and Old Navy Outlet stores, and on the Old Navy website).”

Whale of an Accusation

Aside from the scale – the company boasts over a thousand locations, with plans to reach double that number, so the potential opportunities for deception are countless – the complaint outlined a typical false discount scheme. Allegedly, Old Navy offered between 30 and 60 percent off of a “regular” list price, but had rarely if ever sold any products at that baseline cost.

According to the plaintiffs’ research, false reference prices drive up purchases, deceive consumers as to the actual value of the product and decrease consumers’ drive to find a better price somewhere else. And so, they sued – alleging violations of the California Consumer Legal Remedies Act, the California False Advertising Law, the California Unfair Competition Law, the New Jersey Consumer Fraud Act, and the New Jersey Truth in Consumer Contract Warranty and Notice Act.

The Takeaway

The amended complaint was hefty – 40-plus pages – as one might expect from a lawsuit built around lots of photo examples. It would be worth handing the complaint over to your compliance department (and your copywriters, for that matter) for its real-life lessons on the type of ad copy and design that can draw negative legal attention – be careful about how you use the word “NOW” when listing a sales price, for instance, and be sure you can back up strike-through formats on comparison price listings.

But for the time being, at least, we will not get the benefit of seeing how Barba and Tripicchio’s arguments fare in court. The plaintiffs, passing like ships in the night, dismissed the case voluntarily and pursued different courses. Barba, a resident of Sacramento County, California, “provides notice of her intent to proceed in arbitration.” Tripicchio, for her part, claims she will refile in “the state or federal courts” of her native New Jersey.

Check Out Our Latest Blog Post

BakerHostetler Comments on Draft CCPA Regulations

The California attorney general (the AG) has concluded the first round of public comments on the proposed regulations that would serve to interpret and implement California's sweeping new privacy law, the California Consumer Privacy Act (the CCPA). After just under two months since the release of the proposed regulations (the Regs) by the AG and a series of four public hearings across the state, the final deadline to submit written comments in response to the Regs came and went on Friday, Dec. 6. Now that the first public comment period has ended, there will be revisions to the Regs followed by another wait period, which can be either 15 or 45 days, depending on the extent of changes in response to the first public comment period. In effect, this means that the Regs are subject to further changes, even post-Jan.1, 2020. Learn more here.

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.