Alerts

AD-ttorneys@law – December 5, 2018

Alerts / December 5, 2018

In This Issue:

Subscribe to AD-ttorneys@law >>

Will TCPA Cats Finally Form a Herd?

Supremes set to review a case that may change the TCPA landscape

Is It Over Yet?

Remember that 2015 Federal Communications Commission order that expanded the scope of the Telephone Consumer Protection Act? We hope you do, because it means you're reading this newsletter.

We keep covering the aftershocks of this order, which expanded the scope of the TCPA by, among other things, widening the definition of autodialing systems.

The D.C. Circuit trimmed back that order in March 2018, and its decision was cited in the following months by 3rd Circuit and 9th Circuit rulings. We won't link to our coverage of all of them, but rather will point you toward one of our recent blog posts that explores the reverberations of the original FCC ruling in one convenient package.

DC Confab

If you thought that all these decisions meant that we were headed to an overall working consensus on the autodialer definition issue, hold your horses.

The Olympic gaze of the Supreme Court has lighted on PDR Network LLC et al. v. Carlton & Harris Chiropractic Inc., a TCPA case that started wending its way from the Southern District of West Virginia to First Street, NE back in 2015.

PDR isn't about autodialer definitions, but its upcoming star turn will impact any TCPA dispute that finds itself torn between an FCC order and a lower court decision. PDR is a junk fax class action that was appealed to the 4th Circuit by the plaintiff in 2016; the appeals court overturned the Southern District's decision, maintaining that the district court had erred when it disagreed with the FCC on one of the issues in the case. PDR filed a petition for certiorari in April 2018, and the Supreme Court decided to take a look.

More is at stake in the Supreme Court's review than whether the faxes sent by PDR were "unsolicited advertisements" or not. The nature of the interplay between FCC rulings and lower court decisions is on the line. Specifically, the issue is whether the Hobbs Act requires the district court to defer to policies and definitions laid down by the FCC on the question at hand – as the 4th Circuit ruled – or whether the court enjoys significant leeway in its rulings under the auspices of the 1984 Chevron USA Supreme Court decision.

The Takeaway

Because the FCC's opinions have carried a lot of weight in TCPA litigation, an unfamiliar ‒ but to some, welcome ‒ uniformity may soon suffuse lower court decisions if the Supreme Court rules in PDR's favor.

Subscribe to AD-ttorneys@law >>

FTC Takes Position on Anti-Competitive Ad Agreements

Commish: 1-800 Contacts had no right to arrange ad bidding with competitors

Jealous Much?

The Federal Trade Commission offered an opinion in November 2018 that has significant implications for online advertising and commerce.

The central player in the opinion ‒ and the 15-year-old legal drama preceding it ‒ is 1-800 Contacts, a major retailer of contact lenses and related products.

The story begins with a series of bidding agreements allegedly entered into by the company beginning in 2004. According to the Commission, 1-800 Contacts secured the agreements with at least 14 competitors, requiring the parties not to bid against one another in search-advertising auctions held by Google and Bing.

These agreements were the fruit of several trademark infringement lawsuits brought by 1-800 Contacts against the competitors; the company objected to the appearance of competitor ads in the search results yielded by typing in "1-800 Contacts." The agreements required the competitors to refrain from bidding on ad appearances based on searches of each other's trademarked terms; this approach meant that from then on, no other company's trademarked term would appear when a consumer typed "1-800 Contacts" in a search engine.

Out of Sight!

The FTC sued 1-800 Contacts in 2016, claiming that the agreements harmed competition and may have led to increased consumer prices. In late 2017, the chief administrative law judge decided in favor of the Commission. 1-800 Contacts appealed, and the opinion and final order were issued in November of this year.

Commission Chairman Joseph J. Simons wrote the opinion, which ruled that the undisclosed agreements constituted unfair modes of competition under the FTC Act. Because the agreements forbid competing trademarks from appearing side by side, consumers might have missed the fact that products identical to their upcoming purchase were available and cheaper than search results suggest.

In the attached order, the FTC demanded that 1-800 Contacts drop the "unlawful" provisions in the agreements and not institute similar agreements in the future.

The Takeaway

While this ruling obviously impacts 1-800 Contacts directly, the opinion will have reverberations throughout the online advertising ecosystem: "The agreements harm competition in bidding for search engine key words, artificially reducing the prices that 1-800 Contacts pays, as well as the quality of search engine results delivered to consumers," the Commission maintains.

It's a major new statement on how the FTC views competition among online advertisers and their clients alike.

Subscribe to AD-ttorneys@law >>

Vaporizer Vitamin Claims up in Smoke?

ERSP blows cloud over vitamin B12 delivery system

What Next?

So, vaping vitamins is a thing. Sometimes it’s hard to keep up with the myriad substances, legal and illegal, that Americans currently inhale through vaporizer technology ‒ "vaping," if you hadn’t guessed. The introduction of small, easily concealable and portable vaporizer pens means that consumers have been inhaling all sorts of stuff since the first e-cig was introduced in 2007 ‒ tobacco substitutes, marijuana, essential oils, and now vitamins and vitamin blends are getting thrown in the chamber.

One company, for example, sells a mix of ginseng, green coffee extract, grapefruit, lemon and orange essential oils, which is laced with doses of vitamins B12, A, C, D and E, and other substances on the health-and-wellness radar. The maker claims that this mix, when inhaled, confers the benefits of more traditional means of vitamin consumption.

Does it work?

Unstudied

No one's sure yet ‒ studies are hard to come by, and it's not clear that inhaling vaporized vitamins gets you anything that a well-balanced diet wouldn't get you in the first place.

But the vape business is big, and it's starting to get attention from regulators ‒ recall the recent decision by e-cig manufacturer Juul to limit certain forms of advertising in the wake of pressure from the Food and Drug Administration.

Now the Electronic Retailing Self-Regulation Program is climbing into the ring. In the course of routine monitoring, ERSP ran across VitaminVape, Inc., a vitamin B12 vaporizer system that makes all sorts of claims. Here are just a few from its website: "A Better Way To B;" "Better Than Shots & Pills" and "VitaminVape is a personal vaporizer that delivers all the benefits of B12."

The Takeaway

In the summary of its review and recommendations, ERSP maintained, in a masterstroke of understatement, that "the core performance claims in the advertising could reasonably communicate the message that VitaminVape will deliver all the benefits of vitamin B12."

ERSP noted that VitaminVape conducted only one test on the product, and that the data involved in that test raised reliability concerns. Moreover, the company submitted three more general studies on the effectiveness of inhaled B12, but ERSP criticized those studies because they allegedly addressed different B12 mixes and vaporizers than VitaminVape's products.

Based on these weaknesses, ERSP urged VitaminVape to discontinue claims that it provided the energy or other benefits of vitamin B12 and to limit or modify its customer testimonials. Even its crowning tagline, "A Better Way to B," came under criticism for implying that "VitaminVape is superior to shots or pills based on cost, convenience, or effectiveness," an unsupported series of claims, according to ERSP.

VitaminVape promised to modify its advertising based on ERSP's recommendations.

Subscribe to AD-ttorneys@law >>

Body Armor's All-Natural Sports Drink Claims Are Superiority Claims, Says NAD

Complaints from competitor Gatorade kicked to the FTC

Snark

The advertisements were clever.

The conceit of Body Armor Sports Drink's television ad campaign was that competitor Gatorade was old news, outdated, kaput, finis. The hook for each commercial was a famous sports figure ‒ NBA MVP James Harden, Angels center fielder Mike Trout, WNBA Point Guard Skylar Diggins-Smith, to name three ‒ doing something in an archaic fashion. Harden, for instance, walks toward the court in elaborate Revolutionary War regalia, accompanied by a military drummer. Trout is seen comically shaking in the frantic embrace of an old-fashioned, fat-melting “jiggle machine.” Not to be outdone, an 80s style hair-crimped Diggins-Smith runs a throwback aerobics class.

Poking the Gator

"This is ridiculous," says Diggins-Smith into the camera as the workout music comes to an abrupt halt. "Yes, it is," intones the announcer. "But not as ridiculous as an outdated sports drink. This is Body Armor, more natural, more electrolytes, better sports drink. Thanks Gatorade ‒ we'll take it from here."

Ouch.

(Diggins-Smith hit Gatorade with a further indignity by simply appearing in the ad ‒ she is a former high school "Gatorade Female Athlete of the Year," after all.)

There was no way a slam like this would go unanswered, and Gatorade responded by taking these and other ads before the National Advertising Division. The company claimed that the Body Armor TV ads were falsely denigrating and conveyed a false and misleading superiority claim against its iconic flagship brand. The petition also took aim at claims in other Body Armor ads, including assertions that Body Armor is a "better sports drink," is "more natural" and provides "better hydration."

The Takeaway

NAD issued a ruling on the claims in November 2018, and the results weren't good for Body Armor.

In the case of the "more natural better sports drink" claim, the Division pointed out that the tagline was placed in close proximity to a list of product features including natural ingredients. This proximity effectively "tethered" the claim to the number of natural ingredients and attributes. Because this relationship was established, NAD maintained, Body Armor needed ‒ and failed ‒ to produce evidence that Body Armor products contained more natural ingredients than other beverages.

According to NAD, the "more natural" tagline similarly felled the hydration claims by association, again because Body Armor failed to provide evidence that it offered better hydration because of its natural ingredients.

Those claims dispensed, the Division turned to the television spots. While it disagreed that Body Armor had falsely denigrated Gatorade in the commercials, it did hold that the commercials conveyed superiority.

NAD recommended that Body Armor discontinue the "More Natural Better" drink and hydration claims and edit the TV advertisements so that they did not imply Gatorade's inferiority.

Appropriately thick-skinned, Body Armor brushed off the Division's holdings and refused to comply with its recommendations. The claims are now being forwarded by the NAD to the Federal Trade Commission for further review.

Subscribe to AD-ttorneys@law >>

FTC Issues Online Ad-Tracking Recommendations

Commission rejects opt-in systems in favor of...what, exactly?

It's a Weigh-In

In recently released comments to another federal agency, the Federal Trade Commission offered its latest thoughts on online privacy, including consumer choice regarding ad-tracking ‒ the first such insight following the arrival of new leadership that took office this year.

The comments were written in response to the National Telecommunications and Information Administration's request for comment on online privacy issues. Back in September, the NTIA, on behalf of the Department of Commerce, sought comments on a proposed approach to consumer privacy that establishes "user-centric privacy outcomes" to underpin Federal consumer privacy policies.

Why the call to action now? It may be that the federal government has been caught flat-footed by the rising tide of privacy regulation from the states and foreign governments, which we've covered before (see here, and here).

Valuable Insights

Nonetheless, the Commission's comments, built on the advice of "a broad range of industries, academics, and civil society organizations," do not propose change to any federal laws. Instead, the Commission hopes to shift the discussion around consumer privacy to focus on "the outcomes of organizational practices," rather than dictating the practices themselves.

The point seems to be that the desired outcome ‒ an informed, protected end user ‒ is more important than enforcing a blanket set of stringent regulatory requirements. The Commission urges a risk-based approach to privacy and opines that its Section 5 unfairness authority, which requires a cost-benefit analysis that weighs harm against benefits to consumers or competition, is the right approach to online privacy.

The one area where the comments seem to offer concrete new information is one of the goals it's setting for itself: "harmoniz[ing] the regulatory landscape.”

"We are actively witnessing the production of a patchwork of competing and contradictory baseline laws," the Department maintains, without mentioning who is responsible for them ‒ state and local legislatures are not named. These scattershot attempts to regulate online privacy will harm "the American economy and [fail] to improve privacy outcomes for individuals."

State legislatures ‒ you're on notice.

The Takeaway

The Commission calls for "a balanced approach that protects both consumer privacy and innovation" and asserts that "privacy standards that give short shrift to the benefits of data-driven practices may negatively affect innovation and competition." These balanced pronouncements provide the tenor of the whole document; however, among its many calls for context-appropriate disclosures and a "balanced approach to control," one of the few concrete recommendations is the argument that "...if consumers were opted out of online advertisements by default (i.e., requiring opt-in to ad-tracking as is required in Europe)...the likely result would include the loss of advertising-funded online content."

This is welcome news to online advertisers and publishers; at least as far as the new FTC is concerned, the current online privacy regime for digital advertising, which relies on industry self-regulation of transparency and choice, won't be changing drastically anytime soon. However, California and other states may yet upset that apple cart.

Subscribe to AD-ttorneys@law >>

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.