Alerts

AD-ttorneys@law – February 28, 2019

Alerts / February 28, 2019

In This Issue:

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California Consumer Privacy Act Updates

On Wednesday, Feb. 20, the California Assembly Committee on Privacy and Consumer Protection held a hearing on the California Consumer Privacy Act (CCPA). This was the first legislative hearing ever on the law, and the first committee report was released; see here. Two days later, an attorney general (AG)-backed amendment bill was submitted that proposes to eliminate the act’s 30-day opportunity to cure violations and greatly expands the private right of action. For more information, see our analysis here.

Things Fall Apart: NARB Breaks With NAD on Dyson Suction Claims

Board uses precision nozzle to winnow down NAD ruling

Hip to Be Square

Dyson is a remarkable company. We’re not even talking about their products; we’ll leave them for you to judge in your own home. But from an advertising perspective? Remarkable. Because Dyson took household products – vacuum cleaners, hair dryers, fans – and gave them all the panache of an iconographic, high-tech consumer product.

The success of Dyson’s approach has made such an impression on the marketplace that the company’s name is a byword for sophisticated design. Check out this commercial for the company’s sleek and chic branding.

An even greater compliment – the contrast inherent in Dyson’s high-concept approach to low-cost, household mainstays has been spoofed by internet and television outlets, including “Saturday Night Live.”

Cordless Controversies

Dyson presents a big target to competitors who want to challenge its role as the “luxury” vacuum maker. Rivals have gone after Dyson for claims made in its ads, and Dyson has fired back – see our previous coverage of the company here, here and here.

Most recently, longtime competitor SharkNinja tried to sweep up several of Dyson’s marketing claims with a challenge before the National Advertising Division (NAD). At the center of the challenge were claims about Dyson’s line of cordless V8 vacuums, including that the products featured the “most powerful suction,” “40 minutes of runtime” and “new battery chemistry.”

The NAD maintained that Dyson’s suction ads should be modified “to disclose, as part of the main claim, that the Dyson V8 cordless vacuums have the most powerful suction in ‘max’ mode” and that the claims clearly represent that they describe cordless vacuums.

The NAD found Dyson’s “up to 40 minutes runtime” claims unsubstantiated and that the “new battery chemistry” claims should be discontinued, since the batteries in the cordless vacuums had been sold since 2016.

The Takeaway

Dyson appealed the decision to the National Advertising Review Board the (NARB).

The NARB agreed that Dyson needed to be more clear about the comparisons that went into the most powerful suction claims and asked the ads be modified to limit the claims to cordless vacuums. However, the board struck down the NAD’s request that the “max mode” should be specified in Dyson’s claim – agreeing with Dyson that “qualifying the claim to explain that it refers to operation in the ‘max’ mode would be redundant and potentially confusing.”

The NARB did believe that the 40-minute runtime claims were not substantiated but held that Dyson could support the claims if they were modified to say the claim was based on “operation in the extended runtime mode without use of motorized attachments” or note that “actual runtime will vary based on power mode and/or attachments used.” However, the NARB held that these new modified claims would need to be kept clear of images of the cordless vacuums with the motorized brush attached.

The NARB also agreed with the NAD about the discontinuation of the new battery chemistry claim, again because the new battery had been in products for more than two years.

Dyson agreed to be guided by the NARB ruling in future ads.

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CAN-SPAM Stands

FTC’s public comment process yields no changes to email marketing rule

A Contrived Reduction of Nouns, Yielding Mnemonics

If there were some sort of literary prize for legislative acronym-engineering, the poor assistant responsible for inventing the title of the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act of 2003 wouldn’t even earn a nomination.

After all, Congress has produced some real winners: The Robo Calls Off Phones (Robo COP) Act, for instance, or the Preventing All Your Bucks from Aiding non-Citizens is Key (PAYBACK) Act come to mind. If you want to explore a statistical analysis of congressional acronym use, check out data analyst Noah Veltman’s “Congressional acronym abuse, 1973-2013” page. But CAN-SPAM? Now, that is kind of lame. OK, sure, we need to “can” spam, as in “toss it in the trash.” But it’s just as likely to be read as “Yes! Go ahead, you can spam people; why not?”

Shame, unnamed legislative assistant. We hope you moved on to better titles, like the “Dairy Augmentation for Increased Retail in Yogurt products (DAIRY) Act.”

Monument

Lame nomenclature aside – back to marketing law.

This Federal Trade Commission (FTC) rule associated with the CAN-SPAM Act is a venerable feature of the internet regulatory landscape. Implemented in the silver age of online advertising, when pornographers spammed email servers worldwide, CAN-SPAM set tough new standards for commercial email, including upfront disclosure of X-rated content, clear unsubscribe mechanisms and strict sending rules.

The rule created by the FTC to implement CAN-SPAM was modified several times and then stabilized after 2008. Nine years later, in 2017, the commission opened the rule up for public comment as part of its regular review process.

The Takeaway

That yielded, more or less, not much at all.

Taking the FTC’s summary report at face value, the CAN-SPAM rule seems to be a remarkably popular (or at least durable) piece of regulation. The original call for public comment opened a general query on the usefulness and the future of the rule as well as specific questions about the time period for opt-out windows, a request for new activities that might be considered “aggravated violations,” and the meaning of the “transaction or relationship message” category.

As of mid-February 2019, the actual public comment page seems to be down, but the summary suggests that the rule remains popular – out of 92 comments from a mix of individuals, consumer and trade groups, and service providers, a mere six registered a desire to shut down and replace the rule.

“Despite some comments recommending that the Commission adopt modifications to the Rule, there is insufficient evidence in the record to demonstrate that such modifications are necessary and would, in fact, help consumers,” the report concludes in a sentence that might stand in for the whole report.

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Instagram Fashionista’s Suit Survives Clever Challenges

PopSugar, accused of misappropriating influencer images, fails to dismiss

She’s Not Gonna Take It

Here’s an update on noted Instagram celebrity Nita Mann, aka Nita Batra, a fashion influencer with a law degree who took aim at PopSugar, one of her generation’s most important lifestyle companies.

In brief, Batra (@nextwithnita, with nearly a quarter-million followers and close to 1,800 posts) accused PopSugar (with 27 million readers and a reach to half of all millennial women in the country) of swiping her pictures from her Instagram account and posting them on its former shopping platform, ShopStyle.

Why wouldn’t Batra welcome the extra publicity? Because PopSugar allegedly added affiliate links from the images to ShopStyle. Not only did these links earn money from Batra’s images without her permission or participation, she claimed, they also threatened the value of Batra’s own affiliate links.

Did Batra call upon her law degree when she hit PopSugar with a slew of charges, including violations of the Digital Millennium Copyright Act (DMCA), copyright infringement, violations of her right of publicity, violation of the Lanham Act and violation of California’s unfair competition law? We don’t know, but considering that she’s seeking profits or statutory damages of up to $150,000 per photo, it’s clear she means business.

You can read our previous coverage of Batra’s suit here and a story about a similar lawsuit here.

The Takeaway

The latest development: Batra’s case survived a motion to dismiss by PopSugar in a recent order executed by California’s Northern District.

Here are some highlights.

The court reaffirmed that the “Instagram Sidebar” – the right-hand information column that accompanies photos in posts on the service – is copyright management information under the DMCA. Batra had argued that PopSugar had violated the act when it used the photos but disposed of the copyright information in their post.

Against Batra’s Lanham Act claims, PopSugar attempted an interesting defense. The company claimed that the act properly covers only the products worn or held by Batra in the photos, thereby bypassing her claim that the use of her name and likeness implied endorsement. The court rejected PopSugar’s argument, writing, “The false impression alleged in the complaint is that Plaintiff endorses or is affiliated with Defendant’s service, not that Plaintiff falsely endorses the products themselves.”

PopSugar also attacked Batra’s publicity claims, stating that they were preempted by the Copyright Act because her likeness was contained within photographs, which fall within the purview of the act. Again, the court went in the other direction. Regarding the publicity claims, the court held that “[a]lthough Plaintiff’s allegations in part involve the misappropriation of photographs, those photographs are not the exclusive subject of Plaintiff’s right of publicity claim. Plaintiff’s claim additionally relies on information outside of the photographs, including Plaintiff’s ‘name and/or other identifying information’ associated with Plaintiff’s likeness.”

A good day in court for Batra; not so sweet for PopSugar.

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FTC Fattens Consumer Wallets With Supplement Settlement

Company founders forced to surrender valuables to pay consumer damages

Snow Devils?

“A blizzard of lies” is how the Maine AG’s office described the sales and marketing practices of husband-and-wife duo Anthony and Staci Dill.

According to a recently resolved joint complaint filed in the District of Maine by the FTC and the Maine AG, the Dills, along with their companies, Direct Alternatives and Original Organics LLC, were engaged in multiple no-nos while hawking their weight-loss products, AF Plus and Final Trim.

The complaint, which was filed in 2016, accused the Dills of garden-variety unsubstantiated weight-loss claims, such as promising significant weight loss in a matter of days and guaranteed weight loss.

But the defendants supplemented these violations further with several forbidden marketing practices, including fabricating nonexistent satisfied customers for testimonials and even implying that their commercials were public service announcements. Add to this a negative option payment scheme and you have a thick complaint.

The Takeaway

The Dills were accused of multiple violations, including false or unsubstantiated claims, false advertising, deceptive radio format, deceptive free gift cards, misrepresentation of risk-free trial offers and unauthorized billing charges.

The settlement was reached in short order, with the defendants getting smacked with a $16 million judgment that was to be suspended after “the defendants sell or liquidate a substantial portion of their assets, including real estate, furniture, appliances, timeshares, a boat, snowmobiles, IRAs, jewelry, artwork, numerous investment accounts, and business investments.”

The usual agreements to not indulge in previous misdeeds were struck as well.

Funds recovered from the Dills – as well as from a related case against an advertising agency that put together deceptive radio ads for the couple – totaled $3.5 million, which was distributed to consumers in mid-February 2019.

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Defendant Flips Repeat TCPA Litigant With Fraud Kung Fu

Claws are out as court allows rare counterclaim

Always Say ‘Allegedly’

At first glance, it’s just a run-of-the-mill Telephone Consumer Protection Act (TCPA) class action.

Back in early 2018, Georgia citizen Ricky Franklin sued Upland Software, a Texas company, for allegedly sending more than 20 unwelcome text messages to his phone. In his complaint, he claims that he had never “provided his cellular phone number to the Defendant or given his prior express consent to be called, whether on his own or on behalf of any third party.”

The rest of the suit should be familiar to any denizen of TCPA Land: concrete and real invasions of privacy, extra charges, and harm and damages from emotional distress leading to anger and resentment.

And treble damages of $1,500 per text (augmented by $2,000 per text under Georgia law).

Auto-Dialer Auto-Filer?

Here’s where it gets interesting. Franklin allegedly has a bit of a past in the TCPA lawsuit business. According to a counterclaim filed by Upland a month after the original complaint, Franklin had been involved in at least seven other TCPA lawsuits during the prior three years. Worse than that, Upland alleged, Franklin had been accused in “many” of the earlier cases of falsely claiming that the messages he received were unsolicited.

Upland went on to maintain that Franklin had received his phone from Benita Ross (possibly his wife), who previously had consented to receive texts from Upland’s client. Upland wrote, “He therefore knew, prior to sending a demand letter to Upland in February 2018 and filing this suit in March 2018, that Benita Ross had opted in to receive phone calls and text messages ...”

And with that, Upland hit Franklin with a suit for common-law fraud and fraud for nondisclosure. Generally, such allegations would be used to support a motion to dismiss. But in an age of rampant TCPA lawsuits, one company simply had enough – or, if the allegations are false, thought such a countersuit would be a smart defense strategy.

In the court’s recent report on the case, which responded to Franklin’s motion for summary judgment and motion to dismiss the counterclaims, the judge gave this approach a green light.

Against the Grain

Before we address that issue, however, one argument from Franklin’s motion for summary judgment bears examination.

Franklin claimed Upland was liable because it provided the texting service to the vendor that was doing the marketing to Ross. This accusation aligns with a recent TCPA trend that punishes platforms for the sins of the clients who use them, but in this case, the court favored the defendant.

“[Upland’s] platforms require significant human intervention and sorting on almost all aspects of the text messages and the platforms do not have the capacity to act as an auto dialer,” the court held. “In the Court’s examination of the summary judgment evidence, it can find nothing to suggest that Upland initiated the text messages or that an ATDS was used. To the extent that Franklin relies on a theory of vicarious liability, he does not succeed in his motion.”

On to the fraud.

The Takeaway

On the fraud claims, the court was blunt.

“Taking all of Upland’s factual allegations as true,” the court wrote, “Upland has pled enough factual content to allow the Court to draw the reasonable inference that Franklin is liable for the misconduct alleged.”

Serial TCPA litigants – honest or not – take notice: Defendants have a new weapon in their arsenal.

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Speaker Spotlight

National Advertising Division/Children’s Advertising Review Unit

West Coast Conferences, Marina del Rey, California

BakerHostetler partner Alan Friel will join a faculty of experts at the West Coast conference of the Children’s Advertising Review Unit in Marina del Rey, California, on March 6. Alongside Cynthia Kao, vice president, Sony Pictures Entertainment, Alan will explore how to harmonize the compliance requirements of COPPA, GDPR and the California Consumer Privacy Act, which is set to go into effect in 2020. To register, click here.

Association of National Advertisers’ 2019 Advertising Law & Public Policy Conference, Washington, DC

Amy Ralph Mudge, co-leader of BakerHostetler’s advertising, marketing and digital media team, will participate in a dynamic discussion on diversity in advertising at the ANA’s Advertising Law & Public Policy Conference in Washington, D.C., on March 19-20. Alongside panelists Eugenia Blackmon, director, U.S. Commercial Compliance, Project Moonwalker, Allergan, Inc.; Shantel Smart, senior corporate counsel, global contracts, Subway; and Deidre Richardson, senior director, corporate counsel, Chico’s FAS, Amy will explore the role of legal practitioners in matters of diversity and inclusion. To register, click here.

International Trademark Association’s ‘The Business of Brands’ Conference, New York, New York

INTA has invited Linda Goldstein, co-leader of BakerHostetler’s advertising, marketing and digital media team, to serve on the faculty of its conference, The Business of Brands, in New York on March 28-29. Linda will participate in a panel discussion of the legal requirements for responsible advertising. For additional information, click here.

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