Alerts

AD-ttorneys@law – February 6, 2018

Alerts / February 6, 2018

In This Issue:

IAB Alleviates the Anxiety of Influence

Bureau issues helpful primer on the collaboration between publishers and influencers

Human League

In a head-to-head contest between a slogan and a human, the human will almost always win.

Consumers respond to human influencers—celebrities, tastemakers, pundits—not simply because they are perceived as trustworthy conveyers of solid information. It’s the human touch that matters. The influencer keeps a consumer engaged on a personal level in ways other advertising can’t. And a successful influencer is the holy grail of interactive marketing: a trusted or beloved personality that reacts to consumer communication, often in real time, with organic responses.

Increasingly, content publishers are incorporating influencer marketing programs into their own offerings—to expand revenue, to promote events, and to attract and build the right audience. And marketing professionals are exploring how to get the most advantage from them.

The Bible

Luckily, the Interactive Advertising Bureau’s Social Media/Native/Content Committee has put together a guide for marketers and publishers alike, titled “Inside Influence: Why Publishers are Increasingly Turning to Influencer Marketing – and What That Means for Marketers.”

The guide encourages marketers to embrace these new influencer packages to leverage the audience reach, research, and careful talent selection of publishers. But it also cautions that marketers ask the right questions before plunging into a new relationship program.

The list of questions is as useful as it is comprehensive. It covers crucial disclosure issues—How is the publisher ensuring FTC-approved disclosure of the influencer relationship? How will it monitor the influencer to ensure the relationship remains properly disclosed? Why care about disclosure in the first place? It addresses basic identification questions: How does the publisher pick its influencer roster? How do you ensure the influencer is the right fit for your brand? And incisive questions about cost and execution—How much control will you have over the content the influencer produces? Is there an agreed-to timeline or production schedule?

Additional sections cover how to measure impact, assess return on investment, and other topics.

The Takeaway

The IAB’s “Inside Influence” guide is a basic but thorough introduction to the field of publisher-produced influence marketing. If you’re thinking about beginning your own program, or leveraging the power of someone else’s, it’s worth a read—not least of all for the dozen or so case studies that round out the book and provide concrete examples of the publisher-influencer-marketer relationship. However, sponsors and influencers need to take heed that the Federal Trade Commission (FTC) deems it deceptive for influencers to fail to clearly and conspicuously disclose any material connection to a sponsor. For more detailed guidance on how to comply with advertising law regarding use of influencers, see the FTC's guidance here and articles by our attorneys here and here.

FTC Throws Made-in-the-USA Shade

Commission casts its shadow over two companies’ all-American claims

Already?!

The beginning of the new year serves up two interesting cases of companies that ran afoul of the Federal Trade Commission (FTC) for allegedly false “Made-in-the-USA” claims.

Mad at Hatters

The FTC took aim at Pennsylvania-based Bollman Hat Company with a complaint filed on Jan. 23, 2018. The Commission claims that Bollman, while touting its patriotism using taglines like “Made in USA,” “Choose American,” and “Made in USA since 1868”—it even boasted a subsidiary named “SaveAnAmericanJob”—was peddling hats that were finished products before they were imported to the United States. The FTC estimates that 70% of Bollman’s hat styles were made in foreign countries.

According to the Commission, Bollman, with what can only be described as Morissette-levels of irony, introduced a seal in 2010 labeled “American Made Matters,” which it used to market its own products. But, per the FTC, the company was also licensing the seal to any company that claimed “it had a United States-based manufacturing factory or one product with a U.S.-origin label” and met several other decidedly non-onerous application requirements. Bollman charged applicants $99 in annual licensing fees.

Not OK Computer

Over the river in New Jersey, Maingear, a gaming computer manufacturer, was wrestling with a “built in the USA” inquiry of its own. During its investigation, the FTC claimed it discovered that “[a]lthough Maingear designs, finishes, tests, and supports its computers in New Jersey, the computers incorporate significant imported content”—which is a problem, since the Commission requires “all or virtually all” of the product to be built in the States.

The Takeaway

Bollman settled. Its agreement with the FTC bars it from making any unqualified claims about the American origin of its products. When it makes qualified claims, it is now required to clearly disclose how many foreign parts the labeled product includes.

And the “American Made Matters” seal triggered a provision in the settlement ordering Bollman to “disclose any material connection it has with any certification it uses to tout its products.” In addition, the hat maker must seek independent and objective assessment of the origin of any product stamped with the seal—or disclose that the label is solely self-certified.

Maingear took a different tack, hoping to avoid anything worse than a closed inquiry by removing the offending “built in the USA” claims from its site, altering its materials to include tags like “designed in the USA” to convey the nature of the products’ manufacture, and suspending related Google ads.

The moves were successful—the inquiry closed in mid-December 2017. But watchdog group Truth in Advertising did some digging and uncovered several instances of web copy and advertisements that remain festooned with “built in the USA” tags. We’ll have to wait and see if the FTC takes notice, too.

The FTC has long been active in bringing deception claims based on inaccurate or misleading U.S. origin claims, and these companies could have avoided their mistakes had they paid attention to the FTC’s Enforcement Policy Statement on U.S. Origin Claims that was issued in 1997, and the guidance for businesses it has issued.

ERSP Finds Whitening Claims Only Slightly Dimmed

Stain Away’s whitening system claims chipped, but not capped

Toothless?

Power Swabs, the teeth-whitening system produced by Stain Away, LLC, promises truly amazing results—“Clinically proven on average to whiten teeth two shades in less than five minutes after first use, six shades in seven days,” and “The Power Swabs literally saved my pocketbook $7,500.00 when preparing to replace my four 25-year-old (front-teeth) porcelain veneers…” The company features remarkable before-and-after photos on its website, alongside glowing doctor testimonials.

So it isn’t surprising that the company’s advertisements caught the attention of industry self-regulator, the Electronic Retailing Self-Regulation Program.

ERSP’s assessment offered a mixed bag of results that mostly favor Stain Away’s claims. On the one hand, the company supplied clinical studies that backed up its “six shades in seven days” and other claims about the product’s efficacy and comparative strength versus competitors, and found that certain of the testimonials used by the company passed muster.

The Takeaway

The not-so-good news? While ERSP did not take issue with the product’s effect on a variety of dental substances—“natural teeth, veneers, bonding, caps and crowns”—it took issue with a claim that artificial surfaces could be returned to a “natural” color. In addition, ERSP raised objections to two testimonials: one dentist “communicated an implied claim that was not supported by the evidence in the case record,” while a consumer testimonial that “Power Swabs literally saved my pocketbook $7,500.00” was also not reasonably supported.

ERSP also noted that the macabre line, “Unlike those normal whitening strips and trays, you won’t be screaming in pain,” wasn’t quite a fair representation of the company’s competition.

The company promised to properly qualify the specified claims and to take its recommendations into account for future advertising. Advertisers need to have sufficient substantiation for each and every implied and express claim made or else advertising may be challenged by competitors, consumers, regulators and advertising self-regulatory watch dogs.

Trump Administration Fails to Shock Public with FTC Picks

Four uncontroversial nominees up to fill long-standing gap on Commission

Reinvention?

The normally five-person panel that oversees the Federal Trade Commission has been working at less than half-strength for more than a year. With his recent slate of nominees, the President has taken a rare opportunity to completely re-vamp the Commission (because of their customary seven-year terms, presidents rarely get to make nominations for all five seats).

Acting Chairman Maureen Ohlhausen has been nominated by the president to serve on the federal claims court, and so will be leaving her seat. Commissioner Terrell McSweeny will also be stepping down when her replacement is confirmed (her term ended in 2017, but she stayed on to help the Commission handle its caseload).

And the Nominees Are…

If approved, McSweeny’s seat will be filled by Republican Joseph Simons, Of Counsel at New York law firm Paul, Weiss and chair of its antitrust group. Simons served as the chief antitrust enforcer at the FTC during George W. Bush’s presidency.

Delta Air Lines executive Christine Wilson is up for another Republican seat. Wilson currently serves as the airline’s Senior Vice President – Legal, Regulatory and International. Before moving in-house at Delta, she was a partner at law firm Kirkland & Ellis, where she represented clients before various regulatory and enforcement bodies.

Noah Phillips, chief counsel for Senate Majority Whip John Cornyn, is being tapped for a Republican vacancy. He is a former litigation associate at Cravath and Steptoe & Johnson.

Finally, President Trump advanced Rohit Chopra, a former assistant director of the Consumer Financial Protection Bureau, a member of Hillary Clinton’s campaign transition team, and ally of Massachusetts Senator Elizabeth Warren.

The Takeaway

For the most part, the selections come with Big Law, pro-business backgrounds.  If Chopra’s biography seems out of place, it’s because he was recommended by Senate Minority Leader Chuck Schumer.

Unlike many aspects of the Trump administration, the Chopra pick follows established tradition: Opposition party seats on the Commission are generally recommended to the president by the highest-ranking opposing-party senator. Chopra was Schumer’s choice.  While no more than three of the five Commissioners can be from the same political party, there are no rules that required the President to accept Schumer’s choice, or even appoint a Democrat.  He could have turned to independents after capping out on Republicans.

Should they be confirmed, Simons’ term would end in 2024, Wilson’s in 2025, Phillips’ in 2023, and Chopra’s in 2019.

A future fifth nominee for the empty Democratic seat has not been announced.  It will be interesting to see if it goes to a Democrat or an Independent, and if the nominee has a consumer protection or business background.

Camp Drugs’ Class Action Survives Novel Dismissal Attempts

Action is one of many filed against alleged pharma fax fanatics

Keeping Busy

Camp Drug Stores has a number of chestnuts in the legal fire—in this case, the Illinois Southern District Court. Since May 2017, the company has filed seven TCPA class actions there against various defendants working in or around the pharmaceutical industry.

Each action alleges that the defendant sent Camp Drugs ads by fax in violation of the Telephone Consumer Protection Act. The facts are the same across each filing and contain a litany familiar to anyone who’s become acquainted with TCPA lawsuits—Camp Drugs never asked to be sent anything by the named defendant, and there was no clear opt-out option included in the fax as required under the TCPA.

Lotsa Dockets

Each action seeks damages under the TCPA, of course, but also for conversion, which effectively accuses the defendants of seizing control of Camp Drug’s fax machines and taking possession of its ink, toner and paper (and employee time necessary to deal with the faxes in the first place).

The actions have yet to meet with unvarnished success. Three are currently underway; a fourth is before the Seventh Circuit Court of Appeals. Three have been voluntarily dismissed by Camp Drugs.

The Takeaway

Before the latest self-dismissal, which took place on Jan. 11, 2018, one of the cases, Camp Drug Store, Inc. v. Emily Corporation, took a strange turn. Or two strange turns, to be precise.

Emily moved to dismiss the second count—conversion—arguing that the claim duplicated the damages that Camp Drugs sought through the first TCPA-related claim and should therefore be dismissed.

The court rejected the argument, noting that, while a claim is a set of facts that produces one injury, a count is the expression of a legal theory on which a claim can be based. “Since [the conversion count] is premised on the same facts as Count I,” the court maintained, “it is not a distinct ‘claim,’ but an alternative legal theory under which Camp Drug Stores might claim entitlement to relief.”

Emily marshalled a second argument, that the conversion count should be dismissed because the damages Camp Drugs alleges are de minimis, or trivial, and do not state a claim for conversion. The court also disposed of this argument, noting a previous decision that ruled that claims might be dismissed in this way, “but [federal rules] do not provide a basis for striking individual legal theories.”

Regardless of the ultimate potential success of the cases, they demonstrate the need for advertisers to exercise care in meeting compliance obligations under the TCPA and state laws regarding telemarketing by phone, text or fax. The requirements are complex and the TCPA’s inclusion of statutory damages and a private right of action make these kinds of cases a cottage industry for the class action bar.

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.