Alerts

AD-ttorneys@law - January 4, 2018

Alerts / January 4, 2018

In This Issue

You Better Recognize: FTC Issues Ad Recognition Staff Study

Commish: Changes to ad design and content boosts ad awareness

Look! Over There!

A basic tactic of shady internet advertisers relies on blurring the lines between “real” content and advertisements. Enough users are duped in this fashion to make the practice commonplace (and lucrative). Ad producers blend their pitch in with “legitimate” content, whether it is a search results page or a feature article – especially now that legitimate content is reposted and shared across platforms like never before.

The Federal Trade Commission (FTC or Commission) has issued disclosure guidelines to help advertisers make the necessary distinctions, available here. In mid-December 2017, the Commission followed up on its guidance with a staff research report that concretely demonstrates how a few simple modifications to advertising disclosures can make a big difference.

A Little Goes a Long Way

Study participants were presented with a set of ads on a number of separate web pages viewed on a PC or a smartphone. Half of the ads were derived from search engine page results, the other half from media sites that included native advertising. The FTC then modified the ads with changes made to basic design aspects such as background shading, text color contrast, disclosure placement in proximity to the headline and label consistency. FTC coders recorded the reactions of the tested consumers and scored how well they did spotting the ad.

The result? The combined set of changes in the modified ads spurred consumers on to heightened awareness – a 10 percent to 45 percent jump in ad recognition.

The Takeaway

The FTC’s staff report does not replace or supplant previous disclosure guidelines. But it is essential reading for anyone who wants to keep their native advertising on the right track, providing a useful summary of disclosure techniques, before and after examples, and a full summary of its own methodology – helpful tools for any advertiser (or their counsel).

Court Finds Fitbit Motion Weak, Flabby

Plaintiff case on sleep-tracking claims is still wide awake

Big Brother is Spotting You

The promise of Fitbit products is amazing, even if it’s a little scary.

The company’s slim, attractive wearable devices and accessories – watches, wristbands and clips – track your heart rate, steps taken, distances traveled, sleep duration and calories burned. They can even determine that you’ve started working out on a particular kind of machine. Fitbit’s service then uses this data to help you reach your fitness goals.

Sleepwalk

Plaintiffs took issue with some of these claims in a class action lawsuit originally filed in the Northern District of California in 2015.

Fitbit products use an accelerometer to track user data, including sleep. But the plaintiffs claim that the accelerometer is not an accurate tool for measuring shuteye – one claimed that his device logged his television watching time as sleep, another claimed that she was tracked as sleeping while she was awake and pushing a shopping cart. Had they known the devices didn’t accurately measure sleep, they would have opted for less-expensive devices that didn’t boast the feature.

The plaintiffs sought damages under several statutes, including California’s Unfair Competition Law, the California False Advertising Law, the Consumer Legal Remedies Act and common law fraud.

The Takeaway

Fitbit moved to dismiss, claiming that its monitoring technology is valid and reliable, and that the plaintiffs presented no evidence of deception. The court denied the motion in December 2017, ruling that there was sufficient conflicting testimony for both the reliability of the product and the possibility of deception.

Fitbit also sought to strike expert testimony submitted by the plaintiffs as irrelevant and inadmissible under Rule 702 and Daubert v. Merrell Dow Pharm., Inc. Fitbit was contesting “whether the reasoning or methodology underlying the testimony is scientifically valid” under Daubert, specifically alleging that the expert, a psychology professor and sleep expert from West Virginia University, gave other theories and studies short shrift in her report.

The court responded that the expert’s testimony presented ample opportunity for cross-examination, but could not be dismissed as unreliable.

Berry-flavored Class Action Leaves Aftertaste for Dunkin' Donuts

Court denies chain’s motion to dismiss

Blueberry Bombshell

Bartosz Grabowski’s world was rocked.

In early December 2016, Grabowski entered a Dunkin’ Donuts in Chicago, Illinois and purchased a glazed blueberry donut. Grabowski consumed said donut, presumably enjoyed it and went on his way.

We don’t know where or how he learned that the blueberry-flavored ingredient in his Dunkin’ Donut donut was not, in fact, blueberries, but something else entirely. We don’t know how emotional or distraught he was. All we have is one stoic sentence in the complaint that opened his class action suit: “After Plaintiff learned that the Blueberry Products do not contain blueberry, he ceased purchasing and consuming the Products, and retained counsel.”

In Plain Sight

Grabowski filed his suit in the Northern District of Illinois, Eastern Division, in July 2017. He alleged that the Dunkin’ blueberry products – its Blueberry Butternut, Blueberry Crumb Cake, and Glazed Blueberry donuts – did not include blueberries at all but rather sophisticated man-made imitations of blueberries that went so far as to mimic the size and shape of the fruit.

He claimed that he would never have purchased the product if he understood it did not contain genuine blueberries – a fact it was impossible to know because there was no ingredient list provided in the store where they were sold. Moreover, Grabowski shared, Dunkin’ Donuts actually used genuine blueberries in its blueberry muffin, which was presented in the same display rack as the fake-blueberry donuts, and uses the same blueberry tag.

Grabowski sued for damages under the Illinois Consumer Fraud and Deceptive Business Practices Act, and leveled charges including common law fraud, intentional misrepresentation and negligent misrepresentation.

The Takeaway

Dunkin’s recent motion to dismiss was denied almost in its entirety by the court on Dec. 7, 2017.

A common theme struck by the court in its decision was that the case law cited by Dunkin’ did not apply to the current case on several counts because the cases involved claims dealing mostly with product packaging. For instance, Dunkin’ cited Williams v. Gerber Prod. Co. In this case, the plaintiffs were complaining about packaging that read “fruit juice” and contained images of fruit but did not contain actual fruit juice from the depicted fruit.

The court waved off this and other cases cited by Dunkin’ because there was no product packaging involved in Grabowski’s allegations. Since the blueberry products were unpackaged and presented in the same display with products containing real blueberries, precedent involving the prominence of certain words or disclosure information on packaging was irrelevant. Likewise, the court gave short shrift to Dunkin’s insistence that ingredient lists that are available online were sufficient to alert Grabowski to the fake blueberries in his donut.

Guess Who’s Back: Spokeo Asks for Second Spin

Tech company asks the Supremes to review standing decision

Prelude to a…

It all seems so long ago. But it’s only been about a year and a half.

Back in May 2016, the Supreme Court handed down a ruling in Spokeo, Inc. v. Robins. The ruling stated that plaintiffs must allege a tangible or intangible concrete injury in order to have standing in a federal court.

In the Beginning

Plaintiff Thomas Robins alleged that he had suffered harm when Spokeo, a so-called people search engine, reported incorrect information about him, thereby violating the Fair Credit Reporting Act. Robins argued that the false information might affect the deliberations of companies doing background checks on him. The district court dismissed the complaint, holding that Robins had not pleaded an actual injury as required by Article III of the Constitution.

But on appeal the Ninth Circuit flipped the script, maintaining that Robins had met the injury-in-fact requirement and had standing to sue.

The Road to Petition

Back to that Supreme Court ruling from 2016. Reviewing the Ninth’s decision, the Court held that plaintiffs must allege a tangible or intangible concrete injury to gain standing. Nonetheless, it did not make a decision regarding the Spokeo/Robins dispute. It held that the Ninth had failed to consider “both aspects of the injury-in-fact requirement” in the case – particularization and concreteness – and sent the case back.

On the second go-round, the Ninth found that Robins had standing under Article III, because he had alleged a real, albeit intangible injury – all that was required given the FCRA’s mission to protect his concrete interests.

In the most recent twist in this saga, Spokeo has filed a petition for writ of certiorari, attempting to persuade the justices to address the Ninth’s most recent finding. It claimed that the circuit court misapplied the justices’ ruling, but also that the ruling demanded clarity – too many conflicting decisions in the lower courts were being made on the strength of the decision for it to remain unaddressed.

The Takeaway

By Spokeo’s account, the legal wishbone that’s being tugged on by the lower courts concerns the interpretation of what constitutes a “concrete” injury claim. Some courts have followed the Ninth Circuit, maintaining that as long as specific interests of the plaintiff are at stake, standing exists – even if there was no actual harm suffered. Others interpret the ruling to mean that an actual harm in the real world is necessary to gain standing.

The final disposition of this question – if it ever comes – will be of great interest to both plaintiffs and defendants alike in a wide variety of cases, especially matters invoking the Telephone Consumer Protection Act, where the question of actual harm is the cause of much debate.

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.

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