AD-ttorneys@law – July 2, 2019

Alerts / July 2, 2019

In This Issue

NAD Praises Baby Tech Manufacturer, Makes Small Tweaks

But what makes the product special? Is it more than data?

“Back in My Day …”

The following gripe has nothing to do with age.

It has everything to do with life experience.

It’s the right of anyone – anyone who has taken care of a child for more than a short stretch – to complain in the presence of a new parent, loudly and obviously, about how difficult child care was back when they did it.

As in relating the fabled “uphill both ways walk” of school commutes past, newfangled baby-tech is the perfect occasion to roll one’s eyes at the wimpy decadence of today’s parents. Perfect baby-bottle prep machines? Self-rocking cribs? High-tech baby monitors with app-controlled cameras?

Please. I had to do [NAME OF TASK] all on my own. <eyeroll>

Sock It to Me

Indulging in new-parent mockery is one of the pleasures of battle-scarred parenthood. And with that territory staked out, here’s the latest improvement to mock: the Owlet Baby Care Smart Sock Baby Monitor.

The Smart Sock is meant to allow anyone who obsessively checks on their baby to get some rest. Controlled by a remote app, the product – a tiny wraparound sock – monitors a baby’s heart rate and oxygen levels. A base station glows green or red depending on how far the measurements stray from a defined baseline.

So, it seems to be the perfect product – alleviating the anxiety of new parents, and letting the veterans remind everyone of how difficult things were for them.

Not so fast, says the National Advertising Division (NAD). In the course of its routine monitoring work, the NAD came across Owlet Baby Care Inc.’s product lines, and started asking questions. The NAD requested substantiation for several of Owlet’s claims, including whether the Smart Sock device accurately gathered the information it purported to gather. The NAD’s decision noted that the NAD was concerned that Owlet’s advertising conveyed unsupported messages about the capability of the Smart Sock – such as the product would reassure parents and help them achieve “peace of mind,” that it can prevent Sudden Infant Death Syndrome (SIDS), and that it can save a baby’s life – because the device only gathers information and does not dispense testable advice. Using the sock and monitoring the data are not substitutes, for instance, for medically approved sleeping guidelines.

With regard to Owlet’s testimonial stories of its products, including “So thankful we were able to catch this early,” the NAD found that they “accurately reflect how the Smart Sock is meant to be used and did not overstate [its] capabilities ….”

The Takeaway

The NAD urges Owlet to not only change its disclosures so that the company expressly limits the use of the Smart Sock for information-gathering purposes but also add warnings to follow established sleep advice. The NAD has also asked the company to limit the Smart Sock’s use for sick babies because it does not replace standard medical monitors. Finally, the NAD has suggested that the company remove the offending “peace of mind” claims.

Owlet gave a hoot and agreed to make the changes.

This inquiry perfectly encapsulates our modern confusion about the differences between knowledge and wisdom. You can gather data, really get to know it, but offering sound interpretations of that data is an entirely different thing. When you’re advertising tech products, be especially wary that qualitative judgments – “peace of mind” – are justified separately from quantitative claims. Companies should be mindful not to make unsupported claims in advertising their products and not to overstate the capabilities of their products, but rather to accurately reflect how the product is intended to function and be used.

North Dakota Joins Auto-Renewal Legislation Parade

California, Vermont and the District of Columbia led the way

Bustin’ Out All Over

Ah, June! It’s a magical month. The Northern Hemisphere has tilted as far as it can toward the center of all warmth and energy – the sun. Life has returned in full bloom. Adorable baby animals are born. Everyone feels entitled to wear shorts.

And, for some reason, auto-renewal legislation is in full swing.

What is it about June that calls forth the efforts of eager statehouse legislators to vanquish shady auto-renewal schemes? We don’t know, but we imagine them loosening ties, rolling up sleeves and kicking off heels in a festival of legislative frenzy.

It’s a rite of spring that produced legislation that spanned the nation, from California to Vermont, last June.

(There is also D.C.’s recent law, but it was enacted in January and doesn’t fit our painstakingly themed intro, so we’d rather not mention it.)

In any case, June 2019 arrived with an auto-renewal legislative package from the North Dakota Legislature, which passed its own law in the beginning of the month. The provisions are similar to law in its sister states, but here’s a brief summary.

Anyone selling products in North Dakota under an automatic renewal (auto-renewal) plan – defined as an arrangement in which a paid subscription or purchasing agreement is automatically renewed for a period of more than one month at the end of a definite period for a subsequent period – needs to present the terms of the auto-renewal in a clear and conspicuous manner, in proximity to the offer, before a subscription is fulfilled. Further, the seller needs to provide an acknowledgment that includes the terms of the auto-renewal offer, information about how to cancel in a manner that the buyer is capable of retaining, and a simple procedure for cancellation that is cost-effective and timely. To be clear and conspicuous, the terms must be “readily apparent, readable, and understandable to the person to which the language is disclosed.” Among other requirements set forth in the new law, the seller needs to receive “affirmative consent” from the customer to the auto-renewal terms.

Further, a seller that offers auto-renewal plans must provide an email, snail mail or text notice for renewals scheduled for more than six months after the initial purchase that lets the customer know that they “may cancel the contract and avoid automatic renewal.” Any seller making changes to the renewal agreement after the fact is required to notify the customer about the change and cancellation instructions.

The North Dakota attorney general is empowered to seek remedies for violations of the new statute. Further, the statute sets forth a private right of action for consumers to bring an action to enjoin a violation or for restitution, or both, and a court may award the plaintiff costs, expenses and reasonable attorney’s fees.

The Takeaway

Companies should audit their auto-renewal programs to assure that they are in compliance with auto-renewal laws. We’ll keep you up to date on other states’ auto-renewal legislation, no matter what season it passes in.

Alo Yoga Caught with Its Pants Down?

ERSP makes yoga apparel company hit the mat

Pretzel Logic

If you’re considering taking up yoga for the first time, and you’re easily intimidated by other people’s strength, flexibility and stamina, brace yourself for the Alo Yoga Instagram feed.

It’s practically overflowing with badass yoga practitioners, all of them, presumably, wearing Alo Yoga’s signature workout clothes and using its yoga accoutrements. The number of impossible poses being struck is endless.

It’s enough to make a person take up fencing instead. Seriously – look at this couple. Is this their first class?!

In Plain Sight

Alo Yoga’s feed is complemented by hordes of users who laud Alo’s products by tagging @aloyoga and other accounts owned by the company. The #aloyoga hashtag alone has more than 500,000 related posts.

According to the Electronic Retailing Self-Regulation Program (ERSP), an investigative unit of the advertising industry’s system of self-regulation, however, influencers are scattered among this throng – influencers who allegedly promote Alo Yoga products but fail to disclose their material connection to the company in their posts.

ERSP was just minding its own business, going about its ongoing monitoring program, when it spotted 60 or so Instagram accounts that endorsed Alo Yoga. ERSP believed these posts may have had a material connection to the company, although the posts lacked any information indicating that they were advertisements. In response to ERSP’s inquiry, Alo Yoga confirmed that most of the Instagram posts that ERSP identified in its review did in fact have a material connection to the company, such as “monetary payment or free products in exchange for posting on Instagram.”

ERSP found that these posts constituted endorsements, thus requiring disclosures of the material relationship between Alo Yoga, the marketer and the influencers posting on Instagram. ERSP recommended that Alo go back over its posts and ensure that each of its paid influencers clearly and conspicuously disclose their material connection with the company in accordance with the Federal Trade Commission (FTC) Guides.

The Takeaway

In a telling anecdote for social media marketers, ERSP claims that Alo protested ERSP’s conclusions by noting that its standard-issue “Alo Yoga Ambassador Program Guidelines” had been built around the FTC’s Guides. The company maintained that copies of the guidelines were handed out to every influencer in its stable.

That’s very nice, ERSP seemed to say. While it “appreciated the marketer’s efforts, [ERSP] reinforced to the marketer that the FTC Guides place responsibility not only on influencers, but on the brands that partner with them.”

Pay attention and get engaged – a contract is not enough.

Additionally, the Program outlined the elements of a robust and successful influencer training program – and we’re not talking about warrior pose or downward-facing dog. ERSP wants companies to take responsibility for self-monitoring and asks that they “explain to members of the network what they can/cannot say about the products; instruct members of the network on their responsibilities for disclosing their connections to the advertiser; periodically search for what members of the network are saying; and follow-up if there are questionable practices.”

Tough love from the electronic retailing yogi; better get in shape!

Massive Subscription Scam Gets Hobbled in Trial

FTC prevails over accused newspaper and mag subscription scamsters

One of THOSE Cases

You know you’re in for a treat when the list of defendants takes up half of the complaint.

Federal Trade Commission v. Adept Management, Inc., et al., a 2016 Federal Trade Commission Act case filed in the U.S. District Court, District of Oregon, might as well be called FTC v. The Whole Mishpucha.

About 13 pages of the 25-page complaint are dedicated to merely listing the defendants; in the words of the FTC, they are “a complicated and ever-changing web of companies.”

You can imagine that with a defendant list consisting of the baroque tangle of companies, dbas and individuals featured in this case, the alleged underlying scam must be interesting.

All the News That’s Fit to Mint

The complaint alleges that since at least 2010, the defendants, “through a complicated and ever-changing web of companies,” engaged in a nationwide campaign that relies on misrepresentations to solicit newspaper renewals and new subscriptions from consumers. The defendants were accused of cooking up mass mailings that looked like subscription notices and representing that they were authorized by, or acting on behalf of, newspaper publishers to obtain and renew subscriptions. According to the complaint, in numerous instances, these representations were false or misleading because many publishers of the newspapers had not authorized the defendants to solicit subscriptions or renewals or to accept payments from consumers for subscriptions or renewals. The defendants were not affiliated with the newspapers in any way “and had no preexisting authorization to solicit, sell, accept, or receive payment for, or secure newspaper subscriptions or subscription renewals” – but they were happily charging a 40% markup for many of the subscriptions. Disclosures about their (lack of) relationship to the publishers were included only in fine print on the back of the notices – and even then, applied only to the magazine subscriptions. The complaint alleges that defendants’ practices have prompted thousands of consumer complaints and that some consumers paid twice for the same subscription.

In addition to the inflated rates, the subscribers often failed to receive their publications, and when they called customer service for refunds, they often received no assistance whatsoever. Multiple publishers – the overall list included The New York Times, The Wall Street Journal, The Seattle Times and The Denver Post – sent the various defendant companies cease and desist letters.

The Takeaway

This decades-long scam wound to an end with a trial in the District of Oregon in 2019. The court ordered the defendants banned from direct mail marketing, future sales misrepresentations and any benefit from the consumer information they gathered during the alleged scam. Finally, the horde of defendants was hit with $8.9 million in judgments.

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