Alerts

AD-ttorneys@law - June 12, 2019

Alerts / June 12, 2019

In This Issue

IMC Releases Best Practices for Fraudspotting

Dig into the numbers, says industry watchdog

All-Star Game

Look, the Influencer Marketing Council sounds cooler than it actually is.

From the group’s name, you might think that IMC meetings are the “glammest” thing ever. Imagine a cheapish hotel conference room out on the interstate, with watery coffee, stale muffins and bagels, and “fritzy” PowerPoint projectors.

DJ Khaled is the treasurer. Bella Hadid takes minutes. A contentious breakout session led by Tati and James Charles dissolves into angry, tear-soaked recriminations. Cristiano Ronaldo complains about the bagels.

Kardashians are sprinkled everywhere.

Down to Earth

Alas, the real-world IMC is a more prosaic affair. Celebrity fantasies aside, no one involved in marketing for the past decade expects influencers to self-regulate their community.

Founded in 2017, the IMC’s raison d’etre was “to bring the industry together to provide clarity on the type of disclosure that works best for consumers, as individual companies and creators have struggled to define these guidelines.”

Because in a marketplace where influence and engagement can be bought wholesale, how are marketers supposed to judge the fruit of their efforts?

The Takeaway

The IMC provides a figure that should give any online marketer the chills: “More than 11% of the engagement for influencer-sponsored posts on Instagram are generated by fraudulent accounts.”

So, let’s thank the slightly less glamorous folks at Clorox, Publicis Media, Initiative, Horizon Media, Saatchi & Saatchi Wellness, Haworth, Havas Media, Lippe Taylor, StubHub, Abrams Artists Agency and Captiv8: As leaders of the IMC, they’ve done the hard work of assembling “Fraud Best Practices and Guidelines,” a guidebook for anyone looking for tips on spotting and shutting down fraud.

What’s the skinny?

The main thrust of the advice entails a multifaceted, if cursory, examination of the numbers. Do you see spikes or troughs in the number of your influencer’s followers? Does the influencer’s follower count match his or her engagement activity? Does the engagement rate spike in unnatural ways? How does the influencer’s view rate on YouTube compare with the influencer’s follower count?

There’s qualitative advice, too: Check on the grammar and overall quality of responses to the influencer’s posts. Where are the followers located? And does that information provide an unwelcome contrast to where engagement activity originates?

Read more here.

NAD’s Kitty Litter Pan Conclusions Don’t Smell Quite Right?

NARB ratifies only half of NAD’s Doskocil decision

Reigning Cats …

The National Advertising Review Board (NARB) issued a split decision on a recent National Advertising Division (NAD) ruling dealing with the one downside involved in cat ownership: litter stink.

Yes, it’s the only drawback. Some of us like the unpredictable temperament, the strange dead-animal gifts, and even the sense that a cat’s aloof distaste masks the frustrated urges of a larger, more threatening predator. Don’t ask us why.

Plus, they poop in the same place most of the time, on their own time – they don’t force us to chase them around outside with a scooper or a wad of plastic bags on a cold winter morning.

But oy, the stink.

Cat Scratch Fever

Enter Doskocil Manufacturing Company, doing business as PetMate, which sells kitty litter pans under the Arm & Hammer brand. The product description on the Arm & Hammer-branded box is surrounded by text reading “With Built-In Antimicrobial Product Protection … Inhibits the Growth of Odor-Causing Bacteria on the Pan.”

Rival cat litter pan competitor Van Ness Plastic Molding Company challenged the claim before the NAD, arguing that the antimicrobial protection, infused in the pans by supplier Microban Company, was implying a health benefit claim protecting consumers against disease and an odor-elimination or improvement claim. Neither, the company argued, were verified.

NAD agreed, and asked Doskocil to remove the claims.

The Takeaway

NARB split the difference.

Regarding the conclusion that PetMate’s product description implied a health benefit claim, the NARB broke with the NAD’s decision, holding that the tag line did not constitute a health claim when read in context.

But the NARB favored the NAD on the more odiferous charge, agreeing that while Doskocil had provided evidence that its product reduced antimicrobial activity, its test method did not show whether users will detect a difference in the odor emanating from the pan.

Without proof of consumer relevance, NAD concluded, the implied odor-reduction claims should be discontinued. NARB agreed, and Doskocil promised to comply.

IBA Brings Ad-Tech Firms Into Line

Two companies respond to bureau inquiries on opt-out, disclosures

Train Kept A-Rollin’

The Better Business Bureau’s Interest-Based Advertising Accountability Program reviews and enforces advertising in line with the Digital Advertising Alliance’s (DAA’s) self-regulatory privacy principles. (Most of us have encountered the work of the DAA through the AdChoices program, whose logo can be seen on various websites throughout the internet.)

A few weeks ago, we covered a milestone for the IBA – 100 public actions enforcing DAA rules and regs. And it’s not letting up: The IBA just brought the “Almighty Word” of the DAA to two more ad-tech companies. Both investigations were inspired by consumer complaints.

Politicking

First in the docket: IQM, self-proclaimed “data-driven political marketer.” Consumers complained that they encountered “errors” when they attempted to opt out of the company’s interest-based advertising, including attempts to exit made through the DAA’s WebChoices page and a lack of an opt-out tool on the IQM site.

After digging deeper, IBA found issues with IQM’s privacy disclosures, unmet third-party obligations regarding cross-app and precise location data, and general cross-device compliance issues, among other problem areas.

The company addressed the complaint by updating its privacy disclosures to clarify the scope of its IBA practices, joining the WebChoices and AppChoices opt-out platforms, revising its contracts to require consumer consent before gathering location data, and several other measures.

The Takeaway

The second company, Kargo, is another ad-tech company, which boasts that it reaches “100% of smartphone users in the United States, a scale that eclipses Google and Facebook.” Again, consumers complained that Kargo’s opt-out tools failed to work; upon further review, the IBA found flaws in the company’s privacy policy language as well.

In response to the inquiries, Kargo agreed to work to meet the DAA requirements.

Of special note for ad-tech compliance officers is a line from the Kargo inquiry: “Today’s decision again outlines the role of third parties in promoting an online advertising ecosystem that respects consumer privacy,” the IBA writes. “Third parties, as the masters of the technology that facilitates IBA, cannot neglect their duty to ensure that they provide functional opt-out mechanisms to consumers in both the desktop and mobile environment.”

Inquiries and Lawsuits a Drag for e-Cig Companies

Mass. AG and watchdog groups want to snuff out ads aimed at people of all ages

Get Off Our Lawn, Again!

Okay. We’ve said it before. And we’re sorry if we’re starting to sound like a broken record.

But things were so much simpler when we were young.

From video games where people can buy wins to fidget spinner health threats, the culture has taken some baffling turns. The latest is all this e-cigarette folderol: pods and kits and cartridges and tanks and … eJuice. What on earth is eJuice?

We’re not condoning nicotine addiction in any form, but we’re amazed that anyone can figure out how to get hooked anymore.

… Plus C’est la Même Chose

One thing remains familiar, however: E-cigarettes, despite their initial rep as a safe alternative to standard cigarettes, have attracted negative attention from regulators. The federal government’s decision to regulate e-cigarettes as one tobacco product among many kicked in back in 2016; most recently, the Food and Drug Administration held a “public scientific workshop … to discuss the unique challenges associated with youth tobacco addiction and cessation … with a focus on e-cigarette cessation.”

Above and beyond federal guidelines, which they are bound to follow, states have embraced a variety of legislative approaches to dealing with the e-cigarette issue.

Mass Attack!

But some jurisdictions prefer a plain, old-fashioned lawsuit.

Recently, Massachusetts Attorney General Maura Healey sued New Jersey vaping product company Eonsmoke in the commonwealth’s Boston’s Suffolk Superior Court. According to the Healey complaint, Eonsmoke targeted sales of its vaping products to youth and neglected to verify consumer age before selling and shipping to them – offenses banned under Massachusetts’ Consumer Protection Act.

In one instance, the complaint alleges, Eonsmoke paid an influencer – some dude named “DonnySmokes” – to market its products to kids.

In the past, the suit alleges, Donny (can we just call him Donny?) uploaded videos instructing his followers on “How to HIDE & HIT Your JUUL at SCHOOL WITHOUT Getting CAUGHT.”

The complaint also included allegations that Eonsmoke sold nicotine products with kid-friendly flavors like “sourgummy,” “gummybear,” “donutcream” and “cerealloops.”

Who Let the Dogs Out?

Watchdog groups are on the e-cigarette warpath as well.

Recently, a passel of anti-smoking organizations, including the Campaign for Tobacco-Free Kids and the American Cancer Society Cancer Action Network, penned a missive to the FDA demanding that the administration investigate the big kahuna of e-cig manufacturers, JUUL.

(An aside: Proving that when it rains it pours, JUUL is still under investigation by AG Healey, who launched an inquiry into the company back in July 2018 when she first started poking Eonsmoke.)

In this case, the watchdogs are attacking JUUL’s “express or implied claims that [its] products help users stop smoking,” and their line of attack is quite clever.

The Takeaway

According to the letter, “After JUUL came under intense public scrutiny and criticism for this youth-directed social media marketing, the company changed its marketing strategy to make it appear to be targeted only at adult smokers.” The watchdogs maintain that because these new advertisements focus on helping older smokers switch to e-cigarettes, “the intended use of JUUL now is for smoking cessation, a clear therapeutic purpose, making the advertised products drugs, devices, or combination products that must be approved prior to sale.”

And since JUUL products have never been approved for such a purpose, they are unapproved drugs or devices being “marketed illegally under the Federal Food, Drug and Cosmetic Act.”

Flipping a company’s marketing against itself – an interesting demonstration of ad-world jiu-jitsu.

Risk-Free or Just Risk-y?

Another set of trial program scammers settles with the FTC

Again?!

It’s an interesting exercise to put yourself in the shoes of a “risk-free trial” scammer.

Your basic trick is simple: Promise consumers “risk-free” samples, charge them a nominal shipping and handling fee of a few bucks, and once you get their payment information, hit them with a hefty monthly charge.

But can this sort of practice be worth the risk?

We’ve covered so many alleged instances of these scams that we’ve lost count (see here, here, here …). Legislatures and payment processors alike have cracked down on the practice.

So we know that plenty of (alleged) perpetrators get caught. But how many scammers must get away with these switch-ups to inspire others to resurrect them, over and over again?

Following a Template?

We don’t know the answer.

But we do have another settlement between alleged risk-free trial scammers and their bête noire, the Federal Trade Commission (FTC), to share with you.

Triangle Media Corp., Jasper Rain Marketing LLC and Brian Phillips are marketers and distributors of skin care products, e-cigarettes and dietary supplements (products that are often featured in shady risk-free offers). The commission sued them in the Southern District of California in June 2018 for allegedly offering deceptive free trials of their products for a small shipping and handling fee (typically $4.95 or less).

Guess what comes next?

According to the FTC, once the defendants had the consumers’ credit card numbers, they charged “them as much as $98.71 for a single shipment and enroll[ed] them in a continuity program costing the same amount on a monthly basis.” Adding injury to injury, the defendants then allegedly charged the consumers for entirely different products – and enrolled them in a new set of continuity programs.

The Takeaway

The commission added another set of defendants – Hardwire Interactive Inc., Global Northern Trading Ltd. and Devin Keer – in an amended complaint filed in December 2018. These new parties were accused of helping run the scam from outside the United States.

At the end of the day, everyone settled.

The commission’s agreement with the first set of defendants prohibits Triangle and company from misrepresenting negative option transactions and orders them to comply with the Restore Online Shoppers’ Confidence Act consent and disclosure requirements. The order came with a hefty $48 million judgment, suspended after a $400,000 payment and relinquishment of assets.

The second order settled the Hardwire defendant’s charges with the same prohibitions and directives, but added a $123.1 million judgment, suspended after a $3 million payment.

And now, get ready for the next risk-free trial scam settlement in 3 … 2 … 1 …

Check Out Our Latest Blog Post

Texas Moves Forward With Updates to Breach Notification Law and Institutes Privacy Council to Study Data Privacy Legislation

Texas is one of the many states that looked to be following in the footsteps of California’s enactment of a broad consumer privacy law (the California Consumer Privacy Act), which has far-ranging implications for businesses and consumers. Read more here.

Nevada Adds “Do Not Sell” Requirement to Privacy Law

Nevada Governor Steve Sisolak signed new privacy legislation into law in Nevada. Senate Bill 220 (SB-220) updates Nevada Revised State 603A to provide consumers a new right to opt out of the sale of their data. Effective Oct. 1, 2019, the new law will come into effect prior to the more comprehensive California Consumer Privacy Act (CCPA). Accordingly, the Nevada law will be the first law in the United States granting consumers the right to opt out of data sales. Read more here.

Takeaways From FDA Hearing on CBD

On May 31, the Food and Drug Administration (FDA) held a hearing at its headquarters in Silver Spring, Maryland, to hear from the public about cannabidiol (CBD). The popularity of CBD was reflected in participation at the meeting, which took place in a jam-packed conference room and involved 120 speakers, selected from more than 400 applicants. Read more here.

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