Alerts

AD-ttorneys@law – June 27, 2018

Alerts / June 27, 2018

In This Issue:

Heads Up – Feds Sniffing Around Ad Industry?

Reported inquiries may have been spurred by 2016 ANA investigation

Skullduggery

Communications industry website Campaignlive.com recently reported claims that the FBI has been contacting people with knowledge of the ad industry and asking for their help in recent months. A source for the article claims that the bureau may be aiming to gather information about specific companies and their senior leaders.

In line with the FBI’s secretive nature, a bureau spokesperson refused to confirm or deny any investigation.

The trigger for this investigation – if there is an actual investigation – may have been a report commissioned by the Association of National Advertisers, conducted by the K2 Intelligence firm. This report, issued in 2016, decried a number of nontransparent business practices in the ad industry, including undisclosed cash rebates allegedly received by unnamed agency groups and significant and possibly improper media purchase markups.

The head of K2 cited emails that allegedly revealed open discussion between agency “executives and media companies” regarding rebates, which is a practice that is not permitted in the United States.

Alternatively, there is some speculation that the FBI may be opening an investigation into online ad fraud, which has been plaguing the media supply chain for a number of years. Concerns about transparency in the media-trading ecosystem would fall under the purview of the FBI, which has authority to investigate white collar crime, including the evasion of regulations, and to enforce anti-kickback statutes.

The Takeaway

Time will tell if this act of industry self-policing will lead to a full-blown action by the Department of Justice or if it is merely a prompt for paranoia.

It’s Baaaaack! New York State Takes Another Stab at Right of Publicity

Guess what? Industry and watchdog groups are not happy

Eternal Return

The New York state legislature is taking aim at another right of privacy/publicity overhaul push, on roughly the one-year anniversary of the last time it tried to get the measure through. The Electronic Freedom Foundation (EFF), a prominent digital rights group, is not excited.

“In what now appears to be an annual ritual, a bad right of publicity law is being rushed through at the end of the legislative session in New York,” kicks off the EFF’s summary of the new bill. What’s the problem? The foundation claims that the bill’s provisions will cause an increase in celebrity litigation in New York and will pressure heirs to monetize the memories of their famous ancestors.

The Foundation Finds Faults

The EFF bases its criticism on a few distinct points. First, the bill allegedly redefines the right of publicity as a property right rather than a personal right. “Publicity rights were originally and properly construed as a narrow subspecies of privacy rights, designed to prevent unfair commercial exploitations of one’s own likeness,” the foundation writes in an open letter to the legislature.

Second, because the value of a transferable publicity right would be enormous in certain cases, the EFF argues, heirs might be forced into marketing or other agreements to offset the tax burden the right imposes. Additionally, the new bill allows claims “without regard to whether the [offending] use or activity is for profit or not-for-profit,” which the EFF believes will chill “a wide range of non-profit speech and activism inspired by deceased individuals.”

The EFF also asserts that the bill would “turn the state of New York into a litigation destination” for celebrities because of its broad interpretation of publicity rights. Because the bill treats publicity rights as property rights, such rights would become transferable and more open to dispute from celebrities who may have transferred their rights to others who improperly use an image or likeness in a manner inconsistent with the celebrity’s wishes.

Interestingly, the bill aims to quell the increasing use of digitally rendered celebrity images in pornographic works; however, the EFF notes that the term “pornographic work” does not have a settled definition and is at risk of being interpreted in a much broader manner than those imposed by First Amendment obscenity standards. Therefore, the EFF asserts that the bill will likely chill the creation of works that would be protected under the First Amendment.

The Takeaway

Another group, the Association of National Advertisers (ANA), joined the EFF in taking aim at the lack of domicile requirements for suits brought under the bill’s aegis. “Unlike similar right of publicity statutes in other jurisdictions,” the ANA claims in its response to the legislature, “the proposed bill would grant the successors-in-interest to a decedent’s right of publicity the ability to assert an action under this law, regardless of the decedent’s domicile at his or her time of death.” The ANA specifically notes the fact that “so long as an estate pays a $100 registration fee with the New York Secretary of State, they would have the right for 40 years to litigate against a marketer, broadcaster or media outlet even though the deceased person never set foot in the state.”

This omission, the ANA claims, will cause a tremendous flood of right of publicity litigation, effectively making New York state the hub of legal action in this area. The association writes that the legislation “personally impacts the ANA membership by subjecting all national advertising campaigns to potential suit within the state, regardless of where the decedent was domiciled,” which could chill advertising in the state.

Similarly, the ANA targeted the bill’s registry requirement because of its lack of clarity with regard to who must register for rights. Without clarity, according to the ANA, “the registry will not function as contemplated.” Additionally, with the bill’s expansion of the right of publicity to include an individual’s “persona,” the ANA claims that because of the term’s vague meaning, it will be difficult for marketers to determine whether a persona is covered or has been registered.

We will be tracking how this proposed legislation fares. Stay tuned for updates.

Comments Section Not Sweet on FDA Labeling Decision

“Added sugar” definition is souring the labels of natural sweeteners

Saccharine

Back in March 2018, we covered recent changes by the Food and Drug Administration (FDA) to nutrition facts labels, the first major overhaul in years.

The FDA touted the changes as beneficial enhancements that provide necessary guidance for consumers in a rapidly evolving nutrition landscape and an effort to avoid misinterpretation of the different types of sugar that may be added to various products such as juices. But one set of proposed changes – draft guidance regarding “added” and “natural” sugar – received withering commentary from the public at large.

Categorical Imperative

The controversy stems from the treatment of sweet, natural foods, like maple syrup and honey, which are added to other dishes. The new rules set aside a line item on the label under “Total Carbohydrates” for “Added Sugars.” Added sugars, according to the FDA, are “sugars that are either added during the processing of foods, or are packaged as such. The term includes free sugars (free mono- and disaccharides), [and] sugars from syrups and honey … ”

Fine, but what if you’re a maple syrup farmer or a honey harvester? Your product is the only sugar in your package. How do you label the sugar content?

The FDA ruled that even though these products may be all natural, producers are required to list the contents as added sugars on the label. In order to clarify that the products are nonetheless natural, the administration opted to require a visual element – † – to the added-sugar line item that redirects consumers to explanatory “contextual information.” For example, “ † All these sugars are naturally occurring in honey.”

The Takeaway

This approach was not well-received.

The FDA’s open comment period, which began in March, yielded over one thousand comments, the majority of which were negative. The tactics employed by the commentators were characteristic of online comments-section discourse, ranging from the rational and balanced – “I am entirely in favor of accurate labeling, and I don’t disagree that many Americans consume too much sugar. But let’s not resort to inaccurate and misleading labeling to counter it.” ­to the emotional – “It is absurd to add this statement to honey! If this is what the FDA wants on the label of my honey please explain the process I need to go through to add sugar to honey! And each FDA board member voting on this needs to spend a day with a beekeeper extracting and bottling said honey!!!”

There also was the arch and disdainful – “Einstein was right. ... The most abundant element is hydrogen ... followed by stupidity. You lot illustrate this perfectly.”­ – and the conspiratorial – “I smell a rat. To force maple syrup and honey makers to in effect lie to the public about the sugar content of their products seems to me to be a nefarious scheme to lower the profit margins of said makers. In fact, the plot stinks to high heaven!”

Whether the variety of negative comments received by this proposed guidance will encourage the FDA to consider revising its approach remains to be seen.

Dyson Sucks Up $16.4 Million at Trial

Longtime rival SharkNinja engaged in false advertising, says jury

Of Knights and Ninjas

Let’s just say that these two brands are … different.

To start, there’s the European vacuum maker founded by a British knight – Dyson – that chooses to buck typographical convention by using a lowercase “d” in its name. Across the pond is Dyson’s American competitor SharkNinja – a company that similarly has taken a unique naming approach by adopting a hybrid aquatic-predator-martial-arts-assassin as its brand.

While the storyline of a knight locked in battle with a shark-ninja would otherwise sound like the makings of a blockbuster movie, these two companies have unfortunately found themselves battling in the courtroom.

Hot Air

Back in 2014, SharkNinja ran ads that caught the attention of Dyson’s lawyers. According to a complaint filed in the Northern District of Illinois that same year, SharkNinja claimed on its packaging, print ads and television spots that its vacuums were “as good as” Dyson’s products but available at a lower price. Some of SharkNinja’s ads, according to the complaint, go even further by making broad superiority claims over all Dyson vacuums and all upright vacuum cleaners on the market. The complaint referenced two previous National Advertising Division (NAD) decisions finding that these ads were “false and misleading” and recommending that the makers of SharkNinja cease using the claims made in the ads.

More specifically, Dyson accused SharkNinja of falsely claiming that its Rotator Powered Lift-Away vacuum “outperforms” the Dyson DC65 vacuum on certain carpets by 15 percent. Dyson claimed that this figure was not supported by “head-to-head [testing] under the industry-accepted test protocol for measuring cleaning performance on carpets.”

The suit charged SharkNinja with false advertising under the Lanham Act, deceptive trade practices under Illinois compiled statutes and false advertising under Illinois common law. Dyson calculated its losses as a result of SharkNinja’s advertising at approximately $18 million, arguing that the amount would be sufficient compensation given that the ads aired in the final four months of 2014, which are allegedly the busiest and most profitable months for vacuum cleaner sales. Failing to otherwise resolve the dispute, the parties eventually went to trial in May 2018.

The Takeaway

Dyson and SharkNinja have been going at it hammer and tongs for a while now through a number of actions, including a patent infringement case (also in Illinois), the aforementioned NAD proceedings and a more recent NAD preference claims dispute we covered in August 2017. SharkNinja also hit Dyson with its own false advertising complaint in 2014.

This latest act in the drama ended when a jury tossed a win to Dyson in its 2014 Lanham Act case concerning the Dyson DC65 vacuum and SharkNinja’s claims in June of this year. The jury found that SharkNinja had acted willfully and awarded Dyson $16.4 million in damages based on profits generated by SharkNinja’s 2014 ad campaign.

Advertisers, particularly those in highly competitive industries, should view this case as a cautionary tale and take care when making comparative claims. If a court finds that such claims are not backed up by appropriate evidence, the damages can be significant.

Vermont Automatic Renewal Bill Slips Into Law

Defines new contract boundaries

On a Tear

Vermont has been keeping busy. We recently covered the Green Mountain State’s aggressive anti-data broker legislation passed in May 2018, the first of its kind in the United States. In June, Vermont kept the ball rolling by passing a new law that puts official boundaries around automatic renewal programs and offers.

The Takeaway

The refreshingly tripartisan bill (signed by members of the Democratic, Republican and Progressive parties) aims to ensure that consumers are not subject to auto-renewal of subscription services without explicitly opting in. Among its many goals, the legislature hopes that the law will provide protection to “vulnerable” consumers, such as minors and incapacitated persons, whose personal information is at risk of exploitation or otherwise being used without their consent.

Specifically, under the new law, auto-renew contracts must contain language explaining the renewal policies “in plain, unambiguous language in bold-face type.” Additionally, subscription sellers are required to provide notice of renewal to customers 30 to 60 days prior to the automatic renewal or subscription termination date.

Violations of the legislation’s terms will be considered unfair and deceptive acts. The law, which was not signed or vetoed by the governor, simply went into effect upon its passage.

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