Alerts

AD-ttorneys@law – May 15, 2020

Alerts / May 15, 2020

In This Issue

Upcoming Webinars

Join former Congressman Mike Ferguson, leader of BakerHostetler’s Federal Policy team, and former Congressman Heath Shuler, Senior Advisor for the Federal Policy team, as we continue our bipartisan webinar series, Washington's Response to COVID-19, with members of both chambers of Congress.

  • May 19: Hear from U.S. Senator John Barrasso, R-Wyo., who is serving in his third term and is the third-ranking Republican in Senate leadership. Barrasso is chairman of the Environment and Public Works Committee, and also serves on the Foreign Relations Committee, the Indian Affairs Committee and the Energy and Natural Resources Committee. Known by many as “Wyoming’s Doctor,” he practiced as an orthopedic surgeon for 24 years and was president of the Wyoming Medical Society. Click here for more information.
  • May 20: Hear from Senator Cory Booker, D-N.J., who is completing his first full term in the Senate. He serves on the Senate Environment and Public Works Committee, the Foreign Relations Committee, the Judiciary Committee, and the Small Business Committee. Before his election to the Senate, Senator Booker gained national prominence as mayor of Newark from 2006 to 2013. Register here today.

Join BakerHostetler’s NEW Digital Transformation and Data Economy Team (DTDE) as they continue their four-part webinar series which covers legal implications surrounding COVID-19 for business leaders and provides practical answers and actionable advice. Register here to attend:

  • May 20: Accelerate: Getting to Your North Star Faster
  • May 27: Restructuring Options, Reorg Strategies and When to File for Bankruptcy
NCAA Sets College Athlete Endorsements Free

College stars will be allowed to strike deals but should expect limits

Throwing the Gates Open

It’s difficult for the sports world to generate headlines in the middle of various social-distancing regimes, but this is news: The long-standing restrictions on college athlete endorsements and promotions are being removed.

Student athletes will be allowed to identify themselves by name and by school, although use of conference and team identifiers are strictly forbidden. Educational institutions will not be allowed to pay students for these activities.

Here Be Endorsers

What else do we know? According to a National Collegiate Athletic Association (NCAA) press release, the organization “is requiring guardrails around any future name, image and likeness activities.” These guardrails include “[no] pay for play; no school or conference involvement; no use of name, image and likeness for recruiting by schools or boosters; and the regulation of agents and advisors.”

Final rules on the shape of the guardrails will now be hammered out by January 2021, with the final rules taking effect at the beginning of the 2021-22 school year.

The Takeaway

This announcement marks a policy change for the NCAA and college athletes at universities around the country.

Some questions to consider with this change in policy include: How will endorsements be disclosed? How will those disclosures be monitored or enforced? How will the value of the various agreements be assessed, and will there be any limits? While there are hints out there regarding the answers to these questions, for now there is a list of concerns and issues that will need to be addressed.

We promise we’ll be on top of each development.

Apps and IRL Businesses Get Called Out by DAA

Watchdog group again recommends enhanced disclosures, other fixes

Slow but Steady

The Digital Advertising Accountability Program (DAAP), part of the national Better Business Bureau’s group of national advertising self-regulatory bodies, continues its march across the internet, dispensing justice in the form of consumer protection by policing digital marketers’ practices not in line with self-regulatory guidelines.

In its latest release, the DAAP, which the Digital Advertising Alliance (DAA) entrusts to enforce its AdChoices and other self-regulatory programs, made a statement on its efforts to bring companies in line with the DAA’s Self-Regulatory Principles. The current cases bring the program’s total number of public actions to 115, many of which we have reported on before.

Unusual Suspects

The DAAP investigations involve two very different companies. The first involves two apps produced by Mammoth Media, the self-proclaimed “Social Entertainment Studio for Gen Z.” Mammoth Media produces two apps that fell under the DAAP’s privacy searchlight – Wishbone and Yarn.

Wishbone serves up a daily set of poll questions comparing two things – any two things. Different colored hoodies (which one should I wear?) different locations (seaside or cityscape?) or the same actor in different roles (who gave a better performance?). We’re sure there’s some sinister algorithm lurking behind the choices. Once a decision is made, the user gets to see how community voting impacted each choice.

Yarn is an app that tries to provide one of cyberculture’s perennial entertainments – “found” stories presented within the context of online communication. In this case, they’re stories based around invented text exchanges.

The second company, Recovery Centers of America, couldn’t be more different from Mammoth Media: It’s a well-known alcohol and drug addiction treatment chain with facilities in Maryland, Pennsylvania, New Jersey and Massachusetts.

The Takeaway

Recovery Centers of America received a simple request: After noticing “signs” of targeted advertising data collection at the company’s website, the DAA asked the company to add an “enhanced notice” link at the top of its privacy policies describing how user data is used in third-party advertising.

In Mammoth Media’s case, “technical analysis revealed the collection of user data – including precise location data – by third parties for advertising purposes.” But clear disclosure of those activities and requests for consent were not found.

Under the DAAP’s direction, Mammoth Media added its own “enhanced notice” link at the top of its privacy policies, linked to the DAAP’s AppChoices tool, which lets users opt out of mobile ads, and disabled collection of location information by third parties.

It’s like a greatest hits package of DAAP enforcement – and thus serves as a good lesson in “the basics” for advertisers. These enhanced notices for targeted advertising data collection and geolocation tracking provide notice to consumers about these practices and the choices consumers are entitled to make under the DAA principles. Like most self-regulatory programs, adherence is voluntary, but the DAAP will seek to obtain compliance regardless of a company’s affiliation with the DAA.

As companies continue to implement these useful and tailored technologies for consumer-facing apps, they should also be aware of potential DAAP scrutiny. While most app publishers are not directly affiliated with the DAA, most of the vendors they work with to enable interest-based advertising are, and they contractually push DAA adherence down to the publishers with which they work. Accordingly, while the DAAP can’t force a publisher to follow the DAA’s self-regulatory rules, publishers could find themselves in trouble with critical vendors that have committed to do so.

Petco’s Boldest Claim Survives NAD Scrutiny

After several suggested modifications, its ‘all-natural standard’ boast carries on

Ambivalence

The National Advertising Division (NAD) of the national Better Business Bureau, the lead self-regulatory body for national advertising, often renders split decisions, approving of one set of advertising claims and dispensing with another. The watchdog rendered another such decision in the case of a recent review of pet supply chain Petco. But rather than an ambivalent ruling, this split is a rare vote of confidence in a marketing campaign.

Big Bark

In 2018, Petco launched a new campaign dedicating itself to a “a bold new standard for nutrition.” In a series of internet, television and direct email advertisements, the company pledged to stop selling cat and dog food that contained artificial colors, flavors and preservatives by mid-2019. “We are raising the bar and stepping out ahead of the industry,” Petco CEO Ron Coughlin said in an upbeat but serious announcement video, “not because it’s an easy thing to do, but because it’s the right thing to do.”

The campaign caught the attention of NAD as it roamed the backyard of the internet, sniffing out piles of iffy ads. The group reacted to several Petco claims – first and foremost, the flagship “bold new standard” tag, but also key related claims, including that Petco sold pet food with all-natural ingredients exclusively, that Petco’s food is healthier than food with artificial ingredients sold by other retailers and that artificial ingredients are unhealthy for pets.

Small Bites

Artificial vs. natural ingredients claims are red meat for NAD; they’re generally tough on these claims, and in a limited sense this case proved no exception.

NAD argued for a strict interpretation of Petco’s “artificial free” claims such as “no more nasties,” “no more artificials” and “we’re turning our back on artificial ingredients,” noting cat food products that contain titanium dioxide and “substances that are derivatives or mimics of natural compounds.” “Because such statements directly contradict the unequivocal statements that Petco is removing ‘all’ artificial ingredients or that there will be ‘no more artificials’ in any dog food or treats,” the watchdog wrote, “NAD recommended that such claims be modified.”

Subjective tags such as “no more nasties” and “bye-bye bad stuff” were ruled to not be mere puffery, because “these claims describe the pet food being removed from Petco (but sold by its competitors) in language that clearly matters to consumers.” Considered seriously, the claims needed to be discontinued, because Petco had not submitted evidence that the health benefits of all-natural ingredients outweighed those of artificial ingredients – or that artificial ingredients were “bad” for animals in the first place.

The Takeaway

These and other claims aside, the main claim of the campaign – that Petco was setting “a bold new standard for nutrition” – survived scrutiny. “In rolling out its initiative, Petco has collaborated with its vendors and partners to define a standard, refine it and reformulate products without artificial colors, flavors and preservatives,” NAD wrote. Consumer education efforts and a well-maintained website disclosure page played a significant role in Petco’s win.

Such big claims as Petco’s “bold new standards” take a lot of flak from regulators and watchdog groups, but Petco demonstrated how such claims can be successfully made – and defended – despite NAD’s generally tough scrutiny of these types of claims in advertisements.

California Rolls Up Fake Crab Suit Against P.F. Chang’s

And will a second action against Benihana get chopped to bits?

The Sushi Bar

A trio of Los Angeles law firms – Yoon Law, the Lim Law Group and the Law Offices of Jong Yun Kim – seem to be developing a new legal discipline: the fake crab suit.

The firms have filed two class actions in California’s Central District since last October that pursue similar claims against two well-known Asian food chains: P.F. Chang’s China Bistro and Japanese cuisine chain Benihana. At the heart of the suits are imitation crab – and its deceptive use by the restaurants.

Cereal Offenders

The first action, Chansue Kang et al. v. P.F. Chang’s China Bistro, Inc., was filed last October, alleging violations of the California Business and Professions and Civil codes. The action accused P.F. Chang’s of employing a “classic bait and switch” through which it “falsely labeled and advertised food products containing crab on their menu, when in fact, no crab meat was present in the product.”

The products in question were menu items that identified “krab mix” as an ingredient, even though actual crab was not part of that mix. The plaintiff argued that he wouldn’t have purchased the product had he known there was no real crab involved, and the lack of real crab should have been disclosed. P.F. Chang’s maintained that no reasonable consumer would be so deceived.

The court dismissed all the charges, first dispensing with non-California class members for lack of standing and then getting to the interesting stuff. Citing at least two cases invoking 1970s-era cereals, the court held that the spelling of “krab,” like “froot” in “Froot Loops,” was a dead giveaway to any savvy consumer that genuine crab wasn’t involved. Likewise, “no reasonable consumer would be led to believe that ‘Cap’n Crunch’s Crunch Berries’ cereal contained real fruit berries despite the use of the word berries in the product.”

The court saved the most telling blow for last: “Other dishes on P.F. Chang’s menu are described with the use of the word ‘crab’ where they contain actual crab.” Reasonable consumers would understand the difference between “krab mix” and “crab” when they were juxtaposed on the menu itself and thus would not be reasonably deceived.

The Takeaway

The trio’s second action, Youngsuk Kim v. Benihana, Inc. et al., was criticized in Benihana’s motion to dismiss as “nearly identical” to the P.F. Chang’s class action.

But there was a further, baffling twist to this complaint: In the words of Benihana’s motion to dismiss, the plaintiffs “acknowledge that Benihana’s menu describes the subject sushi rolls as containing kani kama crab and kani kama crab mix.” Furthermore, they “also acknowledge that the menu explains that “Kani kama crab & kani kama crab mix contain imitation crab.” The allegations that the menu was misleading “defy common sense” as “the menu explicitly states that the sushi rolls contain imitation crab and never states that ‘actual crab meat’ is used in the products.”

We’re waiting for the court to weigh in on Benihana’s motion, which was filed at the end of April 2020. Until then, we will await the court’s position about these ingredient disclosures and remind you that good disclosure and proper brand nomenclature can spare you (and your favorite restaurants) a lot of trouble.

Fashion House Sued for Lively Snaps

Italian style powerhouse Fendi sued over copyrighted paparazzi pic

Dangerous Intersection

The flowering of the paparazzi-social media lawsuit is an unintended consequence of the head-on collision of celebrity culture, internet technology and the law. It seems to have no natural limits, like a boundless universe that curves in on itself. It also makes for a fun story most every issue. Why, oh why can’t brands get the message?

Big-dollar figures are at stake – $150,000 per infringed photo or video, a figure that dwarfs the cost of filing suit. And there’s plenty of material potentially at stake, with countless celebrity photos and videos captured daily.

The Takeaway

So, here’s another suit bobbing past us in the ongoing deluge: Fendi, the famed luxury fashion house, is being sued by Eva’s Photography, a Queens, New York-based “professional photography company [in] the business of licensing photographs for a fee,” as its complaint alleges.

Fendi posted a photograph of Gossip Girl actress Blake Lively wearing one of its creations, a mustard-yellow shorts, duster and boots combo. Eva’s Photography claimed that it had copyrighted the picture and had not given permission to Fendi to post it, and this formed the basis of Eva’s Photography’s claim against Fendi.

The suit was filed in the Southern District of New York at the end of April, so there’s more news to come. In the meantime, we will wait to see whether Lively brings her own suit for commercial appropriation of her right to publicity and false endorsement. Remember, please, there is a copyright in a photo and a right of publicity for the person depicted, both of which are implicated when a brand wants to use a celebrity photo it did not commission, license or get permission to use. Of course, there are some exceptions to the rule, but they are narrow.

Check Out Our Latest Blog Posts

Maryland and Other States Weighing Taxes on Digital Ads

On May 7, 2020, Governor Larry Hogan vetoed HB 732 containing the new digital advertising tax. The Governor’s veto letter states that HB 732 and other vetoed measures are “misguided” and “would raise taxes and fees on Marylanders at a time when many are already out of work and financially struggling.” Read more here.

CCPA Compliance Meets Trade Secret Protection: A Peaceful Coexistence?

Since the California Consumer Privacy Act (CCPA) went live on January 1, 2020, businesses have been working to develop procedures for lawfully complying with requests from California consumers relating to their personal information. Such requests may provoke a vexing question for which there currently is no definitive answer in the CCPA: What is the business obligated to do if information that would be responsive to a consumer request includes legally protectible trade secret data either owned by the business or held subject to confidentiality restrictions imposed by third-party data sources? Learn more here.

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.