Alerts

AD-ttorneys@law – September 19, 2019

Alerts / September 19, 2019

In This Issue:

J-B Weld, Glued to Its Guns, Faces FTC Review

Adhesive company rejects NAD and NARB recommendations

Sticky Businesses

Back in February 2019 – my, has the time flown – we told you about a dispute before the National Advertising Division between J-B Weld, manufacturer of a staggering array of adhesives, and its competitor Illinois Tool Works (ITW), manufacturer of a staggering array of, well, subsidiaries (go check out the list of its 470 child companies here).

At issue were “Made in the USA” claims J-B Weld allegedly made on its product packaging and online advertising – slogans like “Made in USA” and “they have always been made in the USA.”

ITW called NAD’s attention to the tags because, it claimed, J-B Weld’s products contained significant foreign components, rendering the advertising misleading. (As you may remember from that previous article, the Federal Trade Commission (FTC) limits made-in-the-USA claims to products that meet the “all or virtually all” standard, where “all significant parts and processing [are] of U.S. origin. That is, the product should contain no – or negligible – foreign content.”)

You, studious reader, also know that NAD attempts to harmonize its decisions with the guidelines set by regulators. So, how did J-B Weld fare?

The Takeaway

Not so well. The NAD held that reasonable consumers would consider the caps, tubes, syringes and other delivery system components as part of the product itself rather than packaging, which wouldn’t be subject to the all-or-virtually-all requirement. It recommended that J-B Weld discontinue the claims. J-B Weld, in turn, rejected the recommendations and announced its plans to appeal to the National Advertising Review Board (NARB).

And now, seven months later, NARB has weighed in, agreeing fully with NAD’s original decision and recommendations.

But man, it’s hard to keep J-B Weld down. The company rejected NARB’s recommendations, saying that it “believes that its Made in the U.S.A. advertising is adequately substantiated in accordance with applicable laws and regulations.”

And so, the next step: the FTC. The NARB says it’s “referring the advertising to an appropriate government agency [in this case, the Federal Trade Commission] for possible enforcement action.”

Was pushing back at every step of the way a wise choice, or a recipe for a complaint? Particularly to an FTC that has been hungering to impose more significant Made-in-USA sanctions?

AMD Settles Bulldozer Suit

Class can draw on $12 million settlement fund

Back to School

In another throwback to an earlier case, we revisit Tony Dickey, et al. v. Advanced Micro Devices, Inc., a class action that made quite a splash when it was filed back in 2015.

Now, pay attention. This is nerd material. The original complaint centered on Advanced Micro Devices’s (AMD’s) “Bulldozer” core processors. Each core processor is an independent processing unit within a computer’s CPU that can independently execute user commands; if your computer boasts more core processors, you can reasonably expect increased processing power and a faster execution of commands.

The suit alleges that the Bulldozer was hawked to high-end designers and gamers as the “world’s first 8-core CPU.” But Dickey and the class he represented accused AMD of softening its definition of “core.” The original suit maintains that AMD “built the Bulldozer processors by stripping away components from two cores and combining what was left to make a single ‘module.’ But by removing certain components of two cores to make one module, they no longer work independently.”

Which meant that an 8-core was really a 4-core. Which meant decreased performance. And a false advertising suit.

The Takeaway

In our last report, we relayed how AMD suffered a defeat in the Northern District of California when the court certified Dickey’s putative class of AMD processor buyers.

And now, a settlement has been reached.

The chipmaker has agreed to set up a $12.1 million fund for the chip purchasers with a cap of 30% of the fund value placed on attorney’s fees. The award works out to $35 per chip if 20% of the class stakes a claim. “The value of the proposed common fund represents a recovery of approximately 20% of the damages Plaintiffs would have sought to prove at trial on behalf of the certified class,” the agreement reads. “And, based on their experience, Class Counsel estimate that claiming class members are likely to receive more than 50% of the value of their certified claims had they prevailed at trial.”

One wonders how the class members feel about this statement, when some of the original processors sold for upward of $250 each.

Oooooh! Ryan’s in Trouble!

Someone told on 8-year-old YouTube king’s channel

Not Toyin’ Around

Remember Ryan, from Ryan ToysReview? When last we met Ryan, we were stunned by his reach as an influencer. At the tender age of 7, Ryan, along with his mother and father, was the owner and star of one of the world’s most popular YouTube channels. At the time (2017 to be exact), his frenetic, hyper-cut, colorful review videos had earned him somewhere around 9.4 million subscribers and more than 16 billion – that’s billion – total views.

What a difference two years makes. Today, Ryan and his fam have captured the eyes of more than 21 million subscribers, and their videos have been viewed 31 billion times, more than any other channel on YouTube. One source estimates that he earned $22 million between June 2017 and June 2018.

That Was Then

Back then, we reported that Ryan’s channel was peripherally involved in a Children’s Advertising Review Unit investigation. One of Ryan’s partners, WhatNot Toys, was accused of soliciting information from consumers without complying with the applicable legal requirements for the youngsters who were likely to visit its site.

In today’s edition, Ryan is the main player in a complaint filed with the Federal Trade Commission by Truth in Advertising, Inc. ((TINA). The accusation? Ryan is breaking the law, TINA claims, by failing to disclose material connections with brands that are appearing in his videos.

TINA cites a video with the understated title of “Ryan’s Drive Thru Pretend Play with Hardee’s New Star Pals Toys!!!” TINA maintains that this video, launched days after a similarly food-themed video that lacked brand endorsement, is aimed squarely at preschoolers who are unable to assess the relationship between “organic” content and advertisement. “While adults may be able to spot the ad,” the watchdog explains in its case summary, “[T]hey are not the target audience . . . children under the age of five are. And for them, it’s impossible to discern the difference, even if the Hardee’s video disclosed the burger joint’s partnership with Ryan ToysReview, which it does not.”

The complaint cites a passel of other videos for similar infractions involving well-known brands like Chuck-E-Cheese and Nickelodeon.

The Takeaway

TINA references another CARU investigation from 2017, in which the group “found that sponsored content . . . was not adequately disclosed,” on Ryan’s channel. “CARU concluded that children could reasonably believe that all the Ryan ToysReview videos, including sponsored ones, were independent and unbiased unless there was a clear disclosure indicating otherwise.”

TINA notes that CARU recommended that Ryan’s videos feature an audible disclosure at the beginning of each video to identify sponsored content, and that the channel ignored their guidance.

And then, interestingly, TINA takes CARU to task: “[B]ut the recommendation itself was, unfortunately, flawed because it was not based on data regarding the channel’s target audience’s age or consumer perception. . . . Had CARU obtained data on the specific age of Ryan ToysReview’s target audience, as well as the consumer perception of this demographic, it would undoubtedly have concluded that even an audible disclosure . . . does not clarify the content for its target audience or eradicate the deception present in such videos.”

We’ll see where this complaint goes; remember, it’s essentially just a request for the FTC to take a look. But if you’re advertising products and services to kids, it might pay to remember that children under 13 are not all the same when it comes to making subtle distinctions about content. TINA is adding a further shading to the under-13 demographic: youngsters under the age of 5 or so, who cannot differentiate advertising from “regular” content at all, and who therefore deserve extra consideration.

YouTube and Google Settle COPPA Claims With FTC

But it isn’t the $170M settlement figure that’s interesting

What’s It Going to Look Like?

Let’s start at the end, shall we?

What will YouTube look like after its recent settlement with the Federal Trade Commission (FTC)?

The agreement, which was shared with parent company Google and has made big, big news (see here, here and here), is seen to be yet another sign that federal and state regulators are taking off the gloves when it comes to the big tech companies.

But, in the immediate future, what does it mean for YouTube’s design?

The service, which was purchased by Google in the Dark Ages 2006, has always had a bit of an anarchic feel, which was preserved even after Google fitted it with its famed custom ad technology. To the present day, anyone can watch most of the platform’s videos without being challenged about who they are or whether the content they’re consuming is appropriate.

But that will have to change.

Demands

Here’s why. The FTC said about the agreement that “[t]he proposed settlement requires Google and YouTube to develop, implement, and maintain a system that permits channel owners to identify their child-directed content on the YouTube platform so that YouTube can ensure it is complying with COPPA.”

As you know (but in case you don’t), COPPA is the Children’s Online Privacy Protection Act, and it requires websites to obtain parental consent before gathering personal information – including browsing habits – from children under 13. That includes cookies, which are the lifeblood of Google’s ad model.

The Commission brushed aside arguments that YouTube’s 13-and-over registration requirement made any difference to whether a good deal of its content was actually viewed by children. (See this article for background.)

But there’s more: “The companies must notify channel owners that their child-directed content may be subject to the COPPA Rule’s obligations and provide annual training about complying with COPPA for employees who deal with YouTube channel owners.”

Channel owners, who are allowed to monetize their presence on the platform, will be drawn into the “system” as well.

The Takeaway

Oh – there’s also the $170 million penalty. You can tell that even the normally stuffy FTC staff is excited about something when they break out the charts.

But, in the end, the money isn’t the real story – as the New York Times article cited above notes, the entire penalty represents only 1.7% of parent company Alphabet’s profit last quarter. It’s nothing.

What is tantalizing is how on earth YouTube will be refitted so permission can be sought from parents before any personal information is collected about a child under the age of 13. This change will be a vast undertaking.

According to the FTC at least, both companies were aware of their influence on children and the size of their under-13 audience. The companies boasted “YouTube: The new Saturday morning cartoons” in one marketing presentation. “The #1 website regularly visited by kids” claimed another.

While sloganeering like this served as evidence for the Commission to demonstrate Google and YouTube’s unlawful behavior, it also serves to point out the immensity of the problem facing the companies.

Thirty million people visit YouTube every day.

Which of them are kids?

IAB Tech Lab to Propose New Privacy Standard

It’s an individualized digital opt-out token that may defuse changes wrought by the CCPA

Reminiscing

Remember Y2K? (Please say you do.) Remember the anxiety, the fear, the uncertainty?

Well, 20 years to the day the advertising world will be facing its own mini-version of the famed millennial panic. No, no one’s worried that gas will stop pumping or the Eastern Seaboard will lose electricity.

But still: The technological structure of “The Way Things Are” will shift beneath us at midnight on Dec. 31, 2019. Because that’s when the California Consumer Privacy Act of 2018 kicks in.

Ripple Effects

We’re so fond of calling California the 800-pound gorilla of the national economy that we ought to come up with a different metaphor already. But even clichés are sometimes true: Decisions made in California loom large for citizens of every other state. And the CCPA is unprecedented legislation in the United States. Once it is in place, California residents will be granted European-style rights regarding their personal information. That will affect everyone doing business in the Golden State – which means everyone. The overall effect of the law will be nothing short of a sea change.

For a comprehensive review, see our resources here, but the main thrust of the CCPA is that Californians will have the right to prohibit businesses from selling their personal information and the right to have it deleted. They can ask for detailed information about their personal data, including purposes for which it is being used and specific personal information held on file.

Because the CCPA demands a radical departure from the current ad infrastructure, businesses are becoming concerned – especially since the enforcement penalties are robust, carrying civil penalties of $2,500 per violation, or up to $7,500 per intentional violation.

The Takeaway

Luckily, the folks at the IAB Tech Lab, a partner to the Interactive Advertising Bureau, are taking charge with a new proposed privacy architecture that will help address the requirements of the CCPA in a new, digital token format.

Unlike the mounds of cookies that exist on the devices of everyone who doesn’t block them or regularly clean them out, the token will be a single identifier that will be used by online publishers and advertisers. This centralized point of control will allow the user to set data preferences in one fell swoop, and those preferences will cascade outward to the publishers, the ad companies and the data companies that undergird the system.

Although details are forthcoming – the technology will be shared at the World Wide Web Consortium’s Improving Web Advertising Business Group – it sounds like a win-win. Consumers can simply walk away from tracking if they wish, while companies will have one simple-to-manage gateway to identify those who want to stay. This will allow companies to demonstrate compliance as well.

New Developments

Since the passage of the initial law, there have also been legislative amendments, which the Governor has until Oct. 13 to veto or sign. You can find more information on these amendments at our blog post here, but in short, here are the areas covered by the changes:

  • Scope of Coverage Delayed (transactional communications and employee request rights delayed one year).
  • Exceptions to Statutory Coverage (Fair Credit Reporting Act information and vehicle recall and warranty information).
  • Exceptions to Scope of Personal Information (publicly available government records, aggregate consumer information and deidentified information clarified or expanded).
  • Scope of Non-Discrimination (value to be based on value to business, not consumer, plus a limited exception for loyalty programs).
  • Consumer Rights Notices and Requests (changes to how rights are to be noticed and exercised).

We’ll keep you posted on how this solution develops.

Check Out Our Latest Blog Posts

IAB Unveils Solution for Interest-Based Advertising and CCPA “Do Not Sell” Right

On September 17, 2019, numerous stakeholders in the digital advertising industry – including publishers, advertisers/brands, AdTech companies and law firms (including numerous representatives from BakerHostetler) – convened at the Interactive Advertising Bureau’s (IAB) headquarters in New York for its unveiling of an industry solution to address the CCPA. The solution and its requirements of adoption by website publishers and advertisers/brands alike are discussed in detail here.

Lead Generation Leads to FTC Settlement

There is nothing particularly new about the idea of lead generation in marketing. Companies have from the very beginning paid their own employees or paid others to help find prospects for their goods and services. However, in today’s digital world and with the myriad different ways in which consumer information is gathered, the use of third parties for lead generation has proliferated. Not surprisingly, so has the abuse of lead generation efforts. Read more here.

CCPA Exceptions: What Qualifies as Activity ‘Wholly Outside’ of California?

Much has been said about the scope of the California Consumer Privacy Act (CCPA) and the far-reaching implications the law will have on businesses throughout the United States. Although it is true that the territorial reach of the law is broad, it is not without limits. The CCPA explicitly includes a geographic exception that may be important in determining the applicability of the law to personal information processed by businesses that do not have a physical presence (including employees) in California. Learn more here.

Part 3: Companies Are Not Complying With the Safe Harbor Provision of the DMCA

Once a company is found ineligible for DMCA safe harbor, it is vulnerable to be found liable for copyright infringement claims. Copyright holders may pursue secondary liabilities such as vicarious, contributory or induced infringement. Read 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.