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FTC Vastly Expands Reach of the Health Breach Notification Rule

Government Contractors and the Government’s FCA Enforcement Environment

IP Intelligence Report

In re Post Foods, LLC: TTAB Denies Color Mark for Post’s Fruity Pebbles

Mark Johnson, Mathew Drocton Release 2024 Q1 Updates in Insurance Class Actions

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<a href="#Hotel">Hotel Giant Hilton Accused of Leaky Fees, Unsound Partitions</a>

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<a href="#New">New York City to Slap Labels on Added Sugars</a>

<a href="#Manly">Manly Soap Maker Howls, Pounds Chest, Runs Smack into NAD</a>

<a href="#NAD">NAD Rolls Eyes at Charcoal Maker’s Size Boasts</a>

<a href="#Two">Two Updates on AI and Overseas Copyright Law</a>

<a href="#Register">Register for Our Upcoming Webinar</a>

<a href="#Check">Check Out Our Latest Blog Posts</a>

<a href="#Join">Join Us at This Upcoming Conference</a>

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Hotel Giant Hilton Accused of Leaky Fees, Unsound Partitions

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Watchdog class action another sign of national junk fee obsession

<s>A hundred years ago</s> <a href="https://www.bakerlaw.com/insights/ad-ttorneyslaw-june-1-2023/">Back in June</a>, we mentioned how politicians were hopping on the Joe Biden bandwagon when it came to a pre-2016 political throwback issue: junk fees.

Biden highlighted it in his <a href="https://www.npr.org/2023/02/07/1155313067/biden-bill-stop-junk-fees-travel-entertainment-state-of-the-union-2023">State of The Union address</a> in February, and we outlined the efforts of state and federal legislators to address the same issue shortly thereafter. Those efforts included California Senate Bill 478, which promised to have an outsized impact on how other states and regulators addressed the hated fees.

In October, the FTC got in on the act, <a href="https://www.ftc.gov/news-events/news/press-releases/2023/10/ftc-proposes-rule-ban-junk-fees">proposing a rule</a> to, in its own words, “ban” junk fees. It’s a bold proposal and very similar to the legislation from the Golden State—and sharing many of that bill’s <s>problematic</s> interesting wrinkles. Check out our discussion of the rule, and some of those wrinkles, over on the <a href="https://www.adventures-in-law.com/blogs/junk-fees-rulemaking-how-hard-can-it-be-to-figure-out-the-price-of-a-burrito/">latest edition</a> of our AD-ttorneys Law Blog (which inadvertently reveals the authors’ strange obsession with burritos).

Recently, a consumer watchdog group called Travelers United took aim at junk fees through a <a href="https://admin.bakerlaw.com/wp-content/uploads/2023/12/fees-comp.pdf" target="_blank" rel="noreferrer noopener">class action</a> that was bumped from the Superior Court of the District of Columbia to the District’s Federal Court. Filed in early December, the complaint accuses Hilton of participating in a $2.7 billion enterprise—and no, that’s not the budget of its latest hotel line expansion, it’s the alleged revenue gathered by the hotel industry in junk fees.

The case reflects the increased focus on this across the board and helpfully describes some of the practices being targeted by regulators. First, there’s “drip pricing,” a practice that “occurs when a company does not disclose the total price of a product or service until late in the purchase process, after consumers have already expended time and effort selecting the product or service ….” Weary customers at the end of the checkout process tend to proceed with their purchase even if the final price has climbed above the original quote—mostly to avoid the pain of further searching.

Second, there’s “partition pricing,” in which “a portion of the costs for a good or service is excluded from the total price,” the complaint states. “When Junk Fees are initially ‘partitioned’ from total price, consumers are unable to make effective price comparisons between goods and service leading to distortions in the market.”

There’s lots of detail in the complaint about how Hilton’s fees allegedly work—worth a read for anyone worried that their company might be tagged with similar accusations. As the complaint notes, hotels have been the subject of FTC warning letters and enforcement by state Attorneys General. Adding fees later in the purchase process, however, is a common practice across e-commerce. Laws such as the one passed by California and the FTC’s proposed rule would regulate a much broader swath of commerce than just hotels. Almost any fee, except for shipping and those imposed by the government, would be fair game.

Those laws are not in force yet, though, and Hilton here is charged with a single count: violations of D.C.’s Consumer Protection Procedures Act, under the argument that the alleged fee practices violate the Act’s prohibition of “misrepresent[ing] ... a material fact which has a tendency to mislead.” Notably, this law includes statutory damages—the greater of treble damages or $1,500 per violation. In arguing why consumers are misled, the complaint borrows heavily from prior FTC enforcement and guidance related to drip pricing. The landscape is shifting rapidly in this area. While California has passed a law that potentially requires all fees be included in price advertising, industry is awaiting FAQs from the Attorney General that will clarify requirements. The FTC may finalize a rule in this area, which would almost certainly be challenged in court, or the Commission may issue a trimmed down, more targeted version. Considering the focus on the issue, stricter requirements are almost certainly coming, from those sources or elsewhere, so it makes sense to start thinking about how your business could incorporate fees into an upfront price. We’ll keep you updated on new developments as they come. For further conversation on the background of junk fees, the nature of the FTC’s proposed rule, and at least one Ad-law partner’s shocking and hitherto unrevealed love for the song stylings of <a href="https://www.youtube.com/watch?v=_QNEf9oGw8o">Captain &amp; Tennille</a>, check out last month’s <a href="https://www.bakerlaw.com/insights/ad-nauseam-junk-fees-will-keep-us-together/">AD Nauseam podcast</a> on the subject.

New York City to Slap Labels on Added Sugars

New warnings the latest step in Mayor Adams’ vegandetta

But Can I Still Get Halal on the Corner of 6th and 52nd?

New York Mayor Eric Adams has never made a secret of his allegiance to healthy eating.

Before he ran for the mayor’s seat, Adams had already authored a <a href="https://theplantbasedworld.com/2020/10/12/must-read-healthy-at-last-by-brooklyn-borough-president-eric-adams/">plant-based diet book</a>. He then made a splash during his campaign with <a href="https://nypost.com/2021/06/01/mayoral-candidate-eric-adams-wants-nyc-to-go-vegan/">claims that his fast-food-laden daily diet</a> had made him a diabetic, left him blind in one eye, caused nerve damage that set him on the road to amputation, and engendered a host of other health issues. He promised to bring the plant-based wellness diet regimen that he credited with saving his life to the five boroughs, including city-sponsored “lifestyle clinics” to promote healthy eating.

Things started off well enough. The newly elected mayor <a href="https://www.nyc.gov/office-of-the-mayor/news/070-22/mayor-adams-takes-executive-action-promote-healthy-food-new-york-city#/0">signed decrees </a>committing the city to “procuring, preparing, and serving healthy and nutritious food citywide” and <a href="https://www.nyc.gov/office-of-the-mayor/news/388-23/mayor-adams-food-education-roadmap-promote-healthier-school-communities-across-new-york#/0">food education initiatives </a>in public schools.

But then, the whispers began—was he really vegan? Was he eating fish on the sly?

“The controversy, which was called ‘FishGate’ on social media, was in part a humorous diversion, but it also reinforced concerns that Mr. Adams often stretches the truth,” wrote <a href="https://www.nytimes.com/2022/02/07/nyregion/eric-adams-fish-vegan.html">The New York Times</a>, drawing connections between the lighthearted FishGate and other controversies. This was, of course, long before the <a href="https://www.nytimes.com/2023/11/10/nyregion/adams-fbi-investigation-phones.html">FBI seized his phones and iPad</a>, but that’s a whole different kettle of plant-based fish substitute.

Perfect vegan or not, Adams seems determined to bring New Yorkers into the plant-based present anyway. The Center for Science in the Public Interest <a href="https://www.cspinet.org/press-release/nyc-mayor-eric-adams-signs-sweet-truth-act">lauded the mayor</a> for signing city <a href="https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=5839410&amp;GUID=C669DFA8-AB8D-4DB1-B75B-D0F233C03CD0&amp;Options=&amp;Search=">legislation</a> that requires restaurants with 15 or more locations—read fast-food chains and “casual” dining businesses—to slap warnings on all products that “contain more than a day’s worth of added sugars.”

Note the word “added.” “[Added sugars in some foods] can be harder to estimate, particularly when sugar is added to a recipe along with fruit or milk, which are naturally sweet,” the center notes. “Menu items that lack a prepackaged equivalent will not have to carry warnings until the federal government requires restaurants to post added sugars information.”

The warnings, which the city’s health department is mandated to design by next June, include factual statements “about high added sugars intake, which will be displayed at the register, on the menu board, and next to places where high-sugar items are dispensed, such as soda fountains” as well as icons on the products that allow New Yorkers “to see at a glance that their fountain soda or combo meal has more than a whole day’s worth of added sugars.”

If you’re a restaurant chain doing business in the Big Apple—or the Big Onion, if you<a>’</a>re in a ’70s frame of mind—and you’re curious about what the warnings will look like, you can check out an earlier iconographic intervention staged by the city <a href="https://www.nyc.gov/assets/doh/downloads/pdf/cardio/sodium-warning-rule.pdf">targeting sodium</a>.

Manly Soap Maker Howls, Pounds Chest, Runs Smack into NAD

For Dr. Squatch, the line between comparative and standalone claims is blurry

It’s the Testosterone, Stupid

There’s an ironic, unapologetic, outdoorsy, muscular, manly-man style that’s become a bit of a cliché in advertising over the past 20 years. Think “Trojan Man” commercials, car ads <a href="https://www.youtube.com/watch?v=_QRzEcKhFr8">like this one</a>, or that series of <a href="https://www.youtube.com/watch?v=uLTIowBF0kE">deodorant commercials</a> from Old Spice.

We’re at a loss as to the overall cultural significance of this attitude. It’s clearly a tongue-in-cheek approach to masculinity—perhaps meant to tickle the amygdalae of countless male office workers alienated from the life-and-death struggles of our Cro-Magnon ancestors? Who knows?

But there’s an <a href="https://bbbprograms.org/media-center/dd/dr-squatch-no-harmful-ingredients">interesting case</a> before the National Advertising Division involving a brand that embodies this attitude—<a href="https://www.drsquatch.com/">Dr. Squatch</a>, a line of men’s personal care products featuring soaps, deodorants, colognes … and mood chews and bidets.

(Wait—isn’t this supposed to be macho?)

Dr. Squatch’s exuberant branding goes beyond signature scents like “Wood Barrel Bourbon” and “Bay Rum.” The company mounts a full-throated endorsement of “natural ingredients,” including marketing tags that inspired the ire of the effete sophisticates over at European multinational consumer goods behemoth Unilever, which manufactures a number of competing products.

Unilever objected to so many individual tags that it’s best to work through them one by one.

The first category—claims such as “No harmful ingredients” and “We never use harmful ingredients or harsh chemicals” survived NAD’s inquiry because they were interpreted as “monadic,” which we’re going to assume means “standalone” rather than “<a href="https://en.wikipedia.org/wiki/Monadology">related to the metaphysics of German philosopher Gottfried Wilhelm von Leibniz</a>.” In other words, the claims didn’t disparage other products by comparison. Unilever’s argument, which NAD struck down, is that Dr. Squatch promoting its products’ lack of harmful ingredients necessarily implies that those ingredients are in competing products.

Likewise, Dr. Squatch’s use of a so-called Sh*t List—nothing’s more manly than the willingness to deploy a carefully censored swear word—that includes “a roster of ingredients that we vow to never use in any of our products … common and lesser-known chemicals, synthetics, and preservatives that can have a range of adverse effects on your skin and body.”&nbsp;NAD held that this trope didn’t establish a “comparative superiority message” either.

Interestingly, icons that accompanied these “monadic” claims—skull and crossbones imagery that appeared next to the text—were axed by NAD. The images “reasonably convey[ed] a message related to potential harms … and when displayed in the context of the ‘Sh*t List,’ further convey[ed] a message that the ingredients listed, which include non-chemical and non-harmful ingredients, are harmful.” Skull and crossbones equals death, equals a message of potential harm. Makes sense. Dr. Squatch provided substantiation that its ingredients are not harmful, but NAD was not satisfied that its “sh*t list” ingredients, presumably at least some of which are in Unilever’s products, are harmful.

While this seems like an overall win for Dr. Squatch so far, the company lost on several other claims and tags.

“For generations, traditional mass market brands have been avoiding using natural ingredients in personal care products to make production cheaper and faster,” for instance, got slapped down by NAD because it hadn’t been reasonably supported with evidence. Likewise, “I can even pronounce all the ingredients unlike my last deodorant” failed the supporting evidence test.

Declarations including “I’m never going back to aluminum deodorant again!” and “No X ALUMINUM X TRICLOSAN X PHTHALATES … can’t go back to that other junk” also met with disapproval because they “convey the misleading message that other deodorant products are unsafe or pose potential risks or dangers” but, again, had not been substantiated through evidence.

Dr. Squatch’s exhortation to avoid hitting “the showers with neon goop that looks like a sports drink” was recommended for discontinuation as well for conveying an implied superiority message “that mainstream personal care products (some of which may be brightly-colored) have a goop-like or unappealing consistency, do not smell good, and are ultimately worthless.”

The takeaway? Making comparative claims—or claims that tiptoe up to the edge of comparison—is a minefield. As we often repeat, advertisers must have substantiation for their claims. Claims about the benefits of a certain product shouldn’t edge over into criticisms of a competitor unless you’ve done the research to back it up.

NAD Rolls Eyes at Charcoal Maker’s Size Boasts

The claims, built one on top of the other, all fell down together

We’re Not Making the Obvious Joke Here

We’ll move now from a ... shall we say “hair-splitting” National Advertising Division decision to <a href="https://bbbprograms.org/media-center/dd/royal-oak">one that’s more clear-cut</a>. In fact, the claims in the present NAD case stack neatly together.

Before NAD appeared Royal Oak Enterprises, maker of Royal Oak Super Size briquets. Dragging Royal Oak into the advertising arena was Kingsford Products Company, maker of various competing products, including its 100% Natural Hardwood Briquets—an offering that <a href="https://www.bakerlaw.com/insights/ad-ttorneyslaw-february-26-2021/#5">caught heat from </a>a Snack Dragon class action a couple of years back.

This time, Kingsford is on the attack, and NAD’s decision worked in its favor on all three of the Royal Oak claims it challenged. The tags are, in order, that Royal Oak’s Super Size briquets are 50 percent bigger (although bigger than what was not specified); that its briquets provided the “best grilling experience”; and that a “bigger briquet is a better briquet.”

NAD recommended that all the claims be discontinued.

Here’s how the decision broke down the briquets:

First, although the 50 percent claim did not reference a specific competing product, “consumers may reasonably understand the comparison to be against Kingsford since Kingsford Original briquets comprise a significant share of the charcoal briquet market.” But NAD found that these claims, when considered against the Kingsford products, were unsupported by any evidence.

On the second claim—that Royal Oak provided the “best grilling experience”—NAD held that the claim was related to measurable attributes referenced in the advertising. Namely, quickness of lighting, high heat output, and a long burn. This is important because it meant that the claim wasn’t standalone puffery; it had to be substantiated. And since the size of the briquets wasn’t the only factor that played into the three grilling criteria, Royal Oak had to rely on testing of these qualities, which it failed to provide.

Finally, NAD maintained that the “bigger is better” claim—which had been tied to the “better grilling experience” tag in some advertising—would be understood by reasonable consumers to mean “that a bigger briquet size is comparatively better in some recognizable or measurable way with respect to overall grilling performance.” Unfortunately, since Royal Oak had failed to substantiate measurable ways in which a bigger briquet was superior to a smaller one, NAD held that it shouldn’t make the “bigger is better” claim at all.

In keeping with the “bigger is better” topic, we have not one, not two, but three takeaways from this story.

Takeaway number one: Not naming a competitor won’t necessarily spare you from backing up your comparison claims.

Takeaway number two: Don’t build your marketing claims on a house of sand; Royal Oak relied on size alone to stake its claim to a better grilling experience, and once that original claim was rejected by NAD, the rest of its claims fell too.

Takeaway number three: The “bigger is better” claim was the last card in a house of cards. By implying a connection between briquet size and the “better grilling experience” claim, Royal Oak lost the right to claim that size mattered at all.

In Royal Oak’s case, the lack of substantiation wasn’t the only problem; its individual claims worked to undermine each other. So here’s the bonus takeaway—pay attention to the logic of your copy. It could mean the difference between having to fix three dead claims and having to clean up only one.

Two Updates on AI and Overseas Copyright Law

China and the U.K. face tussles around and about generative image models

Here’s an update, of sorts, to the Getty Images lawsuit against Stability AI, owner of the Stable Diffusion text-to-image AI model, that <a href="https://www.bakerlaw.com/insights/ad-ttorneyslaw-feb-24-2023/#getty">we covered back in February</a>.

If you don’t want to go back and read the immaculately crafted and gripping original article, here’s the TL; DR:

Getty sued Stability AI for copyright and trademark violations, claiming that the company copied “over 12 million” images from Getty’s websites in order to train Stable Diffusion, had removed copyright notices from some of the Getty images it used, and spat out images that incorporated a modified version of Getty’s trademark.

While this case is in a holding pattern over jurisdiction, another similar case is moving forward across the pond—where Getty is suing Stability for <a href="https://www.msn.com/en-us/money/companies/getty-lawsuit-against-stability-ai-to-go-to-trial-in-the-uk/ar-AA1l01Oz">roughly the same offenses</a>. The difference is that the U.K. case is scheduled to go to trial, after Stability failed to convince The Business and Property Courts of England and Wales under the High Court of Justice (yes, that’s the <a href="https://en.wikipedia.org/wiki/Courts_of_England_and_Wales">complete and proper name</a>, let us catch our breath)—that the case shouldn’t be heard in the U.K. because no one involved in the training of the model was based in that country.

... to China’s Capital

While we’re globe hopping, we thought we’d mention an <a href="https://www.scmp.com/tech/tech-trends/article/3243570/beijing-courts-ruling-ai-generated-content-can-be-covered-copyright-eschews-us-stand-far-reaching">interesting case </a>out of the Beijing Internet Court, where artwork created using Stable Diffusion is copyrightable, as the human author’s use of prompts and adjusting parameters of the generative AI tool to effect the output meant that the outputted image was copyrightable.

The decision stands in sharp contrast to the position of the U.S. Copyright Office, which has <a href="https://www.bakerlaw.com/insights/copyright-and-ai-generated-content-establishing-scope-requires-more-than-registration/">consistently refused</a> to find that unaltered generative AI outputs are copyrightable, as they are not the result of <a href="https://www.bakerlaw.com/insights/ad-ttorneyslaw-april-10-2023/#us">human creativity</a>.

This Chinese ruling, although issued by a relatively low-level court, is seen by some as a sign of things to come. In the South China Morning Post article, linked above, a University of Hong Kong law professor is quoted as saying that the ruling “is very significant” and that “its issuance ... signals a substantial policy endorsement for the AI industry.”

Check out The Fashion Lawfor an <a href="https://www.thefashionlaw.com/stability-ai-cant-escape-getty-images-copyright-lawsuit-in-uk-court-says/">interesting discussion</a> about how Getty’s twin cases might fare differently in the United States and the U.K. (TL;DR—the author argues that the company may do better in the States because the U.K.’s exceptions to infringement are narrower.)

We don’t normally cover international copyright issues, but the fate of the U.K. Getty suit—and the development of AI copyright policy in China—are instructive, by way of contrast, to the unfolding situation in the United States. Among other things, AI technology itself doesn’t seem particularly concerned with respecting international borders, so how the technology is used—or abused—in the United States will in large part depend on how it is defined and deployed in other jurisdictions.

<a href="https://bakerlaw.zoom.us/webinar/register/WN_MW2T5tdpRymW_XMqUD4xrg#/registration">Session1: 2023 Year in Review</a>

2023 was a year of heightened regulatory scrutiny of some of the key marketing strategies and tools marketers are employing in this rapidly evolving landscape. This webinar will highlight some of this year’s most significant legal and regulatory developments and the challenges they present for marketers in both the real and virtual worlds.

<a href="https://www.adventures-in-law.com/blogs/the-view-from-the-ana-kids-table-ana-childrens-advertising-recap/">The View from the ANA Kids Table [ANA Children’s Advertising Recap]</a>

The Association of National Advertisers (ANA) Masters of Advertising Law Conference took place in sunny Orlando, Florida – aka The Happiest Place on Earth. And what a fitting location to discuss the flurry of activity in the children’s advertising space. Children’s advertising has had quite a year, and the panels at ANA covered the news expertly. The Federal Trade Commission (FTC) has been active with the Stealth advertising report and the update to the Endorsement Guides. The Children’s Advertising Review Unit (CARU) announced new guardrails aimed at protecting children in the metaverse. The Children’s Online Privacy Protection Act (COPPA) continues to loom large, with enforcement actions and the specter of “COPPA 2.0” hanging around in the background. Artificial intelligence (AI) was a HUGE focus of every panel and appeared in several of the children-focused presentations. The following are more details about the child topics that were raised at the conference.

<a href="https://www.adventures-in-law.com/blogs/takeaways-from-sustainability-marketing-panel-at-ana/">Takeaways from Sustainability Marketing Panel at ANA</a>

As we all begin to bundle up for a chilly holiday season, I can’t help but reminisce about and pine for the warm Florida weather last month at the ANA Masters of Advertising Law Conference. I am also continuing to reflect on the lively panels and discussions at ANA. One discussion that I keep thinking back on was a panel, which featured Better Business Bureau’s National Programs Executive Vice President Mary Engle, on today’s top five sustainability marketing trends. The panel kicked off by highlighting recent updates in the sustainability marketing arena, including discussion of the ongoing review of the FTC’s Green Guides and recent enforcement action by state and federal regulators as well as lawsuits brought by private plaintiffs.

<a href="https://www.americanconference.com/advertising-claims-substantiation/">7th Annual Legal, Regulatory, and Compliance Forum on Advertising Claims Substantiation</a>

Find solutions to the challenges of substantiating claims in this new era of advertising. While the modalities of advertising may change, advertising’s core tenant of claims substantiation remains an unwavering constant. As such, legal and regulatory professionals in marketing and advertising set their calendars for this industry-leading event and recognize it as the premier source of information and practical guidance in this area of practice!

AD-ttorneys@law – December 21, 2023

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