Advertising Law

Recipients of FTC Influencer Letters Revealed

By Richard P. Lawson, Partner, Advertising, Marketing and Media

The Federal Trade Commission took on some big-name celebrities and companies when it sent warning letters to influencers and marketers about the need to comply with the agency's guidelines regarding endorsements and testimonials on social networking sites.

Sent last month, the letters marked the first time the agency has reached out directly to educate social media influencers themselves, the FTC said. Each of the 90 letters cited a social media post that concerned the agency, and some addressed particular disclosures that the FTC declared were "not sufficiently clear," such as "#sp," "Thanks [Brand]" and "#partner."

"The FTC's Endorsement Guides state that if there is a 'material connection between an endorser and the marketer of a product'—in other words, a connection that might affect the weight or credibility that consumers give the endorsement—that connection should be clearly and conspicuously disclosed, unless the connection is already clear from the context of the communication containing the endorsement," wrote Mary K. Engle, associate director of the FTC's Division of Advertising Practices. "Material connections could consist of a business or family relationship, monetary payment, or the provision of free products to the endorser."

While the FTC did not reveal the identity of the recipients when it announced the letters, a records request by news outlets uncovered the names of both influencers and companies that were instructed to improve their disclosures.

The 45 influencers included actresses such as Jennifer Lopez and Lindsay Lohan, reality television celebrities like Kourtney Kardashian and Scott Disick, and athletes such as Allen Iverson. The majority of the companies were fashion and beauty companies (Adidas, Chanel, Puma and Yves Saint Laurent, to name a few).

In the letters, the FTC advised that disclosures should include "clear," "conspicuous" and unambiguous language so that consumers can easily notice the disclosure and not have to conduct a search.

The agency also suggested that marketers review their written social media policies to ensure they comply with the Endorsement Guides (or implementation of such a policy if they lack one) and can appraise their social media marketing to ensure that all posts contain the necessary clear and conspicuous disclosures.

To read a sample letter to an influencer, click here.

To read a sample letter to a marketer, click here.

Why it matters: That letters were sent to many high-profile celebrities and major companies reinforces the message that the FTC means business when it comes to ensuring compliance with the Endorsement Guides. As a reminder, the agency emphasized three tips for influencers and marketers alike: Keep disclosures unambiguous (avoid vague terms that won't explain the nature of the relationship between an influencer and the brand), make disclosures hard to miss (by disclosing material connections above the "more" button), and don't bury disclosures in a string of hashtags that readers are likely to skip.

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NAD Recommends That a Coffee Brand Discontinue Its Environmental Claims

By Jeffrey S. Edelstein, Partner, Advertising, Marketing and Media

After considering environmental benefit claims made by Kauai Coffee Co., the National Advertising Division recommended that certain ads for the company's single-serve coffee pods be discontinued.

The self-regulatory body requested that the company substantiate its express claims such as "Don't trash the Earth with your coffee. Brew & Renew," "Kauai Coffee comes in newly certified 100% compostable pods that work in all K-Cup brewers," and "Now you can enjoy the great taste and convenience of single-serve coffee without worrying about the environmental impact. Our certified 100% compostable pod is compatible with all K-Cup brewers and is designed to go back to the land—not the landfill."

In addition, the NAD evaluated implied claims that Kauai Coffee pods are compostable in a home compost pile and that the environmental benefits of the pods are significant.

The advertiser provided certification from the Biodegradable Products Institute (BPI) for its "certified 100% compostable claim" and argued that the elimination of the more traditional, plastic format of single-serve coffee "is both [an] evident and significant" benefit.

While the NAD appreciated Kauai Coffee's efforts to develop new types of product packaging, it found that the advertiser's claims failed to include the "significant limitation" that the products are only compostable in industrial facilities. The print advertisement featured the "complete absence of any disclaimer indicating that the 'certified 100% compostable pods' are only compostable in industrial facilities," the NAD wrote.

"Although this significant limitation appears in a barely legible font on the photo of the Kauai Coffee box, and in a similarly tiny font within the BPI certification seal itself, the phrase 'compostable in industrial facilities' does not modify the main claim, nor is it sufficiently clear and conspicuous such that consumers will notice, read and understand it," the self-regulatory body said. A reference in the ad to "Learn more at coffeecomposting.com" was insufficient, as the NAD has consistently held that consumers should not have to search to learn more about the limitations of an advertising claim.

The print ad was particularly problematic given the audience targeted by the advertiser: mainly senior citizens, who may have impaired vision and are less likely than a younger population to notice important disclosures.

In harmonizing its decision with the FTC's Green Guides, the NAD found the advertising also overstated the environmental benefits of Kauai Coffee's products. "The advertisement boldly presents the Kauai coffee pods as an alternative to the 'Over 11 Billion K-CUPS [that] go into America's landfills each year,' however there was no evidence in the record quantifying the actual reduction (or potential reduction) of solid waste from the use of Kauai compostable coffee pods," the NAD wrote, and "given the fact that industrial facilities do not currently exist in the majority of communities, the environmental benefits are significantly overstated."

The NAD recommended the advertiser discontinue or modify the advertisement to include the language "Compostable in industrial facilities. Check locally, as these do not exist in many communities. Not certified for backyard composting."

To read the NAD's press release about the decision, click here.

Why it matters: "While manufacturers of single-use food service products should certainly be permitted, and even encouraged, to educate consumers about their innovations in the arena of disposable products, it is equally important that the benefits of such products be promoted in a responsible manner that does not overstate what has been proven by scientific evidence," the NAD wrote. In addition to obeying the requirement that advertising be truthful, accurate and nonmisleading, marketers should ensure that they comply with the FTC's Green Guides and avoid overstating the environmental benefits of their products.

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Court Looks to Ink Decision in Tattoo Copyright Dispute

By Jesse M. Brody, Partner, Advertising, Marketing and Media

The question of whether infringement occurs if a copyrighted tattoo is shown during a video game may soon be answered, after a federal court judge in New York moved a lawsuit forward earlier this week.

Solid Oak Sketches filed suit after its copyrighted tattoos—found on athletes including LeBron James and Kobe Bryant—were visible in Take-Two Interactive Software's video game "NBA 2K."

Take-Two countered, seeking a declaratory judgment that the visibility of the tattoos was both fair use and a de minimis use. Solid Oak moved to dismiss the counterclaims, but U.S. District Court Judge Laura Taylor Swain decided to let the parties battle it out in court.

With respect to Solid Oak's protection of the "Lion's Head Tattoo Artwork" found on James, the court said a conclusive answer was necessary to avoid future litigation. "Solid Oak has asserted infringement of this copyright against Take-Two in the past, giving rise to a 'reasonable apprehension' that Solid Oak will sue Take-Two if it continues to produce games depicting that tattoo, and 'the validity of the [copyright] may very well be placed at issue in further litigation between the parties,'" the court wrote. "Declaratory judgment on this issue in this action would thus 'serve a useful purpose' and 'offer relief from uncertainty.'"

Further, the defendant has a "substantial interest" in the resolution of the de minimis use and fair use counterclaims, the court added, "because Take-Two releases the NBA 2K game annually and Take-Two depicts other tattoos—including those that have been subjects of Solid Oak's previous demands—in a similar manner," the court said. "Because resolution of these disputes issues would also 'serve a useful purpose' and 'offer relief from uncertainty,' the motion to strike these counterclaims is also denied."

To read the memorandum order in Solid Oak Sketches, LLC v. 2K Games, Inc., click here.

Why it matters: The court's denial of the motion to dismiss the defendant's counterclaims moves the case one step closer to answering the question of whether a license is necessary to visually depict a copyrighted tattoo in a video game, movie or television show. The issue first gained notoriety when the tattoo artist behind Mike Tyson's face tattoo sued to stop the release of "The Hangover Part II" because the movie featured actor Ed Helms sporting the distinctive face tattoo. That case settled, leaving the question unanswered—for now.

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EPIC Takes a Swing at Youth Tennis Ratings

By Richard P. Lawson, Partner, Advertising, Marketing and Media

Does a secret algorithm used to rank young tennis players violate the Children's Online Privacy Protection Act (COPPA)?

According to a complaint filed by the Electronic Privacy Information Center (EPIC) with the FTC, it might. The privacy watchdog group argued that Universal Tennis LLC uses a "secret, proprietary algorithm" to assign personally identifiable numeric scores to tennis players under 13 years old and publishes the ratings online, all without parental permission, in violation of the statute.

The company collects match results from high school, college, professional, international, and U.S. Tennis Association junior and adult tournaments for its Universal Tennis Rating (UTR), a number between 1 and 16 that is based on a player's last 30 matches within the last 12 months. While a free subscription provides access to single-digit ratings, for $4.95 per month, premium subscribers will receive a report with two additional decimals that provide a more precise rating figure. They will also receive a player rating precision as well as player rating history and search features.

Universal Tennis provides no mechanism that would permit players or their parents to opt out of having their data collected, used and disclosed; players or their parents cannot opt out of being scored; and the actual logic used to create the rating, EPIC told the FTC, has not been explained.

While sporting associations have long provided ratings of athletes that are objective and transparent, "There is no necessary reason that a rating system that enables young tennis players, or competitors in any sport or activity, must be secret, proprietary, or essentially unaccountable," the group wrote.

It further alleges that Universal Tennis violates COPPA by failing to obtain verifiable parental consent prior to collecting, using and disclosing children's personal information (specifically, their full names) without the ability to opt out or direct that their children's personal information be deleted from Universal Tennis' website.

Further, the company's mysterious ratings system runs afoul of Section 5 of the FTC Act's prohibition on unfair practices, EPIC added. "The use of a secret algorithm to score children creates a substantial risk of harm because children's development, educational, scholarship, and employment opportunities may be unfairly hindered by low and inaccurate scores, the calculation of which is secret and the validity of which parents are not permitted to dispute."

EPIC requested the FTC investigate the UTR system and enjoin the company's COPPA and Section 5 violations.

To read EPIC's complaint, click here.

Why it matters: While the complaint focuses on the alleged COPPA violations, EPIC also argued that the secret algorithms violate Section 5. "Algorithms are used for social control," the group wrote, citing examples such as the Chinese government's social credit system. "The UTR score defines the status of young athletes in all tennis-related activity; impacts opportunities for scholarship, education and employment; and may in the future provide the basis for 'social scoring' and government rating of citizens," according to the complaint. "EPIC seeks to ensure that all rating systems concerning individuals are open, transparent, and accountable."

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