Advertising Law

In This Issue

Editors: Linda A. Goldstein | Jeffrey S. Edelstein | Marc Roth

Manatt Partners to Serve as Faculty at AAF’s ADMERICA! 2011 Conference

On June 1-4, 2011, the American Advertising Federation will hold its inaugural ADAMERICA! 2011 conference at which Manatt partners Jeff Edelsteinwill join professionals from influential advertising agencies, media companies, consumer products companies and other organizations to share insights on new legal developments regarding digital media, sustainability and other emerging areas.

Jeff will present on the legal panel, “Laying Down the Law of Advertising,” highlighting the unique legal and business challenges posed by digital and social media.

The conference will be held in San Diego, CA.

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From The Hill: Senate Gets Another Privacy Bill, House Considers COPPA Update

Legislators have introduced two new bills that impact the advertising industry. Sen. John Rockefeller (D-W.V.) introduced the Do Not Track Online Act of 2011, and a similar bill, the Do Not Track Kids Act of 2011, is awaiting consideration in the House of Representatives.

Sen. Rockefeller’s bill would create a federal registry of consumers who choose not to have information about their online activities collected.

Companies would be allowed to collect information about registered consumers only if “necessary” to provide a service requested by the consumer, or if a consumer is given “clear notice” about the site’s tracking and gives affirmative consent. All information must be destroyed or anonymized when it is no longer needed.

The Federal Trade Commission would have enforcement powers and would be tasked with creating the Do Not Track mechanism. Civil penalties range from up to $16,000 per day to a maximum total liability of $15 million.

“Consumers have a right to know when and how their personal and sensitive information is being used online – and most importantly to be able to say ‘no thanks’ when companies seek to gather that information without their approval,” Sen. Rockefeller, Chairman of the Senate Commerce Committee, said in a press release about his proposed bill.

Just days later Congressmen Ed Markey (D-Mass.) and Joe Barton (R-Tex.) introduced the Do Not Track Kids Act, which would expand the protections of the Children’s Online Privacy Protection Act (COPPA) and prevent online behavioral advertising to persons under age 18. The Act would prohibit Web sites from knowingly collecting data from minors for purposes of “targeted marketing.”

The legislation would also broaden the definition of “personal information” to include IP addresses, unique identifiers, and anything else that might permit the identification of a specific computer and would bring mobile applications under the auspices of COPPA.

Companies would also be prohibited from collecting geolocation data for minors.

Under the proposed legislation, sites would be allowed to continue to collect some information from users under age 18 only if they adhere to the Fair Information Practices Principles, which restrict companies in their collection and use of information.

Further, to the extent technologically feasible, sites would be required to implement an “eraser button” that would allow users to “erase or otherwise eliminate” publicly available content, and to take steps to ensure users are aware that this feature is available.

To read the Do Not Track Online Act of 2011, click here.

Why it matters: Lawmakers have no shortage of privacy-related bills to consider this term. In addition to Sen. Rockefeller’s bill, Congress is already considering both the Best Practices Act and the Do Not Track Me Online bill in the House of Representatives and Sens. John Kerry (D-Mass.) and John McCain’s (R-Ariz.) privacy bill in the Senate. While a number of consumer groups praised both pieces of legislation, representatives of the Direct Marketing Association expressed initial concern about Sen. Rockefeller’s bill, noting that a new law could lead the public to believe that current self-regulatory efforts have not been effective to date.

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Dial Soap Not “Complete,” Suit Claims

According to a new class action suit filed against The Dial Corporation in New York federal court, Dial Complete soap products are no more effective than ordinary soap and water and do not kill virtually all bacteria, as the company claims.

Even the product name – Dial Complete – is false, Michael Feuer claims in his complaint against The Dial Corporation.

“Dial’s marketing and advertising campaign sends an unmistakably clear, but an unconsciously deceptive and unfair message: Dial Complete is more effective at killing germs, protecting the consumer from germs, and thus preventing illness and promoting good health, than washing with less expensive soap and water,” according to the complaint.

Plaintiffs also argue that since 2001 the company has promoted the health benefits of triclosan, an active ingredient in Dial Complete that was originally developed as a surgical scrub for medical professionals.

The allegedly false claims include that Dial Complete 1) is “over 1,000 times more effective at killing disease-causing germs than other antibacterial liquid hand soaps,” 2) can kill “99.99% of bacteria” and “99.9% of illness-causing bacteria,” 3) reduces “disease transmission by 50% compared to washing with a plain soap,” 4) can kill “more germs than any other liquid hand soap,” and 5) that Dial Complete prevents and/or protects consumers from contracting serious illnesses caused by streptococcal infections, salmonella, E. coli, and staphylococcus bacteria.

But “[i]n truth, [Dial] has no independent, competent and reliable support for these claims,” according to the complaint.

Although Dial ads reference study results, the plaintiff contends that the study was performed by Dial itself and only two strains of bacteria were tested, while several other studies about triclosan have concluded that washing with soap and water is more effective.

The suit seeks compensatory and punitive damages under New York’s false advertising law as well as damages for breach of contract, negligent design, failure to warn, and unjust enrichment for a class of New York residents.

To read the complaint in Feuer v. The Dial Corp., click here.

Why it matters: Triclosan is an increasingly controversial ingredient. Several European Union countries have restricted or banned the use of triclosan, and in 2005 the Food and Drug Administration concluded that the use of triclosan soaps and sanitizers does not reduce the risk of illness and infection in the home. The Feuer lawsuit joins similar complaints filed against The Dial Corporation in Florida and Ohio.

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Indiana Adds Cell Phones to Do Not Call List

After the state legislature unanimously passed a bill to allow consumers to register cell phones on the state’s Do Not Call list, Indiana Governor Mitch Daniels signed it into law on May 13.

The House Enrolled Act 1273 allows consumers to register their cell phones, VOIP numbers, and prepaid wireless calling service with the existing state Do Not Call registry.
Telemarketers that place calls to numbers on the registry are subject to financial penalties and suits from the state attorney general.

The bill passed 50-0 in the state Senate and 93-0 in the House.

“Because many Hoosiers now use cell phones only and do not have land lines at home, we wanted to statutorily extend the protections of the Do Not Call list for cell phone users so they also can be shielded from intrusive solicitors,” Attorney General Greg Zoeller said in a statement after the legislature sent the bill to the Governor’s desk.

The current Indiana Do Not Call list contains more than 1.8 million residential numbers.
The law also updated the definition of a “call” to include calls made by the use of a recorded message device, the transmission of a text or graphic message via SMS, and the transmission of an image, photograph, or a multimedia message.

The law takes effect immediately.

Why it matters: As consumers increasingly rely upon their cell phones, marketers and advertisers are also using them as a means of contact, either by phone calls or text messages. Indiana’s addition of cell phones and VOIP service, as well as its broadened definition of what constitutes a “call,” means companies must be careful when making contact with Indiana residents.

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FTC Testifies about Mobile Privacy, “A Number” of Active Investigations

At a recent hearing before the Senate Judiciary Subcommittee on Privacy, Technology, and the Law, a staffer from the Federal Trade Commission testified that the agency has a “number” of active investigations into privacy issues associated with mobile devices, including children’s privacy.

The hearing was scheduled after news broke that iPhones and iPads were gathering and storing location data about users – even if they turned off their location services.

Jessica Rich, Deputy Director of the FTC’s Bureau of Consumer Protection, said the agency has been examining wireless and mobile privacy issues since 2000. “New technology can bring tremendous benefits to consumers, but it also can present new concerns and provide a platform for old frauds to resurface. Mobile technology is no different,” Rich said.

She highlighted four recent mobile-related enforcement actions brought by the agency, including actions against Google and Twitter for failing to protect the privacy and security of consumer information.

In addition, the FTC filed complaints against Reverb Communications, a public relations firm accused of having its employees pose as consumers and post positive reviews about clients’ gaming applications on iTunes, and against Philip Flora, a spammer who used prepaid cell phones to send over 5 million unsolicited text messages.

Currently the FTC has “a number of active investigations into privacy issues associated with mobile devices, including children’s privacy,” Rich told lawmakers, including Committee Chairman Sen. Al Franken (D-Minn.).

Rich also referenced the agency’s December privacy report, applying those recommendations to mobile privacy. For example, the “privacy by design” approach recommended in the report could lead a traffic and weather app to limit its collection of data only to consumers’ location information rather than simultaneously collecting consumers’ call logs or contact lists. Rich suggested that app developers should “carefully consider” how long their service should retain consumers’ location information.

Rich said the agency is currently reviewing 452 comments received in response to its privacy report, many of which address mobile privacy issues, and will release a final staff report later in 2011.

Testimony from the Justice Department also revealed that the Criminal Division is in the process of creating proposals for anti-computer-crime laws relating to mobile privacy.

Deputy Assistant Attorney General Jason Weinstein in the Criminal Division said that a “package of anti-computer-crime” issues relating to mobile privacy is “imminent as measured by days instead of weeks.” Such proposals could provide the basis for future laws.

Other speakers included representatives from Apple and Google, who noted that location-based services have proliferated due to increased consumer demand.

To read the text of the FTC’s testimony, click here.

Why it matters: “What today is about is trying to find a balance between . . . wonderful benefits and the public’s right to privacy,” Franken said in his opening statement at the hearing. “I believe that consumers have a fundamental right to know what data is being collected about them. I also believe that they have a right to decide whether they want to share that information, and with whom they want to share it and when. And I think we have those rights for all of our personal information.”

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$3 Million FTC Settlement over COPPA Violations

The Federal Trade Commission has reached a $3 million settlement with Disney-owned Playdom, Inc., and a company executive, Howard Marks, over charges that they violated the Children’s Online Privacy Protection Act approximately 1.2 million times.

The defendants operated 20 online, virtual worlds where users can play games, participate in online forums, and engage in other activities. But according to the Commission, the defendants illegally collected and disclosed the personal information of children under the age of 13.

According to the FTC, approximately 403,000 children registered on the defendants’ general-audience sites – like My Diva Doll and Ninja Clans – between 2006 and 2010, and an additional 821,000 registered on Pony Stars, a Web site specifically directed at children. (The Walt Disney Company acquired Playdom in August 2010.)

The defendants failed to notify parents and obtain parental consent prior to collecting, using, or disclosing the names, e-mail addresses, and ages of children under the age of 13, as required by the FTC’s COPPA Rule, and the sites’ profile pages and online community forums allowed children to publicly post their personal information, including full names, instant messenger IDs, and location, according to the FTC complaint.

In addition, Playdom violated the FTC Act because its privacy policy misrepresented that the company would not allow children under 13 to post their personal information online, the Commission alleged.

The defendants agreed to pay a $3 million civil penalty and are barred from future misrepresentations about their information collection practices regarding children and COPPA violations. The consent decree also orders that any personal information collected in violation of the law be destroyed within 10 days and that the defendants are subject to compliance monitoring for four years.

To read the complaint in U.S. v. Playdom, Inc., click here.

To read the consent decree, click here.

Why it matters: “Let’s be clear: Whether you are a virtual world, a social network, or any other interactive site that appeals to kids, you owe it to parents and their children to provide proper notice and get proper consent,” Jon Leibowitz, Chairman of the Federal Trade Commission, said in a statement about the settlement. “It’s the law, it’s the right thing to do, and, as today’s settlement demonstrates, violating COPPA will not come cheap.” As Leibowitz’s comment and the size of the fine – the largest civil penalty given by the FTC under COPPA – make clear, companies that deal with children’s information should ensure they are following all rules and requirements, or face a steep penalty.

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