Ad Groups Push for FCC Privacy Rule Reversal
The drama surrounding the Federal Communications Commission's privacy rules continues.
Part of an Order passed last year along party lines under former Chairman Tom Wheeler, the rule established privacy regulations that required Internet service providers to obtain opt-in consent before sensitive data (defined to include browsing and app usage history) can be collected and used for ad targeting purposes.
Just days before the controversial rule was set to take effect, the agency voted two-to-one to issue a stay. Sen. Jeff Flake (R-Az.) and Rep. Marsha Blackburn (R-Tenn.) then introduced joint resolutions that would invalidate the privacy rule pursuant to the Congressional Review Act (CRA).
Longtime critics of the rule, a coalition of ad groups—the American Association of Advertising Agencies, American Advertising Federation, Association of National Advertisers, Data & Marketing Association, Interactive Advertising Bureau, and Network Advertising Initiative—threw their support behind the resolutions.
"We wholeheartedly commend Senator Flake and Congressman Blackburn, and their Senate and House colleagues, for introducing resolutions of disapproval for the FCC's ill-considered move to create a new, costly, counterproductive, confusing and unnecessary regulatory regime around privacy for broadband providers," the groups said in a statement. "Without prompt action in Congress or at the FCC, the FCC's regulations would break with well-accepted and functioning industry practices, chilling innovation and hurting the consumers the regulation was supposed to protect."
Association of National Advertisers executive vice president Dan Jaffe told MediaPost that the groups intend to lobby in Washington, D.C. in support of the resolutions. "We think this is one of the worst rules that has been put forward in some time," he said. "One way or another, it needs to be stopped."
Why it matters: The groups "strongly urge[d] Congress to support and quickly act" on the joint resolutions, but the CRA only provides 60 legislative days after the regulations are approved to effectuate a repeal. Under that timeline, the legislature must act by mid-May. Not taking any chances, the industry also continued fighting the rule at the FCC itself by filing a reply to the oppositions for the petition that urged the Commission to reconsider the rule. The same collection of ad groups argued that the rule failed to align with the FTC's privacy approach and that the Order was an unconstitutional restriction on free speech. "The creation, analysis, and transfer of consumer data for marketing purposes constitutes speech," the groups wrote. "Non-misleading commercial speech regarding a lawful activity is protected under the First Amendment."
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Invention Promotion Company Hit With TRO Courtesy of FTC
A company that advertised it would analyze, file and promote inventions was the subject of a temporary restraining order thanks to a new Federal Trade Commission action filed in Florida federal court.
According to the agency, Scott Cooper and his companies, World Patent Marketing and Desa Industries Inc., deceived consumers with fake "success stories" and testimonials to induce them to pay thousands of dollars to patent and market their inventions. Potential customers were told they would need to purchase a "Global Invention Royalty Analysis" that the defendants claimed contained expert evaluations of the patentability and marketability of the invention, with a price tag of up to $1,295.
Once the analysis arrived, consumers faced another bill, the FTC alleged: this time for packages ranging from $7,995 to almost $65,000 for various services that would help them to earn money from their inventions and see their product sold at big-name retailers.
But after paying thousands of dollars for the defendants' services, consumers were strung along for months, even years, with many seeing nothing in return, the agency said. Those that did receive some marketing assistance received "low-effort, low-value" help, such as domain registrations, press releases, or logos. The defendants generally failed to obtain patents for consumers, secure licensing deals or royalty income, and did not even market the inventions featured in the website testimonials.
The defendants also used unfair tactics—including threats of criminal prosecution—to discourage consumers from publishing negative reviews of the company, the FTC said. One consumer who sought a refund and filed a complaint with the Better Business Bureau received a threatening letter from the defendants' lawyer, stating that seeking a refund was extortion under Florida law and, "since you used email to make your threats, you would be subject to a federal extortion charge, which carries a term of imprisonment of up to two years and potential criminal fines."
The defendants filed at least one lawsuit to suppress consumer complaints, the FTC told the court, and used other threatening tactics that included a gag clause in its consumer contracts and a link that sent existing customers to a company blog post that claimed a consumer who visited the defendants' office was kicked out by the company's "intimidating security team, all ex-Israeli special ops and trained in Krav Maga, one of the most deadly of the martial arts."
A U.S. District Court Judge granted the agency's motion to halt the defendants' operations and freeze its assets pending litigation, in which the FTC seeks a permanent injunction against the allegedly illegal practices and the return of consumers' money.
To read the complaint and the TRO in FTC v. World Patent Marketing, Inc., click here.
Why it matters: "This case is about protecting innovators, the engine of a thriving economy," acting chair of the FTC, Maureen K. Ohlhausen said in a statement about the case. "The defendants promised to promote people's inventions and took thousands of dollars, but provided almost no service in return. Then they added insult to injury by threatening people who complained." The agency also reminded businesses that representations about patentability, marketability, or potential earnings are subject to the FTC's truth-in-advertising standards.
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Oh Canada! FTC Signs MOU With Northern Neighbor
Strengthening enforcement cooperation on cross-border fraud matters, the Federal Trade Commission has signed a memorandum of understanding (MOU) with the Royal Canadian Mounted Police (RCMP).
The agreement will enhance the ability to share information and engage in joint investigations, the agencies said, and confirm "that the enforcement challenges of combatting [fraudulent and deceptive commercial] practices go[es] beyond national frontiers and that cooperation between national authorities is essential to fight such practices."
Coordination between civil and criminal agencies "may provide complementary approaches to serious economic crime, including mass marketing fraud, through information and intelligence sharing and cooperative enforcement," according to the MOU.
The parties agreed to meet at least once a year and participate in periodic teleconferences to discuss ongoing and future opportunities for cooperation. The MOU took immediate effect and will remain in force for five years.
"This MOU will strengthen our efforts to combat cross-border fraud and protect both U.S. and Canadian consumers," acting chair, Maureen K. Ohlhausen said in a statement. "This will expand our areas of cooperation and our ability to share information and conduct joint investigations."
To read the MOU between the FTC and the RCMP, click here.
Why it matters: The FTC and the RCMP already work together on issues such as telemarketing fraud and providing redress for victims of international schemes, the agencies noted, and the MOU recognizes the partnership history between the two agencies, such as a 2015 case involving cross-border telemarketing fraud targeting seniors and a 2016 case that yielded $1.87 million for the victims of a debt relief scam.
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