Advertising Law

Goldstein Presents Native Advertising Webinar, Mar. 16

Native advertising has generated a lot of buzz lately as a means for advertisers to break through the clutter and for online publishers to generate revenue. The FTC recently issued updated guidance to ensure that native ads do not deceive, however since some of the more specific guides may be at odds with today's industry practices, the new requirements present compliance challenges for advertisers and publishers alike. Linda Goldstein, partner and chair of Manatt's Advertising, Marketing and Media practice, will address these challenges and clarify the FTC's detailed recommendations in a complimentary webinar hosted by BNA on Wednesday, March 16.

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EU, U.S. Reach Data Deal—Not a Harbor, but a Shield

After the deadline expired to reach a deal on a new Safe Harbor for the transatlantic transfer of data, the European Union and the United States reached an agreement on a "Privacy Shield."

Last October, the Court of Justice of the European Union threw out the Safe Harbor agreement between the United States and European Union, leaving a wake of uncertainty about the international transfer of data. The 15-year-old agreement required companies in the United States to self-certify that they were in compliance with the seven principles found in the European Union's standard. Administered by the U.S. Department of Commerce, the deal permitted American companies to transfer data from the European Union to the United States without violating the more stringent data laws found in the European Union.

However, after Edward Snowden's revelations about the surveillance activities of the National Security Agency (NSA), Austrian citizen Max Schrems filed a complaint that led the European Union's highest court to invalidate the Safe Harbor. Businesses were left in a quandary and the pressure on the negotiations surrounding a new agreement increased. Thereafter, the January 31 deadline to reach a new deal passed.

Bringing a measure of relief—but a new dose of uncertainty—officials announced two days later that the governments had reached an understanding. Details about the agreement, dubbed the EU-U.S. Privacy Shield, remain unclear and the parties must still hammer out the details. One issue that remains key for the European Union: limits on U.S. governmental surveillance of data.

The European Commission about the Privacy Shield issued a statement in which it revealed that the United States has promised to rein in its oversight. "For the first time, the U.S. has given the EU written assurances that the access of public authorities for law enforcement and national security will be subject to clear limitations, safeguards and oversight mechanisms," the Commission said. "The U.S. has ruled out indiscriminate mass surveillance on the personal data transferred to the U.S. under the new arrangement. To regularly monitor the functioning of the arrangement there will be an annual joint review" conducted by the Commission and the Commerce Department.

Companies that receive personal data from Europeans must practice robust enforcement to protect the rights of EU citizens, who will be offered multiple redress possibilities. The State Department must appoint an Ombudsperson to handle complaints regarding instances of possible access by national intelligence authorities.

Moving forward with the Privacy Shield will require some effort on both sides of the pond. Lawmakers in the United States need to move along the Judicial Redress Act, a bill that would permit non-U.S. citizens to bring suit in this country over allegations of illegal governmental data surveillance. The House of Representatives passed the bill in October but it remains pending in the Senate Judiciary Committee.

In Europe, the Article 29 Working Party (WP29), composed of EU privacy regulators, released a statement requesting additional information before the group will sign off on the deal. The WP29 "looks forward to receiving the relevant documents in order to know precisely the content and the legal bindingness of the arrangement and to assess whether it can answer the wider concerns raised by the Schrems judgment as regards international transfers of personal data," the group said.

The WP29 highlighted "four essential guarantees for intelligence activities" to garner its approval: the processing of data should be based on clear, precise and accessible rules; the objectives of the processing should be necessary and proportionate; an independent oversight mechanism should exist that is both effective and impartial; and effective remedies must be made available to the individual.

To read the EU Commission's press release, click here.

To read the Judicial Redress Act, click here.

To read the WP29 statement, click here.

Why it matters: Work will still be required to finalize the agreement. While the EU Commission, with the assistance of the WP29, prepares a draft "adequacy decision" that will explain the agreement for approval by the European Union's College of Commissioners, officials in the United States will put in place the new framework, the monitoring mechanisms, and the Ombudsperson required by the understanding. But even an agreement in principle allows businesses to breathe a sigh a relief. "This new agreement provides certainty to American and European businesses that trans-Atlantic data flows may continue and confirms the establishment of clear safeguards for protecting individual privacy rights," Direct Marketing Association Vice President of Advocacy Christopher Oswald said in a statement. Federal Trade Commission Chair Edith Ramirez agreed. "We are pleased that U.S. and European Commission officials have reached an agreement in principle which, once finalized, will allow for the continuation of an important mechanism for transatlantic data transfers," she said in a statement. "Under the new agreement, the EU-U.S. Privacy Shield, the Federal Trade Commission will continue to prioritize enforcement of the framework as part of our broader commitment to protect consumers' personal information and privacy. We will continue to work closely with our European partners to ensure consumer privacy is protected on both sides of the Atlantic."

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A Sticky Situation: Glue Company Faces Suit From FTC

"Made in the USA" claims formed the basis for another Federal Trade Commission lawsuit, this time against Chemence, Inc., the maker of glue products such as Kwik Frame, Kwik Fix, and Krylex.

Although the company touted its fast-acting glues as "Made in the USA" and "Proudly Made in the USA," approximately 55 percent of the product cost is attributable to imported chemicals that are essential for the glue to function, the agency said.

In addition to its own unqualified deceptive claims, Chemence assisted third parties in duping consumers, the FTC alleged. The defendant also manufactures cyanoacrylate glues marketed under the brand names of other retailers, and by supplying "Made in the USA" marketing materials to those sellers to promote the glue products, the company provided others with the "means and instrumentalities" to deceive consumers in violation of the Federal Trade Commission Act.

The complaint, filed in Ohio federal court, requests monetary relief and an injunction that would permanently prohibit the defendant from making claims in violation of the Federal Trade Commission Act.

"For many shoppers, a claim that a product is made in the USA is a big selling point," Jessica Rich, Director of the FTC's Bureau of Consumer Protection, said in a statement about the action. "Companies should not overstate the amount of U.S. content their products actually contain."

To read the complaint in FTC v. Chemence, Inc., click here.

Why it matters: The agency has been active in enforcing national origin claims in recent years, reminding advertisers that the FTC's Enforcement Policy Statement on U.S. Origin Claims requires that products labeled or advertised as "Made in the USA" must be "all or virtually all" made in the United States. State regulators, particularly in California where the state amended its national original law last year, may also institute enforcement actions.

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Feeling the Love, California Appellate Panel Affirms "Twibel" Verdict

Courtney Love's victory in a Twitter libel suit—dubbed "Twibel"—was affirmed in an unpublished opinion from a California appellate panel.

Love—no stranger to defamation suits based on Twitter activity, having agreed to a $430,000 settlement in a suit against her for calling a fashion designer a prostitute on the social networking site—was sued by her former attorney.

The widow of Kurt Cobain hired Rhonda J. Holmes because she believed that various persons had defrauded her, her daughter, and her husband's estate of millions of dollars. Holmes investigated the allegations for several months and, in April 2009, issued a press release stating that she had been able to "track down" $30 million and would be "filing civil cases" within 30 days.

Thirty days came and went, however, with no action by Holmes. She told Love that her computer had been hacked, she had been accosted in a parking lot, her phone was tapped, and that she had been the victim of credit card fraud. Holmes attributed the events to the press release. Months went by without Love hearing from Holmes. In June 2010, Love commented on Twitter: "I was fucking devastated when Rhonda J. Holmes, Esquire, of San Diego was bought off @FairNewsSpears perhaps you can get a quote."

Love thought the tweet was privately sent to another Twitter user and removed it less than ten minutes later. Holmes sued for defamation. At trial, Love testified that she did not think about the potential harm to the attorney's reputation from the comment because she believed it was true when she wrote it. She told the California state jury she didn't think "someone walked up and handed [Holmes] a bunch of cash," but instead meant that Holmes had been "gotten to" or "compromised" in some manner.

The jury returned a special verdict in which it found that the Twitter statement was false and had a natural tendency to injure Holmes' profession, but that Holmes, who was deemed a public figure for purposes of the law suit, did not prove by clear and convincing evidence that Love knew the statement was false or had serious doubts about the truth of the statement. The court entered judgment in favor of Love and Holmes appealed.

An appellate panel affirmed, rejecting Holmes' argument that Love admitted she did not know whether Holmes had been bribed and that the dictionary definition of "bought off" meant "bribed."

Viewing the evidence in the light most favorable to Love, "we conclude that there is substantial evidence to support that jury's finding that although [Love's] statement was false and injurious, Holmes failed to establish by clear and convincing evidence that [Love] knew the statement was false or had serious doubts about the truth of the statement." As such, Holmes failed to show that Love acted with actual malice as required when defamation suits are brought by a public figure.

The dictionary definition of "bought off" and Love's lack of knowledge whether Holmes had been bribed to stop representing her did not constitute clear and convincing proof of a knowing falsehood or of reckless disregard for the truth, the panel wrote. Love "firmly believed Holmes had been compromised or 'gotten to' in some manner," the court said. Under the circumstances—Holmes' description to Love of all that had befallen her since the press release was issued followed by months of silence—"it was not reckless for [Love] to believe that Holmes had been induced to stop representing her."

Even if the court assumed that the term "bought off" only meant "bribed," Love's testimony "supports the finding that she in fact believed that Holmes has been pressured to stop representing her," the panel noted, and Holmes presented no evidence to establish that Love in fact entertained serious doubts as to the truth of her statement. It was therefore "reasonable for the jury to conclude that by saying that Holmes was bought off, [Love] meant that Holmes had been induced in some manner to stop representing her—whether by consideration or by threat."

To read the decision in Gordon & Holmes v. Love, click here.

Why it matters: The lawsuit is believed to be the first "Twibel" suit to make it to trial (with Love's first alleged Twitter defamation ending in a settlement). The appellate panel agreed with Love that her statement was not made with actual malice given that she sincerely believed that her former attorney had been "bought off," in the sense that she had been compromised or "gotten to," and not simply handed a pile of cash, per the dictionary definition of the term. Even though the tweet was false and could have injured the lawyer's reputation, Love's sincere belief carried the day and the court affirmed judgment in her favor.

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Court Tosses Comparative Pricing Suit for Lack of Injury

In a positive development for retailers coping with the new trend of deceptive pricing class actions, a Massachusetts federal court judge threw out a suit against Kohl's Department Stores over "comparison prices."

Ellen Mulder visited a Kohl's store in Hingham, Massachusetts, in November 2014. According to her complaint, she observed at least two price tags that displayed comparison prices: one represented the manufacturer's suggested retail price as having been $55 and another displayed an undefined comparison price of $26. The products were listed as being on sale for $29.99 and $17.99, respectively.

"Enticed by the idea of paying significantly less than the comparison pricing price," Mulder purchased both items. She then filed suit alleging violations of the Massachusetts state law and the Federal Trade Commission Act as well as fraud, breach of contract, and unjust enrichment. In response, Kohl's filed a motion to dismiss.

Finding that Mulder suffered no harm, U.S. District Court Judge F. Dennis Saylor granted the motion.

"[I]t is superficially appealing to conclude that plaintiff has suffered a cognizable 'injury' under the law," the court said. "The requirements of misrepresentation and causation have been met: plaintiff alleges that she was unfairly induced into making a purchase that she would not have made, but for the misrepresentation. And the transaction was arguably to her detriment; she would rather have her money—which she could use to purchase other things—than the items."

But this was insufficient, Judge Saylor wrote.

"The law requires more than misrepresentation, causation, and a potential remedy: it requires a legally cognizable 'injury,' " the court said. "There does not appear to be such an injury here. Plaintiff has not suffered an economic injury; among other things, she has suffered no loss, and there is no sum of money that could be awarded to her that could 'compensate' her without providing a windfall."

For similar reasons, the court dismissed Mulder's claims of breach of contract, fraud, and unjust enrichment. Because proposed amendments to the complaint would be futile, the court also denied Mulder's request to file an amended version and granted Kohl's motion to dismiss on all counts.

To read the order in Mulder v. Kohl's Department Stores, Inc., click here.

Why it matters: Given the trend of deceptive pricing litigation sweeping courts across the country, the decision in Mulder is a positive development for retailers facing such cases. The court was clear: even if the plaintiff regretted her purchase, "it appears that she paid $40.78 for items that were, in fact, worth $40.78," the judge wrote. "The fact that plaintiff may have been manipulated into purchasing the items because she believed she was getting a bargain does not necessarily mean she suffered economic harm."

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