Advertising Law

Christine Reilly Joins Manatt’s Los Angeles Office as Partner and Co-Chair of the TCPA Compliance and Class Action Defense Practice

Manatt is pleased to welcome Christine Reilly as a partner and co-chair of the firm’s TCPA Compliance and Class Action Defense practice. Reilly represents clients in major litigation in a wide variety of areas, including consumer protection, unfair competition, false and deceptive advertising, business torts, and entertainment and intellectual property.

back to top

FTC Consumer Protection Head Addresses Do’s, Don’ts for Privacy

Calling the current advertising climate “a technological revolution at the intersection of marketing and consumer data,” Director of the Federal Trade Commission’s Bureau of Consumer Protection Jessica Rich discussed the importance of protecting the privacy of consumers who make online transactions.

In the new era of advertising, “timing and context are everything,” Rich told attendees at the AdExchanger Industry Preview event. “Advertisers are looking to connect with the right consumers, at the right time, and in the right context.”

Targeted advertising benefits consumers, Rich acknowledged, and added that the FTC has “no interest in jeopardizing” such ads that help support online content and services that might not otherwise be available or for which consumers would have to pay.

Despite its benefits, “targeted advertising raises consumer privacy concerns, plain and simple,” she said, particularly as online tracking becomes increasingly more invisible due to technological advances like device fingerprinting and enhanced tracking of consumers across multiple devices.

What should advertisers do?

Rich made the business case for privacy, noting that she has seen an uptick in companies that use privacy choices as a selling point. She praised industry efforts like the Digital Advertising Alliance and Network Advertising Initiative to establish privacy codes of conduct for online tracking.

She also set forth three “privacy rules for the road” featuring privacy by design, increased transparency, and “usable” choice. Companies should build in privacy protections at every stage of the product or service development, she advised, emphasizing the importance of deidentification.

“[B]olster sound technical strategies for de-identifying data with a strong commitment and effective policies not to re-identify it,” Rich suggested. “This means that companies should publicly commit not to seek to re-identify the data and should, through contract, require the same of those with whom they share data.”

Increased transparency should be a goal for advertisers. Privacy policies should be easy to read, include “just-in-time” notices, provide key information and set forth the choices consumers will have at the time they provide data or make other decisions. These choices also included practices that would come as a surprise given the context and the consumers’ overall relationship with the company, Rich said.

She also noted four key pitfalls that marketers should avoid. “[M]ake sure that any claims you make about how you collect, use, or share data are truthful and complete,” Secondly, “be careful about who you do business with.”

To be meaningful and non-deceptive, the information and choices given to consumers must cover all tracking practices, not just a subset. And finally, advertisers should “be very careful about marketing using sensitive data.” Avoid it altogether she suggested, but at the very least, provide an opt-in.

To read Rich’s prepared remarks, click here.

Why it matters: Rich repeatedly emphasized the importance of transparency and providing choices to consumers, some of whom know nothing about cookies or even know that they are being tracked at Internet sites. The FTC isn’t interested in cracking down on online tracking, she explained, but instead wants companies to be open and honest about how they are collecting and using data. “[T]he Commission’s central goal is to offer consumers truthful information and meaningful choices as they navigate the marketplace. And we have learned that when companies explain the ‘value proposition’ to consumers and give them such choices, many consumers choose to continue to engage, or to allow use of some of their data, rather than opting out altogether. Giving consumers choices about their data is essential to building the trust necessary for this marketplace to flourish. In the long run, hiding the ball will erode consumer confidence, which benefits no one.”

back to top

Alcohol Ads Banned in Los Angeles

Citing an interest in reducing alcohol abuse and underage drinking, the Los Angeles City Council voted unanimously to ban advertisements for all types of alcoholic beverages on public property and buses.

“Given the number of youth in the City of Los Angeles who are susceptible to alcohol advertising, as well as the general impact of alcohol advertising on alcohol use, the City can play a role in reducing exposure of youth and others to alcohol advertisements by voluntarily prohibiting the advertising of alcoholic beverages on real or personal property, including buses and other vehicles,” according to the new ordinance.

Alcohol ads will not disappear overnight, however, as the new measure excludes current advertising contracts, some with up to six years remaining.

While the ban covers all city-owned and city-controlled property, it exempts city proprietary departments, departments that control their own funds and properties used for “operation of a restaurant, concert, sports or entertainment venue” like the Los Angeles Convention Center, the Los Angeles Zoo, and the Los Angeles International Airport, although they “are strongly encouraged to adopt advertising policies consonant with” the ordinance.

Advertisements intended to communicate the health hazards of alcoholic beverages, that encourage people not to drink alcoholic beverages, or that publicize drug or alcohol treatment or rehabilitation services, are excluded from the advertising ban.

Opponents of the new measure argued that the city would lose revenue, as roughly 20 percent of the space offered by Los Angeles for advertisements featured alcohol-related ads. Supporters, including groups like Women Against Gun Violence and the Asian American Drug Abuse Program, countered that the actual dollar amount was less than 1 percent of the city’s operating revenue and cited a study from the UCLA Center for Alcohol Marketing to Youth which found that alcohol advertising on city-owned property encourages youth alcohol consumption.

Why it matters: City property has become a hot-button area with regard to alcohol advertising. Los Angeles, which previously prohibited alcohol advertisements from bus benches in 2011, follows in the footsteps of cities like Boston, Philadelphia, and San Francisco, which have similar bans on all city property.

back to top

Forget It: FTC Shuts Down Unsubstantiated Memory Claims for Children’s Game

Focus Education touted that Jungle Raiders, its child-directed computer game, can improve children’s focus, memory, attention, behavior, and school performance, even for kids with attention deficit hyperactivity disorder (ADHD).

But a proposed consent order with the Federal Trade Commission will put an end to the company’s claims that the agency alleged were unsubstantiated and lacked scientific proof.

The Texas-based company and its officers generated sales of about $4.5 million for the game, which was sold as part of the ifocus System via infomercials and Web site advertising for $214.75 plus tax. The ads claimed that Jungle Raiders had “scientifically proven memory and attention brain training exercises, designed to improve focus, concentration and memory,” and could permanently give children “the ability to focus, complete school work, homework, and to stay on task.”

Commercials featured children stating they got “better grades” and “a lot more 100 percents,” and parents, teachers, and a child psychiatrist who said the game improved the school performance and behavior of children.

Pursuant to the proposed consent order, the defendants would be prohibited from making the challenged claims or other claims for substantially similar products unless competent and reliable scientific evidence was provided. The order would also ban unsubstantiated claims about the benefits, performance, or the efficacy of products or services related to improved cognitive abilities, behavior, or academic performance, or that can treat or reduce symptoms of cognitive disorders like ADHD.

Misrepresentations about the results of tests, studies, or research, or that the benefits of a cognitive improvement product are scientifically proven, are also prohibited under the order.

The FTC will accept comments on the proposed deal until February 20.

To read the complaint and consent order in In the Matter of Focus Education, click here.

Why it matters: “This case is the most recent example of the FTC’s efforts to ensure that advertisements for cognitive products, especially those marketed for children, are true and supported by evidence,” Jessica Rich, director of the agency’s Bureau of Consumer Protection, said in a press release about the case. “Many parents are interested in products that can improve their children’s focus, behavior, and grades, but companies must back up their brain training claims with reliable science.”

back to top

Google: FTC Deal Should End Parallel Class Action

Does a settlement with the Federal Trade Commission that provides consumer restitution foreclose recovery in a class action suit based on identical allegations?

According to Google, the answer is yes.

Last year, the FTC charged Google with committing unfair commercial practices within the meaning of the Federal Trade Commission Act by billing consumers for Google Play store-app purchases made by children without the authorization of the account holder. Apps downloaded from the store did not require the entry of a password to make in-app purchases.

Google changed its policy in 2012 to require a password for such purchases but created a 30-minute window during which purchases could be made without a password. Over the last three years, “many thousands” of consumers complained to Google about the unauthorized charges incurred by children making in-app purchases, some reaching hundreds of dollars, the FTC said. The company failed to take appropriate action by typically referring customers to the app developer and internally referring to the issue as “family fraud.”

To settle the allegations, Google agreed to pay $19 million in customer restitution.

Prior to the consent agreement, Google faced a putative class action filed in California federal court by a mother who claimed the company’s lax policy for in-app purchases cost her $65.95 when her sons bought items in the Run Jump Smash app.

In a joint status report filed with the court after the FTC settlement was finalized, Google argued that the civil suit should be dismissed, because the agreement requires that Google reimburse all wrongly billed customers who now have no additional basis for recovery.

“The FTC Settlement resolved allegations that parallel the plaintiffs’ allegations in this matter and provides that Google will grant to consumers all of the relief to which plaintiffs would be entitled if they were successful in this litigation – i.e., full refunds to consumers for minors’ unauthorized in-app purchases,” Google told the court. “In light of the FTC Settlement, Google submits that the plaintiffs in this case will obtain all of the relief to which they would otherwise be entitled and, therefore, there is no basis for this class action to proceed.”

The plaintiff refused to drop the suit, and Google stated it will file a motion to deny certification of the proposed class.

In response, the plaintiffs “strongly disagree[d]” with Google’s contention and indicated the parties “are now at an impasse.” It requested that the court order discovery to commence immediately.

To read the parties’ joint status report in Imber-Gluck v. Google, click here.

Why it matters: Google’s situation is not uncommon, as plaintiffs are often quick to file a civil lawsuit in the wake of an FTC enforcement action. Companies should keep an eye on the proceedings to see whether Google is successful in getting the consumer class action dismissed.

back to top

Cybersecurity and the State of the Union

After recently announcing his plans to introduce several pieces of privacy and data security legislation, President Barack Obama turned his attention to cybersecurity again in his State of the Union address.

“No foreign nation, no hacker, should be able to shut down our networks, steal our trade secrets, or invade the privacy of American families, especially our kids,” the President said. “I urge this Congress to finally pass the legislation we need to better meet the evolving threat of cyber attacks, combat identity theft, and protect our children’s information. If we don’t act, we’ll leave our nation and our economy vulnerable. If we do, we can continue to protect the technologies that have unleashed untold opportunities for people around the globe.”

The week before, the President paid a visit to the Federal Trade Commission and the Department of Homeland Security to announce new legislation on data breach notification, cybersecurity, student privacy, and a consumer privacy Bill of Rights.

Weighing in on the State of the Union, the Interactive Advertising Bureau found some positives as well as some negatives. Executive Vice President and General Counsel Mike Zaneis said the group supports a federal data breach notification law that would preempt the various state versions, which he said shares “ideals” with the IAB.

However, he expressed concern about the proposed consumer privacy Bill of Rights, which “would make the U.S. less competitive in the global economy.”

To read the text of President Obama’s State of the Union address, click here.

Why it matters: While the future of President Obama’s various proposals remains unclear, legislators have scheduled the first hearing on the data breach notification measure. The House Subcommittee on Commerce, Manufacturing and Trade will consider the bill, which includes a requirement that companies notify customers within 30 days of a breach and would preempt the current patchwork of 47 state laws. “We need a plan in place that will help prevent data from being stolen in the first place, and will also alleviate consequences for consumers if hackers are successful,” Rep. Michael Burgess (R-Texas), chair of the subcommittee, told The Hill. “I am encouraged by the President’s recent focus on this issue and call for a national standard, and I agree.”

back to top

Noted and Quoted . . . Natural Products Insider Talks to Wasserman About Rise of Class Actions Challenging Dietary Supplement Makers

A recent article published by Natural Products Insider highlights the rising tide of class action lawsuits filed against manufacturers and marketers of foods, beverages and dietary supplements and explores strategies for companies to limit their exposure to class action complaints.

In the article, Manatt partner Ivan Wasserman said, “[u]nlike FTC or FDA, which does have some checks and balances before a suit can be filed, basically nothing is stopping the plaintiff’s attorney from filing a lawsuit. They can certainly file them for good cause or not for good cause.”

To read the full article, click here.

back to top



pursuant to New York DR 2-101(f)

© 2023 Manatt, Phelps & Phillips, LLP.

All rights reserved