Advertising Law

Manatt Hosts Webinar on FCC's New TCPA Ruling, July 30

Last week, the FCC issued its long-awaited Declaratory Ruling and Order on the Telephone Consumer Protection Act which went into effect immediately. The Ruling is not favorable to the industry and will significantly impact how companies in all business sectors communicate with customers and prospects via telephone and text message. It also addresses liability for actions that are beyond a calling party's control. Given the many concerns raised by the Ruling, Manatt, Phelps & Phillips, LLP, is hosting "Call to Action: Understanding and Complying with the FCC's New TCPA Ruling," a webinar to report on the Ruling, examine its implications and provide valuable guidance on how to stay compliant and avoid pitfalls. Join Christine Reilly and Marc Roth, co-chairs of the firm's TCPA Compliance and Class Action Defense Group, to learn firsthand how to structure programs and develop strategies to mitigate risk and avoid liability while remaining competitive in the marketplace. To register or learn more about Manatt's webinar, click here.

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Harlem Globetrotters Get an Assist From CARU

In a rare loss, the Harlem Globetrotters agreed, at the direction of the Children's Advertising Review Unit (CARU), that their age-screening practices for the company's website would be compliant with the Children's Online Privacy Protection Act (COPPA).

Boy's Life magazine directed readers to the website to find a show in a "city near you" and for more information regarding the purchase of specially priced tickets for Boy Scouts. CARU visited the website and observed that visitors to the site could sign up for an e-newsletter by providing personal information (first and last name, ZIP code, and e-mail address). Beneath the newsletter sign-up, the website featured a check box that stated, "You are 13 or older."

CARU was concerned that the website did not properly age-screen before requesting that users provide personally identifiable information.

CARU found the site was directed to children, noting that the Globetrotters offer family-friendly entertainment. In addition, the site had features "expressly aimed at children," with a section titled "Kids Games Here!" and images on the home page of a Harlem Globetrotter showing a young girl how to spin a basketball and a 9-year-old winner of a contest for tickets. CARU also acknowledged that since children were not the primary audience for the site, the Globetrotters were permitted to age-screen to establish whether users were under the age of 13. If so, COPPA requires parental consent prior to the collection of personal information for the e-newsletter.

However, CARU found that the existing age-screening mechanism (the checkbox) was inadequate. The Guidelines for Online Privacy Protection state that "Operators should ask screening questions in a neutral manner so as to discourage inaccurate answers from children trying to avoid parental permission requirements," and that such mechanisms "should be used in conjunction with technology, e.g., a session cookie, to help prevent underage children from going back and changing their age to circumvent age-screening."

"CARU does not consider asking a visitor to confirm that he or she is over the age of 13 to be neutral," the decision noted. The self-regulatory body recommended that the Globetrotters "modify the site's age-screening mechanism to one that is neutral to discourage inaccurate answers from children trying to avoid parental permission and notice requirements."

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

Why it matters: In the advertiser's statement, the Globetrotters stated that it was "unaware" that its website was not in accord, but promised to work with CARU to achieve compliance with the group's Guidelines and the requirements of COPPA. The decision provides an important reminder to website operators that if they collect e-mail addresses along with other personally identifiable information and their sites are even partially directed to children, they must use an effective, neutral age screen.

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FTC, Florida AG Hang Up "Massive" Robocall Campaigns Targeting Seniors

Teaming up with the Florida Attorney General, the Federal Trade Commission filed suit against a group of defendants that allegedly engaged in "massive" robocall campaigns targeting seniors.

Claiming to be from "credit card services" or "card member services," the defendants offered to help call recipients reduce their credit card interest rates to 0 percent with savings of at least $2,500 in a short period of time. But according to the complaint, the defendants charged between $300 and $3,499 in up-front fees for their services, sometimes without consent, and then failed to provide the promised rate reductions or savings.

Telemarketers—who also identified themselves as representatives from the call recipients' banks or credit card companies—persuaded consumers to provide their Social Security numbers and credit card information and would charge their cards immediately after the call was complete, the FTC and Florida AG's Office said.

Some consumers received a package of financial education information. In other instances the defendants used consumer information to apply for new credit cards, the FTC and Florida AG Pam Bondi said. The Orlando-based defendants (All US Marketing, Global Marketing Enterprises, Global One Financial Services, Your #1 Savings, Ovadaa, and Royal Holdings of America, as well as related individuals, all doing business as Payless Solutions) had been making "thousands" of calls nationwide since 2011, the regulators alleged.

The Florida federal court complaint alleged violations of the Do Not Call Registry, the Telemarketing Sales Rule, Florida's Telemarketing and Consumer Fraud and Abuse Act, and Section 5 of the Federal Trade Commission Act.

A federal court judge issued a temporary restraining order freezing the defendants' assets and appointing a receiver for the business.

To read the complaint and the court's TRO in FTC v. All US Marketing, click here.

Why it matters: This case is part of the FTC's ongoing enforcement activity against telemarketing schemes targeting vulnerable populations. Both Jessica Rich, Director of the FTC's Bureau of Consumer Protection, and Florida AG Pam Bondi noted the defendants targeted an elderly population, some of whom were on fixed incomes.

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Virtual Currency Mining App Results in Real FTC Action

An app developer tricked consumers into downloading a "rewards" application that actually loaded mobile phones with malicious software to mine virtual currency for the developer, the Federal Trade Commission charged in a new action.

The agency's latest foray into fintech enforcement involved Ohio-based Equiliv Investments and owner Ryan Ramminger. In February 2014 the defendants launched the Prized app, which claimed that consumers could earn points for playing games and then use the points on rewards such as clothes or gift cards.

The app was available in the Google Play Store and Amazon App Store, among others, and its terms of use promised the app was free of malicious software, time bombs, or viruses.

In reality, Prized was a "Trojan horse" that contained malware that once loaded onto a consumer's smartphone "hijacked" the device's resources, the FTC and the New Jersey Attorney General said, in order to mine for virtual currencies such as DogeCoin, LiteCoin, and QuarkCoin. And many consumers never got their points, either.

The mining—harnessing users' devices to solve complex mathematical equations more quickly to generate the cryptocurrency—drained both consumers' smartphone batteries as well as their data plans, the AG and the agency added. Nowhere did the defendants disclose to users the existence of the "malware in their app capable of turning users' devices into virtual currency miners," according to the complaint.

To settle charges of violations of both the Federal Trade Commission Act and the New Jersey Consumer Fraud Act, the defendants agreed to a permanent ban on the creation and distribution of malicious software. A monetary judgment of $50,000 was partially suspended upon a $5,200 payment to the state of New Jersey, and the defendants promised to destroy any consumer information that was collected through the marketing and distribution of the app.

To read the complaint and stipulated order in FTC v. Equiliv Investments, click here.

Why it matters: The case demonstrates the FTC's continuing focus on new and emerging financial technology, or fintech, and follows the FTC's first case involving crowdfunding, where the Commission settled with a defendant who raised money through a Kickstarter campaign ostensibly to produce a board game, only to spend it on himself.

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New Tax Alert: Streaming Services, Cloud Computing

In June the Chicago Department of Finance issued two rulings expanding the application of the city's Personal Property Lease Transaction Tax to include nonpossessory computer leases (the "Cloud Computing Tax") and broadening the application of the Amusement Tax to electronically delivered amusements. They instituted the Amusement Tax, charging residents 9 percent of their costs when they stream television shows, movies, music, or online games, and the Cloud Computing Tax, also set at 9 percent, for those who use remote platforms.

Both taxes took effect July 1.

As defined, "amusement" includes "any entertainment or recreational activity offered for public participation or on a membership or other basis," and "any paid television programming, whether transmitted by wire, cable, fiber optics, laser, microwave, radio, satellite or similar means." Specific amusements that are subject to the tax include "participating in games, online or otherwise," "listening to electronically delivered music," and "watching electronically delivered television shows, movies, or videos."

Bundled transactions will be taxed unless "clearly proven" that at least half of the price is not for the amusement. Online companies are not obligated to collect the tax.

"Jurisdictions around the world, including the U.S., are trying to figure out ways to tax online services," a representative from Netflix told The Verge. "This is one approach."

To read the Department's Personal Property Lease Transaction Tax ruling, click here.

To read the Department's Amusement Tax ruling, click here.

Why it matters: Since the rise of the Internet, jurisdictions have struggled with how to tax online business. Multiple states and municipalities have tried the so-called "Amazon tax" in their attempt to tax online entities. But the measures proved highly controversial and resulted in litigation across the country. The Illinois Supreme Court struck down the state's Tax Freedom Act in 2013, for example, although New York's highest court let the state's tax stand. Given that lawsuits followed the enactment of any "Amazon tax," a legal challenge to Chicago's new laws seems inevitable. However, if the taxes survive judicial review, copycat laws are likely to pop up across the country.

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Noted and Quoted . . . Ivan Wasserman and FoodNavigator-USA Catch the FDA in a Fishy Challenge Over High Fructose Corn Syrup Used in a "100% Natural" Product

Ivan Wasserman, partner in Manatt's Advertising, Marketing and Media practice, noticed something fishy in a warning letter from the FDA to a seafood company challenging its "100% natural" claims on a product containing high fructose corn syrup (HFCS). Although there is much confusion surrounding the naturalness of HFCS, and conflicting stances from the FDA, Wasserman's catch resulted in the FDA revising the warning letter to exclude the section on HFCS. Wasserman worked with FoodNavigator-USA to bring this issue to light in the article "FDA revises warning letter over HFCS and 100% natural claims to 'avoid any confusion,'" published on July 10, 2015. To read the full article, click here.

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