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Operation Full Disclosure – The FTC Targets Advertising

Earlier today, the Federal Trade Commission issued a press release indicating that after a review of many national television and print advertisements, warning letters have been sent to a number of companies – including some of the largest advertisers in the United States – noting that they had failed to make adequate disclosures in at least some of their advertising. The initiative, entitled Operation Full Disclosure, is intended to enforce regulations that prohibit advertising that misleads consumers.

The FTC’s targets in this operation are disclosures in fine print, those that were hard to read – even though they contained important information for the consumer. The letters warned advertisers they need to make sure disclosures are clear and conspicuous, and reminded advertisers the disclosures should be close to the claims that are being made. They must not be obscure or disguised with font sizes or colors that make it difficult to read, and on television, they should appear for a long-enough period of time and in a manner that will allow them to actually be read and understood. Consumers should not have to search for them!

Included within each of the FTC letters was a request that each of the advertisers respond back to the FTC with specific actions they individually intended to take regarding their particular advertising, in order to remedy any deficiencies.

You can read the full FTC Press Release and, as always, if you have questions, need help, want guidance, or want to know how best to ensure your advertising and marketing is in compliance with legal and regulatory requirements, just contact me, Joe Rosenbaum, any lawyer in our Advertising, Technology & Media law practice group, or the lawyer with whom you regularly work at Rimon.

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…And Now a Word from Your Hedge Fund

This post was written by Frederick Lah.

This past Wednesday (July 10), the SEC voted 4-1 to approve amendments to Rule 506, lifting the 80-year ban on advertising for hedge funds and certain other investments (See, SEC Votes to Ease 80-Year-Old Ban on Private-Investment Ads.) Rimon previously reported these amendments when they were initially proposed in August 2012, and you can read our earlier analysis, SEC Regs Amended To Allow Hedge Funds To Advertise: Potential Data Privacy Implications.

Under the revised Rule 506, hedge funds and other issuers seeking to conduct private offers may now use general solicitation and advertising to offer their securities, provided that: (1) the issuer takes reasonable steps to verify that the purchasers are accredited investors; and (2) all purchases of the securities fall within one of the categories of persons who are accredited investors, or the issuer must reasonably believe that the investors fall within one of the categories at the time of the sale.

To be an accredited investor, the individual’s net worth must exceed $1 million, excluding the value of a primary residence, or the individual’s annual income must exceed $200,000. According to the SEC, the determination of the reasonableness of the steps taken to verify that the investors are accredited is an “objective assessment” by an issuer. An issuer is required to consider the facts and circumstances of each investor and the transaction. The final rule provides a non-exhaustive list of methods that an issuer may employ for verification.

As noted in our previous analysis, it is unlikely we’ll see hedge funds competing with large consumer brands for prime advertising space. Instead, given the target audience, we’ll likely see more tailored efforts, such as email marketing campaigns, direct phone marketing, and targeted online advertising. We are also likely to see new strategies from issuers such as speaking about funds in public and posting details on websites (which may represent quite a change considering many issuers don’t even have websites). As issuers enter into the world of marketing, they will also have to deal with the reality that the SEC is not the only regulatory agency on their radar; these issuers will need to make sure that they’re not engaging in unfair or deceptive marketing practices and drawing the ire (and an investigation or enforcement action) of the FTC.

The amendments become effective 60 days after publication in the Federal Register. For more information on this issue, please contact Frederick H. Lah, the author, or Joseph I. Rosenbaum, editor and publisher of Legal Bytes.

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What You Don’t Know Can Hurt You

Multiple Choice Question: What do the following have in common:

“Privacy & Data Protection: Distinctions Between Surveillance and Secrecy”

“Ethics, Process, Privilege, Discovery and Work Product in the Digital Age”

“When Worlds Collide: Old Ethics and New Media”

“Outsourcing: The Law & Technology”

“The Changing Legal Landscape: Evolution or Revolution”

“Growing Your Business Internationally – What to Know Before You Go”

“Social Media, Mobile Marketing, Clouds and Crowds: (modules)

  • Advertising & Marketing in a Digital World
  • Media & Entertainment: Digital Rights and Wrongs
  • Financial Services, Payments & E-Commerce
  • Online Gaming, Gambling & Virtual Worlds
  • Apps & M-Commerce
  • Context & Geo-Marketing: Wi-Fi, Bluetooth, SMS, RFID, QR Codes & Augmented Reality
  • Operations & Performance, Security, Compliance and Interoperability
  • Wired & Wireless: Sweepstakes, Contests, Product Placement & Branded Entertainment
  • Anti-Social? Communication & Public Relations for Companies, Employees & Investors
  • Behavioral Advertising, Endorsements, Blogs, Buzz, Viral, Street Teams & Word of Mouth
  • Labor & Employment Policies in a Networked Age: The Good, The Bad & The Ugly
  • Crowd Sourcing, Crowd Funding, Crowd Investing: Today & Tomorrow

“Privacy, Data Protection & Globalizing Technology: Digital Commerce Brings Legal Challenges”

“Comparative Advertising Issues: Multinational Brands; Global Challenges”

“Direct to Consumer: Legal Challenges in the Digital Marketplace”

“Out of Control? Challenges to Privacy & Security in a Big Data World.”

 

Answers: (a) Seminars & Presentations Given; (b) Seminars & Presentations Available; (c) Targeted at Lawyers; (d) Targeted at Commercial and Business Management; (e) Relevant to Small-to-Medium Size Business; (f) Relevant to Multinational, International & Global Companies; (g) None of the Above; or (Y) All of the Above.

If you guessed (Y), you are correct. Let us know if any of these, a combination of these or a customized version of these or any other presentations might be right for you. Hey, you never know, but what you don’t know, can hurt you. For more information, contact me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

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A New Twist to Chubby Checker – Oh No, Not an App for That!

Chubby Checker, whose real name is Ernest Evans, is suing Hewlett Packard for trademark infringement. Chubby Checker, an iconic music entertainer, rose to fame when his song “The Twist” first reached No. 1 on the charts in 1960 and his appearances on the “Ed Sullivan Show” and “American Bandstand” helped spawn a national, if not international, dance frenzy. His 2008 song “Knock Down the Walls” reached the top of the dance charts and sparked a brief comeback for the music legend.

Ernest Evans Corporation, one of Mr. Checker’s companies, was originally granted trademark rights for the use of his name in connection with musical performances. Later, The Last Twist Inc., another of his companies, was granted trademark rights for “Chubby Checker’s” in connection with food products, based on the release of a line of snack foods.

The mobile “app” named “The Chubby Checker” – no, we couldn’t possibly make this up – ostensibly enabled users who downloaded it to calculate the size of a male penis based on the individual’s shoe size. The development shop named Magic Apps, now non-existent, had touted the international appeal of the app, noting “The Chubby Checker” allows calculations based on U.S., UK and European shoe sizes.

Lawyers for Mr. Checker had sent HP a cease-and-desist letter last September and apparently the app was removed from all HP or Palm-hosted websites later that month. In the lawsuit filed in the U.S. District Court for the Southern District of Florida, lawyers for Mr. Checker, now 71 years old, claim that “irreparable damage and harm” has been done to the entertainer’s name and reputation, are seeking an injunction, and are asserting claims of millions of dollars in damages arising from “The Chubby Checker” app that Hewlett Packard Co. made available on Palm mobile devices starting in 2006. You may recall that HP acquired Palm in 2010, and a year later opted to shutter the production of Palm hardware, although it continued to provide technical support to existing Palm users.

The suit alleges that purchasers of the app, as well as anyone simply browsing the webpage, had been misled into believing that Chubby Checker had endorsed the app, and that the use of his name would confuse users who might reasonably conclude the singer had some association with the app bearing his name.

The lawsuit alleges that the defendants made millions of dollars exploiting the name of one of the greatest musical entertainers of our time, and claims the “Defendants’ use of the name ‘Chubby Checker’ in its app is likely to associate the plaintiffs’ marks with the obscene, sexual connotation and images evoked by defendants’ app ‘The Chubby Checker.’” You can read the filing in its entirety right here at Evans, et al. v. Hewlett Packard Company, et al., Case 2:13-cv-14066-JEM.

The Advertising, Technology & Media Law Group at Rimon has lawyers with decades of experience in working with advertisers and agencies, marketing and promotional companies, online, mobile, and traditional, handling matters involving celebrity endorsements – good, bad and sometimes ugly. Let us know if you need us. Call me, Joe Rosenbaum, or any of the Rimon lawyers with whom you regularly work. We are happy to help.

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Gift Cards Deal With Discounts & Charity; Chart Updated

This post was written by Keri S. Bruce and Joseph I. Rosenbaum.

If you have been coming back to Legal Bytes to keep up with this and other developments in the law of Advertising Technology & Media ("ATM"), you know that we have been following the world of gift cards for many years (e.g., Gift Card Issuers Fight & Switch, Gift Cards in New Jersey: It’s Complicated!, Federal Reserve Board Has a Free Gift (Card) For You, Credit Card Act of 2009: Act I, Scene 1, Gift Cards in the Legal Limelight, Gift Cards: The Updated Chart is Still Free). If you are a regular Legal Bytes reader, you also probably know that we published and routinely update our U.S. Gift Card Statutory Chart – a reference tool you will certainly find helpful, although not a substitute for experienced legal counsel. In addition to the amendments noted below, we have updated our U.S. Gift Card Statutory Chart and you can read or download the updated chart right here (U.S. Gift Card Statutory Chart) [PDF].

You will also appreciate that we advise clients in this area all the time, assisted by an able team of financial services regulatory specialists, and so it will come as no surprise that we are telling you about some changes to the law in Vermont and Rhode Island that apply to gift cards. The term "gift certificate" is often used in the law, but separate definitions make it clear that the law applies to cards or any similar instrument, regardless of the material (e.g., paper, plastic, beads).

In addition to the Federal Credit Card Act of 2009, many states have their own regulations of gift cards and gift certificates. While many states have carve-outs in their gift certificate laws for loyalty and reward cards, Vermont has gone a step further and embraced group coupon/discount providers by separately defining these cards and providing separate disclosures to benefit consumers. In light of popular group coupon/discount providers, new marketing efforts involving gift cards and the continued prevalence of class actions, such as In re Groupon Marketing and Sales Practices Litigation, where Groupon reached a nationwide class action litigation settlement over allegations it had illegal expiration dates and other provisions on its vouchers, it is even more important to stay on top of these ever-changing laws.

Effective as of May 18, 2012, amendments to the Vermont statutes (Vt. Stat. § 2701 et seq.) seek to address issues arising from popular group coupon/discount providers. The new amendments introduce definitions for "a loyalty, award, or promotional gift certificate," "paid value" and "promotional value," extend the expiration dates for the paid value of a gift certificate, and remove the specific exemption for food product gift certificates.

Under the amended law, a "loyalty, award, or promotional gift certificate" is defined as a gift certificate issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in connection with a loyalty, award or promotional program, and that is redeemable upon presentation to one or more merchants for goods or services, or is usable at automated teller machines.

These definitions are important because, if defined as loyalty, award or promotional gift certificates, they can be exempt from the statute’s requirements on expiration dates and fees and some other restrictions that would otherwise apply, provided that certain requirements are met.

To qualify, these instruments must disclose, on the front of the certificate, that the certificate is issued for loyalty, award or promotional purposes, and the date of expiration for both the paid value and promotional value (if any). (More on that distinction in a moment.) On or along with the instrument, the consumer must be informed as to the amount and conditions under which fees may be imposed, and if a fee is assessed and on the instrument, a toll-free telephone number and, if one is maintained, a website a consumer may use to obtain fee information (disclosed on the certificate).

The Vermont amendment distinguishes between "paid" and "promotional" value. Paid value is the value of any money or other consideration given in exchange for the gift certificate. Promotional value means any value shown on a gift certificate in excess of the paid value. Example, a loyalty program buys 1 billion $25 gift cards and pays $19.99 each. The $19.99 is the paid value and the $5.01 is the promotional value. The statute prohibits the paid value from expiring for five years (extended from the previous three-year requirement), while the promotional value is exempt from the restrictions on expiration dates and fees.

Meanwhile, in Rhode Island, amendments – effective as of June 19, 2012 – to gift certificate provisions of the state’s Unfair Sales Practices law (R.I. Gen. Laws § 6-13-12) allow gift cards donated for fundraising purposes to expire, but only if the card clearly states that the instrument has been donated for charity and a clearly defined expiration date of not less than one year after the issuance, is disclosed to the recipient.

If you need help from lawyers who know this area and can provide experienced, practical counsel, contact Joseph I. ("Joe") Rosenbaum or Keri Bruce or your favorite Rimon lawyer, all of whom will be happy to help.

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IAPP Privacy Presentation – Is the Wizard of Oz Still Behind the Curtain?

On May 10, 2012, I had the privilege of making a presentation at the IAPP Canada Privacy Symposium 2012. The title of my presentation was "Social and Mobile and Clouds, Oh My!" and it addressed some of the emerging issues in privacy, data protection and surveillance that arise as a result of globalizing technology and the convergence of social media, mobile marketing and cloud computing.

As part of that presentation (and as I have started to do for some time now in other presentations), I raised the issue of how lawyers, the law, legislators and regulators often use words to describe activities – words rooted in tradition or precedent – that are no longer applicable to the activity in today’s world. "Privacy" is such a word, although "not applicable" perhaps is too harsh. Obviously the word has significant applicability in a wide variety of situations. But "invasion of privacy" has become a knee-jerk reaction to virtually every information-gathering activity, even information readily and publicly available and, in some cases, posted, disclosed or distributed by the very individual whose privacy is alleged to have been "invaded."

Please feel free to download a PDF of my presentation, "Social and Mobile and Clouds, Oh My!" [PDF] (Note: Embedded video file sizes are too large to include), and let’s start a conversation about how we use words and how they wind up in laws and regulations. Lawyers work with words. Use them artfully and they provide powerful structures within which society, commerce and all forms of human endeavor function. Use them improperly and they cause confusion, uncertainty, inconsistency and inherently inequitable outcomes.

Seems like I am not the only one to point this out. Take a look at the insightful comments by John Montgomery, COO of GroupM Interaction, North America, as reported in a MediaPost RAW posting on Social Media entitled: If Marketing Terms Could Kill.

Kudos John. I’m with you. Let’s get it right.

FYI, Rimon has teams of lawyers who have experience and follow developments in privacy and data protection, information security and identity theft. If you want to know more, if you need counsel or need help navigating, or if you require legal representation in this or any other area, feel free to call me, Joseph I. ("Joe") Rosenbaum, or any of the Rimon lawyers with whom you regularly work.

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Gift Card Issuers Fight & Switch

Back in August 2010, Legal Bytes reported that a New Jersey law applicable to abandoned property (escheat) would effectively alter the tenor and scope of the New Jersey gift card law (see, Gift Cards in New Jersey: It’s Complicated!).

Well today, in an Associated Press article published by ABC News Internet Ventures. Yahoo! – ABC News Network, it is being reported that American Express, which was already pursuing its legal rights and remedies in a law suit filed to overturn the law, has now opted to pull gift cards from retail sale in New Jersey.

The new law would require sellers in New Jersey to capture the ZIP code of everyone who buys a gift card. Monies left on those gift cards bought in New Jersey that lie dormant and unused after two years would then ostensibly be required to escheat to the state. After the law was passed about two years ago, American Express (joining forces with the New Jersey Retail Merchants Association and others), filed suit challenging the new law. Initially, a U.S. District Court issued an injunction against implementing it, but more recently the injunction was removed – perhaps the stimulus for the reported move by American Express.

If you have been coming back to Legal Bytes to keep up with this and other developments in the law of Advertising Technology & Media (“ATM”), you know that Keri Bruce in Rimon’s ATM practice group previously posted a report entitled Gift Cards Tag Along with Credit Card Legislation, noting that federal legislative and regulatory requirements will soon apply to gift cards. You will also see links to a U.S. Gift Card Statutory Chart (Updated), which those of you who work with gift cards and similar financial payment instruments may find helpful; and you already know we follow and advise clients in this area all the time, assisted by a team of financial services regulatory specialists as well.

So if you need help from lawyers who know this area and can provide experienced, practical counsel, contact Joseph I. (“Joe”) Rosenbaum or Keri Bruce, or your favorite Rimon lawyer, all of whom will be happy to help.
 

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German Court Requires Facebook to About Face

This post was written by Katharina Weimer.

A German Court thinks it may be time to de-friend Facebook. On 6 March 2012, the Regional Court in Berlin took a rare opportunity to rule on several features available on the social media platform Facebook, and not surprisingly opined that Facebook needs to provide more transparency and ask for consent when using users’ information. Worded in the form of consents, the German Court held:

  • Consent No. 1: Facebook may no longer make available one of its most used features, the “friend finder,” without proper information of the user and consent of the user’s contacts who are invited to join Facebook via email
  • Consent No. 2: The exploitation of user content that is protected by intellectual property rights requires affirmative and specific user consent. The language purporting to grant Facebook a comprehensive, worldwide, royalty-free license that is incorporated into Facebook’s existing terms of use is not sufficient.
  • Consent No. 3: Facebook needs to reword its consent regarding the use of personal data for advertising purposes

Although the judgment is technically not legally binding as yet, Facebook announced it will carefully review the consequences and consider legal remedies once the judgment is available in full length. This decision may lead the way to more transparency and user control over social media and the use of information in Germany. Having a world of information at your fingertips and incorporating user content in Web 2.0 services is a great tool for user interaction and learning more about them, but the court’s ruling suggests that Facebook not forget for whom their service was created – the users, not the advertisers. As Facebook edges closer to an IPO and looks to monetize its services and features, the German Court’s view is that Facebook needs to continue to give its users control over their content and information. Stay tuned to Legal Bytes for more details as the court proceedings continue.

Vielen dank (many thanks) to Katharina Weimer for the insights and the update. If you need legal or regulatory counsel, contact Katharina directly, or you can always contact me, Joseph I. (“Joe”) Rosenbaum, or the Rimon lawyer with whom you regularly work.

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White House Releases Privacy Report and Calls For a Consumer Bill of Rights

Earlier today, Secretary of Commerce John Bryson and Federal Trade Commission Chairman John Liebowitz outlined the Obama administration’s strategy for ensuring “consumers’ trust in the technologies and companies that drive the digital economy.” On the heels of their announcement, and although it is dated January 2012, the Department of Commerce released a long-awaited report entitled “Consumer Data Privacy in a Networked World, A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy,” the administration’s roadmap for privacy legislation and regulation in the years ahead.

The announcement and privacy blueprint envisions a comprehensive and integrated framework for data protection, rather than the current sector-patchwork-quilt approach, and is comprised of four key pillars: (1) a consumer privacy bill of rights; (2) a multi-stakeholder process and approach dealing with how such a bill of rights would apply in a business context; (3) more effective enforcement; and (4) greater commitment to harmonization and cooperation in the international community.

The Report outlines the seven principles of its proposed Consumer Privacy Bill of Rights and, although calling for legislation and regulation to codify and memorialize these rights, also sets out consumer privacy standards that companies are asked to immediately and voluntarily adopt in a cooperative public-private partnership. These seven principles are:

  1. Individual Control Through Choice
  2. Greater Transparency
  3. Respect for Context
  4. Secure Handling
  5. Access & Correction Rights
  6. Focused Collection
  7. Accountability

The Report notes that a company’s adherence to the voluntary codes will be viewed favorably by the FTC in any investigation or enforcement action for unfair and deceptive trade practices. By implication, a company that does not adopt and follow these principles might be used as evidence of a violation of Section 5 of the FTC Act, even if federal legislation is not passed on the subject. The FTC is expected to soon release its Final Staff Report on Consumer Privacy that will be consistent with the Obama administration’s proposed Framework Report. The report reinforces the administration’s commitment to international harmonization, and also touches upon the role state attorneys general in the United States can play. While we are still reviewing the details – and more will likely be forthcoming from the administration in the weeks and months ahead – Legal Bytes will keep you on top of these developments as they arise.

You can read the entire report right here: Consumer Data Privacy in a Networked World, A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy.

These are developments that affect all businesses, domestic and multi-national, global and local, consumers and regulators. The complexity and challenges of compliance should not be underestimated, nor should the administration’s commitment to follow the roadmap outlined. Rimon has teams of lawyers who have experience and follow developments in privacy and data protection, from prevention and policy to compliance and implementation. If you want to know more, need counsel, need help navigating, or if you require legal representation in this or any other area, feel free to call me, Joseph I. (“Joe”) Rosenbaum, or any of the Rimon lawyers with whom you regularly work.

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Robocop Fights Robocalling

In the 1987 film "Robocop", directed by Paul Verhoeven, a terminally wounded cop returns to the police force as a powerful cyborg, albeit with haunting memories, to fight crime and evil. Fast-forward to 2012 and "robo calling."

One of the government’s main consumer cops, the Federal Communications Commission, has acted to tighten rules regarding the use of so-called "robo calling" (ok, it’s auto-dialing systems). The FCC’s official order has not been released, but the following is clear:

  • Express written consumer consent in advance will be required before using an autodialer or prerecorded message
  • You can no longer rely on an "established business relationship" as an exception to the prior written consent requirement
  • Each robocall must include an automated opt-out mechanism
  • Rules governing abandoned or "dead air" calls will be tightened

When the final regulations and order designating the effective date and detailing precisely how these rules will be applied are released, we’ll bring you the news; but in the meantime, you can read more about the FCC’s action and its thinking right here: FCC Approves Order to Tighten Regulatory Treatment of Robocalls Under the Telephone Consumer Protection Act.

As always, if you need legal or regulatory counsel, call me, Joseph I. ("Joe") Rosenbaum, or any of the lawyers highlighted in the full client alert, or, of course, the Rimon lawyer with whom you regularly work.