FTC Testimonial and Endorsement Guides Stimulate Industry Comment

Rimon acts as counsel to many of the advertising industry’s leading trade and membership associations – The Association of National Advertisers, The Word of Mouth Marketing Association, the Interactive Advertising Bureau, to name only a few. As you may have notices, a recent Legal Bytes blog post noted that just last month the FTC supplemented its December 2007 “Self-Regulatory Principles for Online Behavioral Advertising” report.

Well the FTC has been busy in re-examining it’s policies regarding testimonials and endorsements in this digital age. As previously reported in Legal Bytes, the FTC indicated it was revising it’s Testimonial and Endorsement Guides (the first time since the 1980s). Well comments have now been submitted and we strongly recommend that anyone in the advertising and marketing business take a look at some of them. In fact, to help you, Legal Bytes has a couple you can look at right now – Comments for The Association of National Advertisers and Comments for The Word of Mouth Marketing Association – and when you finish reading them ask yourself:

  • Now that public comments are in, what do we think will happen?
  • What is in front of the FTC that might affect its decision making?
  • How would self-regulation differ from the way the FTC has been operating?
  • What does the new FTC Chairman think about self-regulation?
  • Do we expect the new administration to shift direction? If so, which way?
  • How is all this likely to affect advertising and marketing using product placements, branded entertainment, blogs, consumer generated content, buzz, viral and word of mouth marketing?

If you need to know, you need to contact John Feldman, Douglas Wood or Joseph Rosenbaum – or your favorite Rimon attorney – who will be more than happy to help you.

Touchdown!

The NFL Players Association was recently ordered to pay $7 million in compensatory damages and $21 million in punitive damages to retired football players who claimed they were excluded from lucrative marketing deals. The class action claimed the “Madden” interactive football games, and deals involving sports card and sponsorships, intentionally scrambled images of retired players to avoid paying royalties. Active players received royalties for their images, but retired players’ images were scrambled. Now normally that might be a key question of fact to be determined by a jury. Unfortunately, there was a smoking gun! Someone at NFLPA wrote to Electronic Arts, publisher of the popular Madden games, explaining that unless they scrambled the retired players’ images, payments would be required. Oops.

Endorsements & Testimonials – FTC Broom Proposes Some Sweeping Changes

The FTC is seeking comments to its proposed revisions to the Guides Concerning the Use of Endorsements and Testimonials in Advertising, last updated in 1980, and which define endorsements and testimonials: advertising messages reflecting opinions, beliefs, findings or experiences of someone other than the advertiser, and which consumers are likely to believe. The revisions propose changes to the way the FTC will interpret (and enforce) the Act:

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…And Now A Word From the FCC

The FCC is looking into regulations regarding disclosures for product placements and has been soliciting comments on its proposed changes. Should feature films produced for theatrical release and then aired on TV, and which have traditionally enjoyed an exemption from the sponsorship identification required of TV programming—have that exemption removed? should product placements be identified when the product is shown on screen? Should embedded advertising be completely prohibited in children’s programming? Increasing product placement and integration into programming has stimulated concern among consumer advocacy groups and Congressional legislators that the rules, many of which are decades old, do not address the new wave of advertising and promotion that has arisen as DVR technology and marketing has migrated away from the traditional “30-second spot.”

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Are You For Real?

In the 1960s, Stanley Milgrim, then a psychologist at Yale University, conducted a controversial experiment. In an obviously controlled setting for the study, Milgrim and his associates directed their subjects to give ever-increasing electrical shocks to strangers whenever they gave the wrong answer to questions in a test of memory. The strangers were really actors pretending to experience pain and did not actually receive any jolts of electricity. The study, intended to measure how compliant people would be to obey authority figures, even to the point of inflicting pain on otherwise innocent individuals, was disturbing, to say the least. The subjects, despite some discomfort at first, continued to “shock” the test-taking actors. The experiment raised ethical concerns about subject study methodologies, among other things.

However, recently, Mel Slater, a computer scientist at University College London in England (with a joint appointment to the Universitat Politecnica de Catalunya in Barcelona), reproduced this experiment without running afoul of the ethical concerns that the original study raised. Mr. Slater conducted his experiment in a virtual world where test-taking “victims” were avatars whose expressions changed from happy to pained in response to the actions of participants in the study—much the same way the real-life actors did more than 40 years ago. Not only were the results astonishingly similar, but to the surprise of many, the real-life participants experienced increased heart rates and described feelings of regret or feeling badly about delivering electrical shocks—even though they knew the strangers on the other side of the screens were avatars and not real people!

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Brands & Entertainment

Those name brands appearing in hit shows. Those logos on the motion picture screen. The characters at the breakfast table with a favorite cereal. The star driving around in a particular automobile. The airline shown flying the lead character off to an exotic destination. Reality? Coincidence? Hardly. They are the result of contracts between the entertainment company or producers and the advertisers, and they represent a growing and important trend in marketing to consumers, along with the Internet, as reaching market segments through traditional radio and television advertising becomes increasingly difficult in our on-demand, fast-forward world.

In some cases, such “branded” entertainment is subtle—inserting itself into a scene or a sequence quite seamlessly and, not necessarily inconsistent with, reality. In other cases—“Harold and Khumar Go to White Castle”—yes, this really was the name of a movie, as was “Akeelah and the Bee,” which Starbucks helped finance and promote. In case you didn’t know, the FCC (and the FTC) regulate advertising on television—the FCC’s regulations concerning disclosure arose primarily from the quiz show scandals in the 1950s. When does creative control over programming yield to paid sponsorship and financing dollars or Euros (or British Pound Sterling). At what point does a program or movie become an infomercial or advercast? Are there vulnerable groups (e.g., children) that might not distinguish so readily between advertising and programming and at what point is that deceptive? What does SAG say about their actors being de facto appearing to endorse a product or brand inserted into their scenes and programs? If an actress is under contract with a cosmetic brand exclusively and a movie scene requires her to use a different brand—actionable? When the trailer with that clip airs on broadcast television—problem? Witness the following quote from Jonathan Adelstein, FCC Commissioner: “Now, products have even seeped into plot lines. Soap operas have woven cosmetic lines into their tales of who-did-what-with-who, while “The Apprentice” sounds more and more like an hour-long infomercial for the latest corporate sponsors.”

Trademark issues, endorsement and competitive/ambush marketing issues, free speech, freedom of expression, adequacy of disclosures, misleading or deceptive advertising—the list of potential issues is growing as the balance between creative control and commercial reality infect the entertainment industry. At one extreme is the traditional product placement in which an advertiser pays a fee for the hopes that the scene with its product doesn’t get cut and wind up on the editing room floor. At the other extreme is a placement fee and promotional campaign that is so integrally tied with the plot and the program that the two are indistinguishable—think “The Apprentice” or “Home Makeover.”

The deals are becoming more complex, and more fraught with potential legal and regulatory issues, and the stakes are higher. Need help? Contact Doug Wood or me—we would be happy to help.

Web Videos Test the Limits of Feeds, Uploads & Time-Shifting

Web-based videos, through links, feeds or user uploads, are generating significant legal and commercial interest these days. Advertisers are also quick to recognize the potential “buzz” marketing opportunities enabled by the use of the Internet and digital audiovisual technology. User-generated content draws consumers to websites, powerful magnets for advertising messages targeted to those consumers. But beware: Simply because a consumer creates the content, doesn’t mean it is immune from standard legal tests for advertising, endorsements, publicity and product liability.

A lawsuit has recently been filed against one online video-sharing network—Veoh—alleging it allowed video works owned by an adult entertainment company to be viewed through Veoh’s website without authorization. The claims of copyright infringement could be an important test of how the courts view sites that enable sharing or feeds of audiovisual works. Although there are a growing number of popular user-generated content sites such as IFILM, YouTube, Guba, Yahoo! and Google, these sites often have very different policies and some, but not all, of them review user-generated content before it is posted—either to ensure it meets guidelines or to confirm that the user’s tags are accurate.

Earlier this month, the New York State Consumer Protection Board published an official warning about content available on Google Video, the new Google site for user-generated content. Because videos are uploaded by users, Google Video relies on tags (labels which describe the content) which are input and generated by the users. Since the content is not indexed or catalogued by Google, a search will turn up whatever the user submits—and that is what has irritated the New York authorities. As with many websites that allow user-generated content to be uploaded for viewing, Google warns users about uploading obscene or illegal material or items protected by copyright, but currently has no mechanism for filtering it out.

In a move widely viewed as adding an air of legitimacy to these sites, Warner Bros. agreed to allow Guba to distribute some of its television shows and motion pictures, online. NBC is allegedly planning to make clips of some of its most popular programs available to YouTube to promote its fall programming lineup. NBC’s decision is reportedly coupled with advertising commitments for both companies in broadcast television medium and the Internet. That should come as no surprise since advertising is what is usually at the root of all of these revenue models—a fact that has not escaped broadcast network executives.

Also this month, a number of leading television production and motion picture companies joined forces in filing suit against Cablevision, one of the largest cable television companies in the United States. The action asks the U.S. District Court in New York to declare the time-shifting service Cablevision has announced, but not yet offered, in violation of U.S. copyright law. Cablevision has countered that time-shifting of programming by consumers is legal. Unlike an “on-demand” service which would record everything and replay programs when selected by the consumer, Cablevision intends to offer subscribers a specific amount of allocated storage space on the network. Analogous to an outsourced set-top box or digital video recording device that a consumer might purchase, Cablevision will offer consumers an opportunity to buy storage space and use it to record and play back programs and then erase them to free space for new programs—no different than if the storage medium was sitting in their living rooms. Stay tuned.