FTC (Revised) Endorsement Guides Go Into Effect

This post was written by John Feldman.

Yesterday, Dec. 1, 2009, the revised “Guides Concerning the Use of Endorsements and Testimonials in Advertising” released by the Federal Trade Commission came into effect. If you are a loyal Legal Bytes’ reader, you know we have been following this as early as November 2008, when we posted Endorsements & Testimonials – FTC Broom Proposes Some Sweeping Changes. Numerous updates and informational pieces have graced these pages since then (now when we say “pages,” we mean web pages), and you can refer back to any or all of them, or you can check out any you may have missed right here: FTC Testimonial and Endorsement Guides Stimulate Industry Comment (March 2009); a presentation given at the University of Limerick on the subject entitled “Trust Me, I’m a Satisfied Customer: Testimonials & Endorsements in the United States,” which you can download (If You Didn’t Make It to Ireland …); Ghostwriters: Medical Research or Paid Endorsers (and are they mutually exclusive?) and Rights of Publicity – Wake Up and Smell the Coffee! (both in August 2009); and FTC Releases Updated Endorsement & Testimonial Guidelines and Rimon Analysis of the New FTC Endorsement and Testimonial Guidelines (both in October 2009).

Yesterday, John P. Feldman, an authority in these types of advertising regulations and compliance and who is based in Washington, D.C., put together some thoughts concerning the implications of these Guides upon coming into effect, continuing his thoughtful and practical analysis. While we will maintain bringing you news and information about the Guides, John’s analysis is timely and helpful, and outlines some considerations every advertiser – online, in social media and off-line – and every blogger, viral marketer, celebrity endorser or consumer making a testimonial, should take into account. John’s analysis, which you can download and read in its entirety by selecting the link below, asks and answers the following questions about these Guides:

  • What does this mean for advertisers?
  • What is the most dramatic shift in enforcement policy?
  • What will this mean for advertisers that use celebrity endorsers?
  • How much control should sponsoring advertisers exercise over endorsers in new media channels?
  • What impact will the FTC’s new approach to clinical trials have on the OTC, cosmetic, and pharmaceutical industry?
  • Is there a role for self-regulation and what do you make of the proposed “best practices” recently announced by the Word of Mouth Marketing Association (WOMMA)?

You can download your own copy of John’s analysis or you can read it online right here: “FTC Endorsement Guides (Revised) – Some Thoughts As They Become Effective“. You won’t be disappointed. In addition, if you want to know more about these issues or have questions about your particular circumstances, please do contact John P. Feldman directly, or you can call Joseph I. Rosenbaum or Douglas. J. Wood or, of course, any Rimon attorney with whom you regularly work.

Regulators Poised to Give Financial Institutions a Slap in the Facebook

This post was also written by Anthony S. Traymore.

A few weeks ago, Legal Bytes reported that, buried in the new financial services “reform” legislation, is the establishment of a brand new regulatory agency – the Consumer Financial Protection Agency (see Congressional Hammer Poised to Strike at Financial Advertising). Guess what. Not to be outdone, the regulators are in the act – pardon the pun – already. Witness recent statements by Richard Ketchum, Chief Executive of the Financial Industry Regulatory Authority (FINRA). In recent statements, Ketchum acknowledged that Wall Street is eager to use social media like Facebook, Twitter and Linked In to interact with customers and, that to a large extent, the growth of the use of these sites is inevitable. But at a recent Securities Industry and Financial Markets Association (SIFMA) meeting, he noted, “We continue to witness the advent of technologies that will challenge your ability to ensure compliance with regulatory requirements,” and “Social networking is one such innovation.”

At that same meeting, Ketchum raised the issue that retention functionality available on social media services may not be sufficient to ensure a financial service firm’s compliance with applicable regulations, including the FINRA Rules. If you aren’t a broker-dealer, don’t read the next sentence. But if you are: Imagine how social media services used by brokers to communicate with clients could impact FINRA Rules concerning Communications and Disclosures (see, Section 2200). FINRA has now set up a taskforce comprised of industry professionals to explore how firms may utilize social media to better communicate with their customers without “compromising investor protection.”

Such studies and evolutionary (or revolutionary) regulation are increasingly common these days. As our loyal readers already know, Legal Bytes reported previously (FTC Releases Updated Endorsement & Testimonial Guidelines and Rimon Analysis of the New FTC Endorsement and Testimonial Guidelines), that the FTC’s revised Guides Concerning the Use of Endorsements and Testimonials in Advertising will become effective Dec. 1, 2009. These revised guidelines represent updates to the prior guides, and acknowledge the proliferation of false claims, phony testimonials, and spurious endorsements (or negative comments) by consumers, experts, organizations and celebrities, through the use of blogs and other “word of mouth” marketing tools. As described in a recent Wall Street Journal article, the SEC disclosure rules apply to Tweets, blog postings, wall postings and other communication platforms provided by social media sites. Other regulatory agencies are similarly seeking to address the use of social media sites by the entities they regulate (e.g., the FCC, the New York State Insurance Department).

Do you have a social media policy?  The complexities are enormous. Internal (during work) and external (non-working hours). Employees, agents, contractors and suppliers. Domain names, URLs and trademarks (which include service marks, for you purists in the audience). Approved content or ad hoc comments. Official presence or not – condoned or not. Today, activities outside the scope of employment are often considered not attributable back to the company absent special circumstances or relationships. Will social media break down those barriers further? If so, what can companies do to reach their customers while continuing to protect their most valuable assets – their employees and their brands? Does a company have the right to regulate conduct outside the workplace, even if it involves reference to the company? Oh, and by the way, you do know that social media, enabled by the borderless web, doesn’t really pay attention to national boundaries, AND that means it’s not just U.S. law you may need to worry about – even if you are a U.S. company. If you are an international, multinational or global company . . . good luck. No, not good luck. Call us. Our Advertising Technology & Media Law group has unparalleled breadth and depth in understanding, working with, and advising clients in this brave new world.

So if any of this is of passing interest, stay tuned. If it is or becomes a pressing need, please contact Joseph I. Rosenbaum or Anthony S. Traymore, and let us help you avoid being anti-social. Of course, if you are already a Rimon client, feel free to contact the Rimon attorney with whom you regularly work, and he or she will be happy to coordinate your legal needs with us.

Investigating Online & Interactive Advertising

The U.S. Congress appears determined to investigate online advertising. Early this month, the House Energy and Commerce Committee issued a letter to more than 30 companies, and what began as an inquiry into how Internet service providers use network data to target advertising, has morphed into a fishing expedition into all kinds of interactive advertising. Most notably, and despite urging by the FTC to allow self-regulation to take hold, the Committee does not differentiate between personally identifiable information and non-identifying, anonymous data used for traffic metrics, ad insertion and other common advertising purposes. Lumping different kinds of information together could needlessly undermine marketing as it has been practiced for decades. The “tailoring” of advertising, in the Committee’s words, based on consumers’ behavior and media consumption patterns, has been at the heart of marketing for as long as marketing has been around.

More disturbing are presumptions that “privacy” rights are being violated by any and all forms of behavioral or targeted marketing. Advocacy groups opposed to commercial communication seek to promote an implicit, yet fundamental redefinition of personal privacy—i.e., anything that derives from peoples’ activities, no matter how distanced or anonymous. Taken to logical conclusion, any academic, commercial or journalistic observation of consumer activity could fall under regulatory restrictions under such a framework. Not surprisingly, the FTC—with its long history of regulation of advertising practices—has argued before Congress that self-regulation is likely to be an effective means of protecting consumers’ real privacy interests. According to testimony by FTC Consumer Protection Bureau Director Lydia Parnes before the Senate Committee on Commerce, Science, and Transportation this July, the FTC is “cautiously optimistic that the privacy concerns raised by behavioral advertising can be addressed by industry self-regulation.” Nevertheless, in the letter released this month and in three previous inquiries over the past few months, both the House and the Senate seem to be searching for a rationale to regulate. Stay tuned.

To Collect or Not To Collect, That’s the Dilemma?

This article was contributed by Adam Snukal, Esq.

Surfed the web lately? Seen a banner promoting a product, service or trip to Ireland you priced yesterday? Serendipity? Luck? Cookies? Yes, it’s those tiny files placed on your computer when you visit a website. Advertisers can now parse through cookies on your computer when you visit certain websites and instantaneously serve up advertisements based on your historical online behavior—“behavioral marketing.” For some, this is a great convenience. For others, like New York State Assemblyman Richard Brodsky, this is invasive and should be stopped unless the consumer has given consent.

Assemblyman Brodsky sees the acquisition of Doubleclick by Google as a step backward for consumers since the combined company could tap into a reservoir of consumer behavior and search data on an individual basis. So he introduced a bill aimed at restricting Internet behavioral marketing—The Third Party Internet Advertising Consumers’ Bill of Rights Act of 2008—that would prohibit advertisers from collecting and using sensitive, personally identifiable information from users online; require websites to clearly and conspicuously disclose behavioral policies and practices; give consumers the right to opt-out of profiling practices; prevent their online behavior from being collected and used to deliver targeted advertisements; and police how advertisers are permitted to merge and synthesize such information with other data (e.g., merging personally identifiable information collected offline with information collected online). Opponents—some of the largest interactive advertising and media companies—have voiced their opposition in a letter to Assemblyman Brodsky, noting, “Time after time, state laws that have attempted to impose this sort of broad Internet regulation have been struck down by the courts, doing nothing more than making taxpayers bear the expense both of defending the lawsuit and paying the successful plaintiffs’ attorneys fees.”

Continue reading “To Collect or Not To Collect, That’s the Dilemma?”

It’s a Dyanmic Environment Out There: Yes, You Can Still Avoid Being a Target

Most of us know the law tends to lag behind the marketplace. It is in the nature of most legal systems to try and balance statutory and regulatory authority—which makes rules based on experience or potential issues that will apply to future conduct—with judicial and regulatory decisions—cases that are adjudicated, create precedent and help shape the contours and boundaries of what is or is not permissible behavior within the statutory authorities.

In such a framework, we are often asked to counsel clients as to what is or is not acceptable when there may be little law, few regulations and sometimes no precedent. What to do? Well, as you may imagine, there is no simple answer. But there are some guideposts. A key guidepost is to consider common sense, best practices and some lessons learned from analogous legal precedent.

Continue reading “It’s a Dyanmic Environment Out There: Yes, You Can Still Avoid Being a Target”