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Deceptive Sweepstakes Draw NY Fines

In June, H&R Block settled charges brought by the New York Attorney General arising from two sweepstakes programs involving instant-win scratch-off cards. The cards were available at retail when purchasing tax-return preparation services, or online via free registration. The advertisements online, in print, and on radio and television mentioned “no purchase necessary,” but the mentions were fleeting or not conspicuous, according to the NY AG. Further, in-store advertising did not include these words, nor were Official Rules posted in the retail stores. The NY AG noted that under these circumstances, customers who found about the promotions in retail stores had no way to know they could enter online at no charge. The NY AG alleged the lack of disclosure in stores about free entry, coupled with unclear or minor disclosures in the other ads, was false and deceptive. To settle, H&R Block agreed not only to clearly post the Official Rules at participating retail offices, but also to pay $245,000 in penalties and costs. The settlement also requires H&R Block to train employees to direct consumers to information about no purchase means of entry and clearly disclose that alternate means of entry are available whenever advertising mentions entry is available by purchasing an H&R Block service.

There are complex state laws that cover how promotions, chance, skill or combinations, are to be advertised and operated. When marketing globally, rules are more complicated with language, currency, prize notification and disclosure regulations, as well as age and consent requirements on national, provincial or trading-block scale. What is a “skill” or when is “no purchase” required? When does the chance of winning have equal “dignity” when entering without a purchase? These are often subject to varying interpretation—online and offline. Compliance (registration and bonding in some jurisdictions) can seem an endless legal quagmire. Fortunately, Rimon’s Advertising Technology & Media lawyers around the world can help.

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Online Deceptive Ads Cost Millions

To settle FTC charges of deceptive advertising, ValueClick (and its subsidiaries—we’ll just use ValueClick, for short) agreed to pay $2.9 million. In addition to the civil penalty, among other things, ValueClick agreed to conspicuously disclose costs and obligations associated with “free” products. ValueClick is also precluded from making any deceptive claims about the security of a consumer’s information collected by its websites. The FTC charged that ValueClick attracted web traffic using deceptive e-mails, online banner ads and pop-ups claiming individuals were eligible for “free” gifts, but instead were required to plow through and participate in tiresome and potentially expensive third-party offers in order to receive the “free” products. With respect to the security of consumer information, ValueClick’s privacy policies represented that customer information was encrypted—but that either there was no encryption, or a non-standard, insecure form of encryption was used. The proposed order would require ValueClick have a comprehensive security program and obtain independent thirdparty assessments of their programs for 20 years. This is not the first time the FTC has brought an enforcement action against “lead generating” companies, and certainly among a string of cases relating to the data security and information security practices of companies handling non-public consumer information.

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Puffery at the Singles Bars Moves Online

The National Advertising Division has determined that when an online dating service advertises “Better first dates,” it’s puffing and not deceptive advertising. Sounds like my university dating experience—no real expectations. But if you say “more second dates,” which is comparative in nature, you better be able to substantiate it or you can’t do it. Similarly, saying “finding great people to date is easier” must also be supported by evidence (“easier” is not subjective or puffery, but is determinable statistically).

In case you didn’t know, the National Advertising Division (“NAD”) is part of the National Advertising Review Council (“NARC”), the same folks who bring you the Children’s Advertising Review Unit (“CARU”), all under the umbrella of the Better Business Bureau (“BBB”). It is not in any way associated with the FTC, OFCOM or SETI. Oh, and F U KN RD THS MSSG, U KN WRK THER.

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Truth in Video Gaming?

A proposed new “Truth in Video Game Rating Act” (H.R. 5912), would require the Federal Trade Commission to promulgate rules prohibiting unfair and deceptive acts or practices by video game marketers, and would require ratings to be based on video or computer game content as a whole. It would also be a violation if any producer or maker of these games hid or grossly mischaracterized the content of the game. Joysticks ready?

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100% Legal = 100% Deceptive

What if you offer a tutorial service that teaches how to use peer-to-peer file-sharing programs and refers members to P2P networks but doesn’t actually license file-sharing programs, and doesn’t operate a file-sharing network itself? Sounds like it would be tough to prove copyright infringement—the Grokster case notwithstanding.

But what if you advertise that by becoming a member, subscribing and paying a fee, your P2P file-sharing is legal. “PEOPLE ARE NOT GETTING SUED FOR USING OUR SOFTWARE. YES! IT IS 100% LEGAL,” or “Rest assured that File-Sharing is 100% legal.” What if customers are deceived into thinking that by becoming a member, P2P file-sharing is legal? Remember, when anyone uses a P2P file-sharing program to download copyrighted material, or to make that material available to others without the copyright owner’s permission, it’s copyright infringement. Well the FTC has charged Cashier Myricks Jr., doing business as MP3downloadcity.com, with deceptive advertising by falsely claiming that membership in the service makes P2P file-sharing legal; and acting on the FTC’s action, a U.S. District Court judge has stopped the deceptive ads. The FTC is seeking to make the ban permanent.

Want to know more? The FTC has published “P2P File Sharing: Evaluating the Risks.” Oh, and you should also probably call Rimon…after all, we know advertising, marketing and promotion like nobody else.

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NY Pursues Spy and Adware—Deceptive Practices At Issue

On April 28, 2005, New York’s Attorney General sued Intermix Media—a major Internet marketer based in Los Angeles, claiming “spyware” and “adware” were secretly installed, which, among other things, can redirect browsers to unwanted websites, can add toolbar functions and icons, and distribute ads that pop up on your monitor. The suit alleges violation of New York State General Business Law provisions against false advertising and deceptive business practices, and also alleges trespass under New York common law. Intermix’ software would download, install and then direct advertising to computers based on user activity—often without notice and without an uninstall application—when a user visited a website, played a game or downloaded a screen saver. The Attorney General’s office claims that the lengthy licensing agreement purporting to seek permission, even when used, is misleading or inaccurate.