Adlaw By Request : Advertising & Marketing Lawyer & Attorney : Reed Smith Law Firm : AdLaw By Request & KidAdLaw

Once again, that truism that old habits die hard has been substantiated. The U.S. District Court of Northern California just awarded Facebook a $711 million judgment against the self-described “spam king,” Sandford Wallace, for violating the CAN-SPAM Act. The CAN-SPAM Act establishes the rules for sending commercial emails and bans “false and misleading” marketing emails. 

Wallace and two others were sued by Facebook in February, alleging they used various phishing sites, technologies and other means to gain unauthorized access to Facebook users’ accounts, and then used those same accounts to distribute SPAM throughout Facebook’s network. Specifically, Facebook asserted that Wallace had used the site to induce members to click on messages that appeared to be legitimate, but were actually designed to capture personal information.

Judge Jeremy Fogel wrote in his order, “The record demonstrates that Wallace willfully violated the statutes in question with blatant disregard for the rights of Facebook and the thousands of Facebook users whose accounts were compromised by his conduct.” In addition to the aforementioned monetary judgment, Wallace has been permanently prohibited from accessing or using Facebook, or from creating a Facebook account.

Along with Wallace’s violation of the CAN-SPAM Act, Judge Fogel noted that Wallace “willfully violated” a temporary restraining order and preliminary injunction issued earlier in the case against accessing Facebook. The court referred this matter to the U.S. Attorney’s Office for criminal prosecution.

You may recall Wallace’s name being mentioned in the past in the context of anti-spam and/or CAN-SPAM violations. Wallace was a defendant in a similar case in 2008 in which he was ordered to pay MySpace $234 million for similar violations. He was also the target of the FTC in a suit brought in 2006, in which he was fined $4 million after the FTC accused him of running an operation that infected computers with software that caused flurries of pop-up ads, known as “spyware.”

Why This Matters

Interestingly, this not the largest CAN-SPAM award. That honor also belongs to Facebook, who in November 2008 won an $873 million victory against Adam Guerbuez and Atlantis Blue Capital. In all earnest, Facebook realizes the likelihood of enforcing its judgment is remote at best. In fact, Facebook’s lead counsel for litigation and intellectual property remarked on a Facebook blog post: “While we don’t expect to receive the vast majority of the award, we hope that this will act as a continued deterrent against these criminals. This is another important victory in our fight against spam.”

However, this case proves, once again, that even in a dynamic and evolving landscape such as social media, fundamental legal principles, rules and regulations still apply, and have an excellent chance of being enforced by the courts around this country.

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This continues to be an interesting year for entertainment labor negotiations. New SAG/AFTRA ad industry contracts, SAG’s new television and theatrical contract and studio agreement, an extension of the Non-Broadcast/Industrial and Educational agreement, not to mention infighting and lawsuits. And now there’s a new item – SAG and AFTRA’s separate negotiations with the videogame industry over voiceover work.

The unions, which had been negotiating with the industry separately, appeared to achieve some parity between their deals, and made a joint announcement earlier this month that agreements had been reached. The deals, if ratified, would expire March 30, 2011, and would provide for the following improvements over the current contract (set to expire in December):

• A 3 percent wage hike for SAG (to match AFTRA’s current deal), and another 2.5 percent increase April 1 for both unions
• A 0.5 percent increase in the pension and health contribution rate for SAG members, and an additional 0.2 percent next year for both unions
• The establishment of a $100 liquidated damage for failure to give notice of “vocally stressful” work, and agreement to develop a set of guidelines for conducting vocally stressful work
• A cap of $125,000 on contributions to the AFTRA Health and Retirement and SAG Pension and Health funds for performers paid more than $125,000 by a single producer in a single year for work done on the same game franchise

Both the SAG and AFTRA boards recommended acceptance of the contract, with AFTRA giving the contract “an overwhelming and strong” recommendation. However, SAG’s membership apparently feels differently – SAG members who work the contract voted it down, 73-42. One reason for the rejection was the inclusion of “atmospheric” provisions that would allow employers to use actors to perform up to 20 voices, of up to 300 words each, at the daily base rate, which some members saw as a reduction from current pay levels. 

SAG will now try to bring the video game companies back to the table to negotiate its deal, but the industry’s negotiators may require SAG to sweeten the deal before coming back. As for the AFTRA deal, a vote by AFTRA membership is currently underway.

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To:              ANA Washington Reps and Legal Affairs Reps

From:         Dan Jaffe

Subject:    Congressman Kucinich to Introduce Ad Tax Bill

Date:          October 29, 2009

We have learned that Ohio Congressman Dennis Kucinich plans soon to introduce legislation to eliminate the tax deduction for certain food advertising directed to children.

This comes on top of the legislation introduced on October 8^th by Senators Al Franken (D-MN), Sherrod Brown (D-OH) and Sheldon Whitehouse (D-RI) to disallow the deduction for DTC prescription drug advertising and promotion expenses.  They intend to try to move that bill as part of the Senate’s consideration of health care reform.

The tax deduction for advertising costs is the number one bottom line issue for the entire marketing community.  In addition to product-specific attacks on food and pharmaceutical advertising, we face a serious threat of an across-the-board attack on the tax deductibility of all advertising expenditures as the Congress looks for revenue to fund various programs.

We need your help to protect the deductibility of all marketing costs.  It would be very helpful if you would contact the members of Congress where you have employees or operations to express your opposition to any restriction on the deduction for advertising costs for any product or service.  If we don’t oppose attacks on product-specific categories, we will face increasing pressures across the board.  As Benjamin Franklin said, “we must all hang together or most assuredly we will all hang separately.”

ANA is working with all other marketing and media associations to let Congress know that we stand united in opposition to any attack on ad deductibility, on an across the board or product specific basis.  It is critical that members also hear directly from the companies that provide jobs in their states and districts.

We will provide more information on the Kucinich legislation on food advertising deductibility as well as Senator Franken’s bill as it becomes available.

If you have any questions about this matter, please contact Dan Jaffe (djaffe@ana.net) or Keith Scarborough (kscarborough@ana.net) in ANA’s Washington, D.C. office at (202) 296-1883.  Please let us know of any feedback you get from these contacts.

Dan Jaffe
EVP, Government Relations
Association of National Advertisers
202-296-2359 office
646-369-4886 cell

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To:  ANA Washington and Legal Representatives

From:  Dan Jaffe 

Re:  The Impact of the CFPA Act on the FTC

Date:  October 28, 2009

We sent out a letter to the House Energy and Commerce Committee regarding the CFPA Act last night. A markup in that Committee has been scheduled for tomorrow. We hope that the Committee will hear from numerous sources about the problems with this bill. If you have any questions, please feel free to call me or Keith Scarborough, our Senior VP, Government Relations.

Dan Jaffe
EVP, Government Relations
Association of National Advertisers
202-296-2359 office
646-369-4886 cell

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To:  ANA Washington and Legal Representatives

From:  Dan Jaffe

RE:  Markup on FTC provisions in the CFPA legislation

Date:  October 27, 2009

The markup is expected on the CFPA bill imminently. Apparently, Chairman Waxman of the House Energy and Commerce Committee appears poised to give the FTC its complete wish list as described in the attached letter from FTC Chairman Leibowitz without any hearings or careful consideration. We will have another letter out opposing all this later today and hope others will be weighing in as loudly as possible. It appears that we will be facing a new powerful CFPA, a dramatically strengthened FTC and states that can have even more extensive regulation. This multiple overlapping regulation is particularly harmful for those who need to run coordinated national advertising campaigns. If the FTC gets immediate civil penalty authority, the dollar risk for every company will also go up astronomically. Not a pretty picture. Hopefully, the opposition will increase and we can chip away at some of this as we go through the process.

If you have any questions or comments about the impact of the CFPA on the marketing community, please contact Dan Jaffe (djaffe@ana.net) or Keith Scarborough (kscarborough@ana.net) in ANA’s Washington, DC office at (202) 296-1883.

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Luis G. Rivera Marín, Secretary of the Commonwealth of Puerto Rico’s Department of Consumer Affairs (DACO), this week announced the enactment of the country’s revised Sweepstakes and Games of Chance Regulation, effective Nov. 27, 2009. The new rules remove legal barriers that previously forced advertisers and other promoters to void sales promotions in Puerto Rico and to limit participation in many product and service sweepstakes to only residents of the 50 United States and the District of Columbia. When effective Nov. 27, the regulation will provide Puerto Rico’s 3.9 million residents with broader access to the many chance-to-win participation opportunities available within the U.S. market.

“I am pleased to announce that the many practical complications U.S. advertisers previously experienced conducting sweepstakes in Puerto Rico, which routinely led to excluding our residents from participation in their promotions, are now behind us,” Mr. Rivera said. “For many years, our laws made it impossible for companies to conduct national sweepstakes here, and consequently we have been excluded from the opportunity to take part in these potentially valuable promotions. We enter a new chapter now whereby our law adequately protects consumers without locking ourselves out of perfectly legitimate sweepstakes.”

Changes in Puerto Rico’s Sweepstakes and Games of Chance Regulation align the Commonwealth’s rules and definitions with regulations in the United States promulgated by the U.S. Postal Service, the U.S. Federal Trade Commission and individual states. Highlights of the new regulation include:

• The definition of "consideration" contains some of the best language for SMS and other technology-based sweepstakes in the United States
• Certification by a notary requirement for rules is GONE
• The vague reference to having to deliver prizes within three months is GONE
• An express provision defining "abbreviated rules" has been added with "material terms" that are even more reasonable than Florida's. Furthermore, the regulation provides for the use of abbreviated rules in advertising so long as they point to where the full rules are published.
• Although rules still need to be "published," you can now satisfy that requirement by just putting them on an Internet site
• The requirement that the rules be published, disseminated and spread in Spanish is GONE. Now, you just need to publish the rules in the language that the advertising appears in.
• Complicated odds statements have been simplified to conform with typical odds statements
• Complicated publication dates for different types of promotions are GONE
• Notarized certification of drawing procedures is GONE
• Notarized certification of game piece security codes is GONE
• Tax liability, which was placed on the promoter, is now on the entrant
• Requirement that full rules appear in print ad that covers more than two-thirds of the page is GONE
• Provision concerning unavailability of prizes based on "foreseeability" of circumstances is GONE
• Penalty for not awarding prizes if the circumstances were foreseeable is GONE
• Although changes to rules still need to be approved by the Secretary, there is now default approval after 10 business days with no action
• The prohibition against not awarding prizes within three months, or awarding prizes that are not the quality advertised, is simplified to just require that prizes be awarded as advertised
• The requirement that alternate winners be chosen is tempered by the caveat that some prizes, because of their nature--like sports events or perishable items,--cannot be awarded to an alternate winner
• The distinction between games originating inside or outside of Puerto Rico is GONE

“DACO is grateful for the assistance of John Feldman, a partner in the Washington, D.C. office of Reed Smith LLP, an international law firm, and Gabe Karp, Executive Vice President and General Counsel of ePrize LLC, the worldwide leader in interactive promotions, who both provided the Department with a great deal of information and significant input and suggestions in redrafting the sweepstakes regulations,” Mr. Rivera said. “Without Mr. Feldman’s and Mr. Karp’s able consultation and guidance over the past several months, the opening of a vibrant Puerto Rican sweepstakes market for U.S. advertisers and our people would not have been possible.

“Both Reed Smith and ePrize are cutting edge in the area of promotions, particularly in the cross-border aspects of this advertising specialty,” Mr. Rivera continued. “They provide aggressive and creative thinking, as John and Gabe did in helping us solve our longstanding issue with sweepstakes barriers.”

Why This Matters:

These changes will be a boon to U.S. advertisers who use sweepstakes promotions in their advertising campaigns, as well as to Puerto Rican residents now able to vie for U.S. sweepstakes prizes.

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Multichannel: Now Hear This: House Subcommittee Approves Commercial Loudness Bill

CALM, Passing By Voice Vote, Referred To Full Energy & Commerce Committee

The House Communications Subcommittee has approved a bill that would require the broadcast and cable industries, which includes satellite and other multichannel video providers, to regularize the volume of advertisements and the programming surrounding them.

CNET: Yes, new FTC guidelines extend to Facebook fan pages

Prominent users of Twitter and Facebook won't be exempt from controversial new Federal Trade Commission guidelines that keep tabs on blogger freebies and giveaways, according to Richard Cleland, associate director for the FTC's advertising division. The agency absolutely plans to keep tabs on social networks as well as blogs in accordance with revised regulations that could see violators fined up to $11,000, he said.

Environmental Leader: ‘Valuable,’ ‘Smart’ Among Top Descriptors Associated with Energy Efficiency

When consumers think about energy efficiency and energy conservation, “value” and “smart” are the adjectives that most come to mind, according to “Green Gap Redux: Green Words Gone Wrong,” a report from EcoAlign. The report is based on results from the EcoPinion Survey.

Mediaweek: Web Users Prefer E-mail Interaction With Marketers, Says Study

Web users are far more willing to share personal information with marketers via email than on social networking sites, according to new research commissioned by lead generation specialty firm Pontiflex.

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The Joint Policy Committee on Broadcast Talent Union Relations (JPC) is the multi-employer bargaining unit that represents the advertising industry in negotiations with the Screen Actors Guild and the American Federation of Television and Radio Artists in connection with the union agreements covering actors who perform in commercials for traditional and non-traditional media.. Established in 1962 by the Association of National Advertisers and the American Association of Advertising Agencies, the JPC is looking for one or two individuals who can join the JPC team to work with a consultant company hired jointly by the JPC and SAG and AFTRA. The consultant will be developing and running a pilot project testing a new way to pay actors in television commercials that is based upon a payment per GRP (in network, national cable, and syndication) (the "Project"). The JPC will be appointing one full time employee to work with the consultant and be the "eyes and ears" of the JPC while the Project software and hardware are developed, during operation of the actual Pilot Test (April 1, 2010 through March 31, 2011), and in post pilot test evaluation. While the ideal candidate would be full time and have experience in both areas described below, the JPC may hire two individuals part time to cover the experience required. The project is expected to end at some time between August and October 2011. The person(s) selected would most likely be based in New York City but the JPC is open to discussions in that regard for qualified individuals. Some travel will be required.

The candidate(s) needs the following experience and skills:

1. Media Buying: At least five years experience as a media buyer. Experience requires a thorough knowledge of up front and scatter buying, in network, national cable, and syndication. The person chosen must also have a thorough knowledge of how to apply Neilson ratings (C-3) to media buys and how such media buys are reconciled in order to be certain the GRP's promised are delivered, including credits and make-goods.
2. Talent Payments: A thorough knowledge of the SAG and AFTRA Television Commercials Agreements with a minimum five years experience in paying actors under those agreements including experience in working with databases used in such payment process, handling audits by the unions, reconciling claims and familiarity with internal agency processes between media buying, talent payment and broadcast traffic departments.

The individual(s) hired for each role will be expected to work closely with the consultant and report back to the JPC on a weekly basis with respect to developments in the Project. The individual(s) will be employed directly by the consultant. The candidate will be expected to work from both their residence and the consultant’s offices.

Salaries for the positions will be commensurate with the individual's experience and the full or part time status.

Please send your resume to Marilyn Colaninno at Reed Smith LLP, 599 Lexington Avenue, New York, NY 10022. 

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California has long had a law requiring that children seeking to be employed in entertainment productions, or as advertising or photographic models, must obtain an Entertainment Work Permit prior to beginning work. See Cal. Labor Code § 1285 et seq.; see also 8 C.C.R. 11750 et seq. The Entertainment Work Permits were issued free of charge upon submission of the application, which required, among other things, proof of the child’s school attendance, adequate grades, and health records. However, since the permits were not tracked in a meaningful way, some parents had little incentive to obtain them in the first place.

The California Legislature has sought to address this issue through the passage of a new law – A.B. 402. The new law, if signed by the governor, would require permit seekers to pay a fee of $50 every six months to obtain the required authorization. The money collected from these fees would be deposited into the Entertainment Work Permit Fund, and would be available for use by the Labor Commissioner to make at least one unannounced site visit per quarter to a randomly selected set or production facility where one or more children are working under Entertainment Work Permits; the money would also be used to develop and enhance an Internet website, informational materials, and training provided to studio teachers.

The bill was supported by SAG, but opposed by The Hollywood Group and Republican Assemblyman and 2010 Senate Candidate Chuck Devore.

Why This Matters: A.B. 402 would provide a sourcing of financing to visit production facilities where children are working under Entertainment Work Permits, and in fact would require the Labor Commissioner to make at least one such visit per quarter. By placing a requirement on the Labor Commissioner to make site inspections, there will be an enhanced incentive on the part of the production facility, as well as on the producer and/or advertiser, to comply with all child actor-related laws, including working-condition regulations and the establishment of Coogan Trust Accounts. 

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Samsung allegedly made advertising claims stating that its keyboards were antimicrobial and inhibited germs and bacteria. Because these were essentially pesticide claims, they fell under the jurisdiction of the EPA, which enforces the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). Under FIFRA, before a pesticide can be sold or distributed in the United States, the manufacturer must register with the EPA. Samsung didn't do that, and EPA brought an enforcement action. Under the resulting order, Samsung will pay a $205,000 fine, and will provide a certification that it has complied with FIFRA by removing all pesticidal claims made in connection with the sales and distributions of these products. Additionally, Samsung agreed to notify its retailers and distributors to remove any pesticidal claims from labels, promotional brochures and Internet/Web-based content for the subject products.

Why This Matters

Advertising for certain products and services is regulated by agencies other than the FTC. Moreover, there are situations, as here, where a product whose advertising otherwise would be regulated by FTC suddenly becomes subject to another regulatory regime because of the type of claim being made.

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If you haven’t already registered for the Interactive Advertising Bureau’s education webinar, entitled “What Me Worry? Legal Best Practices for Small Publishers”, THERE IS STILL TIME! The webinar, which is scheduled for this coming Friday, October 23, 2009 from 12:00 pm – 1:00 pm (Eastern US Time), is being presented by Reed Smith and sponsored by the Long Tail Alliance Program of the Interactive Advertising Bureau (IAB). The Webinar will provide an overview of the legal issues and suggested best practices in the following areas:

Advertising Compliance          Privacy              Social Media

There will be a Q&A session as time permits at the end of the session, and a .PDF copy will be available on Legal Bytes after the seminar is over.

The webinar is open not only to IAB members and Reed Smith clients, but also to anyone who is interested - on a first-come, first-served basis. So register now. You can get more information and register right here for What, Me Worry? Legal Best Practices for Small Publishers. 

About the Long Tail Alliance Program

The IAB formed the Long Tail Alliance program in summer 2008 to encourage involvement with individuals and small business who, powered by interactive advertising, have turned their interests and passions into a media revolution. The Alliance is the beginning of something the IAB envisions as a much larger portrait of American entrepreneurs who are pursuing and achieving the American dream, even as they row hard against strong economic currents. The IAB hopes to expand its Long Tail Membership in order to encourage advocacy, training, and a coming-together of smaller publishers across America as their businesses grow, all while the dynamic of technology and media continues to change.

For more information, click here: http://iamthelongtail.com/707346

About the IAB

The Interactive Advertising Bureau is comprised of more than 375 leading media and technology companies who are responsible for selling 86 percent of online advertising in the United States. On behalf of its members, the IAB is dedicated to the growth of the interactive advertising marketplace, of interactive's share of total marketing spend, and of its members' share of total marketing spend. The IAB educates marketers, agencies, media companies and the wider business community about the value of interactive advertising. Working with its member companies, the IAB evaluates and recommends standards and practices, and fields critical research on interactive advertising. Founded in 1996, the IAB is headquartered in New York City, with a Public Policy office in Washington, D.C.

About Reed Smith

Reed Smith is a global, full-service law firm with nearly 1600 lawyers in 23 offices around the world. Joseph I. (“Joe”) Rosenbaum, a partner in the New York office, chairs the firm’s global Advertising Technology & Media law practice, is the editor and publisher of Legal Bytes, is Corporate Secretary & General Counsel to the IAB, and is an ex-officio member of the IAB Board. Adam Snukal is a senior associate who works with Joe in the Advertising Technology & Media law group and is editor of Adlaw by Request, the gold standard in advertising legal publications in the industry.

Join us for this exciting and timely IAB Long Tail Alliance webinar presented by Reed Smith. We look forward to your participation.

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We have updated our "Where in the World are Reed Smith Attorneys?" section with the following presentations:

• New York City, New York:  "Facebook Personalized URLs - Titanic Opportunity for Brands or Tip of an Iceberg?"
• Buenos Aires, Argentina:  "IP and the Global Financial Crisis - Risks and Opportunities"

To see all of the places Reed Smith Advertising, Technology and Media attorneys have been and to download selected presentations, please click here.

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Environmental Leader: E-Waste Recycling Bill Floated in Senate

As more and more states institute electronics recycling programs, a U.S. Senator has proposed federal legislation that would standardize the recycling of electronics devices, reports Circuits Assembly.

Brandweek: Social Net Ads: Fewer Clicks, More Engagement

Conventional wisdom holds that social media advertising does not perform nearly as well as ads running on non-social sites, at least by standard measurements like clicks.

Reuter: U.S. lawmakers urge delay in Internet gambling rules

U.S. House Financial Services Committee Chairman Barney Frank and other lawmakers on Friday urged regulators to delay the December 1 implementation of financial rules to enforce a ban on Internet gambling.

Washington Post: FTC Sets Endorsement Rules for Blogs

Bloggers who offer endorsements must disclose any payments they have received from the subjects of their reviews or face penalties of up to $11,000 per violation, the Federal Trade Commission said Monday.

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Here’s a little known fact - over fifty-six million Americans - 20% of the U.S. population - have a disability. I AM PWD, a coalition of entertainment industry organizations including Actors Equity, SAG and AFTRA is dedicated to enhancing the status and promoting the advancement of performers with disabilities; fostering understanding and respect for disabled performers and develop and improve working standards and assist in the continuing development of ethical standards for practitioners in the industry.

The JPC is pleased to forward to you an invitation from the I AM PWD for the Hollywood Disabilities Forum, taking place on October 24th at the UCLA School of heater, Film and Television.

Please see the attached invitation for this very unique and informative event. For additional information about I AM PWD and a detailed agenda of the program, please visit the I AM PWD website.

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Following the U.S. District Court's statement last month regarding the dubious constitutionality of Maine's Act To Prevent Predatory Marketing Practices against Minors has been recommended for repeal by a special committee of the Maine legislature. MediaPost reports that last Friday, the state's judiciary committee conceded that the constitutionally flawed statute, which had been questioned but not invalidated by the Court, could only create unnecessary costs in a flurry of private actions. That said, the committee was committed to the original purpose behind the law, that is, to enact a carefully tailored measure to address the collection of minors' health-related information.

Why This Matters

Advertisers and marketers can go back to their normal age filters and can once again include Maine in their promotions and marketing plans.

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This post was written by Rachel Rubin.

If it looks like fruit and sounds like fruit, it must be fruit. Well, not exactly, and please don’t waste our time, says a California court. Ray Werbel recently filed a lawsuit in San Francisco federal court claiming that he bought and ate Froot Loops cereal, believing it was healthy . . . for four years. Upon discovering that it was in fact a sugary children’s cereal, Werbel claims he was misled by Toucan Sam’s claims about “the flavor of froot.” He seeks unspecified punitive and actual damages to be paid to all consumers who, like him, bought Froot Loops under the same mistaken belief.   

The “Froot” in Kellogg’s Froot Loops cereal is not real fruit. Eating the “froot” does not provide the same health benefits of real fruit. We expect the court to dismiss this complaint just as it has recently dismissed similar complaints – and there have been a few of them lately. Though Werbel claims otherwise, he may be a serial cereal litigant. He also brought suit against Pepsi, the maker of Cap’n Crunch with Crunchberries cereal, not realizing that a nearly identical case had been dismissed by the court earlier this year. In May, a judge in the U.S. District Court in the Eastern District of California dismissed a complaint by a woman who claimed she had purchased Cap'n Crunch with Crunchberries because she believed "crunchberries" were real fruit. The plaintiff, Janine Sugawara, alleged that she had only recently learned to her dismay that the "berries" were in fact simply brightly colored cereal balls. Though the colorful “berries” did contain a small amount of strawberry fruit concentrate for color and flavor, it was not enough to be considered an actual strawberry. Judge Morrison England, Jr. stated that:

This Court is not aware of, nor has Plaintiff alleged the existence of, any actual fruit referred to as a "crunchberry." Furthermore, the "Crunchberries" depicted on the [box] are round, crunchy, brightly-colored cereal balls, and the [box] clearly states both that the Product contains "sweetened corn & oat cereal" and that the cereal is "enlarged to show texture." Thus, a reasonable consumer would not be deceived into believing that the Product in the instant case contained a fruit that does not exist. . . . So far as this Court has been made aware, there is no such fruit growing in the wild or occurring naturally in any part of the world. 

Noting that normally the loser on a motion to dismiss would get a chance to amend the complaint, that was not going to happen here:

In this case, . . . it is simply impossible for Plaintiff to file an amended complaint stating a claim based upon these facts. The survival of the instant claim would require this Court to ignore all concepts of personal responsibility and common sense.  The Court has no intention of allowing that to happen.

More on the decisions here, here, and here.   

In other breakfast news, consumers filed a $5 million class action suit against General Mills over its claims that Cheerios helps to lower cholesterol. Suits by consumers in three states were consolidated in federal court in New Jersey last week. The suits were prompted by a warning the FDA issued to General Mills in May on the claims that Cheerios “can lower your cholesterol 4 percent in 6 weeks” and has been “clinically proven to lower cholesterol.” As we previously reported, the FDA said that Cheerios’ claims regarding its benefits in the prevention and treatment of a disease (hypercholesterolemia) likely make it a drug under FDA standards. Cheerios responded to the FDA, arguing that its claims are not unlawful disease claims, and that the claims are consistent with the FDA’s health claim regulations. General Mills says it is in talks with the FDA to resolve the issue. General Mills’ answer to the complaint is due at the end of the month.

Why This Matters

Besides setting the media and blogosphere abuzz with bad puns and witticisms (nor could we help ourselves), this case is interesting from an advertising perspective. It reminds us that the court has a sense of humor, and, more importantly, addresses the “reasonable person” standard. It affirms two important points: (1) that the “reasonable person” is expected to have some common sense, some perspective, and to not take things so literally, but (2) companies are still accountable for the content of their advertising, especially when statements cross the line from marketing messages to health- or scientific-related claims. 

As always, you can contact the author, Rachel Rubin, Adam Snukal or any other Reed Smith attorney with whom you regularly work, for more information or assistance.

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This post was written by Paul Bond. 

When emergencies hit, Reed Smith's clients routinely call upon the Firm's Privacy, Security, and Management Group. We've dealt with everything from lost laptops to international hacking, database thefts by employees to pharmacy dumpster diving. On the litigation side, we have defended more than sixty (60) consumer class actions arising from privacy incidents, along with significant government relations and insurance recovery work. We are assisting a wide variety of clients with emerging challenges to what personal information they capture and utilize, both in connection with marketing as well as for day-to-day business operations.

There is no perfect privacy compliance program. However, in an article recently published by The Privacy & Data Security Law Journal, Paul Bond has presented a series of "Ten Data Security Questions Faced by Every Company." A comprehensive approach to privacy compliance will address each of these questions, and reduce the incidence and likely severity of privacy events going forward.

If you have questions about this article, feel free to contact Paul directly, the Group's head Mark Melodia, or the Reed Smith attorney with whom you regularly work.

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We’ve written in the past on Adlaw by Request about pending legislation that’s winding its way through Congress to establish a new agency, the Consumer Finance Protection Agency (the “CFPA”). H.R. 3216, the Consumer Financial Protection Agency Act (the “Act”), seeks to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools. The CFPA would be charged with overseeing a significant portion of the financial services industry (e.g., lending practices, financial fraud, structuring of personal and commercial loans, etc.), and in particular, the marketing and advertising of financial products and services.

Among the various new rules, regulations and initiatives that have been bundled within the Act, media outlets could be held liable for running financial advertisements that the CFPA deems misleading or fraudulent.  

The pending bill, in its most current form, would allow the CFPA to create rules for what would be unlawful to run in an ad, and then to assign liability to any party that “knowingly or recklessly provides substantial assistance to another person” by running an ad that the CFPA determines to be unlawful. According to the Advertising Coalition, a 14-member group that includes most all of the major advertising trade groups and several large corporations, “This language could create a very large net that reaches virtually anyone involved in preparing, placing, receiving, televising or printing an advertisement.” Media outlets might now be required to go as far as hiring financial experts to review and study advertisements from financial services companies before those advertisements are allowed to run or air. The Advertising Coalition has also raised the concern that such legislation could have the chilling effect of encumbering free speech, as media outlets will be likely to abstain from running questionable ads rather than expose themselves to liability, according to Jim Davidson, Executive Director of the Advertising Coalition. Good for the economy and an already struggling industry, probably not so much…

A core criticism that many experts have raised with the Act is the noticeably absent “unfairness” standards that would limit the CFPA’s rulemaking and enforcement authority. These fairness standards, which are set forth in a letter sent by the FTC in 1980 to Sens. Wendell H. Ford and John C. Danforth, establish the FTC’s position on the definition of “unfairness” in advertising, which is made up of a three-part test: (1) the injury must be substantial; (2) it must not be outweighed by countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided. These standards have been both a beacon and a measuring stick for the FTC over the past 20 years. If a practice does not violate all three of the foregoing factors, the FTC is generally prohibited from concluding that such a practice is “unfair” and in violation of the FTC Act. The combination of broad financial services advertising oversight without the kind of checks and balances that exist within the FTC’s mandate has many experts understandably concerned over the CFPA’s broad rulemaking and enforcement authority. 

Another question that has many experts scratching their heads is the relationship between the CFPA and the Federal Trade Commission, the ad industry’s primary regulator today. The creation of the CFPA would likely have a dramatic restructuring effect on the FTC, as much of the FTC’s regulatory authority and resources would be shifted to the CFPA. By the CFPA assuming primary responsibility for advertising review and fraud prevention within the financial services industry, many are expecting both unnecessary overlap and near-decimation of the FTC’s role. It’s still somewhat of a mystery to many as to where the CFPA’s authority ends and the FTC’s authority begins. Thankfully, Rep. Barney Frank (D-Mass.), Chairman of the House and Financial Services Committee and Sponsor of the Act, has said that he still envisions a strong role for the FTC.

The Act is certainly on a fast-track, and the House of Representatives may even vote on some version of the bill before Congress breaks for Thanksgiving in November. We, at Adlaw by Request, will continue to cover these developments and elucidate for our readership how they are likely to affect both the financial services and advertising industries. Buckle up!

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MediaPost: Publicis Warns Online Publishers To Be Vigilant Against Rogue Insertion Orders

In an effort to head off potential liabilities and threats to its clients' reputations from rogue media buyers posing as legitimate online marketers, Publicis Groupe last week sent letters to publishers putting them on notice that they must take steps to manually confirm any requests for insertion orders they receive from a Publicis agency that looks questionable or comes from a source they are not familiar with. "We have read with increasing alarm the press surrounding rogue software and malicious advertising that is being placed on Web sites by individuals pretending to represent legitimate insertion requests," reads a copy of one of the letters from Publicis' Starcom unit, a copy of which was obtained by OnlineMediaDaily.

PC World: Facebook Will Shut Down Beacon to Settle Lawsuit

Facebook has agreed to shut down its much maligned Beacon advertising system in order to settle a class-action lawsuit.

BNET: FDA to Hold Hearing on Social Media, Web 2.0; Long Overdue Guidance Could Be On Its Way

The FDA is to hold a public hearing on how drug companies use the web and other social media to promote pharmaceuticals. The news will be greeted warmly by the industry which for years has been complaining that brand managers do not know how far the FDA will allow them to go in media such as Google ads, Twitter, Facebook, and even on their own web sites.

Environmental Leader: New York Launches Green Hospitality Certification Program

The New York State Department of Environmental Conservation (DEC) has launched a new initiative to certify lodging establishments as "green" for employing environmentally friendly and sustainable practices. Forty-three hotels and inns have signed on as initial participants for the certification process.

Environmental Leader: ‘Natural,’ ‘Recyclable,’ ‘Renewable’ Terms Resonate Most with Consumers

About 84 percent of consumers think of "green" products as those that are made of recyclable or reusable material, or include such packaging, according to new research from Grail Research.

Adweek: Ad Tracking Widely Opposed, Study Says 60% of U.S. adults don't want to be shown ads based on their interests

It has long been an article of faith among advertisers that consumers want more relevant advertising. Yet a new academic report finds that most Americans are opposed to marketers tracking them to tailor ad messages.

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Reed Smith will host the next brown bag lunch meeting of the Federal Communications Bar Association’s joint Privacy/Data Security and Legislative Committees. The meeting will be held tomorrow, October 13, 2009, between 12:00 noon – 2:00 p.m. at Reed Smith’s Washington, D.C. offices (1301 K Street, NW, Suite 1100 East Tower). The Committees will discuss the legislative priorities for the 111th Congress with special emphasis on behavioral marketing and data security legislation. The following speakers are confirmed to-date:

• Amy Levine, Legislative Counsel to Congressman Rich Boucher; and
• Paul Cancienne, Legislative Aide to Congresswoman Mary Bono Mack.

We also have invited staff from the U.S. Senate. It's not too late if you'd still like to attend -- please RSVP to Desiree Logan at dlogan@reedsmith.com.

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On Friday, October 23, 2009, from 12 – 1 p.m. (Eastern US Time), Joseph I. (“Joe”) Rosenbaum, Partner at Reed Smith and General Counsel of the IAB, assisted by Adam Snukal, Senior Associate at Reed Smith, will be presenting an educational webinar, sponsored by the Long Tail Alliance Program of the Interactive Advertising Bureau (IAB), entitled: What Me Worry? Legal Best Practices for Small Publishers.

During the webinar, Joe and Adam will be discussing and fielding questions in each of the following areas:

Trademarks: Buying someone else’s key words? Displaying advertising? Sponsoring or hosting contests, sweepstakes, co-branded promotions? Using social media or virtual worlds? Trademarks are everywhere. When should you worry?

Compliance: What’s new at the FTC and FCC? Industry groups want self-regulation. Privacy and consumer advocacy groups want more regulation. Congress is poised to “do something.” What you need to know about marketing to children, adults, compliance with sectoral advertising regulations, from finance and health care to product safety. The new FTC guidelines for Endorsements and Testimonials, and the slow death of diet commercials.

Privacy: Behavioral targeting has everyone up in arms. What should a small publisher do if she feels her privacy policy has been violated?

Social Media: Blogs, splogs and vlogs. Virtual worlds, avatars and pseudonyms. Profiles and networks, friends and fans. Testimonials and endorsements – from celebrities to consumers, paid and unpaid. Buzz, viral and word of mouth. Defamation, libel, copyright and personalized URLs. Sound confusing? It is. But ignorance won’t insulate you from liability. Don’t want to become a regulatory target? What you should know.

Q&A: IAB and Reed Smith to answer questions from participants.

The webinar is open to IAB members, to Reed Smith clients, and to the general public on a first-come, first-served basis. Register now. You can get more information and register right here for What Me Worry? Legal Best Practices for Small Publishers. 

About the Long Tail Alliance Program

The IAB formed the Long Tail Alliance program in summer 2008 to encourage involvement with individuals and small businesses who, powered by interactive advertising, have turned their interests and passions into a media revolution. The Alliance is the beginning of something the IAB envisions as a much larger portrait of American entrepreneurs who are pursuing and achieving the American dream, even as they row hard against strong economic currents. The IAB hopes to expand its Long Tail Membership in order to encourage advocacy, training, and a coming-together of smaller publishers across America as their businesses grow, all while the dynamic of technology and media continues to change.

For more information, click here.

About the IAB

The Interactive Advertising Bureau is comprised of more than 375 leading media and technology companies that are responsible for selling 86 percent of online advertising in the United States. On behalf of its members, the IAB is dedicated to the growth of the interactive advertising marketplace, of interactive's share of total marketing spend, and of its members' share of total marketing spend. The IAB educates marketers, agencies, media companies and the wider business community about the value of interactive advertising. Working with its member companies, the IAB evaluates and recommends standards and practices, and fields critical research on interactive advertising. Founded in 1996, the IAB is headquartered in New York City, with a Public Policy office in Washington, D.C.

About Reed Smith

Reed Smith is a global, full-service law firm with nearly 1600 lawyers in 23 offices around the world. Joseph I. (“Joe”) Rosenbaum, a partner in the New York office, chairs the firm’s global Advertising Technology & Media law practice; is the editor and publisher of Legal Bytes; is Corporate Secretary & General Counsel to the IAB; and is an ex-officio member of the IAB Board. Adam Snukal is a Senior Associate who works with Joe in the Advertising Technology & Media law group and is editor of Adlaw by Request, the gold standard in advertising legal publications in the industry.

Join us for this exciting and timely IAB Long Tail Alliance webinar presented by Reed Smith. We look forward to your participation.

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An important and relevant topic that has been addressed through several articles on Adlaw by Request in the past is the FTC’s position and guidance on endorsements and testimonials in advertising. Moreover, in a digital, social media age where blogs, social networking sites and other real time digital tools have become commonplace for user and advertiser alike, the line between them can and often has become awfully blurred. This, and many other examples, are addressed in the FTC’s long-awaited revised "Guides Concerning the Use of Endorsements and Testimonials in Advertising," issued yesterday. As reported previously on Adlaw by Request, the final revisions are intended to update the FTC’s guidance, last revised in 1980, and provide advice to advertisers and agencies regarding compliance with the FTC Act.

The principle espoused and defended by the FTC that a consumer should be informed of any material connection between the advertiser and the maker of the statements is expressly set forth in the FTC Guides, even though these cases were always fact-sensitive and subject to review on a case-by-case basis.  The analysis will, as always, turn on facts that may or may not support the existence of a “material connection,” but if a company, for example, sponsors research about its products or services (or potentially about the products or services of a competitor, if the results will be used in a comparative ad), that same company must disclose its sponsorship in the ad. Similarly, although consumers may expect celebrities to be paid for appearing in commercials, if an endorsement is made outside that context – for example, on a talk show, at a book signing, at a motion picture premiere, or on Facebook, Twitter or other social media – any material relationships and connection must be disclosed.

For more information on this topic, our esteemed colleague Joe Rosenbaum presented a seminar entitled, "Trust Me, I'm a Satisfied Customer: Testimonials & Endorsements in the United States" at the University of Limerick this past July. You can go to the previous Legal Bytes blog post and download a copy of Joe’s presentation at any time.

Want to know more about the FTC Guides, or the implications to social media advertising and marketing, or traditional advertising?  Feel free to contact me or the Reed Smith attorney with whom you regularly work.

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It's our distinct pleasure to provide you with a Primer on Copyright Law, prepared by John Hines, Jr., a partner in our Chicago office. The primer was developed by John for a Practicing Law Institute (PLI) event this coming November, at which he's speaking on the topic of Copyright Licensing. The primer is both comprehensive and user-friendly, and should be a desk companion for anyone who regularly deals with copyright-related issues.

If you have questions about the Primer, U.S. copyright laws, or want to know more about the PLI event mentioned above, feel free to contact John directly or the Reed Smith attorney with whom you regularly work.

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In what could be a watershed case between a pharmaceutical company and the FDA, Allergan has filed suit against the FDA in the U.S. District Court for the District of Columbia, seeking a ruling from the court that would allow Allergan to share relevant information about the safe use of BOTOX with the medical community for non-FDA approved uses (i.e., off-label uses). Under current law, the FDA restricts its approvals on pharmaceuticals for very specific uses and treatments. Although physicians have quite a bit of maneuverability and flexibility to prescribe drugs for off-label uses, both the FDA and the Justice Department have taken the hard-line position that federal law prohibits pharmaceutical companies from proactively providing information (including advertising) to the medical community regarding off-label uses, even when such information is accurate, complete and beneficial. For the reasons mentioned in the article below, this is particularly problematic for Allergan.

This is a case we'll be following closely on Adlaw by Request, and we'll make every effort to keep you updated on all important developments.The press release is available on Allergen's website.

Read the full complaint (PDF).

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