FTC Drops A $31 Million Hammer On Live Event Ticket Brokers In First Ever BOTS Act Enforcement Case

The illusive secondary market for tickets to live events from concerts and theater performances to sporting events may be experiencing a new step towards reform. The Federal Trade Commission took legal action against three New York-based ticket brokers and an officer of each entity for violating the Better Online Ticket Sales (“BOTS”) Act. In 2016, the BOTS Acts was enacted to help curb companies and individuals from using computer software, or “bots,” to purchase massive amounts of live event tickets and resell them to consumers for a mark-up. Pursuant to the BOTS Act, ticket brokers who use these bots are prohibited from circumventing purchase controls and ticket allocation measures used by online ticket sellers.

According to the consent order, Cartisim Corp. and Simon Ebrani; Just In Time Tickets, Inc. and Evan Kohanian; and Concert Specials, Inc. and Steven Ebrani, each purchased tens of thousands of tickets for performances and events and used hundreds of fictitious Ticketmaster accounts, credit cards, and IP addresses to avoid security measures and control systems implemented on the Ticketmaster websites. The defendants profited millions of dollars in revenue from sales made on secondary market ticketing platforms. The FTC determined that such actions prejudiced consumers, unjustly enriched defendants, and violated the BOTS Act and the FTC Act. The FTC entered orders against the defendants of more than $31 million, which are partially suspended due to the defendants’ inability to pay. That said, defendants will cut checks to the FTC for civil penalties in the amount of $3.7 million.

Takeaway: In this first-ever case brought by the FTC over live event ticket sales, both first party sellers and third party purchasers should be aware of the FTC’s ability to enforce the BOTS Act. Given the breadth of FTC’s authority, we expect it will continue to use the BOTS Act as an enforcement tool against those who attempt to purchase bulk tickets to live events with the goal of reselling them at a markup to consumers.

FTC reaches settlement over misleading mobile advertisements for in-game rewards, and warns of growing scrutiny towards today’s gaming gatekeepers

The Federal Trade Commission (FTC) has settled with mobile advertiser Tapjoy, Inc. (“Tapjoy”) over allegations that it misled consumers by failing to provide in-game rewards that users earned by completing its advertising offers. According to the FTC’s complaint, Tapjoy offered users in-game virtual currency for completing advertising offers like purchasing products or services, signing up for limited-time free trials, providing personal information, or completing surveys. In exchange, Tapjoy allegedly received commissions from its third-party advertiser clients.

The FTC further alleged Tapjoy was aware of these deceptive claims and had received “hundreds of thousands” of complaints from users who did not receive the rewards they were promised. Many consumers complained that they ended up spending a significant amount of money and/or revealed sensitive personal information because of these advertising offers. Rather than take steps to remedy the misleading claims, Tapjoy “implemented policies to discourage consumers from complaining, such as prohibiting consumers from submitting a complaint within 24 hours of completing an offer.”

As part of the proposed settlement, Tapjoy is prohibited from misrepresenting the rewards and terms of its advertising offers, and is required to monitor its advertisers in order to ensure the promised rewards are delivered. The consent agreement is subject to a public comment period, after which the FTC will decide whether to issue a final order. The FTC explained that each violation of such an order could result in civil penalties of up to $43,280.

The action against Tapjoy reveals a more intense scrutiny toward the mobile gaming market structure, particularly with in-app stores and advertising intermediaries. In a joint statement, Commissioners Rohit Chopra and Rebecca Kelly Slaughter warned that “when it comes to addressing the deeper structural problems in this marketplace that threaten both gamers and developers, the Commission will need to use all of its tools — competition, consumer protection, and data protection — to combat middlemen mischief, including by the largest gaming gatekeepers.”  That said, the FTC’s proposed settlement reveals several important signals: a growing trend to regulate the mobile gaming industry as a whole; the materiality of consumer complaint volume; and the strong consensus for continued FTC enforcement, including financial penalties.  With this in mind, gaming gatekeepers that have formal policies and procedures in place to facilitate accountability in connection with claims and practices are often better-positioned to respond to investigations and manage consumer requests or complaints.  Lastly, the joint statement by the Democrat members of the Commission signals increasing recognition of the interplay between competition policy and consumer protection issues—a theme we expect may continue to emerge in the new administration.

Aldi Sued Over “Underfilled” Coffee In Class Action Lawsuit

Last week, a putative class action lawsuit was filed against Aldi Inc. regarding certain Beaumont Coffee products sold in its stores. According to the complaint, the packaging for the coffee product states that a single package will make “Up to 210 6 oz Cups.” According to package instructions, the plaintiffs assert that a single serving consists of one tablespoon of ground coffee and one serving of water. To make the advertised 210 servings, the plaintiffs allege that the package would need to contain 210 tablespoons of ground coffee, not the 137 tablespoons contained in the purchased package. An example of the alleged claim appear on the packaging here:

When compared to the advertised cups of coffee available to be made with this product, the plaintiffs allege that the product is underfilled by over 34%.  Despite one of the named defendants residing in Illinois, and the complaint being filed in U.S. District Court for the Northern District of Illinois, the complaint alleges that the packaging constitutes false advertising pursuant to several California and New York unfair or deceptive acts or practices statutes, including the California Consumer Legal Remedies Act, Unfair Competition Law, and False Advertising Law.

Takeaway: Most slack fill cases involve allegations that a product contains too much empty space commensurate with the overall package size. In this case, however, the plaintiffs allege that the package is underfilled based on the claims of contained on the package itself. Advertisers that make claims about number of servings per package should ensure that such claims match with the instructions and nutrition facts label.

FTC Issues Largest Ever Judgment Over Made In The USA Claims

Last week, the Federal Trade Commission issued a $1.2 Million judgment against glue maker, Chemence. Chemence is the manufacturer of various glues. The judgment originates from the production and manufacturing of various glue products with pre-packaged and pre-labeled Made in the USA claims. Additionally, the FTC alleged that Chemence represented to third parties that their private label products were all or virtually all made in the USA. An example of Chemence’s packaging, including both unqualified Made in the USA claims and use of the American Flag are below:

According to the complaint, Chemence violated a 2016 order with the FTC over identical, unqualified Made in the USA claims. Moreover, the FTC alleged that Chemence’s CEO declared in a 2017 compliance report under penalty of perjury, that Chemence changed the packaging to include the following revised claim: “Made in USA with US and globally sourced materials.”

In addition to the monetary judgment, Chemence is barred from making unqualified Made in the USA claims unless it can show that both the final assembly and all or virtually all of the ingredients of its glues are Made in the USA. Chemence must also notify third party sellers of its white-label products of the order, and provide compliance reports to the FTC.

Takeaway: In the largest-ever judgement against a company over Made in the USA claims, the FTC reaffirmed its commitment to ensuring consumers understand the source of origin of products they buy. This case serves as a reminder that any unqualified use of the American Flag or Made in the USA will require both the assembly of the products and the component ingredients to be all or substantially all made in the USA.

Twitter Announces, “Fleets”

On November 17, 2020, Twitter introduced Fleets, “a new way to join the conversation.”  Fleets are “fleeting” tweets; ones that disappear from an account after 24 hours.  According to Twitter’s blog, the impetus behind the product iteration is that users feel that posting permanent Tweets presents too much social pressure.  Users can “Fleet” various media, including text, photos, video, and even other Tweets.  From there, users can add backgrounds and text to a Fleet such as emojis and (soon) stickers.

Advertisers can harness this technology much in the same way they utilize Instagram Stories, including in influencer campaigns and to engage in social moments.  Fleets can also be used to comment on other Tweets.  From an analytics perspective, Fleets allow users to see all those who view it, even if the viewer has a protected account.  Twitter announces that soon, live broadcasting will be available via Fleets.

Of course, Fleets must comply with Twitter’s Terms of Use and all applicable laws and guidance, such as the Federal Trade Commission’s Endorsements and Testimonials Guides.  Advertisers can add text, such as #ad, clearly and conspicuously to a Fleet to disclose a material connection between an advertiser and the user who posted the Fleet.  And, though temporary, Fleets are still subject to the failsafe screen grab so all standard legal reviews and best practices should be followed.

Takeaway: New developments in social media provide exciting opportunities for marketers to engage audiences and showcase their products and services in new ways.  However, marketers may need reminding that the same legal requirements apply even when the marketing moment is fleeting.

Supermodel Sues for Alleged Unauthorized Use of Her Likeness

On November 16, 2020, supermodel Anastassia Khozissova filed a $20 million lawsuit in the New York state court against Ralph Lauren Corp. (“Ralph Lauren”) and HBO for their alleged unauthorized use of her likeness. Ms. Khozissova has been featured in campaigns and runway shows for numerous luxury brands, including Ralph Lauren. The model once shared a close working relationship with Ralph Lauren having been featured as the only model in the brand’s book “Diary of a Collection,” which was originally published in 2005. Ms. Khozissova alleges that her relationship with Ralph Lauren has since dissolved.

Ms. Khozissova purports that Ralph Lauren continues to use her photos in the brand’s Moscow store and New York City restaurant Polo Bar. Her image is also shown multiple times in “Very Ralph,” a documentary about Ralph Lauren that airs and is available for streaming on HBO.

Ms. Khozissova alleges that these acts are in violation of New York Civil Rights Law § 50 because Ralph Lauren and HBO failed to obtain her written consent to such uses of her likeness. The statute provides that “A…corporation that uses for advertising purposes, or for the purposes of trade, the name, portrait or picture of any living person without having first obtained the written consent of such person…is guilty of a misdemeanor.” N.Y. Civ. Rights Law § 50. In addition to monetary damages, Ms. Khozissova seeks attorney fees, court costs and injunctive relief.

Takeaway: Brands should ensure that they have sufficient rights to use a models’ likenesses. When preparing agreements, consider whether a right to use a model’s likeness extends beyond a specific campaign and is inclusive of other advertising and marketing messages. If that right is not secured in prior agreements, brands should ensure that they obtain the necessary consents in subsequent agreements.

Trump International Hotel Faces BIPA Class Action Lawsuit

Late last month, the Trump International Hotel in Chicago became the latest target hit with a class action lawsuit under the Illinois Biometric Information Privacy Act (BIPA).

Gianni Bartucci alleges he and other employees of the luxury downtown Chicago hotel were required to scan their handprints and/or fingerprints each time they clocked in and clock out of a work shift.  But according to Bartucci, the hotel violated BIPA by failing to provide prior written notice and obtain prior written release from employees before doing so.  Bartucci also alleges the hotel failed to have a publicly available retention schedule and destruction guidelines.

Trump International now faces alleged statutory damages of $1,000 for each negligent violation, and $5,000 for each willful/reckless violation.  This means alleged damages between $1,000 and $5,000 each time an employee scanned her or his handprints and/or fingerprints for two (2) to as much as five (5) years.

Takeaway: To help mitigate the risk of a BIPA lawsuit, employers should comply with the following BIPA notice requirements: provide prior written notice to employees that their biometric data is being collected and stored, and the purpose and duration for such uses.  Additionally, employers should obtain a written release from the employees that authorizes such uses, and make public a retention schedule and destruction guidelines that details the timeline (no less than three (3) years from the date of the employee’s last interaction with the company) for the eventual destruction of the employees’ biometric data.

Restarting advertising production? New U.S. Department of Labor’s “joint employer” rule shutdown by NY federal judge

As we head into fall 2020, many advertising companies are beginning – if they have not already done so – to restart media shoots. Just as they did before the pandemic hit, media shoots raise a broad swath of questions on the employment law front. One of the principal issues in this regard is the question of which entity(ies) is considered the talent’s employer.

This is a particularly important issue because of the so-called “joint employer” doctrine, which refers to a situation whereby a worker is deemed employed by more than one entity at the same time. If multiple entities are considered joint employers, they can then generally each be held jointly and severally liable for workplace violations (e.g., discrimination, harassment, retaliation, unpaid wages). The joint employer doctrine is often invoked in the advertising and media space, and can result in unforeseen corporate liability.

To that end, earlier this year, the U.S. Department of Labor (DOL) issued a rule updating its interpretation of the “joint employer” doctrine under federal wage and hour law. On September 8, 2020, however, a New York federal judge struck down a significant portion of the rule. Judge Gregory H. Woods’ 62-page decision delivers a significant blow to businesses that had relied on the business-friendly nature of the DOL’s new rule.

Reed Smith’s New York labor and employment team has prepared an article summarizing this decision and its impact on the business community. Click here to read the entire post on Employment Law Watch. If you have any questions about how this decision impacts your company – particularly as it relates to your use of talent on media shoots – please contact Mark Goldstein at mgoldstein@reedsmith.com or Stacy Marcus at smarcus@reedsmith.com.

Another NY Update: Legislators Pass Protection of Post-Mortem Right of Publicity

The New York State Legislature recently passed a bill that expands the State’s current laws to protect one’s right of publicity after death.  Under current privacy laws in NY, permission is required to use a living individual’s name, voice, or likeness for commercial purposes (i.e., in advertising materials).

While the bill – which awaits signature by Governor Andrew Cuomo – will not change the current law in relation to living individuals, it would create a new right of publicity for the deceased, whose publicity rights (e.g., name, likeness, photograph, voice, and signature) have commercial value at the time of their death or because of their death. Such right would be transferable and descendible.  For example, it could be exercised by the deceased individual’s estate or an individual who owns or has inherited 51% or more of such rights.  Subject to certain enumerated exceptions, the bill would also create liability for the use of “deep fakes” and deceptive use of a deceased performer’s “digital replica” if such use is likely to deceive the public into thinking the use was authorized by the deceased person or its successor (note this last element would only apply to “performers”, which is defined in the bill as a person who lived in NY at the time of death and who was regularly engaged in singing, acting, dancing, or playing a musical instrument). The bill would provide post-mortem rights for forty years after the person’s death.

In order to bring an action under the bill, the deceased must be domiciled in NY at the time of death and must have died at least one hundred and eighty days after the bill becomes law.  To file a lawsuit under the bill, the deceased’s estate must register with the Office of the NY Secretary of State.  Keep in mind that this right is not retroactive, and therefore, the risk of litigation is likely reduced.

Takeaway:  An advertiser should carefully consider the scope of consent it has to use an individual’s publicity rights, including when the individual is deceased.  Rights of publicity are protected under state and common law and some, but not all, states provide for a post-mortem right of publicity.  However, not every state applies its post-mortem publicity right the same way, so the analysis when determining whether permission is needed to use a deceased person’s publicity rights can be complex.  New York’s new bill, if signed by the Governor, would certainly raise new issues (and likely lawsuits) where brands fail to obtain the necessary consent from an estate to use a famous New York celebrity’s publicity rights in advertising where he or she passed away after the New York post-mortem right goes into effect.

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