Lyft Faces Second Wave of TCPA Litigation for Sending Autodialed Texts

Lyft, Inc. – the popular ride hailing service featuring the iconic pink moustache – is facing a second class action lawsuit in California alleging violations under the Telephone Consumer Protection Act (“TCPA”).

The complaint alleges that Lyft sent unwanted and unsolicited text messages to cellphones using an automated dialing system without first obtaining express written consent from consumers, as required by the TCPA. The plaintiff allegedly received two unsolicited text messages from Lyft – the first instructing him to download the company’s mobile app and the second containing a link to the app store download page.

Lyft is no stranger to TCPA actions over its auto-dialer system. Earlier this year, a California federal judge denied Lyft’s motion to dismiss a class action accusing the company of spamming prospective drivers with text messages in violation of the TCPA.  Before that, in September 2015, the FCC notified Lyft that it violated the TCPA by requiring users to consent to receive automated text messages in order to use its services.  In the citation, the FCC said it found that Lyft (1) unlawfully conditioned consumers’ ability to use Lyft’s services on their agreement to receive marketing text messages, and (2) illegally circumvented the FCC’s disclosure requirements for prior express written consent.

TAKEAWAY: Companies must have a consumer’s “prior express written consent” for all autodialed or prerecorded telemarketing/advertising calls or texts to wireless numbers. Before implementing text message-based marketing programs, companies should review and update their policies and compliance programs to ensure that they obtain this consent, and that consumers are given an opt-out from those promotional communications.

And the dream lives on: DraftKings and FanDuel Settle Remaining False Advertising Claims with New York AG

In June, we covered Daily Fantasy Sports (“DFS”) operators’ major legislative victory in New York: a bill legalizing and regulating their business, ending the potential for an outright prohibition on DFS in the state. That bill’s passage was akin to clinching the pennant.

With the New York Attorney General (“NYAG”) announcing yesterday that it settled the remaining false advertising claims it lobbed against leading DFS operators DraftKings and Fanduel, the DFS industry appears to have just swept the World Series.

The NYAG’s false and deceptive advertising claims against DraftKings and Fanduel boiled down to a few key purported flaws in their marketing practices:

  • Advertisements misled novice players about the advantages high-volume and professional players had over them;
  • Advertisements contained false and misleading statistics about the likelihood of winning cash prizes;
  • Testimonials used about player success omitted key information about the players featured, such as, experience in sports analytics or industry reputation as a go-to fantasy sports analyst; and
  • Marketing gave the impression that participation in DFS was harmless, fun, and generally without risk, despite evidence of the dangers associated with compulsive gambling and addiction.

DraftKings and Fanduel agreed to settle their respective NYAG actions for $6 million each. They also agreed to adopt consumer protection-based safeguards, including adequate disclosures about the terms and conditions and limitations of promotions.

Takeaway: This settlement serves as a reminder to advertisers of the potential costs associated with games that toe the line between lawful promotions and illegal lotteries. It also represents the importance of carefully considering the marketing practices used to advertise promotions: claims must be substantiated (including the odds and expectation of winning), testimonials must be accurate and not misleading, and target audience vulnerabilities should be considered.

White House Announces New Privacy Officer

Last week, the Office of Management and Budget created a new dedicated position for privacy within the Office of Information and Regulatory Affairs (“OIRA”). The privacy position will streamline the United States Government’s privacy practices, including:

  • Leading efforts to develop and implement consistent, comprehensive and forward-looking Federal privacy policies, strategies and practices across agencies;
  • Collaborating with the Federal Privacy Council to identify government-wide trends and issues related to privacy that require government-wide solutions; and
  • Overseeing and evaluating agency regulatory initiatives, privacy policies, information collection and related policies, and other policy initiatives that impact the privacy of information about people.

TAKEAWAY:  The U.S. Government is ramping up its investment in privacy and data collection to help streamline policies and procedures across multiple departments.  These directives and recommendations issued will be helpful as the Government attempts to harmonize privacy issues on a government-wide basis.

Class Action Filed Against Indianapolis Colts Over App

This month, the Indianapolis Colts, app developer Yinzcam, Inc., and ultrasonic technology provider Lisnr, Inc., were hit with a federal class action lawsuit in Pennsylvania for violating the Electronic Communications Privacy Act by allegedly allowing the Colts fan app to listen in on users’ personal phone conversations, and use that information for advertising purposes without obtaining adequate consent.

The app provides Colts fans with team stats, scores, and other relevant news. The app also uses Lisnr, a service that utilizes web beacons, ultrasonic frequencies and audio signals in order to allegedly track how users interact with advertisements.  The complaint alleges that Lisnr’s software determines a user’s precise location by activating the user’s built-in microphone, and listening for nearby Lisnr audio beacons in order to allow the Colts app to target specific consumers and send them tailored content, promotions and advertisements based on their location.

Although the Colts app asks users to agree to give it access to the microphone, saying it “uses Smart Tones to deliver interactive experiences in-arena and on the road,” the plaintiffs allege that the activated microphone recorded all audio, including personal conversations, and that consumers were not given adequate notice of or opportunity to opt-out of the functionality. In addition to damages, plaintiffs seek an injunction ordering the defendants to stop using the app to record conversations.

TAKEAWAY: With the proliferation of highly technical tracking tools on the market, advertisers should ensure that they are providing clear notice and consent abilities. Many brands are hiring developers to build these apps for the brand; it is imperative that the brands dive in to fully understand the extent of the information captured by the developers, and how it will be used.

Starbucks Puts Another False Advertising Lawsuit On Ice

On Friday, the U.S. District Court for the Northern District of Illinois dismissed a class-action lawsuit against Starbucks. The class alleged a violation of Illinois’ Uniform Deceptive Trade Practices Act and the Illinois Consumer Fraud and Deceptive Business Practices Act, among other claims.  Specifically, the class alleged that Starbucks is engaging in unfair acts and practices by advertising the size of its cups on its menu, instead of the amount of fluid a customer will receive when they select an iced beverage.  The heart of the class’s claims is that if Starbucks advertises an “iced” drink as containing 24 fluid ounces, the drink should have 24 ounces of fluid plus ice.

The court noted that regarding the “iced” part of the name of the cold drinks at issue in this case, the drinks are served “over ice” or “with ice” and the ingredients list includes ice on the menus online. An example of the disclosures on Starbucks website is found here:



To prove an injury, plaintiffs must show that a reasonable consumer would be deceived by the advertising messages made by Starbucks. The court concluded no deception could occur because a reasonable consumer would notice that the menus separately list the contents of the drinks and the size of the containers the drinks are served in and that the fluid ounces disclosed refers to the volume, as opposed to the drink contents.

TAKEAWAY:  Advertisers are only responsible for all reasonable advertising messages conveyed.  Importantly, some of these messages may include messages the advertiser did not intend to convey, but that a reasonable consumer could take away.

Chicago Contract Workshop for Advertiser/Agency Agreements: Incorporating Transparency, Audit Rights and Governance

The ANA will be hosting a contract workshop in Chicago for Advertiser/Agency Agreements on November 16, 2016.  The workshop, taught by Doug Wood and Keri Bruce, will cover key issues in the advertiser/agency contract related to agent versus principal status, incorporating transparency, audit rights and contract governance.

Note that this is a complimentary in-person workshop for client-side marketers and their in-house counsel only. Attendees do not have to be an ANA member, but all attendees must be a client-side marketers or in-house legal counsel.  Space is limited.

Find out more here.

YouTube Encourages Transparency by Offering Optional Disclosures on Paid Videos

As more and more companies voluntarily implement measures to enhance transparency among their user base, this month, YouTube introduced the option for creators to feature paid promotion disclosures on video content.

The disclosure may be added to existing or new videos and features visible text on the video for the first few seconds as viewers watch the content, informing them of a paid promotion. The company acknowledges that “viewers appreciate transparency when brands and creators collaborate on paid promotions such as product placements, sponsorships or endorsements.”

YouTube is no stranger to native advertising. Last year, the video-sharing platform unveiled TrueView Cards and Shopping Ads – interactive spins on its skippable pre-roll ad format that let brands include information about a product featured in an ad as well as links to a brand’s website.

TAKEAWAY: Transparency with users is essential in the world of online native advertising, where the line between editorial content and paid advertising may be blurred. Before running native ads, companies should ensure ads clearly and conspicuously disclose any material connections between the speaker and the advertiser that could affect consumers’ judgment as to the objectivity of the speaker.

FTC Settles Supplement Maker Over Unsubstantiated Claims and Expert Endorsement

On October 5, 2016, the Federal Trade Commission (FTC) settled its case with Supple, LLC over certain advertising claims regarding its Supple joint supplement. Between 2011 and 2015, the company advertised (via social media, radio, and in-person pitches) that the supplement was scientifically proven to provide complete relief from chronic and severe joint pain stemming from arthritis and fibromyalgia. Additionally, the FTC charged one of the company’s principals for making unsubstantiated “expert endorsement” claims and for misrepresenting herself as an independent, impartial medical expert when in fact she was an employee of the company.  As part of the settlement, Supple and its principals may be required to pay $150 million to the FTC if they fail to comply with the terms of the stipulated order.    

Takeaway: Advertisers and marketers should ensure that any claims they make about pain relief, disease treatment, or other health benefits are supported by valid scientific evidence. Additionally, endorsements should adequately disclose any material connection between the advertiser and the endorser. 



PepsiCo Hit with False Advertising Suit for Marketing of Naked Juices

This week, the Center for Science in the Public Interest (CSPI), a nonprofit nutrition and food-safety watchdog group, filed a class action against PepsiCo, alleging that Pepsi misled consumers by marketing its popular Naked Juices as healthier than they really are. The complaint alleges product packaging and advertising for Naked Juices suggest or imply that the products are high quality, and contain expensive and nutritious ingredients, such as apples, berries and kale, while the main ingredient in the products are often cheaper, less nutritious apple juice. Additionally, CPSI alleges that certain Naked Juice drink labels claim that the “no sugar [is] added,” to the products when the drinks’ sugar content is arguably equivalent to (and sometimes, more than) a can of Pepsi. Accordingly, CPSI alleges reasonable consumers are deceived into buying the not-so-healthy drinks and seeks monetary and injunctive relief for U.S. consumers who bought Naked products since October 2010. Three years ago, PepsiCo’s Naked Juice paid a $9 million settlement in a class-action lawsuit after plaintiffs accused the company of falsely labeling some of its juices “all natural.” In the settlement, PepsiCo agreed to stop using the claim on labels, though it denied that the term was misleading or false in any way.

TAKEAWAY: Advertisers should be keenly aware of the growing number of cases involving health claims. This uptick in litigation should serve as a reminder that advertisers are responsible for all reasonable interpretations of the messages made, and that they must have substantiation in their files before the ads are disseminated.

Skin in the Game: Video Game Publisher Dodges Teenage Gambling Suit, But Must Address State Regulator Concerns

On October 4, 2016, a federal court dismissed a putative class action against Valve Corporation (“Valve”) regarding its popular eSports game, Counter Strike Global Offensive (“CS:GO”). Specifically, the class claimed Valve violated a host of state laws and the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”).

In their complaint, the plaintiffs alleged that Valve’s online marketplace (“Steam”) fostered an environment for unlawful gambling directed towards teenaged children. Steam users can purchase and sell virtual items for use in CS:GO, including “Skins”. Skins, as the court described, are “textures” that alter the appearance of virtual weapons used during CS:GO gameplay. Skins are also reportedly used as gambling chips on third-party websites that allow users to link their Steam accounts and wager Skins based on the outcome of certain CS:GO matches. Skins are treated as virtual currency, and according to the complaint, can be converted to cash.

In a narrow decision, the court dismissed the plaintiffs’ RICO claim—the only federal cause of action asserted—because it concluded the plaintiffs lacked standing (i.e., dismissal was procedural). As a result, the court also dismissed the plaintiffs’ remaining state law-based claims because the court lacked jurisdiction. This dismissal, however, did not rule out the possibility of the plaintiffs filing in state court. Indeed, early reports suggest a new complaint may be filed in the coming days.

The likelihood of Valve defending itself against these allegations in state court became clearer when, just one day after the federal court’s decision was handed down, the Washington State Gambling Commission issued a press release, where it claimed to have directed “Valve to stop facilitating the use of “skins” for gambling activities through its Steam Platform.” Steam’s Subscriber Agreement prohibits the conduct at issue, but the Gambling Commission is concerned that Valve does not enforce its policy and, thus, permitted unlawful gambling to persist in connection with its online marketplace. In its September letter to Valve counsel, the Gambling Commission accused Valve of violating Washington State gambling law. For Valve to avoid civil or potentially criminal action, Valve must respond to the Commission’s directive and exhibit full compliance by October 14, 2016.

This two-pronged attack on Valve regarding perceived state gambling law violations is not unfamiliar territory for popular gaming companies. This time last year, Daily Fantasy Sports (“DFS”) companies DraftKings and Fanduel began their prolonged legal battles to maintain operations despite claims they were running illegal lotteries.

The issue presented here differs from the DFS litigation, however. In the DFS litigation, state regulators and private individuals attacked the core business model of DFS and litigated whether such model is a game of skill or chance. Here the focus appears to be on whether an element of the game, not the entire game itself, constitutes an illegal lottery.

This case may have far-reaching consequences for game publishers who setup online marketplaces for players to buy and sell items for in-game use. Several questions come to mind: If the Steam Subscriber Agreement is not enough to disclaim liability for third-party conduct, what is? Will Valve need to establish a robust monitoring system policing how Steam users behave on non-Valve websites? Will other state regulators follow? Class actions in state court?

For now, all we know is that Valve escaped litigating its conduct in federal court, but now must counter-strike (see what I did there?) state regulators to stave off civil and criminal penalties.

Stay tuned for additional Adlawbyrequest follow up on this important story.