Seeing Through Transparency, Part 3

In the aftermath of the media transparency report from K2 Intelligence in June 2016, the ANA has published two additional reports on transparency issues beyond the K2 report.  In May 2017, the ANA added, “Programmatic: Seeing Through The Financial Fog”, a study on the lack of transparency in programmatic buying.  Now the ANA has added the third report entitled “Production Transparency in the U.S. Advertising Industry” that reveals the lack of transparency in production.  All three are critical reads for anyone in the advertising and marketing industry.



Laura Brett Selected As New NAD Director

Last week, Laura Brett was named director of the National Advertising Division of the Advertising Self-Regulatory Council (“NAD”). Laura Brett joined the NAD in 2012, and is widely viewed as an excellent choice to maintain continuity with former director Andrea Levine. Laura speaks frequently at advertising conferences about the role of the NAD in the self-regulatory process, and developed a reputation as a fair arbiter of disputes between advertisers. Laura earned her law degree from Fordham, and will be based in New York.

Bebe Stores Settles TCPA Class Action

Last month, women’s fashion retailer Bebe Stores, Inc. agreed to settle a proposed class action over purported violations of the Telephone Consumer Protection Act (“TCPA”), which alleged that the retailer sent unwanted spam texts through an automatic telephone dialing system. According to court records, Bebe’s financial condition was a substantial factor in the parties’ considerations to settle the matter, as Bebe recently closed all of its physical stores and terminated the vast majority of its employees in an effort to avoid bankruptcy.  If approved, the deal could provide more than $772,000 to shoppers, amounting to a payout of $20 to each class member who provided a mobile telephone number at the point of sale and subsequently received a text from the retailer.

Takeaway:  Advertisers should carefully structure text message marketing programs in order to comply with the TCPA.  This case serves as a reminder that the class action bar is very active with regard to text message programs.

FDA Postpones Food Labeling Deadline

Last month, the U.S. Food and Drug Administration (“FDA”) pushed back the deadline for food companies to adopt changes to nutritional labels for packaged foods. Industry stakeholders welcomed the extension amidst concerns over their ability to meet the compliance deadline of July 26, 2018.  The FDA has not yet set a new deadline for label compliance.

In May 2016, the FDA released changes to the Nutrition Facts label on packaged foods to include new scientific information and the link between diet and chronic diseases to make it easier for consumers to make healthier decisions about the foods they eat.

The FDA’s extension seeks to decrease costs of compliance, and minimize the transition period during which consumers will see both the old and the new versions of the label in the marketplace. 

Takeaway:  Food packagers should monitor the Federal Register for additional announcements pertaining to the Nutrition Facts Label compliance deadline.

FTC Warns 11 Companies Over Made in USA Claims

It seems to be another star-spangled banner year for the Federal Trade Commission (“FTC”) and its crackdown on certain “Made in USA” claims. In 2016, the FTC cited 29 companies for their misleading “Made in USA” claims.  With the year’s halfway mark behind us, reports indicate that the FTC has similarly warned 11 companies for their use of the all-American claim on a range of products, including pillows, coffee makers and air purifiers.

To make a “Made in USA” advertising claim, the FTC believes that “all or virtually all” portions of the advertised product must be made in the United States. After the FTC stepped up its enforcement efforts, some companies tempered their origin of manufacturing claims with appropriate disclosures, including clarifications that a product may contain foreign components, or simply that the product may be assembled in the United States.  As we previously reported, however, the FTC appears to be keeping a close eye on those claims as well.

TAKEAWAY: Advertisers that make manufacturing origin claims, including “Made in USA” claims, should carefully review the source of origin for products, including all sub-components—particularly in light of the current enforcement climate.


Instagram Updates Sponsored Post Disclosures

Last month, Instagram launched a new feature to let users know when a post is sponsored, making it easier for users to determine if a celebrity was paid to sponsor a post. Instagram will now have a “Paid partnership with” tag in organic content posts and Instagram Stories, in order for creators and businesses to “be able to quickly disclose their partnerships easier than ever before, maintaining authenticity across the board.”  Those who use the tag will be able to track the performance of branded content posts and stories to monitor and gage reach and engagement metrics.  Says Instagram, “launching this branded content tool is the first step in ensuring transparency of paid partnerships on Instagram.” In the coming months, Instagram also plans on launching a paid partnerships policy that will attempt to provide guidance to advertisers based on Facebook’s current practices

 Takeaway:  Advertisers seeking to promote their message on social media should take note that users are calling for – and platforms are responding to – a request for more transparency among celebrities, creators, and influencers to clearly alert their followers when they are getting paid for promoting something on social media.

Jewelry Company Sues Macy’s for Copyright Infringement

California-based jewelry company Brighton Collectibles LLC (“Brighton”) filed suit against Macy’s Inc. (“Macy’s”) for copyright infringement. According to the complaint, Brighton alleges that Macy’s infringed copyrighted designs for Brighton’s Reno heart bracelet and necklace products.

Brighton alleges that Macy’s damaged its brand, reputation and goodwill by continuing to sell the alleged copies, despite receiving a letter from Brighton informing it of the infringement. The complaint demands Macy’s stop selling the allegedly infringing products, destroy any jewelry or promotional material it has in stock, and requests that Macy’s place all profit made from selling the allegedly infringing products into a trust for Brighton’s benefit.

Takeaway: Product designs may be protectable under trademark or copyright law. Retailers should thus take caution when advertising and selling designs that are similar to competitors, even if the designs appear to be common or ornamental.


SoulCycle Settles Gift Card Lawsuit For Up To $9.2 Million

Popular indoor cycling company SoulCycle Inc. recently settled a nationwide putative class action in an agreement valued between $6.9 million and $9.2 million. The suit alleged that SoulCycle defrauded customers by selling gift certificates with expiration dates (and keeping the expiring, unused balances), in violation of state and Federal law. According to the complaint, SoulCycle sold gift certificates with short enrollment windows, knowing that it is often difficult for consumers to use the certificates within the allotted time period due to a lack of available classes.

Under the settlement agreement, SoulCycle agreed to reinstate up to two expired classes or to reimburse up to $50 to customers with unused, expired gift cards. The company also agreed to adopt policy changes to ensure consumers understand the differentiation between purchasing a SoulCycle class, which expires, and purchasing a gift card or gift certificate, which do not.

Takeaway: Companies may be permitted to offer services with expiration dates, but should take caution when offering expiring gift cards/certificates for those same services.


SCOTUS Grants Review of Federal Ban on Sports Gambling

In one of its final acts of the October 2016 term, the Supreme Court of the United States recently agreed to hear a New Jersey challenge to the constitutionality of the Professional and Amateur Sports Protection Act (“PAPSA”), a federal statute banning states from authorizing and regulating gambling on sporting events.[1]

As we reported earlier this year, legislators in numerous states have introduced legislation aiming to legalize and regulate sports wagering. Thus far, sports wagering legalization efforts by various states have been blocked by federal courts on the basis that PAPSA prevents states from taking such actions. Most notably, the United States Court of Appeals for the Third Circuit held in an en banc decision that a New Jersey statute seeking to legalize sports wagering was preempted by PAPSA and that PAPSA was a constitutionally valid exercise of congressional power.

The Supreme Court’s decision to grant review was issued at the end of the October 2016 term because the Court gave the then-incoming Trump administration an opportunity to file an amicus brief expressing its views on whether the Court should take up the matter. The Trump administration took the position that the Court should not grant review to the Third Circuit’s en banc decision. Despite waiting for the Trump administration’s views, the Court disagreed with the Trump administration’s position and granted review of PAPSA to determine whether the statute’s language prohibiting states from authorizing sports wagering exceeds the constitutional power of the federal government, which is constrained by the Tenth Amendment. The key legal battleground in this case will be the Court’s interpretation of PAPSA under the controlling precedent of New York v. United States, a 1992 decision which held that “the Federal Government may not compel the States to enact or administer a federal regulatory program.” 505 U.S. 144, 188.

Takeaway: Advertisers will need to watch this case closely. Should PAPSA be struck down, there will be new opportunities for states to legalize sports wagering, creating an entirely new competitive advertising market in the gaming industry.

[1] Nevada and certain other states are exempt from the PAPSA prohibition because they allowed legal sports wagering before PAPSA was enacted.

Texas Passes New Driverless Car Law: Drivers Not Required in Texas

Last month, Governor Greg Abbott signed a bill into law that expressly allows motor vehicles with “automated driving systems” to operate on Texas highways.

While Texas had previously been silent on the issue of driverless cars, Texas Senate Bill 2205 authorizes these vehicles to operate on the roadways, provided that the operators (who may or may not be inside the vehicle) and their vehicles adhere to clearly listed specifications. The vehicles are allowed to operate “only for the purpose of research or testing” and, among other requirements, must display a sign stating that the vehicle is “a test automated motor vehicle.”  The vehicle operator must also give notice to the relevant Texas agencies of the anticipated date and location of the automated vehicle testing on the highway.

Takeaway: Companies testing self-driving cars should take care to comply with the common-sense requirements outlined in the new Texas law when it goes into effect on September 1, 2017.