Have Something to Add? The NAD Updates Evidentiary Procedures

The National Advertising Division of the Better Business Bureau (“NAD”) recently announced updates to its procedures. The change was announced by the Director of the NAD, Laura Brett, at the NAD’s Annual Conference and is the self-regulatory body’s response to a recommendation from the ABA Antitrust Section’s Working Group.

The new procedural process is codified in sections 3.8-3.9 of The Advertising Industry’s Process of Voluntary Self-Regulation (available here). In sum, the change comes into play when the NAD reaches a decision that an advertiser’s claim must be discontinued. Previously, a case could be re-opened only in “extraordinary circumstances” but under the updated procedures, new evidence to support a claim can be grounds for re-opening a case.

Where the NAD has decided that an advertiser must discontinue its claim, the advertiser can either (1) continue using the claim at issue and ask the NAD to consider the new substantiation in a compliance proceeding, or (2) re-open the case by seeking the NAD’s review of the new substantiation before resuming use of the claim at issue. Whether or not the NAD allows a case to be re-opened is up to the Director of the NAD, and she can consider whether the new evidence was available to the party at the time the NAD case closed and whether the new evidence would have changed the NAD’s decision in a material way.

According to the Director of the NAD, this change “balances allowing advertisers to make truthful, substantiated claims with the need for speed and finality in the self-regulatory process for competitive challenges.”

TAKEAWAY: Under the updated procedures, advertisers may introduce new materials to support a previously discontinued claim. This opens the door to allow advertisers to re-introduce claims that were otherwise discontinued due to an NAD action.

FTC Takes Action against “iV Cocktails”

Last week, the FTC brought its first action against a company marketing and selling intravenously injected therapy products, or “iV Cocktails” as they are often called. In its Press Release, the FTC announced that it reached a settlement with A&O Enterprises Inc., d/b/a iV Bars, and its individual owner/operator, that prohibits iV Bars from making unsupported claims about its iV Cocktails.

According to the Complaint, iV Bars offers its iV Cocktails to consumers for about $100-$250 per “treatment”. iV Bars marketed the treatments on its website and social media as an alternative to traditional medicine as a way to treat major diseases including cancer, congestive heart failure, multiple sclerosis, diabetes, fibromyalgia, and neurodegenerative disorders.

These iV Cocktails have been growing in popularity during recent years as an alternative to traditional medicine, but what exactly make up these cocktails? The FTC found that, at least in the case of iV Bars, the “treatments” were nothing more than a mix of water, vitamins, minerals and herbs. iV Bars failed to produce evidence to support the claims that the iV Cocktails are effective at treating major diseases, triggering the FTC order that prohibits the company from making unsupported health and efficacy claims.

Earlier this month, iV Bars also notified consumers who purchased the “Myers Cocktail”, one of iV Bars’ “treatments”, to clarify some of the health claims used to market the iV Cocktail. In its email, iV Bars included a clarification that, contrary to its marketing claims, studies have not shown the Myers Cocktail is an effective treatment for any disease.

TAKEAWAY: The FTC takes health claims very seriously particularly because they can cause some of the worst harm to consumers. If a company offers a product that it claims will treat any type of medical disorder, it better have substantive and concrete evidence to support those claims.

Reed Smith and the #SeeHer Movement

Reed Smith is pleased to announce that it is the first law firm to become a member of the #SeeHer Movement, an initiative which aims to create a more accurate portrayal of women in the media.  Despite the great strides made to accurately portray women and girls in the media, there still exists an unconscious bias against how women and girls are shown.  Age-old stereotypes and clichéd behavior persist and this is what women and girls see in the media every day.

The Association of National Advertisers (ANA) launched the #SeeHer initiative in partnership with The Female Quotient (TFQ) at the 2016 United States of Women Summit.  #SeeHer’s mission is to increase the accurate portrayal of women and girls in media twenty-percent (20%) by 2020, the 100th anniversary of women winning the right to vote in the U.S.  The name #SeeHer comes from the idea that “if you can see her, you can be her”.  The initiative’s goal is best expressed in its own words:

#SeeHer is not political.  It does not take sides.  It is interested only in creating a world in which every woman and every girl sees themselves as they really are in advertising and media.  Because we are not just marketers, or producers, or storytellers.  We are mothers and fathers, sons and daughters, brothers and sisters.  We believe that we owe it to ourselves, our businesses and our families to create a more just and equitable society.

As one of various objectives, Reed Smith will create an internal campaign of short films for media celebrating its partnership with #SeeHer and highlighting the inspirational women of the firm. The videos will complement the movement by speaking in support of gender equality and illustrating stories that will motivate and inspire women in all industries, including the law.

For additional information regarding the #SeeHer Movement, visit www.SeeHer.com or contact Keri S. Bruce (KBruce@ReedSmith.com) or Stacy K. Marcus (SMarcus@ReedSmith.com).

Feds Investigate Ad Agency Media Buying Practices

According to the Wall Street Journal, federal prosecutors in Manhattan have opened an investigation into media-buying practices in the advertising industry, and have begun to issue subpoenas.  The investigation will reportedly look at, among other things, alleged non-transparent practices, including whether advertising agencies received rebates from media outlets.  The investigation comes after the 2016 report on media transparency conducted by K2 Intelligence on behalf of the Association of National Advertisers (ANA).  The report identified numerous non-transparent business practices alleged to be pervasive in the advertising industry.  For example, the report claimed media agencies were receiving rebates and incentives from media outlets and not returning those funds to advertiser clients.  The federal investigation could shed further light on such non-transparent practices and may help move the industry towards greater transparency and trust.

TAKEAWAY: The industry is closely monitoring the investigation.  One tool to address transparency in contracts with media buying agencies is the ANA’s Media Agency Template Agreement, Version 2.0.  It can be found here.


Facebook and Employers Are Subject to Gender Bias Employment Complaint

Several women and the Communications Workers of America have brought an Equal Employment Opportunity Commission (EEOC) complaint against Facebook and 10 employers who advertise on the social network, alleging that the companies are in violation of laws prohibiting sex-based job discrimination.

By allowing employers to target job ads based on gender and seek only men for certain positions, the claimants allege, Facebook is running afoul of Title VII of the Civil Rights Act of 1968, and a 1973 U.S. Supreme Court ruling supporting a Pittsburgh law that banned classified job ads seeking only men or women.

Facebook and other social media companies have been the target of similar suits before, including civil rights suits about job discrimination over age and discrimination against protected classes in housing ads. Their first line of defense is generally Section 230 of the federal Communications Decency Act, which grants immunity to Internet service providers (ISPs) from liability attached to content provided by users of their services. However, the more involved that ISPs are in moderating that content, the more they might be held liable. Social media companies have been taking an increasingly active role in monitoring and removing content from their sites in the wake of claims that they are not doing enough to prevent the spread of “fake news” and offensive content.

The claimants in the EEOC complaint allege that Section 230 does not protect Facebook because the company designed and operates the job advertising system, provides mechanisms for employers to target ads to certain demographics, and is in essence a recruiter, not simply a passive, neutral service provider.

Takeaway: Advertisers should take heed that even if an Internet service allows you to select which audiences will view your ads, there may be underlying laws that regulate discrimination regarding who can be targeted.

ID Comms Releases Latest Report on Media Transparency

ID Comms, a media and advertising consultant, recently released its 2018 Media Transparency Report. While the Report indicates that the advertising industry is hopeful that trust and transparency may improve down the road, it paints a rather bleak view of the current state of affairs.

Highlights from the Report include that about 40% of respondents feel the level of trust that currently exists between advertisers and media agencies is low, an increase from the 29% of respondents in ID Comms’ 2016 Report. In terms of trust, both agencies (75%) and advertisers (80%) feel that transparency influences the level of trust in advertiser-agency relationships. Significantly, the number of agencies that believe transparency influences trust tripled from 2016 to 2018.

Something that has not changed since 2016 is the four areas of transparency that most influence trust and how an agency (1) deals with rebates and AVBs, (2) makes money, (3) trades with media vendors, and (4) structures group buying/share deals. The Report also reveals that advertisers care less in 2018 than they did in 2016 about how agencies provide access to innovation and thought leadership.

Of course, a media transparency study would not be complete without covering client data. Perhaps not surprisingly, management of client data saw an increase in importance with advertisers in 2018 versus 2016.

For the Report, ID Comms received 232 responses that represented a range of industries with a collective global media investment of over $25 billion.


Is that a selfie or an ad? UK watchdog launches investigation into influencer marketing.

We are all familiar with celebrities and social media stars using their social media accounts to promote brands and products. For some, it is their main source of income and they can make millions in endorsement and sponsorship deals. Major TV and sports icons can command hundreds of thousands of pounds per post, which may sound extraordinary but the reality is that this is fast becoming one of the primary means for marketing to young people.

The problem with influencer marketing is that the commercial relationship is not always appropriately disclosed, making it difficult for consumers to distinguish between editorial content and advertising.

In response to this, the Competition and Markets Authority (CMA) has now launched an investigation into the failure of influencers to properly declare the promotional or paid-for nature of some of their social media posts.

Regulatory scrutiny on these issues is nothing new; the CMA conducted similar work in 2016 in relation to online review and endorsements. Similarly, the Advertising Standards Authority (ASA) announced earlier this year that it had launched a project exploring consumers’ ability to recognise ads online and the adequacy of labelling.

What does the law require?

Currently, the most relevant laws which seek to prevent this behaviour are contained in the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), as well as in the CAP code.

The law requires, among other things, that: (a) all marketing communications are clearly identifiable as marketing; (b) marketers must not falsely claim or imply that the marketer is acting as a consumer; and (c) marketers must make clear that advertorials are marketing communications.

The key is transparency; Consumers must understand when they’re viewing advertising rather than genuine editorial content. This is particularly important when applied to the social media accounts of individuals who may use their account for a mixture of personal posts (at the gym, eating out, or humble-bragging) and paid-for posts.

To help consumers understand when they are seeing top-quality editorial selfies and when they are seeing promotional posts, back in 2012, the industry came up with simple identifiers: #Ad – to be used where the influencer receives money or other benefit for the post and the marketer has some degree of control over the content; and #Spon – to be used where the influencer receives money or other benefit for the post, but where the marketer has no control over the content. The ASA has warned about using ambiguous labels such as “brought to you by” and “thanks to our friends at”.

Both advertisers and influencers have historically been unenthusiastic about using the identifiers, on the basis they consider that it dilutes the message and because influencers are sensitive not to appear insincere in their posts. That said, we have found that with the proliferation in influencer advertising, consumers are becoming more familiar and comfortable with seeing the #Ad / #Spon identifiers.

Practical considerations

Influencers and advertisers have been critical of the increased scrutiny on influencer marketing on the basis that they consider that the requirements are not sufficiently clear. The CAP code rules and the ASA’s guidance are purposefully broad and non-specific in nature, recognising that there is no one-size-fits-all approach. This can make it difficult applying the rules to the various social media platforms, the functionality of which can vary significantly.

For instance, it is generally accepted practice to include the marketing label/identifier for influencer marketing in the following manner:

  • Twitter: anywhere in the tweet
  • Pinterest: at the beginning of the text
  • Facebook: at the beginning of the post (unless the post is very short)
  • Instagram: on the image itself and in the accompanying post

Additionally, the platforms themselves have started to take their own steps to tackle this problem. In response to being singled out by the ASA in 2017, Instagram has now developed a ‘paid partnership’ tagging tool to enable influencers to communicate that they are working in collaboration with a brand.

These platform-specific nuances can make it difficult for influencers to understand their disclosure duties and there have been a number of celebrities who have been caught out by the rules and received adverse adjudications from the ASA.

As the primary party responsible for ensuring compliance with the disclosure requirements, there is increased pressure on advertisers to educate the influencers they work with of their disclosure responsibilities and it is recommended that the specific disclosure requirements are expressly set out in the advertiser’s contract with the influencer.

The investigation

 The CMA has reportedly contacted numerous social media influencers (including influencers based outside the UK, but targeting followers in the UK) to elicit information about the deals they have in place with brands. The CMA has also asked members of the public to provide details of their experiences interacting with this type of content, with particular interest in people who have purchased products as a result of such practices.

The CMA investigation is considering the extent to which influencers are clearly and accurately identifying any commercial relationships, and whether people are being misled. “It is really important they are clearly told whether a celebrity is promoting a product because they have bought it themselves, or because they have been paid or thanked in some way by the brand,” said George Lusty, senior director at the CMA.

Although there has been no time-frame set by the CMA for the investigation, they expect to provide an update at the end of 2018. In any case, it is clear that they intend to take appropriate action where they find that there has been a breach of the law. The CMA has the power to seek enforcement orders from the courts, as well as being able to name and shame influencers and advertisers not playing by the rules.

With both the CMA and the ASA paying particular attention to this topic this year, the message to advertisers and influencers is quite clear and it will become incumbent on them to ensure their influencer marketing practices are compliant.

Webinar: Rules of the road in engaging with influencers

Please join us for a complimentary webinar hosted by the Association of National Advertisers on the current issues related to influencer marketing, for industry experts. Jason Gordon, partner in the Entertainment & Media Group at Reed Smith, and Jennifer MacDougall, VP, associate general counsel and assistant corporate secretary & ethics officer at Jack in the Box, will provide an overview of some of the most pressing legal and business concerns related to influencer marketing, including insights on how brands should work with influencers to avoid compliance issues and tips on influencer agreements.

Date: Tuesday, September 11, 2018

Time: 1 p.m.–2 p.m. EST
To register, please click here

FTC Approves Final Revisions to Jewelry Guides

The Federal Trade Commission (“FTC”) recently approved final revisions to its Jewelry Guides (formally, the “Guides for the Jewelry, Precious Metals, and Pewter Industries,” the “Guides”), aimed at helping prevent deception in jewelry marketing. Based on the overall record of FTC review over the past six (6) years, the FTC has approved revisions to the Guides to better align the Guides with Section 5 of the FTC Act by: removing outdated or redundant provisions; guiding marketing of certain products to more accurately represent their properties; and removing existing restrictions on product marketing that are unnecessary to prevent deception.

Specifically, the FTC revised twelve (12) areas of the Guides as follows:

  1. Surface application of precious metals – First, the Guides caution marketers against using gold, silver or platinum terms to describe all or part of a coated product, unless they adequately qualify the term to indicate the product has only a surface layer of the advertised precious metal. Second, the Guides advise marketers advertising their product’s gold, silver or platinum coating to assure its reasonable durability. Third, the Guides provide revised examples of non-deceptive marking and descriptions for gold surface applications that are reasonably durable. Fourth, the Guides advise marketers to disclose the purity of coatings made with gold, silver or platinum alloy. Finally, the Guides advise marketers to disclose rhodium coatings over products advertised as precious metals.
  2. Alloys with precious metals in amounts below minimum thresholds – The Guides remove the thresholds for gold and silver alloys, advising marketers that they may use “gold” and “silver” to describe a product or part thereof composed throughout of gold or silver alloy if they qualify the term with an equally conspicuous, accurate karat fineness disclosure for gold alloys and/or an equally conspicuous, accurate part per thousand designation immediately preceding the silver term for silver alloys. The Guides retain the existing platinum alloy guidance without change.
  3. Products containing more than one precious metal – The Guides include a new section which states that it is unfair or deceptive to misrepresent the relative quantity of each precious metal in a product that contains more than one precious metal. The Guides advise marketers to list precious metals in the order of their relative weight in the product from greatest to least; however marketers may list metals in a different order if the context makes clear that the metal listed first is not predominant (e.g., “14K gold-accented silver”).
  4. Composite gemstone products – The Guides include new guidance for composite gemstone products, cautioning marketers not to use unqualified gemstone names to describe composite gemstone products and advising against calling such products “treated [gemstone name].” The Guides also caution against using the unqualified terms “composite [gemstone name],” “hybrid [gemstone name],” or “manufactured [gemstone name]” unless the term is qualified to clearly and conspicuously disclose that the product: (i) does not have the same characteristics as the named stone; and (ii) requires special care. The Guides further recommend the marketer to disclose the special care requirements to the customer.
  5. Varietals – The Guides include new guidance stating that it is unfair or deceptive to mark or describe a product with an incorrect varietal name.
  6. “Cultured” diamonds – The Guides include new guidance addressing the use of the word “cultured” to describe laboratory-created diamonds, advising marketers to qualify the word “cultured” by disclosing clearly and conspicuously that the product is not a mined stone. The Guides state that marketers can effectively qualify the term “cultured diamond” with the Guides suggested disclosures (“laboratory-created,” “laboratory-grown,” “[manufacturer name]-created”), however these qualifying disclosures need not be adjacent to the term “cultured,” provided they disclose clearly and conspicuously that the product is not a mined stone.
  7. Qualifying claims about man-made gemstones – The Guides advise marketers of man-made gemstones sharing the same optical, physical and chemical properties as the named stone that they may use terms other than the terms previously listed in the Guides (“laboratory-grown,” “laboratory-created,” “[manufacturer name]-created,” “synthetic”) to describe such man-made gemstone if such terms clearly and conspicuously convey that the product is not a mined stone.
  8. Pearl treatment disclosures – The Guides include a new guidance advising marketers to disclose clearly and conspicuously treatments to pearls and cultured pearls that: (i) are not permanent; (ii) create special care requirements; or (iii) significantly affect product value.
  9. Use of the term “gem” – The Guides eliminate two sections that discussed the use of the word “gem” because they are not necessary to prevent deception.
  10. Misleading illustrations – The Guides eliminate a section that discussed misleading illustrations because relevant guidance is provided in already addressed in other areas of the Guides.
  11. Diamond definition – The Guides eliminate the word “natural” from the definition of diamond because lab-created products that have essentially the same optical, physical and chemical properties as mined diamonds are also diamonds.
  12. Exemptions recognized in the assay for gold, silver and platinum – The Guides add bracelet and necklace snap tongues to the exempted items listed in the Appendix for gold alloy products and for products made of silver in combination with gold, as these items are already included in the exemption for mechanically-coated gold, silver and platinum products

Takeaway: Marketers should continue to clearly and conspicuously disclose the contents and processing of their jewelry products in accordance with the Guides, as applicable, and refer to the amended Guides when making certain products claims regarding content and quality.

Potential(ly) Reach(ing): Facebook Sued Over Inflated Audience Numbers

On August 15, Danielle A. Singer and her company Project Therapy, LLC (dba Therapy Threads) filed a class-action complaint against Facebook, Inc. over its claims concerning ad audiences. According to the Complaint, Facebook overstates its audience metrics in order to induce advertisers to spend money on ads on the platform.

The plaintiffs allege, in part, that Facebook’s statements regarding the “Potential Reach” of ads placed on the platform are so inflated that they contradict census data. For instance, the Complaint points to Facebook’s claims about its Potential Reach in Chicago, IL. Facebook allegedly stated that its ads could possibly reach 1.9 million people from ages 18-34 in Chicago. However, the plaintiffs presented census data that only about 800,000 residents of Chicago fell in that age range.

The plaintiffs seek monetary damages as well as an order which requires Facebook to hire auditors and to fix problems identified by the auditors.

While Facebook has not yet responded to the statements made in the Compliant, in 2017, the company stated that it bases its audience reach estimates on several factors and that the estimates are not intended to match the population set forth in census estimates.

Takeaway: When buying ads based on projected audience reach, advertisers should determine what the ad platform factors into such reach estimates and understand that estimates are, of course, never a guarantee.