FTC Makes New Strides in Social Media Influencer Space with Settlement, Warnings, and Guidance

This month, online gaming social media influencers Trevor Martin and Thomas Cassell settled the Federal Trade Commission’s first charges against individual failure to disclose material information in social media endorsements. Martin and Cassell are both operators of YouTube channels with millions of subscribers in the online gaming community and owners and officers of CSGOLotto, Inc., an online gambling service in which players use collectible in-game weapon “skins” as virtual currency. Between November 2015 and June 2016, Martin and Cassell promoted the service online using free skins from CSGO Lotto and allegedly paid other influencers thousands in dollars and skins credits to do the same. Aside from occasional mention of sponsorship in video description boxes “below the fold,” videos snagged over 5.7 million views without adequately disclosing compensation, Martin’s and Cassell’s vested interests in the company, or third party contractual obligations against impairing CSGO Lotto’s reputation.

The order demands clear and conspicuous disclosure of connections between endorsers and promoted products and services that would have a material impact on consumer choice. The settlement was the first of its kind against social media influencers, who have come increasingly to the Commission’s attention as it focuses on the adequacy of testimonial and endorsement disclosures. The settlement was accompanied by several other actions by the Commission in the endorsement space.

Along with the settlement against Martin and Cassell, the FTC announced that it has sent warning letters to 21 social media influencers it had contacted earlier this year regarding the adequacy of disclosures in their Instagram posts. The letters cited specific posts of concern and reminded the influencers of the agency’s Endorsement Guides and the requirement that material connections between the endorser and the marketer of a product must be clearly and conspicuously disclosed, unless the connection is already clear from the context. As we reported in April, the Commission sent educational letters to 90 social media influencers and brands.

Furthermore, the FTC issued updated guidance on material connection disclosure by updating the Endorsement Guides and including additional FAQs. The additional guidance targets social media influencers and marketers in particular by addressing topics such as Snapchat and Instagram disclosures, tags in pictures, disclosure of free travel, placement of the disclosure within the post and how well certain disclosures work to inform consumers, such as #consultant or #ambassador.

Takeaway: Over the past few years, the FTC has paid very close attention to social media developments and how influencers are disclosing their connections in this evolving context. This latest crop of guidance and warning letters, coupled with the unprecedented targeting of two influencers themselves, indicates that this continues to be a primary area of concern for the Commission. Advertisers can protect themselves by making sure that all parties they work with are well acquainted with the FTC’s rules in this area and by aiming to comply with the FTC Endorsement & Testimonial Guides in social and new media.

IBA Self-Regulatory Principles at Center of BBB Decision

Two digital advertising companies are the targets of a recent Better Business Bureau effort to enforce the industry’s self-regulatory principles.  The interest-based advertising rules of the road require third parties to provide enhanced notice to consumers when collecting IBA data from non-affiliated websites, and require all companies to provide easy-to-use tools to opt out of IBA data collection activities on non-affiliated mobile apps.

NIST Updates Its Security and Privacy Guidance

Earlier this month, the National Institute of Standards and Technology (“NIST”) issued its fifth and latest draft of its “Security and Privacy Controls for Information Systems and Organizations” guidance document. The NIST guidance document expands on previous drafts that focused on privacy and security improvements for the federal government and now provides security and privacy improvements that can be implemented by other organizations.

With an eye toward the potential risks posed by the internet of things and the increase in connected devices, the latest draft of the guidance document aims to provide steps to developing a more concrete, and ultimately more secure, system for maintaining security and privacy. The new guidance prepares for the proliferation of the “Internet of Things”- connected devices that contain remote sensors and media collection mechanisms such as cameras and recorders. Finally, the guidance contains new sections geared towards enterprise security and privacy professionals, electronic and networking component developers and systems engineers.

Takeaway: The NIST’s move to develop draft guidance for both government and industry professionals illustrates a growing awareness about the security and privacy risks associated with growing technologies, including the internet of things.


Coachella Sues “Filmchella” for Trademark Infringement

Coachella Music Festival LLC, the organization behind the popular desert-based Coachella Valley Music and Arts Festival, filed a trademark infringement lawsuit earlier this month against the organizers of “Filmchella” arguing that the name is confusingly similar to “Coachella”. According to the complaint, Filmchella, like Coachella, is an event held in Southern California, and features a variety of entertainment and musical acts. The plaintiff alleges that Filmchella has ignored its repeated requests to change the name of its film festival, which, if changed, could prevent confusion or false association.

Takeaway: This case serves as a reminder that events and festivals are also owners of intellectual property rights.  Brands that wish to create an event that plays on an existing festival or event should consider any potential trademark and false association claims that could arise.

Dona J. Fraser, formerly of ESRB, to serve as Director, Children’s Advertising Review Unit

Dona Fraser, a leading privacy expert, comes to CARU from the Entertainment Software Rating Board (ESRB), a self-regulatory program developed by the video game industry. Dona brings to CARU a strong understanding of the marketplace challenges facing children’s advertisers, the complexities of children’s privacy issues and extensive experience with self-regulation. Dona has spoken on these issues both in the U.S. and abroad. At ESRB, she served as Vice President, Privacy Certified, starting in 2012. Prior to that, she was the ESRB Director, Privacy Online. In those positions, Dona was responsible for providing hands-on assistance to participating companies on development of data collection and privacy practices to meet ESRB standards. She also crafted best privacy practices in several areas including mobile apps, downloadable games, short-form privacy policies, behavioral advertising and social networking. Prior to her ESRB role, Dona served as a Director of Business and Legal Affairs for music labels at BMG/Sony Music in New York.



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.