Advertising & Product Risk Management

In an expansion designed to bring its advertising review jurisdiction in line with those of international self-regulatory organizations and enforcers, the National Advertising Division (NAD) has expanded its review authority so that it not only covers the truth and accuracy of national advertising, but also advertising that portrays “negative harmful social stereotyping, prejudice or discrimination.” In so doing, NAD seeks to adapt its review process to permit the review of ads that cause possible social harm based on stereotypical or discriminatory portrayals. Unlike some international bodies, which are not constrained by the First Amendment, NAD proposes to tether its review to such portrayals that may cause harm because they are misleading and inaccurate.

Continue Reading National Advertising Division (NAD) Expands Jurisdiction to Review of Advertising Portraying “Negative Harmful Social Stereotyping, Prejudice or Discrimination.”

The news of Elon Musk’s $42-44 billion offer to purchase Twitter, and his apparent cold feet, have spread far and wide. Speculation has swirled that his offer was a politically-motivated stunt and that he never intended to actually follow-through with the deal. More recently, however, Musk has publicly demanded more information from Twitter regarding its so-called “bots” and he has publicly suggested that up to 20% of Twitter’s active user base is comprised of fake accounts, in contrast to the 5% that Twitter itself has claimed in its latest annual report. So, is Musk’s stated concern real or a coverup for cold feet?

While some have derided Musk’s demands as pretextual, he has a valid point that the number of real, daily active users on the Twitter platform – actual human eyeballs – is critical to the value of Twitter. A difference of 15% in estimates of bots is likely to be material. Twitter itself has said so.

Continue Reading Does Elon Musk Have a Point? The Impact of Bots on Twitter Revenue.

In the wake murder of George Floyd in 2020 and the demonstrations that followed, brands pledged to support anti-racism and solidarity with the Black community. Some companies professed that they would make large donations to social justice organizations, leading commentators to ponder whether brands were “woke washing.” At the end of Black History Month, the National Advertising Division (“NAD”) announced that it investigated two companies making express claims committing to sizable charitable contributions to ensure that those claims were substantiated. See Niantic, Inc. (Advertising by Niantic Labs), Report #7037, NAD/CARU Case Reports (February 2022) and DoorDash, Inc. (Advertising by DoorDash, Inc.), Report #7036, NAD/CARU Case Reports (February 2022).
Continue Reading NAD Makes Clear that “Woke Washing” is False Advertising

Tuesday, September 14, 2021

Bureau of Competition and Bureau of Consumer Protection

  • The FTC and Justice Department issued a joint statement detailing antitrust guidance for businesses taking part in relief efforts and those involved in rebuilding communities affected by Hurricane Ida without violating the antitrust laws. The statement highlighted that the agencies will hold businesses or individuals accountable for attempting to “illegally subvert competition or engage in fraudulent conduct under the guide of disaster recovery.”

FTC Operations

  • The FTC approved a series of resolutions that will enable agency staff to efficiently and expeditiously investigate conduct in core FTC priority areas over the next ten years. The Bureau of Consumer Protection and the Bureau of Competition recommended that the Commission authorize eight new compulsory process resolutionsin these essential areas: (1) Acts or Practices Affecting United States Armed Forces Service Members and Veterans; (2) Acts or Practices Affecting Children; (3) Bias in Algorithms and Biometrics; (4) Deceptive and Manipulative Conduct on the Internet; (5) Repair Restrictions; (6) Abuse of Intellectual Property; (7) Common Directors and Officers and Common Ownership; and (8) Monopolization Offenses.


Continue Reading FTC Updates – September 2021

In 2020, Greenpeace published a major report that purports to show that less than 15% of all plastic, including single-use plastic that is labeled as “recyclable,” is actually recycled in the United States. These dramatic findings kicked off a new wave of putative class action cases against manufacturers who regularly use plastic packaging, much of which is labeled as recyclable. For example, mere days after issuance of the Greenpeace Report, Earth Island Institute sued a group of ten major companies, including Coca-Cola, Pepsi, Clorox and Nestle over the use of plastic packaging that allegedly contributes substantially to plastics pollution in California waterways.

On Monday, the United States District Court for the Northern District of California dismissed one of the more prominent recent cases, which had been filed by Greenpeace itself against Walmart. Greenpeace, Inc. v. Walmart, Inc., No. 21-cv-00754-MMC (Sept. 20, 2021). Greenpeace’s case, brought under the widely-used, California consumer protection law, Cal. Bus. & Professions Code §17200 (“UCL”), sought to hold Walmart liable for making what Greenpeace alleged were false and misleading “recyclable” claims for certain products. Greenpeace alleged that the claims were false, not because the products are not recyclable, because most consumers do not have access to recycling programs that could accept the products for recycling.
Continue Reading Greenpeace Plastics Recyclability Suit Dismissed for Lack of Standing

A new trend in false advertising lawsuits targets specific characterizing flavor claims on the labels of foods and beverages. For example, Frito-Lay was recently sued in California federal court alleging the company’s “Tostito’s Hint of Lime” tortilla chips falsely implies that natural lime is a primary flavoring ingredient and that consumers were misled by various misrepresentations of lime on the product packaging. Kellogg, Hershey, and Bimbo Bakeries were all sued because the “fudge” in their respective products allegedly are produced with vegetable oil substitutes instead of butter and milk, which the complaint alleges is known to consumers as the traditional way of making fudge.

Typically, in these false or misleading flavoring ingredient lawsuits, a plaintiff attempts to represent a class of consumers and alleges they were charged a premium price for the products because of the specific ingredient, based on the misleading representation.  The plaintiff generally must also allege that they would not have purchased the product in the first place if they had known that the specific ingredient was missing.

Continue Reading Despite the Pandemic, Food-Related False Advertising Lawsuits Continue to be Frequent Filers

In a recent Law360 article titled, “Navigating NFT Brand Management Risks And Rewards,” David Ervin, Kayvan Ghaffari and Carissa Wilson explain what brand and business owners should know about NFT opportunities and corresponding risks, particularly with respect to trademark, licensing, anti-counterfeiting and advertising law.

Click here to read the full article.

Last week the Supreme Court unanimously held that §13(b) of the Federal Trade Commission Act does not give the Federal Trade Commission the power to seek equitable monetary relief such as disgorgement or restitution. The Court’s opinion in AMG Capital Management LLC v. Federal Trade Commission removes a powerful tool that the FTC has long relied on to pursue monetary relief for consumers in both consumer protection and competition matters.

By way of background, the FTC has authority to protect consumers from unfair or deceptive acts or practice (“UDAP”) and unfair methods of competition (“UMC”) with an overlapping but distinct set of tools it can use to pursue its dual consumer protection and competition missions:

  • Administrative Proceeding: The FTC can initiate an administrative proceeding to seek a cease and desist order for either a UDAP or UMC violation from an administrative law judge. If necessary, the FTC can later bring a contempt proceeding in federal court seeking to enforce the terms of an administrative order. A defendant may respond by arguing that it has “substantially complied” with the terms of the order. If the FTC prevails in such a case, it can seek civil penalties and other equitable relief necessary to enforce the order (however monetary relief only applies to UDAP violations).
  • Rulemaking: The FTC has authority to promulgate rules that define UDAP with specificity. Generally, this requires a lengthy, formal rulemaking process that allows for public comment, and a final rule can be challenged in federal court. If a defendant later violates a duly enacted UDAP rule, the FTC can seek civil penalties for a knowing violation. The FTC can also file suit in federal court and obtain monetary relief “to redress consumer injury,” including an order compelling “refund of money or return of property,” but only if “a reasonable man would have known under the circumstances [that the challenged conduct] was dishonest or fraudulent.”
  • Federal Court: The FTC can sue in federal court under §13(b) of the FTC Act to enjoin a defendant when the defendant “is violating, or is about to violate” a law that the FTC enforces and such an injunction is in the public’s interest. While courts have historically read §13(b) as giving the FTC an implied right to recover equitable monetary relief in addition to injunctive relief, the Supreme Court’s ruling now limits the FTC to seeking injunctive relief only.


Continue Reading The Supreme Court Limits FTC’s §13(b) Powers

Maryland became the first U.S. state to create a digital advertising tax on February 12, 2021. The Digital Advertising Gross Revenue Tax (DAGRT) was originally passed in March of 2020, but subsequently vetoed by Maryland Governor, Larry Hogan. Maryland’s legislature voted to override the Governor’s veto, however. The contentious journey for DAGRT passage is likely to be overshadowed by a litigious future.

DAGRT (full text here) imposes a progressive tax on the sale of digital advertising services’ gross revenue within the state. DAGRT focuses on large providers of digital advertising services; entities with revenue exceeding $100 million. The rate of the tax imposed, based on global revenue, is 2.5% for annual global gross receipts of $100 million to $1 billion, 5% for gross receipts of $1 billion to $5 billion, 7.5% for gross receipts of $5 billion to $15 billion, and 10% for gross receipts exceeding $15 billion. The rate then applies to digital advertising services’ gross revenue in Maryland. However, DAGRT does require all entities with an annual gross revenue derived from digital advertising services within the state over $1 million to file a specialized tax return. DAGRT’s focus on large providers of digital advertising services might incentivize these providers to find avenues to avoid the tax by changing their digital advertising strategies. For example, more companies may offer advertisement-free subscription options. It’s also possible that the companies faced with paying the tax may simply pass the cost on to the smaller businesses purchasing the advertisements and to consumers.
Continue Reading Maryland’s Digital Advertising Tax: A Contentious Start, and an Uncertain Future

On December 18, 2020, the Ninth Circuit Court of Appeals held that “Oh, the Places You’ll Boldly Go!,” a Dr. Seuss and Star Trek mashup illustrated book, is not a fair use exempted from copyright liability. Under the Copyright Act of 1976, the factors courts assess in determining if there is fair use include:

  1. The