Advertising & Product Risk Management

The word “bot” is a double-entendre. It refers both to the larval stage of the bot-fly, a rather gruesome internal parasite (warning, link not for the squeamish) and to a software application that runs automated scripts on the internet in highly repetitive fashion—also with parasitic effects. Internet bots can be programmed for good or evil. This post refers to the latter kind.

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Use of Bots for Ad Fraud

The dominant model of compensation for digital advertising remains the CPM, or cost per thousand impressions. Impressions are simply ad views, that is, the successful delivery of a specific advertisement to a consumer’s web browser. (We adopt the fiction that it has been “viewed” so long as it appears for some period of time on the consumer’s screen.) There is robust debate on what an impression actually means with respect to non-static ads, such as videos, for which compensation may flow even if the consumer sees only a few seconds of the entire video. A publisher, such as a website, will offer advertisers a sliver of their online real-estate at a given CPM rate, and will thereafter be compensated by advertisers at that rate for how many impressions have been generated.

Continue Reading Subverting Democracy, Advertising, and the Economy Through Bots

You may have seen the commercial on late night television. A glowing image of a human brain appears (along with a disclosure stating “dramatization”), with flashing lights pulsing through a crisscrossed mesh, depicting nerves. The voiceover intones, “Your brain is an amazing thing. But as you get older, it begins to change, causing a lack of sharpness or even trouble with recall.” So far, so good. Who, of a certain age, hasn’t experienced these symptoms?

The voiceover continues: “Thankfully, the breakthrough in Prevagen helps your brain and actually improves memory.” The flashing lights grow stronger and zoom more quickly across the neural net. “The secret is an ingredient originally discovered in jellyfish. In clinical trials, Prevagen has been shown to improve short term memory. Prevagen, the name to remember.”

A screen shot of the key frame, showing a graph of what appears to be recall improvement over time appears, along with a disclosure that states that “in a computer assessed, double-blinded, placebo controlled study, Prevagen improved recall tasks in subjects.”

© Prevagen

Continue Reading Quincy Biosciences: What the decision means for advertising of health claims, and what it means to the FTC

Consumers are winning in the digital age. And marketing teams are being forced to think outside of the box.

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According to a recent study, people would rather give up their spouse, or go to prison if it means they won’t lose their smartphone. On top of that, consumers are “cutting” or “shaving” the cord to traditional television and demanding more flexibility in how they view content. Nielsen data shows that between 2011 and 2017, traditional TV viewing by 18-24 year olds dropped by almost 12 hours a week, or by roughly 1 hour 40 minutes per day. In addition, online advertisers are employing targeted advertising whereby consumers are exposed to ads that reflect their interests. As a consequence, consumers are becoming increasingly difficult for marketers to reach and businesses are struggling to find ways to bridge this gap.

Continue Reading It’s Only A Game. Or Is It? Advergaming In The Digital Age

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Ninth Circuit Blocks Sweet Drink Warning Labels Pending Free Speech Lawsuit

The Ninth Circuit dealt a blow to the war on sugar last month, calling the warning labels a San Francisco ordinance would require on sweet drinks “deceptive” and blocking the mandate on free speech grounds. As we have discussed before, cities and counties across the nation have been launching an offensive against sugar for years. Favorite methods of attack include bans on large sugary drinks, taxes on sugar in drinks by volume, and now, warning labels.

While the USDA, FDA, and American Heart Association all have backed policies aimed at limiting sugar consumption, these policies have received mixed reviews from consumers and courts. A state judge knocked down the New York City ban on large sodas in 2013, calling it “arbitrary and capricious.” More recently, sugar taxes have been protested by unions in Philadelphia, sparked class-action litigation in Illinois, and were outright repealed in Cook County after only three months of implementation because residents began crossing state and county lines to avoid them.

Continue Reading Soda Stays Safe in San Francisco

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Earlier this month, the Northern District of California dismissed FTC’s unfairness claims against D-Link, a manufacturer of routers and IP cameras, while allowing most of FTC’s claims rooted in deception to survive, suggesting that traditional false advertising actions may be FTC’s most effective means of addressing suspect data security practices. Further, the Northern District of California’s decision to dismiss the unfairness claims shows this court’s unwillingness to entertain data security actions rooted in the FTC’s unfairness prong, without concrete harm.

Deception

FTC filed suit against D-Link in January of this year, alleging that the company engaged in both deceptive and unfair practices based on D-Link’s claimed flimsy data security practices. Specifically, the FTC alleged that D-Link engaged in deceptive practices by marketing sophisticated and state-of-the-art security provided with its products, while simultaneously failing to protect users from “widely known and reasonably foreseeable risks of unauthorized access.” For example, D-Link touted that its products featured “the latest wireless security features to help prevent unauthorized access” and offered the “best possible encryption.” But in practice, according to FTC’s pleadings, D-Link failed to take “easily preventable measures” against “hard-coded user credentials and other backdoors.” And, the Northern District held, these accusations were sufficient to plead a deception claim under the FTC Act. However, where the company did not specifically market its data security practices, its advertising was not deceptive – such as in a brochure where D-Link described the camera as a “surveillance camera” for the “home or small office.” Indeed, where D-Link did not refer to its digital security, the court would not imply messages about the state of that security.

Unfairness

Notably though, the Northern District dismissed FTC’s claims that, because D-Link failed to provide adequate data security, it engaged in unfair practices. Specifically, the court found that, because the FTC could not plead actual harm, it had not sufficiently pled a violation of the FTC Act. FTC was unable, the court noted, to show any “monetary loss or an actual incident where sensitive personal data was accessed or exposed.” It was not enough to plead that D-Link put customers at risk.

The Northern District did not, however, completely close the door on potential unfairness claims against D-Link. Choosing to dismiss the claims without prejudice, the Northern District noted that “[i]f the FTC had tied the unfairness claim to representations underlying the deception claims, it might have had a more colorable injury element.” Accordingly, where a company does not make affirmative representations about its data security practices, a court will likely be reluctant to find a violation of the FTC Act without concrete injury.

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The FTC is closely watching influencers to remind them to clearly disclose material connections to brands. In June 2017, the Commission settled with a trampoline manufacturer for relying on misleading endorsements and, in March, the Commission sent more than 90 letters to influencers and brands to remind them to clearly disclose relationships. The FTC has now made clear that it will target influencers who fail to comply with its Endorsement Guides. While the FTC had previously settled claims against various advertising networks, advertising agencies, and brands for failing to comply with the Endorsement Guides, the FTC has announced that it has settled its first ever enforcement action against social media influencers. In the same press release, the FTC simultaneously stated that it sent follow-up warning letters to 21 influencers that first received letters in March.

The message is clear: influencers that fail to disclose a material connection to brands do so at their own peril—and brands are responsible for implementing clear measures to make sure that the influencers they work with comply with disclosure requirements. Furthermore, the FTC has also made clear that many commonly used disclosure methods and practices are inadequate in its newly revised Endorsement Guides FAQs. Brands and the influencers they work with should take note of these recommendations and ensure that their disclosure practices comply.

Continue Reading FTC Announces First Enforcement Action Against Social Media Influencers and Updates FAQs Rejecting Common Disclosure Practices

Last week, the U.S. Consumer Product Safety Commission announced that Home Depot U.S.A., Inc. has entered into a settlement agreement with the agency to resolve allegations that the retailer knowingly sold and distributed recalled consumer products over a four year period. The Company will pay a civil penalty of $5.7 million. This penalty is significant because it involves claims against a retailer who allegedly sold recalled products in violation of Section 19(a)(2)(B) of the Consumer Product Safety Act which makes it unlawful to sell a recalled product – and not the more typical “failure to timely report” claims against a manufacturer under Section 19(a)(4). This penalty is just the third such penalty in recent years (see Meijer 2014 civil penalty and Best Buy 2016 civil penalty).

Continue Reading CPSC Targets Retailer Home Depot in Rare Sale of Recalled Goods Civil Penalty

The regulation of e-cigarettes and other electronic nicotine delivery systems (“ENDS”) presents complex regulatory and scientific challenges. Two key federal agencies with product safety mandates and overlapping jurisdiction – the Consumer Product Safety Commission and the Food and Drug Administration – have turned their attention onto the specific area of e-cigarette battery-related fires and explosions in the last few months.

In August 2016, the Food and Drug Administration finalized its so-called Deeming Rule to bring e-cigarettes and ENDS, as well as their components and parts such as batteries, under its authority to regulate tobacco products. Under this newly granted authority to regulate e-cigarettes and ENDS, FDA held a public workshop in April on “Battery Safety Concerns in Electronic Nicotine Delivery Systems.” Through the workshop and also through other channels, FDA is seeking data and other information on explosions, fires, and overheating of e-cigarettes. FDA also has initiated a public safety campaign of “Tips to Help Avoid Vape Battery Explosions.”

Continue Reading Dueling Interests at CPSC and FDA “Deem” E-cigarette Battery Safety a Priority

On August 1, 2017, the Advertising Self-Regulatory Council (ASRC) and Council of Better Business Bureaus (CBBB) announced that Laura Brett has been appointed as director of the National Advertising Division (NAD). Ms. Brett has served as Acting Director of NAD since Andrea Levine, former Director of NAD, retired after 20 years as NAD Director. She joined NAD as a Staff Attorney in 2012 and was later an Assistant Director. Prior to joining NAD, Ms. Brett was a litigator at Willkie Farr & Gallagher and a solo practitioner. She was also a member of the Rye City Council and Deputy Mayor of Rye, NY.

At NAD, Ms. Brett has authored decisions in numerous cases challenging the adequacy of disclosures in native advertising formats, sponsored content, and other online and social media advertising issue. Before the FTC adopted its long-awaited native advertising guidance, Ms. Brett used the NAD’s self-monitoring authority to fill a regulatory gap and bring several challenges of native advertising. In her decisions, she pushed for improved disclosures and provided detailed guidance for companies engaged in novel forms of online advertising. She has not shied away from using NAD’ s authority to challenge the advertising practices of well-known tastemakers with large social media followings, challenging the Kardashians and Kate Hudson this year.

Continue Reading Laura Brett Named New NAD Director

On Monday, President Trump nominated Ann Marie Buerkle, who has served as Acting Chair of the U.S. Consumer Product Safety Commission since February 9, 2017, to serve as permanent Chair of the Commission.  The appointment is for a term of seven years beginning on October 27, 2018 when her current term expires.  Acting Chair Buerkle’s statement on her nomination can be read here.

This nomination must be confirmed by the Senate.  Even if confirmed expeditiously (and that is a big if), the current minority-majority political dynamic at the Commission will not change until President Trump is able to appoint a third Republican Commissioner once Commissioner Marietta Robinson’s term expires in October later this year.

Acting Chair Buerkle’s regulatory philosophy and priorities for the Commission have been well documented, including in our prior blog posts.  In fact, she reiterated some of those thoughts as they pertain to product recalls in opening remarks at the CPSC’s Recall Effectiveness Workshop yesterday, July 25.  Acting Chair Buerkle stated that the Commission and its staff:

  • need to continue engaging all product safety stakeholders and listen to ideas, problems, and solutions concerning product recalls;
  • should not have a “one size fits all” approach to product recalls;
  • should not expect recalling companies to bankrupt themselves in undertaking a voluntary product recall; and
  • should look at proportionality and risk when effectuating a product recall.

Acting Chair Buerkle concluded her remarks by stating that the most effective way to prevent consumer injury is not through product recalls, but through preventing unsafe products from entering the market in the first instance.

We expect Acting Chair Buerkle to be confirmed in the coming months and wish her congratulations on the nomination.