Photo of Lauren B. Aronson

This article originally appeared in Bloomberg Law Big Law Business.

Pop-star Selena Gomez is an international celebrity with 144 million followers on Instagram. That’s second only to soccer icon Cristiano Ronaldo who trumps her by 500 followers.

So you might think companies would jump at the opportunity to enlist them as brand ambassadors. But

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The FTC’s Consumer Protection Division has long targeted advertisements for “work-at-home,” business and investment opportunities that exaggerate the earning potential and downplay risks. Recently, the FTC announced that it filed a complaint against four individuals doing business as “Bitcoin Funding Team” in the U.S. District Court for the Southern District of Florida for deceptively advertising a cryptocurrency scheme that promised consumers that they could turn a cryptocurrency payment of approximately $100 into $80,000 in monthly income. Specifically, the complaint alleges two counts: 1) that Defendants’ representations that the programs are structured to operate as bona fide money-making opportunities are false or misleading and violate Section 5(a) of the FTC Act, and 2) that Defendants’ representations that consumers who participate in the programs are likely to earn substantial income are also false or misleading, violating Section 5(a). On March 16th, the Commission secured a temporary restraining order against, and froze the assets of pending trial, the defendants it alleges who were operating and promoting cryptocurrency pyramid schemes.


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In the largest-ever penalty issued against an ad agency, the Federal Trade Commission announced that Marketing Architects, Inc. (MAI) agreed to pay $2 million dollars to settle a false advertising complaint filed with the FTC and the State of Maine Attorney General’s Office.

The ad agency came to the FTC’s attention after the Commission settled with Direct Alternatives (DA) and Sensa Products, LLC  for more than $16 million and more than $26 million respectively to resolve claims that the companies engaged in the false and deceptive advertising, marketing and sale of weight loss products.  According to the Complaint, MAI created direct response radio ads for Sensa and DA as well as MI6 Holdings, LLC (MI6) and other unidentified clients with toll free numbers inviting consumers to call and purchase weight loss. In addition, for some clients, including DA, MAI created and implemented scripts for its Interactive Voice Response (IVR) system, providing testing, analysis and strategic advice regarding the performance of its IVR scripts and ads as well as collecting payment information.


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On January 8, 2018, the FTC announced settlement of its first connected toy case with VTech Electronics Ltd (“VTech”) for violating the Children’s Online Privacy Protection Act (COPPA) Rules by failing to properly collect and protect personal information about and from children and violating the FTC Act by misrepresenting its security practices. In addition to paying a $650,000 civil penalty, VTech agreed to comply with COPPA, implement and maintain a comprehensive information security program with regular third-party security audits for the next twenty years, and not misrepresent its privacy and data security practices.

The settlement comes more than two years after VTech learned that a hacker had gained remote access to databases for its interactive electronic learning products (ELPs), including for its Kid Connect chat application, in what was described at the time as the largest known hack targeting children. According to the FTC’s Complaint, the hacker accessed VTech’s databases “by exploiting commonly known and reasonably foreseeable vulnerabilities,” and VTech was unaware of the intrusion until it was informed by a reporter.


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Online dating company eHarmony will pay more than $2 million to settle a consumer protection lawsuit brought by four California counties and the city of Santa Monica. In total, the company will pay up to $1 million to California customers who enrolled in eHarmony’s automatic subscription program between March 10, 2012 and December 13, 2016

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Subscription services for everything from food delivery to beauty products to exercise gear have grown exponentially in the past five years. Such services require consumers to enroll in a program to purchase goods on a consistent basis. They typically automatically renew, often on a monthly basis, and require customers wishing to cancel to take affirmative steps to avoid being charged. Marketers know that consumers often fail to take steps to cancel timely, which only benefits the marketers’ bottom lines.

With the explosion of subscription business models, consumer complaints have skyrocketed as well, with consumers complaining that the terms of the negative option offer – an offer that interprets a consumer’s failure to take an affirmative action as an agreement to be charged – were not clearly explained. For example, consumers have complained that were not told they would be charged each month, were not adequately reminded of how to “skip” being charged each month, that prepaid credits expire without notice, and that it can be difficult to cancel. Thus, subscription businesses have faced increasing regulatory scrutiny and all advertisers that offer products or services that automatically renew should pay close attention.

AdoreMe Settlement

AdoreMe, a subscription lingerie service launched as a rival to Victoria’s Secret, recently agreed to pay $1.38 million to settle the Federal Trade Commission’s charges that the company did not clearly communicate to consumers the terms of its “VIP Membership” program which automatically billed consumers if they failed to “skip” a month within a 5-day window, falsely claimed that store credits could be used “any time,” and made it difficult for subscribers to cancel their memberships in violation of Section 5(a) of the FTC Act as well as the Restore Online Shoppers’ Confidence Act.


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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.


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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.


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FTC Moves Ahead Enforcing Endorsement Cases

A few months ago, acting Federal Trade Commission Chairwoman Olhausen stated that the FTC should shift focus to cases of actual harm, leaving many to wonder whether FTC would still actively enforce endorsement cases. However, in April, the FTC sent out ninety letters to brand influencers and marketers reminding those influencers and marketers to clearly and conspicuously disclose their relationship to brands. On the heels of these April letters, the FTC filed a complaint and ultimately reached entered a proposed settlement order (“order”) with two brothers that relied on deceptive endorsements and misleading review websites to sell Infinity and Olympus Pro brand trampolines.


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There’s a new tool for deceptive pricing class actions challenging “up to __%” savings promotional messaging:  A new lawsuit filed in New Jersey alleges that the clothing retailer’s “up to _% off” promotional messaging violates New Jersey’s consumer protection laws. The plaintiff sued Jos. A. Bank under the New Jersey Truth in Consumer Contract, Warranty and Notice Act (TCCWNA), N.J. Stat. § 56:12-15. This once-forgotten statute has recently been in the limelight, invoked in numerous class actions due to its generous civil penalties provision providing “not less than $100.00 or for actual damages, or both” at the choice of the consumer, plus attorney’s fees. See N.J. Stat § 56:12-17.


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