Photo of Peter B. Miller, CIPP/G/US, CIPP/E, CIPM, CIPT

Peter B. Miller, CIPP/G/US, CIPP/E, CIPM, CIPT

Join Us For A Complimentary Webinar – Thursday, October 25, 2018 – 12:00 – 1:00 PM ET

Two years into the Trump Administration and:

  • The Consumer Product Safety Commission finally has a Republican majority,
  • the Department of Transportation has released its 3.0 guidance on autonomous vehicles,
  • NIST has published a 375 page recommendation on medical device security,
  • the FTC is holding a series of hearings on the transformative nature of the digital transformation on markets.
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What does all this activity in the United States mean for companies following the rapidly evolving regulations globally related to the safety and security of products?

This PLAC webinar will describe the current landscape at the federal agencies setting policy for product safety and security. With all the recent talk of regulatory humility in the face of great technological change, we’ll discuss whether regulators practice what they preach and if recent actions encourage or stifle innovation. Our session will compare and contrast activities across the federal government relevant to consumer products broadly defined with a particular focus on product safety and security.

Presenters:

Cheryl Falvey, Partner, Crowell & Moring, Washington, DC
John Fuson, Partner, Crowell & Moring, Washington, DC
Peter Miller, Senior CounselCrowell & Moring, Washington, DC

Please click here to register for this webinar.

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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.

Continue Reading FTC Settles First Connected Toy Case With VTech After Massive Data Breach

The incoming administration promises big changes to federal consumer protection administration and enforcement. On January 5, 2017, Crowell & Moring’s Advertising & Product Risk Management Group hosted a webinar in which they discussed likely changes on the horizon to the Federal Trade Commission, Federal Communications Commission, and Consumer Financial Protection Bureau.

Please click here to access an on-demand recording of the webinar (note: you must complete the registration form for access).

Webinar details:

What can we expect to see with new commissioners? How will the newly reconstituted agencies manage ongoing legal battles affecting their jurisdiction that carry over from the Obama Administration? Our team engaged in a discussion highlighting our predictions and possible outcomes that will drive consumer protection enforcement and litigation for the next four years. We have highlighted where the government is likely to pull back, and where it may stay the course.

Key topics:

  • The FTC’s and FCC’s new majorities and what that portends for privacy and data security enforcement.
  • The uncertain future of Net Neutrality.
  • Will there be a CFPB by 2018 and if so, what will it look like?
  • What will the FTC focus on in 2017 and beyond?
  • The (likely) rise of the state AGs.
  • Into the breach: will private litigation fill the gap?

Christopher Cole, Peter Miller, and Kristin Madigan conducted this webinar.

In its 2012 revisions to the Green Guides (16 C.F.R. Part 260) on environmental marketing claims, the FTC declined to provide guidance regarding “organic” claims, “either because the FTC lacks a sufficient basis to provide meaningful guidance or wants to avoid proposing guidance that duplicates or contradicts rules or guidance of other agencies.” That self-imposed silence ended with the FTC’s release of a staff report and study results, “Consumer Perception of ‘Recycled Content’ and ‘Organic’ Claims,” and its announcement of an October 20, 2016 joint FTC/USDA Roundtable, “Consumer Perceptions of ‘Organic’ Claims for Non-Agricultural Products.”

The FTC’s “organic” activities fall squarely within the larger regulatory movement toward providing guidance to businesses and consumers regarding the use of powerfully effective marketing terms such as “natural,” “organic,” “GMO-free,” and “locally grown.” For example, the FDA continues to work on developing a policy for using “natural” in food claims, and states and now the federal government are struggling with labeling requirements for genetically modified organisms (GMO).

The FTC staff report concluded, based on a study of consumer perceptions regarding unqualified and qualified organic claims, that sufficient concern existed about deceptive “organic” marketing claims for the FTC and USDA to convene the October 20 Roundtable “to explore organic claims for non-food products, and how we can work together to reduce deceptive organic claims.” The staff report also concluded that the study results regarding “recycled content” claims did not merit further FTC follow-up or require revision to current Green Guides guidance.

The portion of the study regarding organic claims asked consumers about scenarios involving shampoos, mattresses, and dry cleaning services, all described with unqualified “organic” claims, that included a percentage range of content that was “made by a man-made, chemical process” (0%, less than 1%; 1% to 5%; and 5% to 10%). There was widespread agreement among respondents that the “organic” claim was appropriate for products with no non-organic materials, but a “significant minority of respondents” – the FTC trigger for deceptive claims – believed that an unqualified “organic” claim was not proper if non-organic materials were present in any percentage. That “not organic” result did not change significantly if respondents were advised that the non-organic materials “pose[d] no health or safety hazard to consumers.” FTC staff also concluded from the study – consistent with current Green Guide guidance for general environmental marketing claims – that “qualified claims stating which parts of the product are organic are significantly less likely to mislead consumers than unqualified organic claims,” and, alternatively, that “a percentage qualification may also make the claim less misleading.”

Notwithstanding FTC staff’s concessions of limitations in the study design and the results, the report concludes that the consistency of the results demonstrates the need for follow-up regarding “organic” claims used to market non-agricultural products, including personal care products. Accordingly, the October 20 Roundtable will, among other things, address

  • Consumers’ interpretations of “organic” claims for products and services that are not covered by USDA’s Agricultural Marketing Service’s National Organic Program;
  • The staff report; and
  • Approaches to address potential deception, including consumer education.

The FTC has a dedicated email address for questions and proposals regarding the October 20 Roundtable, green@ftc.gov, and, separately, will be accepting public comments regarding “organic” claims until December 1, 2016.

Miller FTC Image Businesses that try to prevent disgruntled customers from sharing their experiences with other consumers may have to answer to the FTC for engaging in an unfair practice.

In Roca Labs, the FTC filed a complaint against marketers of purported weight loss products who “spent millions of dollars … to serve online advertisements.”  Consumers who went online to complain about their experiences faced threats and lawsuits for violating “a Gag Clause purporting to prohibit purchasers from disparaging Roca Labs, its products, and its employees, regardless of the purchasers’ outcomes.” That Gag Clause, part of the terms and conditions Continue Reading Don’t Put a Sock In It: FTC Says “Let Customers Complain”

On Monday, September 14, the FTC announced that it had sent letters to five providers of environmental seals and certifications and 32 individual companies using such seals and certifications, warning them against potentially overbroad, deceptive uses. The latest edition of the FTC’s Green Guides contains a section dealing with the use of environmental seals and certifications. 16 C.F.R. Part 260.6. The Guides make clear that labeling a product with an unqualified environmental seal runs the risk of conveying an unsubstantiated and overbroad claim about the overall environmental benefits of a product. Furthermore, third-party seals and certifications do not relieve marketers of the obligation to substantiate all of the claims that they convey to consumers, including claims relating to the seals and certifications. For that reason, the FTC recommends that such seals and certifications be prominently qualified in order to explain to consumers exactly the attributes on which the certification is based. In a blog post regarding the release, the FTC reminds marketers who use a green seal or certification on products that they must “explain what the seal or certification is based on, and it has to be specific. For example, a marketer could say the product is ‘biodegradable’ or ‘recyclable.’ It’s not enough for a seal to just say ‘green’ or ‘eco-friendly;’ in fact, that could be deceptive.”

Chris FTC Enviro Seals Image

The letters to the certifiers focus on the risk of “unqualified general environmental benefit claims [which] likely convey a wide range of meanings, including that a product has specific and far-reaching environmental benefits and that an item has no negative environmental impact.” As the Green Guides state, Continue Reading The FTC’s Latest Warning Letter Barrage Targets Misuse of Environmental Seals and Certifications.

Smartphone app image
Photo courtesy of Flickr by highwaysengland

 

The FTC continued its campaign against deceptive health and disease claims with enforcement actions against the marketers of “MelApp” and “Mole Detective,” smartphone apps that claimed to detect melanoma. These enforcement actions follow earlier FTC actions against smartphone apps that claimed to cure acne.

The Commission voted 4-1 to settle deceptive advertising claims against the Mel App defendant and two of the Mole Detective defendants and to litigate against the remaining two Mole Detective defendants.  Commissioner Ohlhausen disagreed with the majority’s interpretation of the melanoma detection claims and thus with the amount of substantiation required.  The settlement agreements require defendants to substantiate future melanoma-related claims with “competent and reliable scientific evidence [that] shall consist of human clinical testing” that meets rigorous scientific standards.  Consistent with her analysis in POM Wonderful, Commissioner Ohlhausen’s dissent made clear that she  would not require such “onerous” substantiation because “substantiation requirements must flow from the claims made by the advertiser” and “[w]ithout extrinsic evidence, I do not have reason to believe that a reasonable consumer would take away the implied claim that using these apps would increase their chances of detecting skin cancer in the early stages as compared to an examination by a dermatologist.”

Continue Reading Holy Moly! FTC Says Smartphone Apps Don’t Detect Skin Cancer

In the FTC’s administrative proceeding against ECM Biofilms, Inc., Administrative Law Judge Chappell rejected the FTC’s assertion, taken directly from the Green Guides, that marketing a product as “biodegradable” includes an implied claim that the product “will completely decompose into elements found in nature within one year after customary disposal.” ALJ Chappell ruled that the FTC failed to “demonstrate with probative, persuasive evidence” that ECM Biofilm’s claim that products made with its plastic additives were “biodegradable” also communicated an implied one-year claim to “a significant number of reasonable consumers.” ALJ Chappell’s traditional advertising claims analysis included ECM’s marketing materials, dictionary definitions of “biodegradable,” the absence of copy tests specific to ECM Biofilm’s claims, competing consumer surveys about biodegradability, and related expert testimony. ECM Biofilms did not escape unscathed, however: ALJ Chappell agreed with the FTC that more specific claims – “fully biodegradable in a landfill within 9 months to 5 years” – were false and unsubstantiated and thus violated the FTC Act.

Don’t scratch the implied one-year claim out of your copy of the Green Guides or change your substantiation practices regarding “bare” biodegradable claims just yet. Given the importance the FTC attaches in the Green Guides to conveying a reasonable time frame for biodegradability, expect the full Commission to sit as an appellate body in review of this ALJ decision.  If the Commission reaches a different result, expect the matter to go up to the DC Circuit for further appellate review, similar to the administrative proceeding and appeals process in the POM Wonderful proceeding.

Image courtesy of Flickr by StockMoneys.com.

The FTC continues its active presence in the environmental claims space with 20 warning letters targeting marketers of “dog waste bags” who make biodegradability and/or compostability claims for the bags and their, er, contents. The sweep contains no surprises in terms of FTC interpretation of environmental claims and is consistent with past FTC actions against marketers of such products as waste disposal bags, plastic lumber, low-VOC mattresses, and diapers. Marketers who want to include environmental claims in their pitch to consumers should avoid stepping into something messy by paying close attention to the FTC’s Green Guides.  Please click here for the full FTC report.