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ONLINE ADVERTISING:LAW ENFORCEMENT RISKS
FOR ADVERTISERS, AFFILIATES & NETWORKS
AD:TECH SF, APRIL 21, 2009Milo Cividanes
Tom CohnLisa Jose FalesTodd Harrison
Venable LLP
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HOW TO AVOID GOVERNMENT INVESTIGATIONS, AND WHAT TO DO [AND NOT DO] IF FACED WITH ONE
FTC Enforcement / Principles re: Online Negative Option Marketing
+ Consumer Blogs, Celebrity/Expert Endorsements, Product Claims
----------------------------------------------------------------= The Perfect Storm?
Top Ten Tips!
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ALLEGED DECEPTIVE ALLEGED DECEPTIVE PRACTICES PRACTICES ––FTC vs. JAB VENTURESFTC vs. JAB VENTURES
n Failure to adequately disclose material terms of continuity plans
n Misrepresenting:– Free trial period before charging more than
S&H– Right to cancel easily/at any time
n Unfairly billing without express informed consentn False/unsubstantiated weight loss claimsn Debiting bank accounts on recurring basis without
proper authorization
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REMEDIES FOR ALLEGED REMEDIES FOR ALLEGED DECEPTIVE ADVERTISING DECEPTIVE ADVERTISING ––FTC vs. JAB VENTURESFTC vs. JAB VENTURES
FINAL STIPULATED ORDER:
n prohibits misrepresentations alleged, bans key terms
n mandates disclosures allegedly not made
n prohibits billing without express informed consent
n prohibits preauthorized debiting w/o written authzn.
n prohibits false/unsubstantiated weight-loss claims
n Defendants ordered to pay $610,000 in redress, with rest of $7.8 million judgment suspended
n Corporate and individual defendants jointly and severally liable
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First 5 Tips : FTC STAFF PRINCIPLES RE: ONLINE NEGATIVE OPTION MARKETINGn Marketers should disclose the offer[s]'s
material terms in an understandable manner.n Marketers should make the appearance of
disclosures clear and conspicuous.n Marketers should disclose the offer[s]’s
material terms before consumers pay or incur a financial obligation.
n Marketers should obtain consumers’affirmative consent to the offer[s].
n Marketers should not impede the effective operation of promised cancellation procedures.
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Testimonials and Endorsements
n Testimonials and endorsements that pertain to the benefits of a product must be substantiated, or properly disclaimed.(“Results not typical”)
n A testimonial must represent the experience that a typical consumer can expect with the product.Ø There is no personal opinion exception. Ø Must reflect the honest opinions, findings, beliefs, or
experience of the endorser.Ø Any material connection between the endorser and the
seller must be disclosed -- $ from seller to endorser, directly or through ad network
Ø Note: FTC is currently modifying their Endorsement/ Testimonial Guides, and “results not typical” safe harbor may be removed – may have to disclose generally expected results
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Disclaimers: FTC’s view
n Important to focus on the “net effect” of the advertisement.
n Disclaimer must be clear and conspicuous.
n Statements like “not all consumer will get this result”are generally not adequate.
n Disclose what the generally expected performance would be, or the limited applicability of the endorser’s experience to what consumers may expect to achieve.
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Expert Endorsements: FTC’s View
n Expert’s qualifications must give him the expertise he is represented as possessing.
n An expert must have a reasonable basis for his/her opinion.
n Expert’s endorsement must be:
– supported by actual exercise of his expertise in evaluating product features or characteristics with respect to which he is expert, and
– which are both relevant to ordinary consumer’s use of or experience with product, and are also available to ordinary consumer.
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Weight Loss: A current example
1) Endorser may not have experienced the reported result.
2) Weight loss may be attributable to other factors, such as diet, exercise, or lifestyle changes.
3) If testimonials claiming extreme and atypical weight loss are presented as typical and ordinary, they are likely to be deceptive, without:
4) an indication of the more modest weight loss results that the typical user would experience using the product. 15
3 Ways Testimonial Can Be Deceptive: FTC’s View
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Implied Celebrity/Expert/Media EndorsementsUse of celebrity picture and quotes:
Ø DO NOT use unless consent is provided
Ø If consent is not provided, make clear that celebrity/expert does not endorse product (this approach not recommended).
Use of news media pictures/videos/quotes:Ø SAME PRINCIPLES AS ABOVE, and make clear:
no affiliation/separately-owned marks!
What about use of trademarked keywords?Ø Lanham Act challenge: “use in commerce,”
but likely confusion?16
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WHO ELSE MAY BE LIABLE FOR DECEPTIVE ADVERTISING CLAIMS?n Advertiser – Strict liabilityn Ad agency – “Knew or should have known”n Individual corp. officers with authority/control/knowledgen Endorsers / Bloggersn In appropriate circumstances, shopping channels,
catalogs, payment processors, fulfillment houses, others with role in promotion
n Affiliate Marketers? Ad Networks?n "It is well settled law that the originator is liable if it
passes on a false or misleading representation with knowledge or reason to expect that consumers may possibly be deceived as a result." FTC Chairman Pitofskyand Commissioners Anthony and Thompson, In re Shell Oil Company (1999).
n In other words: don’t have to be seller to be liable!17
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Avoiding Govt. Investigations: Last 5 Tipsn Online advertisers and affiliates driving traffic to them
[bloggers, reviewers] should avoid false or unsubstantiated claims re: advertised good/service.
n Advertisers and affiliates should avoid false celebrity/ expert/media endorsements, express or implied.
n Disclose any material connections between advertisers and affiliates – directly or through ad networks.
n Advertising networks should avoid actively or knowingly participating in or approving of the above practices/failures to disclose.
n Advertisers, affiliates and ad networks should seek counsel before publishing online ad claims, and online marketing offers with negative option features.
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QUESTIONS?n Emilio Cividanes
n Tom Cohn212.370.6256 [email protected]
n Lisa Jose Fales202.344.4349 [email protected]
n Todd [email protected]
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