digging deeper into recent developments in advertising law · • earlier this month, the ftc sued...

© 2014 Winston & Strawn LLP

May 29, 2014

Digging Deeper into Recent Developments in Advertising Law


Today’s eLunch Presenter

Brian Fergemann Partner Chicago

[email protected]


Heigl vs. Duane Reade


Katherine Heigl Sued Duane Reade for $6 Million Over Social Media Posts • Duane Reade tweeted a candid photo of

Heigl apparently leaving a Duane Reade store in New York City carrying two Duane Reade shopping bags • “Love a quick #DuaneReade run? Even

@KatieHeigl can’t resist shopping #NYC’s favorite drugstore.”

• Heigl’s lawsuit alleges that Duane Reade’s unauthorized use of her name and likeness is in violation of Heigl’s right of privacy and publicity under New York law, and constitutes a false endorsement under the Lanham Act


What is Right of Publicity?

• The Right of Publicity is a statutory right in some states (19 states) and a Common Law right in others

• It gives a person control over the use of his or her name, voice, signature, photograph, and/or likeness for commercial purposes • “Any person who knowingly uses another's name, voice, signature,

photograph, or likeness, in any manner on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of products, merchandise, goods or services, without such person's prior consent … shall be liable for damages.” California Civil Code Section 3344


What Constitutes “Advertising”?

• Michael Jordan sued a grocery retailer for use of his name and number in a congratulatory ad in a commemorative issue of SI

• ND of Illinois ruled the ad is constitutionally protected free speech and was not commercial speech

• The 7th Circuit Court of Appeals just recently reversed, finding the ad was commercial speech • Retailer Logo

• Reference to retailer tagline


What Constitutes “Advertising”? • Burberry sued by Bogart rights holder

Bogart LLC for post on a historical timeline on Burberry’s Facebook page: • “Humphrey Bogart, wearing a Burberry trench

coat, in the final scene of Casablanca”

• Burberry asserted its use of the image of Humphrey Bogart from ‘Casablanca’ within its historical timeline “was not directly connected with the sale of any merchandise, but rather was a historical positioning of the image within an educational project along with numerous other photographs of people wearing Burberry apparel over the last century”


What Constitutes “Advertising”? • Thermador sued by Julia Child Foundation for use of name and likeness on

its Pinterest and Facebook pages: • “Julia Child had Thermador appliances in her beloved kitchen”

• Facebook page: “1970 - Julia Child uses Thermador in her critically acclaimed PBS TV Series”

• JCF also sued Williams-Sonoma


Key Takeaways

• No “fair use” exception has been recognized for right of publicity

• A person does not need to prove that an endorsement is being communicated – only that the person’s name or likeness was used for commercial purposes

• Protection for commercial speech is limited and content produced by companies selling goods or services is likely to be viewed as commercial speech even if it has “editorial” characteristics • Companies should treat social media as advertising in most cases – for all purposes,

not just for right of publicity


Key Questions

• Is it ever acceptable for an advertiser to mention a celebrity in social media?

• Ways to reduce risk of a lawsuit: • Steer clear of express or implied message that a celebrity likes or even uses your

product (even if he/she does)

• Don’t mix “social messages” and “advertising messages”

• Don’t fixate on one celebrity

• Don’t tag the celebrity in your post

• If someone asks you to take down a post with his/her name in it, it’s probably a good idea to take it down


FTC Investigation of Cole Haan


FTC Investigates Cole Haan for Failure to Instruct Contest Entrants to Disclose Material Connection

• Cole Haan “Wandering Sole” Pinterest Contest • Required entrants to create Pinterest boards

with images of Cole Haan products and include the hashtag #wanderingsole for a chance to win a shopping spree

• The FTC concluded that the pins constituted an endorsement of Cole Haan and that the chance of winning a prize by pinning those images was a material connection that needed to be disclosed

5/28/2014


FTC Requirement to Disclose “Material Connections” • FTC “Guides Concerning the Use of Endorsements and Testimonials”

• The FTC recently clarified that full disclosure of any material connection between an endorser and the company whose products or services are being endorsed is required that could materially affect the credibility of the statement is required • Concern is ensuring that readers have necessary information to evaluate the

credibility of the endorsement


FTC Requirement to Disclose “Material Connections” • Earlier this month, the FTC sued the makers of weight loss supplement Pure

Green Coffee for false advertising, alleging, among other things, that they paid $200 and offered a free supply of Pure Green Coffee pills to consumers in exchange for video testimonials that were then used without disclosing that material connection

• In March, ADT settled allegations by the Federal Trade Commission that the home security company misrepresented paid endorsements from safety and technology experts as independent reviews


Key Takeaways

• If a consumer is given an entry into a chance promotion or a contest by posting anything that could be viewed as an endorsement of the Sponsor or its product, require entrants to identify the post as a sweepstakes/contest entry • Only applies if the post constitutes an “endorsement”

• An image of the Sponsor’s product likely = an endorsement

• Does a hashtag which includes the sponsor’s trademark or the requirement to include @BRAND constitute an endorsement?

• A generic hashtag #mysummervacation with no requirement to include any content related to the sponsor likely does not constitute an endorsement

• Only applies if the post is incentivized • A sweepstakes entry is a material connection

• Post a photo of your favorite pair of Cole Haan shoes and we may feature it on our website, Facebook page, etc.—is recognition a material connection?


Key Questions

• What constitutes an adequate disclosure? • FTC noted that it did not believe that the #wanderingsole hashtag adequately

communicated the material connection

• #Sweeps or #Contest?

• #Spon or #Ad?

• #wanderingsolecontest?

• What if an entrant does not include the disclosure? • Can the entrant still be included in the drawing or judging?

• What if you don’t ask for an endorsement, but the consumer includes one anyway?


Key Questions

• Do I really have to do this? • This sets a precedent, but future inquiries are likely to result in more serious action

by the FTC


FTC vs. Nissan


FTC vs. Nissan

• The FTC alleged that the commercial misled consumers as to the truck’s capabilities because the pickup truck could not actually push the dune buggy up the hill, but rather both vehicles were actually pulled to the top of the hill by cables

• The FTC also alleged that the hill was made to look significantly steeper than it actually was


Key Takeaways

• When an ad purports to show a product in action, the visual must be a truthful representation of what the product can do • FTC staff noted that “Advertisers up the ante when the demonstration relates to an

objective product attribute…” • Voiceover: “The mid-size Nissan Frontier with full-size horsepower and torque”

• The video appears to have been captured spontaneously by an onlooker


Key Questions

• Could the FTC’s concerns have been addressed with a clear and conspicuous disclaimer? • In the first three seconds of the commercial, the words “Fictionalization. Do not

attempt.” appear on the screen • FTC staff characterized this as “a fleeting superscript in white letters against a sand dune”

• FTC staff was also concerned that the meaning of “fictionalization” wasn’t entirely clear in this context

• What about “This is not a demonstration of the actual capabilities of the truck”? • In this case, it might be tough to address the FTC’s concerns even with a clearly stated and

prominent disclaimer, which could be viewed as contradicting the visual message

• Several recent cases indicate that the FTC is becoming more and more skeptical that disclosures are effective at all


In re L’Oréal (NARB Panel Appeal)

• The NAD reviewed an ad for L’Oréal mascara that featured a photograph of a model whose eye lashes were enhanced with lash inserts • The ad included a disclaimer: “Lashes styled with lash inserts”

• NAD determined that the ad was literally false because the photograph was not an accurate depiction of the volume that could be achieved solely by applying the advertised mascara

• NAD recommended that L’Oréal discontinue use of the photo, or expressly state (not just in a disclaimer) that the photo depicts the volume that can be achieved only when the mascara product is used together with lash inserts

• The NARB panel disagreed, reasoning that the photograph contained an appropriate disclaimer regarding the use of lash inserts and accurately showed the effect of the advertised mascara on the model’s eyelashes (both real and fake) • Disclaimer did not contradict the express or implied messages of the ad, but

recommended it be made more clear and conspicuous


Key Questions

• Does this mean special effects can’t be used in advertising even with a disclosure? • Highly exaggerated, clearly absurd or fanciful situations are less likely to be viewed

as demonstrations of a product’s performance or capabilities

• Is a disclosure always required?


“Didn’t Actually Happen”


Overstock.com Sued Over Comparative Savings Claims

5/28/2014


$6.8 Million Civil Penalty Assessed Against Overstock.com for Comparative Savings Claims • People of the State of California v. Overstock.com

• Brought by seven District Attorneys' offices in 2010

• Complaint alleged that Overstock.com exaggerated savings claims in making comparisons to a product’s “List Price” or “Compare at” price • Savings were exaggerated by referencing the highest price the company could find

as the “compare at” price without regard for whether any sales were made at that price or the typical price from competing online retailers

• Overstock did not disclose that some list prices were based on similar, but not identical products

• Alleged example: Overstock offered a patio set for sale for $449.99 and claimed that the “List Price” was $999.00, indicating that the consumer would save $549.01, but a the same patio set was available from a competing online retailer for $247.00


FTC Guides Against Deceptive Pricing

• When making a comparison to a higher advertised price, “the advertised higher price must be based upon fact, and not be fictitious or misleading”

• “Whenever an advertiser represents that he is selling below the prices being charged in his area for a particular article, he should be reasonably certain that the higher price he advertises does not appreciably exceed the price at which substantial sales of the article are being made in the area – that is, a sufficient number of sales so that a consumer would consider a reduction from the price to represent a genuine bargain or saving”


Key Takeaways

• A “compare at” price should be established by evidence of substantial sales of the product at that price in the recent past • Advertised savings should represent a “true bargain” to consumers

• Comparative pricing claims, both internal (to a higher former regular price) and external (to a higher advertised price) are regulated under state and federal laws and continue to be scrutinized by competitors, class action attorneys, and law enforcement


Key Questions

• Can a retailer make a savings claim compared to the Manufacturer’s Suggested Retail Price for an item instead? • FTC Guides: “Many members of the purchasing public believe that a manufacturer's

list price, or suggested retail price, is the price at which an article is generally sold. To the extent that list or suggested retail prices do not in fact correspond to prices at which a substantial number of sales of the article in question are made, the advertisement of a reduction may mislead the consumer

• Would a disclosure help? • Identify basis for comparison, note exclusions


Toys “R” Us Free Gift Offer Settlement


Toys “R” Us Settles Consumer Class Action Over Free Gift Offer • Lawsuit alleged Toys “R” Us offered consumers a free gift with purchase, but

failed to honor the offer by providing gifts of lesser value or no gift at all to a majority of customers • Plaintiff alleged he purchased two Lego sets after seeing an incentive for a Lego gift

worth $15, but instead of receiving two Lego gifts worth $15, he received a magnet and Christmas tree figurine valued at $5 each

• The complaint alleged Toys “R” Us violated New Jersey’s Consumer Fraud Act and Connecticut’s Unfair Trade Practices Act


Key Takeaways

• When offering a “free gift with purchase,” be sure to have enough of the free item to meet reasonably anticipated demand, and plan to substitute an item of comparable value if you run out

• Include “while supplies last” prominently in any advertising


Key Questions

• Can an advertiser limit the supply of free items available to consumers with a purchase by disclosing that the free item is available “while supplies last”? • Generally speaking, “while supplies last” gives an advertiser the right to substitute a

gift of comparable value, but does not relieve the advertiser of the obligation to provide a free item of comparable value even if supplies of the advertised gift are exhausted

• What if the advertisement includes the quantity available? • Does the consumer know at the time of purchase whether there are free items still

available?

• Does the consumer know at the time of purchase whether there will still be free items available by the time he/she sends in their claim?


NAD Reviews “Up To” Claims for Dog Chews

5/28/2014


NAD Provides Further Guidance on “Up To” Claims • NAD reviewed a number of claims for PEDIGREE® DENTASTIX® Chews,

including “up to 80% tartar build-up reduction*” • This claim was accompanied by a disclaimer stating: “*Average reduction was 47%”

• The advertiser submitted testing purporting to show that 12% of dogs achieved a reduction above 80%

• NAD determined that consumers could reasonably take away the message that their dogs will achieve 80% tartar build-up • NAD seemed to base its recommendation largely on the size and placement of the

disclaimer regarding the average reduction, concluding that it was ineffective at disclosing the “material limitation” to consumers

• NAD recommended the advertiser discontinue the claim or modify the claim to expressly state the mean tartar build-up reduction (47%)


Key Takeaways

• Although NAD determined that issues with the post-hoc statistical analysis rendered moot the issue of what “up to” claim could have been supported, NAD also noted that there is no set percentage required, but rather “an appreciable number of consumers should be able to achieve the maximum results claimed” • However, NAD also indicated that “the reasonable consumer expectation of

achieving the maximum result must be considered on a case-by-case basis”


Key Takeaways

• NAD does not appear to go as far as the FTC, which in 2012 settled charges with window marketers involving “up to” energy saving performance claims • FTC orders required that if they claim consumers will achieve energy savings “up to”

a certain amount, they must have competent and reliable scientific evidence to substantiate that all or almost all consumers are likely to achieve the maximum savings claimed

• The FTC also released a study conducted in connection with those cases which it said shows that consumers had nearly the same opinion of the likelihood of reaching the maximum savings whether the words “up to” were used or not • The FTC concluded that “many consumers are likely to believe that they will achieve

the maximum ‘up to’ results”


Key Questions

• Can an advertiser still make “up to” claims and if so, what should the rule of thumb be for establishing that an appreciable number of consumers will experience the maximum results claimed? • This likely depends to some extent on the specific test results, including the variation

in the results • In the PEDIGREE® NAD case, the maximum result being advertised (up to 80% reduction)

was significantly higher than the mean, which was at best a 47% reduction

• There was also wide variation in the results – 12% above 80%; 19% between 60-80%; 31% between 40-60%; 23% between 20-40%; 15% below 20%

• Sample size may also be relevant–of 26 “pairings” tested, at best, only three showed an 80% reduction, and after reviewing the data, NAD determined that only one was at 80%

• Some ads also stated the “up to” claim was “clinically proven”


Key Questions

• If the maximum result claimed is greater than the mean result, is it necessary or advisable to disclose the mean result? • This likely depends on many of the same facts discussed above, but it would seem

to be advisable in most cases

• If so, can this be communicated in legal disclosure, or does it need to be part of the ad copy?

• What about “up to” savings claims, e.g., “save up to 40%”?


The “Express Written Consent” For Text Message Marketing


The “Express Written Consent” Requirement

• As of October 16, 2013, FCC regulations now require prior express written consent of the called party before using an autodialer to send a marketing text message

• Prior express written consent means a written agreement bearing the “signature” of the person that clearly authorizes the seller to deliver the message


The “Express Written Consent” Requirement

• The written agreement must include a clear and conspicuous disclosure informing the person signing that a. by executing the agreement, the person authorizes the seller to deliver

telemarketing calls using an automatic telephone dialing system

b. the person is not required to sign the agreement, or agree to enter into the agreement as a condition of making a purchase

• The “signature” must be obtained in compliance with the E-SIGN Act, which can include affirmative steps taken by the person providing consent, including via an email, opt-in (un-checked) box, text message, or telephone key-press


Key Takeaways

• Example of a typical disclosure: • “Text EXAMPLE to 12345 if you want to receive up to 4 automated text messages

per month from ADVERTISER with special offers and product info. Msg&Data rates may apply. Consent not req’d to make purchase. Not all carriers covered. You can always text STOP to XXXX to stop (confirmation message will be sent), or call us at ___. Text HELP to XXXX for help.”

• TCPA provides a private cause of action and statutory damages, which has led to a significant number of consumer class actions with respect to both marketing and “informational” text messages

• The prior express written consent requirement does not apply to transactional or informational text messages as those do not include marketing and advertising material, but obtaining prior affirmative consent for these is still advisable


Key Questions

• If the disclosure that a person is not required to give consent as a condition of making a purchase applicable when no purchase is contemplated at the time the consent is sought?

• Is a double opt-in required? • No, but it may be advisable for certain types of opt-ins, such as via text message

• If I have a database of numbers collected prior to last October, can I still send marketing text messages to those people? • Even if you obtained express consent, the required disclosures likely were not

included in the “written agreement”

• Best practice to renew consent from time to time • Cases being brought by recipients with ported numbers

• Despite concerns, most feedback I have heard has been positive


Looking Forward to The Rest of 2014

5/28/2014


Looking Forward to The Rest of 2014

• Pom Wonderful vs. Coca-Cola Supreme Court decision

• More TCPA class actions and possible clarification from the FCC on its interpretation on the application of TCPA?

• More guidance regarding native advertising?

• Members of Congress have asked the FTC to look into outlet store pricing


Questions?


Thank You.

Brian Fergemann Partner Chicago

[email protected]

digging deeper into recent developments in advertising law · • earlier this month, the ftc sued...

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