Corporate CounselThe Metropo l i tan

Volume 16, No. 12 © 2008 The Metropolitan Corporate Counsel, Inc. December 2008

®

As the world celebrated the BeijingOlympics and witnessed the rise of China asa world economic power, the U.S. economycontinued to falter and not even MichaelPhelps’s eighth gold medal could ease thefinancial tensions at home. While a fewunscrupulous advertisers took advantage ofthese troubled economic times with bogusoffers and fraudulent schemes, most of theindustry responded with promotional pricing,sales events, value meals, coupons and freeoffers that brought some economic relief toweary consumers.

We explore some of the year’s majorissues in advertising, marketing and promo-tion, all of which contributed to making 2008a memorable year (whether for good or forbad).

Right Of PublicityAfter being the first man to break the

sound-barrier 60 years ago, Chuck Yeager isnow seeking to “break” Cingular for refer-encing his historic accomplishment in a pressrelease, which he alleged violated his right ofpublicity and falsely suggested that he hadendorsed Cingular’s product. Yeager cameone step closer to his goal when a California

court denied Cingular’s motion to dismiss,finding that the press release created a likeli-hood of confusion as to whether Yeager wasendorsing Cingular’s product.

While he is not exactly Cowboy TonyRomo, Robert Burck is the one and onlyTimes Square “Naked Cowboy.” Earlier thisyear, Burck brought a $6 million lawsuitagainst Mars Inc. alleging that two TimesSquare billboards depicting a guitar-wieldingM&M candy in tight white shorts violated hisright of publicity and gave the impression thathe was endorsing the product. The court dis-missed the “Naked Cowboy’s” right of pub-licity claim, citing the fact that New York lawdoes not protect a character created or a roleperformed by a living person, but the falseendorsement claim was allowed to go for-ward until parties settled the case in Novem-ber.

Fantasy sports players rejoiced on June 2,2008, when the U.S. Supreme Court deniedcertiorari to the Eighth Circuit case which hadfound that a provider of fantasy sports gamesdid not violate MLB players’ rights of public-ity by using the names and statistical recordsof players, thus, allowing fantasy baseballdrafts to continue unabated.

Sweepstakes“That terminator is out there. It can’t be

bargained with! It can’t be reasoned with!”Well, that was not entirely true on September30, 2008, when California Governor Arnold

Schwarzenegger signedinto law a significantlymodified version of Cal-ifornia Sweepstakes Bill- 2007 SB 1400. Thenew law requires,among other things, thatthe “no-purchase-or-payment-necessary” lan-guage in the sweep-stakes’ official rulesappear in a separate

paragraph, in capital letters in contrastingtypeface – not smaller than the largest type-face used in the text of the official rules.

Late last year, a California court denied amotion to dismiss brought by The Apprentice,Deal or No Deal, 1 vs. 100, and American Idoldefendants in the premium text message law-suit, allowing plaintiffs to proceed with theirclaim that the reality show sweepstakes con-stituted illegal lotteries (even though entrantscould enter for free on the Internet) becausetext message entrants paid a 99-cent premiumtext message fee to play the game andreceived nothing of economic value in return.

But all was not lost for premium text mes-sage promotions. In April, the GeorgiaSupreme Court unanimously held that non-winning entrants who had paid 99 cents toenter the premium text messaging sweep-stakes, which ran during the television show“Deal or No Deal,” were not authorized underGeorgia’s gambling statute to recover fromdefendants the premium text message chargesthey had paid to participate in the game.

Children’s AdvertisingBig Mac, Filet-a-Fish, Quarterpounder,

Apple Slices? In July, the FTC released itsstudy on food marketing to children and ado-lescents, which found that 44 major food andbeverage marketers (including Burger King,Coca-Cola, General Mills, Kraft, McDon-ald’s, and PepsiCo.) spent $1.6 billion to pro-

Advertising, Marketing And Promotions Law Year In ReviewWhile Wall Street, the Olympics, and a Presidential Election Dominated Headlines, Green Marketers, Kevin Trudeau (again) and a Naked Cowboy Also Left Their Indelible Marks on 2008

www.metrocorpcounsel.com

Please email the authors at jlewczak@dglaw.com, afitzpatrick@dglaw.com and msmith@dglaw.comwith questions about this article.

Joseph Lewczak, Allison Fitzpatrick and Matthew Smith

DAVIS & GILBERT LLP

Joseph Lewczak is a Partner, and AllisonFitzpatrick and Matthew Smith are Associ-ates in the Advertising, Marketing and Pro-motions practice group of Davis & GilbertLLP. Authors’ Note: The authors gratefullyacknowledge the assistance of JenniferSoussa, Aaron Taylor, and Alison Winter inpreparing this article.

AllisonFitzpatrick

JosephLewczak

MatthewSmith

Volume 16, No. 12 © 2008 The Metropolitan Corporate Counsel, Inc. December 2008

content of his weight-loss book in violation ofan earlier court order.

In what may result in a sales boom for RedBull and vodka, Anheuser-Busch agreed todiscontinue its popular alcoholic energydrinks, Tilt and Bud Extra, and to refrain fromproducing any caffeinated alcohol beveragesin the future, resolving claims brought by 11states that AB had made misleading health-related statements about the energizingeffects of its caffeinated alcohol beverages.

In May, Merck agreed to pay $58 millionas part of a multi-state settlement of allega-tions that its ads for the painkiller Vioxxdeceptively played down its health risks. Thesettlement also requires Merck to submit allnew TV commercials to the Food and DrugAdministration before they can be aired.Merck is now looking for a painkiller formulti-million dollar regulatory actions.

Privacy / Data ProtectionIn the “Not In MySpace” category, Attor-

ney Generals from 49 states and the Districtof Columbia announced a sweeping agree-ment with MySpace under which the com-pany would adopt new measures to protectchildren online, including developing newtechnology for age and identity verification.In January, the operators of imbee.com, asocial networking site targeting tweens,agreed to pay $130,000 to resolve FTCcharges that it collected personal informationfrom children without parental consent in vio-lation of the Children’s Online Privacy Pro-tection Act.

In two unrelated FTC actions, discountretailer TJX and data brokers Reed Elsevierand Seisint agreed to settle charges that eachengaged in practices that, taken together,failed to provide reasonable and appropriatesecurity for sensitive consumer information.The settlements will require that the compa-nies implement comprehensive informationsecurity programs and obtain audits by inde-pendent third-party security professionalsevery other year for 20 years.

Life is not so good for Life Is Good, Inc.,an online apparel retailer, who settled FTCcharges that it failed to protect consumers’personal information and that its securityclaims made in its online privacy policy weredeceptive and violated federal law. The pro-posed settlement requires the retailer toimplement a comprehensive data-securityprogram and obtain audits by an independentthird-party security professional every otheryear for 20 years.

TelemarketingIn August, the FTC announced two

amendments to the Telemarketing Sales Rule(“TSR”). The first one bars telemarketingcalls that deliver prerecorded messages unlessa consumer previously agreed to accept suchcalls from the seller, and the second one mod-

mote their products to children and adoles-cents throughout 2006, and called for suchmarketers to implement a number of newself-regulatory measures, including adoptingand adhering to meaningful, nutrition-basedstandards for marketing their products to chil-dren under 12 (otherwise known as the “NoPepsi Generation”).

At the same time, the Council of BetterBusiness Bureaus released its first report onthe progress of the participants in its self reg-ulation program, the Children’s Food andBeverage Advertising Initiative (“Initiative”),which concluded that all participants success-fully implemented their pledges to either notadvertise to children under 12 or only adver-tise products that met the specific “better-for-you” criteria. This summer Nestlé USA,maker of Juicy Juice®, Nestle® and Nesquik®,

became the fifteenth participant in the Initia-tive.

In the “what will kids do without the DarkKnight or the Hulk” category, the Children’sAdvertising Review Unit (“CARU”) enteredinto an agreement with the MPAA to refer toit any advertisements for films that are inten-tionally placed in children’s programmingdeemed by CARU to be inappropriate forsuch programming. So far this year, CARUhas referred at least ten cases to the MPAA,including advertisements for the “The Incred-ible Hulk” and “Sisterhood of the TravelingPants 2.”

Environmental AdvertisingThroughout the year, the FTC held a series

of public workshops as part of the agency’sregulatory review of the “Guides for the Useof Environmental Marketing Claims,” com-monly known as the Green Guides. Theseworkshops focused on the marketing of car-bon offset programs and renewable energycertificates, environmental claims for productpackaging, and green claims for textiles,building products, and buildings. We canexpect additional workshops in 2009 andchanges to the Green Guides some time in thefuture.

In May, the National Advertising Divisionrecommended that Church & Dwight stopadvertising claims that its Arm & HammerEssentials Liquid Laundry Detergent productwas more environmentally friendly than otherlaundry detergents by use of unqualified envi-ronmental claims and “green” visuals.

Health And Weight Loss AdvertisingWhat will infomercials do now that their

“king” has been dethroned? In August, a fed-eral judge banned Kevin Trudeau frominfomercials in which he has an interest for aperiod of three years and ordered him to paymore than $5 million in profits from his book,“The Weight Loss Cure ‘They’ Don’t WantYou to Know About” because his latestinfomercials allegedly misrepresented the

ifies the TSR’s method of calculating themaximum permissible level of “call abandon-ment” to within two seconds of the consumeranswering the phone.

In the largest telemarketing fraud sweepever, dubbed Operation Tele-PHONEY, theFTC, in cooperation with more than 30 inter-national, federal, state, and local law enforce-ment agencies, filed 13 separate federaldistrict court complaints against companiesthat allegedly engaged in deceptive telemar-keting operations in which more than 500,000consumers were defrauded in losses of morethan $100 million.

CAN-SPAMIn May, the FTC announced four new rule

provisions to the CAN-SPAM Act, includinga provision that modifies the definition of“sender” to make it easier to determine whichof multiple parties advertising in a single e-mail message is responsible for complyingwith the Act’s opt-out requirements, and onethat clarifies that a “sender” of commercial e-mail can include an accurately-registered postoffice box or private mailbox to satisfy the“valid physical postal address” requirement.

The FTC also clarified its position withrespect to the Act’s application to forward-to-a-friend e-mail marketing campaigns: whileany inquiry is “highly fact specific,” its appli-cation would likely turn on whether the sellerhas offered to pay or provide other considera-tion to the forwarder, such as money,coupons, discounts, awards, additional entriesin sweepstakes or the like, in exchange forforwarding a message.

In the largest settlement of CAN-SPAM todate, online advertiser ValueClick, Inc. agreedto pay $2.9 million to resolve FTC chargesthat its advertising claims and e-mails weredeceptive and violated federal law. The e-mails and online ads claimed that consumerswere eligible for “free” gifts, including lap-tops, iPods, and high-value gift cards, butfailed to disclose that consumers must spendsubstantial sums of money to obtain thepromised “free” merchandise.

* * * *The regulatory trends for 2008 are cer-

tainly consistent with those of 2007 – chil-dren’s advertising, privacy and dataprotection, health and weight loss advertising,CAN-SPAM, and telemarketing - with regula-tors arguably even more aggressive inresponse to challenging economic times.Look for these trends to continue well into2009 with further focus and scrutiny on envi-ronmental advertising, digital marketing, andviolence in videogames and movies. Inresponse to President-elect Obama’s success-ful presidential campaign, we can also antici-pate increased use of social networkingplatforms, viral, and buzz methods of adver-tising.