Ad Law Insights - Legal and Regulatory Updates
Latest FTC and state attorneys general compliance, investigation and enforcement developments of concern to advertisers and marketers
On September 21, 2023, the Federal Trade Commission announced that it has joined the Federal Communications Commission in signing a renewed memorandum of understanding (MOU) between public authorities who are members of the Unsolicited Communications Enforcement Network (UCENet). The MOU aims to promote cross-border collaboration to combat unsolicited communications, including email and text spam, scams, and illegal telemarketing.
“The FTC is committed to using all of its tools to fight robocalls and other unsolicited communications that try to prey on consumers,” said FTC attorney and Chair Lina M. Khan. “This scourge does not respect borders, and our recommitment to this MOU underscores the importance of international communication and cooperation to combat this problem.”
UCENet members agreed to renew and make evergreen the MOU, a non-binding instrument which the FTC and its partners signed in 2016.
The 2016 MOU was aimed at facilitating information sharing, capacity building, and enforcement assistance among the partners. For the past seven years, it also has facilitated communication about emerging threats and complaint trends related to spam, scams, and illegal telemarketing.
The UCENET MOU is part of the FTC’s continuing to work to fight harms that can arise from unwanted messages. According to the announcement, unsolicited communications in the form of illegal and spoofed robocalls, text messages, and emails are often the source of scams that harm millions of consumers in the United States each year. The revised MOU also has been signed by UCENet partners in Canada, Australia, South Korea,
On August 22, 2023, the Federal Trade Commission announced that as a result of an FTC lawsuit, a federal court has temporarily shut down an alleged business opportunity scheme that purportedly lured consumers to invest $22 million in online stores, using alleged unfounded claims about income and profits.
The operators of Automators also claimed to use artificial intelligence to ensure success and profitability for consumers who agreed to invest with Automators, according to the agency.
In addition to offering consumers high return as “passive investors” in profitable e-stores, Automators, which previously used the names Empire and Onyx Distribution, also offered to teach consumers how to successfully set up and manage e-stores themselves using a “proven system” and the powers of artificial intelligence, according to the FTC.
“The defendants preyed on consumers looking to provide for their families with promises of high returns and the use of AI to power such returns,” said FTC attorney Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Their lies caused consumers to lose tens of thousands of dollars, with many losing their life savings. The FTC is working to hold defendants accountable and to secure redress for their victims.”
The FTC’s complaint against defendants Roman Cresto, John Cresto, and Andrew Chapman, through their companies Automators AI, Empire Ecommerce and Onyx Distribution, claims that the vast majority of defendants’ clients did not make the promised earnings or even recoup their investment. Instead, most clients allegedly lost significant amounts and Amazon and Walmart have routinely suspended or terminated the stores that defendants operated for repeated policy violations,
On August 14, 2023, the Federal Trade Commission announced that it will require Experian Consumer Services, which offers consumers access to their Experian credit information, to pay $650,000 to settle charges it sent consumers unsolicited email without offering them a way to opt out of such messages, as required under the CAN-SPAM Act.
In a complaint filed by the Department of Justice on behalf of the FTC, the agency says that California-based Experian Consumer Services (ECS), also known as ConsumerInfo.com, Inc., spammed consumers with marketing offers after they signed up for an account with the company in order to manage their Experian credit report information.
In the emails, the FTC alleges that the company failed to provide clear and conspicuous notice of consumers’ ability to opt out of receiving additional marketing messages and a mechanism for doing so, in violation of the CAN-SPAM Act, according to the complaint.
“Signing up for a membership doesn’t mean you’re signing up for unwanted email, especially when all you’re trying to do is freeze your credit to protect your identity,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “You always have the right to unsubscribe from marketing messages, and the FTC takes enforcing that right seriously.”
Consumers who wish to freeze or take other steps to manage their Experian credit information online must create an account with ECS. The complaint charges that consumers who signed up for a free membership account with ECS were then sent emails promoting Experian’s products and services such as one touting Experian Boost,
FTC advertising compliance and defense attorney Richard B. Newman was recently quoted in an article for Cybersecurity Law Report titled “Xbox and Alexa COPPA Case Lessons: Avatars, Biometrics and Other New Expectations.”
The article discusses the FTC’s recent privacy enforcement run and how it reinforces regulators’ expanding expectations for companies using video and audio recordings, smart devices and AI. The article further discusses recent agency settlements with Microsoft, Amazon and educational technology provider Edmodo that drew $51 million in penalties, broke new ground on the Children’s Online Privacy Protection Act Rule enforcement and signaled new expectations for all companies’ privacy compliance.
In discussing how COPPA is a tool for financial penalties and how these cases highlight the value of COPPA enforcement to the FTC versus its Section 5 authority under the FTC Act, Mr. Newman noted that “[i]n Amazon, obviously, the $25‑million settlement amount leaps out” for Alexa’s improper retention of voice recordings in violation of COPPA.
Mr. Newman further shared that “not just the FTC, but state attorneys general are becoming increasingly interested in expanding regulation of the use and sharing of consumer data, including geolocation data.”
While the FTC contests the issue at the federal level, data brokers and those that interact with them should expect that the plaintiffs’ class action bar and state AGs may lodge claims under state “little FTC acts” that echo the FTC’s July 2022 statement about geolocation data or the biometric one,
Florida has become the latest state – approximately ten – to enact a comprehensive privacy law. On June 6, 2023, Governor DeSantis recently signed SB 262 which includes some new privacy provisions. Florida also recently passed a child privacy law that is notably similar to California’s Age Appropriation Act that becomes effective July 1, 2024.
The Florida Digital Bill of Rights Law
Covered entities (“controllers”) include those that earn $1 billion in global gross annual revenues and either (i) receive 50% of gross annual revenue from online ad sales; (ii) operate a consumer smart speaker and voice command service with an integrated virtual assistant through a cloud-connected service and hands-free verbal activation; or (iii) operate an app store or digital distribution platform that has at least 250,000 apps available for download.
Note, however, that non-covered entities that serve as data processors for covered entities may potentially be impacted. More specifically, such processors are required to support a covered entities’ compliance efforts and to maintain responsible contracts that include provisions governing data processing. In fact, the new law sets forth specific requirements that must be included in such data processing agreements.
Not unlike other states, the Florida Digital Bill of Rights Law has numerous exemptions and applies to consumer information. Exemptions include entities covered by HIPAA (and business associates), financial institutions and affiliates (subject to GLBA), non-profits, certain government entities, and higher education institutions. There are also specific data exemptions.
About This Blog and Hinch Newman’s Advertising + Marketing Practice
Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.