eCommerce

FTC Reevaulates Green Guides and Pending Civil Penalty Implementing Rulemakings

By Richard Newman / June 4, 2023
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On May 23, 2023, the Federal Trade Commission hosted a national workshop designed to consider the current state of recycling practices and recycling-related advertising.

This follows an FTC announcement in December 2022 that the agency was seeking public comment on potential updates and changes to its ‘Green Guides’ for the use of environment marketing claims.  The Green Guides help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act.

Updates to ‘Green Guides’

In December 2022, the FTC announced that it would seek public comment on potential updates to its “Green Guides” for the use of environmental marketing claims.  FTC attorneys seek to update the Green Guides based on increasing consumer interest in buying environmentally friendly products.  The comment period was extended through April 24, 2023.

“Consumers are increasingly conscious of how the products they buy affect the environment, and depend on marketers’ environmental claims to be truthful,” said FTC lawyer and Bureau of Consumer Protection Director Samuel Levine.  “We look forward to this review process, and will make any updates necessary to ensure the Green Guides provide current, accurate information about consumer perception of environmental benefit claims.  This will both help marketers make truthful claims and consumers find the products they seek.”

The Green Guides were first issued in 1992 and were revised in 1996, 1998, and 2012.  They provide guidance on environmental marketing claims, including how consumers are likely to interpret particular claims and how marketers can substantiate these environmental claims to avoid deceiving consumers. 

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FTC Attorney Update on Existential Threat to Lead Generation Industry Arising Out of FCC Notice of Proposed Rulemaking

By Richard Newman / May 18, 2023
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As previously blogged about here, the FCC recently proposed a rule that would turn the lead generation on its head.  The proposed new rule goes quite a bit further than simply requiring wireless carriers to block texts from illegitimate numbers.

In addition to carrier investigation and blocking obligations, as well as an extension of DNC protections to text messages, the FCC proposes:

“…to ban the practice of obtaining a single consumer consent as grounds for delivering calls and text messages from multiple marketers on subjects beyond the scope of the original consent.”

In an illustration of the issue, Company A describes a website that purports to enable consumers to comparison shop for insurance.  The website sought consumer consent for calls and texts from insurance companies and other various entities, including Company A’s ‘partner companies.’  The ‘partner companies’ were listed in a hyperlink on the web page (i.e., they were not displayed on the website without clicking on the link) and the list of ‘partner companies’ included both insurance companies and other entities that did not appear to be related to insurance.”

Public Knowledge, an influential non-profit Washington, D.C.-based public interest group argues that lead generators and data brokers use hyperlinked lists to harvest consumer telephone numbers and consent agreements on a website and pass that information to telemarketers and scam callers.  Commentors have argued that the telemarketer that obtains the consumer’s contact information from the lead generator may believe that it has the consumer’s prior express consent,

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FTC Pursues Blanket Prohibition on Meta’s Monetization of Children’s Data

By Richard Newman / May 4, 2023
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On May 3, 2023, the FTC announced that it is proposing a blanket prohibition preventing Facebook from monetizing youth data.  The Commission alleges that the company violated the 2020 privacy order and now proposes new protections for children and teens.

The Federal Trade Commission proposed changes to the agency’s 2020 privacy order with Facebook after alleging that the company has failed to fully comply with the order, misled parents about their ability to control with whom their children communicated through its Messenger Kids app, and misrepresented the access it provided some app developers to private user data.

 

“Facebook has repeatedly violated its privacy promises,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The company’s recklessness has put young users at risk, and Facebook needs to answer for its failures.”

As part of the proposed changes, Meta, which changed its name from Facebook in October 2021, would be prohibited from profiting from data it collects, including through its virtual reality products, from users under the age of 18.

The company would also be subject to other expanded limitations, including in its use of facial recognition technology, and required to provide additional protections for users.

This marks the third time the agency has taken action against Facebook for allegedly failing to protect users’ privacy.

The Commission first filed a complaint against Facebook in 2011, and secured an order in 2012 barring the company from misrepresenting its privacy practices. 

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FTC Proposes Broad Sweeping Updates to Recurring Subscriptions and Memberships

By Richard Newman / March 30, 2023
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The Federal Trade Commission recently announced a proposed a “click to cancel” provision requiring sellers to make it as simple for consumers to cancel their enrollment as it was to enroll.

According to the FTC, if consumers are unable to easily leave any program when they want to, the negative option feature becomes nothing more than a way to continue charging them for products they no longer want.  To address this issue, the proposed rule would require businesses to make it at least as easy to cancel a subscription as it was to start it.  For example, if a consumer can sign-up online, cancellation much be able to be effectuated on the same website, in the same number of steps.

But that’s not all the FTC is proposing regarding subscriptions and recurring payments.

The FTC is also proposing:

  • Expanded Scope: The proposed “Rule Concerning Recurring Subscriptions and Other Negative Option Plans” would cover all forms of negative option marketing, whether via internet, phone, through print materials, and in-person transactions.  Any persons “selling, offering, promoting, charging for, or otherwise marketing a negative option feature” would be subject to the new Rule.
  • Additional Consent Requirements: The proposed rule requires marketers to obtain independent consent for the negative option feature and precludes the inclusion of additional information that could interfere a consumer’s ability to provide consent. It sets forth requirements about how consent must be obtained.  Marketers would be required to obtain consent for the whole transaction and maintain proof for three years.

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National Advertising Division Recommends that Pier 1 Provide Enhanced Clear and Conspicuous Automatic Renewal Program Disclosures  

By Richard Newman / March 14, 2023
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As part of the independent, non-profit BBB National Programs, the National Advertising Division independently evaluates and regulates the truth and accuracy of national advertising.  It also works to increase the public’s confidence in advertising.  The NAD also offers dispute resolution process for advertisers.

Recently, the NAD reviewed Pier 1’s automatic renewal subscription rewards loyalty program that charges consumers a recurring monthly or annual fee for products discounts, and free shipping and returns on select items.  In doing so, the NAD recommended that the company provide enhanced “clear and conspicuous” disclosures.

As described by the NAD, items added to a consumer’s cart on the company website automatically include the rewards subscription via a pre-checked box.  Additionally, the terms of the renewal subscription program appeared under the pre-checked box.  According to the NAD, consumers are required to take affirmative action to uncheck the box to opt-out of the automatically renewing subscription and cost related thereto.

According to the NAD, one issue was whether promoting a lower price for a product or service is deceptive if that price is only made available to those that agree to the automatically renewing subscription.  The other issue was whether the material terms of the automatic renewal subscription program were “clearly and conspicuously” disclosed prior to a consumer’s decision to make a purchase.

The NAD ultimately concluded that, unless the terms of the automatically renewing subscription are appropriately disclosed, it is misleading to promote a discounted price if the discount is only available when a consumer consents to a subscription. 

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Richard Newman Quoted by Law.com on First FTC “Review Hijacking” Case

By Richard Newman / March 2, 2023
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FTC advertising compliance and defense lawyer Richard B. Newman was recently quoted in an article for Law.com titled “FTC Bags First Settlement in Probe of ‘Review Hijacking’ in E-Commerce.”

The article discusses the FTC’s first case alleging “review hijacking,” in which a marketer steals or repurposes reviews of another product.  The case involves a marketer of vitamins and other supplements that allegedly carried out this  tactic by merging its new products on Amazon with different well-established products that had more ratings, reviews and badges.

Mr. Newman stated, “[n]ot only is the FTC currently seeking to promulgate us that come with big civil penalties for such conduct, it has recently blanketed the digital advertising industry with warning letters.”

According to the FTC, the marketer “took advantage of an Amazon feature that allows vendors to create or request the creation of  ‘variation’” relationships between some products that are similar but differ only in narrow, specific ways – such as color, size, quantity, or flavor. Products with a variation relationship share the same product detail page on Amazon.com and appear as alternative choices, so shoppers can compare and choose among similar products.”

“The product detail page of products that are in a variation relationship displays the total number of ratings, the average star rating, and the reviews for all of the products in the variation relationship,” the FTC said in its complaint.  “They also share any ‘#1 Best Seller’

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FCC Proposes Rule That Would Severely Impact Text Messaging and Result in BIG Lead Generation Implications

By Richard Newman / February 27, 2023
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Lead generators beware.  The FTC has issued a Notice of Proposed Rulemaking that would turn the lead generation industry on its head.

Amongst numerous items currently on the FCC’s agenda, there is discussion on closing the “lead generator” loophole.

The FCC Chairwoman has proposed a new rule that would block unlawful robotexts.  Read more, here.

The FCC first issued a Report and Order requiring mobile wireless providers to block text messages from numbers on a reasonable Do Not Originate list, which includes numbers that purport to be from invalid, unallocated or unused North American Numbering Plan numbers, and numbers for which the subscriber to the number has requested that texts purporting to originate from that number be blocked.  The FCC already requires similar blocking of voice calls by gateway providers.

The Report and Order would also ensure that any erroneous text blocking can be reported to the provider doing the blocking by requiring mobile wireless providers to maintain a single point of contact for texters to report erroneously blocked texts. This single point of contact is already required for voice call blocking.

Even more significant for lead generators is that the FCC has issued a NPRM that would require carriers to “investigate and potentially block texts from a sender after they are on notice from the Commission that the sender is transmitting suspected illegal texts…”

Additionally, the FCC has proposed an extension of DNC protections to text messages. 

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TeamViewer Automatic Renewal Disclosure and Consent Funnel Held Compliant With California’s ARL

By Richard Newman / February 24, 2023
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California’s stringent Automatic Renewal Law is heavily focused upon free trial requirements, promotional periods and annual programs.  Various obligations and restrictions are discussed, here.

In 2021, Jack Gershfeld initiated legal action against TeamViewer US, Inc.  Mr. Gershfeld alleged that TeamViewer violated California’s Consumer Privacy Act and Unfair Competition Law when it automatically renewed his software subscription without his consent.

TeamViewer is a remote access and control computer software, allowing maintenance and management of computers and other devices.  In short, Mr. Gershfeld alleged that he purchased a one-year subscription, that automatically renewed thereafter at a higher price.

The California district court reviewed TeamViewer’s website enrollment funnel and post-purchase acknowledgments.  In doing so, the lower court held that TeamViewer did not violate California’s ARL because there was an adequate disclosure on the “checkout summary.”  The lower court noted that the disclosure partially stated, in bold and directly above the “Continue to Payment” button, that the “subscription will automatically renew every 12 months, unless you terminate your contract at least 28 days before the end of the initial term or any renewal term.”

Additionally, TeamViewer was found to have secured appropriate consent because Mr. Gershfeld was required to check a box affirmatively acknowledging that his subscription was subject to a hyperlinked end user license agreement.

TeamViewer’s post-purchase acknowledgment was also deemed adequate.  Here, it sent an invoice to Mr. Gershfeld reminding him, in bold, that “The license term of the subscription is automatically extended for another 12 months if not cancelled in written form 28 days prior to expiry.”  TeamViewer forwarded another reminder two months prior to the renewal,

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Early 2023 FTC Consumer Protection Enforcement Matters of Interest to Digital Marketers

By Richard Newman / February 18, 2023
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February 2023 has been a busy couple of months at the Federal Trade Commission.  High-profile consumer protection actions and announcements span a broad spectrum of digital advertising and marketing.  From “review hijacking, health product-related claim substantiation issues and lead generation, to the first Health Breach Notification Rule case and a reminder that willful blindness is not a defense for service providers that turn a blind-eye to third-party conduct.  The FTC also announced a new office to keep pace with digital marketplace developments, and issues a Criminal Liaison Unit Report.

First Law Enforcement Action “Review Hijacking”

According to the Commission, a marketer of vitamins and other supplements, called The Bountiful Company, abused a feature of Amazon.com to mislead consumers into thinking that its newly introduced supplements had more product ratings and reviews, higher average ratings, and “#1 Best Seller” and “Amazon’s Choice” badges.  The agency alleges that Bountiful carried out this tactic by merging its new products on Amazon with different well-established products that had more ratings, reviews, and badges.

“Boosting your products by hijacking another product’s ratings or reviews is a relatively new tactic, but is still plain old false advertising,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.  “The Bountiful Company is paying back $600,000 for manipulating product pages and deceiving consumers.”

Bountiful, based in Bohemia, New York, manufactures vitamin, mineral, and other nutritional supplements.  Its brands include Nature’s Bounty and Sundown.  As alleged by the FTC, Bountiful sells its supplements to Amazon,

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FTC’s Bureau of Consumer Protection Issues Criminal Liaison Unit Report Outlining Efforts to Ensure Wrongdoers Face Accountability

By Richard Newman / January 30, 2023
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On January 30, 2023, the Criminal Liaison Unit of the Federal Trade Commission’s Bureau of Consumer Protection (BCP CLU) issued its 2022 Criminal Liaison Unit Report, describing the history of the BCP CLU, its program operations, and major accomplishments over the past five years.  In an effort to ensure criminal prosecution of appropriate consumer fraud cases, the BCP CLU refers cases to partner agencies with criminal jurisdiction, including U.S. Attorney’s Offices across the county, Divisions of the Department of Justice (DOJ) and others.

“For the worst individual and corporate wrongdoers, civil remedies may not be sufficient to protect the public from further harm,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.  “Government works best when agencies work together toward a common goal, and we are proud that our partnership with criminal enforcers leads to justice for bad actors and a safer marketplace for us all.”

The FTC, which is not authorized to bring criminal law enforcement actions, established the BCP CLU in 2002 to bring the “worst of the worst” offenders to the attention of prosecutors.  As it grew, the BCP CLU worked to establish relationships with prosecutors and educate them about the Commission’s consumer fraud and deception cases.  Success in initial cases proved that criminal consumer protection cases were not only viable, but could result in substantial prison sentences.

Over the past five years, the report notes, BCP CLU referrals have led to criminal charges against 107 new defendants,

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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.

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