Ad Law Insights - Legal and Regulatory Updates
Latest FTC and state attorneys general compliance, investigation and enforcement developments of concern to advertisers and marketers
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’ or ‘Amazon’s Choice’ badges.”
According to the FTC’s complaint,
The Federal Trade Commission recently announced that it has taken action to stop an alleged interconnected web of operations purportedly responsible for delivering tens of millions of unwanted Voice Over Internet Protocol and ringless voicemail bogus debt service robocalls to consumers nationwide.
The Department of Justice (DOJ) filed the complaint in federal court on the FTC’s behalf.
The DOJ also filed a proposed consent order against one of the companies and individuals involved in the operation, which would, if approved by the court, bar them from making further misrepresentations about debt relief services and ordering them to comply with the Telemarketing Sales Rule.
“This case targets the ecosystem of companies who perpetrate illegal telemarketing to cheat American consumers who are struggling financially,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue to take aggressive action to protect consumers from the scourge of illegal robocalls.”
“The Department of Justice is committed to stopping individuals and companies from making illegal robocalls and peddling predatory debt relief services,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will continue to work with the FTC to enforce the FTC Act and the Telemarketing Sales Rule against those who use misleading sales tactics to prey on consumers.”
According to the complaint, Stratics Networks, Inc.’s outbound calling service enabled its clients to route and transmit millions of robocalls using VoIP technology.
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.
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,
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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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.