January 2016 Legislative Report

January 6, 2016 Train your Brain not to be Deceptive: Luminosity Targeted by FTC for Publishing User Testimonials in Marketing and Advertising Messages

Last week, the Federal Trade Commission (FTC) sued Luminosity in United Stated District Court (N.D. Cal) and the parties settled Luminosity’s alleged violations of the FTC Act, including that officers and the company will not make false and/or unsubstantiated representations in its advertising such as the following:
• Luminosity improves brain performance in school, at work and in athletics;
• Luminosity protects the brain from dementia and Alzheimers; and
• Luminosity can reduce cognitive impairment associated with PTSD, ADHD, stroke and traumatic brain injury.

Lumosity also settled allegations that 46 user testimonials on its website and in other online marketing materials were deceptive advertising practices because Luminosity did not disclose that the testimonials were submitted as part of a contest with prizes, including a free iPad, a lifetime subscription to Lumosity’s program and a trip to San Francisco.

TIP: Don’t publish user testimonials without adequately disclosing consideration like the chance to win a prize in a sweepstakes contest.
TIP: Don’t make performance claims about a product unless the claims are adequately substantiated by competent and reliable scientific evidence that support such claims.

December 22, 2015   Native Advertising- A Guide for Business

The Federal Trade Commission Act prohibits deceptive or unfair practices.  It’s the FTC’s job to ensure that long-standing consumer protection principles apply in the digital marketplace, including to native advertising.  The FTC issued an Enforcement Policy Statement on Deceptively Formatted Advertisements last month that explains how the agency applies established truth-in-advertising standards in this context.  This Guide for Businesses offers informal guidance from FTC staff to help companies apply the Policy Statement in day-to-day contexts in digital media.

See: https://www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses

December 15, 2015    Should Digital “e-Faxes” be Regulated under the TCPA or the CAN-SPAM Act?

The Federal Communications Commission (FCC) currently regulates both types of faxes under the Telephone Consumer Protection Act (TCPA). The August 2015 FCC ruling requires senders of unsolicited digital fax advertisements to provide an opt-out notice and prohibits “any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine” unless there is an established business relationship between the sender and the recipient. However, even if there is a business relationship between sender and recipient, the not opt-out notice is required and must, among other requirements,: (1) be clear and conspicuous, (2) be on the first page of the advertisement, (3) state that the recipient may opt-out and the sender’s failure to do so within 30 days is unlawful, (4) include a domestic contact phone number and fax number to which the recipient may send an opt-out request, and (5) include a cost-free mechanism which recipients can use to send their opt-out requests.

Recently, a petition by Joseph T. Ryerson & Son, Inc. seeks a declaration that digital fax advertisements should be regulated under the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act). The CAN-SPAM Act, currently applies to emails instead of the TCPA fax rule. Ryerson is currently facing a putative class action alleging it sent unsolicited digital fax advertisements in violation of the TCPA. In its petition, Ryerson argues that digital faxes are distinct from e-faxes or faxes that are converted to emails before being sent, which the FCC recently ruled fall under the TCPA.

WARNING: Direct marketers be aware! The TCPA provides a private right of action for violations and statutory damages in the amount of $500 for each violation and up to $1,500 for each willful violation.