New York Advertising Lawyers Blog

In its first announced enforcement action arising out last year's revised Guides Concerning the Use of Endorsements and Testimonials in Advertising, the FTC has agreed to settle a case brought against Reverb Communications, a P.R. agency. The case arose out of allegations that Reverb employees posted positive reviews on Apple's iTunes store of videogames developed by Reverb's clients and sold via iTunes, without disclosing that the reviews were on behalf of paid clients. (The FTC had previously warned Ann Taylor about a possible Guides violation, but took no enforcement action.)

As described in the FTC's release about the settlement, published on August 26, 2010:

Reverb is a company that provides public relations, marketing, and sales services to developers of video game applications, including mobile gaming apps.  Between November 2008 and May 2009, Reverb and Snitker posted reviews about their clients' games at the iTunes store using account names that gave readers the impression the reviews were written by disinterested consumers, according to the FTC complaint.  Reverb and Snitker did not disclose that they were hired to promote the games and that they often received a percentage of the sales.  These facts would have been relevant to consumers who were evaluating the endorsement and deciding whether to buy the gaming applications, the FTC complaint alleged.

Although the Guides only went into effect in December 2009, after these reviews were posted, we have previously discussed that the Guides are not law or regulation, but rather indications of how the FTC intends to enforce existing consumer protection laws. This case demonstrates that point quite clearly.

The two Webinars presented by The Lustigman Firm about the Guides are available for free download here and here. If you have any questions about the FTC Guides or how they may impact you, please contact the attorneys of our Interactive Marketing practice.

The Federal Trade Commission recently filed a complaint and obtained a temporary restraining order issued against a telemarketing operation that alledgly made millions of illegal phone calls pitching extended auto warranties and credit card interest rate-reduction programs.

The Complaint alleges that, SBN Peripherals, Inc., made more than 370 million calls to consumers nationwide in the past year alone, prompting tens of thousands of complaints to the FTC. The FTC charges the robocalls violated the agency's Do Not Call Registry Rule.

The FTC alleged that the defendant's robocalls often transmitted caller ID information vaguely identifying the caller and displaying telephone numbers registered to an offshore company it controlled. The FTC further alleges that a foreign shell company for SBN called Asia Pacific made many of the calls and lists its addresses in overseas locations.

The complaint states that the recordings used by the defendants falsely claimed that the caller had urgent information about the consumer's auto warranty or credit card interest rate. Consumers who pressed "1" for more information were transferred to live telemarketers at a variety of different locations, who used fraudulent practices to sell inferior extended auto service contracts or worthless debt-reduction services.

The FTC's complaint alleges that defendants violated the FTC's telemarketing rules by: 1) Using robocalls to contact consumers. Under the FTC's Telemarketing Sales Rule, since September 1, 2009, nearly all such pre-recorded calls have been illegal, unless the seller first obtains the consumer's written permission; 2) Calling consumers whose telephone numbers are on the National Do Not Call Registry; 3) Abandoning pre-recorded calls (not connecting to a live person when a consumer answers) at a higher rate than permitted under law (three percent of all calls made); and 4) Repeatedly calling consumers who asked to be put on their company-specific do-not-call list.

IMPORTANT TIP: If you are a telemarketer or going to start a telemarketing campaign it is imperative you understand the laws and regulations that regulate telemarketing. The FTC continues to enforce the requirements of the Telemarketing Sales Rule. To learn more about The Lustigman Firm's Telemarketing Law practice, click here.

Following on the heels of increased class action activity, state legislatures are increasing the focus on attacking allegations of cramming.  Virginia recently enacted a law effective July 1, 2010 requiring all authorizations for third-party charges to be verified by an independent third party.   The State of Maryland has recently passed a law effective October 1, 2010 that requires "express authorization" for third-party services.   New York is considering legislation that would require "valid proof" of authorization of third-party services.   Taken as a whole combined with the increased private enforcement, these and other state laws are increasing a service provider's obligation to ensure that authorization is valid.

Virginia

Virginia has recently enacted legislation - Virginia Code §56-479.3 that prohibits a service provider for charging for products, goods or services from any customer on a telephone bill without the customer's authorization. Importantly, the statute requires the customer authorization to be independently verified by a third party. The verification may be in written, oral, or electronic form and shall be verified and must be retained by the service provider for a minimum of two years.

The Federal Trade Commission has announced sweeping amendments to the Telemarketing Sales Rule that significantly restricts the marketing of what it broadly characterizes as "debt settlement" programs. The restrictions include an advance fee ban and mandatory disclosures.  As part of its announcement, the FTC has published a comprehensive explanation - Debt Relief Services & The Telemarketing Sales Rule: A Guide For Business.

Similar to the FTC's ban on telemarketing of advance fee credit and credit repair services, under the new mendments, beginning on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer's credit card or other unsecured debt. Moreover, the amount of the fee that can be collected once a settlement or reduction is consummated is greatly restricted.    In addition to the advance fee ban, effective September 27, 2010, marketers will be required to make specific disclosures to consumers regarding the service being offered.  

The new amendments come in the wake of a series of enforcement actions targeting telemarketing of debt settlement programs. Given the overbroad nature of the new regulations, including the restrictions applicable to attorneys engaged in debt settlement programs, industry is seriously weighing a legal challenge.

IMPORTANT TIP:  If you are engaged directly or indirectly in marketing or servicing debt settlement programs, you must carefully examine the new regulations and their potential implication to your business.

On September 23, 2010, The Lustigman Firm, P.C. attorney, Sheldon Lustigman, will present with Len Gordon, Northeast Regional Director of the Federal Trade Commission at ACI's 4th Annual Focus on Sweepstakes, Contests and Promotions.  Sheldon will be speaking at the session entitled: "Adapting to Changing Government Enforcement Priorities: Complying With New Sweepstakes Legislation and FTC Regulatory Requirements."

The session will cover the following topics:

• Sweepstakes and contest enforcement activities 
• Applying the FTC's Endorsement Guidelines and CAN-SPAM rules to sweepstakes, contests, and promotions
• Balancing the company's information storage practices with state data breach notification laws
• Organizing legally-compliant sweepstakes when dealing with 50 different state laws
  Discussing recent legislation
• Aligning in-house practices with changing (and at times conflicting) laws
• Bonding and registration requirements
  
  To learn more about our Sweepstakes Law practice, visit sweesptakeslaw.com.

At a recent Congressional hearing, Federal Trade Commission Chairman Jon D. Leibowitz said that the agency is considering assessing the viability of a do-not-track list for online advertising modeled on the national "do not call" list utilized in telemarketing.  Details on the proposal are scare.  However, the FTC plans to release a privacy report this fall which may include the agency's conclusions on such a program.

In the meantime, online marketers are continuing to develop self-regulatory measures designed at giving users the ability to control behavioral tracking.  In addition, Representative Boucher has proposed draft privacy legislation that would require notice and consent from an individual for some forms of data collection.  Our prior blog article, Proposed Federal Privacy Bill Would Impact Mobile Marketing, discusses this proposed legislation. 

As to the FTC's current intentions, as discussed in the "Mobile Marketer article: Will a federal do-not-track list affect mobile advertising and marketing?" , which included commentary by Andrew Lustigman, application of do not track list for online activities, will present significant challenges for online marketers, particularly in the context of the mobile space.

As we had first mentioned in April 2010 after our ABA Roundtable on Social Media Law, the FTC is conducting a review of its rules under the Children's Online Privacy Protection Act of 1998 ("COPPA"), to determine whether changes to technology since its adoption warrant changes to the rule. Under COPPA and the FTC's rules, Web sites may not knowingly collect personally identifiable information from children under the age of 13 without verifiable parental consent.

Since the adoption of the FTC's rules, the expansion of communication technologies (to "mobile communications, interactive television, interactive gaming, and similar activities", as the request for comments states) and increased adoption of such technologies by children (many of whom now regularly carry and use smartphones) have raised concerns about whether the COPPA rules give sufficient guidance to both parents and companies seeking to comply with them. The issues include both practical (how to request and receive verifiable parental consent) and technical (is a text message considered a "Web site"), and the overall concerns about how best to preserve children's privacy while enabling companies to communicate with (and market to) them.

Since issuing the call for comments (which was extended through July 12), the FTC has received at least 70, from various individuals and groups (including the Promotion Marketing Association, the Mobile Marketing Association, and the Direct Marketing Association). It also hosted a COPPA Rule Review Roundtable in June 2010, for which both a Webcast and an official transcript are now available.

For now, it is unclear whether the FTC will take any action to revise its COPPA rules following these comments and discussions. The attorneys in the privacy practice of The Lustigman Firm will keep you informed of any new developments and requirements that may arise.

Florida Attorney General Bill McCollum has reached an agreement with T-Mobile concerning unauthorized billing for third-party charges on consumers' mobile phone bills.   The settlement is the third in a continuing series of enforcement actions against mobile carriers relating to the charges assessed by third-party mobile content providers on customer's phone bills. The settlement requires T-Mobile to enforce what the state has determined to be various best practices regarding the advertising and marketing of content provider services.  Read the Mobile Marketer article here.