Online marketing continues to evolve and affiliate marketing can be a great method of building brand awareness. Online marketers need to stay ahead of legal and regulatory compliance trends. This article looks at recent Federal Trade Commission (“FTC,” “Commission,” or “agency”) activity that impacts online marketing.

Given the lack of a comprehensive federal regulatory scheme, and the increasing awareness of deceptive marketing practices, it is not surprising that the FTC has ramped up enforcement efforts against entities not covered by existing, industry-specific federal regulations over the last decade. Notably, one company has defended itself against the FTC by challenging the FTC’s authority to pursue such broad enforcement.

Jurisdiction

The widely-watched case of FTC v. Wyndham Worldwide Corp is not just about Cybersecurity.

The Federal Trade Commission (FTC) has just won the first major round of its fight with Wyndham Hotels over data security. However, the importance of the case has more to do with the FTC’s jurisdiction, challenged when Wyndham moved to dismiss the FTC’s case. Affirming the FTC’s broad jurisdiction, the federal judge overseeing the controversy noted that the case highlights “a variety of thorny legal issues that Congress and the courts will continue to grapple with for the foreseeable future.”

Affiliate Marketing: A Roadmap for Compliance: Text Message Marketing

The Commission is cracking down on affiliate marketers that allegedly bombard consumers with unwanted text messages in an effort to steer these consumers towards deceptive websites falsely promising “free” gift cards.

For example, in eight different complaints filed in courts around the United States, the FTC charged 29 defendants with collectively sending more than 180 million unwanted text messages to consumers, many of whom had to pay for receiving the texts. The messages promised consumers free gifts or prizes, including gift cards worth $1,000 to major retailers such as Best Buy, Walmart and Target.

By now, many in the Affiliate Marketing industry are familiar with the Legacy Learning Systems case. In March, 2011 the FTC settled charges against Legacy — which sells instructional DVDs — that Legacy represented, directly or indirectly, expressly or by implication, reviews of their products were endorsements reflecting the opinions of ordinary consumers or independent reviewers, when many of the favorable endorsements were posted by affiliate marketers who received a commission from Legacy for sales they generated.

Regardless of the form of affiliate marketing – email campaigns or text message campaigns – there are a couple key take-aways here.

First, identify and disclose a material connection between a product user or endorser and any other party involved in promoting the product. A “material connection” is a relationship that affects the credibility of an endorsement and wouldn’t be reasonably expected by consumers. See our article about complying with the endorsement guides here.

Second, set up and maintain a system to monitor and review affiliates’ representations and disclosures to ensure compliance. For example, Legacy looked at its top 50 revenue-generating affiliates at least once a month, visiting their sites to review their representations and disclosures. It has to be done in a way designed not to disclose to the affiliates that they’re being monitored.

Third, understand he requirements for conducting legally-compliant text message marketing. The Telephone Consumer Protection Act (TCPA) makes it unlawful to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice … to any telephone number assigned to a . . . cellular telephone service … or any service for which the called party is charged for the call. The prohibition on calls to cell phones applies to text messaging.

A presentation on what goes into creating original designs and how these differ from copycats.

WHERE: Decoration & Design Building, J. Robert Scott Showroom, Suite 220

WHEN: Wednesday, October 2,2013 !2 p.m.

WHAT: From film to fashion, creative industries are taking steps to protect and promote original work. Designers and manufacturers need to know what steps they can take to protect their designs, their businesses, and their profits. The discussion will address issues related to how to protect original design (copyright & design patent) and the manufacturers (trademark, unfair competition).

WHO:

INTERIORS Magazine Editorial Director Michael Wollaeger

J. Robert Scott Founder Sally Sirkin Lewis

Designer Laura Kirar [Web Site]

Intellectual Property lawyer David Adler

Showroom reception to follow.

 

Download the full Fall Decoration & Design Building Market Brochure Here.

Intel Mobile Device

Intel Mobile Device (Photo credit: Frank Gruber)

On February 22, 2013, the FTC announced a settlement with HTC America over charges that HTC failed to use adequate “security by design” in millions of consumer mobile devices. As a result, the company is required to patch vulnerabilities on the devices which include #Smartphones and #Tablets. The settlement, the first action involving a mobile device manufacturer and the new “Privacy By Design” guidelines, sheds some light on the legal risks for mobile device manufacturers and, to some extent, mobile application developers.

The FTC alleged that HTC failed to take reasonable steps to secure the software it developed for its smartphones and tablet computers, introducing security flaws that placed sensitive information about millions of consumers at risk. The resulting vulnerabilities posed risks to sensitive functionality, including the possibility that malware could send text messages, record audio, and install additional malware onto a consumer’s device.

Here are four key take-aways for mobile device manufacturers and application developers from the FTC’s complaint:

  1. provide your engineering (programming) staff with security training
  2. review or test your software on mobile devices for potential security vulnerabilities
  3. follow well-known and commonly accepted secure coding practices
  4. establish a process for receiving and addressing vulnerability reports from third parties

Smartphones and tablets are powerful, popular, and continue to find their ways into our personal and business lives. New mobile apps hit the market each day. In this fast-moving era of entrepreneurship and creativity, mobile device and app developers need to keep up with evolving privacy and security. Apps and mobile devices that tap into consumer data — including contact information, photos, and location to name a few — pose a heightened risk to digital snoops, data breaches, and real-world thieves.

Please contact us if you are interested in learning how to evaluate your mobile security and privacy risk or to help develop a “Privacy By Design” approach mobile app security.

Please comment, tweet and forward!

Israel’s Ban on Ultra-Thin Models

FASHION-SAFRICA-NIGERIA-BAKARE

FASHION-SAFRICA-NIGERIA-BAKARE (Photo credit: Bohan Shen_沈伯韩)

 

The Atlantic

By Talya Minsberg A new Israeli law prohibits fashion media and advertising from using Photoshop or models who fall below the World Health Organization’s standard for malnutrition. When a 14-year-old girl delivered a 25,000-signature petition this week to Seventeen asking them to curb their use of Photoshop, the magazine issued a press statement that congratulated the girl on her ambition but was conspicuously silent on changing their editorial practices.

An Impossible Conversation About the Met’s Spring 2012 Costume Institute Exhibit

Huffington Post (satire)

So, culturally and historically, the reason women care so much about fashion is that until very recently, we weren’t allowed professional, legal or vocal ways of expressing ourselves. Fashion was a way of articulating our feelings about ourselves.

Small Aussie fashion label turns George Lucas legal threat into ‘Star 
Dallas News Small Aussie fashion label turns George Lucas legal threat into ‘Star Wars‘ clothing deal.

AsianFashionLaw | Page 5
Fashion lawyers are legal experts too. Sometimes I feel as though people think I am in design studios all day twiddling my thumbs as I look at models wearing 
www.asianfashionlaw.com/page/5/

Adidas-India’s ex-MD slaps legal notice on company – Fashion United
The Adidas-saga in India seems to be taking a different turn. – Fashion India News, Network, Business Community, fashion industry, international, platform for 
www.fashionunited.in/…/adidas-indias-ex-md-slaps-legal-notic…

Privacy News Trends Now

April 4, 2012

White House: Put teeth into online privacy Bill of Rights

GCN.com

By William Jackson

A White House official says that the administration will call on Congress to pass legislation to put the force of law behind a proposed Consumer Privacy Bill of Rights. The administration unveiled the principles in February.

The dangerous nexus of privacy, liberty and government

Atlanta Journal Constitution (blog)

In the long run, will changing expectations of privacy in an electronic world begun to undermine the constitutional protections granted to all Americans in the Bill of Rights?

Consumer Watchdog Calls on Commerce Department to Offer Privacy Legislation

Sacramento Bee

The test of commitment is to translate high-minded principles like the Consumer Privacy Bill of Rights into real legislative language.” The White House issued its privacy proposal, Consumer Data Privacy in a Networked World.

This Is Your Brain on the Department of Defense

Mother Jones

“Some have argued that we’ll need something new—that the existing Bill of Rights doesn’t protect mental privacy adequately enough in the face of these emerging technologies.”

White House Official: Privacy Legislation Would Protect Businesses, Consumers

National Journal

The White House and the Federal Trade Commission, for example, have both released proposals that call for Congress to enact new legislation outlining consumer privacy rights.

FTC Seeks Law to Expose Data Broker Holdings

Business 2 Community

It did get a bit of spotlight, but when President Obama recently proposed a “Consumer Privacy Bill of Rights”, as not just Americans, but consumers and consistent users of technology, we definitely should’ve taken greater notice.

About that SCOTUS strip search ruling

Hot Air

Well, he’s certainly quoted the Bill of Rights accurately, as we should expect. But sometimes I think things can be oversimplified. This is a complex question, but I think Joyner’s argument may come up short both on the particulars of the Florence case.

Do Not Track Supported By Yahoo Web Analytics

WebProNews

Also last week, the Federal Trade Commission issued its final report for how companies should handle consumer privacy, which includes the aforementioned Do Not Track feature. This had previously been mentioned in the Consumer Privacy Bill of Rights.

FTC Seeking Law to Reveal Data Broker Holdings

Caribbean Media Vision

This call for legislation comes a month after the Obama administration outlined their “Consumer Privacy Bill of Rights” a document that details a high expectation of transparency on the part of corporations and their data mining efforts.

US Supreme Court sanctions strip searches even for minor infractions

World Socialist Web Site

by the so-called “swing” member of the court, Justice Anthony Kennedy, and joined by the four-member right-wing bloc, is the latest in a series of reactionary rulings broadening the police powers of the state and trampling on the Bill of Rights.

  • Calls for voluntary online Do Not Track system
  • Calls on Congress to pass general privacy legislation
  • White House has called for privacy bill of rights

In 2011, the Federal Trade Commission slapped Google and Facebook for violating their own privacy policies, forcing both to submit to years of privacy audits. In February, 2012 , the Obama administration issued a blueprint for a “Consumer Privacy Bill of Rights.” The FTC, the main government agency responsible for protecting privacy, called Monday for legislation that would give consumers access to information collected about them by data brokers similar to the rights they now have to review information amassed by credit reporting agencies.

The FTC’s report comes a little over a month after the White House released its privacy bill of rights that called on companies to be more transparent about privacy and grant consumers greater access to their data but that stopped short of backing an explicit “do not track” rule. The Federal Trade Commission’s 57-page privacy report consisted of a set of “best practices” that the Internet industry is expected to follow — or face sanctions. The report mirrors many of the provisions of the “Consumer Privacy Bill of Rights” released by the White House and represents the first serious efforts at striking a balance in online consumer privacy protection related to web usage.

Critics contend the framework is not as extensive as the White House Consumer Privacy Bill of Rights announced back in February. That already made provision for “Do Not Track” technology, with Google, Yahoo!, Microsoft and AOL – together responsible for almost 90-percent of behavioral advertising – already opting in. Privacy advocates have slammed the new” guidelines, arguing that the proposed system for ensuring online data security fails to take advantage of existing authority and relies too much on self-regulation of the online industry. The new framework “mistakenly endorses self-regulation and ‘notice and choice,’” the Electronic Privacy Information Center claims, ”and fails to explain why it has not used its current Section 5 authority to better safeguard the interests of consumers.”

Image representing Facebook as depicted in Cru...

Image via CrunchBase

Seemingly overnight, Social media has moved from a business curiosity to an invaluable tool for customer engagement, brand positioning and employee empowerment. For example, social media use for 18-29 year olds has grown from 16% in 2005 to 89% in 2010. A recent survey, now in its third year, found that Social Media is imperative and effective to stand out in a crowded market: 88% of all marketers found that it helped increase exposure and 76% found that it increased traffic and subscriptions.

Faced with the rapid adoption of social media services and platforms, companies find themselves in a dilemma: move quickly to adapt to new technologies, or put policies in place that support marketing goals. Finding the right balance between taking appropriate business risks and minimizing legal ones is a dilemma shared by all businesses, and it can be particularly tricky in the rapidly changing realm of social media. A social media snafu could pull a business into a range of legal imbroglios, involving employment law, intellectual property rights, advertising, defamation, libel, antitrust, and privacy protection.  What follows is a list of five common social media legal mistakes that businesses are making.

1. Your Company does not have a social media policy.

Social media is going through an evolution from social media to social business. Yet In the rush to avoid being left behind, some 79% of companies do not have social media policies in place. Companies and employees are becoming deep users of Twitter, LinkedIn, Facebook, blogs, private-label platforms, and the like. Absence of a policy has led to lawsuits over basic issues such as ownership of LinkedIn profiles and Twitter followers. Lack of a policy could also lead to awkward situations that require a response, but may not rise to the level of a legal quandary such as public criticism by a volunteer or advisor.

Having a social media policy cannot prevent the occurrence of unintended consequences. However, it can address most risks that businesses will face and provide an informal framework for addressing issues that will inevitably arise before they become full-fledged emergencies that require a legal solution.

2. Your Company’s social media policy is unenforceable.

Not surprisingly, one of the most active legal areas of social media for business has been in the context of Employer-Employee relations. In 2011, the U.S. Chamber of Commerce released a report stating that the National Labor Relations Board (NLRB) had received 129 cases involving social media. The majority of claims concerned overly-restrictive employer social media policies or employee discipline and even termination based on use of social media.

More recently, the NLRB released updated guidance discussing 14 such cases in particular. Significantly, the NLRB criticized five employers’ social media policies, as  “unlawfully overly broad” (e.g., too restrictive). In four cases, an employee’s use of Facebook to complain about their employer was held to be “protected concerted activity.” The benefit for employers is that the report frames the discussion for the appropriate scope of an enforceable social media policy.

3. Your employees don’t understand your social media policy.

For companies who have drafted a social media policy, another risk is that the employees who are engaged in social media on behalf of the company or brand do not understand the policies. Training employees about what it is, how it works and what’s expected is just the beginning.

For example, Australian telecomm company Telstra is an excellent example of social media transparency. This 40,000+ employee company mandates social media training built around a manageable policy focused on “3Rs” – responsibility, respect and representation. To promote awareness and understanding, the comic book-styled policy answers simple questions like “what is Facebook?” and more complex issues like employer criticism on personal blogs. Taking it a step further, the company published their entire social media training guide online for others to study and critique.

4. Your privacy policy is out of date.

Back in the early days of the Internet “Gold Rush,” companies raced to create an online presence complete with ecommerce storefronts. Partly due to the length of time it took to get a web site up and partly due to the fear of risks associated with ecommerce, companies made sure to implement comprehensive Terms of Use and Privacy Policies. Many have not revisited those policies since.

The risks of an outdated privacy policy are twofold. First, it may be unenforceable for any number of reasons. For example, the company has changed the way it gathers and stores information about site visitors, has changed the platforms from which it gathers such data and potentially with whom it shares such data, even unwittingly.

More importantly, the dynamics of online usage and marketing have changed. The availability of GPS data and commonly used technologies for targeted advertising and related services pose new privacy risks such as leaking personally identifiable information including usernames, email addresses, first names, last names, physical addresses, phone numbers, and birthdays. A recent series of articles by the Wall Street Journal analyzed the tracking files installed on people’s computers by the 50 most popular U.S. websites, plus WSJ.com and found that some sites like dictionary.com had over 200 such tracking cookies.

Second, an outdated privacy policy may subject a business to scrutiny and even penalties from the Federal Trade Commission (FTC). On October 12, 2011 the FTC announced a settlement with a file-sharing application developer over allegations that it used deceptive default privacy settings, which would lead consumers to unintentionally and unknowingly share personal files from their mobile device or computer with the public.

5. Your Company is Not Engaging In The Conversation.

Lastly, social media enables instantaneous, ubiquitous, electronic social interaction using highly accessible and scalable publishing techniques. The platforms and services that enable this interaction also provide an unfettered medium for defamatory statements about individuals, disparaging remarks about a companies’ products and services and inaccurate or misleading remarks by over-enthusiastic employees.

The legal risk is that a company often does not control such conversations which can quickly spiral out of control. Many web sites and blogs allow comments and invite participation by unrelated third parties. Having a strategy for when, how, and why to engage is critical to mitigate the legal risks since this area of law is notoriously fact and circumstances dependent and varies by jurisdiction.

Contact Us For a Consultation.

Is your business making one of the mistakes described above? Do you want to learn how to use social media to market and communicate with existing and prospective clients and do so in a way that minimizes potential risks and pitfalls? Hopefully, the guidance outlined above can serve as a good starting point for discussions about how best to use social media as well as suggestions regarding factors that firms may wish to consider in strengthening their compliance and risk management programs. We invite you to contact us with comments and requests about how we can help you educate your employees, prevent fraud, monitor risk, and promote compliance. We can be reached at lsglegal.com, 866-734-256, @adlerlaw and dadler@lsglegal.com.

Seal of the United States Federal Trade Commis...

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For the past year and a half, I have been traveling to various conferences around the country to speak on Legal and Regulatory compliance in social media. In the beginning, case law and regulatory guidance was scarce and little information was available to provide businesses engaged in social media with a roadmap for Social Media Legal and Regulatory compliance. However, a lot has changed over the last year and a clear trend is emerging. Industry regulators are aware of the use – and abuse – of social media by their members. This article examines recent guidance provided by the Federal Trade Commission (FTC), the Food & Drug Administration (FDA), the National Labor Relations Board (NLRB), the Financial Industry Regulatory Authority (FINRA) and the Securities Exchange Commission (SEC).

Social Media in Marketing, Advertising & Commerce.

The FTC has a prime directive to protect consumers. In the social media sphere, the FTC has pursued this mandate by enforcing companies’ Terms of Use and privacy policies. In addition, the FTC has recently issued updated guidance for companies and individuals that review, promote, advertise or otherwise write about various products and services. In 2009, the FTC tackled its first social media case, an investigation involving Twitter. The focus of the FTC action was Twitter’s privacy policy that asserted A concern about safeguarding confidentiality of personally identifiable information and privacy settings designed to designate tweets as private.

The settlement, first announced in June 2010, resolved charges that Twitter deceived consumers and put their privacy at risk by failing to safeguard their personal information. Lapses in the Twitter’s data security allowed hackers to obtain unauthorized administrative control of Twitter, including both access to non-public user information and tweets that consumers had designated as private, and the ability to send out phony tweets from any account. Under the terms of the settlement, Twitter has hit ended and ongoing obligations concerning consumers and the extent to which it protects the security, privacy, and confidentiality of nonpublic consumer information, including the measures it takes to prevent unauthorized access to nonpublic information and honor the privacy choices made by consumers.

In a similar action, the FTC settled and investigation into Facebook,the leading social media platform/service. The social networking service agreed to settle Federal Trade Commission charges that it deceived consumers by telling them they could keep their information on Facebook private, and then repeatedly allowing it to be shared and made public. The settlement requires Facebook to take several steps to make sure it lives up to its promises in the future, including giving consumers clear and prominent notice and obtaining consumers’ express consent before their information is shared beyond the privacy settings they have established.

Read the FTC update here.

As recently as January 10, 2012, the FTC reached a settlement with UPromise, Inc., stemming from charges that the company – a membership reward service – allegedly used a web-browser toolbar to collect consumers’ personal information, without adequately disclosing the extent of personal information collected. The FTC found that the toolbar was collecting the names of all websites visited by its users as well as information entered into web pages by those users, including user names, passwords, credit card numbers, social security numbers and other financial and/or sensitive data. Furthermore, this data was transmitted in unencrypted, clear text that could be intercepted or viewed by third parties in a WiFi environment. The result? UPromise had to destroy all data it collected under the “Personalized Offers” feature of its “TurboSaver” toolbar in addition to other obligations related to data collection practices and consent to collection of personal information.

Other Industry Guidance.

In October 2009, the Federal Trade Commission released it’s updated “FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising.” The updated Guides contain two notable areas of concern for marketers. First, the Guides removed the safe harbor for advertisements featuring a consumer’s experience with a product or service, the so-called “results not typical” disclosure. Second, the FTC Guides underscored the longstanding principle of disclosing “material connections” between advertisers and the consumers, experts, organizations, and celebrities providing reviews and endorsements of products and services.

For concise guidance on when, how and what to disclose, see my article here.

Social Media in the Healthcare & Pharmaceutical Industries.

Like other consumer-oriented industries, Pharmaceutical and Biotech firms are rapidly expanding their presence online. This growth over the past several years has not gone unnoticed as evidenced by FDA Warning Letters targeting marketing campaigns “broadcast” via websites and social media platforms. The FDA also provides more general guidance for the industry. Policy and guidance development for promotion of FDA-regulated medical products using the Internet and social media tools are available in the FDA’s Consumer-Directed Broadcast Advertisements Questions and Answers. While this document provides clear direction for traditional media broadcasting , it only skims the surface regarding web content.

Social Media in the Workplace.

Probably no other federal agency has been as active as the NLRB in recent months. The NLRB has a mandate to protect employees rights to organize and discuss working conditions without fear of reprisals from employers. On August 8, 2011, the Associate General Counsel for the NLRB released a memo entitled “Report of the Acting General Counsel Concerning Social Media Cases.The report began by analyzing a case of first impression: whether an Employer unlawfully discharged five employees who had posted comments on Facebook relating to allegations of poor job performance previously expressed by one of their coworkers.

On January 25, 2012, the NLRB released a second report describing social media cases handled by the NLRB. The “Operations Management Memo” available here, covers 14 cases, half of which involve questions about employer social media policies. Five of those policies were found to be unlawfully broad, one was lawful, and one was found to be lawful after it was revised.

The remaining cases involved discharges of employees after they posted comments to Facebook. Several discharges were found to be unlawful because they flowed from unlawful policies. But in one case, the discharge was upheld despite an unlawful policy because the employee’s posting was not work-related. The report underscores two main points made in an earlier compilation of cases: 1) policies should not sweep so broadly that they prohibit the kinds of activity protected by federal labor law, such as the discussion of wages or working conditions among employees; and 2) an employee’s comments on social media are generally not protected if they are mere gripes not made in relation to group activity among employees.

Social Media and the Financial Services Industry.

From the Madoff scandal, to the Occupy Wall Street Movement, to Mitt Romney’s tax returns, the financial services sector is accustomed to the scrutiny and ire of the public and government regulators. Therefore it is no surprise that on January 4, 2012, the SEC’s Office of Compliance Inspections and Examinations, in coordination with other SEC staff, including in the Division of Enforcement’s Asset Management Unit and the Division of Investment Management, issued its “Investment Adviser Use of Social Media” paper. The paper begins by observing that although “many firms have policies and procedures within their compliance programs” governing use of social media” there is wide “variation in the form and substance of the policies and procedures.” The staff noted that many firms have multiple overlapping procedures that apply to advertisements, client communications or electronic communications generally, which may or may not specifically include social media use. Such lack of specificity may cause confusion as to what procedures or standards apply to social media use.

The SEC paper suggests that the following factors are relevant to determining the effectiveness of a Social Media compliance program:

  • Usage Guidelines
  • Content Standards
  • Monitoring
  • Frequency of Monitoring
  • Approval of Content
  • Firm Resources
  • Criteria for Approving Participation
  • Training
  • Certification
  • Functionality of web sites and updates thereto
  • Personal/Professional sites
  • Information security
  • Enterprise-wide web site content cross collateralization

Similarly, the Financial Industry Regulatory Authority (FINRA) has issued guidance for secutires brokerage firms. According to its web site, FINRA “is the largest independent regulator for all securities firms doing business in the United States.” FINRA protects American investors by ensuring fairness and honesty in the securities industry. In January 2010, FINRA issued Regulatory Notice 10-06, providing guidance on the application of FINRA rules governing communications with the public to social media sites and reminding firms of the recordkeeping, suitability, supervision and content requirements for such communications. Since its publication, firms have raised additional questions regarding the application of the rules. Key take aways from FINRA’s guidance include the flowing:

  • Brokerages have supervisory and record keeping obligations based on the content of the communications – whether it is business related – and not the media
  • Broker-dealers must track and supervise messages that deal with business
  • Firms must have systems in place to supervise and retain interactions with customers, if they are made through personal mobile devices
  • A broker must get approval from the firm if she mentions her employer on a social media site
  • Pre-approval for instant messages, also known as “unscripted interactions’ in legalese, is not necessary as long as supervisors are informed after the fact

Conclusion.

Many professionals in regulated industries are eager to leverage social media to market and communicate with existing and prospective clients and to increase their visibility. However, participants must ensure compliance with all of the regulatory requirements and awareness of the risks associated with using various forms of social media. Hopefully, the guidance outlined above can serve as a good starting point for discussions about how best to use of social media as well as suggestions regarding factors that firms may wish to consider is helpful to firms in strengthening their compliance and risk management programs. We invite you to contact us with comments and requests about how we can help you educate your employees, prevent fraud, monitor risk, and promote compliance. We can be reached at lsglegal.com866-734-256, @adlerlaw and dadler@lsglegal.com.

Seal of the United States Federal Trade Commis...

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In October 2009, the Federal Trade Commission released it’s updated “FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising.” The purpose of the update was to address the increasing use of endorsements by consumers, experts, organizations and celebrities in online marketing. The update is particularly relevant to the explosive growth of social media as a marketing tool.

The updated FTC Guides contain two notable areas of concern for marketers. First, the Guides removed the safe harbor for advertisements featuring a consumer’s experience with a product or service, the so-called “results not typical” disclosure. Second, the FTC Guides underscored the longstanding principle of disclosing “material connections” between advertisers and the consumers, experts, organizations, and celebrities providing reviews and endorsements of products and services.

Even with the illustrations provided within the FTC Guides themselves, it is still confusing for advertisers, marketers, bloggers and social media users to know how to comply with the guidelines. The purpose of this article is to provided simple, concrete standards to determine (1) when to make certain disclosures and (2) the type of disclosures required by the situation. I have grouped the disclosures into seven categories: Personal Opinion, Free Samples & Free Gifts, Promotional Relationship, Employment Relationship, Affiliate Relationship, Healthcare Disclosures, and Financial Guidelines & Disclosures. The key requirement to keep in mind is the obligation to disclose any relationship that may have influenced you.

1. Personal Opinion

If you write a review or blog post and your post contains only your own opinions, you haven’t received any compensation for the review or post, and you otherwise have no material connection to the topic of your post, you have nothing to disclose.

2. Free Sample/Free Gift

If you have been given a free copy, sample, or gift of a product or service and you write a review or blog post, you must disclose the facts and circumstances of how you received the item or service, even if you have not been paid to review or post on that topic. You do not run afoul of the disclosure rules if you receive payment unrelated your content. This disclosure is useful to keep in mind when your content relates to product previews, reviews of samples, services, gifts, books, software, music, movies, etc.

3. Promotional Relationships

If you write a review or blog post and your post is based upon an advertising relationship, and you have received compensation (cash, free services, product samples for personal use or a gift) for the review or post, you must disclose the nature of the relationship, whether you received anything of value, and information about relationships with advertisers or endorsers that would have a material impact about how a prospective consumer would view the message. This disclosure is useful to keep in mind when your content relates to paid posts, sponsored messages, tweets, fan page postings, etc.

4. Employment Relationships

If you write a review or blog post and your post is based upon an employment relationship, e.g. you are an employee or shareholder of a related company, you have a “material business relationship” to disclose, even if you are not being directly compensated for the message. You may post on behalf of a business or brand. In fact, it may even be part of your job description. Again, be mindful of the requirement to disclose any “connections” that may have influenced you, including both direct and indirect relationships.

5. Affiliate Relationships

If you write a review or blog post and your post is based upon an affiliate relationship, e.g., you have included affiliate links on your page, you must disclose the fact that the relationship exists and that you will be paid for referrals from your page.

6. Healthcare Disclosures

If you write a review or blog post and your content is based upon a connection to a pharmaceutical or healthcare product or program, you need to include relevant healthcare-related disclosures or information safety warnings, side effects, or official links with information.

7. Financial Guidelines & Disclosures

If you write a review or blog post and you work for a financial services company, you may be making investor-relations communications and your communications are subject to regulation by the NASD, SEC, FINRA and potentially state and federal regulatory agencies. The FINRA Guidance on Blogs & Social Networking Sites” can be found here. Record Retention: ensure that you can retain records of those communications. Suitability: a particular communication a “recommendation” for purposes of NASD Rule 2310 and is it suitable for potential recipients. Public Appearances: determine whether  your post part of an “interactive online forum” and whether supervision is required. Third-Party Posts: If your firm created or “sponsors” and online forum, be aware that, under certain circumstances, a customer’s or other third party’s content on a social media site may become attributable to the firm. Whether third-party content is attributable to a firm depends on whether the firm has (1) involved itself in the preparation of the content or (2) explicitly or implicitly endorsed or approved the content.

Clearly, legal and regulatory compliance for social media remains a minefield. Although this article is intended to give you a working knowledge of the types of risks created by, and disclosures required for, the use of Social Media, it is NOT LEGAL ADVICE. Each situation is unique and you should consult with qualified legal counsel regarding your specific circumstances.

ABOUT THE AUTHOR

David M. Adler, Esq. is an attorney, author, educator, entrepreneur and partner at the boutique intellectual property, entertainment & media law firm LEAVENS, STRAND, GLOVER & ADLER, LLC based in Chicago, Illinois. My responsibilities include providing advice to business units and executives on copyright, trademark, ecommerce, software/IT, media & entertainment and issues associated with creating and commercializing innovations and creative content, drafting and negotiating contracts and licenses, advising on securities laws and corporate governance and managing outside counsel. Learn more about me here: www.ecommerceattorney.com and here: Leavens Strand Glover & Adler, LLC.

The Earth flag is not an official flag, since ...

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Confused by what is and is not Green? You’re not alone.

Part 1 of 5

The last few years have seen a dramatic increase in consumer awareness and concern for environmentally-conscious or “green” consumerism. Coincidentally, as consumers join the movement to be more eco-friendly, businesses have likewise embraced both being green and being perceived as green in their marketing practices. The rapid proliferation of “green” brands begs the question “How do consumers and institutional buyers know if something is “green” or “eco-friendly”?”

To address such concerns, companies and industries have launched “ecolabels” and “eco-certification” schemes to add credibility to green claims, guide eco-friendly purchasing, and improve environmental performance standards. Demand for products with ecolabels is growing, though confusion about which companies are truly environmentally responsible persists.

Since environmental claims made in advertisements are often intangible, businesses need to make them resonate to consumers beyond just feeling good about what they are buying. Consumers and businesses can benefit from eco-labels by: (1) understanding how certification marks, labels and logos can be used to signal green credentials, (2) using and maintaining proper best practices and guidelines to which companies must adhere in order to meet a certified standard, (3) understanding which companies have succeeded in branding and why, (4) understanding how to avoid accusations of “greenwashing”, or exaggerated claims in their marketing, and (5) keeping informed about the changes in the legal and regulatory environment, such as the FTC‘s Green Guides for marketers.

This five-part series on “green” branding will discuss how to identify these issues, provide guidance on proper use of “green” certification marks, a/k/a “eco-labels,” develop policies and procedures to avoid misleading or unproven environmental claims and keep informed about the current trends, marketing strategies and regulatory regimes.

  1. Certification marks, and their role in signaling green credentials

A certification mark “certifies” the nature or origin of the goods or services to which it has been applied. This includes, for example, region or location or origin, materials of construction, method or mode of manufacture or provision, quality assurance, accuracy of the goods or services or any definable characteristic of the goods or services. It can also certify manufacture or provision of services by members of a union or other organization to certain standards.

For example, the Fair Trade Certified™ label applied to food products ensures that farmers and farm workers in developing nations receive a fair price for their product, have direct trade relations with buyers and access to credit, and encourage sustainable farming methods, without the use of a dozen of the most harmful pesticides, and forced child labor. The seal is viewed as a meaningful and clear signal that the producer supports the concepts of social responsibility, pest management and sustainable agriculture.

Under U.S. federal trademark law, a certification mark has a specific definition and certain characteristics. The term “certification mark” means any word, name, symbol, or device, or any combination thereof that is used by a person other than its owner to certify origin, material, manufacture, quality, accuracy, or other characteristics of goods or services.

There are generally three types of certification marks. First, there are geographic certification marks that signal that goods or services originate in a specific region (e.g., ROQUEFORT for cheese). Second, there are quality certification marks that indicate goods or services meet certain standards in relation to quality, materials, or mode of manufacture (e.g., approval by Underwriters Laboratories). Third, there are labor certification marks that certify (i) services performed or labor used in the manufacture of a product were provided by a member of a union or other organization, or (ii) the service provider meets certain standards.

Certification marks possess two distinct characteristics that set them apart from trademarks or service marks. First, unlike a trademark, a certification mark is used by someone other than the owner. The mark is generally applied by other persons to their goods or services, with authorization from the owner of the mark. Second, while the exclusive purpose of a trademark is to indicate commercial source or distinguish the goods or services of one person from another, a certification mark has no such purpose.

A certification mark is not used in the trademark sense of “used.” Rather, it may be used only by persons other than the owner of the mark. That is, the owner of a certification mark does not apply the mark to his or her goods or services and, in fact, usually does not attach or apply the mark at all. The owner of a certification mark does not produce the goods or perform the services in connection with which the mark is used, and thus does not control their nature and quality. Rather, “control” consists of ensure that users of the mark meet the standards established by the certifier.  The purpose of a certification mark is to inform purchasers that the goods or services of a person possess certain characteristics or meet certain qualifications or standards established by another person.

Proper us of “eco-friendly” certification marks can help businesses and marketers to add credibility to “green” marketing claims. As noted above, since the user of a certification mark is not the owner, the organization doing the certifying cannot itself engage in the production or marketing of the goods or services. Furthermore, the organization must be competent to certify that the requirements have been met. This is achieved by confirming adherence to the rules and regulations, providing methods of testing and quality control, and employing appointed individuals or bodies to periodically ensure conformance by a user.

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