Auto dealers beware – the FTC is watching your ads

This month the Federal Trade Commission (“FTC”) announced proposed settlements with car dealers across the country to settle investigations into the dealers’ advertising practices.  The FTC focused this particular round of investigations on claims to “pay off” the customer’s debt on the vehicle they traded in.  Examples of the allegedly deceptive advertisements provided by the FTC include:

·         "Credit upside down? Need a new car? Go to Billionpayoff.com. We want to pay off your car." The advertisement depicts a car moving, inverts the video to depict it upside down, and then turns it right-side up again. (Billion Auto)

·         "Uncle Frank wants to pay [your trade] off in full, no matter how much you owe." (Frank Myers AutoMaxx)

·         "I want your trade no matter how much you owe or what you're driving. In fact I'll pay off your trade when you upgrade to a nicer, newer vehicle." (Key Hyundai and Hyundai of Milford)

·         "Ramey will pay off your trade no matter what you owe . . . even if you're upside down, Ramey will pay off your trade." (Ramey Motors)

The FTC asserted that such advertisements (which included ads run on the dealers’ websites and on YouTube) mislead consumers into believing that the dealership was going to pay off the debt in full.  The actual practice employed by the dealerships was to roll in the negative equity (the debt balance that exceeded the value of the trade in) into the new loan the customer entered into to purchase a newer or different vehicle.

In addition to alleging deceptive advertising, the FTC alleged violations of the Truth in Lending Act and the Consumer Leasing Act.  As a result of the investigations, the five dealerships that agreed to settle must, among other things, change their advertising practices, retain copies of all advertisements for five years or more, maintain substantiation files for the claims made in each advertisement, and file compliance reports with the FTC. 

How do you avoid an FTC investigation and the resulting burdens?  Here are some compliance tips:

·         Ensure all advertisements, in any medium or in any form, do not contain any misrepresentations or misleading statements.  A statement that is misleading cannot be cured by a disclosure that contains conflicting information.

·         Comply with the Truth in Lending Act and the Consumer Leasing Act and the regulations issued under these Acts.  This includes, for instance, making clear and conspicuous disclosures when advertising certain terms related to issuing consumer credit.

·         Ensure your disclosures are clear and conspicuous.  The FTC provides guidance that to be clear and conspicuous, “the disclosure shall be in understandable language and syntax. Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement or promotion.”  The FTC also provides the following examples:

o   Print: the disclosure should be in a type size, location, and in print that contrasts with the background against which it appears, sufficient for an ordinary consumer to notice, read, and comprehend it.

o   TV or Video: an audio disclosure should be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. A video disclosure shall be of a size and shade and appear on the screen for a duration and in a location sufficient for an ordinary consumer to read and comprehend it.

o   Radio: the disclosure should be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it.

There is a comment period before the proposed settlements become effective.  Once effective, they will be persuasive evidence of the standards car dealerships must abide by for future FTC investigations.  Next up may be the $$ down and $$ per month claims.

Authors:

Mike Schulman	Jason Mueller

The Lorax and the Mazda CX-5: Greenwashing in a movie tie-in advertising campaign?

Are we in the midst of another case of a “citizen’s arrest” for alleged Greenwashing?  In the case of a Mazda advertising campaign tied in to the release of the movie adaptation of Dr. Suess’ The Lorax, the answer might be yes.  

As blog readers with young ones at home probably know, the Lorax movie was this past weekend’s box office champ here in the United States, grossing nearly $40 million.  And theatergoers were not the only ones attracted to this family-friendly fare with a sustainability-positive message.  Mazda, seeking to promote its CX-5 compact SUV, and in particular its Skyactiv technology, jumped in with a piece of movie tie-in marketing.  One place to see the ad is on Youtube, where Mazda touts that it “cares an awful lot”, and that the CX-5 with Skyactiv technology has received the “Truffula Tree Seal of Approval”.   Before going further, I should note that I currently own a Mazda, and have had a number of other Mazda cars over the years.  So I respect the product as a consumer, and in no way intend for this post to “pile on” the criticism this particular ad has received.

What seemed like a good opportunity to Mazda, however, now stands as yet another cautionary tale for companies looking to advertise the sustainability of products and services.   Mazda’s ad, touting the environmental friendliness of the CX-5 via Skyactiv’s fuel economy-promoting benefits against a Lorax-inspired tableau, has quickly come under fire from the “green” media and the public.  Take another look at that Youtube link, where the comments are overwhelmingly negative – along the lines of “Epic fail Mazda” – and the ad has generated 1,341 “dislikes” against 173 “likes." One commenter takes Mazda to task for “using an environmental movie to advertise an SUV” and analogizes it to using “Ghandi to advertise a gun club." 

But the toughest criticism has come from the Guardian’s “Environment blog” which savages the ad for its “crass chicanery” and holds it out as an example of greenwashing at its worst – and in the case of the Lorax himself “character assassination."  This Guardian blogger even uses the ad as a jumping-off point to explore Mazda’s entire green strategy in a critical way.  One can safely assume that this is probably not what Mazda intended with this ad.  

Perhaps most troubling for companies that have a legitimate desire to advertise sustainable products and services is the absolute speed at which a well-intended campaign can fall into critique for alleged greenwashing offenses.  And in today’s marketplace, that criticism can come from all sides, including government agencies, media, and the general public. Further, not only does the criticism emanate from several sources, its sting affects both the sponsor (Mazda) and the co-branded product (Universal's The Lorax film). Now both Mazda and Universal have to deal with the fallout. These unintended consequences are the types of contingencies that a well-informed advertising counsel can help a client consider, prior to the ads' publication.

While policing of greenwashing claims is warranted, there is a risk that such policing will have a chilling effect on advertising of sustainable products and services generally.  Any resultant drop in innovative activity on the part of companies  or missed opportunities to inform consumers of more sustainable choices would be a shame.  For now though, companies must proceed cautiously with such advertising efforts.  Mazda may be the latest to have learned this lesson, but they won’t be the last.

Author: Gaston Kroub

Self-Regulatory Online Privacy Program Part of Comprehensive White House Proposal

The White House, Department of Commerce and Federal Trade Commission each commended the Digital Advertising Alliance (DAA) self-regulatory privacy program for online, interest-based advertising.  This event was one carefully orchestrated part of a significant and comprehensive Consumer Privacy Bill of Rights the White House unveiled on the same day. This Bill of Rights is intended to provide consumers with greater online privacy protection through voluntary codes of conduct, federal legislation, and enforcement by the Federal Trade Commission and state Attorneys General.

Advertisers and agencies will likely watch closely this DAA self-regulatory program that is a White House-commended form of voluntary code of conduct provided for in the Consumer Privacy Bill of Rights.  Online advertisers in all industries will need to review their policies and processes for compliance with these DAA principles and programs as a forerunner of possible future regulatory and court action.

While Internet companies clearly seem to have gotten the message that they must regulate themselves or be regulated, they are likely to be more than a little nervous that a large percentage of consumers may opt-out, which could result in a significant re-tooling of behavioral advertising revenue models.  Notably, the self-regulation measures generally do not impact first-party behavioral advertising (such as targeted ads sent by Amazon to Amazon customers, or sponsored Google search results).

Digital Advertising Alliance

The Digital Advertising Alliance is a consortium of the nation’s largest media and marketing associations, including American Association of Advertising Agencies, the Association of National Advertisers, the National Advertising Federation, the Direct Marketing Association, the Interactive Advertising Bureau, and the Network Advertising Initiative. 

The DAA has several programs for guidance of advertisers for all types of businesses, including advertisers, agencies, web publishing or non-profits that have a presence on the web.

Most recently, last January, the DAA launched the “Your Ad choices” public education advertising campaign designed to inform consumers about interest-based advertising and how they can take greater control of their online privacy through the ad choices icon:

The educational campaign includes banner advertising that directs consumers to the icon and also links to a new informational website.  According to the DDA, “[w]henever you see the Icon, you’ll know two things: (1) You can find out when information about your online interests is being gathered or used to customize the Web ads you see, and (2) you can choose whether to continue seeing these types of ads.”

The first program of the DAA was launched in 2009 for Online Behavioral Advertising (OBA) by introducing seven self-regulatory principles of OBA.

In 2011 the DAA expanded the scope of its self-regulatory program beyond OBA with a self-regulatory guide for Multi-Site Data Principles” which established a framework governing the collection of online data from a particular computer or device regarding web viewing over time and across non-affiliated websites. 

See our previous analysis of the DDA “Multi-site Data Principles.   The Multi-Site Data Principles codified existing industry practices prohibiting the collection of multi-site data for the purpose of any adverse determination, including employment, credit, health treatment or insurance eligibility, as well as specific protections for sensitive data concerning children, health and financial data.

Pointer to the Future of Compliance

The commendation by the White House and government agencies may signal a new era in self-regulation and place greater focus on compliance with the DDA guidelines as being compliant with the direction that online consumer privacy law is taking.  Some privacy activists, however, have complained that these and similar guidelines  do not go far enough, and that the government should not trust this industry to regulate itself.  Time will tell.

Authors:

      Paul C. Van Slyke                                        Bart Huffman

  

             

White House Announces New Consumer Privacy Bill of Rights Affecting Online ‎Advertising

The White House recently announced a significant and comprehensive Consumer Privacy Bill of Rights that, if adopted as law, will have major impact on advertisers, agencies, Internet companies, and consumers. The Obama administration is raising the bar on this measure in an area where Congress has struggled in order to provide consumers with greater online privacy protection through voluntary codes of conduct, federal legislation, and enforcement by the FTC and state Attorneys General. The measure also provides for a federal national standard for notification of data breaches and preemption of all similar state law.

On the same day, the White House, Department of Commerce and Federal Trade Commission each commended the Digital Advertising Alliance (DAA)  for its self-regulatory privacy program for online, interest-based advertising.   On also on that day, the DAA announced an industry self-regulatory program “that will immediately begin work to recognize browser-based choices with a set of tools by which consumers can express their preferences under the DAA Principles."  Major Internet players such as Google and Microsoft agreed to honor consumer do-not-track choices, a particularly significant development given that those players represent the majority of online behavioral advertising delivery and given that such a commitment is subject to FTC enforcement.

The White House initiative is an extension of a privacy report issued by the Department of Commerce on Dec. 16, 2010.  This privacy report was made by an Internet Policy Task Force charged to conduct a “comprehensive review of the nexus between privacy policy, copyright, global free flow of information, cybersecurity, and innovation in the Internet economy.”

Multi-Pronged Approach

The White House said the “blueprint will guide efforts to protect privacy and assure continued innovation in the Internet economy by providing flexible implementation mechanisms to ensure privacy rules keep up with ever-changing technologies.”  The action steps for this blue print are:

• Making Enforceable the  Consumer Privacy Bill of Rights:  The Commerce Department’s National Telecommunications and Information Administration (NTIA) will soon convene Internet companies and consumer advocates to develop enforceable codes of conduct that comply with the Consumer Privacy Bill of Rights, building on strong enforcement by the Federal Trade Commission. The Administration will also work with Congress to enact comprehensive privacy legislation based on the rights outlined here.
• Achieving privacy policies for a Global, Open Internet: The Administration’s plan lays the groundwork for increasing interoperability between the U.S. data privacy framework and those of U.S. trading partners.
• Industry Action: In response to calls from the Administration and the Federal Trade commission (FTC), leading Internet companies and online advertising networks are committing to use Do Not Track technology from the World Wide Web Consortium in most major web browsers to make it easier for users to control online tracking.

Seven Fundamental Protections

According to the White House press release, the Bill of Rights consists of seven fundamental protections that consumers should expect from companies:

• “Individual Control:  Consumers have a right to exercise control over what personal data organizations collect from them and how they use it.
• Transparency:  Consumers have a right to easily understandable information about privacy and security practices.
• Respect for Context:  Consumers have a right to expect that organizations will collect, use, and disclose personal data in ways that are consistent with the context in which consumers provide the data.
• Security:  Consumers have a right to secure and responsible handling of personal data.
• Access and Accuracy:  Consumers have a right to access and correct personal data in usable formats, in a manner that is appropriate to the sensitivity of the data and the risk of adverse consequences to consumers if the data are inaccurate.
• Focused Collection:  Consumers have a right to reasonable limits on the personal data that companies collect and retain.
• Accountability:  Consumers have a right to have personal data handled by companies with appropriate measures in place to assure they adhere to the Consumer Privacy Bill of Rights.”

Federal Privacy Legislation

The White House Report, ambitiously titled “Consumer Data Privacy in a Networked World: A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy,” calls for Congress to enact  legislation to:

• Codify the Consumer Privacy Bill of Rights
• Grant the FTC and state Attorneys General authority to enforce the law directly
• Pre-empt state privacy laws that are inconsistent with the Consumer Privacy Bill of Rights
• Establish a safe harbor from enforcement for companies that adhere to voluntary codes of conduct that the FTC has reviewed and adopted
• Set a national standard for security breach notification that pre-empts existing laws in 47 states.

Authors:

      Paul C. Van Slyke                                        Bart Huffman

  

             

NRLB Weighs in on Employer Social Media Policies and Employee Disciplinary Action

The National Labor Relations Board (“NLRB”) recently provided a second report offering additional guidance to employers on disciplinary actions and social media policies. The report highlights 14 cases: half involving employee discharges based on employees’ Facebook posts; and the other half reviewing employer social media policies. As expressed by the NLRB, its guidance seeks to underscore two points:

• Employer policies should not be so sweeping that they prohibit the kinds of activity protected by federal labor law, such as the discussion of wages or working conditions among employees; and
• 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.

The NLRB is particularly concerned about employers infringing upon employee National Labor Relations Act (“NLRA”) rights “to engage in … concerted activities for … mutual aid and protection,” including activities to address the terms and conditions of the employees’ employment. All employees covered by the NLRA, whether union members or not, have these rights. While the NLRB acknowledges that individual employee gripes made on social media which are not directed toward sparking group discussion or activity are generally not protected, the NLRB has continued to find that many disciplinary decisions based on social media activity infringe upon NLRA rights. Further, even if the disciplinary action at issue did not infringe upon such rights, the NLRB has continued to find that employer policies with broad or vague language could reasonably be construed by employees to restrict conduct protected by the NLRA. The January 24, 2012, publication is instructive to employers—both as a reminder regarding social media/Internet activity-related disciplinary actions, and as a source of specific examples of language the NLRB disfavors in social media policies.

• Recognize employees’ rights under Section 7 of the NLRA. The NLRB indicates that social media policies should contain language to clarify that the policy does not restrict employees’ rights under the NLRA, including their Section 7 rights to engage in concerted activity concerning the terms and conditions of employment or other mutual aid or protection. However, while this language may show the employer’s good intent, the NLRB does not find such a clause to be sufficient to address otherwise vague or overbroad terms that employees may perceive to prohibit Section 7 protected activity.
• Watch the adjectives. The NLRB’s memo stressed repeatedly that vague terms such as “appropriate/inappropriate,” “professional/unprofessional,” “disparaging” and “disrespectful,” when used in broad statements in social media policies, can be construed by employees as restricting their Section 7 rights and should be avoided.
• Context and examples can help. The NLRB indicated that with the addition of context and specific examples the employer can narrow the behavior prohibited by social media policies. Thus, an otherwise vague term like “appropriate” may be lawful if used within a narrowed context because the employee would understand his/her Section 7 rights are not covered.
• Requiring prior authorization or disclaimers that opinions expressed belong solely to the employee should be limited. Except in the case of endorsements, testimonials or other positive statements about an employer or its products, which are governed by Federal Trade Commission regulations, the NLRB found that requiring employees to get prior authorization, or to always identify their position with the company and state that the opinions belong to the employee alone, could be too burdensome.


• Identity of employer should not be broadly prohibited. Again, except with endorsements and testimonials, the NLRB found that using the company’s name or logo may be a tool in an employee’s outreach efforts for protected concerted activity and should not be subject to a blanket prohibition or requirement of prior approval before use.

Given the NLRB’s issuance of this follow-up report, even employers who have updated their social media policies as recently as a year or two ago may want to take a look and revise their policies accordingly. Employers should stay tuned for future decisions from the NLRB.

Authors:

Megan E. Alexander                    Hanna Fister Norvell                 Gregory T. Casamento        

Social Media Site Ownership: Who controls your account?

If you are like many companies, you likely have a Twitter, Facebook, YouTube or other social media account used for public relations, product promotion or simply advertising and marketing.  Such accounts are valuable to a business; however, the ownership and exact value of such accounts is uncertain.  A recently filed lawsuit filed in California federal court raises these issues and may provide some guidance.

The California Lawsuit

California company PhoneDog is suing Noah Kravitz alleging harm from his continued use of a Twitter account that was created while Kravitz was employed at PhoneDog.  During his time at PhoneDog, the account grew to 17,000 followers.  The suit seeks $340,000 in damages, as well as an injunction against Mr. Kravitz from disclosing or trading the list of followers or soliciting business from them. 

PhoneDog offers an interactive web site with mobile news and mobile phone plan comparisons and claims 2.5 million unique visitors each month (See phonedog.com).  A significant source of the company’s income derives from the sale of ad space on its website.  To increase page views, PhoneDog requests it agents and employees to maintain Twitter accounts and to tweet links directing followers to PhoneDog’s website.

Defendant Kravitz was a social media specialist while employed by the company.  He published tweets on Twitter under the “handle” or account name “@Phonedog_Noah.”  Kravitz resigned on good terms with PhoneDog and he kept the Twitter account, changing his handle to “@noahkravitz.”  When PhoneDog asked Kravitz to return control of the Twitter account, he refused and PhoneDog filed suit alleging conversion, misappropriation of trade secrets and other claims.

To quantify the harm caused by Kravitz, PhoneDog valued the ability to send tweets to each follower at $2.50 per month.  They multiplied this value by the number of months Kravitz retained the Twitter account after his departure ($2.50 x 8 months x 17,000 customers) to reach the total of $340,000. 

Other cases involving similar ownership issues are also working through the courts (see e.g., Eagle v. Morgan, 2011 WL 6739448 (E.D. Pa. 2011).  These cases will likely require further factual discovery to resolve factual issues that may have been avoided through the use of a well drafted social media policy.

Takeaways

Social media accounts, the goodwill they represent and the followers of customers and prospective customer are valuable assets.   While the ultimate outcome of the PhoneDog lawsuit is yet to be determined, it is clear that companies should include provisions in their social media policy that govern the ownership and control of social media accounts.  Companies should avoid allowing agents or employees to establish social media accounts in their own name for company business—otherwise companies risk potential loss of the account and interruption of customer communications when the account holder leaves. 

Training on use of company accounts, and monitoring of such usage is also an important aspect of mitigating company risk of litigation and potentially adverse publicity.  It is certainly less expensive to prospectively clarify these issues by policy or contract rather than later seek relief through the courts. 

Authors:  Paul Van Slyke

Gregory Casamento

Jason Mueller

Court holds that Website Operator Not Liable Without Specific Knowledge of Copyright Infringement

Court holds that Website Operator Not Liable Without Specific Knowledge of Copyright Infringement

In a case of first impression, UMG Recordings v. Shelter Capital Partners, et al., the Ninth Circuit refused to hold a website operator liable for copyright infringement based solely on the operator’s general knowledge that some of the third party content on its site may be infringing copyright owners’ rights.  While the case only involved video content submitted by users, its holding applies to text, audio, photos and all user generated content.   The holding also applies to all industries and businesses that have websites, social media or blogs and that permit uploading of user-generated content.

Facts and Issues

The Defendant Veoh operates a publicly accessible website that enables users to share videos with other users. The Plaintiff, Universal Music Group, produces and distributes recorded music and music videos. Although Veoh has implemented various procedures to prevent copyright infringement through its upload system and its website, users of Veoh’s service have in the past been able, without authorization from copyright owners, such as UMG, to upload music videos containing songs in which UMG owns the copyright rights.  This in turn allows other Veoh users to view and even download those music videos.

The Digital Millennium Copyright Act (DMCA) provides so-called “safe harbor” for website operators so that even when a user of the website operator’s site shares a copyright protected video with other users, if the website operator meets the requirements set forth in the “safe harbor”, that operator is not liable for copyright infringement.

In the UMG Recordings case, the particular “safe harbor” Veoh invoked protects website operators and other “service providers” from liability for the copyright infringement of others who provide content on their sites when the provider “expeditiously” takes down the allegedly infringing content residing on its servers in response to a notice from a copyright owner (commonly referred to as a DMCA notice) that the content is infringing the owner’s copyright.

UMG’s Claims

There was no question that Veoh acted expeditiously to remove allegedly infringing content from its servers upon receipt of DMCA notices alleging that specific content on its site was infringing.  UMG claimed, however, that Veoh’s actions were insufficient  due to Veoh’s late adoption of filtering technology to detect infringing material and that Veoh removed only the specific videos identified in DMCA takedown notices, but not other infringing material that the filter detected. 

UMG argued that Veoh’s failure to remove other infringing material detected by its filters imputed Veoh with “actual knowledge” of the infringing activity, which, if true, would deprive Veoh of the DMCA safe harbor.  UMG also raised numerous factors that could have tipped off Veoh to the presence of infringing content on its servers, such as the presence of music videos without any license from a rights holder.

The Court’s Ruling

The Court concluded that to be liable for infringement a service provider must be aware of specific infringing material to have the ability to control that infringing activity.

In finding that Veoh was entitled to the DMCA safe harbor, the Court first found that Veoh’s functions in connection with video uploads by users fell within the safe harbor requirement that the uploaded content on Veoh’s website was “by reason of the storage at the direction of the user.”  The court upheld summary judgment and a Rule 12(b)(6) dismissal in favor of defendants.

The Court reached the same conclusion regarding the safe harbor condition that, “in the absence of [actual] knowledge, [the service provider] is not aware of facts or circumstances from which infringing activity is apparent.”

Implications

When statutorily compliant and specific DMCA takedown notices are received, a website operator or service provider that acts expeditiously to remove the specifically identified infringing content will not likely lose the DMCA safe harbor insulating liability for user-generated content.  At least that is the law in the Ninth Circuit and persuasive authority in other circuits until the Second Circuit issues its decision on the same issue in Viacom v. YouTube.

Authors:        Paul Van Slyke

Gregory Casamento

Mike Schulman