Media Law: FCC, FDA and FTC Regulation

Case: Verizon v. FCC (D.C. Cir. 2014) Be sure you know about the FCC's Open Internet Rules including the important Verizon case we discussed in class. What are the key points of the FCC's 2015 Open Internet Rules? How were these a response to the Verizon ruling? How did the FCC re-classify broadband Internet service providers after that case?

- It cannot be regulated in terms of traffic by different content providers - everybody putting content on the internet can but any out there free and clear - The independent ISP's were unregulatable - And became problematic with broadband age when it is pushed out to users - ISPs could decide that they want to enter in the contract and return google results faster - It became problematic because large companies like comcast are going to try to depress content unless they have relationship material with content provider - FCC tried to pass open internet rules - federal court said they don't have authority - FCC said they will regulate it like a phone company, people who provide informaiton - New open internet rules get passed - 3 main things: can't block traffic selectively, couldn't slow down internet traffic selectively, can't give priority to someone who paid - This is where it stands right now - net neutrality - going to get rolled back

What did the FCC privacy rules for broadband ISP's cover?What was their recent Congressional and agency fate?

- Know basically in the twilight of obama administration, FCC passed rules that prevented ISPs (Website behavior) to sell your data to third party - Congress overturned those rules - those rules are no more - When he asks what is the fate of those rules they are gone and they cannot be reenacted by the method they were rolled back - Before you need consent and now they don't need to give you your consent

Scarcity Spectrum

most often reason for regulations. Not everyone who wants a license has one because there is only enough room in the spectrum to accommodate a limited number of stations.

Notice of imposing rulemaking:

a notice issued by FCC announcing that the commission is considering changing certain of its regulations or adopting new rules.

Review the FCC licensing of broadcast media including noncommercial broadcasting. How does this differ from FCC regulation of cable television, direct broadcast satellite systems, and the Internet (review the Reno v. ACLU case we studied in the first part of the course)?

-First Amendment issues •Broadcast media receive less protection than traditional print media, Internet, and cable television, for example •Rationale: Scarcity of spectrum and public interest standard -Federal Communications Commission (FCC) •Licenses broadcast media (OTR TV and radio) among others •Imposes structural regulations (licensing, ownership rules) •Broadcast content regulations subject to intermediate scrutiny - reduced First Amendment protection for medium -Examples: FCC regulates broadcast political programming, children's television programming including ads, and indecency, among others •FCC rules may be enacted under the agency's general jurisdiction provided by Congress OR, in many instances, might be rules enacted specifically at the direction of Congress in a particular statute dealing with a specific issue

Local Television Ownership Rule (know how the size of the DMA in terms of number of TV and radio stations, and "independent voices" (in the cross-ownership rule) impacts the number of broadcast and media properties a company may own in a single market under these rules.)

A company may own up to two commercial broadcast TV stations in the same DMA if... (1) The digital signals (Noise Limited Service Contours) do not overlap; OR (2) (a) Both stations are NOT ranked in the top four in the same DMA based on market share, AND (b) there remain at least eight independently owned broadcast TV stations in the DMA - the "Eight Voices Test" FCC places limits on the number and the type Where a company can own up to 8 stations - cannot own up to 5 AM or FM Ownership limits come into play when companies merge

Local Radio Ownership Rule (know how the size of the DMA in terms of number of TV and radio stations, and "independent voices" (in the cross-ownership rule) impacts the number of broadcast and media properties a company may own in a single market under these rules.)

Company may own multiple commercial broadcast radio stations as follows... DMA with 45+ radio stations*: Limit is 8 radio stations - but only up to 5 of the same type (AM or FM) DMA with 30-44 radio stations*: Limit is 7 radio stations - again only up to 4 of same type (AM or FM) DMA with 15-29 radio stations*: Limit is 6 radio stations - again only up to 4 of the same type (AM or FM) DMA with 14 or less radio stations*: Limit is 5 radio stations - only up to 3 of the same type (AM or FM) - but no company many own more than half of all stations in the DMA

Privacy and Open Internet Rules: What did the FCC privacy rules for broadband ISP's cover?

Congress voted to overturn rules created by the Federal Communications Commission in October that required broadband providers to get your permission before collecting private data on your online activities and offering it for sale to advertisers. The move means Verizon, Comcast or AT&T can continue tracking and sharing people's browsing and app activity without permission, and it alarmed consumer advocates and Democratic lawmakers. They warned that broadband providers have the widest look into Americans' online habits, and that without the rules, the companies would have more power to collect data on people and sell sensitive information.

Also, be sure to review the disclosure requirements regarding endorsement and testimonials including "material connections" in all media including online and social media (see below also)

Disclosing "material connections": Section 255.5 •Must disclose that payment or consideration was given for an endorsement when reasonable consumers would not expect compensation was paid •Example: Celebrities - Ads versus talk shows, etc. •NOTE: Application to to blogs, social media and online posts

What are examples? Review the Beck's North America case (unfair advertising) and the Wyndham Worldwide case (data security) as examples here. The Beck's case was an advertising case, but the Wyndham Worldwide case was not - involved data security and breach issues.

Example: FTC Unfair Ad Case •FTC does not usually use unfairness jurisdiction for ads but did so in this case Beck's Beer TV spot •PDF HANDOUT: Ad script •What aspects of this ad would serve as grounds for "unfairness" allegations by the FTC? •Settled by "Consent Order" •What does that mean? •Note: Dissenter (C. Swindle) •"...a reasonable adult could easily see that the conduct depicted in the ad is rather stupid and dangerous..." Recent Unfairness Issue: Data Security beer brewed in US advertised as brewed in Germany and consumers got cash rewards for deception.

Broadcast ownership rules: We looked at the FCC broadcast ownership rules as an example of a regulatory scheme for the broadcast media structure. Generally, review the new rules effective 12/1/16

FCC Media Ownership Rules •Nielsen "designated market areas" (DMA) are used for FCC ownership rules •Example: Raleigh-Durham-Fayetteville DMA •FCC's Media Ownership Rules -2010 quadrennial review merged with 2014 review -2016 Second Report and Order kept media ownership rules with "targeted modifications" -"New" 2016 Media Ownership Rules effective 12/1/16 -At least one legal challenge to rules pending (filed 11/16) -UPDATED SINCE TEXT Following its most recent review, the FCC retained its media ownership rules in 2016, and readopted rules counting broadcast stations that jointly sell advertising time as commonly owned. Pending approval from the Office of Management and Budget (OMB), the FCC will require independently owned broadcast television stations to include resource-sharing agreements in their online public inspection files. In addition, as directed by the U.S. Court of Appeals, Third Circuit, the FCC reviewed its broadcast ownership diversity policies. It concluded that it did not believe the 1996 Telecommunications Act nor the Communications Act of 1934 requires it to adopt race- or gender-conscious measures in order to promote ownership diversity. In order to increase broadcast ownership diversity, FCC also reinstated rules enabling certain small businesses to abide by less restrictive media ownership and attribution rules, and more flexible licensing policies, than their counterparts. The newly approved media ownership and diversity rules took effect on December 1, 2016.

What is "host selling" - and how does the FCC regulate this practice?

FCC Policies: Product-based Programming and Program-length Commercials Children's programs based on commercial products (product-based programs) are allowed by the FCC but policy prohibits practice called "host selling": - Generally "prohibits the use of 'program talent or other identifiable program characteristics to deliver commercials' during or adjacent to children's programming featuring that character" - And "restricts host selling in websites where the website address is displayed in a children's program" The FCC prohibits host-selling - not allowed to prohibit a host and restricts any adjacent advertising selling products and services

And be sure to review the material on disclosures in online and mobile advertising (again, see the .com Disclosures reading and examples in addition to the examples in the PowerPoint slides)

FTC regulations against unfair and deceptive advertising are NOT medium or format specific •That applies to ads in online and mobile platforms •And, remember that many consumers access online content on their computers, smartphones and tablets - all using different browsers and operating systems, and screen sizes •So, you need to know how your ad will appear in those various formats that consumers may access your ad - and how it will appear using different operating systems, browsers and devices

Sponsorship identification rules: What are the key requirements of the FCC's sponsorship identification rules for broadcast stations and cable TV systems? What is the difference between "product placement" and "product integration?" What is a "video news release?" Does the FCC currently enforce any specific rules concerning "embedded advertising" in these regulated electronic media? (Remember the FTC generally has jurisdiction to enforce failure to disclosure commercial sponsorship and paid-for content in all media for advertisers under the jurisdiction of the FTC - covered in the FTC regulation material).

FCC Sponsorship Identification Rules -Broadcast stations and cable TV systems are required to identify sponsored content - "paid for" or other consideration -FCC has been concerned about embedded advertising - initiated proposed rulemaking in 2008 but did not enact rules •Product placement - "inserting 'branded products into program-ming in exchange for fees or other consideration" (FCC, FTC) •Product integration - "integration of products into dialogue and/or plot of a program" (FCC referencing Writers Guild) -Video News Releases (VNRs) - FCC has said that sponsorship identification rules apply to VNRs provided by "commercial, government and other entities" (2005) •Example - VNR used to "fill" news program but primarily pro-motes commercial product - could be "free ad" even if not paid -FTC has been cracking down on "fake newsites" on the web used to sell commercial products

Under what circumstances would a children's television program be likely to be deemed a "program-length commercial" under FCC rules?

FCC policy prohibits "program-length commercials": - Recall the time limits on ads during children's TV programming - Running ads that are related to the characters or content in the program can render the program a "program-length commercial" -Failing to adequately separate programming from commercials by "intervening and unrelated program material" also can render the program a "program-length commercial" The FCC prohibits program link commercials, those time limits and minutes FCC went after fine stations that were running after the GI Joe program - FCC does consider the time of the commercials and adds in the program time and that is considered one program link commercial The program becomes the infomercial - make sure those ads are not run and ads are run during children programming

FCC: Review the regulatory powers of the FCC (see text) and how the FCC enacts rules. What is a "notice of proposed rulemaking," and how does it lead to a final rule? What remedies does a company or industry have to challenge FCC rules?

FCC uses its power to adopt regulations affecting large segments of electronic media, as well as licensing spectrum users and enforcing the commission's regulations. - license broadcast media (tv or radio) among others - imposes structural regulations (licensing, ownership rules) - broadcast content regulations subject to intermediate scrutiny-first amendment protection for medium. Need to regulate broadcast bc Scarcity Spectrum & Public Interest.

Local TV/Radio Cross-Ownership Rule (know how the size of the DMA in terms of number of TV and radio stations, and "independent voices" (in the cross-ownership rule) impacts the number of broadcast and media properties a company may own in a single market under these rules.)

First - we need to define "media voices" "Full power TV stations and radio stations, major newspapers, and the cable system in the market" (FCC) DMAs: 20+ "independently owned media voices" A company may own up to 2 broadcast TV stations and 6 broadcast radio stations (or 1 TV and 7 radio stations) DMAs: 10+ "independently owned media voices" Limit is 2 broadcast TV and 4 broadcast radio stations DMAs: <10 "independently owned media voices" Limit is 2 broadcast TV and 1 radio station All DMAs: Comply with local TV and radio rules FCC will require merge companies to divest Owning both radio and tv is permitted in these limits, all the local limits apply - if they're going to own both broadcast and tv limits Based on independent media voices

FTC Regulation of Unfair and Deceptive Practices Generally: Be sure to review the assigned FTC readings in addition to the assigned readings in the text.

GO READ!!! •Overview of the Federal Trade Commission (FTC) •Created by Congress in the FTC Act of 1914 (enabling legislation) •Most states have "Little FTC Acts" and trade commissions

Disclosures - when is it deceptive to omit a disclosure or qualification? What is the "clear and conspicuous" standard - the "Four Ps?" (see the assigned .com Disclosures reading also - and review the examples)?

Generally: •Disclosure is required when needed to prevent an ad from being deceptive or unfair •Required disclosures must be "clear and conspicuous" The "clear and conspicuous" standard - the 4 Ps: •PROMINENCE: Is the disclosure large enough for consumers to notice and read? •PRESENTATION: Is the wording and format easy for consumers to understand? •PLACEMENT: Is the disclosure located where consumers are likely to look? •PROXIMITY: Is the disclosure near the claim that it qualifies? •Operation Full Disclosure •In September 2014 - the FTC sent warning letters to 60 companies about inadequate disclosures in their advertising

Advertising on Noncommercial Educational (NCE) Stations: Be sure to review the issues and ruling in the Minority TV Project case we discussed in class - what is the First Amendment significance of the U.S. Ninth Circuit's 2013 ruling to political candidate, political issue, and commercial advertising on noncommercial educational (NCE) broadcast TV stations? What level of scrutiny was applied in that case? Why?

Important Recent Ruling: Minority TV Project, Inc. v. FCC (U.S. 9th Cir. 2013) Upheld federal ban on political candidate and political issue advertising on noncommercial educational (NCE) stations under federal statute (47 U.S. Code sec. 399b) United States Ninth Circuit Court of Appeals used intermediate scrutiny even though this was a content-based restriction on political speech (core speech) - because it applied to the broadcast medium (less protected medium) The federal statute prohibits paid advertising on NCE stations... "(1) to promote any service, facility, or product offered by any person who is engaged in such offering for profit; (2) to express the views of any person with respect to any matter of public importance or interest; or (3) to support or oppose any candidate for political office." Decision appealed to Supreme Court of the United States - petition for writ of certiorari filed 3/17/14 and denied 6/30/14 Public tv stations are not allowed to accept any paid commercial advertising and not allowed to accept any paid advertising - decision was appealed to the supreme court Case that came out in the 9th circuit decision - is one that the SC denies With regard to non-commercial/public radio stations They rely on contributions from sponsors as well - they're not allowed by federal statute for paid advertising/political advertising They don't have advertising representatives

Example: Allegedly Deceptive Testimonials

In the Matter of Reverb Communications, Inc., and Tracie Snitker, individually and as officer and director of the corporation •Settled in 2010 Consent Decision and Order

Mobile Health App (MelApp)

Mobile Health App Alleged Unsubstantiated Claim •February 2015: FTC complaint alleged that Health Discovery's "MelApp" made unsubstantiated claims that it could analyze melanoma risk with scientifically proven accuracy •April 2015: FTC approved final consent order including barring Health Discovery from distributing any device including "MelApp" that represents expressly or implicitly than it can analyze melanoma risk factors and help detect disease in early stages without CRSE meaning "human clinical testing...that is sufficient in quality and quantity, based on standards generally accepted by experts in the relevant field, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true."

DMA

Nielsen "designated market areas" (DMA) are used for FCC ownership rules Newspaper and Broadcast Station Cross Ownership Rule Prohibits a company from owning a newspaper and a full-power broadcast station (radio or TV) if station's digital signal fully encompasses newspaper's city of publication National TV Ownership Rule* No nationwide limit on number of broadcast TV stations one company may own as long as the national reach does not exceed 39% of all US TV households (US TV HH) *Not subject to FCC's quadrennial review proceedings Dual Network Rule Prohibits merger between or among largest four TV networks (currently ABC, CBS, Fox and NBC)

Are there currently any federal regulations or other limitations on e-cigarette advertising on broadcast or cable media?

No ban on e-cig ads: new warning required (2018)

Be sure to review the factors that the FCC uses to determine whether a website used during children's television programming is commercial or not.

Non-commercial Use of Website Addresses During Children's TV Programming -"The display of Internet Web site addresses during program material is permitted only if the Web site: •(1) Offers a substantial amount of bona fide program-related or other noncommercial content; •(2) Is not primarily intended for commercial purposes, including either e-commerce or advertising; •(3) The Web site's home page and other menu pages are clearly labeled to distinguish the noncommercial from the commercial sections; and •(4) The page of the Web site to which viewers are directed by the Web site address is not used for e-commerce, advertising, or other commercial purposes (e.g., contains no links labeled "store" and no links to another page with commercial material)."

What is "puffery," and does the FTC regulate such claims or statements?

Obviously exaggerated claims or statements that reasonable consumers would not take seriously

Of the examples we discussed in class, you should be familiar by name with the POM Wonderful court case and the issues and rulings in that case - especially the 2015 ruling by the U.S. D.C. Circuit court (update from text).

POM Wonderful v. FTC (D.C. Cir. 2015) •2010: FTC brought administrative action against POM for alleged misleading and unsubstantiated ad claims that its juice would treat, prevent or reduce the risk of heart disease, prostate cancer and erectile dysfunction •2013: FTC final order found 19 ads violative and barred POM from making health-related claims without CRSE, including "two randomized and controlled human clinical trials" (RCTs) AND prior FDA approval for any disease-related claims • 2015: D.C. Circuit upheld most of the FTC's final order - except finding the blanket requirement for two RCTs for any disease-related claims violated the First Amendment using the Central Hudson analysis (one RCT might be enough in some cases) •NOTE: POM petition for certiorari filed with U.S. Supreme Court - denied (May 2015) - Efficacy and establishment claim - It's efficacy because it claims what the product can do by itself - Establishment claim because it indicated that there is scientific experiments that can back it up - Palmwonderful - were effective and has been tested (establishment claim), ___ out of ___ recommend - There are product efficacy claims generally and product efficacy claims - What that product does is FCC hold it to a much higher standard - Palm wonderful case may not be a perfect example of this It is being advertised as a health good

Review the FTC guidance and enforcement mechanisms - including the preventative measures and corrective measures in the text

PREVENTATIVE: opinion letter - an informal FTC communication providing general advice about advertising techniques advisory opinion -a FTC measure that offers formal guidance on whether a specific advertisement may be false or misleading and how to correct it. industry guides - in advertising, FTC measure that outlines FTC's policies concerning a particular category or product service trade regulation rule - broadly worded statement by the FTC that outlines requirements for a particular trade voluntary compliance- the general FTC practice to allow advertisers to correct violations before the commission takes action. CORRECTIVE consent order- agreement between ftc and ad stipulating terms must be followed to address problematic advertising cease and desist-administrative agency order prohibiting business or person from continuing a particular course of conduct litigated order- up to 10,000 per day enforced by court if not followed substantiation- ftc says advertise must prove claims corrective advertising- FTC power require an advertiser to advertise or otherwise distribute info to correct false or misleading advertisement claims. EX: Tropicana

Also: Remember that the advertising industry's self-regulatory process administered by the Advertising Self-Regulatory Council (not a court, so not legally binding), and federal Lanham Act lawsuits between advertisers, are available in addition to FTC regulatory actions, as are state actions by attorney's generals under state unfair and deceptive practices laws.

REMEMBER

Review the assigned guidelines and also the assigned .com Disclosures reading from the FTC (including the examples), and the FTC's 2015 The Endorsement Guides: What People are Asking, especially, regarding disclosures in the digital and social media.

REVIEW THAT SHIT

Online and Mobile Advertising Disclosures: Review the key points regarding disclosures in online and mobile advertising - again, be sure to review the assigned FTC reading .com Disclosures, and review the examples in the PowerPoint slides - all from .com Disclosures.

Recall: Ads in all media platforms must be •Truthful and not misleading •Substantiated before being disseminated •Not an unfair commercial practice FTC regulations against unfair and deceptive advertising are NOT medium or format specific •That applies to ads in online and mobile platforms •And, remember that many consumers access online content on their computers, smartphones and tablets - all using different browsers and operating systems, and screen sizes •So, you need to know how your ad will appear in those various formats that consumers may access your ad - and how it will appear using different operating systems, browsers and devices

"Endorsements" and "testimonials" - including the legal parameters and need for substantiation for various types of claims that are made through endorsements or testimonials.

Revised Endorsements and Testimonials Guides (2009) Key terms of new guides: Section 255.0 •"Endorsement" means... •"[A]dvertising message...consumers are likely to believe reflects...opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser" •"Expert" means... •[I]ndividual, group or institution possessing...knowledge [that] is superior to that generally acquired by ordinary individuals" •General considerations - Section 255.1 •Truthful, nondeceptive and substantiated (reasonable basis)

FTC: Review the overview of the FTC and its jurisdiction to regulation "unfair acts or practices in or affecting commerce" under Section 5 of the FTC Act, including what the FTC does and does not regulate in terms of advertising. Remember that the FTC's Bureau of Consumer Protection's Division of Advertising Practices regulates advertising specifically.

Section 5 of the FTC Act makes illegal any... •"Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce..." •FTC issues opinion letters (staff and advisory), industry guides, rules (trade regulation rules - TRRs - or rules mandated by Congress in federal statutes) - some examples on next slide and in text •FTC Act does not cover... •Bad taste in advertising •Ads for Rx drugs (FDA), banks, insurance, securities, most mortgage and financial products, and services by "common carriers"

What is allowed and not in terms of paid commercial and non-commercial advertising on these types of stations?

The federal statute prohibits paid advertising on NCE stations... •"(1) to promote any service, facility, or product offered by any person who is engaged in such offering for profit; •(2) to express the views of any person with respect to any matter of public importance or interest; or •(3) to support or oppose any candidate for political office."

Alcohol, Tobacco and E-Cigarette Advertising: To what extent does the FCC regulate advertising for cigarettes (and little cigars and smokeless tobacco)? What about alcoholic beverages? When might the FTC consider alcoholic beverage advertising on television as unfairly targeted to underage users?

Tobacco Advertising -Federal statutory bans apply to FCC-regulated electronic media... •FCLAA (1971): "Cigarettes and little cigars" -Upheld as constitutional in Capital Broad. Co. v. Mitchell per D.C. Circuit Court of Appeals (1971) •Congress added "smokeless" tobacco in 1986 •No ban on e-cig ads: new warning required (2018) •Alcohol Advertising -No federal broadcast or cable ban on alcohol ads -But, need to be careful to avoid FTC action •Targeting broadcast alcohol ads using programs with 30% or more of the viewing audience under the legal drinking age of 21 years could be "unfair practice"

How does the 2006 FCC rule limit the use of commercial website addresses in children's television advertising? Generally, when are website addresses allowed in children's television programming?

Web addresses in children's TV programs (2006 FCC rule) •No commercial web addresses allowed during children's TV programming - but can be used in ads (counts toward ad limits) •Non-commercial program-related web addresses can be used if the site meets FCC criteria (see next slide) •No websites used during the program or ads during the program may use characters from the program to sell products/services

FDA Regulation of Drug Advertising and Marketing Be sure that you know the legal distinction between DTC Rx "product claim," "reminder," and "help-seeking" ads. Review the "correct" versions of these ads and the incorrect versions of these types of ads on the assigned FDA website. Be sure to know important terminology.

http://www.fda.gov/Drugs/ResourcesForYou/Consumers/PrescriptionDrugAdvertising/default.htm

Review the assigned reading from the FCC's "Open Internet" website (and the related New York Times article). What are the prohibited activities called "blocking," "throttling," and "paid prioritization?" Be sure to know that the 2015 Open Internet Rules were upheld in 2016 in the U.S. Telecom Ass'n case we discussed in class (decision of the D.C. Circuit Court of Appeals).

https://www.fcc.gov/general/open-internet Open Internet Rules: "Net Neutrality"- ISPs cannot charge content providers to speed up the delivery of their goods. Supporters of Net Neutrality say the concept is important for internet to maintain its democratic statue. ISPs should not favor some content providers over others simply because they can charge them more money to deliver their content, even if it takes up a lot of space. No Blocking- broadband providers may not block access to legal content, application, services, or non-harmful devices. No Throttling - broadband providers may not impair or degrade lawful internet traffic on the basis of content, applications, services, or non-harmful devices. No Paid Prioritization- broadband providers may not favor some lawful internet traffic over other lawful internet traffic in exchange for consideration of any kind- other words "no fast lanes". This rule also bans ISPs from prioritizing content and services of their affiliates.

Public Interest

not defined by FCC or Congress but Congress says federal regulation is guided by public interest, convenience and necessity. -even with development of direct broadcast satellite, cable, internet, etc, FCC still says there is spectrum scarcity... cable, internet, and direct satellite are less regulated because for same reason broadcast intermediate scrutiny bc its pervasive and available.

independent voices

one owner may have licenses for up to two television stations in a community and, at the same time, from one to six radio stations in the same area, depending on how many independent media voices (primarily local broadcast stations and local newspapers) remain in the community. general rule: the more stations available in a DMA the more a broadcast provider can own because means there is more diversity among DMA- as long as provider is not in too much control of what DMA's public is hearing.

Substantiation - be sure to review the substantiation requirement for objective claims - express and reasonably implied - in advertising, and know the "reasonable basis" standard and when the elevated "competent and reliable scientific evidence" (CRSE) standard applies. What is the difference between an "efficacy" claim and an "establishment" claim?

•"Objective claims for products or services represent explicitly or by implication that the advertiser has a REASONABLE BASIS supporting these claims" (1983 FTC advertising substantiation policy statement) •Efficacy Claims: Suggest that product performs or provides benefits as advertised without suggesting scientific proof - advertiser must have "reason-able basis" as determined by factors including the type of claim, product, consequences of a false claim, benefits of a truthful claim, cost of developing substantiation for claim, amount of substantiation experts in the field believe is reasonable (Pfizer factors) (POM Wonderful v. FTC, D.C. Cir. 2015) •Establishment Claims: Suggest that effectiveness or superiority of the product is established by scientific proof - advertiser must have specific level of substantiation claimed and, if non-specific, then the claim is evaluated against evidence considered necessary by the "relevant scientific community to establish the claim's truth" (POM Wonderful) Competent and Reliable Scientific Evidence (CRSE): •The meaning of CRSE has been evolving in FTC cases •CRSE is especially critical in health, safety and product efficacy claims related to foods, dietary supplements and devices

Children's Television Programming What are the key provisions and limitations on children's television advertising in the Children's Television Act and corresponding FCC rules? How does the FCC define "children's programming?"

•1990 Children's TV Act Enforced by FCC Rules -"Children's programming" defined... •Programs "originally produced and broadcast primarily to an audience of children 12 years of age and younger" •Applies to commercial broadcast TV stations, cable operators and "digital video programming...directed to children" ages 12 and under -Ad time limits for children's television programming: •10 ½ minutes per hour on weekends •12 minutes per hour on weekdays

Reasonable consumer perspective

•Ads are evaluated based on their "net general impression" from the perspective of the average consumer acting under reasonable circumstances (if ad targeted to general public) -Note: Targeted ads are evaluated from the perspective of the average target audience member (children, elderly, the sick or diseased, etc.) -Note: According to the FTC, a "disclosure can only qualify or limit a claim to avoid a misleading impression" - a disclosure "cannot cure a false claim," and it must not contradict a material claim •Qualifying disclosures must be CLEAR AND CONSPICUOUS -We'll get back to this - especially for online and mobile formats •Puffery: -Obviously exaggerated claims or statements that reasonable consumers would not take seriously

More Examples: Paid Influencers and Native Advertising

•Alleged failure to disclose payment to "influencers" •November 2016: FTC settled charges against Warner Bros. alleging that company gave free pre-release copies of video game "Middle Earth: Shadow of Morder" to "influencers" with instructions on how to promote the game "in a positive way" and also paid them to post positive videos (allegedly viewed 5.5 million times) - without disclosure of alleged arrangements with "influencers" •Plus alleged failure to disclose "native advertising" •March 2016: FTC reached settlement with Lord & Taylor regarding allegations that the national retailer... •"...deceived consumers by paying for native advertisements, including a seemingly objective article in the online publication Nylon and a Nylon Instagram post, without disclosing that the posts actually were paid promotions for the company's 2015 Design Lab clothing collection" and... •"...paid 50 'influencers' to post Instagram pictures of themselves wearing the same paisley dress from the collection, but failed to disclose they had given each influencer the dress, as well as paid thousands of dollars for their endorsements"

Be sure to review the terms, general considerations, and the key requirements for consumer, expert and organizational endorsements.

•Consumer endorsements - Section 255.2 •Actual-consumer portrayals must use actual consumers •Use and results claims: If not what typical consumer could expect - a clear and conspicuous disclosure is required for typical results (mere "results not typical" NOT enough) •Expert endorsements: Section 255.3 •Endorsers presented as experts - directly or by implication - must have the expected level of relevant expertise that exceeds that of ordinary consumer •Claims related to expected results or superiority must be backed with appropriate research or testing within endorser's expertise •Organizational endorsements: Section 255.4 •Must "fairly reflect the collective judgment" of the organization's membership and not the subjective opinion of one or a few •Remember: Organizations can be presented as experts

Unfairness: How does the FTC law define "unfair" acts or practices in commerce?

•Defined in FTC Act: 15 U.S.C. § 45(n) (added 1994) •Act or practice that causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition •Possible "unfairness" rationales: •Coercion or fraud (use of undue influence in some way) •Inequity of information (keeping info from consumers) •Targeting vulnerable consumers (children, elderly, sick or ill) •Lack of privity (imposing obligations or conditions on consumers in excess of a contract)

How do these guidelines apply to media including social media?

•Disclosing "material connections": Section 255.5 •Must disclose that payment or consideration was given for an endorsement when reasonable consumers would not expect compensation was paid •Example: Celebrities - Ads versus talk shows, etc. •NOTE: Application to to blogs, social media and online posts

Key Points: FTC Definition of "Deception" "Likely to mislead"

•Does not require a finding that an ad is "actually" misleading - just "likely to mislead" at minimum •Express claims: Explicit representations in an ad -The representation itself establishes the meaning without the need for extrinsic evidence •Implied claims: Reasonable consumer "take away" -FTC considers factors such as layout, wording of claims, phrasing, juxtaposition of elements -Extrinsic evidence may be considered such as consumer surveys, copy testing, etc., but often the FTC "steps in the shoes of the reasonable consumer"

Especially, review the FTC's rulemaking authority and process. How do FTC rules differ from "guidances?" What are Trade Regulation Rules (TRRs)?

•Examples of FTC rules mandated by Congress •Telemarketing Sales Rule and National Do Not Call Registry (1996) -Mandated by Congress in the Telemarketing and Consumer Fraud and Abuse Prevention Act (1994) -Revised since enactment - latest revisions in 2014 •Children's Online Privacy Protection Rule (COPPA Rule) (1999) -Mandated by Congress in the Children's Online Privacy Protection Act -Revised since enactment - latest revisions 2013 TRR: broadly worded statement by the FTC that outlines requirements for a particular trade •Examples of Trade Regulation Rules (TRRs) -Funeral Rule -Care Labeling Rule (for clothing) •Examples of Guides (not law) -Endorsement and Testimonial Guides -Green Guides •List of FTC Rules and Guides

Concepts to know well including examples: Claims: What is the difference between an "express" and an "implied" claim in advertising?

•Express claims: Explicit representations in an ad •The representation itself establishes the meaning without the need for extrinsic evidence •Implied claims: Reasonable consumer "take away" •FTC considers factors such as layout, wording of claims, phrasing, juxtaposition of elements •Extrinsic evidence may be considered such as consumer surveys, copy testing, etc., but often the FTC "steps in the shoes of the reasonable consumer"

What are examples of "host selling" and "program length" commercials during children's television programming as alleged by the FCC? You don't need to know these by name but just understand the examples.

•FCC fined local stations for ads that featured the Buzz Lightyear character run during "Buzz Lightyear" program (host selling and program-length commercial violations) (2007, 2010) •FCC fined a local station for Cocoa Pebbles cereal ads broadcast during "Xiaolin Showdown" cartoon that briefly showed a Xiaolin character in the navigation bar for the postopia.com website in the navigation bar shown in the cereal ad (program-length commercial violation) (2006)

Alleged Failure to Disclose Material Connection in Online Promotion

•FTC alleged Cole Haan's "Wandering Sole" Pinterest contest failed to adequately disclose material connection •Consumers created Pinterest boards and pinned shoe images from Cole Haan site plus pictures of "favorite places to wander" using the hashtag #WanderingSole in each pin to enter a contest to win $1,000 shopping spree •FTC in "closing letter" said hashtag did not adequately disclose that consumers were incentivized to pin photos by the chance to win the contest (2014) •NOTE: 2015 FTC FAQ suggests that #contest or #sweepstakes "should be enough" for such promotions Example: Alleged Failure to Disclose Material Connection: Expert Endorsers •FTC administrative complaint alleged that home security company ADT paid three experts (child safety, home security and technology) to promote its home security system on TV and radio programs, including "The Today Show," plus online blogs, etc., without disclosing they were being paid ("material connection") •ADT allegedly set up media interviews through its PR firms and booking agents and provided suggested interview questions, b-roll footage •ADT allegedly paid experts cash (up to $200,000 to one of them) and also provided two of them free home security systems and monthly service •Settled: Consent order (June 2014)

Dannon

•FTC alleged that DanActive ads made unsubstantiated claims that DanActive reduces the likelihood of catching colds or the flu (disease-related claim) •FTC alleged that Activia ads implied unsubstantiated claims that a single serving daily relieves temporary irregularity and improves intestinal functioning but studies suggested three servings were needed to get these benefits (health-related claim) •Dannon settled with FTC in 2011 stipulated order - agreed to stop the challenged claims without CRSE including two well-designed human clinical studies supporting the benefits claims with less than three servings daily, and prior FDA approval for the cold and flu-related claims •Dannon also agreed to pay $21 million to settle actions filed by 39 states attorneys •Activia ad was revised (2012)

Reebok

•FTC alleged that Reebok made unsubstantiated claims about EasyTone shoes including specifically that walking in the shoes were proven to cause 28% more strength and tone in buttock muscles and 11% more strength in calves and hamstrings •Settled by stipulated order and agreement to pay $25 million in customer refunds and not to make certain claims including quantified percentage claims of toning or strengthening without CRSE ("one adequate and well-controlled human clinical study of the covered product") (2011)

Example: Alleged Inadequate Privacy Disclosure

•FTC alleged that Sears Holding Management Corp. failed to adequately disclose the scope of personal data it was collecting from consumers •Click through to terms and on 75th line: "Once you install our application, it monitors all of the Internet behavior that occurs on the computer on which you install the application, including both normal web browsing and the activity you undertake during secure sessions."

Example: Alleged Inadequate Privacy Disclosure

•FTC alleged that Sears Holding Management Corp. failed to adequately disclose the scope of personal data it was collecting from consumers •Click through to terms and on 75th line: "Once you install our application, it monitors all of the Internet behavior that occurs on the computer on which you install the application, including both normal web browsing and the activity you undertake during secure sessions."

the Wyndham Worldwide case (data security)

•FTC v. Wyndham Worldwide Corp. (D. N.J. 2014) •FTC filed 2012 action against Wyndham Worldwide (hotels) alleging three data breaches (including names and credit card numbers) that caused $10.6 million in fraud losses to consumers •Complaint includes unfairness claim (and deception claim) •April 2014: Trial court refused to dismiss the claims and specifically rejected Wyndham's argument that the FTC did not have jurisdiction under the FTC Act to pursue unfairness action involving data security without specific Congressional authority or without enacting specific rules for data security and privacy •June 2014: Trial court certified the jurisdiction question for an interlocutory appeal to the U.S. Third Circuit Court of Appeals •UPDATE: Decision AFFIRMED by U.S. Third Circuit (8/15) and parties settled by STIPULATED COURT ORDER (12/15) •RESOURCE: FTC (2016) "Data Breach Response: A Guide for Business"

Example: Disclosures Paid Search Engine Results

•FTC's 2013 Search Engine Letter •Guidance to search engines for "distinguishing advertising from natural results in a clear and prominent manner" •Note: Any method is acceptable though as long as it is "noticeable and understandable to consumers" •Recommendations: •Visual Cues: (1) More prominent shading that has a clear outline; (2) a prominent border that distinctly sets off advertising from the natural search results; or (3) both prominent shading and a border; plus a... •Text label that: (1) Uses language that explicitly and unambiguously conveys if a search result is advertising; (2) is large and visible enough for consumers to notice it; and (3) is located near the search result...that it qualifies and where consumers will see it (generally incorporates the 4 Ps)

Deception: How does FTC law define "deception" in advertising? Specifically, what are the three key components of the definition of "deception?" What do they mean?

•How does the FTC define deception? •FTC Policy Statement on Deception (1983) - What does it take for an ad to be "deceptive?" •(1) "First, there must be a a representation, omission or practice that is likely to mislead the consumer." •(2) "Second, we [the FTC] examine the practice from the perspective of a consumer acting reasonably in the circumstances." •(3) "Third, the representation, omission or practice must be a 'material' one...meaning likely to affect the consumer's conduct or decision with regard to a product or service."

How are the deception criteria defined? Review the examples we viewed in class (but you don't need to know these by name).

•How does the FTC define deception? •FTC Policy Statement on Deception (1983) - What does it take for an ad to be "deceptive?" •(1) "First, there must be a a representation, omission or practice that is likely to mislead the consumer." •(2) "Second, we [the FTC] examine the practice from the perspective of a consumer acting reasonably in the circumstances." •(3) "Third, the representation, omission or practice must be a 'material' one...meaning likely to affect the consumer's conduct or decision with regard to a product or service." Example: Alleged Deceptive Product Demonstration Nissan and TBWA Worldwide - Settled with Final Consent Order (2014)

Materiality

•Means "likely to affect a consumer's choice or conduct regarding a product (or service)" •Intent of the advertiser can establish "materiality" -Express claims are presumptively "material" -Intended implied claims (and omissions) are presumptively "material" •Examples: "Materiality" in advertising: -Claims of health and safety -Claims of purpose, efficacy, and cost -Claims of durability, performance, warranties and quality -Objective claims - express or implied - presumptively have a "reasonable basis" - have been substantiated

FTC and native advertising: Remember that you have resources regarding the regulatory status regarding "native" advertising - requirements to disclose paid-for or sponsored content, especially when not reasonably obvious to the reasonable consumer - for advertisers that are subject to FTC regulation. Again, review the FTC's enforcement policy statement on deceptively formatted advertising and guidance on "native advertising."

•Native advertising •Allegedly paid-for Nylon article online in Lord & Taylor case •Source: FTC •Allegedly paid-for Instagram posts by "influencers" in Lord & Taylor case •Source: FTC UPDATE: April 19, 2017, FTC sent 90 letters to celebrities, athletes, other influencers, and marketers, reminding them to clearly and conspicuously disclose material connections in Instagram posts in other instances (specific posts were referenced in each letter) (see posted PDF) REVIEW POWERPOINT 31-51

Review the FTC guidance and enforcement mechanisms - including the preventative measures and corrective measures that we covered in class and are discussed in the text.

•Prospective measures: •Staff opinion and advisory letters •Policy statements, industry guides •Rules and regulations •Remedial measures: •Consent agreements (most common resolution of cases) •Affirmative disclosures, corrective advertising •Cease-and-desist orders •Injunctions (federal district court) •Civil fines including consumer redress (federal district court) •Referral to U.S. Dept. of Justice for CRIMINAL prosecution •Note: Self-regulation and Lanham Act claims www.ftc.gov/enforcement/rules