Stanford University Law School February 5, 2014

SPEAKERS:

Tali L. Alban, Kilpatrick Townsend & Stockton, LLP Lin Chan, Lieff Cabraser Heimann & Bernstein, LLP

Stu Eaton, Electronic Arts Michael Elisofon, California Attorney General’s Office, Consumer Law Section

Rashi Mittel, PayPal, Inc. Rachel A. Rubin, Oracle

Advertising, Consumer Protection, and Privacy Law:

An Emerging Practice with Exciting Career Opportunities

Presentation by ABA Section of Antitrust Law Section,

Advertising Disputes & Litigation Committee Consumer Protection Committee

Privacy and Information Security Committee

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What We’ll Cover

» General Advertising Standards » Express and Implied Claims » Puffery » Demonstrations

» Lanham Act » Federal Trade Commission Act » State Deceptive and Unfair Trade Practices Acts

» State Attorney General Actions » State Consumer Class Actions

» National Advertising Division (Industry Self-Regulation) » Other Relevant Areas of Law

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Overview » What is advertising law?

» Advertising law concerns the use of false and/or misleading statements made in advertising.

» Relevant laws:

» Lanham Act Section 43(a): Allows competitors to challenge the use of false or misleading representations of fact in commercial advertising.

» FTC Act Section 5: Allows the FTC to challenge unfair and deceptive practices in or affecting commerce.

» State Consumer Fraud Laws: Many states have statutes similar to the Lanham Act and/or FTC Act (often called “UDAP” statutes or “Little FTC Acts”) that authorize their AGs and often citizens to police false advertising.

» Regulatory Oversight: Agencies like FDA and FCC also oversee advertising and labeling practices within their jurisdiction.

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General Advertising Standards

» Claims must be truthful and not misleading. » Claims must be substantiated before they are

made and must remain substantiated during the entire period of time they are in use.

» Claims that could be misleading without necessary qualifying language must contain clear and conspicuous disclosures whenever necessary to dispel likely consumer confusion.

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Lanham Act, Section 43(a) » Prohibits advertisers from making false or misleading representations of fact in

commercial advertising that deceive or have the capacity to deceive a substantial segment of consumers.

» Only competitors have standing to bring a false advertising claim under the Lanham Act. » Requires advertising made in interstate commerce.

» Advertising claims must be material (i.e., likely to influence a consumer’s purchasing

decision).

» Damages include: » Injunctive relief » Actual damages or profits » Treble damages “according to the circumstances of the case” » Attorneys’ fees and costs in “exceptional cases”

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What is an advertising claim? » Express Claims

» A claim that is literally made. » Example: ABC Hand Soap prevents cold and flu.

» Implied Claims » A claim that is made indirectly or by inference.

» Example: ABC Hand Soap kills cold and flu-causing germs.

» In determining what representation is made by an advertisement, the overall net impression of the advertisement (i.e., context) is important.

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What is an advertising claim?

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Puffery

» Puffery is not actionable. » “Puffery” is a vague or exaggerated claim that no

reasonable person would take literally. »For example:

» Bank slogan: “So…you’re about to buy a new home, or build one. You concentrate on your dream. We’ll take care of everything else.” [Alpine Bank v. Hubbell, 555 F.3d 1097 (10th Cir. 2009)]

» “America’s Favorite Pasta.” [American Italian Pasta Co. v. New World Pasta Co., 371 F.3d 387 (8th Cir. 2004)]

» “You’re in good hands with Allstate.” [Rodio v. Smith, 587 A.2d 621 (N.J. 1991)]

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Miscellaneous Types of Claims

» Consumer Testimonials » Must reflect honest opinions, findings, beliefs or experiences of

consumers. » Must reflect the experience the average consumer will have with the

product or service. » Expert Endorsements

» Must disclose any material connection between the advertiser and the endorser.

» Demonstrations » Must prove something relating to a material attribute of the product. » Must be an accurate depiction of how the product will actually perform.

» Objective, Verifiable Claims » Must have a “reasonable basis” supported by testing, research or other

substantiation that would be relied on by experts in the relevant field

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Demonstrations » Volvo claimed: “On June 12, 1990, a Volvo 240 ruined an otherwise

perfect car crushing exhibition. According to Fred Shafer, monster truck driver, ‘I tried everything. The darn thing just wouldn’t give.’ We couldn’t ask for a better endorsement.”

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Federal Trade Commission Act » FTC is an independent law enforcement agency

with a broad mandate to stop deceptive and unfair practices in commerce.

» Consumer protection » The FTC Act, 15 U.S.C.§41 et seq.:

» Section 5 prohibits unfair or deceptive acts or practices, and

» Section 12 prohibits false advertising likely to induce the purchase of foods, drugs, and devices.

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FTC Act, Section 5

» When is an ad unfair? » It causes or is likely to cause substantial consumer injury

(physical or economic); » Which is not reasonably avoidable by consumers themselves; » And is not outweighed by benefits to consumers or to

competition.

» When is an ad deceptive? » A representation, omission, or practice; » That is likely to mislead consumers acting reasonably under the

circumstances; » And that representation, omission, or practice is material to

consumers.

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FTC Act – Privacy » Privacy is a key consumer protection priority

» No single law governs privacy and security in the United States

» Examples: o Section 5 – Prohibits deceptive privacy practices. o Fair Credit Reporting Act (FCRA) – Protects privacy of

consumer credit reports. o Gramm-Leach-Bliley Act (GLBA) – Protects nonpublic personal

financial information. o Children’s Online Privacy Protection Act (COPPA) – Gives

parents control over types of information that websites can collect from their children under age 13.

For more information: http://business.ftc.gov/privacy-and-security

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FTC Policy Statements and Guides

» Policy Statement on Deception. » Policy Statement on Unfairness. » Policy Statement Regarding Advertising Substantiation. » Policy Statement on Food Advertising. » Comparison Advertising Policy Statement. » Made in USA Policy Statement. » Guides for the Use of Environmental Marketing Claims

(Green Guides) » Dietary Supplements: An Advertising Guide for Industry. » Guides Concerning the Use of Endorsements and

Testimonials. » Guide Concerning the Use of the Word “Free.”

Available at: http://www.ftc.gov/bcp/menus/resources/guidance/adv.shtm

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State Deceptive and Unfair Trade Practices Acts

» State Attorney General Actions » Authority derived from state UDAP statutes. » State attorneys’ general can bring an action on behalf of

consumers within the state based on consumer complaints or independent investigation (similar to the FTC).

» Can seek injunctive relief or monetary relief.

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State Deceptive and Unfair Trade Practices Acts

» State Consumer Class Actions » Commonly instituted by consumers on behalf of a class

of similarly-situated individuals. »Sometimes driven by Plaintiffs’ lawyers or public interest

groups.

» Typically brought under state consumer protection/

UDAP laws (such as the D.C. Consumer Protection Procedures Act).

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National Advertising Division (Industry Self-Regulation)

» Allows a business or group to petition the NAD to investigate the advertising practices of another business or group. » NAD asks that advertisers substantiate all reasonable interpretations of a

claim.

» NAD has specialized expertise in resolving advertising disputes that can streamline and simplify the process » NAD will “step into the shoes of the consumer” to decide certain questions that

would typically require expert evidence in federal court, e.g., implied messages a consumer would take away from the claim or advertising.

» NAD will investigate advertising based on a limited record and will issue an

opinion with a recommendation. » NAD has no enforcement power, but FTC will often enforce advertising

violations brought to its attention by the NAD. » As a practical matter, national advertisers almost always comply with NAD

decisions

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National Advertising Division (Industry Self-Regulation)

» Advantages: » No counterclaims » Relatively low cost » Speed » No discovery » Minimal public record

» Disadvantages: » No enforcement power » No discovery » No preclusive effect » Risk that opposing party will fail to engage or that NAD rules

will preclude jurisdiction

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Other Relevant Areas of Law Related to Advertising

» Trademark » Trade Dress » Copyright » Design Patents » Right of Publicity

Questions?

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