Copper-Infused Apparel Company Settles With FTC for $1.4M
Tommie Copper, Inc. and company founder Thomas Kallish reached a deal with the Federal Trade Commission to settle charges that they misled consumers by claiming that their products would relieve pain and inflammation caused by diseases such as arthritis, multiple sclerosis, and fibromyalgia, and were comparable to—or better than—drugs or surgery.
The New York-based athletic apparel company marketed its copper-infused compression clothing—including socks, braces, sleeves, and shirts—in brochures, print media, social media, as well as in infomercials. From April 2011 to October 2014, the defendants extolled the use of copper to alleviate the pain associated with arthritis, fibromyalgia, and multiple sclerosis with advertising statements such as: "By placing the copper at the source of the discomfort, it provides immediate relief from inflammation, starts to stimulate blood flow and harnesses the other well-known health benefits of copper."
Montel Williams appeared in infomercials, touting the products with statements like, "Since my diagnosis over 13 years ago with MS, I have been on a constant mission to manage my pain. I've tried more prescription medication than you can imagine. I dulled my pain, but it's also dulled my life. Now, Tommie Copper truly is pain relief without a pill." Ads for the products, which ranged in price from $29.95 to $69.50, also featured celebrity and consumer testimonials claiming that Tommie Copper garments could provide pain relief comparable to—or better than—drugs or surgery.
But the claims were false and misleading, the FTC said in its New York federal court complaint. "It's tempting to believe that wearing certain clothing will eliminate severe pain, but Tommie Copper didn't have science to back its claims," Jessica Rich, Director of the FTC's Bureau of Consumer Protection, said in a statement.
The defendants reached a deal with the agency, promising to pay $1.35 million (a partial payment of the $86.8 million total judgment) and to gather competent and reliable scientific evidence before making future claims about pain relief, disease treatment, or health benefits.
To make claims about any devices or garments similar to those challenged in the complaint, they must conduct randomized, double-blind, and placebo-controlled human clinical testing that is "sufficient in quality and quantity, based on standards generally accepted by relevant medical experts, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true."
Why it Matters: What message should advertisers take from the Tommie Copper settlement? According to an agency blog, it "underscores the long-standing requirement that advertisers need appropriate science to support their representations," noting that this wasn't the FTC's first action challenging allegedly deceptive health claims for apparel. "Regardless of the nature of the product or how it purports to provide a health benefit, established proof principles apply."
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DOJ: Proposed Web Accessibility Guidelines Coming in 2018
The Department of Justice announced that it will take another three years to develop the proposed regulations for making websites accessible to the disabled that will comply with the Americans with Disabilities Act.
The applicability of the ADA to websites has been an issue for companies for several years. As the use of the Internet increased and e-commerce exploded, private lawsuits challenged the lack of access to websites. Only a handful of courts have weighed in on the issue. In an attempt to help guide companies, the DOJ issued an advanced notice of proposed rulemaking (ANPRM) in July 2010.
But last year—despite not having released any guidance—the DOJ brought an enforcement action against Peapod for violating the ADA because its website and mobile app were inaccessible to those with disabilities. The action made clear the agency's position that the federal statute applies not just to websites with a connection to physical locations, but to e-tailers with no brick-and-mortar store.
Now the DOJ has extended the delay in guidance.
In November, the agency released its Statement of Regulatory Priorities that emphasized the importance of Internet accessibility, but pushed the target date for guidance until 2018. "[T]he ADA's expansive nondiscrimination mandate reaches the goods and services provided by public accommodations using Internet web sites," the DOJ wrote. "The inability to access web sites puts individuals at a great disadvantage in today's society, which is driven by a dynamic electronic marketplace and unprecedented access to information."
Currently, the agency is reviewing the public comments received in response to the 2010 ANPRM on questions including what standards should be adopted for website accessibility and whether coverage limitations should be used for certain entities such as small businesses. With the state and local government accessibility rule set to be published in 2016, the DOJ said the business entity rule should wait.
"The Department believes that the Title II web site accessibility rule will facilitate the creation of an important infrastructure for web accessibility that will be very important in the Department's preparation of the Title III web site accessibility NPRM," the agency explained. "Consequently, the Department has decided to extend the time period for development of the proposed Title III web site accessibility rule and include it among its long-term rulemaking priorities. The Department expects to publish the Title III web site accessibility NPRM during fiscal year 2018."
To read the DOJ's Statement of Regulatory Priorities, click here.
Why it matters: Companies waiting for the DOJ guidance to make their websites and mobile apps ADA-compliant would be better served to take action now. Plaintiffs and advocacy groups have not hesitated to file suits over inaccessible sites and the DOJ itself—despite postponing its regulations—brought an enforcement action last year for alleged ADA violations.
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Data Breach Triggers Concerns About IoT Technology and COPPA
Generating concerns about the Internet of Things technology—particularly in the context of children—VTech suffered a data breach that exposed the personal data of almost 5 million adults and more than 6 million kids.
The Hong Kong-based toy company offers a "Kid Connect" service that allows parents to use smartphones to talk to kids who use toy tablets and other devices. But the company admitted in late November that a hacker gained access to the company's servers and made off with the names, e-mail addresses, home addresses, and passwords of more than 4.8 million parents, and the names, genders, and birthdays of approximately 6.4 million children. The hacker also gained access to chat logs between kids and their parents, kid selfies, and voice recordings.
The company accepted responsibility for the breach (stating that "our database was not as secure as it should have been") and acknowledged that the majority of the children and adults implicated in the hack were in the United States.
Lawmakers and regulators were quick to act. The Attorneys General of both Connecticut and Illinois announced plans to investigate the breach, while Sen. Ed Markey (D-Mass.) and Rep. Joe Barton (R-Texas) sent a letter to the company requesting information on its data security and use practices.
"This breach raises several questions about what information VTech collects on children, how that data is protected, and how VTech complies with [COPPA]," the legislators wrote. They asked for information the company collected from children 12 years old or younger for each product and other sources, such as social media.
In addition, the co-founders of the Congressional Privacy Caucus asked how VTech uses the data collected about children. Will it make the toy or product properly function and if not, then why is it collected, they wondered. The letter also asked what methods VTech uses to protects its customers' data (such as encryption), whether the company shares or sells information to third parties or data brokers, and what steps are being taken to prevent future breaches.
The lawmakers gave the company until January 8, 2016 to respond to the inquiry.
To read the letter from Sen. Markey and Rep. Barton, click here.
Why it matters: As the Internet of Things continues to grow, the industry faces challenges in addressing regulatory and consumer concerns with regard to data security and privacy. The VTech hacking incident only fuels those worries, particularly since the theft of children's information implicated COPPA.
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EFF Requests FTC Investigate Google Over Educational Program
The Electronic Frontier Foundation filed a recent complaint with the Federal Trade Commission requesting that the agency investigate whether Google is deceptively collecting and mining the personal information of students, including children as young as seven years old.
As part of its Spying on Students campaign, the group took a look into Google's public education project. Google for Education provides inexpensive laptops (Chromebooks) to schools, which allow access to a free suite of web-based education apps for students and classroom management tools for teachers known as Google Apps for Education.
In January 2015, Google signed on to the K-12 School Service Provider Pledge to Safeguard Student Privacy. Specifically, Google promised not to "collect, maintain, use or share student personal information beyond that needed for authorized educational/school purposes," not to build a personal profile of a student other than to support authorized education or school purposes, and not to knowingly retain student personal information beyond the time period required to support the authorized school or educational purposes.
According to the EFF, Google allegedly broke these promises.
When students log in to their Google for Education accounts, personal data about their non-educational Google services is collected, maintained, and used by Google, the group said. The company uses the "highly personal information" for its own purposes to improve Google products and to serve targeted advertising, EFF alleged.
In addition, Chromebook laptops' default setting is such that Google can track the students' entire browsing history and other data (not just while users are browsing within Google-owned or operated sites as part of the education apps). In addition, the company also permits school administrators to choose settings that share student personal information with Google and third-party websites, and they can override the settings selected by a child's parent to turn off browser tracking.
Google acknowledged that it collects and uses student data for the purpose of improving its products but that the data is aggregated and anonymized. "But because students use their computers and access the Internet for non-academic reasons, Google invariably collects, maintains, and uses for its own benefit" student information in violation of the Student Privacy Pledge, the EFF said.
"In light of the Pledge, Google's unauthorized collection, maintenance, use and sharing of student personal information beyond what is needed for education, constitutes unfair or deceptive acts or practices in violation of Section 5 of the Federal Trade Commission Act," the EFF charged. It requested that the agency investigate Google's practices and order the destruction of all student data and a halt on future collection and sharing.
To read the Electronic Frontier Foundation's complaint to the FTC, click here.
Why it matters: EFF argued that violations of the Student Privacy Pledge are akin to companies falsely stating they are certified members of the U.S.-EU Safe Harbor Framework, a deception that triggered multiple FTC enforcement actions. The group cited several other allegedly false privacy promises that resulted in an administrative complaint against Snapchat and the Nomi Technologies' settlement over its failure to abide by its statements that consumers could opt out of its mobile device tracking program. Whether the FTC acts on EFF's complaint remains to be seen.
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Noted and Quoted . . . Goldstein Quoted by Forbes, Fortune on NY Court's Fantasy Sports Decision
Forbes interviewed Manatt's Linda Goldstein, chair of the firm's Advertising, Marketing and Media practice, for an article on a New York court's decision to suspend the operations of daily fantasy sports sites FanDuel and Draft Kings in the state by prohibiting them from accepting entry fees from New York consumers. Goldstein also spoke to Fortune for an article on the same subject.
In "FanDuel and DraftKings Lose Major Battle in New York," Goldstein told Forbes that the decision is disappointing on multiple levels. "Not only is the outcome disappointing, but the court provided little analysis on some of the key legal issues, including the critical issue of whether these games constitute games of skill or chance," she said. Read the article here.
In "NY Judge Rules Against DraftKings and FanDuel, Supporting Ban," Goldstein told Fortune that she thinks the court misinterpreted certain critical elements of the law. She pointed to the 2007 case of Humphrey vs. Viacom, when an attorney sued three fantasy sports websites and lost. The case "held that entry fees paid to enter fantasy games are not bets or wagers," Goldstein said. "Those principals should apply equally to the games at issue and to the definition of gambling in New York." Read the article here.
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