Ad Group to FTC: Keep Right to Be Forgotten Out of U.S.
Responding to a petition filed by Consumer Watchdog with the Federal Trade Commission seeking an expansion of the “Right to Be Forgotten” to the United States, the Association of National Advertisers asked the Commission to reject the request.
In a letter to the FTC authored by executive vice president Daniel L. Jaffe, the ANA warned that recognition of the RTBF “would cause serious and undue harm to the public’s right to determine for itself what is important and relevant information.”
Last year the highest court in the European Union recognized the RTBF, and ordered Google to remove links to stories about a Spanish man’s financial history. Consumer Watchdog recently filed a petition seeking to extend the right to the United States. It argued that Google, in denying the same protection in the U.S., engaged in an unfair and deceptive practice in violation of Section 5 of the Federal Trade Commission Act, and acted deceptively because the company claims to respect user privacy rights but doesn’t allow removal requests.
ANA responded, calling the argument “legally baseless.” The rationale underlying Consumer Watchdog’s petition is “sweeping in nature” and would apply to companies beyond Google and impose new legal obligations, Jaffe wrote. “The FTC has held companies accountable under the law when they promise certain specific privacy practices but then fail to adhere to them,” according to the ANA letter. “But there is no precedent for compelling companies to import expansive privacy policies that are not already part of their terms of service. The fact that a company generally has privacy protections does not provide carte blanche to impose regulations on [Consumer Watchdog’s] wish list. This has nothing to do with Section 5.”
Privacy law in Europe differs greatly from the American approach, the ANA explained, and the U.S. provides far more robust and stringent free speech protections. “Put simply, certain regulations acceptable under European law would be plainly unconstitutional if applied in the United States,” the letter stated. “The so-called ‘Right to Be Forgotten’ is one such policy.”
In addition to constitutional concerns, the ANA highlighted practical considerations. In just one year since the EU recognized the RTBF, Google has received 274,462 removal requests and evaluated 997,008 URLs for removal from its search results—figures that “clearly show that expanding this type of program to the United States would be time-consuming, expensive, burdensome, and difficult for Google or any other company tasked with this requirement,” the ANA wrote.
The free exchange of information online provides immense benefits, the ANA emphasized. Instead of conflating the right to privacy with the right not to be embarrassed by “youthful indiscretions,” as advocated by Consumer Watchdog, the FTC should focus on the “democratization of information,” one of the hallmarks of the Internet. “Imposing the Right to Be Forgotten would impede information access in the United States; it would be anti-consumer, not pro-consumer,” the ANA argued.
“Allowing the Right to Be Forgotten in the United States would cause serious and undue harm to the public’s right to determine for itself what is important and relevant information,” the group concluded. “It would force search companies to edit the past under the supervision of federal regulators. This runs contrary to consumers’ interests. As protecting consumers is a core responsibility of the FTC’s mission, ANA therefore requests that the Commission quickly and forcefully reject [Consumer Watchdog’s] misguided complaint.”
To read the ANA’s letter to the FTC, click here.
Why it Matters: How the FTC deals with the RTBF petition remains to be seen. But the issue arose in a different context when a French authority ordered Google to remove all the links from its search pages—including Google.com in the United States—and not just the European pages. Despite the threat of a $340,000 fine, Google refused to comply. “We believe that no one country should have the authority to control what content someone in a second country can access,” Google’s global privacy counsel Peter Fleischer wrote on the company’s blog. Google appealed the order, calling it “a troubling development that risks serious chilling effects on the Web,” that would result in “a race to the bottom. In the end, the Internet would only be as free as the world’s least free place.”
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Defendants Operating “FTC Credit Solutions” Settle with Agency
The operators of an alleged credit repair scam reached a deal with the Federal Trade Commission for $2.4 million and a ban from the industry after operating with the name “FTC Credit Solutions.”
Implying that their company had a connection to the Commission to help trick primarily Spanish-speaking consumers into paying thousands of dollars to improve their credit, the defendants (First Time Credit Solution, Corp., Guillermo Leyes, Jimena Perez, Fermin Campos, and Maria Bernal) promised they could remove negative information from a consumer’s credit report and guarantee a good credit score. The agency alleged that the defendants violated the Federal Trade Commission Act and the Credit Repair Organizations Act by charging consumers up front for credit repair services, typically $2,000.
In one radio ad, Leyes stated that FTC Credit Solutions was licensed by the Commission, adding that the license allowed the company to guarantee any consumer a credit score of 700 or higher within 120 days or less.
Undercover calls placed by the agency posing as consumers revealed statements by Bernal that the company “works under the Federal Trade Commission, which is a law that was signed by the President in 2010,” and that the company could “delete” and “get [the investigator] a pardon” for $19,000 in debt.
To settle the charges, the four individual defendants must pay a total of $2.4 million. Leyes is responsible for the full amount and the judgment will be suspended against the others due to inability to pay. In addition, all defendants are permanently prohibited from selling or advertising credit repair services to consumers, from selling or otherwise benefiting from the personal information of customers, and from deceiving consumers about any good or service that they sell.
To read the complaint and the stipulated order in FTC v. First Time Credit Solution, click here.
Why it Matters: “These defendants were shameless. They scammed consumers who were in need of financial help and used the good name of the Federal Trade Commission to do so,” director of the FTC’s Bureau of Consumer Protection Jessica Rich said in a statement. “I’m pleased these defendants will be kept away from this business for good.”
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Tom’s of Maine Settles “Natural” False Ad Suit for $4.5M
In the latest multimillion-dollar settlement of a false advertising class action challenging “natural” claims, Tom’s of Maine has agreed to pay $4.5 million in Florida federal court.
Multiple class actions were consolidated in the case, with plaintiffs alleging that Tom’s ran afoul of multiple state consumer protection laws and warranty statutes by using the term “natural” for various personal care products ranging from toothpaste to lip balm to deodorant. Tom’s claimed that “We do not use any synthetic flavors or fragrances. Our customers prefer the fresh, natural taste and smell of herbs, fruits and flowers (or no fragrance at all!).” But Tom’s used processed ingredients including xylitol and sodium lauryl sulfate, the plaintiffs alleged.
In their motion for preliminary approval of the deal, the plaintiffs told the court that the settlement satisfies the two goals of the litigation by providing redress to consumers and stopping Tom’s from further “continuing the systematic and continuing practice of disseminating the allegedly false and misleading information.”
With respect to the first goal, Tom’s agreed to create a non-reversionary fund of $4.5 million for class members, each of whom would receive $4 each for up to seven covered products, without proof of purchase. The class consisted of “hundreds of thousands” of product purchasers across the country dating back to March 25, 2009. If the number of claims exceeds or falls short of the available relief, the $4 will be proportionately reduced or increased on a pro rata basis.
As for the second goal, the company promised to provide information about each of the product ingredients on its website “in an easy-to-access manner,” and include a link on the front page for a three-year period. Tom’s will explain the company’s standards for the use of terms like “natural,” “sustainable,” and “responsible,” as set forth in its Stewardship Model.
To make its website consumer-friendly, Tom’s will provide its website address in a “conspicuous” location on all product packaging and, where practical, include language on its packaging about how to learn more about its Stewardship Model.
Tom’s also agreed to pay notice and administration expenses, $2,000 incentive awards for the named plaintiffs, and agreed not to object to a class counsel award of up to $1.5 million.
Calling the deal a “comprehensive and fair resolution” for the asserted claims, the plaintiffs requested that the court grant preliminary approval of the settlement. “[T]he root cause of the Actions will be resolved—Tom’s has changed its labeling and advertising to provide, in the most practical and conspicuous way possible, disclosures as to its definition of ‘natural’ so that consumers will receive the necessary notice to make informed decisions when purchasing the Covered Products,” the plaintiffs wrote. “Moreover, Tom’s has also agreed to compensate consumers who purchased the Covered Products prior to the modified disclosures, without requiring proof of purchase.”
To read the memorandum of law in support of preliminary approval of the settlement in Gay v. Tom’s of Maine, Inc., click here.
Why it Matters: Class action litigation challenging “natural” claims in advertising and labeling continues unabated, with Tom’s only the latest defendant to pay millions of dollars to settle a case. Church & Dwight paid almost $2 million in a suit over “natural” labeling for its deodorant while a suit over “natural” juice claims cost Naked Juice $9 million. In a statement, Tom’s emphasized that the deal “requires no change to our products, the claims we make on our current packaging, or our use of the term ‘natural,’” and that the company elected to settle “to maintain our focus on the consumers and communities we serve.”
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Every Penny Counts: Class Sues for Cash on Low Gift Card Balance
Dave & Buster’s violated California law by failing to cash out gift cards with a value of less than $10, according to a new putative class action filed in state court.
“The action, if successful, will enforce an important, ongoing right of consumers affecting the public interest and would confer a significant benefit, whether pecuniary or non-pecuniary, on a large class of persons (i.e., all California consumers who possess Defendant’s gift cards with a balance of less than $10),” according to the complaint.
Jason Skinner alleged that for the last several years, the company has violated a 2008 law mandating that businesses redeem gift cards with a balance below $10 for cash. Skinner himself requested cash when the balance on his Dave & Buster’s gift card fell below $10.
But his food server told him he could not receive cash and the balance had to remain on the card for future use at Dave & Buster’s. An investigation by the plaintiff’s attorneys prior to bringing suit resulted in similar exchanges with the defendant’s employees, who “consistently refused to honor valid requests for cash back on gift cards with a balance of less than $10,” according to the complaint.
The defendant’s advertising reflected this position, Skinner said. A statement on the back of its gift cards read: “This card will not be replaced if lost or stolen and user will not be issued any cash back.”
Both in practice and policy, Dave & Buster’s violates California law, the suit claims. In 2008, Senate Bill 250 included an amendment to a gift card law that requires that “any gift certificate with a cash value of less than ten dollars ($10) is redeemable in cash for its cash value.”
For violations of California’s gift card law and unfair competition law, the suit seeks an order that Dave & Buster’s comply with Senate Bill 250 and honor all requests for the cash value of a card with a balance of less than $10, and that it modify its gift cards and other advertising to comply with the law. In addition, the company should provide training and written instructions on the law for all employees, post notices in all California locations to inform consumers about their rights, and pay attorney’s fees and costs for the lawsuit.
To read the complaint in Skinner v. Dave & Buster’s Inc., click here.
Why it Matters: In his complaint, Skinner alleged that many retailers have failed to comply with Senate Bill 250. He cited a judgment against Cinemark USA in a case brought by the District Attorneys of Solano and Shasta Counties, as well as a $225,000 civil penalty levied against Starbucks after being taken to court by three DAs in the state.
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Webinar: Asked and Answered: Key Takeaways from the FTC’s Latest Social Media FAQ Guidance
In its latest social media FAQ guidance, the Federal Trade Commission has taken a “deeper dive” into forms of social media promotion that were in their infancy just a few years ago. If you are responsible for ensuring social media compliance, it is essential that you understand the requirements the FAQs clarify and appreciate the widening liability net. On Thursday, September 10, Manatt, Phelps & Phillips, LLP and Bloomberg BNA will host a complimentary CLE-accredited webinar, “Asked and Answered: Key Takeaways from the FTC’s Latest Social Media FAQ Guidance,” featuring Linda Goldstein, chair of Manatt’s Advertising, Marketing & Media practice, and Richard Cleland, Assistant Director for Advertising Practices in the FTC’s Bureau of Consumer Protection. The webinar will outline the latest practical strategies for running a high-impact social media campaign without putting your organization in legal jeopardy.
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Noted and Quoted . . . Manatt’s Winfree tells NutraIngredients-USA that the New York AG dietary supplement affair is not over yet, while Goldstein speaks to Advertising Age about Kim K’s endorsement of a pharmaceutical drug on Instagram
Duchesnay, the maker of the antinausea pharmaceutical drug Diclegis, is facing FDA violations after Kim Kardashian improperly endorsed use of one of its morning-sickness medications on Instagram. A warning letter from the FDA states that Kardashian's post, for which Diclegis paid her, “misleadingly fails to provide material information about the consequences that may result from use of the drug.” Linda Goldstein, chair of Manatt’s Advertising, Marketing and Media practice, told Advertising Age “If you are hiring celebrities, be sure you have proper controls in place.” To read "Kardashian Endorsement Fail: Celebrities and Social Media Still Cut Both Ways for Brands,” click here.
NutraIngredients-USA sought comment from Manatt partner Katherine Winfree for its report on allegations made by New York Attorney General Eric Schneiderman claiming that retailers were selling fraudulent herbal dietary supplements. “… it's fair to say that this is still very much of a live issue in New York, Indiana and some of the other jurisdictions that signed on,” said Winfree. To read “Even Sans Smoke, There's Still Fire in NYAG Affair, Expert Says,” click here.
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