Full Disclosure: Instagram to Help Influencers With Compliance
By Richard P. Lawson, Partner, Advertising, Marketing and Media
On the heels of dozens of letters sent by the Federal Trade Commission (FTC) to influencers and marketers, cautioning them to make appropriate disclosures on social media, Instagram announced that it will make the disclosure process easier for its users.
Those who work with sponsors will soon be able to tag a brand within their posts. If the brand confirms the relationship, the post will be marked as an ad with a “paid partnership with [brand name]” tag at the top.
The new system is currently being tested on a few celebrities and businesses. If successful, it will be rolled out more widely on the social networking site. “Our goal is to get a ton of feedback,” Charles Porch, head of global creative programs at Instagram, told Bloomberg. “It’s all about transparency within the community.”
Instagram’s new feature appears at just the right time. The FTC recently sent more than 90 letters reiterating that influencers and marketers must clearly disclose their relationships to comply with the agency’s Endorsement Guides.
The agency specifically called out Instagram in its letters, noting that consumers who view posts in their streams or on mobile devices typically see only the first three lines of a longer post unless they click “more,” which many consumers do not do. “Therefore, an endorser should disclose any material connection above the ‘more’ button,” wrote Mary K. Engle, associate director of the FTC’s Division of Advertising Practices. “In addition, where there are multiple tags, hashtags, or links, readers may just skip over them, especially where they appear at the end of a long post.”
Instagram’s new feature appears to alleviate these concerns, although the company cautioned that it wasn’t guaranteeing compliance. “This is actually something we’ve done internally on our own,” without the urging of the FTC, Porch said. “Every creator should defer to their local authority that gives best practices.”
To read Instagram’s announcement, click here.
Why it matters: The new feature could prove beneficial to both influencers (who will hopefully comply with the FTC’s Endorsement Guides and avoid an enforcement action from the agency) as well as marketers, who will be able to access data about the post’s engagement with Instagram users because of the tag.
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Two Pasta Sauces and a Baby
By Jeffrey S. Edelstein, Partner, Advertising, Marketing and Media
The depictions of baby “experts” in a broadcast advertisement for Prego Traditional pasta sauce are puffery, and do not constitute a claim about the preferences of toddlers, the National Advertising Division (NAD) determined.
Competitor Mizkan America Inc., manufacturer of Ragu pasta sauce, challenged claims in a television ad made by Campbell Soup Company for Prego Traditional pasta sauce. The commercial featured two toddlers on a split screen while a voice-over stated: “We took lifelong pasta experts and gave one Prego Traditional and one Ragu Traditional. This is what happened.”
The child given Prego was shown delightedly eating all of his pasta until his bowl was empty and he had sauce all over his face. On the other half of the screen, the baby with Ragu looked askance at the pasta and refused to eat it. The commercial ended with the statement: “That’s because even Ragu users prefer the taste of Prego Traditional 2-to-1” while a super appeared that read, “Taste test ages 6 and up. Prego Traditional vs. Ragu Old World Style Traditional.”
Mizkan expressed concerns about the truthfulness and accuracy of the commercial, noting that a preference claim based on toddlers would be difficult, if not impossible, to substantiate and that the test relied upon by Prego involved those age six and older. The advertiser responded that the babies were used as a humorous device and the ad did not reasonably convey the message that there was a taste test that involved babies.
The NAD agreed. “The depiction of the toddlers in the commercial amounts to puffery and does not constitute a claim about the preferences of toddlers,” the self-regulatory body wrote. Consumers intuitively understand that it is not possible to accurately conduct a taste test using the preferences of very young children, and the humor is reinforced by tongue-in-cheek references to the babies as “lifelong pasta experts.”
“The vignette that follows bolsters the joke about their ‘expertise,’ with one child ending up with as much sauce and pasta on his face as in his mouth and the other refusing to eat altogether,” the NAD said. “While the imagery generally paints the picture that eating Prego is an enjoyable experience for the one toddler and less so for the other, the juxtaposition serves as a depiction of the advertiser’s general opinion that its sauce tastes better, not a provable claim that very young children definitively prefer one sauce to the other.”
In addition, the population that served as the basis for the taste preference claim (Ragu users) was expressly stated in a clear and conspicuous manner, the NAD said, and the advertisement separated the discussion of the preference claim from the depiction of toddlers eating pasta by using the phrase “that’s because.”
The self-regulatory body did recommend that Prego make clear the specific Ragu product being used as a basis of comparison for its claim, since the challenger has multiple “traditional” pasta sauces.
To read the NAD’s press release about the case, click here.
Why it matters: While the NAD recognized that preference claims “can be quite persuasive,” it had little difficulty determining that humorous imagery of two toddlers eating pasta in a “taste-off” montage was puffery, not a provable claim that babies definitively prefer one product over another.
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FTC Adds More Claims Against Invention Promotion Defendants
By Richard P. Lawson, Partner, Advertising, Marketing and Media
Adding more charges against the defendants, the Federal Trade Commission (FTC) has amended its complaint against the operators of an invention promotion scheme.
In March, the agency filed suit against Scott Cooper and his companies, World Patent Marketing and Desa Industries Inc., accusing the defendants of violating Section 5 of the Federal Trade Commission Act by claiming they would analyze, file and promote inventions and then failing to follow through on their promises.
According to the agency, the defendants tricked consumers with fake “success stories” and testimonials to induce them to pay thousands of dollars to patent and market their inventions, with a price tag of up to $1,295 for a report from an “expert” about the viability of a patent. Once the analysis arrived, consumers faced another bill, the FTC alleged: this time for packages, ranging in price from $7,995 to almost $65,000, of various services that would help the consumer earn money from their inventions and see the product sold at big-name retailers. However, consumers were then strung along for months and received, at best, “low-effort, low-value” marketing help, the FTC said.
In the amended complaint, the Commission added new false advertising allegations based on the defendants’ claims that its clients’ products were sold in multiple “big box” stores, including Best Buy, Lowes, Petco, Sears, Target, The Home Depot, Walgreens and Walmart. None of the defendants’ customers’ inventions were sold in any brick-and-mortar stores, the FTC said.
The defendants also claimed to have brokered licensing deals between its clients and a manufacturing plant of the Chinese arm of its business, “WPM China.” But the FTC alleged the defendants do not own a manufacturing plant in China and that “WPM China” does not exist.
A Florida federal court granted the agency’s motion for a temporary restraining order and froze the defendants’ assets pending litigation.
To read the amended complaint in FTC v. World Patent Marketing, click here.
Why it matters: The FTC characterized the action as one “about protecting innovators, the engine of a thriving economy,” as FTC Acting Chair Maureen K. Ohlhausen described the original complaint.
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Data Breach Lawsuits Continue to Fill the Courts
By Jesse M. Brody, Partner, Advertising, Marketing and Media
Data breach litigation continues to fill the courts in all stages, with a new class action filed against Tempur Sealy International and the dismissal of a suit against Barnes & Noble.
In the new action, New York resident Michelle Provost claims that Tempur Sealy (and Aptos Inc., the company’s website host) failed to appropriately safeguard customers’ personal information. The defendants’ poor data security practices and decision not to abide by best practices and industry standards resulted in a February 2016 breach that compromised sensitive consumer data, including names, addresses, email addresses, telephone numbers, and payment card account numbers and expiration dates, the plaintiff alleged.
“Defendants allowed widespread and systematic theft of their customers’ personal information,” according to the complaint. “Defendants’ actions did not come close to meeting the standards of commercially reasonable steps that should be taken to protect customers’ personal information.”
The defendants also waited too long to disclose the extent of the breach and notify affected consumers in a timely manner, Provost claimed. She used her debit card to make two purchases from the Tempur Sealy website in 2016, but when she reviewed her bank statements after being notified of the breach, she found at least one fraudulent charge that was incurred after the hack occurred.
Aptos became aware of the breach in November 2016 but held off informing Tempur Sealy until February 2017 (upon the instructions of law enforcement). Tempur Sealy didn’t give its customers a heads-up until April 2017, and neither defendant has yet to disclose the full extent of the breach, Provost added.
Asserting claims against the defendants for violations of state consumer protection statutes, state data breach statutes, negligence, breach of implied contract and unjust enrichment, the action seeks to recover actual and statutory damages as well as injunctive relief to prevent another breach, including an order requiring the defendants to implement and maintain adequate security measures.
In a separate action, Barnes & Noble was able to dodge consolidated litigation based on similar claims after hackers stole customer credit and debit information from PIN pad terminals in 63 stores in nine states in September 2012. The court dismissed the first two complaints for lack of standing and failure to plead a viable claim, respectively.
The plaintiffs’ third effort was not the charm, despite the fact that they dropped some claims and added factual allegations about their injuries, namely that one had her bank account put on hold, had to spend time with police and bank employees sorting out her financial affairs, lost the value of her personally identifiable information (PII), and suffered emotional distress because she had to renew her credit monitoring service to protect against future fraud.
But U.S. District Court Judge Andrea R. Wood was not persuaded that the updated complaint alleged economic or out-of-pocket damages caused by the data breach, as required by the breach of contract, Illinois Consumer Fraud and Deceptive Business Practices Act, and California Unfair Competition Act claims.
“Plaintiffs’ alleged injuries as to the value of their PII, their time spent with bank and police employees, and any emotional distress they might have suffered are not injuries sufficient to state a claim,” the court said. “In a similar vein, Plaintiffs’ temporary inability to use their bank accounts is also insufficient to state a claim—the temporary inability to use a bank account is not a monetary injury in itself, and Plaintiffs have not set forth any allegations about how they suffered monetary injury due to the inconvenience of not being able to access their accounts.”
Cellphone minutes lost speaking to bank employees were a de minimis cost and too attenuated from Barnes & Noble’s conduct to qualify as a redressable injury, the court added. As for the plaintiff’s renewal of her credit monitoring service, she failed to plausibly allege that the purchase was attributable to the breach, the court said. The plaintiff alleged that the data breach only played a part in her decision to renew the service, “and thus this alleged injury is still insufficient to state a claim.”
Granting the defendant’s motion to dismiss, Judge Wood said further opportunities for amendments to the complaint “would be futile,” dismissing the suit with prejudice.
To read the complaint in Provost v. Aptos, Inc., click here.
To read the order in In re Barnes & Noble Pin Pad Litigation, click here.
Why it matters: The cases demonstrate the challenges facing data breach cases—the difficulties of establishing standing as well as stating a viable claim, as found in the Barnes & Noble litigation. Despite these uphill battles, plaintiffs (like those in the suit against Tempur Sealy) continue to file class actions.
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