ADVERTISING & MARKETING LAW Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved.

Transcription

1 ADVERTISING & MARKETING LAW 2015 Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved.

2 Agenda Panel 1: Key Legal Considerations and Developments in Advertising Panel 2: When the Growing Gets Tough: Compliance Issues in Growing Your Customer Base Panel 3: Best Practices for New Technologies and Approaches to Advertising & Marketing

3 Key Legal Considerations and Developments in Advertising & Marketing Law John L. Landolfi Partner Presented By: Vorys, Sater, Seymour and Pease LLP Eric S. Whisler Associate

4 Why Do We Care? Advertising is highly regulated Federal Trade Commission ( FTC ) regulations Advertising must be truthful Advertising must not be deceptive Advertisements must not be unfair Advertisers must have evidence to back up their claims State consumer protection laws (e.g., deceptive trade practices acts, consumer sales practices acts, etc.) Competitor lawsuits (e.g. Lanham Act)

5 No False and Deceptive Advertising Applies to statement or omission that: Is likely to mislead consumers How a reasonable consumer would interpret For example, a reasonable consumer would not assume a Danish pastry was made in Denmark. Can be either an express or implied claim. Is material : important to a consumer s decision to buy or use the product

6 What Makes an Advertisement Unfair? An advertisement is unfair if: It causes or is likely to cause substantial consumer injury; Monetary harm (such as coercion into buying unwanted or defective goods). Unwarranted health and safety risks can also amount to substantial injury. An act or practice that causes a small amount of harm to a large number of people. The consumer could not reasonably avoid such injury; Depends on the extent to which an ordinary consumer is able to assess alternatives and evaluate the quality of a product. It is not outweighed by the benefit to consumers or competitive benefits.

7 Continuum of Risk Shades of Gray Possible Penalties: Cease and desist orders. These orders can include various kinds of reporting requirements for new ads and substantial monetary fines for violation of the order. Civil penalties (from thousands of dollars to millions depending on extent of violation), consumer redress, and other monetary remedies; the FTC may require that refunds be issued. Corrective measures, e.g., new ads designed to correct misinformation presented in old ads.

8 The FTC Requires Advertisers to be Capable of Backing Up Their Statements Reasonable basis requirement claims must be capable of being reasonably substantiated by objective evidence. Must be able to back up express claims. For example, if an ad claims eight out of ten customers prefer X product over Y product, a reliable survey supporting such a statement should be available for production. Subjective claims (i.e., puffery) receive less scrutiny. Example: Better Ingredients. Better Pizza. The Fifth Circuit Court of Appeals concluded that this advertising statement was non-actionable puffery in a case brought by Pizza Hut against Papa John s in 2000.

9 FTC Deceptive Advertising Enforcement In the matter of Sony Computer Entertainment America LLC (2014) FTC alleged that Sony deceived consumers in its advertising of its handheld device, the PS Vita, by deceptively touting the availability of live online play and integrated cross-platform connectivity with its PlayStation 3 gaming console. In fact, live online play was nearly non-existent, most games were not cross-playable, and those that were required consumers to buy two copies of the same game. As part of the settlement, Sony is barred from making similar claims, and will offer $25 cash (or a $50 merchandise voucher) to consumers who purchased a PS Vita.

10 FTC Deceptive Advertising Enforcement (cont d) FTC v. POM Wonderful LLC (2015) Complaint alleged that POM made misleading statements about health benefits of its juice, including that it prevented various diseases and ailments, without supporting scientific research. DC Circuit agreed with the FTC: POM deceptively advertised that its products could treat, prevent, or reduce the risk of these conditions, without supporting evidence. Before making such claims, POM must conduct at least one randomized, well-controlled human clinical trial. FTC s conclusion: Advertisers who market products for serious health conditions must have rigorous science to back up those claims.

11 Comparative Pricing FTC and state law regulations govern comparative pricing, i.e., favorable comparisons to a regular or former price Trigger words: regularly was you save $_ originally formerly

12 Comparative Pricing (cont d) Regular price typically means the price for which the item has recently been sold in its same quality. If a variable price, the regular price is the lowest price for which substantial sales were made during a significant span of time preceding the promotion. Better Business Bureau additional element: if there have not been substantial actual sales, then a comparison to a former price requires that the former price does not exceed the advertiser s usual and customary markup for similar merchandise.

13 Laws From State to State For example: California: the regular price is the local market price prevailing within the prior three months Massachusetts: either: (a) 30%+ of the seller s sales in the preceding 12 months must have been made at the former price OR (b) the comparison must be made during a 180 day period after the former price, and the product not be offered for sale at a lower price for more than 45% of that price

14 Use of the Word Free in Advertising The FTC is especially interested in regulating use of the word free because it is a very powerful marketing weapon. Free means that the price of the item will not be imposed on the mark-up of another item or by the substitution of inferior merchandise or service. For example, in a buy 1, get 1 free promotion, a purchaser should pay nothing for the article being promised as free and no more than the regular price of the other item.

15 Meaning of the Word Free Any special conditions must be disclosed. All terms, conditions and obligations related to the promotion should be in close proximity to the word free.

16 Various State Limitations Not more than 6 months in any 12-month period in same geographic area. No more than three such offers during the same 12-month period. Sales of the free item should not exceed 50% of the total volume of sales of the product during the promotion period.

17 Disclosures Should be clear and conspicuous so that consumers can actually notice and understand them. Should never contradict or substantially change an important element of the ad. Should not be designed to clear up a misimpression that results from ambiguity.

18 Size and Location No hard and fast rule it is a performance standard. The disclaimer should be easy to find and in a font large enough to read. Does not need to match the font that is the size of the promotion.

19 Key Disclosures Start and end date How will sales tax and shipping & handling be applied? Can it be combined with other offers? Must specify exclusions No substitutions While supplies last Limitation on number, i.e., Limit One Per Customer Minimum purchase requirements Third party restrictions Conditions on returns

20 Application to New Media Smartphones This ad must disclose that the diamond weights are not exact and that a 3/4 carat diamond may weigh between.72 and.78 carats. Here, though, because of the blank space between the textual description of the product and the disclosure, even consumers who scroll down to the end of the text (see second screen) will probably think that there is no more information to view and are likely to miss the disclosure.

21 FTC Operation Full Disclosure Fall 2014: FTC Guidance on disclosures in print, video, online, and mobile app advertising. Warning letters sent to more than 60 companies (including 20 of the 100 largest national advertisers). Faulting advertisers for improper, incomplete, or otherwise inadequate disclosures.

22 FTC Operation Full Disclosure (cont d) Examples of disclosure issues addressed in FTC warning letters: Claim What was not disclosed adequately Advertised price of product or service Product demonstration Advertised free services with product Consumer ability to choose any service product with product Try risk free or worry free Accessory or service included Automatic billing feature, or conditions for obtaining that price Altered to speed elapsed time Limitations on the services, including how long they are free Product would not work with a leading service provider Consumers had to pay for initial and/or return shipping Need to purchase additional or alternative products/services

23 FTC Operation Full Disclosure (cont d) Clear and conspicuous disclosure requires: Contrasting, easy-to-read font, color, and text size. Appearing for a sufficient length of time. Near claims it seeks to qualify (same general area of ad, or same shot of a video). In language a consumer will understand. False claims cannot be cured with contradictory disclosures or footnotes!

24 Application to New Media Web Sites Hyperlinks should not be used to communicate disclosures that are an integral part of a claim or inseparable from it, including important health and safety information. Any disclosure that is integral to the primary claim should be immediately adjacent to that claim. Example: Important health information

25 Endorsements & Testimonials

26 Endorsements & Testimonials The FTC s Guides Concerning Use of Endorsements and Testimonials in Advertising Help ensure that use of endorsements and testimonials in advertising are not unfair or deceptive. No fines, but corrective action (including redress) possible for practices that are inconsistent with the Guides.

27 Endorsements & Testimonials Basics Should be genuine, i.e. based on actual use and knowledge; should actively use the product. Should be sincere opinion can t say a product was great when you truly thought it was terrible. Should not contain any misstatement of fact or misleading implications.

28 Endorsements & Testimonial Basics (cont d) Substantiation Data to support statements Must also substantiate that the product or service is effective for purpose depicted Typicality Can no longer use these results are not typical or you should not expect similar results Must instead disclose what results are generally achieved

29 FTC Endorsement Guides Disclosing Material Connections Could connection affect weight or credibility of endorsement Examples: employees, free products to bloggers, incentives Disclosure must be clear and conspicuous

30 In re AmeriFreight, Inc. (2015)

31 In re AmeriFreight, Inc. (2015) (cont d)

32 In re Deutsch LA (or Sony Part II)

33 Influencers & Bloggers

34 Influencers & Bloggers (cont d) Compliance Steps Require agreements Monitor for proper disclosures Enforce policy to deal with non-compliance

35 Contest Endorsement Issues Cole Haan Pinterest Contest