Interactive Counsel

Arent Fox's interactive media law blog - latest news and trends in advertising, data security & privacy, and IP.

Interactive Counsel

Blog Posts by Thorne Maginnis

Advertising
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FTC Obtains Court Order Banning Marketer from Negative-Option Sales

The Federal Trade Commission recently reached a settlement agreement over charges against an online marketing operation accused of deceptively luring consumers into expensive subscriptions by offering “free trials” of teeth-whiteners and related products. According to FTC, the defendants obtained consumers’ billing information under the pretense of a nominal fee before unexpectedly charging them up to $200 per month. The order imposes a judgment of over $92 million on the defendants and bans them from engaging in negative option sales in the future.

Negative option marketing refers to the practice of billing a consumer on a periodic, recurring basis for a product or service until the consumer affirmatively opts out of the subscription. While negative option marketing is legal when conducted appropriately, regulators are willing to pursue companies that abuse this practice.

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Product Placement & Distribution, Advertising
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FTC Fires Warning Shot Over Misleading Instagram Posts

What’s New?

The Federal Trade Commission recently sent more than 90 letters to celebrities, athletes, and other influencers reminding them that brand endorsements made in social media posts must comply with the FTC’s Endorsement Guides. The letters reminded social media influencers – individuals or groups recruited to promote a brand’s products or services – that social media endorsements must clearly and conspicuously disclose “material connections” between the influencer and the brand, and focused on the need to disclose such connection in Instagram posts.
 

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Advertising, Promotions, Sweepstakes & Contests
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Walgreens Settles Pricing Dispute After New York’s Years Long Investigation

What’s the News?

Walgreens recently settled with the state of New York over allegations that the drug retail chain misled consumers with its pricing, including value and clearance prices. According to the New York attorney general’s office, an undercover investigation showed that Walgreens was overcharging customers compared to the prices displayed in print advertising and on-shelf tags. Walgreens agreed to pay $500,000 to settle the dispute and has agreed to review and correct the allegedly misleading pricing practices. This should serve as a reminder to retailers in all industries of the need to exercise care in product pricing, as this area has become a common target for regulators and the plaintiff’s bar.

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Advertising, Media & Entertainment, Privacy & Security
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FTC Fires Warning Shot over Apps that Can Listen to Your TV

What’s the News?

The Federal Trade Commission recently issued warning letters to companies whose mobile applications contain cutting-edge software that can monitor consumers’ television viewing habits. The software, developed by the company Silverpush, utilizes the microphone on the user’s device to detect signals running in the background of television programming and collect information about the user’s programming interests. In its warning letters, the FTC has put app developers on notice that any false or misleading representations pertaining to their use of Silverpush technology could result in an FTC enforcement action.

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Payment Processing, Electronic Fund Transfers & Mobile Payments
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Costco Looks to Knock Out FACTA Receipt Class Action

What’s the News?

Costco Wholesale Corporation recently moved to dismiss a class action lawsuit alleging that the discount retailer printed more than the last five digits of a customer’s credit card number on her receipt, in violation of the Fair and Accurate Credit Transactions Act (FACTA). Costco argued in its motion that the document upon which the credit card number was printed – a longer document provided to the plaintiff by a customer service supervisor – was not actually a “point-of-sale” receipt within the meaning of FACTA, taking it outside the scope of the law. This case presents an interesting issue for companies as they seek to avoid costly and time-consuming litigation under FACTA.
 

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Advertising, Media & Entertainment
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Ninth Circuit Gives New Life to Grand Theft Auto Class Action

What the News?

In a recent opinion, the Ninth Circuit reversed the dismissal of a lawsuit against the developer of the highly-anticipated videogame Grand Theft Auto V. Two plaintiffs filed a putative class action, claiming that the game’s packaging made promises that the company did not keep. In particular, the plaintiffs asserted that the packaging suggested the game included an online, interactive component, when in fact this functionality was not available to users at the time the game was released. While the district court found that the plaintiffs had not properly stated a claim for relief in their complaint, the Ninth Circuit disagreed, stressing the plaintiff-friendly standard for a motion to dismiss for failure to state a claim. The case presents an interesting issue for advertising related to videogame capabilities.=

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E-Commerce, Payment Processing, Electronic Fund Transfers & Mobile Payments
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Amazon Fights Injunction in FTC Action Over In-App Billing Practices

Practical Guidance

  • In-app purchasing remains a priority for regulators.  
  • Companies with mobile apps should incorporate password protection and informative prompts to obtain informed consent from account owners for in-app purchases.

What the News?

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Advertising, Promotions, Sweepstakes & Contests
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Deal or No Deal? Class Action Alleges Macy’s Offered Misleading Sale Prices

What’s the News?

Macy’s, Inc. and subsidiary Bloomingdale’s, Inc. were recently served with a class action complaint alleging that the retail chains misled consumers with a “phantom pricing scheme” that inflated the savings available on items marked for sale. According to the complaint, the stores listed artificially high “regular” prices on “sale” items, increasing, by comparison, the savings that consumers believed they were receiving. This is the latest of several recent class action lawsuits attacking retail pricing strategies, and it serves as a reminder to retailers nationwide to be careful when using price comparisons.

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Advertising
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FTC Says Retailers Bamboozled Customers with Misleading “Bamboo” Products

What’s the News?

The Federal Trade Commission has a reached a settlement agreement with several major retailers, including Nordstrom, Bed Bath & Beyond, and JCPenney, over claims that they improperly labeled and advertised rayon products as being made of bamboo. According to the FTC, rayon—a chemically manufactured fiber that is sometimes created from bamboo—is not the same as bamboo, making the companies’ “bamboo” claims improper. In addition to injunctive relief, the companies have agreed to pay over $1 million dollars under the settlement. 

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Media & Entertainment
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“World of Warcraft” Creator Takes Battle to Court over Game’s Characters

What’s the News?

A federal judge in the Northern District of California recently dismissed a complaint in which video game producers claimed that characters from their games had been misappropriated by competing developers, in violation of copyright law. While characters are, in some cases, entitled to copyright protection, the court held that plaintiffs in such cases must state with considerable specificity which characters were allegedly infringed, and why those characters are copyrightable. General allegations of idea theft, the court explained, will not survive a motion to dismiss. 
 

Background

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Publicity Rights, Gaming & Interactive Media
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Imitation the Sincerest Form of Flattery? Court Dismisses Video Gamer’s Right of Publicity Claim

What’s the News? 

A judge in New Jersey federal district court recently dismissed a lawsuit brought against The Cartoon Network by a renowned video gamer. In particular, the plaintiff claimed in Mitchell v. The Cartoon Network, Civ. No. 15-5668 (D.N.J., November 20, 2015), that the network violated his right of publicity by depicting an animated version of him, without permission, in an episode of The Regular Show. The court, however, disagreed, holding that the network’s representation of the plaintiff was a parody entitled to First Amendment protection.

 

Background on the Case

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Health Privacy & Security, Mobile Marketing, Advertising
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National Advertising Initiative Updates Rules for Data Collection on Mobile Apps
The Network Advertising Initiative (NAI), an advertising industry trade group for third-party advertisers, recently released the 2015 update to its Mobile Application Code. The App Code is a set of self-regulatory principles governing the data collection practices of NAI member companies in the context of mobile app advertising. The purpose of the 2015 update is to clarify certain obligations for NAI member companies under the App Code. 
 

The App Code

 
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Advertising, E-Commerce, Mobile Marketing, Privacy & Security
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Cross-Device Tracking: The New Frontier in Interest-Based Advertising

What’s the News?

The Federal Trade Commission recently hosted a public hearing on “cross-device tracking.” The agency invited representatives from the advertising industry, academia, and consumer protection groups for a discussion on this increasingly prevalent data collection practice. The hearing shows that cross-device tracking is clearly an area of interest for the agency, and signals the possibility of increased scrutiny from regulators. Consequently, advertisers engaged in cross-device tracking should review their practices to ensure compliance with applicable laws and self-regulatory principles.  
 

What is Cross-Device Tracking?

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Advertising
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Is the Price Right? Nordstrom Facing Class Action Over “Compare At” Pricing

What’s the News?

A federal judge for the Southern District of California recently held in Branca v. Nordstrom, Inc. that a class action could proceed with claims that Nordstrom made deceptive savings claims at a Nordstrom Rack store. In particular, the plaintiff alleged violations of California state law, claiming that Nordstrom listed higher “Compare At” prices next to sale prices, when the items had never been offered at that higher price by Nordstrom or other retailers.
 

Background on the Case

 
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Publicity Rights
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District Court Gives Go-Ahead to Marilyn Monroe’s Estate on False Endorsement Claim

What’s the News?

A federal judge in the Southern District of New York recently held in A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, LLC that the Lanham Act protects rights in a celebrity’s image long after his or her death. Specifically, the court determined that Marilyn Monroe’s estate could proceed with a Lanham Act false endorsement claim against a vintage collectibles licensor who was creating and marketing various products featuring images of the iconic celebrity. Notably, the court issued this holding over the licensor’s objection that the false endorsement claim was a “thinly veiled” attempt to enforce publicity rights, a separate type of claim not available under the Lanham Act.
 

The Legal Backdrop: Milton H. Greene Archives, Inc. v. Estate of Marilyn Monroe, LLC

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Advertising
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Industrial Parts Manufacturer Rockwell Accuses Unauthorized Distributor of Lanham Act Violations

Rockwell Automation, Inc. (Rockwell), a leading industrial parts manufacturer, recently sued industrial parts distributor Radwell International, Inc. (Radwell), alleging numerous violations of the Lanham Act, including claims of trademark infringement and false advertising, as well as multiple violations of state unfair competitions laws.  According to the complaint, Radwell has sold various Rockwell-branded products without authorization, while falsely claiming that these products are warranted by Rockwell.  The case, Rockwell Automation, Inc., v. Radwell International, Inc., No. 1:15-cv-05246 (D. N.J. filed July 6, 2015), is currently pending in New Jersey federal district court.
 

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Promotions, Sweepstakes & Contests
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FTC Takes on Fraudulent Crowdfunding Campaign

What’s the News?
 
The Federal Trade Commission (FTC) recently announced the settlement of a complaint alleging deceptive trade practices in relation to a crowdfunding campaign. According to the FTC, the campaign’s organizer failed to live up to various promises made during the campaign, including promises pertaining to the rewards that individuals contributing funds (commonly known as “backers”) would receive in return for their contributions and how donated funds would be used. The case—the FTC’s first involving crowdfunding—is a clear signal to those engaging in the popular fundraising strategy of the importance of making good on all promises and representations made to backers.  
 
More on Crowdfunding and the Settlement
 

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Big Brother for Hire: FTC Cracks Down on Consumer Tracking Company

What’s the News?
 
The Federal Trade Commission (FTC) sent a new warning for companies engaged in geolocation tracking. Specifically, the FTC recently reached a settlement agreement with Nomi Technologies (Nomi), a company that offers services allowing retailers to track the movements of customers in and around their stores. The FTC claimed that Nomi engaged in unfair and deceptive practices by failing to provide an opt-out for consumers subject to the tracking, despite contrary assurances in the company’s privacy policy.
 
Nomi’s Tracking Technology
 

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Privacy & Security
Agreement Reached on Sale of Consumer Data in RadioShack Bankruptcy

What’s the News?
 
A US Bankruptcy Judge recently approved the sale of a package of RadioShack’s intellectual property assets—including consumer data obtained from RadioShack customers—to General Wireless Inc., the hedge fund affiliate that acquired over 1,700 RadioShack stores in February. The sale was not without controversy.

Major technology companies Apple, Inc. and AT&T Mobility Inc., as well as state and federal regulators, flagged concerns about the disposition of consumer data through the iconic technology retailer’s unwinding. In order to resolve these issues, the agreement approved by the judge places strong limitations on the consumer data that RadioShack will convey to General Wireless. Given that bankruptcy law imposes relatively few limitations on the transfer of consumer data, the conditions placed on this sale could become a standard to which other courts look for guidance.
 

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Privacy & Security, Song-Beverly Act
Court Finds Online Data Collection Legal under California’s Song-Beverly Act

What’s the News?

A California appeals court recently held in Ambers v. Beverages & More, Inc. that retailers are permitted under state law to request customers’ personal information when goods are purchased online but picked up in person. While California’s Song-Beverly Credit Card Act (Song-Beverly) prohibits the collection of personal information in connection with many in-store transactions, courts have found it to have limited applicability to online purchases. Although the plaintiff Michael Ambers did collect the purchased goods in person, the court found that the transaction was completed online and, thus, that defendant BevMo had not violated the law by asking him to provide his address and telephone number.

This case is the latest in an ongoing effort by California courts to determine the scope of Song-Beverly—adopted in the 1971—in the digital economy.

More on the Case

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