Prudent retailers and brands need to monitor advertising and marketing law-related enforcement trends so they can steer away from potential legal challenges.
The Federal Trade Commission is experiencing a major shakeup this year, with several new commissioners slated for approval. The changing composition of the FTC has led many to believe that the newly-appointed commissioners will be less active than their predecessors – or at least less inclined to seek financial penalties for certain marketing tactics – but that they will still target advertising practices that deceive and harm consumers. Moreover, state regulators and consumers are heavily monitoring these trends, too. Therefore, to the extent that we see somewhat lighter enforcement from the FTC in the next few years, we may well see more aggressive enforcement activity at the state level.
Either way, prudent retailers and brands need to monitor advertising and marketing law-related enforcement trends so they can steer away from potential legal challenges by state and federal regulators, consumers, and competitors. A review of enforcement trends and priorities identified by attorneys at the FTC and the Better Business Bureau’s National Advertising Division and other industry professionals, as well as recent activity in advertising and marketing law, highlight five key areas for retailers and brands to consider. They include:
Disclose material connections with influencers and endorsers—and ensure that they disclose too. In September 2017, the FTC updated its Endorsement Guides FAQs to further address how to communicate information about meaningful, incentive-driven relationships between brands and endorsers, including by providing more guidance on both acceptable disclosure language and the location of disclosures. The agency emphasized that influencers and endorsers must disclose their incentive-driven relationship with a company in all advertising and promotional content, no matter the media or platform, and companies using influencers and endorsers are expected to develop policies and procedures consistent with the FTC’s emphasis on disclosure and effective compliance monitoring. Disclosures do not need to be complicated: For example, the FTC notes that if a person was given a free product to post about a brand in social media, then a simple disclosure such as “Company X gave me this product to try” should be sufficient. The FTC also reiterated that the disclosure responsibilities apply both to brands and their influencers, issuing over 90 warning letters to brands and influencers in April 2017 questioning whether they were truthfully and adequately disclosing their incentive-based relationships. Expect enforcement activity in this area to continue.
Ensure that terms and conditions comply with ROSCA and state automatic renewal laws. If you offer free trials that convert to a paid subscription service or other recurring billing services that automatically renew, then you must comply with the federal Restore Online Shopper’s Confidence Act (ROSCA) and related state laws that establish requirements for how, when, and what consumers must be told about Internet transactions, subscription plans, and free trials that convert to paying plans. In particular, California’s automatic renewal law has been a favorite of plaintiffs’ attorneys and was recently updated to expressly require businesses to disclose the price that the consumer will be charged after the free trial ends, among other changes. At a high level, clear and conspicuous disclosure and express consent to the terms are key.
Make sure your product is really “Made in USA.” The FTC will be watching for false “Made in USA” claims. According to the FTC, products advertised or labeled as “Made in USA” without qualification must be “all or virtually all” made in the United States. The FTC takes the position that “all or virtually all” means that all significant materials and processing that go into the product must be of U.S. origin and that “the product should contain no—or negligible—foreign content.” Retailers should review whether they have sufficient support for unqualified or qualified “Made in USA” claims under federal law and state laws. California, for example, has very specific “Made in USA” compliance requirements.
Support your health claims. Any claim that a product is good for you, is healthier than competitor products, or will have a positive impact on your health is potentially subject to greater scrutiny by regulators, consumers, and plaintiffs’ attorneys. Such health and safety claims must be substantiated with competent and reliable scientific evidence, according to the FTC. The FTC is also focused on protecting vulnerable consumers, including older Americans, so carefully vet and qualify any health claims before launching your marketing campaign.
Don’t overstate your “green” claims. The FTC is keeping a close watch on claims that a product is “green,” “organic” or “natural,” and it takes the position that broad, unqualified “eco-friendly” claims are not able to be substantiated. As such, advertising must not expressly or impliedly communicate more than the company can actually substantiate (e.g., stating that a product is “emission-free,” when, in fact, some emissions inevitably occur). Moreover, companies should ensure that any “green seals” or certifications are legitimate and that consumers are not misled into believing that a third party provided certification when the certification was actually bestowed by the company itself.
Political administrations come and go and the composition of regulatory agencies, whether at the federal or state level, also change. While these moves can impact enforcement actions and penalties, marketing and advertising practices that misinform or deceive consumers are always looked upon unfavorably.
Jason Howell and Amanda Beane are partners with Perkins Coie, LLP, a Seattle-based firm with more than 1,000 lawyers in 19 offices throughout the United States and Asia. Howell co-chairs Perkins Coie’s Advertising, Marketing & Promotions Practice and Beane specializes in matters relating to consumer protection, unfair competition and the ADA.