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NATIONWIDE: An Introduction to USA - Nationwide

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Overview
As media and content evolves, marketers and their agencies continue to deploy strategies tailored to the digital age, from influencer marketing and native campaigns to mobile apps, cross-device tracking and consumer targeting. Despite the Trump Administration’s deregulation push, the Federal Trade Commission (FTC) has shown no signs of reducing enforcement actions against unfair or deceptive consumer marketing practices. The National Advertising Division of the Better Business Bureau (NAD) has followed suit, and state regulators have kept a close watch on privacy and cross-device tracking practices, especially in light of new EU data protection regulations.

Regulatory Landscape
The FTC saw a changing of the guard last year, with all five commissioner seats being filled between May and September of 2018. The new FTC’s focus has been on advertising and marketing practices that have the gravest harm to consumers, particularly those with health and safety implications.

For example, the FTC in September settled with the marketer of the iV Cocktail, an intravenously injected therapy product sold for between $100 and $250. The product was marketed as treating various diseases such as cancer, heart failure, multiple sclerosis, diabetes, fibromyalgia and neurodegenerative disorders, and the marketer claimed that its products were in some instances more effective and better-tolerated than conventional medical therapies for treating these conditions. The FTC alleged that these claims were false, or not supported by competent and reliable scientific evidence.

The last year also saw an increase in enforcement by state attorneys general. A number of these actions were coordinated among multiple states. For example, in January of 2019, the New York and Florida attorneys general settled with Devumi over its practice of selling fake social media followers and engagements to influencers. On a larger scale, the attorneys general of 46 states agreed to a $120 million consent judgment with Johnson & Johnson and DePuy over allegations that the companies exaggerated the longevity of their hip implant devices.

State attorneys general were also able to extract impressive settlements on their own. In December of 2018, the New York Attorney General agreed to a $174.2 settlement with Charter Communications, over allegations that Charter inflated the internet speeds that consumers would be able to achieve by accessing Charter’s network. Just days later, the New York Attorney General entered into separate settlements with Altice, Frontier, RCN and Verizon over similar allegations.

Native Advertising
Native advertising practices continue to grow and expand. The FTC has made clear in its Enforcement Policy Statement on Deceptively Formatted Advertisements and accompanying Native Advertising Guide for Businesses (Native Guides) that if consumers cannot distinguish native advertising from surrounding non-commercial content, disclosures such as "advertisement" are necessary to prevent consumer deception, especially in emerging digital and mobile formats. Now regulators may be primed to bring enforcement actions against those who fail to bring their practices into compliance, especially in light of the recent focus on endorsements and testimonials disclosures on digital platforms.

In particular, the NAD will continue to scrutinize paid influencer and native advertising practices in 2019, particularly as the line between advertising and editorial content blurs even further. In a recent action, the NAD asked Buzzfeed to substantiate various claims it made about a St. Ives moisturizer in a digital “shopping guide” of products that its editorial staff recommended to readers. After investigation, the NAD agreed that that the shopping guide was not advertising under its jurisdiction because it was not a “paid commercial message,” since the content was created independently without advertiser input and without commercial motivation, despite the presence of affiliate links in the article (which were added after the editorial content was fully developed).

Influencers
Regulators continue to focus on deceptive influencer marketing campaigns. In the Creaxion matter, the FTC alleged that the misrepresentations included paying thousands of dollars to two Olympic gymnasts to post endorsements for the product on social media without requiring them to disclose that they were paid, and by reimbursing employees and their "friends" who purchased the product and posted online reviews for it (again, without instructing these individuals to disclose their relationship with the advertiser in their posts). Notably, the FTC looked to the agency’s and publisher’s contracts, as well as their degree of involvement in the marketing materials, in determining which parties should be named in the action – but did not bring an action against the advertiser.

The SEC also brought its first case involving violations of endorsement regulations in connection with cryptocurrency investments. The SEC claimed that music producer DJ Khaled failed to disclose a $50,000 promotional payment he received from Centra Tech, a company that conducted an ICO for its “Centra tokens,” in his Instagram and Twitter posts touting the company, and that retired boxer Floyd Mayweather Jr. failed to disclose $300,000 in promotional payments he received from three ICO issuers, which he promoted on his Instagram, Twitter and Facebook accounts.

Influencers, marketers, publishers and networks are now on notice – those who do not comply with the Endorsement Guides or do not have procedures in place to comply with the most recent guidance may become the FTC’s – or even the State Attorneys General, the NAD or the SEC’s - next target. Regulators are equally willing to take action against marketers, agencies and publishers when their influencer campaigns fail to disclose sponsored content.

Privacy
On the heels of the General Data Protection Regulation coming into effect, California passed a sweeping consumer privacy law known as the California Consumer Privacy Act of 2018 (CCPA). The law is expected to significantly impact entities that collect and process the personal information of California residents. While the California Attorney General will not begin enforcing the CCPA until the earlier of six months after it issues implementing regulations or July 1, 2020, businesses should note that the law becomes effective on January 1, 2020.

Not to be outdone, other lawmakers have been introducing their own privacy and data security legislation, seemingly at an ever faster pace. These new (or amended) regulations set minimum data security requirements and practices for businesses that collect and process personal data. Additionally, they identify breach notification time periods, broaden the definitions of personal information and add safeguards with regard to the information of minors.

Mobile
The Advertising Self-Regulatory Council’s (ASRC) Online Interest-Based Advertising Accountability Program (Accountability Program), which enforces the principles set forth by the Digital Advertising Alliance (DAA), began enforcing the DAA’s enhanced notice requirements in interest based video ads in mobile and desktop environments. In its first decision focusing on video advertising, the ASRC reported that Vdopia's Chocolate, a mobile video advertising platform, failed to provide enhanced notice on interest based video ads served through mobile applications and did not obtain adequate consent to collect and use precise location data or provide information on how to withdraw consent. The ASRC issued an instructive decision which emphasizes the importance of meeting the requirements for transparency and control under the DAA’s mobile guidance including by providing enhanced notice of a company's IBA practices and collection of precise location data, as well as adequate "opt out" procedures.

NAD
The NAD mirrored the FTC by paying particular attention to health and wellness claims over the last year.

For example, in February of 2019, the NAD requested substantiation from Rite Aid over claims made in product displays and coupon pamphlets that various over-the-counter medicines were “#1 Doctor Recommended.” The claims were supplied by Rite Aid’s third-party manufacturers, and although Rite Aid indicated that it had received support from those manufacturers, it decided to voluntarily discontinue the claims at issue. The NAD did not review the claims on the merits, but affirmed in its decision that although retailers are not responsible for claims appearing on a manufacturer’s packaging, they are responsible for materials that “reasonably suggest that the claims are those of the retailer or are endorsed by the retailer.”

As in prior years, the NAD also brought a number of cases against supplement manufacturers for over-promising on the efficacy of their products. For example, in November, the NAD reviewed advertising claims that a drinkable supplement could “provide sun protection and repair benefits” and “protect and repair the skin from sun damage.” The NAD found that, although there was some evidence that the product may offer some small sun protection benefits when used in conjunction with sunscreen, shade and protective clothing, the advertiser failed to substantiate its broad, unqualified sun protection claims.