NATIONWIDE: An Introduction to Advertising: Transactional & Regulatory

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. With the new administration firmly in place, we can expect to see the Federal Trade Commission (FTC) at least maintain, and more likely increase, enforcement actions against unfair or deceptive consumer marketing practices in the coming years, with The National Advertising Division of the Better Business Bureau (NAD) and many state regulators following suit. Regulators will continue to seek interest in consumers, ever an important issue especially in light of new state laws, such as the California Consumer Privacy Act (CCPA) and the California Privacy Rights Act (CPRA), which are becoming a de facto national standard.

Regulatory Landscape 

The FTC and other regulators have found themselves particularly busy over the last year due to the COVID-19 pandemic.

During the course of the pandemic, the FTC has sent hundreds of warning letters to marketers of COVID-19 treatments. These letters addressed products ranging from acupuncture and electrical zappers, to IV treatments and ozone therapy, all of which promised to prevent, treat or cure COVID-19.

State attorneys general were also very active in policing false and deceptive practices involving COVID-19 on the local level. The problem became so bad that in December, Congress passed the COVID-19 Consumer Protection Act, which makes it illegal to engage in deceptive marketing with respect to the COVID-19 pandemic and empowers the FTC to seek monetary penalties for first time violations.

The FTC brought its first case under the law against a marketer of vitamin D and zinc supplements who claimed that “COVID-19 patients who get enough vitamin D are 52% less likely to die,” and ignored a prior warning letter sent by the FTC over these practices.

The FTC has also been particularly active in policing false or deceptive “Made in the USA claims.” In June of 2020, the FTC proposed its Made in the USA Labeling Rule, which formalizes the FTC’s previous guidance and makes civil penalties available to the FTC. Under the proposed rule, Made in the USA claims can only be made where all or virtually all of a product’s inputs were sourced in the USA, and the product itself was assembled or manufactured in the USA. The FTC has also continued to enforce its existing Made in the USA Guides, and obtained a $1.2 million settlement from Chemence over allegations that it falsely claimed that its glue products were “Made in USA.”

Charitable solicitation laws have also come to the forefront, as the FTC and state AGs have attempted to stop a wave of fake charities that claimed to benefit victims of several hurricanes and wildfires that occurred in 2020. And, in one particular brazen case, The Black Lives Matter Foundation – which is unaffiliated with the Black Lives Matter movement - fraudulently collected over $4 million, prompting a rebuke from the New York and California AGs.

One industry that was hit particularly hard by regulatory activity was the delivery industry. Amazon recently agreed to pay $61.7 million in redress to the FTC over allegations that it falsely claimed that 100% of tips would go to delivery drivers, when it in fact withheld those amounts or used them to offset reductions in driver pay. DoorDash settled a $2.5 million class action over similar allegations. And Instacart was sued by the Washington D.C. Attorney General over allegations that it implied that an “optional” service fee would go to delivery drivers when it was actually retained by Instacart.

Influencers 

Regulators continue to focus on deceptive influencer marketing campaigns. The FTC is poised to issue updates to its Endorsement Guides in 2021 (following a public comment period which closed in June, 2020). These updates may well provide substantial new guidance with respect to recent developments in technology and how consumers perceive new media.

Marketers should remember that even “viral” and “organic” content on platforms such as TikTok, as well as “CGI” or “bot” virtual influencer content, is still subject to the FTC’s core requirement that influencers, whether human or virtual, must clearly and conspicuously disclose their material connections with the marketer.

The NAD recently opened an inquiry into Procter & Gamble with respect to this issue. P&G had contracted influencers to post videos featuring a “dance challenge” in which influencers break out into a dance while the voiceover sings about how it’s time to “clean up your life.” Bounty paper towels appeared in the background and all of the TikTok videos clearly and conspicuously included the hashtag #BountyPartner disclosing the material connection between the influencer and P&G in accordance with the Endorsement Guides. However, when those videos were shared to Instagram, they did not include the #BountyPartner hashtag. The NAD did not pursue the inquiry further after P&G demonstrated that it had taken action to ensure that disclosures would be made properly in the future.

Privacy 

After the California Consumer Privacy Act of 2018 (CCPA) took effect on January 1, 2020, the California Privacy Rights Act (CPRA) was passed by yet another California ballot initiative in November 2020. The CPRA expands on the obligations and requirements of CCPA, including creating obligations around the collection and use of sensitive personal information, expanding the consumer opt-out right to personal information used for “cross-context behavioral advertising” and imposing additional contractual obligations for disclosures of personal information between parties. CPRA comes into effect on January 1, 2023.

Virginia also followed suit by passing their own data privacy law in March 2021, the Virginia Consumer Data Protection Act (CDPA). The CDPA is modeled after both the EU data privacy law, the General Data Protection Regulation (GDPR) and the CCPA. The CDPA provides Virginia consumers similar opt-out rights for targeted advertising and sales of their personal data. The CDPA will take effect the same day as the new California law, the CPRA, on January 1, 2023.

NAD 

Like the FTC, the NAD has always been particularly concerned with deceptive health and wellness claims. The NAD therefore brought a number of proceedings against advertisers who marketed bogus COVID-19 cures and treatments.

But by far the hottest area for the NAD has been the telecommunications space. Between April 2020 and April 2021, fifteen cases have been brought before the NAD alleging that advertising for 5G service was false or misleading. For example, in March of 2021, the NAD reviewed advertising for Xfinity 5G that claimed “Everyone gets 5G.” Although the NAD found that the disclosure, “only available in parts of select cities,” was sufficient, it also found that the disclosure was not sufficiently conspicuous. In contrast, the NAD found that Verizon’s claim that its 5G Ultra Wideband is “already available in parts of select cities … and it’s rolling out in cities around the country” sufficiently disclosed limitations in availability. The NAD also evaluated a number of comparative performance claims, including that providers offered the “most reliable 5G network,” the “fastest 5G network in the world,” and “5G on America’s best network.”

The NAD also sped things up by introducing its Fast-Track SWIFT (Single Well-Defined Issue Fast Track) challenge process, in which the NAD will reach a decision within 20 business days of a challenge. Currently, the NAD will accept challenges for Fast-Track SWIFT adjudication when they involve (i) the prominence and sufficiency of disclosures in the influencer marketing and native advertising space; (ii) misleading pricing and sales claims; and (iii) misleading express claims that do not require review of complex evidence or substantiation. Since being introduced, more than 10 Fast-Track SWIFT challenges have been brought before the NAD.