The Regulators are Taking Aim: Are You a Target?

350

Published on

This presentation is from Affiliate Summit East 2013 (August 18-20, 2013) in Philadelphia, PA). Session Description: Update on the increasing set of issues affecting affiliates and networks that FTC and State AGs are looking at. Not just spam, but “astroturfing,” data privacy, “review-fraud,” and targeting of kids.

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
350
On Slideshare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

The Regulators are Taking Aim: Are You a Target?

  1. 1. REGULATORS ARE TAKING AIM: ARE YOU A TARGET? KEN DREIFACH, KEN@ZWILLGEN.COM AFFILIATE SUMMIT EAST, AUGUST 20, 2013 Ken Dreifach ZwillGen, PLLC ken@zwillgen.com
  2. 2. What I Will Discuss  FTC and other CONSUMER laws  THINGS THAT MATTER:  WHO is liable?  WHAT are you advertising?  HOW are you describing it?  WHY are you saying it (What‟s in it for you?)  Examples
  3. 3. The Legal Principles Don‟t Be:  Deceptive  Unfair  Creepy  Sloppy
  4. 4. FTC’s Section 5: Deception  “Deception” – a misrepresentation or omission likely to mislead the consumer acting reasonably, to the consumer‟s detriment  Express and implied claims  “Reasonable” consumer standard  What is the “net impression”?  Is a deception “material”?
  5. 5. FTC Section 5: Unfairness  Likely to cause substantial injury  Not reasonably avoidable  Not outweighed by other benefits  Arises in privacy cases (what is “injury”?)
  6. 6. The “What”: Products FTC Scrutinizes  Health and safety claims  Dietary, weight loss  Work from home/business opportunities  Hard-to-test claims  “Save” on energy  “Safe” for ozone layer  Sweepstakes  Advertising Software (“adware,” “overlay”)
  7. 7. Hot Button: It’s “FREE!”  A particular hot-button  “Free” must be “Free”  Any conditions must be disclosed clearly and conspicuously  “free with subscription”  “free basic subscription”  “free trial”  For instance, adjacent to claims  If Software – disclose material functionality
  8. 8. Hot Button: Negative Option Rule  Clearly and conspicuously disclose automatic renewal  Within a ToS or EULA is not clear and conspicuous  FTC may consider high chargebacks as a negative inference of deception
  9. 9. Hot Button: Privacy  Intense Focus on Data and Online Privacy  Multiple FTC Reports (2012, 2013)  Investigations by FTC, State A.G.‟s, Congress  Lawsuits re cookie placement, geo-location data, address books, social network data  FTC: Privacy Violations = Harm  Rule Number One: Privacy Policies Must Be Followed!  Disclose what info you take, how you use it.  Where is the Creepy Line? “Google policy is to get right up to the creepy line and not cross it.“ (Eric Schmidt, CEO)
  10. 10. Hot Button – Kids, COPPA  Children‟s sites, apps – is site “targeted to children under 13”  Focus on “Personal Information” taken from children (without parents consent)  “Personal Information” now = anonymous identifiers  Fines = $11,000 per violation (substantial)  NEW RULES: July 1, 2013  FTC: Increased Enforcement
  11. 11. The “WHO” -- WHO is Liable?  The Advertiser  The Affiliate Network and the Ad Agency?  Maybe, depending on role.  Did they help design the ad?  Did they help create the strategy?  Create websites?  What was their level of knowledge?  Individuals  Participation or  Authority to Control
  12. 12. The “HOW” -- What is “Deceptive”?  False Statements –  “ABC mouthwash prevents colds” (express)  “ABC mouthwash kills germs that cause colds” (implied)  “Will help you lose 60 pounds with no exercise”  “Contains no chemicals”  Results reported must be typical  What about customer testimonials?  Must be typical of the average consumer.
  13. 13. The “HOW”: Can’t I Disclaim?  A disclaimer in a Terms of Service is insufficient  Can‟t be “easily missed” on website.  Disclaimer can‟t be used to contradict other statements in ad or clear up misimpressions that ad leaves  "Lose 10 pounds in a week doing nothing!”  Cannot disclaim via: "Diet and exercise required"  “RESULTS MAY VARY” does not disclaim atypical claims  Disclaimers should be close/adjacent to claim
  14. 14. The “WHY” - Sponsored Content . . . Endorsements, Astroturf & Flogs SPONSORED: The Taliban Is A Vibrant And Thriving Political Movement NEWS • News • ISSUE 49•03 • Jan 15, 2013
  15. 15. Flogging Across America  “Wal-Marting across America” Blog (2006)  Laura & Jim in an RV, staying in Wal-Mart lots  Failed to Disclose Wal-Mart sponsorship
  16. 16. Astroturf, Sockpuppets & Flogs  Background  What are these things?  “Astroturfing” = fake grass(roots)  Reviews, posts,  “Sockpuppet” = fake online identity  “Flog” = fake blog (undisclosed sponsor)  Purpose: Create buzz, viral marketing, influence decision-makers
  17. 17. Does it Really Matter (Isn’t the Internet fake anyway . . . ?)  These devices mimic influential groups:  Consumers  Peers  Journalists
  18. 18. Disclosing “WHY”- Endorsements  “Guides Concerning the user of Endorsements and Testimonials in Advertising”  1975  1980  2009  An “ENDORSEMENT” is an advertising message that “consumers are likely to believe represents the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser” even if the views are the same.
  19. 19. FTC Rule: Disclose Material Connections  Must disclose connections “not reasonably expected” by audience  Disclose payment, if offered to induce  Or if is likely to induce  Reviews, testimonials, tweets  Blogs  Disclose receipt of free product  “An advertiser‟s provision of a gift to a blogger for posting blog content could constitute a material connection that is not reasonably expected by readers . . . .” (FTC, 2012)  Provider should require, monitor for compliance
  20. 20. What NOT to Do  FTC‟s Warning Shots at Ann Taylor (2010)  Ann Taylor Promises attendees a “special gift”  Conditioned on posting about premiere within 24 hours  Hyundai gift certificates for including links to Hyundai videos (Nov. 2011)  Nordstrom (Feb. 2013) – $50 gift card to “influencers” attending a “TweetUp” opening event  “But They Didn‟t Say Reviews Had to be POSITIVE . . .”
  21. 21. How to Disclose?  This is the disclosure that studies shows was not effective.  This is the disclosure that you are probably using. (If you disclose . . . .)  For Twitter: According to FTC: “Use a hashtag and then „ad,‟ and that‟s only three character.”
  22. 22. Increased Focus On . . .  Paid-for reviews  Doctors, health practitioners  “Reputation Management”  SEO providers  FTC, New York State AG
  23. 23. Paid Reviews  “The Best Book Reviews Money Can Buy,” NY Times (August 26, 2012)  Gettingbookreviews.com:  $499 = 20 reviews  $999 = 50 reviews  April 2013: Samsung apologizes for posting fake (negative) reviews of HTC devices  Hired students to do it
  24. 24. Increase in Enforcement, Subpoenas Fake News
  25. 25. More Fake News
  26. 26. More Fake News
  27. 27. Fake Reviews – Enforcement  Lifestyle Lift fined $300k by NYAG in 2010.  Told employees to “put on your wig and skirt and tell them about the great experience you had”  Blogs, social media, websites
  28. 28. More “Who”: FTC Has Cast Broad Net  Affiliate network?  FTC v. Ads4Dough.com (2012) (acai berry case)  Recruited affiliates  Negotiated terms  “Through their affiliate marketers” assisted in promotion through affiliates‟ websites  Individuals?  Participation in wrongdoing  Owner/President was Defendant in above case
  29. 29. Network and Individuals = Liable  FTC v. IMM Interactive (2012)  “Defendants and their affiliate marketers”  Operate websites  Promote products  Allegedly deceive users  Receive commission for click or “free trial”  Failed to disclose in a clear and conspicuous manner that they are being paid to promote the products  “Relevant information . . . Appears in small type at the bottom of the page following the fake consumer comments”  Individuals – President (Owner), CEO and CMO
  30. 30. Some Cases Go the Other Way  NY State v. Synergy6 – Affiliate email network not liable for acts of its independent contractor  NY State v. Direct Revenue – Affiliate overlay/adware network not liable for failure of distributors to present notice.  These are litigated cases, under state law.
  31. 31. Protect Yourself!  Warrants & Reps (Specific)  Indemnities  Insurance  Signed Agreements  Echosign, Docusign  “Overriding” Appendixes  Due diligence
  32. 32. Takeaways -  “Deceptive Acts” – look at whole picture  No Silver Bullet – no easy disclaimers  Testimonials and endorsements must disclose material connections  Respect privacy (and the “creepy line”) – disclose what data you take and how you use it  FTC casts broad net in determining liability  Reps/warranties/indemnities
  33. 33. STOP TALKING NOW. Ken@zwillgen.com 347.210.1798
  34. 34. Questions? Ken Dreifach (ken@zwillgen.com) Blog.zwillgen.com
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×