Advertising Law Blog

1. AUTOMATIC RENEWAL PROGRAMS CONTINUE TO ATTRACT ATTENTION AND SCRUTINY FROM LEGISLATORS AND REGULATORS

States have continued to introduce automatic renewal laws in 2022, and this trend looks poised to continue in 2023. As new state laws are introduced, they add to the hodgepodge of existing state laws governing these programs. The Federal Trade Commission (“FTC”) has previously proposed enhanced federal requirements, which would hopefully lead to uniform standards throughout the nation. In addition to legislative action, automatic renewal practices have continued to be the subject of regulatory actions. The California Automatic Renewal Taskforce has remained active, most recently taking action against Rihanna’s Savage X Fenty lingerie company. Automatic renewal practices, in particular their cancellation processes, also continue to be a focus of the FTC. Specifically, in 2022 the FTC reached a $100 million settlement with an internet service provider, Vonage, in connection with its practices that made it difficult for subscribers to cancel their service.

2. EXPANSION OF STATE PRIVACY LAWS AFFECTING ADVERTISING AND OTHER ISSUES

Starting in 2023, several new state privacy laws go into effect in California, Virginia, Colorado, Connecticut, and Utah. These laws apply not only to businesses located in those states, but also to businesses that meet certain thresholds and collect, store, or process personal data from residents of those states. California, the state that continues to lead the way when it comes to consumer privacy laws, passed a new law, the California Privacy Rights Act, which amends the existing California Consumer Privacy Act. Substantively, each of the new state laws place additional requirements on businesses that collect personal data, and there are also some new restrictions on the ability of businesses to engage in cross-contextual and targeted advertising. It is growing increasingly important for businesses that collect personal data to ascertain whether the relevant compliance thresholds are met, and, if so, to take the steps necessary to ensure compliance with the relevant state laws. Like the state automatic renewal laws, the growing body of different state standards cries out for a uniform federal approach, but with a divided Congress, one doubts that there will be federal action.

3. INTELLECTUAL PROPERTY IN THE METAVERSE

As the metaverse continues to evolve, the manner in which traditional advertising and intellectual property laws and rules will apply (and be enforced) in virtual worlds will also continue to evolve. Brands establishing a presence in the metaverse and applying for registration of their trademarks in the virtual world are ever-expanding. Brands are also seeking to enforce their trademark rights in the metaverse, and recent cases filed by brands against alleged infringers in the metaverse who are using or selling virtual products, including lawsuits filed by Nike, Hermès, and others, will begin to address these issues. Will traditional IP ownership rules apply, or will new standards develop for imaginary worlds?

4. ATTEMPTS TO HOLD CELEBRITIES AND INFLUENCERS RESPONSIBLE FOR THE PRODUCTS/SERVICES THEY ENDORSE; PARTICULARLY IN THE CRYPTO/NFT SPACE

A growing number of A-list actors, athletes, and other celebrities are increasingly being accused of fraud in connection with class actions relating to products and services that they have been paid to endorse. This is particularly true given the collapse of the NFT and crypto asset markets in late 2022. Will the Steve Garvey rule – in which the famous baseball player was found not liable for the claims of a high profile diet that he was promoting – prevail, or will these lawsuits portend new standards in which celebrities are held accountable for the underlying products that they promote? 

5. TELEPHONE CONSUMER PROTECTION ACT - HERE COME THE STATE LAWS

In 2021, the U.S. Supreme Court significantly scaled back the definition of an automatic dialing system, thus opening the door for increased robocalling and SMS marketing. In response, Florida led the charge by enacting a state statute that contains a vague, but broad definition of the term “automated dialing system.” Like the federal Telephone Consumer Protection Act (“TCPA”), Florida’s law contains a $500 per-call penalty. Given the different state standards, the result was a tidal wave of class actions and costly settlements in Florida.

In 2023, similar laws in other states will take center stage and lead to new pockets of class-action activity. Washington’s new law permits recovery of $100 per call plus attorneys’ fees; Oklahoma’s mirrors Florida and the TCPA’s $500 recovery figure. Each state law has one or more unique provisions that will both lead to increased litigation and challenge telemarketers’ ability to draw up national plans for compliance. For example, in Washington, a telemarketer may not continue talking for more than 10 seconds after the consumer says they want to end the call. Other states have their own bills in the legislative pipeline.

Unless and until the scope of the state laws are clarified, they present traps to marketers who rely on texting and telemarketing. 

6. FTC CONTINUES TO FOCUS ON ENDORSEMENTS AND REVIEWS

At the beginning of 2022, online fashion retailer, Fashion Nova, agreed to a consent order to resolve the FTC’s allegation that it blocked negative customer reviews from its website. The FTC alleged that Fashion Nova used a third-party interface to automatically post four- and five-star reviews to its website, but held back three-star and below reviews for review and approval. The FTC alleged that from late 2015 until November 2019, Fashion Nova never posted “hundreds of thousands” of the lower-starred reviews. According to the FTC, suppressing negative reviews deprives consumers of potentially useful information and artificially inflates the product’s average star rating. Notably, this was the FTC’s first case involving a company’s efforts to conceal negative customer reviews. Alongside the announcement of this settlement, the FTC issued new guidelines for online retailers and review platforms who collect and post consumer reviews, thus signaling the agency’s prioritization of this issue.

7. U.S. SUPREME COURT EXPECTED TO ISSUE KEY DECISION ON COPYRIGHT FAIR USE

Fair use is an ever-evolving area of copyright law and does not always have clear-cut guidance. After hearing oral arguments in October of last year, the U.S. Supreme Court is expected to issue a decision on the issue of fair use which may provide further clarity on what constitutes fair use. The case, Andy Warhol Foundation v. Goldsmith, focuses on Andy Warhol’s prints of the musician Prince, which were based on photographs taken by famous rock photographer Lynn Goldsmith. The Second Circuit found that Warhol’s prints infringed Goldsmith’s copyrights because they were derivatives of her photographs. Andy Warhol Foundation’s position is that the prints are sufficiently “transformative” so as to rise to the level of fair use. How the Court rules may have significant impact on creative expressions.

8. FOCUS ON PRICING DISCLOSURES AND JUNK FEES

A number of federal agencies have begun to focus on pricing disclosures, including an examination of the value associated with a particular upsell/ancillary type product. For example, the FTC recently announced rulemaking in this area focusing on so called “junk fees” – unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value to consumers, potentially impacting a wide-array of industries. Similar rulemaking has been proposed by the Department of Transportation relating to airline pricing/ancillaries (like baggage fees). Marketers should be cognizant of clearly disclosing their fees and be prepared to justify the charges.

What key legal issues do you see in the near future? Share your thoughts with us. Of course, if you have any questions on these or other issues, please reach out to us.