Legal Watch Bulletin - March 2017

FTC, NHTSA to Conduct Workshop on June 28 on Privacy, Security Issues Related to Connected, Automated Vehicles

The Federal Trade Commission and the National Highway Traffic Safety Administration (NHTSA) will hold a workshop on June 28, 2017 in Washington, D.C., to examine the consumer privacy and security issues posed by automated and connected motor vehicles.

The workshop will feature opening remarks by Acting FTC Chairman Maureen K. Ohlhausen and will bring together a variety of stakeholders, including industry representatives, consumer advocates, academics, and government regulators, to discuss various issues related to connected and automated vehicles that collect data. They include:

The types of data vehicles with wireless interfaces collect, store, transmit, and share; potential benefits and challenges posed by such data collection;
The privacy and security practices of vehicle manufacturers;
The role of the FTC, NHTSA, and other government agencies regarding privacy and security issues related to connected vehicles; and self-regulatory standards that might apply to privacy and security issues related to connected vehicles

FTC Settlement Bars Spam Email Marketing, Baseless Weight-Loss Claims by Diet-Pill Operation

Three Florida-based affiliate marketers charged with using illegal spam email, false weight-loss claims, and phony celebrity endorsements to market bogus weight-loss products will pay $500,000 to settle Federal Trade Commission charges. The court order resolving the FTC’s allegations also prohibits the defendants from the illegal advertising and marketing tactics alleged in the complaint.

According to the FTC’s June 2016 complaint, Colby Fox; his companies, Tachht, Inc. and Teqqi, LLC; and a fourth defendant paid affiliate marketers to send consumers millions of illegal spam emails from hacked email accounts, making it appear that the messages came from the consumers’ family members, friends, or other contacts. The email messages appeared to be a quick note from a family member or friend, passing along a link to an interesting news story.

The links in those email messages led to websites deceptively promoting the defendants’ unproven weight-loss products, such as Original Pure Forskolin and Original White Kidney Bean. These websites deceptively claimed that the defendants’ products could cause weight loss of 17 pounds in 4 weeks, or “41.7lbs in 2.5 months.”

Read the court documents here.

FTC and FCC Issue Joint Statement on Protecting Online Privacy

Acting Federal Trade Commission Chairman Maureen K. Ohlhausen and Federal Communications Commission Chairman Ajit Pai recently issued the following statement on the FCC’s issuance of a temporary stay of a data security regulation:

“The Federal Communications Commission and the Federal Trade Commission are committed to protecting the online privacy of American consumers. We believe that the best way to do that is through a comprehensive and consistent framework. After all, Americans care about the overall privacy of their information when they use the internet, and they shouldn’t have to be lawyers or engineers to figure out if their information is protected differently depending on which part of the internet holds it.

“That’s why we disagreed with the FCC’s unilateral decision in 2015 to strip the FTC of its authority over broadband providers’ privacy and data security practices, removing an effective cop from the beat. The FTC has a long track record of protecting consumers’ privacy and security throughout the internet ecosystem. It did not serve consumers’ interests to abandon this longstanding, bipartisan, successful approach.

“We still believe that jurisdiction over broadband providers’ privacy and data security practices should be returned to the FTC, the nation’s expert agency with respect to these important subjects. All actors in the online space should be subject to the same rules, enforced by the same agency.

“Until that happens, however, we will work together on harmonizing the FCC’s privacy rules for broadband providers with the FTC’s standards for other companies in the digital economy. Accordingly, the FCC today stayed one of its rules before it could take effect on March 2. This rule is not consistent with the FTC’s privacy framework. The stay will remain in place only until the FCC is able to rule on a petition for reconsideration of its privacy rules.

“Two years after the FCC stripped broadband consumers of FTC privacy protections, some now express concern that the temporary delay of a rule not yet in effect will leave consumers unprotected. We agree that it is vital to fill the consumer protection gap created by the FCC in 2015, and today’s action is a step toward properly filling that gap. How that gap is filled matters. It does not serve consumers’ interests to create two distinct frameworks — one for internet service providers and one for all other online companies.

“The federal government shouldn’t favor one set of companies over another — and certainly not when it comes to a marketplace as dynamic as the internet. So going forward, we will work together to establish a technology-neutral privacy framework for the online world. Such a uniform approach is in the best interests of consumers and has a long track record of success.”

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 877.FTC.HELP (382.4357).

Advertising Coalition on Annoying Online Formats

A coalition of advertisers and agencies on both sides of the Atlantic have backed a set of global standards that insist their peers stop using annoying online formats that have expedited the rise of ad blocking.

It identifies six desktop formats including pop-up ads and auto-play videos alongside 12 mobile web experiences such as presidential ads and full-screen scroll-over variants. (The full list of problematic ad formats can be seen on the coalition’s website).

Read more about this here.

New Supreme Court Ruling on Copy-right able Fashion Industrial Design

In holding that two dimensional designs on cheerleaders uniforms were copyrightable, the Court (with two dissents) adopted a conceptual separability test that asks (1) whether a feature can be perceived as a 2D or 3D work of art separate from a useful article on which it appears and (2) whether it would qualify as a protectable work either standing alone or fixed in some other medium. Opinion: Star Athletica v. Varsity Brands.

Both Houses of Congress Vote to revoke sweeping broadband privacy rules passed last year by the Federal Communications Commission

The bill signed by President Trump on April 3, 2017 also prohibits the FCC from replacing the rules with similar regulations in the future.

The FCC's broadband privacy rules, passed 3-2 last October, imposed a host of new requirements on internet service providers. Among others, the regulations require carriers to obtain opt-in consent before drawing on subscribers' web surfing data and app usage history for ad targeting.

The ad industry and broadband carriers opposed that requirement, as does FCC Chairman Ajit Pai. Critics argue that the opt-in consent mandate subjects carriers to tougher standards than search engines, social networking services and other Web companies.

ANA has stated that “This is an important and very positive development. ANA and the ad community strongly opposed the original rule as harmful to business and the public. We stated that creating enormously broad categories as ‘sensitive” data was totally at odds with our DAA self-regulatory program and the FTC’s opt-out approach. We stated that the rule would require a bombardment of opt-in notices to consumers which would be highly annoying, and non-helpful for consumers. We went on to call on the Congress to use the CRA to abrogate the rule. This vote clearly is a major step in the right direction but this is still only a first big step in the right direction”

We now hope President will finish this job quickly.

D.C. Circuit Invalidates FCC's Solicited Fax Rule

In a significant victory for TCPA junk fax defendants, a split panel of the U.S. Court of Appeals for the District of Columbia Circuit invalidated the Federal Communication Commission's Solicited Fax Rule. The Solicited Fax Rule, created by the FCC in a 2006 Order, required that fax advertisements sent with a recipient's prior express invitation or permission contain an opt-out notice requiring specific information.

Dozens of companies petitioned the FCC seeking a waiver from the Solicited Fax Rule. The FCC granted these petitions, acknowledging the confusion that may have been caused in the marketplace. After years of confusion and abounding lawsuits by opportunist plaintiffs (and their counsel), a group of class action defendants, led by Anda, a seller of generic drugs facing $150 million in liability for sending solicited faxes lacking a detailed opt-out notice, challenged the Solicited Fax Rule in the D.C. Circuit.

In a concise and pithy opinion, Circuit Court Judge Kavanaugh, joined by Judge Randolph, disagreed with the FCC's position that the TCPA's requirement that businesses include opt-out notices on unsolicited faxes provides the FCC authority to require that businesses include the same opt-out on solicited advertisements. The panel reasoned that "Congress drew a line in the text of the statute between unsolicited fax advertisements and solicited fax advertisements." Thanks to M Roth of Manatt Phelps and Phillips. Case is Bais Yaakov of Spring Valley v FCC, U.S. Dist Ct for the D.C. Circuit, No 14-1234