Legal Watch Bulletin - October 2017

Office Supply Telemarketers Will Pay $7 Million to Settle FTC Charges

An office supplier and its owner will pay $7 million to settle Federal Trade Commission charges that they tricked child care centers, schools, and police and fire departments into paying for products they never ordered.

“Billing for unordered merchandise is against the law, and small businesses like those affected here are under no obligation to return or pay for items they did not order,” said FTC Acting Chairman Maureen K. Ohlhausen. “This enforcement action is yet another example of the FTC’s efforts to protect hard-working small businesses from scams.” In May, the chairman announced the launch of a new FTC website, FTC.gov/SmallBusiness, to help business owners avoid scams, protect their computers and networks, and keep their customers’ and employees’ data safe.

Here is a link to the case


CSGO Lotto Owners Settle FTC’s First-Ever Complaint Against Individual Social Media Influencers

Owners must disclose material connections in future posts; FTC staff also sends 21 warning letters to prominent social media influencers Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, two social media influencers who are widely followed in the online gaming community, have settled Federal Trade Commission charges that they deceptively endorsed the online gambling service CSGO Lotto, while failing to disclose they jointly owned the company.

They also allegedly paid other well-known influencers thousands of dollars to promote the site on YouTube, Twitch, Twitter, and Facebook, without requiring them to disclose the payments in their social media posts.

The Commission order settling the charges requires Martin and Cassell to clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service.
“Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts,” said FTC Acting Chairman Maureen Ohlhausen. “This action, the FTC’s first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions.”

Also on September 7, the FTC announced that staff has both sent warning letters to 21 social media influencers it contacted earlier this year regarding their Instagram posts, and updated staff guidance for social media influencers and endorsers.

Here is a link to further material


Industry Wins Important First Amendment Case on Compelled Disclosure in California in American Beverage Association and Cal State Outdoor Advertising Association vs. City of San Francisco


First Amendment / Preliminary Injunction a 9th circuit panel reversed the District court’s denial of the plaintiff Associations’ motion for a preliminary injunction, seeking to enjoin the implementation of the City and County of San Francisco’s ordinance that would require warnings about the health effects of certain sugar-sweetened beverages on specific types of fixed advertising within San Francisco.

The plaintiffs – the American Beverage Association, the California Retailers Association, and the California State Outdoor Advertising Association – alleged that the ordinance violated their First Amendment right to freedom of speech. The panel held that the plaintiffs were likely to succeed on the merits of their claim that the ordinance was an “unjustified or unduly burdensome disclosure requirement [that] might offend the First Amendment by chilling protected commercial speech.” Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 651 (1985). Specifically, the panel joined other circuits in holding that the Zauderer framework applied beyond the context of preventing consumer deception.

The panel held that because the required warning was not purely factual and uncontroversial, San Francisco had not established that the plaintiffs’ constitutionally protected interest in not providing the warning was minimal under Zauderer. The panel agreed with the plaintiffs that the warning requirements – a black box warning that overwhelmed other visual elements of the ads – unduly burdened and chilled protected speech. The panel held that the remaining preliminary injunction factors also weighed in the plaintiffs’ favor.

The panel concluded that the district court abused its discretion in denying the plaintiffs’ motion for a preliminary injunction, and reversed and remanded. Judge Nelson concurred in the judgment because she believed that the ordinance, in its current form, likely violated the First Amendment by mandating a warning requirement so large that it would probably chill protected commercial speech. Judge Nelson would reverse and remand without also making the conclusion that the warning’s language was controversial and misleading.

Here is a link to this important opinion, in which ANA and outside counsel Bob Corn Revere of Davis Wright Tremaine played an important part.


Santa Monica Multinational Fitness Business to Pay Nearly $3.6 Million in Settlement


A Santa Monica-based operation selling everything from workout videos to supplements worldwide is paying nearly $3.6 million in penalties and restitution after prosecutors found customers were being charged automatic renewals for which they hadn’t knowingly signed up.

Prosecutors from the Santa Monica City Attorney’s Office announced the settlement with Beachbody, one of world’s largest sellers of exercise videos, livestreaming workouts, supplements and weight-loss programs. Beachbody says it has 23 million customers, the City Attorney’s Office said.

Investigators found Beachbody was charging its customers’ credit cards on an automatic, recurring basis for renewals of various products and services, although the clients had not given their “express prior consent,” as required by both federal and state law.

Among other protections, Beachbody agreed to provide a separate check-box, or a similar mechanism, for customers, and to make it clear to what they are agreeing, said Chief Deputy City Attorney Adam Radinsky. “A separate check-box is the key,” said Radinsky, who heads Santa Monica’s Consumer Protection Division. Source: Media Law Daily 


FTC and attorneys general in new consumer fraud enforcement initiative


The Federal Trade Commission, along with 11 states and the District of Columbia, today (Oct 13) announced “Operation Game of Loans,” the first coordinated federal-state law enforcement initiative targeting deceptive student loan debt relief scams. This nationwide crackdown encompasses 36 actions by the FTC and state attorneys general against scammers alleged to have used deception and false promises of relief to take more than $95 million in illegal upfront fees from American consumers over a number of years.

Here is a link for more info