Edited by Jeffrey D. Knowles and Gary D. Hailey
NAD Refers Supplement Company to FTC
On April 9th, the National Advertising Division of the Council of Better Business Bureaus ("NAD") provided information about marketer Good Health Naturally and advertising for its Serranol dietary supplement to the FTC. Good Health Naturally had failed to provide a statement that it would comply with NAD's recommendations and discontinue many of the advertising claims made for the supplement.
According to a story in Drug Store News, the Council for Responsible Nutrition ("CRN") brought the NAD challenge of the product's claims as part of an initiative to expand the review of advertising claims made for dietary supplements. The NAD recommended that the marketer discontinue many of its claims because it did not conduct any studies on the Serranol product itself and because the very studies the marketer submitted were insufficient to support the health claims made for the product.
After the marketer failed to submit a statement that it would comply with NAD's recommendations, the self-regulatory body referred the case to the FTC for further review.
Click here to read coverage of the case in Drug Store News.
FTC Orders Alcoholic Beverage Manufacturers to Provide Data on Alcohol Advertising, Including Internet and Digital Marketing
On April 12th, the FTC announced that it sent compulsory process orders to 14 major alcoholic beverage advertisers this week. The orders require the advertisers to provide information for the agency's fourth major study on the effectiveness of voluntary industry guidelines in reducing advertising and marketing by alcohol manufacturers to underage audiences.
This is the first time the FTC has sought information on Internet and digital marketing and data collection practices from alcohol advertisers. In addition to the Internet and digital marketing data, the FTC required the advertisers to supply data on advertising expenditures and placements, as well as background information about the advertisers' business practices.
Previous studies on the effectiveness of the industry's self-regulatory efforts were completed in 1999, 2003, and 2008. Recommendations from past reports have resulted in agreements by the Beer Institute, the Wine Institute, and the Distilled Spirits Council of the United States to adopt a number of guidelines for specific alcohol advertising practices as well as a protocol that enables auditing of advertising practices by outside parties.
Click here to read the FTC's press release about the orders and the study.
FTC Announces Schedule for Reviewing Regulations
Last week, the FTC announced updates to its 10-year rule review schedule. The FTC has reviewed its rules and guides on a rotating basis since 1992. The review schedule is published each year, with adjustments in response to public input, changes in the marketplace, and resource demands.
In 2012, the FTC plans to initiate reviews on the "Guides for the Rebuilt, Reconditioned and Other Used Automobile Parts Industry," the "Guides for the Jewelry, Precious Metals, and Pewter Industries," and the "Guides for Advertising Allowances and Other Merchandising Payments and Services."
In addition, the FTC will rescind nine rules because the rulemaking authority for those rules was transferred to the Consumer Financial Protection Bureau ("CFPB") under the Dodd-Frank Act. The CFPB has republished those rules, which will still be enforced by the FTC, on an interim final basis.
Due to resource constraints, the FTC announced that it will push back the review of several rules scheduled to be reviewed in 2012. The "Preservation of Consumers' Claims and Defenses Rule" will be reviewed in 2013. The review of the "Guides Against Deceptive Pricing," the "Guides Against Bait Advertising," and the "Guides Concerning Use of the Word 'Free' and Similar Representations" will all be pushed back to 2017.
Click here to read the FTC's press release about the schedule changes.
Groupon Settlement, New Developments in NJ have Implications for Gift Card Sellers
Venable Partner Melissa Landau Steinman writes in a recent client alert that several important new developments in the gift card industry over the past couple of weeks may have serious implications for companies that sell gift cards and similar instruments in New Jersey and other states.
She writes, "[a]t the end of March and the beginning of April, several of the biggest gift card sellers announced that they would stop selling gift card products in New Jersey on the basis that they could not ensure that third parties would comply with the data collection provisions of the New Jersey stored value card law."
Across the country, In California, Groupon reached an $8.5 million settlement in multidistrict litigation alleging that the promotions company sold vouchers with unlawful expiration dates, in violation of the law of several states.
Steinman writes that sellers offering gift cards in New Jersey, or that offer "daily deal" vouchers in partnership with Groupon (or run similar promotions), should take note of these developments.
Click here to read Steinman's alert.
Unfairness Makes Comeback Overseas: Is the US Next?
"Claims that certain types of ads are "unfair" or violate public policy have gained considerable traction overseas in recent months," writes Venable Partner Gary D. Hailey in a recent post on Venable's advertising law blog, www.allaboutadvertisinglaw.com.
He points out that the FTC Act prohibits unfair as well as deceptive acts or practices. He writes, "[a]n act or practice is 'unfair' if it causes or is likely to cause substantial consumer injury, the injury is not reasonably avoidable by consumers, and the injury is not offset by countervailing benefits to consumers or competition." With all of the recent overseas attention that "unfair" advertising rulings have attracted, he writes, advertisers in the United States may want to brush up on the concepts of "unfair" and "deceptive" when it comes to advertising.
FTC Blog Illustrates Lessons of Last Week's "Bottom-Dollar" Enforcement Actions for Legitimate Businesses
A post this week to the Business Center Blog published by the FTC's Bureau of Consumer Protection points out useful lessons that businesses of all shapes and sizes can take away from last week's five enforcement actions against so-called "bottom-dollar scams," which target vulnerable consumers.
"It is the conduct, not the characteristics of the company, that counts," writes the FTC's Leslie Fair in the post. She adds that the FTC takes action against both large, established companies and fly-by-night operations, and that FTC complaint allegations offer useful guidance for all types of companies on where the agency draws the line.
Click here to read Fair's blog post.
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