United States: The Adver-Series: State Attorneys General Play Increasing Role In Advertising Regulation

Last Updated: March 14 2018
Article by Neil Austin

Introduction

Every day, consumers are bombarded with advertising messages: print ads on the subway, promoted posts on social media, thirty-second spots on the radio, native ad thumbnails on the internet, email blasts from retailers, product labels touting savings and benefits, billboards along the highway, commercial breaks before the "big reveal" on reality TV, robocalls, and the Saturday morning infomercial, to name just a few.

And, for those fortunate or unfortunate enough to have an office right in the middle of Times Square, there's this:

Keeping tabs on this barrage of commercial speech is no easy task.  The federal government began cracking down on unscrupulous marketers with passage of the Federal Trade Commission Act in 1914. Since then, the means and methods of attracting consumers' attention have become more sophisticated, and the sheer number of ads confronting consumers have skyrocketed.

It is perhaps no surprise, then, that over the past century, the task of regulating commercial speech – and the methods of its dissemination – has spread beyond the Federal Trade Commission.  Presently, nearly a dozen entities, some public and some private, stand ready to pounce on claims they contend may be misleading or deceptive.  This patchwork approach to regulation exemplifies how difficult it can be to keep up with an advertising industry that has exploited technological advancements to reach more consumers more quickly and more often.

To help our readers better understand this patchwork, we are creating a series of posts, each addressing a key player in the world of advertising regulation and litigation.  We call it the Adver-series.  In time, we will post about each of the entities helping to shape advertising law and regulation, including the FTC, NAD, competitors, class actions plaintiffs, search engines, networks, and more.  We begin, however, with a group that has been particularly active in the past several years and shows no signs of slowing down: state attorneys general.

States Attorneys General

Why do we start our journey with state attorneys general ("AGs")?

For starters, they represent a powerful collective of regulators.  In general, state AGs have broad authority to protect consumers in their states, including from marketing and advertising practices they feel are misleading or deceptive.  Not all AGs are equally active in the advertising space, but many are quite active, including AGs in New York, Massachusetts, California, Illinois and Texas. State AGs greatly enhance the ability to reach localized advertising practices that might otherwise fly under the radar.

Moreover, AGs often coordinate with each other and with the FTC, and thereby can come to have a powerful influence in larger enforcement efforts.  When the FTC planned its 2015 nationwide sweep of automobile dealers ( Operation Ruse Control, targeting allegedly deceptive marketing practices), it reached out to state AGs and ultimately partnered with AGs in Florida, Indiana, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, South Dakota, Washington, and West Virginia (in addition to other state law enforcement authorities).  More recently, the FTC coordinated with the attorney general of Maine to pursue a case involving health and cognition claims associated with dietary supplements, a perennial area of focus for the FTC.

Given the breadth of recent enforcement activity, Foley Hoag's Advertising and Marketing practice group works closely with the firm's State Attorney General Investigations group.  The State AG Group is co-chaired by Martha Coakley, the first female Attorney General of Massachusetts, along with Dean Richlin (former First-Assistant AG) and Kevin Conroy (former Deputy AG and Chief of the Business and Labor Bureau).

Source of Enforcement Power

Critically, though, state AGs are independent of the FTC, and this independence is part of what makes them so formidable.  State AGs often have broad authority to enforce state consumer protection statutes.  Sometimes referred to as "UDAP statutes" and sometimes as "Little FTC Acts," these statutes convey tremendous legal authority with just a few simple words, usually something like this: "unfair or deceptive acts or practices [UDAP] in the conduct of any trade or commerce are hereby declared unlawful."  See, e.g., G.L. c. 93A (Mass.), N.Y. Gen. Bus. Law §§349-350.

State law often requires or allows state AGs to draft regulations in order to carry out the purpose of the UDAP statutes, and indeed many state AGs have created detailed regulations or guidelines aimed at advertising practices.  These regulations and guidelines typically describe conduct that the AG deems unfair or deceptive, but they are not exhaustive.  State AGs will often pursue advertising claims or practices even where there is no specific regulation on point.  Few state AGs take a narrow view of the power bestowed to them.

Types of Cases Brought

Within the past two years, state AGs have relied on UDAP statutes to pursue a wide array of advertising issues, including:

  • Bringing an enforcement action against a pesticide manufacturer over claims that use of its product was like "giving 'a daily vitamin' to plants" (Massachusetts);
  • Settling with app developers who claimed that their apps accurately measured users' heart rates after exercise with smartphone camera and sensors (New York);
  • Obtaining a $1.1 billion judgment against for-profit educational institution based on claims concerning post-graduation job placement prospects (California);
  • Settling with a digital advertising company that used geofencing technology to target people entering reproductive health clinics with mobile ads discussing abortion alternatives (Massachusetts);
  • Investigating and pursuing "buy one get one free" claims made by a direct marketers in online and television ads (New York); and
  • As discussed above, settling with marketers of dietary supplements—and their ad agency—based on unsubstantiated claims that products "improve memory" and "reduce joint and back pain." (Maine)

As these examples show, state AGs have range; they pursue those areas that have long been a focus of regulators, like dietary supplement health claims, yet also pursue cases involving new issues and technologies.

The "geofencing" case in Massachusetts is a good example of that.  Not only does it involve new technology (using GPS or cellular data to target consumers who cross a virtual boundary around a location), but it delves into the increasingly challenging issue of privacy.  Like many government regulators, state AGs have expressed concern about threats to data and privacy, and this is increasingly a focus of their enforcement activity.

Procedure

The process of a state AG enforcement will vary by state, but it typically begins with an investigation.  State AGs will often commence an investigation by sending out a subpoena or Civil Investigative Demand requiring the target to produce documents and/or provide testimony.  Members of the AG's staff will run the investigation.  In most advertising cases, the key issue will be substantiation: does the advertiser have evidence to support its claims.  If so, the investigation likely ends.  If not, the AG may choose to press forward with a lawsuit, which would require the target either to settle or fight the AG in court.  Most settle.

Applicable Law & Remedies

The law that governs state false advertising claims is basically the same that would govern a federal claim.  It's an amalgam of precedential court rulings, standards developed through FTC enforcement, and standards developed by the state AG.

Because most cases settle, regulators often have a heavy hand in influencing legal standards through settlement agreements.  For example, a state AG may settle a case by prohibiting the defendant from making particular claims in the future unless supported by two double-blinded clinical studies.  This serves as a warning to others making similar claims in the state that they are at risk, too, unless they have two double-blinded studies. Even though settlement agreements do not have force of law against third parties, they nevertheless often come to represent the legal standard – at least until successfully challenged in court.

In terms of remedies, state AGs generally have the authority to obtain injunctive relief, monetary damages, restitution, and some form of civil penalty.  Settlements vary tremendously.  Some settlements enjoin future conduct and have no damages component, while others include a significant financial component (particularly where multiple AGs work together as part of a multi-state investigation).

Conclusion

Not every investigation concludes with a claim, of course.  Sometimes the AG may decide not to bring a claim, or the investigation may simply stall for one reason or another.  While it would be nice to have a formal letter terminating the investigation, those don't always come.  In some cases, the AG simply moves on, leaving the investigative target with a frustrating feeling of limbo.

We would never leave you hanging like that.  We believe that every blog post deserves a proper conclusion. Therefore, we offer you these final thoughts: State AGs are a key component of our patchwork regulation of advertising, and their activity seems poised to increase in the coming years, with more cooperation among the states and between state AGs and the FTC.  If you have any questions or would like more information, please feel free to contact us.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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