FTC Monitoring Social Networking Sites and Mobile Arena
In testimony before a Senate subcommittee, Jessica Rich, Deputy Director of the FTC's Bureau of Consumer Protection, said that the FTC is closely monitoring social networking sites and the mobile arena as part of its efforts to protect teens in the digital environment. Rich stated that teens tend to be more impulsive than adults and may not always think about the consequences of sharing information online and, as a result, may divulge more information online than they should. Rich discussed the FTC's recent public roundtables about social networking and consumer privacy, and noted that the FTC believes the privacy recommendations that come out of those discussions should benefit teens by providing teens with both a greater understanding of how their information may be used and a greater ability to control such information. Rich concluded that the FTC will continue to use enforcement actions, education, and changes in policy and rules to better enable teens to control and protect their information online.
Congress Considers Legalizing and Taxing Internet Gambling
On July 28, the House Financial Services Committee
approved a bill (H.R. 2267) that would legalize
some forms of Internet gambling. A companion bill would allow the
IRS to tax such activity. This comes just four years after
enactment of a federal law prohibiting the use of credit and debit
cards to pay for online gambling. According to The New York Times, these measures,
which banks and credit unions support, could provide as much as $42
billion in revenue for the government over 10 years.
Ken Florin Introduces the Advanced Media and Technology Law Blog
Ken Florin, Co-Chair of the Advanced Media & Technology Department, welcomes viewers and readers to this MediaTechLaw Blog, http://mediatechlaw.loeb.com/blog.aspx?entry=13, and describes the four practice groups that make up the Advanced Media and Technology Department.
Microsoft CEO talks about Cloud Computing & Privacy
The Washington Post is sharing a Q&A video chat with Microsoft CEO Steve Ballmer on cloud computing, which takes software off the desktop and moves it to networks of data centers accessed via the Internet, among other topics, including recent FCC discussions on net neutrality. Ballmer says one of the company's goals is to secure better enforcement of patent law, especially in foreign jurisdictions, such as China, which have been particularly problematic in the past, and clarity from regulators on how the government plans to oversee the cloud computing market.
YouTube to Introduce 'Skippable' Ads
Later this year, YouTube will allow users to
skip the ads that are embedded at the beginning of
videos, and won't charge advertisers for those ads that are
skipped. Baljeet Singh, senior product manager at YouTube, said the
company has been "playing around with it for the last three
quarters and seeing really great results." He also said that
the rate at which users skip ads varies widely based on the quality
of the ads. "This is a good sign," he said, because it
might motivate advertisers to create compelling ads.
"The Other Red Meat" Is Likely to Dilute "The Other White Meat"
In a June 11 decision, the US Trademark Trial and Appeal Board held that "The Other Red Meat" is likely to dilute the famous mark "The Other White Meat." National Pork Board and the National Pork Producers Council opposed the registration of "The Other Red Meat" by Supreme Lobster and Seafood Company. To prevail on a trademark likelihood of dilution claim, the mark owner must show that its mark is famous and that the distinctiveness of its mark is likely to be diluted by the challenged mark. The pork industry groups provided extensive evidence of their use and promotion of the mark and provided a telephone consumer survey to show likelihood of dilution. In finding a likelihood of dilution, the TTAB recognized the validity of commodity promotion marks such as "The Other White Meat" and recognized the validity of a telephone survey as evidence of likelihood of dilution. The decision was the first time the TTAB had upheld a trademark dilution claim in seven years. Loeb & Loeb represented the National Pork Producers Council in this action.
Draft Federal Privacy Bill Released
A long-awaited draft of a Congressional Bill. was released on May 4 that, if enacted, would enhance consumer privacy protections and would push American privacy legislation closer to the strict regime used in Europe. The bill is broad in scope, applying both to the online and offline collection of personal information and also regulating certain aspects of behavioral advertising. In general, the bill requires companies that collect covered information to provide notice of their privacy practices before collecting any covered information. Regarding consent to collect, use or disclose covered information, the bill generally provides:
- an opt-out framework for collecting covered information as long as the company collecting information provides notice of its privacy policy, as required by the bill
- an opt-in framework for collection or disclosure of sensitive information (sensitive information includes medical records, race, ethnicity, religious beliefs, sexual orientation, financial records, and precise geographical location)
- an opt-in framework for retroactive material changes to a privacy policy
- on opt-in framework for disclosing covered information to unaffiliated parties
- an opt-in framework for disclosing location-based information
Opt-in consent requires express, affirmative consent. The bill's sponsors invited industry members to submit comments and intend to introduce the bill in Congress sometime this summer.
FTC Extends Comment Deadline for Revisions to COPPA
As we mentioned in June, the FTC is currently reviewing its Rule relating to the Children's Online Privacy Protection Act (COPPA) to determine if it adequately protects children given the rapid changes in technology and the way children use and access the Internet, for example, through use of mobile phones, Twitter, interactive games and other new media. The Commission announced that due to a technical glitch it is extending the deadline for submission of comments to July 12.
So far, 45 entities have submitted comments including a coalition of child advocacy, health, consumer, and privacy groups that is urging the FTC to update the COPPA Rule by:
- Extending COPPA to mobile phones, online gaming consoles, interactive television, and other new digital platforms "that are used by marketers to track and target children"
- Revising the definition of personal information "to reflect contemporary marketing practices in which persistent cookies, IP addresses, geo-location data, and even seemingly anonymous combinations of data such as age, zip code, and gender can be used to identify and target individuals"
- Revising when and how a website can contact children without obtaining parental consent, and "investigate whether some marketers are circumventing COPPA's intent by using this exception to the rules to engage in ongoing data collection and personalized marketing"
- Developing a separate set of privacy protections for children 13 and older.
Several industry groups have also submitted comments, including
the Entertainment Software Association who
urged the FTC to:
- Expand the list of parental consent methods to offer more "consumer-friendly, effective and scalable mechanisms"
- Clarify that website operators can avoid the "collection" or "disclosure" of personal information by using robust, automated filtering systems which will "enable operators to offer interactive activities to children in privacy-enhancing, safe, and cost-effective ways"
- Affirm that the COPPA Rule does not apply to "local communications" and is limited to the Internet
- Refrain from expanding the definition of personal information to include persistent IP addresses, online behavioral advertising, or user or screen names which "would result in negative and unintended consequences for consumers".
Numerous individuals have also posted their personal beliefs regarding the proposed Rule. Interested parties may continue to submit comments electronically by using the following link http://www.ftc.gov/os/comments/copparulerev2010/index.shtm, or in paper form mailed and delivered to the FTC, Office of the Secretary, Room H-135 (Annex E), 600 Pennsylvania Avenue, N.W., Washington, DC 20580.
Kellogg Settles Second FTC Investigation into False Advertising Claims and Agrees to Stricter Substantiation Standard
The FTC announced that Kellogg agreed to
expand an existing settlement agreement to resolve an FTC
investigation into questionable immunity-related claims for Rice
Krispies cereal. This is the second time in the last year that the
FTC has taken action against the company. According to the FTC,
Kellogg's product packaging claimed that Rice Krispies cereal
"now helps support your child's immunity," with
"25 percent Daily Value of Antioxidants and Nutrients
– Vitamins A, B, C, and E."
David Vladeck, the Director of the FTC's Bureau of Consumer
Protection, has made no secret of the FTC's desire to sharpen
its written standard of what constitutes "competent and
reliable scientific evidence" in order to make clear "the
amount and type" of scientific evidence required to
substantiate health claims. In a 2009 speech, Vladeck said a revised
standard was needed to help address "situations where a given
piece of research, though it may have been conducted according to
established protocols, achieved results inconsistent with the
weight of scientific evidence in the relevant field."
It is thus significant that the FTC requested, and Kellogg agreed
through the modified order, to substantiate any
future health claims with "competent and reliable scientific
evidence that is sufficient in quality and quantity based on
standards generally accepted in the relevant scientific fields,
when considered in light of the entire body of relevant and
reliable scientific evidence, to substantiate that the
representation is true." The requirement that the scientific
substantiation be considered in light of the body of relevant and
reliable scientific evidence is a revision to the way the FTC has
historically articulated what it considers "competent and
reliable scientific evidence" and appears to be the FTC's
attempt to build into its standard a means to address, among other
things, situations where the substantiation cited in support of a
health claim is out of step with other known studies.
AT&T Decision to End Unlimited Wireless Data Plan Could Threaten Mobile Content Consumption
AT&T announced on June 2 that it is phasing out unlimited data plans for wireless service. The New York Times reported that mobile app developers worry that if all wireless service providers adopt a similar pricing plan, customers will be reluctant to download and use the most bandwidth-intensive apps and that developers will cut back on innovative new features that would push customers over the new limits. However, many of the most successful applications are the simplest, and the announcement may drive developers that have been creating complex programs towards simplicity. There may also be more trends towards layered products, whereby small apps are available and support the largest user base, and the small number of heaviest bandwidth users use richer apps with more features and functionality of a given service, for higher fees. Considering new devices coming online (the newest Android-powered devices and the new Nokia devices seem far more advanced than the iPhone's operating system), models for micro-transactions 'in app', and new purchase capabilities through m-Commerce innovations such as billing to the wireless service provider, it is safe to say that the announcement will certainly be another dynamic for market innovators to drive new behavior.
Should COPPA Be Updated to Apply to Mobile Marketing or Behavioral Advertising?
On June 8, the FTC hosted a public roundtable to discuss the Children's Online Privacy Protection Act (COPPA) and the FTC's COPPA Rule. Although the FTC was scheduled to review the COPPA Rule in 2015, it decided to review the Rule this year in light of rapidly evolving technology (and advertisers who have adopted that technology) and a sharp increase among children using the Internet and mobile devices. COPPA requires, among other things, that operators of websites and online services directed to children obtain verifiable parental consent before collecting, using, or disclosing personal information from children. It also requires that the operators keep the information they collect from children secure, and prohibits them from requiring children to turn over any more personal information than is reasonably necessary to participate in activities on their web sites.
One of the key issues discussed during the roundtable was whether the COPPA Rule should be expanded to address activities accessed or conducted on a mobile device, such as text messaging, video games with interactive and networking features that are not tied to the Internet, and location-based promotions (such as offering points to users who "check in" through applications like FourSquare). Another issue is whether COPPA's definition of personal information should be amended to include information gleaned from a mobile device, such as precise geolocation information, or the information obtained through behavioral advertising.
The FTC is accepting public comments through June 30. Transcripts of the roundtable discussion are available at http://htc-01.media.globix.net/COMP008760MOD1/ftc_web/FTCindex.html#June2_ and public comments submitted to the FTC are available at http://www.ftc.gov/os/comments/copparulerev2010/index.shtm.
Court Holds Text Message Ad Is Subject to Federal Telemarketing Law
In a recent federal court decision, a consumer alleged that a marketer violated federal telemarketing law by sending several text messages to his cell phone advertising the availability of new movies. The marketer moved to dismiss for failure to state a claim, asserting that the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227, which does not define the word "call", does not apply to text messages. The court denied the marketer's motion to dismiss and held that a text message sent to a cell phone is a "call" under the TCPA. The court also held that a plaintiff does not need to allege that he was charged for receiving the text message to state a claim under the TCPA. The decision is Lozano v. Twentieth Century Fox Film Corp., No. 09-cv-6344 (N.D. Illinois, March 23, 2010). The U.S. Court of Appeals for the Ninth Circuit has also held, in Satterfield v. Simon & Schuster Inc., 569 F.3d 946 (9th Cir. 2009), that a promotional text message can be a "call" under the TCPA.
Federal Reserve Issues Final Rules for Gift Cards
On Tuesday, the Federal Reserve Board issued final rules regulating gift certificates, store gift cards, and general-use prepaid cards. The rules become effective August 22, 2010, and will apply to all cards (that are subject to the rules) sold or issued on or after that date. Generally, the rules (1) limit dormancy, inactivity or service fees, (2) require certain disclosures, and (3) prohibit expiration dates less than five years after issuance of gift certificates, store gift cards, and general-use prepaid cards. The new rules are part of Regulation E relating to electronic fund transfers (12 CFR Part 205). The Federal Reserve also issued Official Staff Commentary of the new rules which provide detailed examples and descriptions of the new requirements.
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