Tag Archive | "FTC Defense Lawyer"

FTC DNA Testing Privacy Investigation

In 2017, Senator Chuck Schumer urged the Federal Trade Commission to investigate DNA testing companies in an effort to ensure that data collection and use practices comply with applicable privacy laws, including those that prohibit the sale of information contained in DNA databases to third-parties without consent.

Recent reports indicate that companies like 23andMe and Ancestry.com are currently being investigated by the FTC with regard to their privacy and data protection practices, including the manner in which personal genetic data is being utilized and disseminated.

Apparently, the investigation was indirectly revealed in conjunction with a Freedom of Information Act request.  More specifically, the FTC denied the request by citing an exemption based upon the potential interference with law enforcement activities.  The FTC typically refuses to comment on an active investigation.

Consumers must be clearly, conspicuously and accurately advised what information is collected, how it used, who it is shared with and how it is monetized.  Additionally, privacy law requires companies that license or own consumer data to implement and maintain reasonable security measures, contractually require the same of third-party service providers and implement written disposal policies.

Last week, genealogy and DNA testing service MyHeritage announced that a security researcher found a file containing information on approximately 92 million users, including email addresses and hashed passwords.  The company has stated that it has no reason to believe user data was compromised.

In his November 2017 letter, Sen. Schumer expressed that “…putting your most personal genetic information in the hands of third parties for their exclusive use raises a lot of concerns, from the potential for discrimination by employers all the way to health insurance.  That’s why I am asking the Federal Trade Commission to take a serious look at this relatively new kind of service and ensure that these companies have clear, fair privacy policies and standards for all kinds of at-home DNA test kits.  We don’t want to impede research but we also don’t want to empower those looking to make a fast buck or an unfair judgement off your genetic information.  We can find the right balance here, and we must.”

Privacy and data security will continue to be a regulatory priority for the FTC for the foreseeable future, including the transparent disclosure of privacy practices, informed consent and the adequacy of disclosures.  Recent investigations and enforcement actions unambiguously demonstrate the seriousness of a company’s failure to obtain informed consent or failure to disclose data collection and sharing practices.

Contact the author at rnewman@hinchnewman.com.

Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP focusing on interactive advertising matters. His practice includes conducting legal compliance reviews of advertising campaigns, and representing clients in investigations and government litigation matters. Follow him in LinkedIn.

Informational purposes only. These materials are not legal advice, nor do they create a lawyer-client relationship. Do not act or rely on any information contained herein without seeking the advice of an attorney. Previous results do not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.

Advertising Material

Posted in LegalComments (0)

No TCPA Vicarious Liability Without Ratification

The Ninth Circuit has ruled that payday lenders and two marketing companies were not liable under the Telephone Consumer Protection Act by virtue of working with a lead generator that utilized automated dialing equipment to disseminate text messages.

Here, the lender had separate agreements with a marketing company (LeadPile) that purchased/sold leads from a third-party marketing company (Click Media).  Click Media, in turn, acquired leads from a publisher, AC Referral.

The plaintiff filed a class action against the lenders, LeadPile and Click Media, alleging that they were vicariously liable for AC Referral’s alleged TCPA violations because they ratified such conduct.

Importantly, while Click Media and AC Referral had a contract, the lenders and LeadPile did not and represented that they did not even know who AC Referral was.  Click Media asserted that it was unaware of AC Referral’s alleged TCPA violations.

While recognizing that vicarious liability exists in TCPA matters, it determined that the plaintiff did not allege all of the necessary elements and that there was no issue of fact with respect to ratification of AC Referral’s telemarketing activities, notwithstanding defendants’ acceptance of benefits and failure to vet compliance.

“It is undisputed that AC Referral did not enter into a contract with any of the lenders or with LeadPile,” the court held.  “It is also undisputed that AC Referral did not communicate with or even know of the lenders or LeadPile before the lawsuit was filed.  Because AC Referral was neither an agent nor a purported agent of the lenders or LeadPile, AC Referral’s actions do not qualify as ratifiable acts.  Accordingly, the lenders and LeadPile cannot be held vicariously liable for AC Referral’s unlawful text messages under a ratification theory.”

With respect to Click Media, the court ruled that despite their contractual relationship, “[a]lthough AC Referral was an agent of Click Media, [plaintiff] presented no evidence that Click Media had actual knowledge that AC Referral was sending text messages in violation of TCPA.”  “Nor is there any basis to infer that Click Media assumed the risk of lack of knowledge, because [plaintiff] did not present evidence that Click Media ‘had knowledge of facts that would have led a reasonable person to investigate further,’ but ratified AC Referral’s acts anyway without investigation.”

“The knowledge that an agent is engaged in an otherwise commonplace marketing activity is not the sort of red flag that would lead a reasonable person to investigate whether the agent was engaging in unlawful activities,” the court said.  “Because Click Media had no ‘knowledge of facts that would have led a reasonable person to investigate further,’ Click Media cannot be deemed to have ratified AC Referral’s actions and therefore is not vicariously liable.”

Click here, to read the full opinion.

Contact the author if you are interested in learning more about the design and implementation of compliant lead generation protocols, or if you are the subject of a state or federal regulatory investigation.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements. You can find him on Twitter at FTC Defense Attorney.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

 

 

Posted in LegalComments (0)

FTC Approves Settlement with Lenovo over Advertising Software Privacy Allegations

The Federal Trade Commission recently announced that it has approved a settlement with Lenovo regarding the company’s alleged, widely-publicized practice of pre-installing an advertising software program on some laptops that caused security vulnerabilities.

The settlement terms include prohibitions regarding the misrepresentation of any features of pre-installed software that would “inject advertising into consumers’ Internet browsing sessions or transmit sensitive consumer information to third parties.”  In the event that Lenovo does pre-install such software, the company is required to contain express consent prior to such software is activated.

The company is also required – for 20 years – to implement a software security program for most consumer software pre-loaded on its laptops.  The program is subject to third-party audits.

Between August 2014 and February 2015, Lenovo laptops allegedly came pre-loaded with software called VisualDiscovery, a program developed by a now-defunct advertising company.    The FTC purportedly found that VisualDiscovery delivered pop-up ads from the ad company’s retail partners whenever a user’s cursor hovered over a similar looking product on a website.

To deliver its ads, according to the Commission, VisualDiscovery acted as a “man-in-the-middle” between consumers’ browsers and the websites they visited, even those websites that were encrypted.  Without the consumer’s knowledge or consent, according to the FTC, this “man-in-the-middle” technique allowed VisualDiscovery to access all of a consumer’s sensitive personal information transmitted over the Internet, including login credentials, Social Security numbers, medical information, and financial and payment information.

The FTC alleges that while VisualDiscovery collected and transmitted to the ad company’s  servers more limited information, such as the websites the user browsed and the consumer’s IP address, the ad company had the ability to collect more information.

As alleged by the agency, to facilitate its display of pop-up ads on encrypted websites (those that include https:// in the web address), VisualDiscovery used an insecure method to replace digital certificates for those websites with its own VisualDiscovery-signed certificates.  Digital certificates are used to signal to a user’s browser that the encrypted websites visited by a consumer are authentic and not imposters.  As alleged in the complaint, VisualDiscovery did not adequately verify that the websites’ digital certificates were valid before replacing them, and used the same, easy-to-crack password on all affected laptops rather than using unique passwords for each laptop.

Because of these security vulnerabilities, consumers’ browsers could not warn users when they visited potentially spoofed or malicious websites with invalid digital certificates, the FTC stated.   The FTC also alleged that the vulnerabilities enabled potential attackers to intercept consumers’ electronic communications with any website, including financial institutions and medical providers, by simply cracking the pre-installed password.  The complaint alleges that Lenovo did not discover these security vulnerabilities because it failed to assess and address security risks created by third-party software it pre-loaded on its laptops.

“Lenovo compromised consumers’ privacy when it preloaded software that could access consumers’ sensitive information without adequate notice or consent to its use,” acting FTC Chairwoman Maureen Ohlhausen said in a statement.  “This conduct is even more serious because the software compromised online security protections that consumers rely on.”

Lenovo said in a statement that it stopped pre-installing the program on devices after questions were raised about privacy violations.  “While Lenovo disagrees with allegations contained in these complaints, we are pleased to bring this matter to a close after 2-1/2 years,” the company said.  “To date, we are not aware of any actual instances of a third party exploiting the vulnerabilities to gain access to a user’s communications.”

Notably, the settlement does not include a fine.

Contact the author if you are interested in learning more about the design and implementation of compliant privacy and data security protocols, or if you are the subject of a regulatory investigation or enforcement action.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements. You can find him on LinkedIn at FTC Defense Lawyer.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

 

Posted in CPA MarketingComments (0)

FTC’s Data-Breach “Unfairness” Standard

 

The FTC has showed no signs of slowing down when it comes to data breach investigations and enforcement actions. In doing so, the Commission utilizes concepts of “unfairness” and “deception.”

Companies that tell consumers they will safeguard their personal information are forced to live up to those representations.

To establish that a company’s practices are unfair, the FTC is required to establish that the practices cause or are likely to cause substantial injury to consumers that is not reasonably avoidable by them, and that is not outweighed by countervailing benefits.

The FTC routinely alleges that – and investigates whether – a company’s data security measures create a vulnerability.   The absence of an actual exploitation of such a vulnerability has not stopped the FTC from taking action. In other words, the FTC has alleged that the mere risk of cyber attack “causes or is likely to cause substantial consumer injury,” in violation of the FTC Act.

For example, in a 2013 enforcement action the FTC alleged that malware could exploit vulnerabilities. In early 2017, the FTC took this same position with respect to a manufacturer’s alleged unreasonable security measures that could purportedly be exploited.

The latter defendant chose not to settle, arguing that the existence of a vulnerability alone is not a “substantial consumer injury.” The court agreed and dismissed the FTC’s unfairness claim with leave to amend because the FTC did not identify an incident involving the exploitation of the alleged vulnerabilities and that the “mere possibility of injury” was insufficient under that prong of the statute.

Time will tell whether this ruling will discourage the Commission from taking action upon the existence of vulnerabilities alone.  The ruling certainly suggests that, absent evidence of data misuse, the FTC will face challenges demonstrating that a heightened risk of exposure of personal data constitutes the requisite “substantial injury.”

Despite the foregoing ruling, it is wise to anticipate that the FTC will continue to aggressively investigate and enforce privacy and data security matters, and push the boundaries of “unfairness” claims. Periodic vulnerability assessments should be conducted and remediation patches implemented. Representations and disclosures should also be evaluated for accuracy by an FTC defense lawyer.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements. You can find him on Twitter @FTCLawDefense.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

Posted in LegalComments (0)

Supplement Marketers Settle FTC Deceptive Advertising Charges

A health products company and its owner have agreed to settle charges by the Federal Trade Commission and the State of Maine that they deceived consumers with promises that their products could treat everything from arthritis to memory loss.  The proposed federal court order bars the defendants from engaging in a wide range of business practices that the agencies allege have caused financial injury to consumers.

According to the agencies’ complaint, Health Research Laboratories, LLC and its sole owner marketed BioTherapex, a dietary supplement that purportedly targets the liver to address a host of ailments, and NeuroPlus, a brain supplement, using a variety of false and unsupported claims.

Primarily through direct mail marketing campaigns targeting consumers across the United States and Canada, the defendants allegedly advertised that BioTherapex, which they sold for $39.95 per bottle, could treat arthritis, relieve joint and back pain and cause significant weight loss.

The defendants allegedly advertised that NeuroPlus, which they sold for $39.99 per bottle, could protect the brain against Alzheimer’s disease and dementia, reverse memory loss, and improve memory and cognitive performance.

The complaint alleges that these health and efficacy claims are false or unsubstantiated.

According to the agencies, the defendants also styled their direct mail brochures as scientific journals featuring fictitious medical doctors and consumer testimonials.

Brochures for BioTherapex allegedly highlighted the results of a purported 1,200-person clinical study on the product that was never actually conducted.

The complaint also alleges the defendants engaged in an array of deceptive marketing practices, including:  misrepresenting the terms of the purported “risk free” trial period during which consumers could try the products; enrolling consumers in auto-renewal plans without adequately disclosing that they were doing so; obtaining and charging consumers’ debit card numbers without proper authorization, in violation of the Electronic Fund Transfer Act; failing to disclose all material terms and conditions for additional third-party upsells in violation of the FTC’s Telemarketing Sales Rule; failing to disclose material terms of their refund and cancellation policy in violation of the TSR; and misrepresenting the cost of their products to Canadian consumers.

The proposed court order bans the defendants from making any of the seven “gut check” weight-loss claims that the FTC has publicly advised are always false with respect to any dietary supplement, over-the-counter drug or any product rubbed into or worn on the skin.

The order also prohibits the defendants from making the claims challenged in the complaint unless they have competent and reliable scientific evidence in the form of human clinical testing.

The order requires the defendants to have competent and reliable scientific evidence to support any other claims about the health benefits or efficacy of any dietary supplement, food or drug, and prohibits them from misrepresenting the existence or outcome of tests or studies.  In addition, it prohibits them from misrepresenting the existence of consumer testimonialists and expert endorsers.

The order prohibits the defendants from misrepresenting the terms of free or risk-free trial offers, refunds, cancellations, negative option plans or automatic shipments, and they must get consumers’ consent for negative option offers prior to using consumers’ billing information to obtain payment.

Finally, the order imposes a judgment of $3.7 million, which will be suspended upon payment of $800,000.

Contact an FTC advertising compliance and defense attorney if you are interested in the implementation of preventative compliance measures or are the subject of a regulatory investigation.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements. You can find him on Twitter @FTCLawDefense.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

Posted in LegalComments (0)

Trump Picks Corporate Antitrust Lawyer to Lead FTC

President Trump has chosen Joseph J. Simons, an antitrust lawyer who has represented a number of tech companies, including Microsoft, to lead the Federal Trade Commission.  Other seats at the agency have also been filled, one of which by Rohit Chopra, a fellow at a consumer advocacy group.

The nominations are expected to be approved once reviewed by Congress.

Mr. Simons led the competition bureau of the FTC during the George W. Bush administration.  All signs are that the Commission will continue to pursue a conservative, free-markets approach to antitrust issues.

It will be interesting to see how antitrust policy plays itself out, considering hot button issues such as the growing power of major Internet and digital advertising companies.  While Mr. Simons appears to possess a lot of institutional knowledge, he is not as well-known in the privacy and data security circles, which is the other major policy area under the FTC’s purview.

Chopra, the nominee for a Democratic position, is known for expertise on financial services issues, particularly in the area of student lending.  He was assistant director in the Consumer Financial Protection Bureau.

Noah Phillips is expected to be approved as a Republican commissioner.  Mr. Phillips possesses expertise in privacy and antitrust matters.

Consult with an experienced FTC defense lawyer if you are the subject of a Federal Trade Commission investigation or enforcement action.

Follow the author on Twitter.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

Posted in LegalComments (0)

GDRP Impact on Digital Marketing

GDRP Impact on Digital Marketing

The General Data Protection Regulation is a regulation that is intended to strengthen data protection for individuals within European Union countries.  At its core, the GDPR is intended to provide individuals more control over and additional safeguards with respect to their personal data, including the right to be forgotten and the right to know when their data has been hacked.

The GDPR is also intended to unify privacy and data requirements across the European Union.  However, countries will be permitted to regulate specific types of data, like health data.

In short, companies that conduct business in the European Union may need to reassess their privacy protocols as they may not pass must under the new GDPR regulations which set a higher standard for consent.

It is widely anticipated that the GDRP will have a significant impact on the digital marketing industry, particularly with respect to how personal data is collected, used and stored for commercial purposes, consent management and what companies must do to bring themselves into compliance.

The new law affects every company that uses personal data from European Union citizens.  It provides data localization, data encryption and anti-SPAM.

If you send email in the European Union, regardless of where you are based, you will have to comply with the GDPR.  Affirmative, opt-in consent for commercial communications will be required.  The new law specifies the nature of such consent, including what constitutes “affirmative” consent (e.g., checking a box, etc.).

Consumers must be informed about the brand that is collecting the consent and information pertaining to how data will be used, including the maintenance of data in a CRM database.

Importantly, GDPR also applies to existing data.  So, if presently existing email lists do not meet GDPR standards, they will be off limits when the new law takes effect.

In-line with U.S. Federal Trade Commission best practice guidance, data should never be retained for longer than needed and should only be used for intended purposes – those which a consumer would reasonably and legitimately expect.  Avoid colleting unnecessary data.

Additionally, the new law provides for the appointment of a data protection officer to oversee compliance,  including responding to consumer inquiries.

The new privacy and data protection rules come into force on May 25, 2018.  GDPR will impact any organization – including those in the US and Canada – that does business in the European Union.

Penalties for non-compliance will be steep.  Up to €20 million or 4% of total annual revenue, whichever is greater.  Compliance is also critical from the standpoint of securing a competitive advantage.

This article should be of interest to social media influencers and marketers.  Consult with an experienced FTC defense lawyer for assisting designing and implementing preventative compliance controls, or if you are being threatened with civil litigation or a regulatory investigation.

Follow the author on Twitter.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

Please contact advertising law attorney Richard B. Newman if you are interested in discussing the design and implementation of GDRP compliance protocols, or if you are the subject of a regulatory investigation or enforcement action.

Posted in LegalComments (0)

Facebook

Subscribe via RSS