Tag Archive | "FTC"

CRTC Issues Penalties for Malware Distribution

The Canadian Anti-Spam Law (CASL) does not just prohibit non-consensual commercial messages.  The  Canadian Radio-television and Telecommunications Commission also enforces CASL’s prohibitions on  the non-consensual installation of software onto a person’s computer.

As reported by FTC (CID) investigation defense lawyer Richard B. Newman, on July 11, 2018, the CRTC issued Notices of Violation to Datablocks and Sunlight Media for purportedly  aiding in the installation of malicious computer programs through the distribution of online advertising.  The CRTC alleges that Sunlight Media accepted unverified customers that used their advertising services to distribute malware.  The CRTC also alleges that Datablocks provided the clients of Sunlight Media’s unverified customers with the means to place ads that contained malicious computer code.

The CRTC cited various compliance issues, including, but not limited to, the failure to monitor service usage, the absence of written compliance programs (despite having been warned about cybersecurity issues in 2016) and deficient contracts that failed to mandate compliance with CASL.  Attorney general (AG) defense lawyer Richard Newman has previously blogged about advertising regulatory policy in the U.S. regarding the importance of monitoring marketing partners.

According to the CRTC, the action included penalties of $100,000 for Datablocks and $150,000 for Sunlight Media.

The Chief Compliance and Enforcement Officer, Canadian Radio-television and Telecommunications Commission, stated “[a]s a result of Datablocks and Sunlight Media’s failure to implement basic safeguards, simply viewing certain online ads may have led to the installation of unwanted and malicious software.  Our enforcement actions send a clear message to companies whose business models may enable these types of activities.  Businesses must ensure their commercial activities do not jeopardize Canadians’ online safety. ”

Online advertising is one of the primary ways that malware is distributed.  This matter marks the first time that the CRTC has taken action against the installation of malicious software through online advertisements under CASL.

Written compliance policies and responsible contracts are critical in today’s hyper-aggressive online advertising regulatory landscape.  The FTC and state AGs expect all those in the digital marketing ecosystem to responsible vet and monitory marketing partners.

Richard B. Newman is an FTC compliance and defense lawyer at Hinch Newman LLP focusing on advertising and digital media matters.  Follow him on Twitter @FTCLawDefense.

Informational purposes only. Not legal advice. Always seek the advice of an attorney. Previous case results do not guarantee similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.

 

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FTC Defense Lawyer on Action Illustrating Need to Hold Partners Accountable

The Federal Trade Commission recently announced the settlement of allegations that marketers deceived consumers via a get-rich quick scheme.  According to reports, the operators have agreed to a permanent ban on marketing or selling certain types of software.

The FTC alleges that the international network of defendants deceived consumers by falsely claiming they could earn big money (e.g., “60k a month on 100% autopilot” and “beginners and normal people just like you” could pull in “$4,000 a day using their cell phones”) working online by using products marketed as “secret codes.”  According to the Commission, these products were generic software applications that could help the user make mobile-friendly websites.  The complaint charges the defendants with acquiring millions of dollars in “ill-gotten gains.”

Interestingly, the complaint also alleges that the defendants contacted consumers via affiliate marketers primarily with deceptive SPAM emails in violation of the FTC Act’s prohibition against deceptive practices.  The FTC alleges that consumers visited the defendants’ websites and were met with additional deceptive claims, including relentless pop-up advertisements and  videos that featured individuals that made unsubstantiated earnings claims.  The FTC’s case also includes allegations that the defendants failed to honor the stated refund policy.

While the Federal Trade Commission does not regularly included allegations of CAN-SPAM violations, here, the agency alleges the existence of misleading subject lines, the failure to clearly and conspicuously identify commercial email as an “advertisement,” the failure to include a physical address and the absence of a statutorily required opt-out mechanism.  Consult with an FTC law firm to discuss state and federal email marketing compliance requirements and trends.

According to reports, the defendants agreed to a $7M judgment which shall be partially suspended upon payment of approximately $700,000.

The defendants also are prohibited from marketing or selling money-making software, from making misrepresentations in the promotion, marketing or sale of any product or service, and from violating the CAN-SPAM Act.

Takeaway:  In addition to private plaintiffs, state and federal regulators actively enforce email marketing compliance requirements.  Both the company that presses SEND and the company on whose behalf it is working may be held legally responsible for CAN-SPAM violations.  Additionally, those making unsubstantiated earnings claims or misleading claims regarding the nature of the products/services being offered should be prepared to write Uncle Sam a check and for lifetime bans on certain marketing activities.  The enforcement action also reminds marketers that anyone and everyone in the affiliate marketing ecosystem can be held liable for possessing actual or constructive knowledge of deceptive practices.

Richard Newman is an FTC advertising compliance and defense attorney at Hinch Newman LLP Email him at rnewman@hinchnewman.com, or call him at (212) 756-8777.

ADVERTISING MATERIAL. Informational purposes only. Not legal advice. Always seek the advice of an attorney. Previous case results do not guarantee similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777

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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.

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What Telemarketer’s Need to Know About the “SCAMS Act”

Shortly after being named the acting chair of the Federal Trade Commission, Maureen Ohlhausen stated that a consumer protection priority during her tenure will be stopping fraudulent schemes targeting vulnerable individuals, including the elderly.

The Commission is making good on that promise.

In May 2017, the FTC announced a broad-sweeping nationwide and international crackdown on tech-support scams that tricked consumers into thinking that their computers were infected, then charged them hundreds of dollars for removal of non-existent viruses and malware.  According to reports, “Operation Tech Trap” included complaints, settlements, indictments and guilty pleas.  Additional cases continue to be filed by the Florida Attorney General.

Most of the defendants in these enforcement actions are alleged to have engaged in telemarketing activities in conjunction with the support services.  In one particular action the telemarketing aspect ultimately served as a vehicle for a referral to the Department of Justice and the imposition of federal criminal fraud charges.

According to the indictments, the conspiracy and scheme to defraud operated from 2013 through at least 2016.  During this period, the defendants allegedly victimized over 40,000 people and defrauded these individuals out of more than $25M.  The victims were located in all fifty of the United States, the District of Columbia, Puerto Rico, several U.S. territories, all ten Canadian provinces, the United Kingdom and several other foreign countries.

The defendants have been charged with conspiracy to commit wire fraud.

The Senior Citizens Against Marketing Scams Act (the “SCAMS Act”) provides that individuals that are convicted of various, specifically enumerated offenses (or conspiring to commit such offenses) in connection with the conduct of telemarketing, such as devising a scheme to defraud or to obtain money by means of false or fraudulent pretenses, are subject to “enhanced penalties.”

The SCAMS Act further provides, in pertinent part, that such individuals:

  • Shall be imprisoned for a term of up to 5 years in addition to any term of imprisonment imposed under the underlying statutory provision; and
  • In the case of an offense under any of the specifically enumerated statutory provisions, that (i) victimized ten or more persons over the age of 55; or (ii) targeted persons over the age of 55, shall be imprisoned for a term of up to 10 years in addition to any term of imprisonment imposed under the underlying statutory provision.

Telemarketers and online lead generators that facilitate inbound and/or outbound telephone calls on behalf of third-parties are well-advised to fully consider the potential consequences of the actions of its marketing partners and to preemptively vet such activities.  Willful blindness is not a defense and referrals to the DoJ, especially when there are telemarketing component to advertising campaigns, are not uncommon.

Contact an FTC defense lawyer if you would like to discuss the Commission’s recent investigations and enforcement actions, or if you are the subject of a local, state attorney general or federal regulatory matter.

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., 35th Floor, New York, NY 10005 | (212) 756-8777.

 

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FTC Provides Influencers and Brands Courtesy Reminder to Clearly Disclose Material Connections

 

The Federal Trade Commission recently circulated in excess of 90 letters to influencers and marketers reminding them of obligations to clearly and conspicuously disclose material connections in the context of social media promotions.   The letters were sent following a review of a number of Instagram posts by celebrities, athletes and other influencers.

According to the Commission, the letters were informed by petitions filed by Public Citizen and affiliated organizations regarding influencer advertising on Instagram, and Instagram posts reviewed by FTC staff.  This is the first time that FTC staff has reached out directly to educate social media influencers, themselves.

The FTC’s Endorsement Guides apply to both endorsers and marketers.  The Guides provide, in pertinent part, that if there is a “material connection” between an endorser and an advertiser that is not clear from the context of the communication, that connection should be clearly and conspicuously disclosed.

A material connection could be a monetary payment, a close business or family relationship, or the gift of a free product.

Interestingly, the letters also specifically touched upon Instagram posts, stating that consumers viewing Instagram posts on mobile devices typically see only the first three lines of a longer post unless they click “more,” which many may not do.  The staff’s letters informed recipients that when making endorsements on Instagram, they should disclose any material connection above the “more” button.

The letters also noted that when multiple tags, hashtags or links are used, readers may just skip over them, especially when they appear at the end of a long post.  Meaning, a disclosure placed in such a string is not likely to be conspicuous.

Some of the letters addressed particular disclosures that are not sufficiently clear, pointing out that many consumers will not understand a disclosure like “#sp,” “Thanks [Brand],” or “#partner” in an Instagram post to mean that the post is sponsored.

The FTC has also issued Endorsement Guides: What People are Asking (a document that answers frequently asked questions) and .Com Disclosures: How to Make Effective Disclosures in Digital Advertising.

As always, endorsements must also reflect the honest opinion of the influencer.

The recently circulated letters should be considered a courtesy notice regarding applicable obligations.  The recipients, and other marketers, are being scrutinized and it is highly unlikely that there will be another “free pass” from the Commission.

Social media influencers and marketers are on notice.

Contact an FTC Defense Lawyer to discuss social media marketing best practices and related advertising compliance issues, including disclosures, written policies, marketing contracts,  influencer training/monitoring and substantiating product performance claims.

Follow me on Twitter, here.

Richard B. Newman is an Internet advertising compliance and regulatory defense attorney at                Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of marketing 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.

 

HINCH NEWMAN LLP. 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.

 

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Congress Sets Sights on Recurring Revenue Marketing Model

 

“The Unsubscribe Act” was recently introduced in Congress.  It is designed to protect consumers from automatic monthly charges via marketing campaigns that fail to clearly and conspicuously disclose material terms prior to the entry of billing information.

Trial offers, automatic subscription renewals and continuity plans are prevalent in the dietary supplement industry.

Many marketers fail to adhere to FTC advertising law compliance requirements by, without limitation, properly disclosing all material terms, such as the length of any trial period, refund/cancellation policies, automatic renewal until cancellation, the amount of the charges, how the charges will appear, the timing/manner of charges, and shipping/handling charges.

The bill looks to the Restore Online Shopper’s Confidence Act as a foundation and contemplates the regulation of additional types of negative option programs.

The Unsubscribe Act proposed requirements for merchants to provide clear and conspicuous disclosures, up-front, and obtain affirmative consent from consumers before prior to the collection of any payment for additional products following a one-time purchase by a consumer or the conclusions of a free-trial period.

The Act would also require merchants to provide notification of all charges or account changes within thirty days before the end of the initial fixed period, and subsequently on a quarterly basis.

As proposed, available cancellation mechanisms must be provided in the same manner as the method consumers used to enroll.

Recurring revenue marketing models will continue to draw significant attention from regulatory agencies.  Interestingly, the bill provides for enforcement authority by the Federal Trade Commission and state Attorneys General.

This bill was assigned to a congressional committee on February 15, 2017, which will consider it before possibly sending it on to the House or Senate as a whole.

If you are the subject of a state Attorney General or FTC investigation or enforcement action, contact an FTC Defense Lawyer to ensure that your matter is handled properly and proactively, from the start.

The text of the bill can be seen, here.

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. 

HINCH NEWMAN LLP. 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.

 

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FTC Drops Hammer on SPAM Email Marketing and Unsubstantiated Weight-Loss Claims by Diet-Pill Marketer

The FTC has announced that three Florida-based affiliate marketers charged with using unlawful SPAM email, false weight-loss claims and phony celebrity endorsements to market bogus weight-loss products will pay $500,000 to settle Federal Trade Commission charges.  Terms of the settlement also prohibits the defendants from the deceptive advertising and marketing tactics alleged in the complaint.

According to the FTC’s complaint the individual and corporate defendants paid affiliate marketers to send consumers millions of illegal SPAM emails from hacked email accounts, making it appear that the messages came from the consumers’ family members, friends, or other contacts.  The email messages linked to what purported to be a “news story.”

However, the links actually led to websites that the FTC alleges deceptively promoted the defendants’ unsubstantiated weight-loss products (e.g., Original Pure Forskolin and Original White Kidney Bean).

According to the Commission the websites deceptively claimed that the defendants’ products could cause rapid weight loss.

As set forth in the complaint, the websites also falsely represented that the products had been featured or endorsed by Oprah Winfrey or the hosts of the television show “The Doctors.”  The FTC alleges that these weight-loss claims were false and unsubstantiated, and that the featured celebrities had no affiliation with the defendants’ products.

The FTC alleged that the defendants’ email practices violated both the FTC Act and the CAN-SPAM Act.

The settlement also sets forth that the defendants: must possess competent and reliable scientific evidence to back up any health of efficacy claims they make in the future; are barred from falsely representing that any health claims have been approved by the U.S. Food and Drug Administration; are required to preserve all scientific evidence used to support health claims made for their products; are prohibited from misrepresenting, or helping anyone else misrepresent, that a product or program has been endorsed or approved by specific celebrities, that testimonials reflect typical consumer experience, that any website or other publication is an objective news report when it is actually an advertisements, and that independent tests demonstrate a product’s effectiveness.

The order further prohibits the defendants from making a range of misrepresentations about their products, including their total cost, as well as claims related to refunds or cancellation terms.  The order  specifies how the defendants must monitor their affiliate marketers in the future, and bars them from violating the CAN-SPAM Act in the way alleged in the complaint.

Finally, the order imposes a judgment of $1,303,822.98 against the defendants, which will be partially suspended upon payment of $500,000 to the Commission.  The full amount will become due if they are later found to have misrepresented their financial condition.

If you are the subject of an Attorney General or FTC investigation or enforcement action, contact an FTC Defense Lawyer to ensure that your matter is handled properly and proactively, from the start.

Copies of the complaint and order can be seen, here and here.

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.

HINCH NEWMAN LLP. 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.

 

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