Hunton Retail Law Resource

The Children’s Advertising Review Unit (CARU) of BBB National Programs announced an investigation into the popular kids YouTube channel “Vlad and Niki,” owned by Content Media Group FZC, LLC (CMG), which produces videos under various licensing and merchandising agreements. Because these agreements obligate CMG to produce the videos and allow CMG to share in generated revenue, CARU considers CMG an endorser of the products in Vlad and Niki videos and subject to CARU’s Self-Regulatory Guidelines for Children’s Advertising.

In granting a summary judgment motion on June 16, 2023, the Southern District of Florida Bankruptcy Court developed a new framework to determine the ownership rights to a corporate social media account. The court found that Vital Pharmaceuticals, the manufacturer and seller of “Bang” energy drinks, is the rightful owner of three social media accounts used to market Vital’s products, rather than the company’s former CEO who often posted to the accounts.

On March 16, 2023, the Federal Trade Commission announced it issued orders to eight social media and video streaming platforms seeking Special Reports on how the platforms review and monitor commercial advertising to detect, prevent and reduce deceptive advertisements, including those related to fraudulent healthcare products, financial scams and the sale of fake goods. The FTC sent the orders pursuant to its resolution directing the FTC to use all available compulsory process to inquire into this topic, and using the FTC’s Section 6(b) authority, which authorizes the FTC to conduct studies that do not have a specific law enforcement purpose.

On February 12, 2020, the FTC announced its intention to review its Endorsement Guides (formally known as the “Guides Concerning the Use of Endorsements and Testimonials in Advertising”). These guides, first enacted in 1980 and revised in 2009, provide guidance to businesses, influencers and endorsers on how to make sure endorsements or testimonials abide by the requirements of the FTC Act. While advisory in nature, the Commission can take action under the FTC Act if an endorsement or testimonial is inconsistent with the Guides.

This past week, several consumer actions made headlines that affect the retail industry.

App Operator Im-Pacted by FTC Settlement

The Federal Trade Commission has reached a $948,788 settlement with app developer Pact, Inc. over claims that it engaged in unfair and deceptive business practices. Pact users enter into “pacts” to exercise and/or eat better. The app charges between $5 and $50 per missed activity for users who fail to meet their weekly goals. Users who meet their weekly goals were supposed to be rewarded with a share of the money collected from those who did not.

The FTC alleged that Pact charged “tens of thousands” of consumers even if they met their goals or cancelled their participation in the service. Customers had a difficult time getting refunds or even determining how to cancel. The FTC’s complaint alleged violations of the FTC Act and the Restore Online Shoppers’ Confidence Act.

Under the terms of the settlement, Pact must disclose its billing practices, and is prohibited from misrepresenting its billing practices or engaging in unfair billing practices. A judgement of $1.5 million will be partially suspended upon Pact’s payment of $948,788. 

On September 7, 2017, the FTC announced its first-ever case against social media influencers. In its complaint, the FTC alleged that two widely followed gamers, Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, posted messages endorsing online gaming service CSGO Lotto without disclosing that the two jointly owned the company. In addition to deceptively endorsing the service, the two are alleged to have paid thousands of influencers to promote the CSGO Lotto on social media without requiring those influencers to disclose the payments, which ranged between $2,500 and $55,000. The consent agreement requires Cassell and Martin to clearly and conspicuously disclose material connections between any endorser and promoted products and services. 

This past week, several consumer actions made headlines that affect the retail industry.

The NAD Refers Sports Drink Maker to FTC

The NAD has referred BA Sports Nutrition, the maker of BodyArmor sports drinks, to the FTC after the advertiser failed to alter certain comparative ads. The ad at issue implores customers to “Ditch artificial Sports Drink[s]: artificial flavors, artificial sweeteners, artificial colors” and depicts a bottle of a competing sports drink. The NAD found that the ad implied that the competing sports drink contained artificial flavors, sweeteners and colors when, in fact, many of the competitor’s sports drinks did not.

On April 19, 2017, the Federal Trade Commission issued warnings to more than 90 brands and “influencers” that their social media posts should more clearly and conspicuously disclose brand connections. The warning letters follow petitions filed by consumer advocacy groups aimed at influencer advertising on Instagram. The FTC’s warning letters show that the agency is committed to capitalizing on its recent enforcement actions against brands and influencers, and will continue to scrutinize social media compliance with the Endorsement Guides.

Read the full client alert.

The tidal wave of New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) claims just swept up a novel argument: a class complaint against Facebook, Inc. argues that the popular social media site’s terms of use is subject to TCCWNA because Facebook profits from users’ personal information and intellectual property.

Information posted to social media accounts can be highly relevant in suits brought by individuals, but too often requesting parties ask for “any and all” content, rendering their requests overly burdensome and subject to objection. Especially now, with the December 2015 changes to the Federal Rules of Civil Procedure, courts are grappling with how social media discovery fits into this new world of proportional discovery. In the recent case of Rhone v. Schneider Nat’l Carriers, Inc., No. 4:15-cv-01096-NCC, 2016 WL 1594453, the court settled this question with a unique approach.

Most marketers and retailers know that the consumer protection laws require that their advertising claims be substantiated, truthful and not misleading. But the new year is a good time to take stock of advertising campaigns, practices and procedures to make sure they pass muster under the Federal Trade Commission’s (FTC’s) latest guidance. The FTC’s recent enforcement actions provide a starting point.

Read the full client alert.