Consumer Advertising Law Blog

Tis the Season To Lawfully Process Returns

We wish for our retail clients and friends a successful post-holiday sales season. As the bargain hunters hit the stores and the web, so do the shoppers seeking to return unwanted loot. We thought this a prudent time to remind readers about various laws related to refunds.

The FTC simply asks that a retailer not mislead consumers as to its refund policy. But this is one of those areas governed by different and sometimes conflicting state and even local laws where there may be affirmative requirements. Unless you have clearly and conspicuously told buyers otherwise, it is a best practice to provide cash refunds after purchase. New York requires all merchants to post their refund policies. If the refund policy is not posted, customers must be permitted to return any item for cash for 30 days after purchase as long as the customer has a receipt. California has a similar requirement that if a store does not post its refund policy that stores must provide a full return of the price paid within 30 days of purchase, but there are exceptions for perishable items, goods marked "as is" or "all sales final", and goods not returned in original packaging. Other states have similar requirements of posting of a refund policy and then if a refund policy is not posted, a requirement to accept the return of goods (at least non-custom, new durable goods) for cash for some period of time ranging from 7 days (see Florida) to 60 days (see Hawaii) or an undefined "reasonable" period of time (see Minnesota and Vermont). Again, we hope very much your customers who did not get the perfect gift this holiday season chose to exchange in your shop rather than return, but above all we hope you stay safe from the enforcement eye of the state regulators! 

- Amy Mudge

New Domain Names: From “dot.com” to “not com” [Part 2 of 3]

In this second segment of our series, we discuss options for trademark owners on how to act defensively if they do not become registries under the new top level domain system.

The first blog in this series explained how the opening up of the Internet to new registries -- and the potential explosion of new top level domains -- could change the Internet. Yet many, if not most, trademark owners will not become a registry with their own top level domains, for financial, technical or other reasons. These trademark owners, however, should know how to protect their trademark rights from the new form of cyberpirates that is likely to emerge. This blog briefly describes the more important mechanisms that ICANN plans to offer savvy trademark owners to protect their rights.     

Objecting to a Third Party’s New gTLD Application

Only four grounds may form the basis for a trademark owner’s objection to a new gTLD application: 

• String Confusion Objection: The applicant’s proposed gTLD “string” of letters, is confusingly similar to a pre-existing gTLD or another applied-for gTLD string in the same round of applications. 
• Legal Rights Objection: The applicant’s gTLD string infringes the legal rights of the objector, such as the objector’s trademark rights. Factors in deciding a legal rights objection are similar to those in the Uniform Domain-Name Dispute Resolution Policy under current practice.
• Limited Public Interest Objection: The applicant’s gTLD contravenes generally accepted standards of morality and public order under international law.
• Community Objection: A significant part of the community, such as a geographic community, objects to the gTLD application, e.g., New York City residents might object to a Miami company’s submission for a .nyc registry. 

To initiate a proceeding, the objector must file its complaint by a posted deadline with an appropriate Dispute Resolution Service Provider (DRSP), along with a specified fee. For many companies, the most relevant DRSPs are the World Intellectual Property Organization (for legal rights objections) and the International Centre for Dispute Resolution (for string confusion objections). 

Protecting Against Infringing Second Level Domains in the New Domain Name Space

ICANN’s  program contemplates important measures to protect trademark owners from the registration of second level domains, combined with the new gTLDs, by trademark infringers. Thus, a company owning the ABC^® mark could invoke the procedures described below to prevent a third party from registering “ABC.new TLD” or to learn of such registrations.

The Trademark Clearinghous. ICANN plans to create a Trademark Clearinghouse, i.e., a central database for information about trademark rights. Trademark owners who want to register their second level domains with the new registry ahead of the general public, and trademark owners who want to be notified if a would-be infringer registers their trademarks as second level domains, must submit evidence of their trademark rights to the Trademark Clearinghouse. This evidence may consist of: a trademark registration; a judicial decision recognizing the trademark; or other evidence showing that the mark “constitute[s] intellectual property”. This Clearinghouse will authenticate information about the trademarks it receives and store that information in its database. It will provide information about the authenticity of the trademarks in its database, as needed, to new gTLD registries for use in the Sunrise Service and Trademark Claims Services described below.

Sunrise Service. New gTLD registries must provide a Sunrise Service that protects trademark owners from a “race to registration” against domain name registrants who might infringe the trademark owners’ rights. The anticipated sunrise period will be at least 30 days before the launch of a new gTLD, during which time a rightful trademark owner may reserve its mark as a second level domain with the new gTLD, ahead of others who might try to reserve the same name. For example, if a major car manufacturer could register its MERCEDES^® mark as “mercedes.car” before Company S permits the public to register domain names in the .car gTLD.  

Trademark Claims Service. In addition, all new gTLD registries must provide a Trademark Claims Service for the first 60 days after the public launch of their new gTLDs, i.e., after the general public can begin registering domain names in the gTLDs. This service provides a warning notice, called the Trademarks Claim Notice, to prospective registrants of a pre-existing trademark owner’s rights when the domain name applicant attempts to register a domain name that is an “identical match” to the trademark that the trademark owner has listed with the Trademark Clearinghouse. This notice, however, is of limited utility, because it is only triggered when a third party tries to register a second level domain identical to a trademark that resides in the Trademark Clearinghouse. If the domain name registrant proceeds with the registration application, the trademark owner will receive a notice informing it that a domain name that is an identical match to the trademark owner’s mark has been registered.

Objections to Registrations. The Uniform Dispute Resolution Procedure that currently applies to disputes involving registration of second level domains with .com, .net, .org and certain other top level domains will apply to registration of second level domains with the new gTLDs. An entity that wants to challenge registration of a second level domain with a new gTLD may, assuming jurisdiction and venue lie, also file a lawsuit in the United States alleging infringement, cybersquatting and related causes of action.

- Roberta Horton

 

New Domain Names: From “Dot.Com” to “Not Com” [Part 1 of 3]

This is the first in a series of three blogs on the new gTLDs

Most of you are probably familiar with the common Internet domain name endings such as “.com”, “.net”, or “.org”, which, when combined with an organization’s or individual’s name, serve as addresses for websites in cyberspace (e.g., “microsoft.com”). The portion to the right of the dot is the Top-Level domain (“TLD”). One type of TLD is a “generic” TLD (gTLD), such as .com; another is a “cc TLD” or country code, such as “.jp.” . The portion to the left of the dot is called a “second-level domain name” and is the name of the organization or individual. To date, only 22 gTLDs exist. Beginning on January 12, 2012, however, the Internet will open up to a potentially infinite number of new top level domains or “gTLDs”. This Blog briefly explores how the launch of these new top level domains could change the Internet -- and affect your organization -- dramatically.  

What will the changes look like? The launch of new gTLDs means that anyone with the means can become a “registry” that creates and manages a database of domains ending with a particular top level domain that it selects. That new gTLD can be a generic term (e.g., “.bank”, “.wine”) or a brand name (e.g., “.canon”, “.nokia”). The registry should have a say in setting the rules for entities eligible to register under that gTLD. For example, if the gTLD is a generic term such as “.bank”, the registry may require that registrants actually offer banking services. If the registry is a car manufacturer using its brand name as the gTLD (e.g., “.mercedes”), it may require that only authorized dealers can register in its gTLD space (e.g., “manhattandealer.mercedes”). Still other registries might use the new gTLDs for creative promotional purposes. The camera company Canon was the first to express an interest in setting up a new registry, under .canon. The company may use “.canon” for marketing purposes, issuing second level domain names to Canon camera owners and embedding a unique chip in the buyers’ cameras so that they could upload photos onto [buyer’s name].canon.

The registry will set the rules for bodies called “registrars”, which are accredited by the Internet Corporation for Assigned Names and Numbers, the global body that governs the Internet. The registrars will, in turn, sell to individual registrants the right to combine their second level names with the top level domain for a limited period of time. 

How does one become a Registry?  The requirements are rigorous, and include a significant financial payment ($185,000), a demonstration of financial stability, and sophisticated technical support on a 24/7 basis. If a Registry elects to outsource its technical work, its financial commitment could run $1 million or more. Applicants must complete a 40+ page application and 10 detailed specifications demonstrating their financial and technical capability. ICANN is not planning to post the actual new GTLD application.  This link, here, will allow an Internet visitor to navigate through the application process. ICANN will evaluate the applications. Among other things, it will guard against the granting of multiple new gTLDs that are confusingly similar to a previous gTLD. The application window lasts for only four months, from January 12, 2012 to April 12, 2012.

What to watch out for if you are not a Registry: Becoming a Registry is not for everyone. Some organizations do not have the expertise or the financial wherewithal, or want to make the commitment required. Still others, such as non-commercial entities that do not sell products or services, might not stand to gain by carving out a space they can control to some degree on the Internet. 

If you are not in the “Registry Game”, you should be prepared to act defensively to: 

1. Object to a third party’s proposed gTLD that incorporates your trademark; or
2. Object to a third party’s  attempt to register second level domains incorporating your name or trademark within the new gTLD space. 

The next blog post in this series will describe these defensive mechanisms and explains how they work.  The third and final post will sum up the new gTLD process and suggests strategies for an organization to  adopt as the launch date approaches.   

- Roberta Horton

 

 

UK ASA: Protecting Children from Harm And… Potential Harm

The UK’s advertising regulator, the Advertising Standards Authority (ASA) has banned an advert from haute couture label Miu Miu which showed a child model in a “hazardous or dangerous situation”. The advert, which featured in Tatler Magazine, showed a 14-year old model wearing 1940s-inspired adult clothing and sitting on railway tracks. A complainant said that the model looked like she was or had been crying and challenged whether it was irresponsible as they believed it was suggestive of youth suicide and could be seen by impressionable young people. The ASA also challenged whether the advert was irresponsible for showing a child in an unsafe location. In response, Prada Retail UK Ltd (Prada), which is behind the Miu Miu brand, said that the advert was part of a serious, high-fashion campaign aimed at adult women and was only published in adult magazines such as Tatler. It said that the model was not crying, nor had she been asked to cry or to look upset. The advert was not created to give an impression of youth suicide, nor was it made with the intention of depicting a child in an unsafe location. The photograph had been taken on an abandoned railway, the model was not restrained in any way and it was clear from the extended viewpoint that there was no train in sight.

The ASA dismissed the complaint about youth suicide, holding that the model was not shown looking in distress or crying and that the advert would be seen by a predominantly adult readership. However it upheld the second complaint. The ASA concluded that, although the model was not restrained on the track or seen playing on it, and there was no train in sight, the advert was shot in a potentially hazardous location and was therefore “irresponsible”.

We are used to seeing the ASA taking a firm stance on adverts which sexualise children (e.g., see here how American Apparel learnt from its mistakes), or promote unhealthy behavior (e.g., see here our summary on the banned Kate Moss t-shirt slogan), however this decision takes the ASA’s protection of children significantly further. Advertisers should therefore be mindful of depicting children in situations which may suggest even the potential for danger or hazard.

- Richard Dickinson

UK Competition Appeal Tribunal Tosses Tobacco Pricing Decision

While we focus on advertising and marketing issues in this blog, we occasionally stray into competition law topics when we think they will be of interest to our readers, particularly when they relate to whether and how a manufacturer can dictate or influence the downstream pricing decisions of distributors or retailers. 

In the US, vertical pricing agreements are generally subject to the rule-of-reason after the Supreme Court’s decision in Leegin -- or in other words they will be examined to determine if the overall effects can be said to harm competition rather than forbid such arrangements outright as per se unlawful like horizontal price fixing between competitors.  In some states, minimum resale price maintenance (“You will charge no less than X”) is still per se unlawful and various bills have been introduced at the federal level to overturn the Leegin holding. Competition laws are not one size fits all from a worldwide perspective.  While most countries scratch their heads and refrain from me-tooing the US Robinson Patman, or price discrimination, law, many other countries still outright frown on vertical pricing restraints. 

In the EU, vertical price fixing is considered to be a “hardcore” restraint (essentially one that almost always raises significant competition issues) unless the parties to such an agreement can demonstrate that the provision will result in efficiencies that outweigh harm to competition. The European Commission has limited examples of this to situations where resale price maintenance is necessary for a short period of time to facilitate entry of a new product into a market or to prevent free riding, and a relaxing of the EU approach to resale price maintenance is not anticipated.

In 2003, the UK’s Office of Fair Trading (OFT) opened an investigation into retail tobacco product pricing practices as the result of a leniency application made under the OFT’s leniency program. The OFT issued its statement of objections in 2008, after which six companies entered into agreements settling the OFT’s allegations. In April 2010, the OFT adopted a decision finding that agreements Imperial Tobacco and Gallaher entered into with retailers had the object of preventing, restricting, or distorting competition for the supply of tobacco products and imposing £225 million in fines. The OFT found that these agreements restricted the retailers’ ability to set its own retail prices by mandating “parity and differential requirements” between the manufacturer’s brands and its competitor’s brands. For example, an agreement might provide that manufacturer’s Brand X must be “no more expensive than” or “not more than 3 pence more expensive than” competitor’s Brand Y. 

Imperial and five retailers appealed the OFT’s decision to the UK’s Competition Appeal Tribunal (CAT), which set aside the OFT’s decision as it relates to the appellants. During the proceedings before the CAT, which can hear testimony, the evidence did not support the OFT’s interpretation of the agreements.  As a result, the OFT attempted to change its theory of harm. In short, the OFT argued that no matter how a parity and differential pricing strategy was implemented, it restricted competition by restricting the retailer’s ability to set prices. In a December 12 opinion, the CAT concluded that the OFT’s new theory was not a part of its original decision and the CAT therefore did not have jurisdiction to consider it. The CAT went on to find that even if it had jurisdiction, it would exercise its discretion not to continue hearing the appeals. The decision of the CAT does not mean that the OFT’s original theory of harm would not have been valid had the evidence relied on by the OFT supported that theory.  However, it is yet another significant blow to the OFT’s enforcement activities which have been plagued by a series of high profile failures in the last few years. It is not anticipated that the OFT will seek to re-open the case based on the revised theory of harm.

- Sue Hinchliffe, Matthew Shultz, & Amy Mudge

We Thought People Just Liked to Talk About Superbowl Ads - FTC Closes Investigation of Alleged Payment to Bloggers for Mentioning Ads

When the FTC issued its revised Endorsement Guides, there was much anguish in the blogosphere about the newfound guidance on blogging and the FTC’s enforcement intentions in this regard. The Agency, however, was quick to offer some reassurance that it was not going to throw stay at home blogging mom’s or blogging teenage gamers in jail (see one of our previous postings here). A recent closing letter sent to Hyundai serves as both a reminder that the worst fears in the blogospheres have not come to pass and what steps a company can proactively take to stay out of trouble with the Agency if, despite all precautions, there is a potential Section 5 problem.

The FTC’s inquiry focused on whether bloggers had been given gift certificates as an inducement to include links to Hyundai videos or comment on upcoming Super Bowl ads and were specifically told not to disclose this information (in violation of the Endorsement Guides).

The FTC decided not to recommend an enforcement action. Their decision was influenced in part by steps Hyundai had taken that others might be wise to take as well. 

• First, the incentives were provided by a rogue individual working for a media firm hired to conduct the campaign. Although Hyundai could have been held responsible for the actions of those working for them, Hyundai had an established social media policy that called for bloggers to disclose the receipt of any compensation. (The media firm had one as well.) 

• Second, when the media firm learned of the misconduct, it took prompt action to address it.  We don’t know whether that was before or after the FTC initiated its investigation, but, based upon our prior experience, the FTC likely gave them credit for taking remedial action before the Commission came calling.

So, as this case demonstrates, a few simple steps can sometimes save you from a much bigger problem. 

And just to clear up any confusion, Hyundai did not offer us gift certificates, free cars or super bowl tickets (or anything else) to blog about their case.  

- Randy Shaheen

FDA Weighs in on Lap-Band Advertising by Surgery Centers

Yesterday, the US Food and Drug Administration (FDA) announced that it has issued Warning Letters (e.g., here and here) to eight California surgical centers and one marketing firm for misleading advertising of Allergan Inc.’s Lap-Band device. FDA stated that certain ads for Lap-Band surgery “misbrand” the device in violation of the Federal Food, Drug, and Cosmetic Act (FDCA). FDA advised the firms to immediately cease their marketing of the Lap-Band and advised them to take prompt action to correct the violations. The FDA made no allegations against manufacturer Allergan in any of the letters. 

The Lap-Band is an adjustable gastric banding device approved by FDA to help obese patients lose weight. The inflatable band is inserted surgically through a small incision and placed at the top of the stomach; it can be tightened or loosened to reduce or enlarge stomach capacity. Potential patients must meet certain medical and health requirements to qualify for the Lap-Band surgery. Healthcare providers who choose to promote the gastric banding procedure must educate patients about the risks involved.

The Warning Letters describe ads including photos of billboards and advertising inserts.

• One of the billboards reads: “LOSE WEIGHT WITH THE LAP-BAND! SAFE 1 HOUR, FDA APPROVED 1-800-GET-THIN; 1-800-953-5000; PPO INSURANCE; FREE INSURANCE VERIFICATION.”
• One of the inserts reads: “LET YOUR NEW LIFE BEGIN!” in large text, with a statement acknowledging certain risks of the procedure in smaller print. 

FDA stated that the ads are misleading and misbrand the device because they fail to reveal material facts, including relevant risk information regarding the use of the Lap-Band, age and other qualifying requirements for the Lap-Band procedure, and the need for ongoing modification of eating habits as provided in the approved Lap-Band labeling. It stated that some of the ads also misbrand the device because they do not adequately state the Lap-Band’s relevant warnings, precautions, side effects, and contraindications. Finally, FDA expressed concern that ads that include risk information provide the information in a font “that may be so small as to render the information illegible.” 

Although FDCA’s “practice of medicine” exception limits FDA’s authority to restrict healthcare providers from prescribing or using medical devices for off-label indications, the exception does not expressly place physician advertising and promotional activities beyond FDA’s reach. Consequently, FDA reviews physician advertising and labeling practices and brings enforcement actions against physicians and other healthcare providers based on such practices. The regulatory risks may be higher where ads for healthcare or medical services include alleged off-label statements about a medical device. The commercial and legal costs of such FDCA violations can be significant, as providers risk government inventory seizures, injunctions, and monetary penalties, as well as consumer protection actions from private litigants or state agencies.

The companies have 15 business days to respond to the agency and lay out plans to correct the violations addressed in the letters.

- Vernessa Pollard and Lauren Robbins

 

Groupon UK Under Investigation from the UK’s Office of Fair Trading

The UK’s consumer protection authority, the Office of Fair Trading (OFT), is investigating deal-of-the-day website Groupon for its persistent breaches of UK advertising regulations.

Groupon offers its members daily discounts on a range of deals from restaurant meals and theatre tickets to cosmetic treatment such as teeth whitening, hair removal and surgery. However the sales promoter has continually landed itself in hot water over its advertising practices and the UK’s advertising watchdog, the Advertising Standards Authority (ASA) has formally investigated and upheld complaints against the company 11 times this year and informally resolved another 37 cases.

Groupon most recently breached the Committee of Advertising Practice (CAP) Code for promoting cut-price cosmetic surgery. The ASA ruled (23 November 2011) that the promotion was likely to pressure consumers into making a rash decision to purchase physically invasive surgery and was therefore irresponsible (see our commentary here).

Due to the persistence of Groupon’s breaches and its apparent inability to adhere to the Code, the ASA has now said that it will refer any complaints it receives about its failure to conduct promotions fairly, failure to provide evidence that offers are available or its exaggeration of savings claims directly to the OFT. Referrals to the OFT are rare, however the ASA is able to make a reference to the OFT for investigation under the Consumer Protection from Unfair Trading Regulations 2008 if an advertiser persistently breaches the Code. It has since emerged that the OFT has been investigating Groupon’s trading practices since July 2011 amid concerns about its compliance with consumer protection legislation.

The OFT launched the investigation against Groupon confidentially and on its own initiative, but the latest move by the ASA lends weight to it. The ASA has also shown that it will not take persistent breaches by advertisers lightly and even though it may not have the weight of the law behind it, it is more than willing to escalate matters to the OFT as and when required.

- Richard Dickinson and Gemma Davies