FTC Puffery Defined: The Last Stop Before False Advertising
Originally Posted: August 28th, 2014
Promoting your business means bragging about your business, right? Absolutely. But, there’s a fine line between putting your best foot forward and misrepresenting the facts. We’ll cover the difference between false advertising and what the Federal Trade Commission (FTC) calls “puffery.”
What is Puffery?
So, what is puffery? Claims that can’t be universally proven.
Example: “We offer the best burgers in the world!”
The Federal Trade Commission does not censure businesses for making ambiguous statements like these because they’re obvious exaggerations.
Puffery Is A Claim That Can’t Be Universally Proven.
In general, puffery is a subjective claim about a product or service designed to promote it in a more positive light. Basically, the FTC doesn’t punish businesses for making general, positive statements about their products and services.
FTC Puffery vs. False Advertising
It’s one thing to say that you offer the “best, finest, or greatest” in your business, but it’s another thing to make blatantly misleading claims. So, what is the line between puffery and outright deception? Typically, statements which are general, broad and depend on a person’s preference fall under the definition of puffery.
However, specific, physically verifiable statements qualify as fraud. For instance, suppose a startup claims to have raised $2 million, and you were persuaded to buy in because of the assurance. If it turned out that it didn’t have $2 million in the coffers, the FTC would be banging on the company’s door.
Typically, statements which are general, broad and depend on a person’s preference fall under the definition of puffery.
What is the Effect of Puffery?
The effect of FTC puffery depends on how the consumer thinks they know about a product or service. In a study published in the Journal of Consumer Research, Robert S. Wyer, Jr. and Alison Jing Xu studied consumers’ reactions to advertising claims. They discovered that ambiguous statements were interpreted in two different ways:
People who thought they knew less than others about a product viewed puffery as useful information designed for folks knowledgeable on the subject.
People who have a higher perceived level of knowledge see puffery as useless filler.
The study also showed claims are perceived differently based on the context and type of product.
Get In Touch With A Marketing Lawyer About Your Puffery Questions
It’s acceptable to flatter yourself, but it’s not okay to lie. If you’re ever in doubt, it’s best to have your materials reviewed by a marketing attorney who understands the nuances of FTC puffery issues.
COPPA Update: Cleaner Language & Safe Harbor Programs
Originally Posted: August 26th, 2014
The FTC has been busy this summer! In addition to releasing a few online marketing and privacy reports, the nation’s consumer watchdog also issued several updates to the current mac-daddy of U.S. online privacy laws – the Children’s Online Privacy Protection Act (COPPA). The changes are mostly cosmetic and language-oriented – out with “legalese,” in with “plain English” type of adjustments.
Nevertheless, there are a few items worth reviewing.
Bolstered Liability Language Regarding Site & App Functionality
Requested, Promoted and Encouraged
The previous version of the Children’s Online Privacy Protection Act said the law applied to website operators and app developers who “requested” identifiable information from minors. In the latest version, “requested” has been expanded to “requested, promoted or encouraged.”
Everything Digital Falls Under COPPA Now
The last COPPA version specifically mentioned chat rooms and message boards as Internet-based platforms on which children could share personal information. Now, specific mentions of various types of online websites has been replaced with the broader “in identifiable form.”
Other Small COPPA Language Changes
Changed e-mail to email;
Included “instant messaging user identifiers, VOIP identifiers and video chat identifiers as “an identification that permits direct contact”;
Added geolocation as a “persistent” identifier;
Added the word transfer to section that addresses the exchange of PII between parties, used to be only sharing, selling and renting.
Clarified The Value of Hyperlinks In Determining Which Websites Fall Under COPPA and Which Do Not
The new COPPA documents states:
A website or online service shall not be deemed directed to children solely because it refers or links to a commercial website or online service directed to children by using information location tools, including a directory, index, reference, pointer, or hypertext link.
In other words, just because you link to a website that may fall under COPPA regulations doesn’t mean you ARE a site that falls under COPPA regulations.
Clarified That Websites That Deleting Children’s Info Lowers Liability
One of the main confusions about the Children’s Online Privacy Protection Act is whether or not sites that don’t use, share or sell collected data have to comply with it. The new version of the rule clarifies:
“An operator shall not be considered to have collected personal information under this paragraph if it takes reasonable measures to delete all or virtually all personal information from a child’s postings before they are made public, and also to delete such information from its records.”
Passive Tracking Illegal According To COPPA
The new Children’s Online Privacy Protection Act rules document clearly states that passive tracking of a child online – without following COPPA protocol – is illegal.
Cleared Up What Constitutes Website Functionality
COPPA rules have always allowed for the inconsequential collection of children’s’ data related to website maintenance and functionality mechanisms, like updates and certain types of security backups. The latest version of the rules expounds on allowable “administrative and functionality” collection circumstances. Perhaps most notably, the word “analyze” was added to this section – thereby allowing for more flexibility in terms of traffic aggregator plugins and apps used for business marketing and SEO.
Plainly Stated What Factors The Commission Looks For When Deciding If A Website Must Comply With COPPA Regulations
Previously, the FTC’s explanation of the factors considered when determining a website’s COPPA status was a confusing. The new document is much clearer.
The FTC looks at the following factors when deciding if a site is “directed towards children”:
Use of animated characters or child-oriented activities and incentives;
Music and other audio content;
Age of models;
Presence of child celebrities or celebrities who appeal to children;
“Competent and reliable empirical evidence regarding audience.”
Actual Knowledge Is The New COPPA Standard
Also, the new Children’s Online Privacy Protection Act states that a website, plugin or app will be deemed “directed to children” when the operator has “actual knowledge” that it is collecting personally identifiable information.
Slight Change of Rules Concerning Credit Card Parental Consent Authorization
If it wasn’t clear before, the FTC has now made it so: it is not sufficient to just gather credit card information without charging it as an acceptable parental consent mechanism. However, credit card information coupled with other identifying information may be sufficient.
App Store Account Coverage & Liability
The latest version of the COPPA rules says that developers can “rely” on any disclosures a given app store has if said app store includes legal coverage in their deal / contract with developers. Moreover, software companies can develop multi-platform COPPA parental consent mechanisms without assuming liability. (#score)
Data Retention Clarification
The latest version of the Children’s Online Privacy Protection Act states that any personally identifiable data collected from people aged 13 and younger can only be used “for only as long as is reasonable necessary to fulfill the purpose for which the information was collected.”
Safe Harbor Programs
The original COPPA rules allowed for legislators to develop a “safe harbor parental consent” program in which designated products could earn a “COPPA safe harbor” designation and using any of them would ensure compliance with the law.
Welp, the FTC has developed the program and ratified several products and services. So, new language was added to the COPPA rules to reflect the new “safe harbor” program and outline the “self-regulator” standards.
Speak With A COPPA Lawyer
If you need to learn more about the Children’s Online Privacy Protection Act, check out the related blog posts (in the right sidebar if you’re at a computer; below if you’re on a mobile device).
If you need a COPPA lawyer to review your website for
The Week in FTC Online Business News: Spammers, Big Data & Borders
Originally Posted: August 22nd, 2014
Obamacare Spammers Agree To Settlement
Right before the Affordable Care Act launched, an email marketer launched a campaign that made it seem like people had to pick a new health care provider immediately or they’d be in violation of the law. The email included affiliate links to several insurance companies.
In the end, the email marketers settled with the FTC for $350,000 and a promise to never “misrepresent facts about any product or service, including health insurance.”
The Center for Digital Democracy Wants The FTC To Go After Big Business
The Center for Digital Democracy isn’t happy with the FTC. The non-profit believes the commission has been way too lenient when it comes to the U.S./E.U. online privacy safe harbor program. Specifically, the CDD thinks that data brokers and online marketers are “failing to keep its privacy promise to Europe.” The CDD’s main gripe:
“The commercial surveillance of EU consumers by U.S. companies, without consumer awareness or meaningful consent, contradicts the fundamental rights of EU citizens and European data protection laws, and also violates the intention of the Safe Harbor mechanism to adequately protect EU consumers’ personal information.”
Tldr; The standoff between folks interested in monetizing user data and people who are sticklers for Internet privacy, continues.
Canada & the U.S. Are Teaming Up For A Cross-Border Marketing Investigation
Both the U.S. Federal Trade Commission and the Competition Bureau of Canada have their sights set on Aegis Mobile. Apparently, the Canadian Wireless Telecommunications Association (CWTA) hired Aegis to do some analysis and marketing work.
The cross-border collaboration caught the eye of the Competition Bureau of Canada, which launched an investigation into whether or not Aegis’ and CWTA’s advertising efforts were “false and misleading.” As part of the inquiry, the Competition Bureau, evoking the SAFE WEB Act, enlisted the FTC to seek and gather information about Aegis’ work with CTWA.
Aegis tried to quash the case, arguing that Aegis was a “common carrier” not subject to the SAFE WEB Act. But, the judge disagreed and the U.S.-Canadian FTC online marketing investigation will move forward.
FTC Green Lights New COPPA Safe Harbor Program
The Federal Trade Commission approved another “self-regulatory safe harbor oversight” alternative — the Internet Keep Safe Coalition (iKeepSafe).
Including a line in your terms and conditions that kids under the age of 13 can’t use your website won’t ward off an FTC censure.
Click here to read more about COPPA restrictions (that were recently made stricter) and here to speak with a COPPA lawyer.
Big Data Assured That Congress Will Not Pass A Marketing Online Privacy Law Anytime Soon
This week, a bunch of data bigwigs gathered in Aspen and talked about, amongst other things, Congress’ current temperature regarding a universal online privacy law. Attendee and Experian’s senior vice president for government affairs, Tony Hadley, gave a speech in which he said that only a handful of congresspeople truly wants to regulate online marketing data.
In other words, things will remain the same for the foreseeable future.
Work-At-Home Marketer Lied To FTC About Finances, Got Caught Years Later, And Now Must Pay Nearly $30 Million
Another work-at-home entrepreneur crossed the legal online marketing Rubicon. When first sanctioned, the FTC significantly reduced his fine because he swore he couldn’t pay. But the work-at-home impresario was less than truthful about his financial state, and the FTC finally figured it out. Now, he has to give all his swag to the FTC.
Original FTC Investigation Resulted In Reduced Fine Because of ‘Inability to Pay’
In 2009, the Federal Trade Commission forced Jonathan Eborn, of “Google Money Tree,” “Google Pro” and “Google Treasure Chest,” to fork over $3.5 million in cash and assets for violating Internet marketing laws by way of a credit card scam.
The original verdict was for $26.9 million, but it was cut to less than $5 million based on financial affidavits. Eborn swore he couldn’t pay the entire $26.9 million.
If Eborn had been candid with the FTC, this work-at-home tale, of credit card scam woe, may have ended there. But, the FTC recently discovered that Eborn’s sworn financial statements – on which his fine was reduced – weren’t, as Stephan Colbert might say, “truthy.” Supposedly, the online marketer hid nearly $300,000 from authorities. As a result, the FTC reinstated the full $26.9 million judgment. Ouch.
Director of the FTC’s Bureau of Consumer Protection Jessica Rich explained:
“In determining the amount of assets a defendant must provide in settlement, the FTC often relies on a defendant’s sworn financial statements and requires the defendant to agree that any misrepresentations on those statements will trigger a much larger judgment. The court’s decision to impose the full judgment should serve as a lesson to all defendants that lying to the FTC has serious consequences.”
Cramming Guy Pled Guilty; Has To Hand Over Toys & Cash To FTC
So-called “cramming scams” are an illegal – but undeniably lucrative – swindle. So tempting are the potential riches that many people cross the legal line. But remember: if you get caught, the FTC can and WILL take your stuff.
This past week, the FTC announced a recent bust of a cramming scheme, involving text messages, which deceptively charged customers $9.99 a month. The original judgment was for a whopping $97 million. Like in the majority of these types of online marketing cases, however, the fine was reduced to $1.2 million in cash and assets on account of the busted party’s “inability to pay.” The crammer did have to hand over:
The $4,500 in his bank accounts;
A 2012 Ferrari 458 Italia and a 2012 Mercedes G550 SUV;
Three Audemars watches, one Patek Phillippe watch and four Rolex watches.
FTC Busted Another False Weight Loss Website Marketer
Straight up: the commissioners do not want you promising weight loss miracle cures.
If you are an online marketer peddling weight loss products, do yourself a favor and spend the couple of hundred dollars it will cost to have a website audit done by an online marketing attorney. It could save you a whole lot of money and headaches.
FTC Busted Another Credit Card / Government Grants Operation
The FTC sniffed out another illegal credit card processing scam. Say what you will about the Federal Trade Commission, but the office is getting better at spotting and tackling operations that defy the Dot Com Disclosures and the Federal Trade Commission Act.
Again, if you are running an online business that involves marketing products or services, find an online business attorney to review your advertising materials – and internal operations – to make sure you’re walking on the correct side of the legal line and not unnecessarily exposing yourself or personal finances.
Speak With an FTC Lawyer Today
If you need a legal audit of your website or online business, contact Aaron Kelly of Kelly / Warner Law.
About Kelly / Warner Law
A boutique law firm comprised of tech-heads, gear-heads, programmers and comic book junkies — who also happen to be detail-obsessed FTC defense lawyers – Kelly / Warner is the perfect fit for pioneering people doing business in the 21st century.
BCA v. NBCUniversal: Why Is It An Important Defamation Lawsuit?
Originally Posted: August 4th, 2014
A couple of weeks have passed since the news broke, but we wanted to backtrack, a bit, to the significant Dateline defamation case, BCA v. NBCUniversal.
Why BCA v. NBC Universal Could Prove To Be An Important Case
BCA v. NBC Universal is interesting to legal watchers because it could re-define the limits of “journalistic privilege” under Colorado defamation law.
OK, Give Me The Facts On The BCA v. NBCUniversal Defamation Lawsuit
Tyrone Clark is founder of Broker’s Choice of America (BCA) – an investment firm. Several years ago, Dateline launched an “undercover investigation” into Clark and his business. Fake identities were procured from local law enforcement and Dateline operatives secretly filmed a private BCA seminar.
When the piece aired on Dateline, Clark (and by extension BCA) was ultimately characterized as a shyster who scared seniors into buying annuities.
Defamation Lawsuit Particulars
Irate, BCA filed a defamation lawsuit against every entity involved in the Dateline segment. BCA’s main claim: producers manipulated the raw footage to make the BCA seminar look more sinister than it was.
Team NBC argued “substantial truth” and convinced the trial court judge. The case was dismissed. But BCA appealed, and the decision was reversed.
Why Did The Appeals Court Reverse The Dateline Defamation Decision, And Why Is It Significant?
“Probable falsity” is at the root of the appeals court’s reversal in BCA v. NBCUniversal. The breakdown:
During discovery, Dateline attorneys claimed “journalistic privilege” to block BCA from getting the raw footage. In previous Colorado State cases, the burden of “probable falsity” was put on the plaintiff to defeat the journalists’ privilege clause.
In BCA v. NBCUniversal, the appeals court reasoned that the “probable falsity” standard was misapplied by the lower court, in this instance because the case didn’t involve a confidential source.
The 10th Circuit Court of Appeals also ruled that the total impression the segment had to be considered and that the lower court erred by not crediting BCA’s allegations as true when deciding whether or not to grant NBCUniversal’s motion to dismiss. In defamation lawsuits, when deciding whether or not a case can move on to the next stage, the judge must assume that the plaintiff’s claims are true. At trial, it is the responsibility of the plaintiff to prove that their allegations are, indeed, fact. In the case of libel lawsuits, the plaintiff must prove that the defendant knowingly – or at least negligently — lied with the intent to cause harm.
Speak with A Defamation Lawyer Today
BCA v. NBCUniveral is the perfect example of the nuanced nature of defamation lawsuits. They often hinge on obscure, detailed interpretations of the law. Instead of going it alone, it’s wise to hire an attorney who has handled all manners of libel litigation. Kelly / Warner is a top legal practice, with AV-rated attorneys. Our three main practice areas are defamation law, Internet law and business law. Get in touch today to begin the conversation about your legal needs – and we’ll get to work fixing them.
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Aaron Kelly, a partner at Kelly / Warner Law, is an Internet lawyer who works with online businesses, ecommerce sellers, marketers, startups, developers, and designers.
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