StayADvised: What's New This Week
- The NAD Says BuzzFeed’s Online Shopping Guides Not National Ads
- Reminder Calls Pointing to Other Communications Constitute Advertising Under the TCPA
- Is One Text Message Sufficient for TCPA Article III Standing and Damages?
- Judge in LendingClub, FTC Case Focuses on Reasonable Consumer Application
The NAD Says BuzzFeed’s Online Shopping Guides Not National Ads
The National Advertising Division of the Better Business Bureau (“NAD”) recently ruled that product reviews in BuzzFeed’s “Shopping Guide” that provided links to third-party e-tailers for consumers to purchase those products was not “national advertising” and thus declined to review the practice as it fell outside the division’s self-regulatory jurisdiction.
BuzzFeed, a popular social media site, regularly posts shopping guides along with other editorial content about various products. In some instances these guides include links to either the manufacturer of the product or a retailer that sells the product for consumers to purchase the product. In the event of a consequent sale, BuzzFeed receives a commission from the seller. These arrangements are commonly referred to as affiliate relationships and BuzzFeed fully disclosed the relationship.
A recent BuzzFeed shopping guide reviewed and recommended more than 30 face cream products including St. Ives face cream, noting that the "collagen and elastin proteins in this formula help reduce the appearance of fine lines." This claim drew the attention of the NAD in its self-monitoring role. In addition to product claims, the NAD also noted the existence of affiliate links within the article and so requested further information about the content of and affiliate links within, the articles.
In response, BuzzFeed argued that the content was editorial, no commercial relationship dictated the products the editors chose to review, advertisers did not review or participate in any way in creation of the copy, and the entirely separate commercial department added the links after the content was created. Accordingly, the material did not constitute “national advertising” and so fell outside NAD’s purview.
NAD agreed, specifically based on the fact pattern laid out by BuzzFeed. Although NAD expressed concern with compensation received by BuzzFeed thanks to the affiliate links, it nevertheless concluded that affiliate relationships do not automatically convert editorial content into “national advertising” since here manufacturers and retailers had no say over articles featuring their products, the writers did not know whether or not BuzzFeed would be compensated through affiliate links and links were only added after the writing process was complete.
Once it determined the articles fell outside its jurisdiction, NAD demurred on reviewing the merits of the product claims.
NAD’s decision provides significant advice for all web site operators that earn commissions through affiliate links appended to “editorial” content. Key here, NAD considered various aspects of the article-writing and publication process, particularly the fact that advertisers had no say in the editorial and publishing process and the affiliate links were added post-writing by the commercial, and not the editorial team. NAD was clear that different facts may well cause a different outcome, itself a significant warning to the affiliate marketing industry. In addition, publishers should be aware that like the NAD, the FTC is carefully watching review sites in particular for product claims and adequate disclosure of affiliate relationships pursuant to its broad prosecutorial authority under Section 5 of the FTC Act. To help marketers better understand its concerns in this space, the FTC has published guidance here for companies involved in online affiliate marketing.
Reminder Calls Pointing to Other Communications Constitute Advertising Under the TCPA
An Illinois federal court has ruled that a prerecorded call to a consumer’s mobile phone regarding activation of “free” pet insurance, but also referencing an email containing information about paid policies, renders the call an advertisement under the Telephone Consumer Protection Act.
In August 2018, U.S. District Judge Robert W. Gettleman ruled that automated calls offering free insurance, placed to the mobile phones of consumers who recently adopted a new best friend, would not constitute marketing under the TCPA but for a reference to a previously sent email with information about continuing policies available through the carrier. This reference, Gettleman ruled, transformed the call into an advertisement requiring the consumer’s express written consent prior to sending. The defendants did not have such consent.
Co-defendant PetHealth Inc. offered a “free” 30-day pet insurance policy to people who recently adopted animals from partner agencies. The PetHealth adoption papers required adopters to provide their contact information, including name, address, email address, and telephone number and indicated that, unless the applicant opts out, they would receive marketing offers from PetHealth and its partners via postal mail and email.
Plaintiff Christopher Legg said he was emailed twice and received numerous prerecorded phone calls from co-defendant PTZ Insurance Agency Ltd. following his adoption of a cat from the Florida Humane Society. He acknowledged he did not opt out of receiving the above referenced offers when completing the adoption paperwork, but noted that this consent was limited to mail and email, not telephone calls.
Upon receipt of the phone calls to his mobile phone, he sued, claiming that the messages were “advertisements,” defined by Federal Communication Commission rules as “any material advertising the commercial availability or quality of any property, goods, or services” which required his express written consent, which he said he did not give.
In response, defendants argued that the phone reminder to activate the free gift of insurance (a “gift” Legg was told about at the time of adoption) was not an advertisement as it did not speak to the commercial availability of any product, and thus his express written consent was not required.
Judge Gettleman rendered a mixed decision on a call-by-call basis, finding one call that simply informed Legg that he had one day left to activate his free insurance was not an ad as it contained no other messaging, but another call which referenced a prior email sent to him that contained information about ongoing policy options and prices rendered that call an ad.
Judge Gettleman applied a broad reading of the definition of “advertisement” under the FCC rules, relying on guidance from Golan v. Veritas Entmt. (8th Cir. 2015), where the 8th Circuit held that “[w]hether a call includes or introduces an advertisement depends entirely on the “content” of the call, as opposed to the “context or purpose,” which determines whether a call constitutes telemarketing.” Since one of the calls pointed the plaintiff to an email that “obviously touts the commercial availability of a product, and constitutes an advertisement as defined by the regulations,” he concluded that “the Day Two Call is an advertisement that requires prior express written consent.”
Judge Gettleman’s decision applies a broad reading of “advertisement” that conflicts with other courts’ approach in looking only to the “four corners” of a call to see if it falls within the statutory definition. As this decision only ruled on a motion for summary judgment, it is possible that defendant PTZ may appeal or ultimately win before a jury. But until that time, defendants that are sued in the Northern District of Illinois will have a tough time convincing the court to only consider the call itself when determining whether it is an advertisement.
The case, Legg v. PTZ Insurance Agency, LTD et al. case no. 14 C 10043, may be found here.
Is One Text Message Sufficient for TCPA Article III Standing and Damages?
The 11th Circuit Court of Appeal will shortly issue a decision on whether or not one text message is enough to constitute concrete injury in a Telephone Consumer Protection Act case, a ruling that could have significant ramifications for all TCPA plaintiffs and defendants.
Hanna v. Salcedo began as a class action lawsuit filed against a law firm that allegedly sent unsolicited text messages to former clients offering to provide future legal services. Plaintiff Alex Hanna admitted to previously using the firm for other services, but claimed that he did not consent to receive future text communications.
At issue is whether one communication is sufficient to satisfy Article Three standing under the U.S. Constitution to maintain a suit in federal court, but the issues go deeper in terms of considering the level of invasiveness caused by a single text, whether a previous relationship between the sender and the text recipients matter, and the time that transpired between the prior relationship and transmission of the text.
The defendants moved to dismiss the case for lack of concrete injury, a necessary element for maintaining a suit as articulated by the Supreme Court in Spokeo, Inc. v. Robins (136 S. Ct. 1540 (2016)). The court denied defendant’s motion but allowed for an interlocutory appeal.
On the issue of concrete harm, several courts have considered and ruled on alleged injuries caused by unwanted calls, texts and facsimiles, with the 11th Circuit finding that even a one-page fax advertisement was enough of a personal injury to warrant Article III standing. But despite this decision in Palm Beach Golf Center-Boca, Inc. v. John G. Sarris, D.D.S., P.A., 781 F.3d 1245 (11th Cir. 2015), defendant’s counsel successfully argued that unlike a fax communication, a text message did not block a phone line from receiving other calls or texts at the same time and did not cost the recipient anything of value to receive it, so that the nature of receipt was not offensive.
The judge here noted that the resolution of the one-communication issue could have ripple effects that could either increase or block the volume of TCPA lawsuits filed by consumers, since neither the FCC nor the Supreme Court following Spokeo have provided regulations or guidance regarding what actual harm is caused by unsolicited text messages.
Judge in LendingClub, FTC Case Focuses on Reasonable Consumer Application
In April 2018 the FTC filed a complaint against LendingClub Corporation alleging deceptive and unfair practices by the company in connection with the promise of “no hidden fees” for loans. At the time the case came before the court, however, this promise had been removed from the company’s site, resulting in a rebuke of the FTC by the court for continuing a case that should have settled.
In addition to the hidden fees issue, the FTC claimed that consumers had also complained that the lender had withdrawn money from borrower bank accounts after the loan was paid in full and engaged in misleading application confirmations for consumers who were not qualified for any loan.
In June, LendingClub moved to dismiss, claiming that the FTC’s deception arguments concerning fees were inaccurate as the disclosures complied with the Truth in Lending Act. The defendant argued that these disclosures were easily discovered by a consumer reasonably researching or submitting an application. But U.S. Magistrate Judge Jacqueline Scott Corley disagreed, noting that thousands of consumers had complained about the same issues, thus making it clear that these disclosures were misleading and confusing at best. She added that it was unlikely that thousands of consumers were acting unreasonably as LendingClub appeared to suggest.
But the court also admonished the FTC for taking the matter to court rather than agreeing to settle, after LendingTree had agreed to remedy the allegedly offensive fee disclosures. She also suggested that the FTC’s bid for injunctive relief was not strong, noting that “the allegations are thin here.” In harsh words to both parties, Judge Corley strongly suggested that the parties settle the matter rather than continue to waste the court’s time.
The case is Federal Trade Commission v. LendingClub Corporation, case number 3:18-cv-02454-JSC, filed in the U.S. District Court for the Northern District of California.
Whether LendingClub ultimately succeeds in this case or settles with the FTC, the lesson here is clear – compliance with applicable disclosure laws (in this case, TILA) may not be enough in regulators’ eyes if other advertising and terminology used to promote the advertised products could still be considered confusing to a reasonable consumer.