Stay ADvised: What's New This Week, February 10
- Canada Steps Up Influencer Marketing Enforcement
- NAD Weighs In on Solar Power Savings Claims
- NAD Finds Supplement Claims Actually Supported
- "DiCaprio" Scam Defrauds Advertisers With Roku/Grindr Switcheroo
- Regulators Turn to Service Providers in Fight Against Robocalls
Canada Steps Up Influencer Marketing Enforcement
Canada recently signaled it plans to step up enforcement on influencer marketing and hold social media influencers accountable for violating advertising laws following a trend we have seen in the United States regarding advertising in social media.
Canada's Competition Bureau recently announced it issued close to 100 letters to advertisers and advertising agencies urging compliance with Canadian marketing laws by those working with influencers. Stressing that "businesses and influencers should be transparent when advertising on social media," the letters advised advertisers to review their marketing practices to ensure compliance with the country's Competition Act governing false and misleading advertising.
In the correspondence, the Competition Bureau stressed that influencers must disclose in marketing when they receive payment in exchange for endorsing a business or product. The guidance also reminded influencers that compliance with Canadian law requires them to be "honest" and base any reviews or testimonials on their actual experience with a product or service.
To determine whether a relationship between an influencer and a business subject to the law exists, the Bureau said influencers should consider whether they receive "money or commissions, free products or services, discounts, free trips or tickets to events, or [have] a business or family connection with the brand, among other things." Canada reminded advertisers that in addition to holding influencers accountable for their false and misleading marketing, it will also hold businesses working with influencers accountable for their role in such marketing.
The move follows a Competition Bureau review of influencer marketing and is a strong indication that the Bureau plans to begin enforcing these laws against influencers.
Canada's Competition Act provides for significant civil and criminal penalties for false advertising. Canada's June 2018 "Deceptive Marketing Practices Digest" for influencers confirmed that influencer marketing is subject to the Competition Act. However, Canada has yet to issue any fines against influencers for false marketing. With the issuance of these letters, that is all likely to change.
"When navigating the digital marketplace, consumers often rely on the opinions shared by influencers. To make informed purchasing decisions, consumers must know if these opinions are independent or an advertisement," said Matthew Boswell, Commissioner of Competition. "Ensuring truth in advertising in Canada’s digital economy is a priority for the Competition Bureau," he added.
Canada's move to strengthen enforcement is no surprise given the meteoric rise in influencer marketing in recent years and the desire for regulators to ensure fairness and transparency in the marketplace. The development also comes on the heels of the Federal Trade Commission (FTC)'s recent disclosure guidance for influencer marketing, as we covered here on Stay ADvised.
NAD Weighs In on Solar Power Savings Claims
The National Advertising Division (NAD) has recommended that solar electricity provider Sunrun Installation Services discontinue a number of advertising claims and modify others, even as it gave the company the green light on several challenged advertising claims.
Sunrun installs residential solar energy systems. The Campaign for Accountability (CfA) challenged several of the company's national online advertising claims before NAD in its bid to counter what the watchdog asserts are the "deceptive marketing practices of the rooftop solar industry."
First, CfA challenged Sunrun's claim that consumers could "save up to 20% on their electric bills by switching to solar." NAD found Sunrun's evidence, which was based on long-term projections of electricity costs, to be unconvincing, since the figures the company used to calculate these savings showed an increase in the price of utilities over a span of 20 years.
NAD opined that the company had not provided sufficient evidence to show that the cost increase it forecasted was reliable and based on a nationwide industry standard that a reasonable consumer would expect across different U.S. locales. Finding these long-term projections fundamentally flawed and unreliable, NAD recommended Sunrun discontinue the claim.
Moreover, NAD found the evidence actually showed that electricity rates could vary long term based on things like gas prices, tax rates, public policy, and other "unpredictable and volatile" factors. Due to these variables, Sunrun could not project the rate at which utility prices would increase, and therefore could not forecast and claim a long-term savings rate.
Even putting aside this lack of substantive backing for the "20% savings claim" and just considering the message conveyed by the claim, NAD found the advertiser did not have a reasonable basis for marketing its solar power savings. According to NAD, the message the company reasonably conveyed was that "all or almost all individual consumers will save at least 20% by switching to solar."
In fact, projections provided by Sunrun actually showed that savings rates would vary by household, and that not all or even almost all consumers would save 20 percent or more. Accordingly, NAD concluded that Sunrun should discontinue the claim, not only in online ads but during at-home visits with prospective customers as well.
NAD also recommended that Sunrun modify the claim "Solar Savings are Big" in order to clarify that savings are not guaranteed. Although the advertiser had voluntarily discontinued a claim it had made on YouTube that consumers "will always" save when switching to solar by removing the word "always," NAD recommended the company further modify the remaining claim customers "will" pay less to clarify that it could not guarantee savings.
Nevertheless, NAD approved a pair of challenged claims. Sunrun had advertised that consumers should "Gain Energy Freedom & Control With a Solar Lease" and that "[f]or as little as $0 down, you can secure long term predictability and peace of mind when you go solar with Sunrun’s monthly service plan" by switching to solar.
A video on the company's website claimed that "Every time that the rates go up . . . too bad. Just keep paying. It’s not like you had a choice, right. Well you do now. You can lock in a surprisingly low electricity rate by going solar with Sunrun. The next time utility rates rise, you’re laughing all the way to the bank." NAD approved these claims based on the fact that Sunrun does offer fixed utility rates.
The advertiser agreed to comply with NAD's recommendations.
NAD found the claim that consumers could "save up to 20% on their electric bills by switching to solar," unsubstantiated both based on the lack of supporting evidence backing up the claim and the content of the message. NAD's lesson for advertisers: the strength of the evidence matters just as much as the message that a claim reasonably conveys to consumers.
NAD Finds Supplement Claims Actually Supported
In a rare departure from NAD's usual recommendation to discontinue exaggerated health-related advertising claims, the industry self-regulatory organization found certain claims by Elysium Health adequately supported by evidence—though it was NAD itself that initiated the review of the supplement company as part of its routine monitoring program.
Elysium advertises its Basis Dietary Supplement on the company's website, in social media posts, and via "recommendation widgets" that often link to independent articles touting the supplement’s benefits. Among the products' ingredients, Basis contains vitamin B3 (250 mg of a substance called NR), a precursor to a substance called NAD+ (having no relation to NAD which made these recommendations), and pterostilbene.
NAD concluded that Elysium had submitted sufficient evidence to support the claim that NAD+ "plays…a key role in cellular metabolism and metabolism, and that levels of NAD+ decrease with age." NAD further found that daily servings of Basis do increase NAD+ levels in people between the ages of 40 and 60 and that Elysium could make "truthful, narrowly tailored claims describing cellular metabolism and the role that NR and pterostilbene can play in the cellular metabolism of aging."
NAD noted the evidence Elysium used to support these claims included "many" in vitro studies that "reasonably demonstrated that NAD+ plays a key role in cellular metabolism and mitochondrial health, and that NAD+ levels decrease with age." The company also provided "competent and reliable scientific evidence" that daily servings of Basis raised NAD+ levels.
But NAD qualified its approval by noting the studies had not shown the benefits of NAD+ in humans, which were "still a work in progress," but only on yeast, flies, and rodents. NAD therefore held that Elysium could make "truthful, narrowly-tailored claims describing cellular metabolism and the role that NR and pterostilbene supplementation can play in the cellular metabolism of aging," but required that Elysium should clarify that studies had yet to show that these benefits had applied to humans.
The result of NAD's review might have been different if Elysium had not itself discontinued a number of challenged claims about the anti-aging powers of Basis during the pendency of the proceedings, including "Taking Basis will provide a noticeable effect on consumers' energy, cognitive function, sleep, and overall feeling of health" and "Taking Basis is scientifically proven to counteract the natural human aging process."
NAD clarified that even though some of the claims about Basis had been made in articles published by independent third parties, "those same statements become advertising claims made by the advertiser" when the company quoted the articles or linked to them.
It's indeed rare for NAD to find a supplement company’s health-related claims supported by adequate and relevant evidence. Here, NAD was clearly impressed by the "many" studies Elysium provided as evidence, as well as the breadth of sources Elysium provided. As such, this matter is a helpful guide for advertisers on what appropriate evidence should look like.
"DiCaprio" Scam Defrauds Advertisers With Roku/Grindr Switcheroo
Ad fraudsters recently "weaponized" the popular LGBTQ app Grindr as part of an ad scam, tricking advertisers into buying ads on Roku that were never published. Instead, the fraudsters pocketed the money from the fake ad sales. The scam, nicknamed "DiCaprio" by the ad fraud detection company that discovered it, is so named because the word appears in the code of the ruse.
The "DiCaprio" scammers took advantage of security loopholes in mobile apps to charge advertisers for bogus digital ad space. Indeed, this is a prime area for scammers as advertisers are expected to spend over $7 billion on ads for connected devices. Advertisers like PBS, CBS, TMZ, and FOX bought ads they thought would be shown on the video streaming app Roku. However, the scammers had purchased cheap ad banners in Grindr's Android app and made it look to advertisers like these Grindr ads were actually the Roku ads. The scam also defrauded Grindr app users, who used up extra data and battery life to view the ads.
The practice of making one ad look like another (called spoofing) has been on the rise for years as bad actors take advantage of security issues in the growing digital ad space. Because ads on streaming media like Roku can cost significantly more than ads streaming on apps like Grindr, spoofing is big business in the ad fraud ecosphere where fraudsters pocket the difference. And the more users an app has, the better to perpetrate the fraud: the Grindr app that scammers chose has been downloaded over 10 million times.
For its part, Grindr said it did not learn about the scam until it was alerted by news outlets. The matter is one of many recent woes the dating app has encountered, including privacy breaches and a suspension on Twitter's ad network after the Norwegian Consumer Council found the app had been exposing private information.
To protect themselves from ad fraud, advertisers should take additional steps when purchasing "over the top" (OTT) advertising, the type of advertising exploited here. OTT advertising bypasses traditional broadcast platforms in favor of streaming media offered directly to consumers.
As Roku's VP of communications put it, "We recommend that OTT ad buyers buy directly from Roku or publishers on the platform. When buying from other sources and especially open exchanges, the buyer may be better served to use technology that can help with verifying the source of the ad requests."
Regulators Turn to Service Providers in Fight Against Robocalls
FCC Asks "Gateway Service Providers" to Help Traceback Efforts of Foreign-Originating Calls, While FTC Warns VoIP Providers Against Facilitating Violations
The Federal Communications Commission (FCC) and Federal Trade Commission (FTC) have turned their respective regulatory views toward phone companies and other service providers to stem the tide of unlawful "robocalls" that may violate the Telephone Consumer Protection Act (TCPA), the Telemarketing Sales Rule (TSR), and/or other federal protections against unfair trade practices.
The incidence of unwanted and sometimes fraudulent prerecorded "robocalls" seems to have grown exponentially the last few years. Per government sources, many of these originate abroad and seek to advance a variety of scams and fraudulent practices.
At a minimum, these calls are unwelcome, disruptive, and may well violate restrictions on autodialer use and prerecorded messaging under the TCPA and TSR and in substance can embody unfair trade practices. Eradicating fraudulent robocalls and limiting the intrusion of unwanted calls generally has been a primary focus of recent regulatory and legislative efforts.
FCC Seeks Help From Gateway Service Providers
The most recent of these arises in the form of the Chief of the FCC's Enforcement Bureau sending letters to seven "gateway" service providers—All Access, Globex, Piratel, Talkie, Telcast, ThinQ, and Third Base—asking them to help track down originators of spoofed foreign robocalls, which the FCC characterizes as misusing these service providers' offerings.
Recipients are U.S.-based voice providers that accept foreign call traffic and terminate it to U.S. consumers and in that respect were identified by the FCC as "gateways" into the United States for robocalls originating overseas. The FCC stated that industry participation in call traceback efforts has already proven useful in combatting illegal robocalling and spoofing.
The FCC thus views these U.S. service providers as "uniquely situated to assist government and industry efforts to combat scam robocalls." The letters also seek information about these providers’ potential facilitation of international robocalls and encourages each to take steps to prevent illegal robocall traffic that originates outside the country.
VoIP Service Providers on Notice
Several days ahead of the FCC's announcement that it sent the letters, the FTC sent 19 letters of its own to VoIP service providers warning them against potential "assisting and facilitating" of illegal telemarketing or robocalls. The letters were designed to serve notice on the companies (and the industry generally) that the FTC will take action against service providers it believes are assisting sellers or telemarketers that the service-providers know or consciously avoid knowing are violating the TSR.
The FTC described the letters (which were not released) as highlighting such knowledge-conferring conduct as robocalls that make false or misleading statements to induce purchases or charitable contributions, misrepresentation of affiliation with a government agency, use of false or deceptive caller ID, prerecorded telemarketing for which express written permission has not been obtained, and initiating calls to numbers on the National Do Not Call Registry.
The FTC also cited its recent enforcement action in Texas federal court against a robocalling operation and the extent to which one of the named defendants (Globex, a VoIP service provider) handled traffic for TSR violators and which provider, as indicated above, was asked by the FCC to help identify illegal spoofed foreign robocalls.
The complaint is somewhat opaque about Globex's role, other than alleging that it knew or consciously avoided knowing its service was being used in ways that violated the TSR.
FCC Highlights DOJ Action Against Five VoIPs
The FCC statement also flagged the DOJ's recent announcement of its filing of civil actions against five companies that allegedly facilitated hundreds of millions of fraudulent robocalls. The DOJ identified the targets as including Ecommerce National LLC d/b/a TollFreeDeals.com; SIP Retail d/b/a sipretail.com; Global Voicecom Inc.; Global Telecommunication Services Inc.; and KAT Telecom Inc., a/k/a IP Dish.
The complaints alleged that the defendants were VoIP carriers operating over the internet rather than traditional phone lines to carry calls for "numerous foreign-based criminal organizations … to pass fraudulent government- and business-imposter fraud robocalls," thereby serving as "gateway carriers" for violations. DOJ cited the enormous volume of calls – more 700 million in one 23-day period for just one VoIP carrier defendant, of which more than 400 million lasted less than one second, thereby indicating they were robocalls.
DOJ also cited defendants’ use of spoofed caller ID numbers and what it apparently viewed as the obviously fraudulent content of calls to allege that the defendants ignored repeated red flags and warnings about the fraudulent and unlawful nature of the calls carried on their networks.
Proposed New Rules Would Establish Registration Process to Implement TRACED Act
The FCC characterized its attempt to get tracing assistance from the gateway carriers to whom it wrote as "part of a coordinated effort" with the FTC and DOJ. Its statement also noted that FCC Chairman Pai circulated for review by his fellow Commissioners proposed new rules that would establish a registration process for selecting a consortium to conduct private-led efforts to trace back the origin of suspected unlawful robocalls as part of the implementation of the recently enacted Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act).
DWT is following developments in this area closely. We are happy to answer any questions you may have.