- Hold on there, States, There's a New Political Advertising Sheriff in Town
- House Democrat Plans to Float Bill Targeting False Political Ads
- Actor Steven Seagal Settles Illegal Cryptocurrency Promotion Charges With SEC
- ISPs Urge Court to Strike Down Maine Privacy Law
- Over NRA Objection, Former Ad Agency to Comply With NY Judge Subpoena
Hold on there, States, There's a New Political Advertising Sheriff in Town
In response to the hot-button issue of deceptive political online advertising, the Digital Advertising Accountability Program (DAAP), a division of the BBB National Programs, has announced that it will begin monitoring online political advertisements, adding to its core mission of monitoring online privacy.
To implement its new Political Advertising Transparency Project, the DAAP will monitor online political advertisements to ensure they comply with political ad "best practices" guidelines set out in the Digital Advertising Alliance's (DAA) recently-released Political Advertising Principles (the DAA Principles). The goal of the endeavor is for audiences to better understand "why they are seeing certain political ads and how [the ads] are being paid for."
The DAAP is one of the self-regulatory organizations working under the umbrella of the BBB, along with the National Advertising Division and the National Advertising Review Board, among others. The DAAP began monitoring political advertisements early this year.
The DAA Principles will require political ads to contain certain notices and information to achieve a higher degree of transparency and accountability for audiences encountering those ads.
First, the DAA Principles require political advertisers to place a badge or icon on political ads that identify the advertisement as political. Second, the badge or icon must link to a page providing information about the funding behind the ad, including the name(s) of the advertisers, their contact information, and a link to a "searchable database of political advertisement contributions and expenditures."
The DAA will review political ads to ensure they comply with the DAA Principles using what the BBB calls "sophisticated monitoring technology" and a "team of … professionals." There is also a website set up for people to report complaints if they see political advertisements that fall short of these standards.
The new initiative also includes public disclosure to encourage enforcement. The DAAP will publish on its website the identity of advertisers and the manner in which they have failed to comply. The DAAP says it will also contact advertisers who fall short of the DAA Principles to address noncompliance and will recommend changes. Finally, the DAAP will send information about noncomplying political advertisers to the "appropriate government agencies."
In the announcement, the BBB heralded the move: "In an effort to empower users and address the unfolding challenge of transparency around political advertising, the … [DAA] released a set of industry-standard principles that require up-front disclosures about paid-for political speech. [The DAAP], which has been enforcing the DAA's data privacy principles since 2011, will now monitor the world of online political ads to ensure campaigns meet these new standards."
A DAAP report on political ads appearing this year is already available online. The DAAP emphasized that the organization is "independent and politically neutral."
As the 2020 presidential race heats up, so do concerns about online advertisements for political candidates. The DAAP's initiative attempts to counter the deluge of deceptive ads and "fake news" that dominated the 2016 election news. Of note, the DAA Principles only apply to "communications that unmistakably urge the election or defeat of one or more clearly identified candidate(s) for a federal or statewide election," leaving out many political advertisements.
House Democrat Plans to Float Bill Targeting False Political Ads
House Democrats also appeared ready to tackle false online political ads. One U.S. congressional representative told a Washington, D.C. gathering of broadcast industry professionals that he will soon propose a bill aimed at cracking down on false political advertising by targeting the big tech platforms where the advertisements are posted.
House Democrat David Cicilline of Rhode Island said he was strongly considering whether to propose a bill that would curtail the immunity of online tech giants that post "demonstrably false" political advertising on their platforms, likening that to the legal test used in libel law.
Currently, online platforms are immune from liability for false political content posted on their sites under Section 230 of the Communications Decency Act. According to Cicilline, the law needs to change to reflect the fact that online advertising in today's digital space is often weaponized by bad actors. The legislation Cicilline says he is considering would prevent companies from enabling such false political content on their sites, or at least would prohibit companies from availing themselves of the Section 230 exemption.
"This was a very specific issue that's been raised with respect to political advertising and it's struck me—I think it's struck many people—that there's something wrong with a system that allows a company to essentially sell the right to make demonstrably false representations about a candidate in the context of a political campaign and then assist them in microtargeting that ad to people who are likely to believe it," said Cicilline.
The Congressman compared false political ads on digital platforms to false ads in print publications, making the point that a newspaper or magazine could potentially be sued in court over publishing a "demonstrably false" ad, while technology companies are generally able to display such false political advertising content with impunity. For the 230 exemption, digital platforms should be on the hook in the same way, said Cicilline. He says the proposed legislation would aim to make sure that the exemption would not shield a digital company from liability for this type of conduct.
Although the Congressman named no current co-sponsor or timeline for proposing the bill, he noted that the legislation could come in the next couple of months, and that some Republican representatives have also expressed interest in such a bill.
If proposed, the bill would be a departure from Rep. Cicilline's usual line of expertise in antitrust matters. The bill would also be separate from antitrust investigations Cicilline recently initiated against several tech giants and from the House's current investigation into the digital economy.
Cicilline's proposal is not yet a statute, and hardly even a bill. Yet, if it proceeds, such a move could address much of the concern lobbed at digital giants who, critics say, allow false political advertising that has the potential to cause real harm to the democratic process. Cicilline says he sees it in those terms as well: "There is no question that we have reached a tipping point," he said. "We cannot have a vibrant democracy without a free and diverse press."
Actor Steven Seagal Settles Illegal Cryptocurrency Promotion Charges With SEC
Apparently no longer wishing to be "Under Siege," action movie star Steven Seagal settled Securities and Exchange Commission (SEC) charges that he unlawfully promoted cryptocurrencies in violation of securities laws.
The SEC had charged Seagal with failing to disclose that he had been compensated to promote cryptocurrencies on social media. To resolve the allegations, Seagal will pay a $157,000 fee and a civil penalty in the same amount. The actor has also agreed not to promote securities for three years.
According to the allegations, Bitcoiin2Gen promised Seagal $250,000 in cash plus $750,000 in cryptocurrencies to endorse and promote its currency. In 2018, Seagal's Facebook and Twitter accounts began promoting the company's initial coin offering in exchange for the payments. Among other things, Seagal called himself a "worldwide ambassador" for the cryptocurrency to his then 6.7 million Facebook followers.
The company touted Seagal's endorsement, calling him a "Zen Master" and juxtaposing the actor's mission to spread "contemplation" and "enlighten [people] in some manner" with the company's mission for cryptocurrency as a decentralized currency.
However, in none of Seagal's social media posts—nor in the company's promotions using Seagal's name and likeness—was there a disclosure that Seagal had been paid to promote the product, said the SEC. Initial coin offerings are considered to be sales of securities and subject to securities laws, including provisions that require disclosure of compensation received to promote securities, said the SEC. In failing to disclose that he was paid to promote the currency, Seagal ran afoul of these laws, according to the allegations.
A spokesperson for Seagal said his relationship with Bitcoiin2Gen had soured earlier, and that Seagal only received part of his fee since he terminated an agreement allowing the company to post on his behalf once he became "concerned with the bona fides of the product." The spokesperson stressed that Seagal had fully cooperated with the SEC investigation and that his understanding of the arrangement with the company had been that it was "simply a case of someone paying a celebrity for the use of his image to promote a product."
The SEC announced six months before its action against Seagal that initial coin offerings may be considered sales of securities for purposes of securities law. For advertisers, media figures, and influencers selling instruments and securities subject to securities laws—including cryptocurrencies—this case shows that they may be subjecting themselves to securities law and to SEC enforcement.
This is just one more reason advertisers and influencers should ensure that incentivized posts in any medium are clearly disclosed, lest they find themselves not just before the FTC but also the SEC, if the sale of the product in question is subject to securities laws.
ISPs Urge Court to Strike Down Maine Privacy Law
A group of telecommunications industry groups representing internet service providers (ISPs) has filed suit against Maine Attorney General Aaron Frey and three members of the Maine Public Utilities Commission in federal court, arguing that a Maine privacy law applicable only to ISPs is unconstitutional.
The ISPs, including ACA Connects–America's Communications Association, The Wireless Association, NCTA–The Internet and Television Association, and USTelecom–The Broadband Association, aver in their complaint that the statute, which makes it illegal for ISPs to sell consumer data without consent, is an unconstitutional violation of free speech, due process, and the supremacy clause of the Constitution.
In May 2019, the Act to Protect the Privacy of Online Consumer Information (the Act) was signed into law in Maine and is currently considered to be the strictest privacy law in the country. Under the Act, ISPs may not refuse service to consumers who do not consent to data collection, nor offer discounts in exchange for consent. The Act also requires ISPs to take "reasonable measures" to protect consumer data.
The Act does contain exceptions, however. In cases where ISPs must process data to give users internet access, to market the ISP's products, or to comply with court orders, ISPs may process data without obtaining user consent.
The lawsuit alleges that the Act is flawed for several reasons. The ISPs say it violates their First Amendment rights by requiring them to go to great lengths to protect data they say is not sensitive and does not contain personally identifying information. The suit also alleges that the Act makes "irrational distinctions between closely-related types of speech based on the content of the speech."
"Protecting customer privacy is a laudable objective that ISPs support. But Maine has not shown—through evidence in the legislative record—that ISPs' privacy practices are causing any harm whatsoever to consumers, let alone harm that justifies unique restrictions on ISPs' communications. Nor has Maine shown that such unique restrictions are needed in light of federal privacy standards, which apply evenly across businesses of all types," add the industry groups.
Further, the ISPs argue that the Act unfairly targets only ISPs' speech and collection of data: "The statute imposes unprecedented and unduly burdensome restrictions on ISPs', and only ISPs', protected speech. These include restrictions on how ISPs communicate with their own customers that are not remotely tailored to protecting consumer privacy," allege the plaintiffs. "Indeed, by targeting ISPs alone, the statute deliberately thwarts federal determinations about the proper way to protect consumer privacy—that is, with technology-neutral, uniform regulation."
Plaintiffs argue that any regulation should be applied "uniformly across consumer-facing companies." Indeed, they say this law is particularly troubling as the industry has "consistently" supported "reasonable" regulations safeguarding consumer data applied across industries, online and offline.
However, Senator Shenna Bellows, the original sponsor of the bill, argued at the time of the law's passage that the statute is intended to target companies that collect massive amounts of consumer data, such as big telecommunications companies. It excludes tech giants such as Google because consumers may still avoid data collection under those services if they wish. The law applies to ISPs because "you can use the internet without using [social media], [but y]ou can't use the internet without using your internet service provider," added the senator.
According to the Act's sponsors, the Maine law was passed in order to restore privacy protections that existed under the Federal Trade Commission before Congress ended those protections due to lobbying by the telecommunications industry. But, did it go too far by limiting the data collection and use practices of a single industry category in violation of the Constitution?
Whereas other state privacy laws such as those in California and Washington were opposed by a cross section of industry stakeholders, none faced a constitutional challenge by a coalition of representatives in a single category as presented here. The outcome will likely have a profound impact on the extent to which states may seek to protect consumers from companies collecting and using their data.
Over NRA Objection, Former Ad Agency to Comply With NY Judge Subpoena
A New York state court has ordered an advertising agency to comply with a subpoena to disclose certain information related to its work for the National Rifle Association (NRA), over the NRA's objections.
New York County Supreme Court Judge Melissa Crane ordered Ackerman McQueen (Ackerman) to comply with the subpoena, which New York Attorney General Letitia James had requested as part of the state's ongoing investigation of the NRA. Attorney General James has said that her office is investigating the gun rights organization as part of its responsibility to regulate nonprofit organizations.
The attorney general's office subpoenaed Ackerman in the summer of 2019, but the ad agency, which had represented the NRA for decades, refused to comply. Ackerman argued that it was bound by a nondisclosure agreement it had signed with the NRA that required it to submit any disclosure requests to the NRA for its review prior to responding.
At the time, Attorney General James filed a petition to compel Ackerman's compliance with the subpoena, characterizing the holdup as an attempt to "stifle and interfere with a confidential, law enforcement investigation" and said that it was "fighting this action because the NRA has no authority to act as gatekeeper, a set of virtual eyes and ears over the Attorney General Office's investigations." Attorney General James said her office "won't allow the NRA to control responses to subpoenas, intimidate witnesses, or compromise the integrity of our legal action."
The NRA had argued before Judge Crane that Ackerman was routinely a party to legal communications and as such, the ad agency could not divulge the requested information as it was protected under the attorney-client privilege. In response, Judge Crane agreed to review in camera certain documents Ackerman said had been reviewed by counsel, but she compelled Ackerman to submit the subpoenaed documents without first obtaining NRA review, in a victory for the New York Attorney General's office.
"To allow not-for-profit entities, like the NRA, to shield its conduct through use of an NDA would frustrate [the Office of the Attorney General's] regulatory and law enforcement duties, and its oversight of charities," said Judge Crane.
Although counsel for the NRA said it was "pleased to see the court agree with the NRA on a critical issue: [that] there should be protection via in camera review of certain privileged material," he maintained that "the court ignores, with no evidentiary support, the true nature of the relationship between the NRA and Ackerman McQueen, and misapprehends the full protections that should be afforded to the NRA under the law."
For advertising agencies and advertisers, this matter is a reminder that the existence of an NDA may not be sufficient to protect them from being compelled to disclose information under a court subpoena.