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Volume 15, No. 12 © 2007 The Metropolitan Corporate Counsel, Inc. December 2007 Advertising, Marketing And Promotions Law Year In Review

Joseph Lewczak, Apprentice, Deal or No Deal, and American Privacy/Data Protection Allison Fitzpatrick and Idol were the subjects of class action law- Privacy concerns and internet predators suits this year. In February, a class charged continued to capture headlines in 2007 with Matthew Smith The Apprentice with running an illegal gam- the widespread dissemination of racy pic- bling scheme for its “Get Rich With Trump” tures of Miss New Jersey, Amy Polumbo, DAVIS & GILBERT LLP sweepstakes because viewers who entered taken from her Facebook profile, and by the text message method of entry were Antonella Barba, the American Idol contes- The year came in with a scare Ð but for- charged a 99 cent premium fee by their cel- tant, whose chances of winning the contest tunately not a bang Ð when Boston police lular providers. The suit alleged that the were sabotaged by explicit photos of her arrested two men in connection with a sus- sweepstakes was an illegal lottery even posted on MySpace. picious device alert that turned out to be a though viewers could participate for free In the “Hey, you’re not in my entourage” guerilla marketing ploy for a late night cable online. While this lawsuit was dismissed category, Attorneys General nationwide cartoon. Turner Broadcasting, the parent without prejudice, the very same attorneys commenced an investigation into the use of social networking web sites, including company of the Cartoon Network, said the filed class action lawsuits against NBC Uni- MySpace and Facebook, by sexual predators devices were part of a promotion for the TV versal for the sweepstakes broadcast during to contact children. In October, New York show “Aqua Teen Hunger Force.” Although the television programs Deal or No Deal the devices posed no danger and were part Attorney General Andrew Cuomo and Face- and 1 vs. 100 and against FOX for the of a ten-city outdoor guerilla marketing book announced a new model to enforce sweepstakes broadcast during American campaign, the poorly planned publicity safeguards aimed at protecting network stunt proved costly for Turner Broadcasting, Idol. The sweepstakes administered during members, especially children and adoles- which paid millions of dollars to settle the these shows was much like “Get Rich With cents, from sexual predators, obscene con- matter. Trump” and similarly included an alternate tent, and harassment. Under the terms of the But Turner Broadcasting was not the free online method of entry with the 99 cent settlement, Facebook will promptly respond only advertiser entangled in controversy this premium text message entry. to user complaints about nudity, pornogra- year. Not unlike last year, 2007 was yet As proof that fantasy trumps reality, in phy, harassment or unwelcome contact another year in which regulators and plain- June, a New Jersey court held that the pay- within 24 hours, and allow an independent tiffs’ class action attorneys were vigilant in ment of an entry fee to participate in a fan- examiner to report on Facebook’s compli- the area of advertising, marketing, and pro- tasy sports league does not constitute illegal ance for a two year period. motions. We explore below some of the gambling. In reaching its decision, the court Earlier this year, hackers breached TJ year’s major issues. noted that fantasy league participants do not Maxx’s data security system and stole the credit and debit card information of store Sweepstakes sustain gambling losses within the meaning of the statutes at issue; rather, they pay an customers. The data theft exposed 45 mil- What do Donald Trump, Howie Mandel entry fee for which they bargain for and lion credit and debit cards to potential fraud. and Simon Cowell have in common? The Upon discovery of the breach, the company receive a number of services, such as statis- answer is that the trendy premium text mes- hired IBM and General Dynamics to tical tracking and analysis, which partici- saging promotions advertised during The uncover what information was lost and how pants may use in managing their teams. The their security systems could be improved. Joseph Lewczak is a Partner and Allison court further held that the activities in ques- Elsewhere, a class action lawsuit was filed Fitzpatrick and Matthew Smith are Associ- tion do not constitute gambling within the against Fidelity National Information Ser- ates in the Advertising, Marketing and Pro- meaning of the statute, because (1) the entry vices accusing it and its subsidiary, Certegy motions practice group of Davis & Gilbert fees are paid unconditionally, (2) the prizes Check Services, of negligence and invasion LLP. The authors gratefully acknowledge offered to fantasy sports contestants are for of privacy on behalf of the 8.5 million cus- the assistance of Jennifer Soussa, Alison amounts certain and are guaranteed to be tomers whose sensitive information was Winter and Tara Waters in preparing this awarded, and (3) defendants do not compete sold to direct marketers by a former article. for the prizes. employee. Please email the authors at [email protected], [email protected] or [email protected] with questions about this article. Volume 15, No. 12 © 2007 The Metropolitan Corporate Counsel, Inc. December 2007

Children’s Advertising was a hoax. Federal law still prohibits tele- payment to each member of the class. marketers from using automated dialers to Though the statement may bring your Health And Weight Loss Advertising kids to tears, it’s true – “Trix are not for call cell phones. While the U.S. public continues to crave kids.” Earlier this year, eleven major food In October, the FTC pledged not to drop new weight loss methods, the FTC contin- companies, including McDonald’s, Camp- any telephone numbers from the DNC Reg- ued this year to bring actions for false claims bell Soup, Kellogg’s, and PepsiCo, who are istry at the five year expiration term pending related to weight loss and dietary supple- all charter members of the Children’s Food final Congressional or agency action on ments. Most notably, the FTC recovered and Beverage Advertising Initiative (“Initia- whether to make registration permanent. $25 million to settle allegations of decep- tive”), agreed to stop advertising products Thus, consumers who signed up for the tive marketing for Xenadrine EFX, CortiS- that do not meet certain nutritional standards DNC Registry when it began in June 2003 to children under 12. may be able to continue to enjoy uninter- lim, TrimSpa, and One-A-Day Weight- The companies’ announcements came on rupted dinners without having to re-enroll in Smart. The FTC alleged in four separate the heels of the FTC and the Department of the DNC Registry next June. cases that weight-loss and weight-control claims were not supported by competent and Health and Human Services (“HHS”) forum CAN-SPAM in Washington DC entitled, “Weighing In: reliable scientific evidence. A Check-Up on Marketing, Self-Regulation, The District Court in Arizona made The FTC is not the only one cracking and Childhood Obesity,” which reported on advertisers think twice about their future down on unsubstantiated weight loss claims. the industry’s progress in implementing ini- business partners when it ruled that an Earlier this year, the Center for Science in tiatives addressing food and beverage mar- advertiser could be held vicariously liable the Public Interest (“CSPI”) filed a lawsuit keting to children. The regulators in for its marketing partners’ violations of the over calorie-burning claims made by attendance were encouraged by the progress CAN-SPAM Act. While the court rejected Enviga, a carbonated canned green tea made by the Initiative members but called the government’s claim that the advertiser jointly marketed by the Coca-Cola Com- for broader participation in the fight against should be strictly liable simply for entering pany and Nestle Switzerland. CSPI claims childhood obesity from the food and bever- into the agreement with the spamming that if Coca-Cola and Nestle stop marketing age advertisers who were not in attendance “affiliate,” it did find that the advertiser the product as a calorie-burner, it would at the forum and those that have not yet could be vicariously liable for the “foresee- drop the potential litigation. The beverage joined the Initiative. able” violations of its affiliates. The court makers responded that they have deliber- Despite the progress made by the indus- explained that advertisers who have the abil- ately avoided claims that Enviga is a weight- try in the fight against childhood obesity, ity to control, monitor or supervise affiliate loss product, and that independent research shortly after the forum, the FTC served activities will be scrutinized closely both as substantiates the effects of the product. to their actions or their inaction, and cannot forty-four food, beverage and quick service Rebates restaurants Ð including Burger King, Camp- hide from liability by claiming ignorance. In May, MySpace settled spam and Earlier this year, the FTC hosted a work- bell Soup, and Coca-Cola Ð with subpoenas shop, entitled the Rebate Debate, which pro- (technically, 6(b) information requests) breach of contract claims against The Globe, a marketer which had opened at least vided the opportunity to discuss consumers’ seeking information concerning, among perspectives on rebates, explore best prac- other things, their marketing activities and ninety-five MySpace accounts on the MySpace web site with falsified and fraud- tices in the offering and fulfillment of expenditures targeted toward children and rebates, and address the government’s past adolescents. The companies are being asked ulent information, and sent hundreds of and future role in improving consumers’ to provide this detailed information so that thousands of unsolicited “e-messages” to experiences with rebates. During the Rebate the FTC can prepare a comprehensive report other users, all of which advertised the Debate, the FTC announced enforcement on this topic for Congress. The subpoenas defendant’s products. The settlement was actions against two advertisers, Soyo, Inc. seek wide-ranging information on the recip- preceded by an unpublished court ruling that and InPhonic, for their allegedly unfair and ient’s use of media, including TV, radio, found that “e-messages” sent between deceptive rebate practices, including mis- internet, cinema and in-store marketing, as MySpace.com account holders qualify as leading consumers regarding the documen- well as viral marketing, product placement email under the state and federal CAN- tation necessary for receipt of a rebate, and and licensed characters. SPAM Act and California’s anti-spam statute and that MySpace.com was an failing to timely deliver rebate checks and Telemarketing “internet access provider” eligible to invoke provide consumers with materials necessary In November, the FTC announced a law CAN-SPAM’s civil remedies. to submit a complete rebate application. enforcement crackdown on companies and Talk about multi-tasking Ð the CAN- * * * individuals accused of violating the require- Spam Act has also been invoked to deter The regulatory trends for 2007 are cer- ments of the National Do Not Call (DNC) unwanted text messages. In mid-2006, Dis- tainly consistent with those of 2006 Ð pri- Registry. The actions resulted in six settle- tributed Networks LLC, a wireless content vacy and data protection, predatory Internet ments, which collectively imposed nearly and technology company, was sued by a activity, weight loss, children’s advertising, $7.7 million in civil penalties, and were class of consumers who allegedly received CAN-SPAM, and telemarketing. Look for brought against companies ranging from the unwanted text messages encouraging them these trends to continue well into 2008 with adjustable bed seller Craftmatic Industries to subscribe to Distributed’s services. The further focus and scrutiny on social net- to the alarm-monitoring provider ADT case was brought under the Telephone Con- working sites, video game consoles, and Security Services and lender Ameriquest sumer Protection Act, which prohibits send- mobile marketing. We also anticipate Mortgage Company. ing text message advertisements (messages increased use of viral, buzz and stealth Even though you may have recently that encourage recipients to purchase a methods of advertising. However, if the received an email stating that your cell product or service) if the sender has not first “Aqua Teen Hunger Force” scare is any phone number will be released to telemar- obtained prior express consent. In January, indication, we can expect regulators to start keters as a result of a new cell phone num- Distributed agreed to settle with the class taking a closer look at these new marketing ber database, you needn’t worry Ð the email and to pay $150,000, which includes a $150 devices.