The Legal Lowdown on Marketing and Advertising in 2017
A number of developments are likely to impact the legal landscape for marketing and advertising in 2017. Regulatory changes stemming from the presidential transition, as well as developments in class action lawsuits, are likely to be important issues for advertisers to follow in 2017.
As an initial matter, the presidential transfer of power in 2017 has already led to some changes in senior leadership at key government regulatory agencies like the FTC, FDA and FCC. Additional leadership changes will occur in the future. These personnel changes — and the resulting modifications to agency policies, strategies and priorities — are likely to have a significant impact on advertisers in 2017.
For example, President Donald Trump recently appointed FTC Commissioner Maureen Ohlhausen to serve as acting chairwoman after Chairwoman Edith Ramirez announced she would resign from the agency. In a recent speech, Ohlhausen announced updates to the agency’s consumer protection priorities that will likely impact advertisers.
FTC Priorities, Going Forward
Specifically, Ohlhausen indicated she plans to increase transparency into agency decision-making and to provide additional guidance to businesses. She further stated that the FTC will refocus on fraud and consumer harm in its enforcement activities.
Advertisers have generally reacted favorably to her announcement, partly because they indicate FTC decision-making will continue to be guided by traditional principles of consumer protection law, and partly due to their hope that those traditional principles will be applied in ways that are predictable and understandable to advertisers.
When Commissioner Ramirez steps down from the FTC this month, however, there will be three open positions for FTC Commissioners that the new administration will need to fill. The individuals who fill those positions will also undoubtedly bring their own perspectives and priorities to the agency.
In addition to the regulatory agency changes, developments in class action lawsuits alleging false advertising claims against major advertisers will also be important issues to follow in 2017. If advertisers are able to roll back the tide of class action litigation via procedural or substantive defenses, the future will look different than it will if advertisers are unable to stop the forward-movement of such litigation.
Reviewing 2016: High-Dollar Settlements Involving High-Profile Brands and the FTC
A few high-profile brands, such as Volkswagen and DeVry University, entered into extremely high-dollar settlements with the FTC in 2016.
In the DeVry case, the FTC accused the company of making false promises in its TV, radio, online and print ads by promoting inflated job placement rates and post-graduation income levels. The FTC filed suit in January 2016, and announced a $100 million settlement with the company in December 2016. The settlement requires DeVry to pay almost $50 million in cash to be distributed to qualifying students, and to provide slightly more than $50 million in debt relief.
In June 2016, Volkswagen entered into a settlement with the FTC and others in which the company agreed to spend up to $14.7 billion to settle allegations over misleading “clean diesel” advertising claims. This major settlement will affect owners of the brand’s 2.0-liter diesel vehicles. In February 2017, the FTC announced another settlement with Volkswagen covering 3.0-liter diesel vehicles. That settlement will cost the company between $1.2 and $4 billion dollars.
Ohlhausen has indicated that, going forward, the FTC will focus on redressing consumer harm stemming from deceptive advertising via its enforcement actions rather than on obtaining disgorgement of funds from deceptive advertisers. On initial review, this change in priorities might suggest that there will be fewer high-dollar settlements from the FTC in 2017. Nevertheless, it’s important to note that Ohlhausen voted in favor of both the DeVry and Volkswagen settlements. In 2017, advertisers should keep an eye on FTC settlements to see whether the refocus on consumer harm from the agency has an impact on the dollar value of its settlements with advertisers.
Reviewing 2016: The FTC Cracks Down on Endorsement Disclosures in Social Media Campaigns
In 2016, social media advertising budgets reached an estimated $31 billion worldwide, and many expect the number to increase in 2017. The popularity of social media platforms as a promotion mechanism has drawn attention from the FTC. The agency has made clear — via industry guidance documents, speeches and enforcement actions — that its material connection disclosure standard for endorsements applies to ads disseminated via social media. In 2016, the FTC announced settlements with Lord & Taylor and Warner Bros. on this issue.
In March 2016, Lord & Taylor entered into a settlement with the FTC over claims that it deceived consumers by paying online fashion influencers to post social media photos of themselves wearing clothing from the brand without requiring a disclosure that the influencers were compensated for the posts. According to the FTC, Lord & Taylor not only paid the fashion bloggers/influencers for the social media posts, it also gave them the clothing items for free without requiring disclosures of those facts.