October 1, 2010

Food Ad Guides Anticipated Soon

David Vladeck, the Federal Trade Commission’s Director of the Bureau of Consumer Protection, told a recent public forum that he expects new food advertising guidelines from the Interagency Working Group by the end of the year. The group, which includes the FTC, Center for Disease Control and Prevention, Food and Drug Administration and Department of Agriculture, was tasked by Congress with developing voluntary nutritional standards for foods marketed to children under the age of 18. The guidelines would initially be voluntary. The original draft of the guide released last December, can be found here

Net Neutrality Bill Scrapped, For Now

Congressman Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee dropped an effort to move new net neutrality legislation in the near future. A new bill considered by the Chairman would have reportedly applied nondiscrimination principles to wire-line broadband but not wireless and directed the Federal Communications Commission to deal with enforcement on a case-by-case basis and not by rulemaking. It would have also prohibited the FCC from reclassifying broadband as a telecommunications service under Title II of the Communications Act, which would have given the agency greater regulatory authority. The effort was halted due to lack of bipartisan support. Chairman Waxman has not ruled out taking up the issue in a lame-duck session after the election.

FCC OK's Use of White Space

The Federal Communications Commission voted unanimously to approve the use of idle TV spectrum known as “white spaces” for wireless broadband applications. The order eliminated a requirement that devices that check-in with a geo-location database include sensing technology to ensure they will not interfere with television stations and other spectrum license holders. The Commission does not appear to have granted a request by broadcasters that devices check-in several times a day with the geo-location database. The National Association of Broadcasters, which has expressed concern that the increased use of the white spaces could interfere with existing broadcast signals, has indicated that it will pursue a lawsuit which seeks to block the order.

Planted Reviews Garner FTC Scrutiny 

by Austin Padgett, Frost Brown Todd LLC

California-based Reverb Communications was busy building the reputation of its iPhone application developer clients when the firm caught the FTC’s attention. Reverb’s employees had posted reviews of its clients’ gaming apps on iTunes, claiming that a reviewed app was “an amazing new game,” “one of the best,” “a great, family-friendly board game app,” and that “one of the best apps just got better.” The marketing firm contends that it has never had a policy of planting positive reviews for its clients; rather, the employees were acting in their personal capacity by buying the apps and reviewing them in their role as consumers.

The FTC did not agree with Reverb and, because the reviewers failed to indicate their connection with the game developers, filed a complaint against Reverb Communications and executive Tracie Snitker for deceptive advertising practices. In so doing, the FTC made Reverb its first “example” under the recently updated guidelines governing endorsements and testimonials. These guidelines expressly expand the long-standing principle of disclosing “material connections” between advertisers and endorsers—connections that consumers would not naturally expect—to include online activities and word-of-mouth marketing. The FTC explained that iTunes shoppers expect candid reviews of products and do not anticipate that a reviewer works for the product’s creator. Reverb’s connection to the app developers, the FTC admonished, should have been disclosed in the reviews of the product.

The case is now settling, and, under the proposed settlement agreement, Reverb must (i) remove all endorsements that fail to disclose the company’s connection with the products’ creator and (ii) disclose all material connections when it endorses its clients’ products. Reverb admits no wrong-doing through the settlement and is adamant in conversations with the media that the settlement is merely for convenience, a business decision. Even so, marketers must be cautious about the messages that employees are distributing about clients’ products and services to avoid the appearance of impropriety. Where appropriate, employees should transparently indicate their relationship with clients to avoid consumer misunderstanding . . . and FTC scrutiny.