Tag: Federal Trade Commission

FTC Denies AgeCheq Parental Consent Application But Trumpets General Support for COPPA Common Consent Mechanisms

Covington BUrling Law Firm

The Federal Trade Commission (“FTC”) recently reiterated its support for the use of “common consent” mechanisms that permit multiple operators to use a single system for providing notices and obtaining verifiable consent under the Children’s Online Privacy Protection Act (“COPPA”). COPPA generally requires operators of websites or online services that are directed to children under 13 or that have actual knowledge that they are collecting personal information from children under 13 to provide notice and obtain verifiable parental consent before collecting, using, or disclosing personal information from children under 13.   The FTC’s regulations implementing COPPA (the “COPPA Rule”) do not explicitly address common consent mechanisms, but in the Statement of Basis and Purpose accompanying 2013 revisions to the COPPA Rule, the FTC stated that “nothing forecloses operators from using a common consent mechanism as long as it meets the Rule’s basic notice and consent requirements.”

The FTC’s latest endorsement of common consent mechanisms appeared in a letter explaining why the FTC was denying AgeCheq, Inc.’s application for approval of a common consent method.  The COPPA Rule establishes a voluntary process whereby companies may submit a formal application to have new methods of parental consent considered by the FTC.  The FTC denied AgeCheq’s application because it “incorporates methods already enumerated” in the COPPA Rule: (1) a financial transaction, and (2) a print-and-send form.   The implementation of these approved methods of consent in a common consent mechanism was not enough to merit a separate approval from the FTC .  According to the FTC, the COPPA Rule’s new consent approval process was intended to vet new methods of obtaining verifiable parental consent rather than specificimplementations of approved methods.  While AgeCheq’s application was technically “denied,” the FTC emphasized that AgeCheq and other “[c]ompanies are free to develop common consent mechanisms without applying to the Commission for approval.”  In support of common consent mechanisms, the FTC quoted language from the 2013 Statement of Basis and Purpose and pointed out that at least one COPPA Safe Harbor program already relies on a common consent mechanism.

ARTICLE BY

Shelton L. Abramson
OF
Covington & Burling LLP

Too Good To Be True: FTC’s Crackdown On L’Occitane’s Body Slimming Almond Extracts

Sheppard Mullin Law Firm

L’Occitane Inc’s advertisements for its topically-applied body sculpting almond extracts seemed straightforward: “Almond Shaping Delight 3 out of 4 women saw firmer, lifted skin. This luxuriously lightweight massage gel instantly melts into the skin to help visibly refine and sculpt the silhouette” and “Almond Beautiful Shape Trim 1.3 inches in just 4 weeks. This ultra-fresh gel cream helps to visibly reduce the appearance of cellulite, while smoothing and firming the skin.”

Unfortunately for L’Occitane, an international skin care company with over 150 shops across the U.S., the Federal Trade Commission (FTC) found those claims dubious at best, and earlier this year charged the company with violating the Federal Trade Commission Act (“FTC Act”).

According to the FTC’s complaint, which was filed on January 7, 2014, L’Occitane had been manufacturing, advertising, and selling the two products at issue, “Almond Beautiful Shape” and “Almond Shaping Delight,” in interstate commerce and violated the FTC Act by promoting them as being able to slim and reshape the body. The FTC alleged that L’Occitane did not have sufficient scientific data to support L’Occitane’s advertising claims that the creams could trim the user’s thighs, reduce cellulite, and slim the body in just weeks. The FTC asserted that  L’Occitane based its advertising claims in large part on two unblinded and non-controlled clinical trials and greatly exaggerated the results from one of the studies. The FTC charged L’Occitane with violating Sections 5(a) and 12 of the FTC Act, which declare unfair or deceptive acts or practices unlawful and bar false advertisements likely to induce the purchase of food, drugs, devices, or cosmetics. As part of the final consent order, the FTC fined L’Occitane $450,000 and prohibited it from making future false and deceptive weight-loss claims.

L’Occitane, however, is not the only entity which the FTC has recently fined because of questionable advertising claims. The FTC has also charged Sensa Products, LeanSpa, and HCG Diet Direct with violations of the FTC Act for allegedly misleading the public with unfounded weight loss claims and misleading endorsements relating to their products. These complaints, along with L’Occitane’s, were part of the FTC’s recent “Operation Failed Resolution” initiative, aimed at combating deceptive weight-loss claims.

One of the companies charged, Sensa Products, which claimed weight loss results from one of its dietary supplements, had to pay a $26 million fine for FTC Act violations. As a part of “Operation Failed Resolution,” the FTC also released an updated media guide for spotting deceptive weight-loss claims in advertising, entitled “Gut Check: A Reference Guide for Media on Spotting False Weight-Loss Claims.”

Manufactures and marketers of health products, cosmetics, drugs, and dietary supplements should be mindful of the FTC’s continuing and increasing vigilance in taking action with respect to enforcement of the FTC Act to stop unfounded weight loss claims. Companies making weight-loss claims in advertising and marketing materials must make sure that their claims are defensible and supported by sufficient credible scientific data.

Jordan Grushkin contributed to this article.

Article By:

Theodore C. Max
Of:
Sheppard, Mullin, Richter & Hampton LLP

New Updated FTC Care Labeling Rules: “Do’s and Don’ts”

Sheppard Mullin 2012

The Federal Trade Commission (“FTC”) enforces federal labeling requirements that require manufacturers, importers, sellers and distributors of certain textile and wool clothing  to accurately label their products. For example, FTC rules require that manufacturers indicate the country of origin and fiber content in their clothing. In addition, the Care Labeling Rule requires that manufacturers and importers attach “care labels” to garments and certain piece goods.

Navigating these various labeling requirements can be tricky. On May 5, 2014, the FTC amendment of the labeling rules, known as the Textile Rules, became effective.

Care labels, which can influence consumers’ purchasing decisions more than labels indicating fiber content or country of origin or manufacture, are important to carefully consider.

“Do’s” for Clothing Manufacturers and Importers:

Place all care labels permanently, securely and visibly, so that consumers can easily see or locate them prior to purchase. Ensure that labels will remain legible not just at the point of sale, but throughout the lifecycle of the product.

Include a washing or drycleaning instruction (or both) if either method is safe for the product. If a product can be neither washed nor drycleaned, the label must state “Do not wash – Do not dry clean.” A simple “dryclean” instruction is acceptable in most cases, unless “any part of the drycleaning process would harm the product.” In that case, more specificity is required (e.g., “Professionally Dryclean” or “Dryclean. No Steam.”).

Indicate whether the product is to be washed by machine or by hand. The FTC has stated that water temperature settings must be indicated if “regular use of hot water will harm the product.” Similarly, if using chlorine bleach will harm the product, whereas other bleaches will not, the label must state “Only non-chlorine bleach, when needed.” The appropriate label in the event that no bleach is safe to use is “Do not bleach.”

State how to dry the product and how to iron it, if the product requires regular ironing. Temperature settings for drying and ironing are not needed unless the “regular use of high temperature will harm the product.”

If selling a garment with multiple pieces, only one label is required if the same instructions apply to all parts of the garment, and if the garment is sold as a single unit. The label should be attached to the “major piece” of the garment. In the event that the garment is not sold as a single unit, or if the instructions differ from one part of the garment to the next, then each separate piece of the garment needs its own care label.

If the garment cannot be cleaned without damaging the garment, potential customers must be warned on the label. It is imperative that following the care labeling instructions does not ordinarily lead to product damage. Along these lines, labels must inform consumers not to engage in certain procedures that they may erroneously but reasonably assume are acceptable, given the instructions of the label. For example, if a label indicates that clothes can be washed, a reasonable consumer might infer that the product can also be safely ironed. If these understandable assumption is incorrect, the FTC has stated that the label must indicate the risks involved.

One should always have a “reasonable basis” for everything written on a care labeling instruction. If a piece of clothing indicates that it cannot safely be ironed, there must be some proof (based upon experience, industry expertise or testing) known to the manufacturer or importer that ironing the clothing would cause damage. The FTC has alternatively stated that the manufacturer or importer must have “reliable evidence” to support all warnings or instructions on product labels. Guesswork is insufficient. However, what constitutes “reliable evidence” or a “reasonable basis” does depend on the circumstances. It is incumbent on manufacturers conducting tests to ensure that the results of any tests conducted on only one portion of multi-part garments do, in fact, have applicability to the entire garment.

Importers must ensure that these labels are placed on products before they sell them in the United States. It is not necessary for the labels to be attached as the products enter the country, however. Domestic manufacturers similarly must ensure that care labels are placed on finished products prior to sale.

“Don’ts” for Clothing Manufacturers and Importers:

Certain kinds of exempt apparel, including gloves, hats, and shoes, do not require care labels. Many items are also excluded from the care labeling requirements, including handkerchiefs, belts, suspenders, neckties, or non-woven garments made for one-time use. For piece goods sold for making apparel at home, it is not necessary to include care labeling instructions for any “marked manufacturers’ remnants of up to 10 yards when the fiber content is not known and cannot be determined easily.” These items are exempted from the Care Labeling Rule.

Garments custom-made from fabrics provided by consumers, or products sold directly to institutional buyers for commercial use (e.g., uniforms sold to Office Depot for use by clerks during business hours, and not purchased directly by the clerks), do not require care labels. This also includes items that the consumer may ask to be added to the garment (e.g. lining or buttons).

Use non-standard terms on labels. The FTC recommends, but does not expressly require, that manufacturers ensure that any terms they use on labels are in accord with the definitions in the Rule’s Appendix A glossary, where applicable. For example, the term “Warm” applies to initial water temperature ranging from 87 to 111 degrees F [31 to 44 degrees C]; “Hot” is from 112 to 145 degrees F [45 to 63 degrees C]; and “Cold” is up to 86 degrees F [30 degrees C].

*Gregg Re Summer Associate contributed to this article.

Article By:

Theodore C. Max
Of:
Sheppard, Mullin, Richter & Hampton LLP

Federal Trade Commission (FTC) Wins Appeal: ProMedica Merger with St. Luke’s Not Allowed

vonBriesen

On April 22, 2014, the U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) upheld the Federal Trade Commission’s (FTC) finding that the merger between Ohio-basedProMedica Health System, Inc. (ProMedica) and St. Luke’s Hospital (St. Luke’s), an independent community hospital that operates in the one of the same counties as ProMedica, would adversely affect competition in violation of federal antitrust law. Prior to the merger, ProMedica and St. Luke’s comprised two of the four hospital systems in Lucas County, Ohio. After the two systems merged, ProMedica held more than 50% of the applicable market share.

Accordingly, in 2011 the FTC ordered ProMedica to divest itself of St. Luke’s. ProMedica appealed the FTC’s order to the Sixth Circuit. In a unanimous opinion, the Sixth Circuit denied ProMedica’s petition to overturn the FTC order, citing concerns about anti-competitive behavior and the ability of ProMedica to unduly influence reimbursement rates with healthcare insurance companies.

The full 22-page court opinion may be accessed here.

Article By:

Patrick J. Cannon
Of: 
von Briesen & Roper, S.C.

Social Media Marketing – New FTC (Federal Trade Commission) Guidance On Generating “Buzz”

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For the first time since it issued its Guides Concerning the Use of Endorsements and Testimonials in Advertising in 2009, the FTC has provided new guidance on the use of social media to generate consumer interest (or “buzz”) in a brand.

Shoe manufacturer Cole Haan had a great social media marketing idea.  They would run a contest through Pinterest.  The winner would get a $1,000 shopping spree courtesy of Cole Haan.  To enter, Pinterest users had to “pin” images of Cole Haan shoes on Pinterest.  They even came up with a great slogan for the campaign: “Wandering Sole.”  Finally, so that people could find the images easily, contestants were required to include the hash tag “#wanderingsole” in their pin descriptions.

This was a great marketing idea.  Lots of Pinterest users would post pictures of Cole Haan’s product on Pinterest and generate buzz about Cole Haan shoes. Here is what one Pinterest page currently looks like:

Cole Haan Pinterest

There was only one problem; the Federal Trade Commission.

The FTC considered the posting of images of Cole Haan shoes by Pinterest users to be endorsements of the product.  To be clear, the issue was not whether the Pinterest users actually intended to endorse the brand.  Rather, the concern was whether viewers of the image might perceive the posting of the images to be endorsements.  As such, the FTC investigated the marketing practice and issued a closing letter to Cole Haan regarding their investigation.

As stated in the closing letter, the FTC thought that the since the Pinterest “pins” constituted an endorsement, there should have been a “clear and conspicuous” disclosure concerning the fact that the “endorsers” (i.e., the Pinterest users entering the contest) were being compensated for their endorsement, namely, the chance to win the $1,000 shopping spree.  The FTC did not believe that the “#Wanderingsole” hash tag was sufficient to provide this required disclosure.  Fortunately, the FTC did not take enforcement action against Cole Haan, recognizing that the FTC had not squarely addressed this issue before.

So finally, we get to the point of this post.  While I understand the FTC’s point (I really do), I think social media marketers will need more specific bright line guidance as to what type of disclosure is required.  The reason is that in the social media context, the amount of text that may be capable of devoting to such disclosure can be very limited.  It is noteworthy that the 2009 guidance issued by the FTC provided numerous examples to help us identify when endorsement disclosure s would be required.  Not one of those examples, however, indicated what would constitute a sufficient disclosure.

In fact, one of the comments submitted (by Heath-McLeod) in connection with the 2009 guidelines requested that the FTC provide “minimum standards for the size and clarity of disclosures.”  The FTC expressly rejected this request saying that:

“advertisers flexibility to meet the specific needs of their particular message is often preferable to attempting to mandate specific language, font, and other requirements applicable across-the-board to all ads.  Advertisers thus have always been free under the Guides to make their disclaimers as large and clear as they deemed appropriate to convey the necessary information to consumers”

That’s good, I suppose.  Advertisers need some freedom to do what they think is appropriate in the context of their marketing.  But how, as a practical matter, are advertisers supposed to get comfortable that the disclosure they give is sufficient?  For example, would it have been sufficient for the Pinterest users to have included the word “sponsored” in their pin description?  How about just the word “ad?”  Would that have been sufficient?  It’s not clear.

Consider, for example, the fact that a similar disclosure having to be made through Twitter or using SMS (i.e., texting) might be very difficult given the 140 character limit.  Now, consider further that the FTC guidelines for endorsements also require an additional disclosure when the person depicted in the endorsement is not a real consumer of the product.  Perhaps Cole Haan’s hash tag should have read:

“#These pins are part of a contest. Contestants may win prize for posting pins of Cole Haan products. Persons in such pins may not be actual consumers of the pinned product”

Darn, that’s 141 characters.  Maybe if I get rid of the “#” ….

Article By:

Kurt E. Anderson
Giordano, Halleran & Ciesla, P.C.

McSweeny Confirmed to Fill Vacancy at Federal Trade Commissions (FTC)

Sheppard Mullin 2012

The Federal Trade Commissions will soon be back to having a full complement of five commissioners.  Today, the U.S. Senate, by a vote of 95 to 1, confirmed Terrell McSweeny to fill a vacancy at the agency created by the departure of Jon D. Leibowitz more than a year ago.  Her term runs through September 26, 2017.

The White House announced the nomination of McSweeny in June 2013.  Although her nomination was not controversial, her confirmation was delayed because the Senate failed to take a vote before year’s end.

McSweeny is currently Chief Counsel for Competition Policy and Intergovernmental Relations at the Department of Justice Antitrust Division.  She has been at the Antitrust Division since 2012.  Prior to that, she served as Deputy Assistant to the President and Domestic Policy Advisor to the Vice President at the White House.  McSweeny received an A.B. from Harvard University and a J.D. from Georgetown University Law School.

McSweeny’s arrival at the FTC will provide the agency with a Democratic majority that should avoid two-to-two deadlocks and enable Chairwoman Edith Ramirez to pursue her agenda.

The FTC recently described itself as “collegial, bipartisan, and consensus-driven.”  However, there has certainly been some disagreement among the four current commissioners.

During questioning by the Commerce Committee last year, McSweeny discussed the need for offering guidance to business.  Noting that the FTC was primarily a law enforcement agency dealing with issues on a case-by-case basis, she said that it was incumbent on agency leaders to clearly articulate their reasoning, to apply the law as written, and to follow the case law.  She committed to doing just that if confirmed.

Article By:
Bruce A. Colbath

Of:
Sheppard, Mullin, Richter & Hampton LLP

EEOC & FTC Issue Joint Background Check Guidance

Jackson Lewis Logo

The U.S. Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) issued joint informal guidance concerning the legal pitfalls employers may face when consulting background checks into a worker’s criminal record, financial history, medical history or use of social media.  The FTC enforces the Fair Credit Reporting Act, the law that protects the privacy and accuracy of the information in credit reports. The EEOC enforces laws against employment discrimination.

The two short guides, Background Checks: What Employers Need to Know andBackground Checks: What Job Applicants and Employees Should Know, explain the rights and responsibilities of both employers and employees.

The agency press releases state that the FTC and the EEOC want employers to know that they need written permission from job applicants before getting background reports about them from a company in the business of compiling background information. Employers also should know that it’s illegal to discriminate based on a person’s race, national origin, sex, religion, disability, or age (40 or older) when requesting or using background information for employment.

Additionally, the agencies want job applicants to know that it’s not illegal for potential employers to ask someone about their background as long as the employer does not unlawfully discriminate. Job applicants also should know that if they’ve been turned down for a job or denied a promotion based on information in a background report, they have a right to review the report for accuracy.

According to EEOC Legal Counsel Peggy Mastroianni, “The No. 1 goal here is to ensure that people on both sides of the desk understand their rights and responsibilities.”

Article by:

Jason C. Gavejian

Of:

Jackson Lewis P.C.

Clash Of Titans over Biosimilars at Federal Trade Commission (FTC) Workshop

Bracewell & Giuliani Logo

 

On Tuesday, February 4, the Federal Trade Commission (FTC) conducted an all-day public workshop at its headquarters in Washington, D.C. on competition issues involving biologics and biosimilars.1 During highly informative presentations and roundtable discussions, the FTC and various stakeholders, including top-level representatives from originators of biologics (Pfizer and Amgen), biosimilars developers (Sandoz, Momenta and Hospira), payors (Aetna), prescribers (CVS and Express Scripts) and academia (Harvard Medical School), analyzed the likely impact of recent state substitution laws and naming conventions on biosimilars.

No one denied nor debated that the future of the drug industry lies in the robust and dynamic area of biologics. In 2010, 4 of the top 10 drugs were biologics and it is anticipated that in 2016 biologics will account for 7 of the top 10 drugs worldwide.2 At the same time, all panelists were concerned that the costs associated with biologics are rising at a staggering rate and are therefore not sustainable for patients nor payors, and that many patients will be unable to afford biologics if competition is not introduced.

According to Harry Travis, Vice President at Aetna, patients currently spend about $1 a day on non-specialty medication (traditional drugs) whereas they spend roughly $100 a day for specialty medication (biologics).3 He stated that only 1% of Aetna’s customers use specialty products, which account for 50% of Aetna’s total drug spending. This trend was confirmed by Steve Miller, Chief Medical Officer at Express Scripts, who underlined that specialty products (biologics) currently account for 30% of total drug spending, but this number will rise to 50% in 5 years.

It is thus not surprising that all participants urged for FDA-approved biosimilars in order to improve access to biologics while at the same time protecting public health and safety. Participants were also virtually unanimous in their recommendations that fostering public confidence in biosimilars will be crucial to their success and that unnecessary obstacles to substitution may restrict competition.4

The following points were discussed, relying on a large amount of data and comparative studies between countries:

  • Competition between originators of biologics and biosimilars developers: Panelists agreed that competition is not expected to have the same effects on the biologics industry as it has had in the small-molecule drugs space when generics penetrated the latter. Because the dynamics are completely different, the entry of biosimilars is unlikely to result in either steep price discounting or rapid acquisition of market share by manufacturers of biosimilars.5
  • Premature state biosimilar substitution laws: 18 states have already decided to introduce bills to regulate biosimilars, and 4 of them have enacted laws, all of which may seem slightly premature given that the FDA has yet to approve a biosimilar. Certain provisions of these substitution laws appear controversial as they place onerous requirements on the substitution of biosimilars for branded biologics. Of particular concern are certain substitutions laws requiring pharmacists to promptly notify patients and/or prescribers when dispensing a biosimilar, and to keep special records. These state-level restrictions not only deter substitution by imposing on pharmacists burdensome recordkeeping and additional communications with the physician, they also contradict federal law, namely the Biologics Price Competition and Innovation Act (BPCIA), which expressly provides for substitution.6 These state laws are arguably inconsistent with the BPCIA and could undermine the attractiveness and access to more affordable biologics.
  • Impact of naming on biosimilars: There was debate as to whether biosimilars should bear different non-proprietary names and whether such a requirement would have anticompetitive effects. Some argued that requiring distinct non-proprietary names is simply an effort to cause doubt and distrust among physicians and patients by making biosimilars appear different from biologics. As noted by Bruce Leicher, General Counsel at Momenta, the Biotechnology Industry Organization opposes GMO labelling on genetically modified foods precisely for the same reason – requiring a different name for biosimilars would communicate a different (and perhaps suspicious) product and would therefore grant a competitive advantage to branded biologics. Other panelists argued that names and other types of identifiers were justified by the need for an effective pharmacovigilance system, while some speakers expressed the need for distinguishable naming or other identifiers for purposes of linking a responsible product to a specific adverse event in the event of product liability.

The FTC did not express its own views on the effect of state-level restrictions and naming conventions on competition in the biosimilars market, but did note that securing more prescribing physicians on the panel might have added to the debate.

We will continue to monitor federal and state activities in the regulation of biosimilars.

1 The Food and Drug Administration defines biologics as medical products made from a variety of natural sources (human, animal or microorganism).  Moreover, a biological product may be demonstrated to be “biosimilar” if data show that, among other things, the product is “highly similar” to an already-approved biological product.

2 As presented by Steve Miller, Senior Vice President and Chief Medical Officer at Express Scripts.

3 More alarming to Mr. Travis is that the cost of biologics increased by approximately 15% annually, as compared to the approximately 5% increase in the cost of small molecule drugs.

4 Substitution, by allowing the pharmacist to automatically substitute an interchangeable biosimilar for the branded biologic without the intervention of the physician, provides a strong incentive to use biosimilars.

5 According to Dr. Sumant Ramachandra, Hospira’s Senior Vice President and Chief Scientific Officer, it takes approximately $5 million and 2-3 years for a generic manufacturer to bring a small molecule drug to market, whereas it takes over $100 million and 8-10 years for a biosimilar manufacturer to bring a biosimilar to market.

6 The BPCI provides that “the [interchangeable] biological product may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product.”

Article by:

Of:

Bracewell & Giuliani LLP