At the annual conference of the National Advertising Division, Federal Trade Commission attorneys and Commissioners spoke about pressing issues in the industry.
Among the highlights: executives may be held personally liable when companies engage in false advertising, enforcement of the Children’s Online Privacy Protection Act will remain a priority, and large advertisers are on the FTC’s radar.
COPPA enforcement has been a consistent focus for the agency, a fact Commissioner Terrell McSweeny confirmed in her remarks. She also noted that while most companies are concerned that they obtain prior parental consent before they collect and use information about children under age 13, the Rule’s data security requirements are of equal importance.
“Data security is an element of privacy that I have been thinking a lot about that the FTC has recently been actively engaged in trying to improve and promote,” she told attendees. “The reason we think data security is so important is because it’s absolutely essential to protecting consumer welfare, especially when hacks and attacks are frequent and unpredictable.” McSweeny cited the recent high-profile data breach by Snapchat, Inc., whose service, she noted, was “disproportionately popular” with younger users.
Kandi Parsons, a senior attorney in the FTC’s division of privacy and identity protection, also addressed COPPA. She cautioned that the agency intends to bring more COPPA enforcement actions similar to those brought in September against Yelp and TinyCo and noted that the FTC does not discriminate on format when enforcing the statute.
“These cases, in conjunction with the Commission’s past COPPA cases, demonstrate that the agency is going to pursue enforcement in a variety of areas, be it mobile or web, games, social media, general audience applications, or child-directed apps,” Parsons said. “We’re going to enforce where we find COPPA violations in order to protect children’s privacy.”
Lesley A. Fair, a senior attorney in the Division of Consumer Protection and Business Education, warned advertisers about the potential for personal liability and cited several agency actions that included charges against officers and executives. She also referenced a recent order from the Fourth U.S. Circuit Court of Appeals affirming a $163 million personal judgment against an executive who elected not to settle when the agency accused her company and other officers of deceiving consumers with a scareware scam.
“A lot of you have interesting entrepreneurial clients that have a great idea about a new app or something new online,” Fair said. “All I’m suggesting is … just to remind them that the ‘Inc.’ that they dutifully get after their corporate name will not necessarily shield them from liability under the FTC Act.”
She also said the Commission is turning its attention to mobile advertisers. “The moral of the story is that your clients are moving to mobile, and when they go there, they need to know that the well-established truth in advertising standards go with them.”
FTC Chairwoman Edith Ramirez issued her own warning to attendees of the conference, particularly to large advertisers. She cited the agency’s recently announced initiative, Operation Full Disclosure, that targets advertisers that fail to make adequate disclosures.
“Clearly, a good portion of our enforcement work is geared toward outright fraud, but we are looking very closely at national advertising campaigns,” Ramirez told attendees. “So it won’t be uncommon for us to have cases that target reputable companies, large companies, and I expect that we will continue to see that.”
The Operation will carry on “until we are confident the industry understands the need for ‘clear and conspicuous’ disclosures, and what ‘clear and conspicuous’ means,” she added.
Ramirez also discussed health claims, which she emphasized must be backed by actual and clearly demonstrated evidence, particularly for claims about the treatment and prevention of serious medical conditions. The number of studies necessary to substantiate a claim – some settlements specify that two studies are required, for example – will be based upon recommendations from experts, she explained.
Why it matters: The remarks delivered by the FTC attorneys and Commissioners provide several key takeaways for advertisers: the agency will continue to concentrate on COPPA enforcement, it will consider holding company executives personally liable for false and deceptive ad claims, and it will increasingly focus its attention on mobile marketing.