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ATTORNEY ADVERTISING NOTICE. The contents of this article, and the accompanying articles of this five-article set, are: (i) attorney advertisements, (ii) designed and provided for general informational purposes only, and (iii) are not intended to provide, and should not be construed as providing, legal advice of any sort or for any purpose. Neither Dunlap Bennett & Ludwig, PLLC, nor Kurt R. Klaus, Esq., are responsible for any action or failure to act in reliance upon information presented in this article or any accompanying articles. No action, or decision not to act, should be made in reliance on any of the information contained in this article or in any of the accompanying articles.  The choice of a qualified lawyer or other professional is an important decision and should not be based solely upon advertisements.  Prior results that may be mentioned in this article, or in accompanying articles, do not guarantee same or similar outcomes.

Introduction:

As suggested in the first article of this five-part series, … competition across brands has neither decreased nor decelerated.  Digital platform short videos are often key components of contemporary brand activations and are considered indispensable.  However, fueling social media outlets with sustained volumes of branded visual content isn’t cheap, which is causing brands to increasingly organically handle social media content production and placement in-house.  Unfortunately, due to no fault of their own, personnel of in-house marketing departments and agencies are not always well suited to readily identify and handle business and legal affairs issues concerning federal and state laws compliance related to the creation and online distribution of advertising content.  Such matters are the general subject matter of this article, the third part of the aforementioned series.

About the Author:

Kurt R. Klaus, Esq., is a Partner at the law firm of Dunlap Bennett & Ludwig, PLLC, where he heads the Media/Entertainment Law section.  Kurt regularly functions as lead attorney on domestic and international transactions involving many of the world’s leading media companies and provides creative and practical guidance with related legal and business strategies.  He has been legal counsel to top world brand corporate marketing and social media departments, television networks, content production companies, musicians, and music composers.  Prior to practicing law, Kurt produced television commercials, was an executive in two mid-sized media production and distribution companies, and earned a Master of Science degree in Communications (Advertising Emphasis).  KKlaus@DBLLawyers.com, www.DBLLawyers.com.

Complying With Applicable Law and Contractual Obligations:

Today’s brand activations publish ever more content direct to digital platforms.  To control related costs marketers increasingly turn to in-house produced content to handle video content supply requirements.  While this shift in methodologies supports agile marketing opportunities, there likewise arise concerns:  state and federal consumer law compliance and compliance with digital platforms terms of service (TOS).

It is important for advertisers to understand that they can be held responsible not only for their own actions, but also for those actions or omissions of endorsers/influencers and agencies whom their brands engage.  Challenges can be initiated by federal regulators and state Attorneys General (under state Unfair Deceptive Acts and Practices statutes), self-regulatory bodies (e.g., National Advertising Division of the Council of Better Business Bureaus), competitors, intellectual property owners, celebrities, advertising watchdogs, and consumers, … among others.  Despite this compelling collection of compliance advocates, recent studies have suggested that only 30% of marketers have formalized a process for compliance.

Applicable federal law, enforced by the Federal Trade Commission (FTC), prohibits unfair or deceptive acts or practices in- or affecting- commerce.  Advertisers can run afoul of such federal statutes in a variety of ways.  Perhaps most pertinent to our discussion here: a brand’s claims must not mislead and must have substantiation (i.e., a reasonable basis for any material, objective claim at the time the claim is made).  Although the use of endorsers/influencers will be discussed more fully in a later article in this series, they must be mentioned here as well because, under FTC guidance, marketers have a duty to monitor and correct the content and disclosures disseminated by influencers so as not to mislead consumers.

If the FTC notices or is alerted to advertiser noncompliance issues (e.g., misleading or non-substantiated advertising content), typically the FTC will issue warning (sometimes termed “education”) letters to the advertisers and endorsers it identifies as the offenders.  Such communications usually provide information on how a noncompliant representation may be remedied.  Individually directed guidance may include information on how proper disclosures, corrective advertising, or consumer education may be used to eliminate problem ads or endorsements.  If, following letters of education, the FTC determines that an advertiser has not taken corrective action, then the FTC may provide a stronger letter of warning.  Research indicates that in 2017, the FTC sent out more than 90 educational letters to brands and influencers concerning endorsement noncompliance issues.  Approximately 21 of those influencers who received an educational letter then received a warning letter with heightened individual demands related to compliance.  Failure to follow FTC guidance may result in enforcement actions if the FTC determines those involved engaged in unfair or deceptive acts or practices.  Enforcement actions can take various forms including cease and desist orders, prosecution (through the U.S. Department of Justice), other injunctive relief, and civil penalties.  Alternatively, settlements or consent orders with onerous terms could occur.

Finally, it must be mentioned that marketer compliance with digital platform terms of service (TOS) is also an important area for consideration, as is compliance with privacy laws in data gathering, licensing, and usage.  Failure to adhere to terms of service may result in campaign takedowns, diminution of brand integrity, and loss of consumer trust.  Improperly harvesting, aggregating, or using data, especially those data constituting personal private information, can also lead to very costly litigation, fines, consent orders, and settlements, as well as long-term reputational loss.  A recent, yet somewhat controversial, example of FTC action in this space is the FTC $5 Billion Dollar penalty involving Facebook.  For these and other important reasons, terms of service compliance should not be a mere afterthought or considered a nuisance to be addressed only if forced to do so.

Compliance with applicable state and federal laws pertaining to online publication of brand marketing content is a very doable, yet potentially complex, undertaking.  If you are involved in the distribution and media content related to brand marketing and have questions concerning any of the information provided in this advertisement message, please contact Kurt R. Klaus, Esq., at Dunlap, Bennett & Ludwig.

Kurt R. Klaus, Esq., Dunlap Bennett & Ludwig, PLLC, KKlaus@DBLLawyers.com, DBLLawyers.com.

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