A law firm as creative as you are.
image001
You have the ambition. We can help you get there.

FTC’s Strict New Guidelines for Digital Advertising

Posted on Mar 30th, 2013

On March 12, 2013 the Federal Trade Commission (FTC) released new guidelines covering digital advertising. They are stricter for advertisers and call for digital marketers to review their current practices for compliance.

The original guidelines from 2000 merely demanded that disclosures be in close “proximity” to ads whereas the new guidelines must be “as close as possible,” clear and conspicuous, and hyperlinked only when their meaning is easily understood by consumers. These changes are largely the result of mobile and social media advertising.

The impact is important for digital marketers to understand. The FTC explains in the guidelines that tweets with the hashtag “#Sponsored” are probably acceptable as this is would be easily understood by consumers to be an ad. However, the FTC distinguishes the example tweet “#spon” and says it is probably not acceptable and possibly deceptive.

The FTC also addressed the problems presented by digital advertising on mobile devices. The new guidelines point out that many platforms may not be appropriate for digital advertising based on their incapability of the kinds of conspicuous disclosures now mandated by the FTC. For example, the FTC advises against the use of Flash media now for digital advertising.

The new guidelines specifically address disclosures within social media and mobile platforms. The FTC makes clear that “space-constrained” platforms (like Twitter, for example) are not exempt from the disclosure rules. In fact, the FTC recommends that advertisers actually make their disclosures within the ads despite the lack of space. If they are linked, they must be linked conspicuously. The Guidelines also advise that ads be mobile-optimized, to avoid the problem of ads with clear and conspicuous disclosures on a regular-sized screen becoming ambiguous on a mobile screen or requiring scrolling. Pop ups are also discouraged, since so many people use blockers or simply disregard them completely.

The takeaway here is that digital advertisers need to ensure their compliance with the new guidelines. Mobile optimization and better social media advertising are good business anyway, but the FTC will be making sure that marketers toe the line.

If you have any questions about this topic, please feel free to email us.


ZIP Codes Constitute “Personal Identification Information” According to Recent Massachusetts Supreme Judicial Court Holding

Posted on Mar 27th, 2013

Overview

On March 11, 2013, the Massachusetts Supreme Judicial Court (SJC) followed courts in California* and many other jurisdictions, holding that ZIP Codes constitute personal identification information (PII). While this cases arises in the context of point of sale data collection by off-line brick and mortar retailer, the implications for this are significant for offline and online companies engaged in any collection of data from their customers and end users.

Case Summary

This case arises from the common practice by retailers of collecting customers’ zip codes at the time of purchases. Mass. General Laws Section 105(a) prohibits any business from recording or demanding that a credit card holder write “personal identification information, not required by the credit card issuer, on the credit card transaction form.” The PII contemplated in the section includes address and telephone number as they are explicitly listed but it also states that those are not the only PII it refers to. Any violation of Section 105(a) is considered to be “an unfair and deceptive trade practice” which means it is also in violation of Massachusetts General Laws, chapter 93A, section 2. 93A allows a plaintiff to claim treble damages and attorney’s fees, which can significantly up the ante in the event of potential violation.

The Tyler case was filed after the similar Pineda decision from California (see below) and was based on a complainant’s argument that she provided her ZIP Code to defendant Michael’s over the course of a year believing she had to in order to make her purchases. The plaintiff also alleged that Michael’s employees recorded her ZIP code information in an electronic transaction form and that Michaels was then able to get her address and phone number from commercial databases using her name and ZIP Code to send her unwanted, unsolicited marketing materials. The plaintiffs asserted that this was tantamount to writing PII on a credit card transaction form. Ergo, according to Massachusetts law, the practice should be considered a deceptive or unfair trade practice. Michaels moved to dismiss.

The district court agreed that ZIP codes are PII and that Section 105(a) may apply to the Michaels electronic credit card transaction forms. However, the district court dismissed because it found that, absent identity theft, there was no cognizable injury stated by the plaintiffs under chapter 93A of the General Laws. Thus, the district posed the following three questions to the SJC to answer under Massachusetts law:

(1) Do ZIP Codes constitute personal identification information (PII); (2) Absent identity fraud, can a violation of the Massachusetts General Laws, chapter 93, section 105(a) give rise to an action concerning PII; and (3) Third, does the phrase “credit card transaction form” covers both electronic and paper transaction forms equally. These three questions originated within a class action lawsuit citing violation of Section 105(a) on the part of Michaels who had allegedly asked for and stored customers’ credit cards’ ZIP codes.

The Court first clarified that “based on the text, title and caption, and legislative history of § 105,” the purpose of the statute was not in fact to protect against identity theft; rather, this section’s purpose is to protect consumer privacy with regard to credit card transactions. Because ZIP codes could allow other PII about consumers to be discovered using public databases (PII like addresses and phone numbers) the court reasoned that ZIP codes must also be PII. The court further observed that Section 105(a) is not specifically limited to identity theft and thus refused to limit it in this way. Finally, the statute explicitly states that it applies to “all credit card transactions”, so the court found that electronic credit card transaction forms would be included within its purview.

Impact of Tyler

It is possible that, as with the older Pineda case, the Tyler case might lead to additional class action lawsuits. In any event, given the Massachusetts SJC’s strong stand on consumer rights in Tyler, businesspeople and retailers (local or national) doing business in the Commonwealth of Massachusetts should re-evaluate their own practices to make certain they are in compliance with Section 105(a). This practice should also be taking place in the other states that have similar laws on the books.

It is possible, within the confines of Tyler, that collecting this kind of information for internal use only, and not for marketing or to sell or make a profit on the information, might not give rise to enough of an actual “harm” to support a cause of action. Any plaintiff still must prove an actual injury to some extent. Still, the decision makes collecting information beyond what is required by credit card issuers risky.

* (For a related case see the California Supreme Court decision Pineda v. Williams-Sonoma Stores which also holds that ZIP codes are personal identification information according to California’s Song-Beverly Credit Card Act, Civil Code section 1747.08. In excess of 15 states, Massachusetts and California among them, have laws that regulate the type of customer personal identification information that retailers may legally collect and store.)

If you have any questions about this topic, please feel free to email us.