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This post was written by Judith L. Harris, James M. Duchesne, and Joseph I. Rosenbaum.

It's Election Night 2010 in Maryland, where a high-profile gubernatorial race is coming to a close. The telephone rings once again, but this time, the message is not "go out and vote before the polls close." Instead, a recorded message tells the voter, "Relax. Everything is fine. The only thing left is to watch [election results] on TV tonight." The automated call with a recorded message (a "robocall") ends with no indication as to who made it or where it came from. This was what actually happened to more than 112,000 African-American voters in Maryland on November 2, 2010. While these "robocalls" may have violated Maryland election laws (criminal charges were recently issued), they may also have violated the TCPA - theTelephone Consumer Protection Act of 1991 (47 U.S.C. 227).

The TCPA amended the Communications Act of 1934 and is the primary law regulating telemarketing in the United States. Subsection (d) of the TCPA, entitled "Technical and procedural standards," requires the Federal Communications Commission to create minimum technical and procedural standards for making calls using an artificial or prerecorded voice system (a "robocall") and makes it a violation of the law if an individual ignores those standards. As part of those minimum standards, one must, at the beginning of the robocall, clearly disclose the identity of whoever initiated the call and at some point during the call, disclose the telephone number or address of that business, individual or entity.

The TCPA allows each state attorney general to enforce the law in federal court, and Maryland brought an action against the company that initiated the offending calls, as well as one of its owners, and one of its employees, claiming they violated the TCPA's disclosure requirements in an effort to confuse voters and suppress voter turnout (Maryland v. Universal Elections). In response, Universal filed a motion to dismiss the suit, and just a few weeks ago (May 25, 2011), in its opinion dismissing that motion and allowing the suit to proceed, the U.S. District Court for the District of Maryland made some noteworthy observations regarding TCPA liability:

Purpose Doesn't Matter. The defendants claimed that making "political robocalls" exempted them from the requirements of the TCPA. Nope. While the FCC may have exempted political robocalls from the requirement of obtaining prior consent, neither Congress nor the FCC exempted political robocalls from the minimum disclosure standards of the TCPA - the plain language of the rule states: "all artificial or prerecorded telephone messages." Any robocall, for any purpose - commercial, political, or charitable - must contain a disclosure regarding who initiated the call and where that entity or individual can be contacted.

Individuals Can Be Liable. The plain language of the statute, cited in the court's opinion, states: "It shall be unlawful for any person . . ." to violate the robocall disclosure requirement. Whether an owner of the company or an employee acting on behalf of the company, the court noted several instances in which individuals acting on behalf of corporations could be held personally liable for violating the TCPA (e.g., if they, "had direct, personal participation in or personally authorized the conduct found to have violated the statute"). The owner and employee here could be found liable not because they worked for Universal Elections, but because they were directly involved in initiating the calls that may have violated the TCPA. In other words, if an individual causes a corporation to act in a way that violates the TCPA, that individual can be found liable for the corporate action. Corporate, political campaign and nonprofit decision makers should be aware of this personal liability when they plan their calling campaigns.

One Who Initiates the Call, Not Just Makes It, Can Be Liable. In its motion, Universal argued that because it did not physically make the robocalls, it was not subject to the procedural disclosure standards of the TCPA. It hired a third party to place the robocalls and only recorded the message and uploaded it, and the 112,000 telephone numbers to be called, into the vendor's system. Guess what the court said? "As the persons and entity responsible for recording the message, the defendants," and not the conduit that distributed the message, "were in a position to ensure that the content of the message complied with the TCPA."

If you are making pre-recorded calls, compliance is cheaper than the risk of damages. Maryland is seeking not just to enjoin the defendants from ever violating the TCPA again, but is also seeking monetary damages of $500 per TCPA violation (i.e., each call); and since the state alleges the violations were made willfully and knowingly, it claims the defendants were trying to deceive voters by failing to disclose who made the call, and is also asking the court to triple the damages and require the defendants pay the state's attorneys' fees.

A special thank you to James M. Duchesne, a legal intern at Reed Smith and one of the primary authors of this post. His contribution is greatly appreciated. If you need legal advice and representation on issues related to telemarketing, look no farther than Judith L. Harris and her team, working with our Advertising Technology & Media law practice group. Experienced. Knowledgeable. Seamless. Responsive. Cost Effective. We are happy to help.

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Wow! I thought I was cool playing "Going Mobile" by The Who (from their album – remember albums? - Who's Next, released in the United States August 14, 1971) to introduce my presentation about the legal implications of mobile advertising and mobile marketing (see Advertising on the Go - Mobile Marketing or Mobile Mayhem).

But I tip my hat to you Legal Bytes readers. You are on the ball. After blogging about the presentation, a friend and avid Legal Bytes reader reminded me of an article I wrote in 2005, published in the New York Law Journal Magazine, entitled "Transformed", in which I stated: "No longer tied to desks or offices located in centers of commerce and society, we carry our electronic tool boxes with us wherever we go. We have pagers, cell phones and wireless PDAs with names like Treo™ and the BlackBerry® . . . whose addictive qualities . . . (make us refer to them) as 'crack' berries! We carry them with us into restaurants, Broadway shows, buses and even bathrooms."

Wow, déjà vu all over again (with respect to Yogi Berra). Can you make it through the day without your BlackBerry or your Smartphone (we didn't call them that in 2005)? What's the first device you look at in the morning? What about before going to bed? Now I can even access Legal Bytes with a scan using my mobile. Wow!!

I am reminded of one of my favorite quotes from George Santayana, Spanish American philosopher (perhaps most remembered for his remark, "Those who cannot remember the past are condemned to repeat it"). My personal favorite quote of his is, "We must welcome the future, remembering that soon it will be the past; and we must respect the past, remembering that once it was all that was humanly possible." (The Philosophy of George Santayana, Northwestern University Press, 1940, p. 560). Oh, and if you actually like The Who, you can listen to Going Mobile:

Indeed. Déjà vu all over again!

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February 9, 2011—one day before the Association of National Advertisers held its TV & Everything Video Forum—Joseph I. (“Joe”) Rosenbaum had the privilege of presenting a pre-conference legal educational seminar at the New York offices of Reed Smith. Joe’s presentation, in PDF format, is available for your personal viewing right here: “Mobile Advertising, or I Know Where You Will Be Next Summer & Other Mobile Marketing Myths”.

You won’t be able to see the embedded videos – if you want to see those or any other presentations Joe and the Advertising Technology & Media practice has presented over the years, or if you want to arrange a customized presentation on any or all things ATM-related, contact Joe at jrosenbaum@reedsmith.com.

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Following up on the April 30th Legal Bytes posting Product Placement in the UK, our Reed Smith sister publication, ReACTS, has posted a note entitled Product Placement Ofcom Consultation regarding today’s opening, by Ofcom, of two consultations regarding changes to the Ofcom Broadcasting Code (one for television and one for radio) to allow for product placement in UK television programming.

Should you wish more information or need assistance in providing comments in response to the consultations – which close September 17, 2010 – just follow the link to the article above, and help is an email or phone contact away. Of course, any Reed Smith attorney with whom you work or I stand ready to assist or make the necessary introductions at any time. 

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This post was written by  Judith L. Harris and Amy Mushahwar.

The Federal Communications Commission ("FCC") has just voted to open a formal proceeding regarding how best to respond to the D.C. Circuit's decision in Comcast v. FCC (see our previous blog post, FCC Caught by (not in) the Web). In the Comcast case, the court reversed an FCC decision finding that Comcast had violated the Commission's non-discrimination principles by interfering with traffic from broadband subscribers using an online peer-to-peer file-sharing technology from BitTorrent. The appellate court ruled the Commission, under the FCC's previous (Republican) Chairman Kevin Martin, had improperly stretched its ancillary jurisdiction pursuant to Title I of the Communications Act to enforce one of its net neutrality principles against an Internet services provider. Earlier, the Commission had classified Internet access as an information service, only subject to light-touch Title I regulation, rather than as a telecommunications service, subject to more extensive Title II regulation, traditionally applied to common carriers.

At stake, in the minds of many, is nothing less than the future of the Internet: whether it is to be free and open and, assuming so, who is best positioned to determine what that means. In the eyes of some, especially the large Internet service providers such as Comcast, Verizon Wireless and AT&T, a free and open Internet equates to a complete government hands-off approach. Investment and innovation has flourished under the prior deregulatory steps, they argue. Others, especially edge players, including content and application providers such as Google, Amazon.com and Apple, focus on increasing Internet facilities consolidation and vertical integration in the industry. They see the need for a "cop on the beat" and explicit (e.g., net neutrality) rules to insure that those who control the "pipes" don't interfere with consumer choice and play favorites when it comes to content.

In the two months that have ensued since the Comcast decision, handed down only two weeks after the FCC's release of the Congressionally mandated National Broadband Plan, the debate has raged as to whether, and if so, how, the FCC should proceed to exercise oversight over the activities of Internet service providers. Not surprisingly, the question of increasing significance is where the FCC might turn for the power it needs to implement many of the recommendations contained in the National Broadband Plan. Everyone, it seems, has weighed in, from all branches of government (the White House, Congress and all the Commissioners at the FCC), to all of the private stakeholders, trade associations, coalitions that have come into existence to lobby the issue, media, academics, and Wall Street analysts (witnessing the recent volatility of ISP stocks).

Yesterday's action by the FCC finally gets the ball really rolling. While Congress has threatened legislation (in both directions) and a court challenge is inevitable no matter where the Commission ends up, the FCC's 3-2 decision opening this new proceeding is a necessary first step in breaking the current logjam.

The Notice of this new action is worded in neutral terms and presents three alternative solutions to the Commission's current dilemma. The Notice also seeks other ideas from the public. However, FCC Chairman Julius Genachowski has made no secret of the course he prefers. In the aftermath of the Comcast ruling, he outlined what he dubbed a "third way," (the third option, obviously not accidentally, in yesterday's Notice). His approach, he believes, represents a middle road between continuing to limp along regulating ISPs under Title I, despite the limited power that would afford the FCC to implement some aspects of the National Broadband Plan, and simply reclassifying broadband as a telecommunications service under Title II, with the potential that would introduce for heavy-handed regulation – such things as oversight of rates and the imposition of interconnection and unbundling obligations. This "third way" envisioned by Chairman Genowchowski, WOULD involve Title II reclassification, but would also include explicit forbearance from use of those powers most feared by telcos and cable companies.

One thing is clear: it's going to be a long, hot summer in Washington. The Chairman is determined to keep the proceeding moving (perhaps in part to encourage industry and public/private working groups that have already sprouted to come up with a negotiated solution). Comments from the public are due July 15, 2010, less than 30 days from now, with reply comments due August 12, 2010. An Order by the Commission is expected before year-end (and the start of a new Congress), with a decision possible as early as October. The effect of the outcome of the midterm elections and, before then, the tremendous amounts of money the upcoming election will infuse into the system from all of the stakeholders, create wildcards. The stakes are high; the decisions are likely to affect the shape of the Internet for a very long time.

Whether you want more information or need help filing comments with the FCC, look no further than our own Judith L. Harris and Amy Mushahwar in our D.C. office – authorities in the area. Of course, you can always call me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work.
 

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This post was written by Paul Bond.

Companies routinely issue communications devices to employees for on-the-job use. Employees routinely use such devices to conduct personal business, wasting company resources and sometimes violating company codes of conduct. Under what circumstances may a company monitor messages to and from an employer-issued device? That question is currently before the U.S. Supreme Court in the case City of Ontario v. Quon.

The CSO Breakfast Club, an organization of Chief Information Security Officers from around the country, recently interviewed Reed Smith attorney Paul Bond about the potential ramifications of the case. 

The City issued Sergeant Quon a pager for work use and he signed an agreement acknowledging he had no expectation of privacy in his communications. When Sergeant Quon kept going over his character quota, a supervisor told him the supervisor would not audit communications, provided Sergeant Quon paid for the overages. A departmental audit revealed that Sergeant Quon was regularly sending highly inappropriate texts to his wife, girlfriend, and a fellow officer. All of them sued the City for violations of their constitutional rights to privacy. The Supreme Court briefing and a transcript of the spirited oral argument are available at SCOTUS Wiki, (neither Legal Bytes nor Reed Smith can vouch for the accuracy of the material or analysis on this external link).

Employers are watching this case closely to see if the nation's highest court will provide any guidance on the ground-rules for monitoring employee use (and abuse) of company-issued communications devices; but whether you want to stay in tune with developments or you need help in this area, contact Paul Bond. Of course, you can always call me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work.

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This post was written by Christopher Hackford, Marina Palomba, and Huw Morris.

The Audiovisual Media Services (Product Placement) Regulations came into effect in the UK 16 April 2010. Under the Regulations, product placement will now be permitted in television programmes made in the UK, although those featuring product placement will not be permitted until Ofcom has amended the Broadcasting Code, which may not be until sometime in autumn 2010.

“Product placement” is defined in the UK Regulations as the inclusion in a programme of, or the reference to, a product, service or trademark, where the inclusion is for a commercial purpose, has been paid for (by way of cash or other valuable consideration), and does not amount to prop placement (i.e., inclusion of a product that has no significant value and that was not included because of a payment or valuable consideration).

There are four types of programmes in which product placement is permitted: (i) films made for cinema; (ii) films or series made for television or on-demand services; (iii) sports programmes; and (iv) light entertainment programmes. No children’s programmes may carry product placements—programmes primarily aimed at viewers under 16. News programmes fall outside these permitted types, and UK-made religious, consumer affairs or current affairs programmes are not permitted to include product placement. There is also some catch-all wording to prevent programmes for which product placement is “unsuitable”—an undefined term. As for the BBC, it is still bound by its Royal Agreement and is prohibited from making or commissioning programmes that carry product placement, but programmes acquired from third parties and those made by BBC Worldwide will be subject to the new rules.

The new Regulations prohibit product placements of cigarettes, tobacco products or prescription-only medicines, as well as alcoholic drinks, if the programme is aimed at an under-18 demographic or encourages immoderate drinking. Not content, the UK government has expanded the list where the programmes are UK-produced or commissioned-television, or on-demand programmes (excluding films made for cinema), to also include smokeless cigarettes and smoking accessories; medicines (i.e., over-the-counter as well as prescription); any alcoholic drinks; infant and follow-on formula; food or drink high in fat, salt or sugar (HFSS); and gambling services. These were prohibited by the UK government to protect the health and welfare of viewers, especially children, but the result of this is that a vast swathe of potential advertisers who may have considered paying to place their products in programmes are now unable to do so.

The Regulations also fail to deal with the difference between product placement and brand placement. Can McDonalds, for instance, pay to have its name referred to (e.g., “Let’s all go to McDonald’s”) or would this be regarded as a promotion of an HFSS product.

There are also significant conditions that apply under the regulations. For example, the product placement must not influence content or scheduling to affect editorial independence; there must be no direct encouragement to purchase or rent the products; the programme must not give undue influence to the products; no subliminal advertising techniques can be used; and the way the product is included in the programme is not socially irresponsible and does not harm children. The point about “socially irresponsible” means it cannot “prejudice human dignity,” promote discrimination, encourage behaviour prejudicial to health, safety or protection of the environment, cause physical or moral detriment to children under 18, exploit children’s trust in parents, or show children in a dangerous situations.

As you may appreciate if you're watching the advertising marketplace in the UK, there is no indication that advertisers will increase marketing budgets to take advantage of new rules, rather than changing their priorities within existing budgets. In addition, parties cannot enter into contracts stating how, how often, when or whether the product is even placed into a programme, because this is contrary to the requirements for editorial independence. The consequence may well be that advertisers may be reluctant to part with their funds if they have absolutely no control or influence over the way their product is portrayed or used in a programme, or indeed, whether it ends up being used at all.

If you want to keep updated on product placement developments in the UK, or if you need help in understanding how the new UK product-placement regulations may affect you, contact Christopher Hackford directly or, of course, you can always call me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work.

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This post was written by Judith L. Harris.

Last week, the U.S. Court of Appeals for the D.C. Circuit handed down a unanimous decision in the case of Comcast v. the FCC, holding, in effect, that the Federal Communications Commission ("FCC") could not use its ancillary jurisdiction under Title I of the Communications Act to exercise broad oversight over the activities of Internet service providers ("ISPs"). The case involved a 2008 decision under prior FCC Chairman Kevin Martin, seeking to enforce 2005 "net neutrality" principles by banning Comcast's blocking or slowing of traffic from broadband subscribers using BitTorrent, an online peer-to-peer file-sharing technology. You can download and/or read the entire case here Comcast v. FCC.

 At first blush, the ruling appears to be a total victory for Comcast but,as no one knows better than Comcast itself, nothing in the Nation’s capital is ever that cut and dried. Thus, Comcast was wise to respond in a conciliatory fashion: "We are gratified by the court's decision today to vacate the previous FCC order. Comcast remains committed to the FCC's existing open internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant internet." . 

Afterall, Comcast is awaiting the FCC's judgment on Comcast's $30 billion merger with NBC Universal. The Commission (along with the Department of Justice) has the power to sideline the deal altogether or to impose conditions that, depending on their severity, could place significant constraints on the business plan of the wanna-be merger partners. Stated another way: Comcast knows that its time for customer golf. Moreover, and possibly even more significant, the only options now available to a highly motivated FCC appear to be far more draconian to the ISP community than the relatively innocuous exercise of power that Comcast successfully challenged in court. The old adage "be careful what you wish for" comes to mind.

Not that any of this leaves the FCC smiling. From their perspective, the court's ruling could cast a long shadow over the FCC's ability to proceed with its pending rulemaking designed to codify even bolder net neutrality policies across all broadband platforms, including wireless. Moreover, the issue of the reach of the FCC's jurisdiction over Internet services could constrain the FCC's ability to deliver on President Obama's promise of universal broadband access at high speeds and reasonable prices, and the FCC's marquee project: implementation of the National Broadband Plan. That plan was released to Congress by the Agency just a few weeks ago (March 16), amid much fanfare and after a year's worth of intensive effort involving no less than 36 public workshops, nine field hearings, and 31 public notices that produced 75,000 pages of public comment!  

But, soldiers march forward. Only two days after the court's decision, the FCC announced its "Broadband Action Agenda," explaining the purpose and timing of more than 60 rulemakings and other proceedings recommended for action by the FCC in the plan, and quoting FCC Chairman Julius Genachowski defiantly proclaiming: "We are putting the National Broadband Plan into action," immediately adding, "The court decision earlier this week does not change our broadband policy goals, or the ultimate authority of the FCC to act to achieve those goals." Well, maybe not.

The ISPs will undoubtedly act with all deliberate speed to nail down the Comcast victory by vigorously lobbying Capitol Hill to oppose any effort by the FCC (and potentially other providers such as Google and Amazon.com, and tech companies such as Apple), to entreat Congress to mandate network neutrality or to enact legislation giving the FCC clear authority to regulate broadband. From the ISP perspective, even worse could be an effort by the FCC to unilaterally reclassify broadband transmission as a Title II telecommunications service, empowering the FCC (at least until the next court challenge) to regulate with impunity. This latter action, often referred to around town as the "nuclear option," would only require an affirmative vote by three of the five Commissioners, a low hurdle given the unrestrained, unambivalent public reactions of all three of the Democratic Commissioners (including the Chairman) in the immediate aftermath of the court's pronouncement.

This week (on April 14), Chairman Genachowski is scheduled to be the only witness at a hearing before the Senate Commerce Committee. That hearing was originally planned to focus exclusively on the National Broadband Plan. But now, in addition to examining the FCC's substantive proposals, the hearing will likely focus on its power, in light of the Comcast decision, to move forward with its implementation plans. With lobbyists swarming the halls of power, expect fireworks. Hopefully, all-out war won't be the only avenue considered. The public and private stakeholders would do well to take a deep breath and earnestly consider an immediate, good-faith attempt at serious industry self-regulation, with agreed-upon standards of conduct and meaningful enforcement mechanisms.

Time's a-wasting. As the FCC moves to implement the administration's broadband agenda, over at the Federal Trade Commission, net neutrality and open Internet advocates are undoubtedly pondering how best they can use their own powers to protect consumers from potentially abusive trade practices by vertically integrated ISPs with enormous market power in a world where the FCC might, in the end, have limited enforcement tools. Who knows, the FTC and the Antitrust Division might decide that its time to burnish tried and true antitrust laws as a way of curtailing any anti-competitive conduct. Comcast, to be sure, is ahead at half time but, as  they well know, there is still much more of the game to be played.

Whether you want to stay in touch and in tune with developments, you wonder how "net neutrality" and these skirmishes might affect your business; or if you need legal advice and representation, you need look no farther than our very own Judith L. Harris – she's the authority, and she graciously contributed this timely and insightful post. Of course, you can always call me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work.

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On February 18, 2010, the International Law Office (ILO) published an article authored by Gregor Pryor and Sachin Premnath in the London office of Reed Smith, and Joe Rosenbaum in New York. It discusses the benefits and pitfalls of social media, and raises issues and concerns applicable to global companies—not just those on either side of the pond!

The article was derived from one published in Legal Week, and you can download your own PDF copy of “Commercial risks and rewards of the social media phenomenon” right here.

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In November, Legal Bytes reported (Regulators Poised to Give Financial Institutions a Slap in the Facebook) that Richard Ketchum, Chief Executive of the Financial Industry Regulatory Authority (FINRA), acknowledged Wall Street is eager to use social media to interact with customers. In the course of his remarks at a recent meeting of the Securities Industry and Financial Markets Association (SIFMA), he noted, "We continue to witness the advent of technologies that will challenge your ability to ensure compliance with regulatory requirements,” and “Social networking is one such innovation." 

Now, supplementing existing FINRA Rules, FINRA has released a notice concerning online media rules (you can download and read a copy of the notice below) whose key components include requirements that securities firms:

• Must develop policies and require its employees to comply with the new regulatory requirements
• Must retain records of communications (a compliance requirement of the Securities Exchange Act of 1934) when social media is used to communicate
• Must ensure that recommendations made through social media are suitable to all investors to whom the recommendation is made (e.g., by limiting or filtering access based on investor/consumer qualifications)

FINRA’s notice takes the position that securities firms must adapt existing rules to social media and essentially mirror the 2003 FINRA definition of “public appearance.” This definition noted that chat room postings were no different than if a firm representative was in a room making statements to a room filled with investors. FINRA’s current notice indicates that information posted or content placed online (static information) is subject to these same rules and must be approved by a firm principal – presumably, even information about individuals in the firm that may be part of an individual’s profile on the firm’s website or in social media platforms. But online interactions that are occurring on the fly (e.g., in real time), while subject to supervisory requirements (e.g., they must be supervised, perhaps even monitored), do not require such approvals.

You can read or download the FINRA Regulatory Notice 10-06 (Social Media Web Sites) [PDF] here.

As mentioned in the Legal Bytes November post, SEC disclosure rules apply to Tweets, blog postings, wall postings and other communication platforms provided by social media sites, and other regulatory agencies are seeking to address the use of social media sites by the entities they regulate (e.g., the FCC, the New York State Insurance Department). So if any of this is of interest and if you need to know more or need help, please contact me, Joseph I. Rosenbaum, or the Reed Smith attorney with whom you regularly work. We are happy to help.

Update:  Reed Smith lawyers Christopher P. Bennet, Amy J. Greer, Jacob Thride and Kevin Xu have prepared a Client Alert on the subject which you can read by going to: FINRA Issues Notice for Financial Firms Using Social Media.

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Join top legal professionals and government regulators March 17-18, 2010 in Washington, D.C., at the 2010 Annual ANA Advertising Law & Public Policy Conference, where you will hear from Jon Leibowitz, Chairman of the FTC and Doug Gansler, Maryland attorney general, as well as leading legal experts both from law firms and client-side marketers.

Connect with key industry leaders and policymakers as we discuss the most volatile and fast-moving legal and political environment for advertising and marketing in decades. Learn about the new regulations, legislation and major court cases that are fundamentally changing the business environment, and how you can keep up!

For the full agenda and to register, go to http://www.ana.net/adlaw2010.

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As it does every year at this time, Advertising Age has again published its Book of Tens. For as long as I can recall, that has included an amazingly prescient set of legal prediction ‘Tens’ from my partner, Douglas J. Wood, and this year is no different.

Go. Look. Read. Recall last year’s. Save this one for December 2010. It’s amazing how good his track record is . . . but then, if you know him, that shouldn’t surprise you. But some of his predictions this year, just might: Book of Tens: Legal Predictions for 2010.

You can contact Douglas J. Wood directly to tell him how ‘on target’ he is, or you can contact me, Joseph I. Rosenbaum, or any of the Reed Smith attorneys with whom you regularly work if you need more information or help in areas related to advertising, media, technology and entertainment. We are here to help.

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Today, the U.S. House of Representatives is scheduled to vote (and likely pass) H.R. 4173. H.R. 4173, entitled the Wall Street Reform and Consumer Protection Act of 2009, but commonly referred to as the CFPA (Consumer Financial Protection Act), has been blogged about on Legal Bytes before (see Congressional Hammer Poised to Strike at Financial Advertising). The provisions to which advertisers might wish to pay particular attention are those that would amend the Federal Trade Commission Act.

Rather than summarizing industry concerns over this legislation, I’ve posted a copy of the Industry Letter, signed and sent to members of Congress on behalf of at least these twenty two (22) U.S. associations and coalitions: American Advertising Federation, American Association of Advertising Agencies, American Escrow Association, American Financial Services Association, American Herbal Products Association, Association of National Advertisers, Consumer Data Industry Association, Consumer Electronics Association, Direct Marketing Association, Direct Selling Association, Electronic Retailing Association, Financial Services Institute, Inc., Financial Services Roundtable, Interactive Advertising Bureau, International Franchise Association, Internet Commerce Coalition, National Association of Manufacturers, National Association of Professional Background Screeners, National Business Coalition on E-Commerce and Privacy, National Retail Federation, Natural Products Association, U.S. Chamber of Commerce.

If you need more information, or if you believe you should have a voice in this process and don’t already have one, Reed Smith is here to help. You can contact me (Joseph I. Rosenbaum) or, of course, any Reed Smith attorney with whom you regularly work.

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This post was written by John P. Feldman. 

Yesterday, Dec. 1, 2009, the revised "Guides Concerning the Use of Endorsements and Testimonials in Advertising" released by the Federal Trade Commission came into effect. If you are a loyal Legal Bytes' reader, you know we have been following this as early as November 2008, when we posted Endorsements & Testimonials - FTC Broom Proposes Some Sweeping Changes. Numerous updates and informational pieces have graced these pages since then (now when we say "pages," we mean web pages), and you can refer back to any or all of them, or you can check out any you may have missed right here: FTC Testimonial and Endorsement Guides Stimulate Industry Comment (March 2009); a presentation given at the University of Limerick on the subject entitled "Trust Me, I'm a Satisfied Customer: Testimonials & Endorsements in the United States," which you can download (If You Didn't Make It to Ireland ...); Ghostwriters: Medical Research or Paid Endorsers (and are they mutually exclusive?) and Rights of Publicity - Wake Up and Smell the Coffee! (both in August 2009); and FTC Releases Updated Endorsement & Testimonial Guidelines and Reed Smith Analysis of the New FTC Endorsement and Testimonial Guidelines (both in October 2009).

Yesterday, John P. Feldman, an authority in these types of advertising regulations and compliance and who is based in Washington, D.C., put together some thoughts concerning the implications of these Guides upon coming into effect, continuing his thoughtful and practical analysis. While we will maintain bringing you news and information about the Guides, John's analysis is timely and helpful, and outlines some considerations every advertiser – online, in social media and off-line – and every blogger, viral marketer, celebrity endorser or consumer making a testimonial, should take into account. John's analysis, which you can download and read in its entirety by selecting the link below, asks and answers the following questions about these Guides:

• What does this mean for advertisers?
• What is the most dramatic shift in enforcement policy?
• What will this mean for advertisers that use celebrity endorsers?
• How much control should sponsoring advertisers exercise over endorsers in new mediachannels?
• What impact will the FTC's new approach to clinical trials have on the OTC, cosmetic, and pharmaceutical industry?
• Is there a role for self-regulation and what do you make of the proposed "best practices" recently announced by the Word of Mouth Marketing Association (WOMMA)?

You can download your own copy of John's analysis or you can read it online right here: "FTC Endorsement Guides (Revised) - Some Thoughts As They Become Effective". You won't be disappointed. In addition, if you want to know more about these issues or have questions about your particular circumstances, please do contact John P. Feldman directly, or you can call Joseph I. Rosenbaum or Douglas. J. Wood or, of course, any Reed Smith attorney with whom you regularly work.

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This post was written by Anthony S. Traymore and Joseph I. Rosenbaum.

A few weeks ago, Legal Bytes reported that, buried in the new financial services "reform" legislation, is the establishment of a brand new regulatory agency – the Consumer Financial Protection Agency (see Congressional Hammer Poised to Strike at Financial Advertising). Guess what. Not to be outdone, the regulators are in the act – pardon the pun – already. Witness recent statements by Richard Ketchum, Chief Executive of the Financial Industry Regulatory Authority (FINRA). In recent statements, Ketchum acknowledged that Wall Street is eager to use social media like Facebook, Twitter and Linked In to interact with customers and, that to a large extent, the growth of the use of these sites is inevitable. But at a recent Securities Industry and Financial Markets Association (SIFMA) meeting, he noted, "We continue to witness the advent of technologies that will challenge your ability to ensure compliance with regulatory requirements," and "Social networking is one such innovation."

At that same meeting, Ketchum raised the issue that retention functionality available on social media services may not be sufficient to ensure a financial service firm's compliance with applicable regulations, including the FINRA Rules. If you aren’t a broker-dealer, don't read the next sentence. But if you are: Imagine how social media services used by brokers to communicate with clients could impact FINRA Rules concerning Communications and Disclosures (see, Section 2200). FINRA has now set up a taskforce comprised of industry professionals to explore how firms may utilize social media to better communicate with their customers without "compromising investor protection."   

Such studies and evolutionary (or revolutionary) regulation are increasingly common these days. As our loyal readers already know, Legal Bytes reported previously (FTC Releases Updated Endorsement & Testimonial Guidelines and Reed Smith Analysis of the New FTC Endorsement and Testimonial Guidelines), that the FTC’s revised Guides Concerning the Use of Endorsements and Testimonials in Advertising will become effective Dec. 1, 2009. These revised guidelines represent updates to the prior guides, and acknowledge the proliferation of false claims, phony testimonials, and spurious endorsements (or negative comments) by consumers, experts, organizations and celebrities, through the use of blogs and other "word of mouth" marketing tools. As described in a recent Wall Street Journal article, the SEC disclosure rules apply to Tweets, blog postings, wall postings and other communication platforms provided by social media sites. Other regulatory agencies are similarly seeking to address the use of social media sites by the entities they regulate (e.g., the FCC, the New York State Insurance Department).

Do you have a social media policy?  The complexities are enormous. Internal (during work) and external (non-working hours). Employees, agents, contractors and suppliers. Domain names, URLs and trademarks (which include service marks, for you purists in the audience). Approved content or ad hoc comments. Official presence or not – condoned or not. Today, activities outside the scope of employment are often considered not attributable back to the company absent special circumstances or relationships. Will social media break down those barriers further? If so, what can companies do to reach their customers while continuing to protect their most valuable assets – their employees and their brands? Does a company have the right to regulate conduct outside the workplace, even if it involves reference to the company? Oh, and by the way, you do know that social media, enabled by the borderless web, doesn’t really pay attention to national boundaries, AND that means it's not just U.S. law you may need to worry about – even if you are a U.S. company. If you are an international, multinational or global company . . . good luck. No, not good luck. Call us. Our Advertising Technology & Media Law group has unparalleled breadth and depth in understanding, working with, and advising clients in this brave new world. 

So if any of this is of passing interest, stay tuned. If it is or becomes a pressing need, please contact Joseph I. Rosenbaum or Anthony S. Traymore, and let us help you avoid being anti-social. Of course, if you are already a Reed Smith client, feel free to contact the Reed Smith attorney with whom you regularly work, and he or she will be happy to coordinate your legal needs with us.

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The U.S. Congress appears determined to investigate online advertising. Early this month, the House Energy and Commerce Committee issued a letter to more than 30 companies, and what began as an inquiry into how Internet service providers use network data to target advertising, has morphed into a fishing expedition into all kinds of interactive advertising. Most notably, and despite urging by the FTC to allow self-regulation to take hold, the Committee does not differentiate between personally identifiable information and non-identifying, anonymous data used for traffic metrics, ad insertion and other common advertising purposes. Lumping different kinds of information together could needlessly undermine marketing as it has been practiced for decades. The “tailoring” of advertising, in the Committee’s words, based on consumers’ behavior and media consumption patterns, has been at the heart of marketing for as long as marketing has been around.

More disturbing are presumptions that “privacy” rights are being violated by any and all forms of behavioral or targeted marketing. Advocacy groups opposed to commercial communication seek to promote an implicit, yet fundamental redefinition of personal privacy—i.e., anything that derives from peoples’ activities, no matter how distanced or anonymous. Taken to logical conclusion, any academic, commercial or journalistic observation of consumer activity could fall under regulatory restrictions under such a framework. Not surprisingly, the FTC—with its long history of regulation of advertising practices—has argued before Congress that self-regulation is likely to be an effective means of protecting consumers’ real privacy interests. According to testimony by FTC Consumer Protection Bureau Director Lydia Parnes before the Senate Committee on Commerce, Science, and Transportation this July, the FTC is “cautiously optimistic that the privacy concerns raised by behavioral advertising can be addressed by industry self-regulation.” Nevertheless, in the letter released this month and in three previous inquiries over the past few months, both the House and the Senate seem to be searching for a rationale to regulate. Stay tuned.

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This article was contributed by Adam Snukal, Esq.

Surfed the web lately? Seen a banner promoting a product, service or trip to Ireland you priced yesterday? Serendipity? Luck? Cookies? Yes, it’s those tiny files placed on your computer when you visit a website. Advertisers can now parse through cookies on your computer when you visit certain websites and instantaneously serve up advertisements based on your historical online behavior—“behavioral marketing.” For some, this is a great convenience. For others, like New York State Assemblyman Richard Brodsky, this is invasive and should be stopped unless the consumer has given consent.

Assemblyman Brodsky sees the acquisition of Doubleclick by Google as a step backward for consumers since the combined company could tap into a reservoir of consumer behavior and search data on an individual basis. So he introduced a bill aimed at restricting Internet behavioral marketing—The Third Party Internet Advertising Consumers’ Bill of Rights Act of 2008—that would prohibit advertisers from collecting and using sensitive, personally identifiable information from users online; require websites to clearly and conspicuously disclose behavioral policies and practices; give consumers the right to opt-out of profiling practices; prevent their online behavior from being collected and used to deliver targeted advertisements; and police how advertisers are permitted to merge and synthesize such information with other data (e.g., merging personally identifiable information collected offline with information collected online). Opponents—some of the largest interactive advertising and media companies—have voiced their opposition in a letter to Assemblyman Brodsky, noting, “Time after time, state laws that have attempted to impose this sort of broad Internet regulation have been struck down by the courts, doing nothing more than making taxpayers bear the expense both of defending the lawsuit and paying the successful plaintiffs’ attorneys fees.”

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Most of us know the law tends to lag behind the marketplace. It is in the nature of most legal systems to try and balance statutory and regulatory authority—which makes rules based on experience or potential issues that will apply to future conduct—with judicial and regulatory decisions—cases that are adjudicated, create precedent and help shape the contours and boundaries of what is or is not permissible behavior within the statutory authorities.

In such a framework, we are often asked to counsel clients as to what is or is not acceptable when there may be little law, few regulations and sometimes no precedent. What to do? Well, as you may imagine, there is no simple answer. But there are some guideposts. A key guidepost is to consider common sense, best practices and some lessons learned from analogous legal precedent.

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