FTC Sued Prevagen Over Representation Of Placebo Results

FTC sued Prevagen

The FTC sued Prevagen’s marketers. Charge: Unsubstantiated marketing. Is the FTC’s claim meritless? Prevagen says yes. So, they’re fighting back.

The case serves as a reminder for dietary supplement marketers: Make sure your promotional materials are in line with FTC compliance standards!

Federal Trade Commission (FTC) to Quincy Bioscience (Prevagen Marketers): Your Brain Supplement Marketing Is Misleading!

Who is suing who? The Federal Trade Commission, alongside the New York Attorney General’s office, is suing Quincy Bioscience (“Quincy”) — marketers of Prevagen.

Why is the FTC suing Prevagen’s Marketers? The FTC regularly penalizes companies for promoting questionable findings. But this case is a bit different. The commission objects to how Quincy presented information, not the veracity of the study from which the information came. Specifically, the FTC condemned Quincy’s failure to disclose near identical results for both placebo and active participants.

How does Prevagen feel about the lawsuit? Often, companies caught in an FTC web lick wounds, cut losses (and a check), and call it a day. But Quincy is swinging back. The supplement marketer feels the FTC has overstepped its bounds and is forcing unfair scientific interpretations down the throats of small businesses.

The Curious Case of the Jellyfish Protein

A jellyfish protein — and active ingredient in Prevagen — researches have used apoaequorin since the 1960s in calcium studies. But newer — arguably fringe — research suggests the substance may enhance memory function.

But, like many touted supplements — (omega-3’s come to mind) — the medical community’s jury is still hanging outside the courtroom. To wit, the American Pharmacists Association summarizes its stance thusly: “Human data on apoaequorin are limited to small, company-sponsored trials that do not meet expected scientific standards.”

Marketing and Science: An Uneasy Partnership

The intersection of science and marketing is riddled with potholes. On one hand, dangerous products shouldn’t land on shelves, which requires a certain amount of oversight. However, mixing scientific studies with promotional materials can be a messy legal recipe. Why? Because science is not a monolith; a singular idea. Scientists don’t always agree. Which raises the question: Should judges be determining the proper way to present scientific findings?

This suit is unique because the FTC and AG aren’t questioning a study’s veracity, which is the norm in “unsubstantiated claim” cases. Instead, commissioners contend that Quincy failed to present the results adequately; (specifically, the near similar results for placebo and dosed participants). To put it another way, the FTC doesn’t think Quincy is providing “reliable evidence of a treatment effect.”

The FTC’s Rule About Scientific Support

You may be wondering: “Why can the FTC sue over some scientific studies but not others?” And that’s the question Quincy wants people to ask. But is it the right question?

Quincy insists the lawsuit is subjectively rooted, and therefore meritless. In a statement the company argued:

“Quincy has amassed a large body of evidence that Prevagen improves memory and supports healthy brain function. This evidence includes preclinical rat studies, canine studies, human clinical studies, and, most importantly, randomized, double-blind, placebo-controlled human clinical testing. This type of testing has long been acknowledged by both the FTC and the FDA to be the ‘gold standard’ for scientific evidence.

“The FTC does not allege that Quincy’s principal clinical study fails to meet the FTC’s and FDA’s own definition of ‘gold standard,’ nor does the FTC allege that the study was poorly designed or inappropriately conducted, or that it failed to rely on scientifically-validated measures.

“The sole dispute rests on the interpretation and analysis of the data, with the regulators attempting to hold the company to a standard that is unreasonable, scientifically debatable, and legally invalid. Their experts simply disagree with ours over how to interpret the study results. The FTC should not be the arbiter in matters of scientific debate. We are proud of the work we have done to support Prevagen’s effects and believe our large body of evidence clearly satisfies the longstanding standard to support such claims.”

This squabble over semantics may prove to be the crux of the case. Quincy could win by convincingly framing the FTC’s argument as scientific interpretation, as opposed to objective oversight. But is an interpretational variance truly the problem?

Scientific method convention stands: If a control group’s results aren’t statistically different than “activated” participants’, then it’s back to the lab to form a new hypothesis. The FTC will undoubtedly argue something to this effect. But, hey, you never know; a sympathetic judge could see it Quincy’s way.

Lame-Duck FTC Means Ruling Should Be Vacated?

Quincy’s also upset that only two commissioners voted on the action. In a statement, the company characterized the suit as “another example of government overreach and regulators extinguishing innovation by imposing arbitrary new rules on small businesses like ours.” Quincy also accused the agency of being “short-staffed and lame-duck.”

FTC Sued Prevagen And They’re Not Backing Down

The FTC and AG are standing firm in their decision. Jessica Rich, an agency director, chastised, “The marketers of Prevagen preyed on the fears of older consumers experiencing age-related memory loss. But one critical thing these marketers forgot is that their claims need to be backed up by real scientific evidence.”

Warning Letter Dates Back To 2012

Was the suit a shock to Quincy? Maybe not. According to reports, the Commission sent the company a warning letter in 2012. Which just goes to show: Don’t assume you’re in the clear if nothing ever came of that FTC caution from years ago.

The FTC Keeps A Close Eye On Dietary Supplement Marketers

The FTC’s Prevagen censure comes as little surprise. Not only are the ads ubiquitous (in certain regions), but they appeal to senior citizens. The AG remonstrated, “It’s particularly unacceptable that this company has targeted vulnerable citizens like seniors in its advertising for a product that costs more than a week’s groceries, but provides none of the health benefits that it claims.”

Yes, The FTC Wins Dietary Supplement Lawsuits – A Lot

This post isn’t a case-merit analysis. It’s still early stages; both sides have reasonable arguments; the devil will be in the litigatory details.

However, as attorneys who work with dietary supplement marketers and keep abreast of industry happenings, we wanted to point out a small curiosity in Quincy’s statement. It reads:

“The FTC has already brought three similar cases against three other companies in which the Commission tried to impose its own rigid interpretation of a company’s scientific evidence to prohibit truthful, non-misleading claims. In each case, the FTC lost.”

How did you interpret that statement? Did you walk away thinking the FTC lost every deceptive marketing case involving a nootropic? Not the case. For example, in 2015, the Commission went head-to-head with the folks behind Procera AVH, a product promising to “restore memory loss and improve brain function.” Originally, the court slapped a $150 million judgment on the supplement distributors, but the FTC agreed to a final payout of $1.4 million to satisfy the censure.

We point this out not to question Quincy, but to warn dietary supplement marketers: The FTC does prevail…often. Don’t be complacent when it comes to advertising compliance.

Connect With An FTC Attorney

Being investigated by the FTC? Have questions about advertising and marketing compliance? We’re here to help.

Homeopathic Marketing Guidelines: FTC Issues New Rules

old fashion medicine bottles picture to accompany a post about homeopathic marketingThe FTC has zero time for homeopathic hyperbole. Called the “Enforcement Policy Statement on Marketing Claims for Over-the-Counter (OTC) Homeopathic Drugs,” the FTC’s latest guidelines address the dos-and-don’ts of homeopathic marketing materials.

After analyzing concerns, the nation’s consumer watchdog averred:

[T]he FTC will hold efficacy and safety claims for OTC homeopathic drugs to the same standard as other products making similar claims. That is, companies must have competent and reliable scientific evidence for health-related claims, including claims that a product can treat specific conditions. The statement describes the type of scientific evidence that the Commission requires of companies making such claims for their products.

Homeopathy Marketing Guidelines: Long History, Little Science

Homeopathy sits at the crossroad between belief and science. A healing methodology dating back to the 18th century, the practice involves micro-doses of symptom-inducing ingredients. Over the past two decades, new age devotees have revived the methodology.

Yet, fringe popularity doesn’t guarantee efficacy; as far as the medical community is concerned, homeopathy falls under the anti-scientific umbrella.

The 18th-century factoid is pivotal in the FTC’s stance on homeopathic marketing.  According to the guidelines, commissioners understand that “claims may include additional explanatory information to prevent the claims from being misleading.” In other words, so long as the packaging conveys that “[this claim is] based only on theories of homeopathy from the 1700s that are not accepted by most modern medical experts,” then it’s fine. (Sorry. Slapping a Dr. Quinn doppelganger on your label probably won’t cut legal muster.)

Don’t Skirt Homeopathic Marketing Guidelines with Tricky, Verbose Language

The FTC’s announcement also condemns undercutting “a disclosure with additional positive statements or consumer endorsements reinforcing a product’s efficacy.”

“The bottom line, when it comes to FTC marketing compliance,” explained marketing and advertising lawyer Dan Warner, “is to avoid deception; and definitely don’t make unsubstantiated claims.” When asked about the new OTC homeopathic marketing guidelines, Warner explained, “To be fair, the FTC’s latest announcement isn’t necessarily a brand new stance, but a reminder that questionable science shouldn’t be used in promotional materials. Do so, and you risk a big fine.”

Get Help From A Dietary Supplement Marketing Lawyer

If, after reading the FTC’s new homeopathic marketing guidelines, you still have questions, get in touch with Kelly / Warner Law. We regularly perform advertising audits to help clients avoid FTC fines.

More FTC compliance standards this way.

Social Media Marketing Maven: Chrissy Teigen

picture of social media icons on phone to accompany post about Chrissy Teigen's social media marketing prowessWhen she’s not lip sync battling, Chrissy Teigen apparently ponders social media marketing mysteries! Recently, the brand influencer Twitter-shared some musings about FTC advertising compliance.

We learned:

  • Chrissy Teigen is serious about her online marketing work and keeps up-to-date with FTC regulations. We say, “Good on her!” Every influencer should familiarize themselves with Federal Trade Commission compliance standards.
  • Chrissy collaborates with brands to draft promotional tweets.
  • Teigen, (like many marketers), doesn’t quite understand why some tea and smoothie social media influencers seem allergic to #ad or #spon promotional hashtags, which are, technically, required.

The FTC’s social media marketing rules

  • Promotional Hashtags: Influencers, marketers, and brands are expected to use #ad, #spon, #sponsor, or #paid in promotional tweets, ‘grams, and other social media posts.
  • Disclose Material Relationships: Read the Dot Com Disclosures to determine the necessary promotional declarations for your product. Don’t want to wade through an FTC regulatory document? Click here for the most important points.
  • Be Mindful of Promotional Language: Don’t lie about product benefits; don’t fib about ingredients; don’t rely on questionable scientific studies to support claims. The FTC has — and will continue to — sue over these types of infractions.

Twitter, Facebook, and Instagram promotions are ubiquitous, but online marketing regulations are still nascent. Please don’t misunderstand the assertion. Regulations DO exist; brands risk sizable fines for shirking guidelines. And even though the FTC has earned a reputation for, shall we say, mutable justice… consistency has, over the past year, quietly snuck its way into the investigation equation.

Want to evade the FTC’s prying eyes?  Clean up your marketing compliance house.

Click here to read about other digital promotional legalities. Head this way to speak with someone who can help solve your social media marketing challenges.

Native Advertising Rules Are Now In Effect (And The FTC Is On The Hunt)!

native advertising law

Don’t Let The FTC Decimate Your Profits

A quick reminder.

Native advertising rules are now in effect!

At the end of 2015, the Federal Trade Commission published native advertising (promotional content designed to mimic editorial content) guidelines.

Before the release, websites profited from native advertising blocks that fell under headlines like “Promoted Content” — basically, headers that disguised links as internal links. Or, to put it another way, click bait.

However, despite the regulation’s release, Adweek recently reported that about 70% of websites using native advertising are flouting FTC guidelines.

So, what happens if officials catch you snubbing online marketing rules and regulations? Well, they can sue you, fine you and make you pay.

Native Advertising Startup Opportunity Alert!

Another interesting tidbit to pop out of Adweek’s piece? Experts estimate that portions of the native advertising niche will generate as much as $53.4 billion by 2020.

Put Me In Touch With An Online Marketing Lawyer, Pronto!

Unaware of the new native advertising guidelines? Click here for a summary. For those in a rush, the gist is this: Make sure native advertising is distinguishable as advertising.

Are you sure you’re 100% FTC compliant? If not, get in touch. We may be able to help you avoid an FTC investigation — and subsequent fines.

Article Sources

Swant, M. (2016, April 8). Publishers Are Largely Not Following the FTC’s Native Ad Guidelines. Retrieved May 31, 2016, from http://www.adweek.com/news/technology/publishers-are-largely-not-following-ftcs-native-ad-guidelines-170705

Dietary Supplement Law: FTC Targets 120 Marketers and Manufacturers

dietary supplement law
The FTC led a massive crackdown against supplement marketers using questionable promotional tactics. Are you positive you’re marketing on the right side of the law?

Dietary Supplement Law: Summary of The FTC’s Marketing Crackdown

The Federal Trade Commission (FTC), in conjunction with several government offices and agencies, executed a year-long dietary supplement law crackdown. The targets? Manufacturers and marketers suspected of flouting guidelines. Regulators investigated about 120 parties, resulting in 89 lawsuits, in 18 states.

Or, to put it bluntly: The FTC sanctioned marketers caught peddling sketchy weight loss and “miracle” drugs.

A spokesperson explained:

“This joint agency effort is a testament to our commitment to protecting consumers from potentially unsafe dietary supplements and products falsely marketed as dietary supplements. The criminal charges […] should serve as notice to the industry that if products are a threat to public health, the FDA will exercise its full authority under the law to bring justice.”

The crackdown serves as a warning to dietary supplement manufacturers and marketers.

Do you want to be on the FTC’s radar? Didn’t think so. So, if you’re involved in the promotion of weight loss or health supplements, now is the time to invest in a marketing compliance review. Either read up on the latest rules and regulations or you own, or, enlist a marketing attorney to conduct a thorough analysis.

If you’re involved in the promotion of weight loss or health supplements, now is the time to invest in a marketing review.

Dietary Supplement Law: Details About The FTC’s Marketing Crackdown

What federal, state, and quasi-governmental agencies participated in the dietary supplement law crackdown?

  • The Federal Trade Commission
  • The Food and Drug Administration
  • The Internal Revenue Service
  • Various criminal investigation units
  • The Department of Defense
  • The United States Postal Inspection Service
  • United States Anti-Doping Agency

What charges were brought against the dietary supplement manufacturers and marketers?

  • Improper Labeling: Some of the products supposedly contained ingredients that weren’t listed on the packaging.
  • Improper Benefit Claims: Several of the marketing materials allegedly included unsubstantiated and scientifically unsupported claims. Some of the cases involved the use of promotional language that promised to help cure cancer, arthritis, herpes, opiate addiction, and Alzheimer’s. Government officials also targeted marketers for publishing outrageous weight loss claims like *shed five pounds in four days with one pill, or up to 20 pounds in 16 days with four pills.*
  • Improper Financial Practices: Some of the targeted parties were brought up on “obstruction of an FDA proceeding” and “conspiracy to commit money laundering” charges.
  • Improper Disclosures: Several of the indicted parties allegedly knew about studies that linked their products to liver toxicity, but failed to include disclaimers.
  • Improper Manufacturing: A few of the businesses and marketers caught in the sting supposedly used false certificates of analysis and questionable labeling; plus, a few parties allegedly lied about ingredients, claiming the products used natural plant extracts…but “natural” turned out to be a synthetic invention, courtesy of a Chinese factory.
  • Improper Testing: Several of the pursued businesses allegedly sold and marketed dietary supplements without first determining the safety of their products.
  • Recidivism: At least one of the targeted parties was allegedly given fair warning to stop sales on one of their products. But according to reports, instead of complying, the company executives purportedly engaged in a “surreptitious, all-hands-on-deck effort to sell as much” of the product “as quickly as possible.”
Government officials also targeted marketers for using weight loss claims like *shed five pounds in four days with one pill, or up to 20 pounds in 16 days with four pills.*

What Consequences Did the “Busted” Parties Face?

  • Asset Seizures: Not only did some of the affected parties lose dozens of investment accounts, but they also lost real estate, luxury goods, and sports cars.
  • Bans and Promises: Presumably, the guilty parties will – if they haven’t already –be made to sign promissory agreements pledging to rebuke “unfair and deceptive marketing” in the future.

Additional Resources

If you’re in the business of manufacturing or marketing dietary supplements, check out the resources below.

Speak To A Dietary Supplement Marketing Attorney

Kelly Warner is an Internet law firm that regularly works with entrepreneurs in the supplement marketing space. We’ve helped businesses and FBA sellers escape tight jams. Our attorneys frequently conduct compliance reviews for marketers and e-commerce retailers.

When you’re ready, get in touch. We look forward to working with you soon.

ATTN BUSINESS OWNERS: THE FTC NOW FINES FOR BEING HACKED!

FTC can fine for being hacked
Yep. The FTC can fine for being hacked. Not the hackers, but the businesses that are breached.

Is your online security house in order? If not, stop what you’re doing and contact a digital security guru, pronto – especially if you collect and store customers’ personal and financial information. Why? A U.S. court recently ruled that the Federal Trade Commission can pursue companies that fail to sufficiently protect consumer data.

In other words: If someone hacks into your business, YOU could be held responsible and fined into submission. Yes, the FTC can now fine for being hacked!

Wyndham Hotel Hack

The Appeals Court ruling was a result of Wyndham Hotels and Resorts’ data breach from a few years back. The high-profile hack exposed approximately 619,000 records and allegedly resulted in $10.6 million in “fraudulent charges.”

FTC’s Argument In Hacking Case: Company Did Not Do Enough To Protect Consumer Data

When pursuing the case, FTC staffers identified four points of protest. According to available reports, Wyndham allegedly:

  • Wasn’t using an appropriate firewall at the time of the breach;
  • Didn’t encrypt customers’ credit card information;
  • “Failed to address known vulnerabilities”;
  • Maintained a poorly managed network – so much so that staffers weren’t aware which computers were connected to it.

The FTC Can Now Fine For Being Hacked

Though the FTC has been granted new leeway in regards to punishing companies that are hacked, the agency is still murky on what constitutes the “reasonable steps” a company should follow to prevent a security breach.

It’s wise to work with an attorney who handles online privacy and security issues. The mere act of working with a firm looks good in the eyes of the law.

“But, Wait! It’s Not The Company’s Fault!” The FTC Doesn’t Care

In its defense, Wyndham argued that the company “does not treat its customers in an ‘unfair’ manner when the business itself is victimized by criminals.” But the court disagreed, reasoning:

“A company does not act equitably when it publishes a privacy policy to attract customers who are concerned about data privacy, fails to make good on that promise by investing inadequate resources in cybersecurity, exposes its unsuspecting customers to substantial financial injury, and retains the profits of their business.”

The court determined that lack of a privacy policy doesn’t preclude lax security. FTC chairperson, Edith Ramirez further explained:

“It is not only appropriate, but critical, that the FTC has the ability to take action on behalf of consumers when companies fail to take reasonable steps to secure sensitive consumer information.”

Get An Online Privacy Lawyer, Who Deals With Hacking Incidents, On Speed Dial

Some business owners may be peeved about the FTC’s new authority regarding hacks. Understandably. But as they say: there’s no use crying over spilled milk the long arm of the Federal Trade Commission. Instead, it’s best to get your digital security house in order and have a hacking lawyer on speed dial, in the event of a breach.

Contact Kelly Warner’s Internet Law Aficionados

Lawyers Daniel Warner, Aaron Kelly and Raees Mohamed are partners at Kelly Warner Law. A firm that focuses on 21st-century legal issues, Kelly Warner has grown to become one of the preeminent Internet law practices in the country, helping clients with issues related to online privacy and hacking.

To learn more about the firm, please click here. To read more about Kelly Warner’s lawyers, head here. If you’re interested in further reading regarding FTC legalities, please peruse the Federal Trade Commission section of our blog.

If you’re ready to speak with an attorney well versed in online privacy and hacking law, please get in touch. We look forward to sorting any legal challenges you may be facing.

And remember, the FTC can now fine for being hacked, so make sure you have an online privacy lawyer on speed dial.

Article Sources

Bloomberg, J. (2015, August 25). Company Breached By Hackers? You’re Being Deceptive, According to FTC And The Court. Retrieved October 19, 2015, from http://www.forbes.com/sites/jasonbloomberg/2015/08/25/company-breached-by-hackers-youre-being-deceptive-according-to-ftc-and-the-court/

FTC Favors Companies With Data Breach Contingency Plans

data breach contingency plan
Having a data breach contingency plan may mitigate penalties in the event of an incident.

A couple of months ago, Mark Eichorn posted a quietly significant post on the Federal Trade Commission’s blog. In it, Eichorn gives an overview of how the FTC approaches breach and data security investigations.

In the post, Eichorn advises:

“We’ll also consider the steps the company took to help affected consumers, and whether it cooperated with criminal and other law enforcement agencies in their efforts to apprehend the people responsible for the intrusion. In our eyes, a company that has reported a breach to the appropriate law enforcers and cooperated with them has taken an important step to reduce the harm from the breach. Therefore, in the course of conducting an investigation, it’s likely we’d view that company more favorably than a company that hasn’t cooperated.”

In other words, when deciding on punitive measures in data security cases, the Federal Trade Commission is often more lenient with businesses that report breaches to the proper authorities promptly. Or, conversely, if you try to hide a data breach from authorities, and the FTC discovers your deception, the commissioners may – and are legally allowed to – dole out a larger fine.

Three Data Privacy Best Practices For SMBs

  • Have a “privacy officer” on speed dial. Privacy officers are usually attorneys; they’re the people businesses can call in the wake of a data breach to determine their legal responsibilities based on the nature of the data attack or hack. Your privacy officer, depending on the information you provide, will let you know what you need to do to satisfy local, state, federal and international data breach regulations. On occasion, contingent on the circumstances, you may not have to report the incident.
  • Don’t ignore security issues. Digital hacking is a serious reality. Laboring under the assumption that “it will never happen to you” or “only the big guys get hit” is erroneous. Implement certain data security measures at your office. Also, establish data security rules amongst your employees – the most fundamental being that they’re forbidden from accessing files remotely without authorization and instruction.
  • Have data security, maintenance and breach procedures in place. Moreover, companies should make a habit of corporate-wide password changes on regular intervals. Additionally, like a fire drill, businesses should establish a data breach drill. Not only will it be helpful in the event of an attack, but being able to prove to officials that you did take precautions may mitigate eventual punishments handed down by the FTC or other government agencies.
data breach law
Kelly Warner Law can create a comprehensive data breach contingency plan for your business.

Consult A Data Breach Lawyer

Lawyers at Internet law firm Kelly Warner act as the privacy officers for several startups and businesses. We’d be happy to help you establish a data security and / or data breach program or procedure that satisfies all state, federal and international regulations. If you’re not yet ready for a consultation, you may want to read through these blog posts [will be linked to online privacy blog]. They will give a better idea of the types of online privacy and data security laws that businesses must follow. When you’re ready to move forward with an online privacy and data security plan, contact Kelly Warner’s online privacy lawyers.

4 Defenses That DIDN’T Work In An FTC Marketing Lawsuit

FTC marketing law
Common FTC marketing lawsuit defenses may not work if it’s your second or third time at the rodeo.

If you’re an online marketer, who pushes the legal envelope, it’s wise to read up on people who’ve been caught – because that loophole you think is protecting you, may not be as much of a shield as you believe. We’re not saying that the four defenses described below will never work, but if you’re caught more than once, don’t expect to slip the legal noose.

Kyle Kimoto is a recidivist FTC violator. A perpetual purveyor of negative option and free-to-pay marketing schemes, he’s currently in prison for wire fraud violations. Kimoto recently tried to escape another FTC censure, but failed.

Below, we’ll explain his appeals’ arguments and the reasons they didn’t work.

First, A Bit About Negative-Option Kingpin, Kyle Kimoto

Got Caught By The FTC, Then Opened A Business Under His Wife’s Name

A notoriously aggressive marketer, in 2008 Kimoto was going through his 3rd FTC investigation. At the time, due to previous FTC “busts,” he was legally prohibited from engaging in certain marketing tactics. At that time, he moved to Las Vegas, registered a new company in his wife’s name, and then hired his old network of coders, designers, marketers, writers and programmers.

“Stopped” Involvement In “Wife’s Company”

That same year, Kimoto went on criminal trial and insisted he ceased activities in his “wife’s” new Las Vegas-based marketing business. In 2009, after he had been convicted on wire fraud charges, the FTC caught up with Kimoto’s new – still sketchy — operation and swiftly brought suit against it and its principals. Everyone involved, except Kimoto, accepted a summary judgement; he appealed.

Failed Defense Arguments For Recidivist Online Marketer

Online Marketer’s Defense #1: It Wasn’t Me!

Marketer: I Had Nothing To Do With The Company During The Time Period The FTC Said I Did

Kimoto argued that he completely severed ties with his wife’s company when he started to prepare for his wire fraud trial, and therefore should not be held liable for any misdeeds carried out by the company from that point.

Judges: No Way; You Knew What Was Going On And Even Had Testimonials Before There Were Customers.

The judges didn’t agree. They reasoned that Kimoto’s involvement in establishing the company was enough to link him to the entity. The panel also pointed out that he helped “structure the deceptive offers” and was aware of the contents of the company’s marketing materials, thereby making him liable — even though he may not have been “hands on” during the period in question. The bench specifically pointed out Kimoto’s egregious use of testimonials before the “products” had even launched.

Online Marketer’s Defense #2: Advice of Counsel

Marketer: Before I launched the scheme I ran it by a lawyer who said it was legal. It’s not my fault.

Kimoto also tried to use the “advice of counsel” defense, which is, essentially: “my lawyer said what I was doing was legal; so, it’s not my fault.”

Judges: Nope. The Defense Can’t Be Used When It’s A Question of Individual Knowledge of Liability

Judges shot down the “advice of counsel” defense because it doesn’t apply in cases where the issue at hand is individual knowledge as it relates to liability.

Online Marketer’s Defense #3: Jeff Skilling Defense

Marketer: All The Complaints Started Pouring In After I Had Recused Myself From The Company

In an argument very similar to his first, Kimoto tried to convince the panel of judges that he couldn’t have been involved in any scamming because the chargeback complaints came flooding in after his criminal trial commenced. In other words, “I had no idea I had done anything wrong, I was gone went to hell.” (Call it “the Jeff Skilling Enron” defense).

Judges: “Sorry, Mr. Frequent FTC Violator, No Go.”

Considering Kimoto’s track record with online marketing schemes, the judges scoffed, pointed to his past infractions and gaveled that one down.

Online Markete’s Defense #4: EFTA Doesn’t Apply To Little ‘Ole Me

Marketer: The federal law, on which I am being charged with violating, only applies to companies and entities, not individuals

Kimoto reasoned that the Electronic Fund Transfer Act (EFTA), one of the statutes used to charge him, didn’t cover individual liability.

Judges: EFTA = FTC Act = Personal Liability

The court knocked that one down, too, reasoning that his EFTA violations were also FTC Act violations, which does allow for individual liability.

There’s a certain valiance to fearless folks who refuse to go down without a fight, so a tip of the hat for gumption is deserved; nevertheless, his Hail Mary legal passes fell flat at the 50-yard-line.

In the end, it was FTC 4, Kimoto 0.

Marketing Online? Talk To A Lawyer.

It’s tempting to cross the marketing legal line because let’s face it, “There’s gold in them thar hills!” But know that if you try to skirt FTC marketing regulations, they will come after you. Commissioners can, if in generous moods, go soft on first-time offenders – especially if they have proper counsel. But if the commission catches you creating another illegal honey pot after being censured? The FTC gloves come off.

Moreover, just because these defenses didn’t work for Kimoto, it doesn’t mean they won’t work for you. Talk to an FTC Marketing lawyer about the specifics of your situation to learn your options.

Remember: Kimoto is in JAIL right now.

Are you in trouble with the Federal Trade Commission? If you need a lawyer that has helped hundreds of online marketers with their FTC investigation situations, get in touch with Kelly / Warner Law. We’re one of the first firms to have a team dedicated to online marketing legal issues, and we’ve seen it all.

Call or emails us today to start untangling your FTC legal knot, or to simply review your scheme to make sure you’re in safe, legal territory.

FTC Fines Snapchat For Being Loosey-Goosey With Data

snapchat FTC fine

Snapchat entered into a consent decree with the Federal Trade Commission for supposedly misleading users about data collection and inter-device privacy. Avoid the same outcome by making sure your apps and websites are outfitted with proper legal disclosures.

Why Did The FTC Go After Snapchat? (Answer: Playing Fast and Loose With Customer Data)

iOS7 Bug

Snapchat users can take screenshots of a “snap,” but the original user is supposed to get a notification when it happens. But the Federal Trade Commission reported that recipients with Apple devices running iOS 7 can exploit the app to avoid screenshot detection.

Encryption Issue

The FTC also reported that Snapchat stores videos on recipients’ devices without encryption, meaning the videos can be accessed even after “disappearing” on the Snapchat application.

Successful Hacker Breach

On top of all that, in January, hackers snagged a whole lot of valuable Snapchat user data. Making matters more complicated for the app company, security experts had warned Snapchat that the application was exploitable, but the company, allegedly, did little to fix the issue.

Android Issue

iOS users weren’t the only affected people. Android Snapchaters’ locations were also transmitted to the Snapchat servers, even though the company claimed it didn’t collect any information from users.

Snapchat Got The Same “Sweetheart” Punishment As Facebook Did For Beacon

Like Facebook before them, part of Snapchat’s FTC agreement requires the company to implement a 20-year privacy monitoring program, which will be overseen by an external privacy expert.
The FTC warned Snapchat that violation of the agreement will result in a civil penalty of up to $16,000 for each offense. Snapchat has since made some upgrades, reporting: “we continue to invest heavily in security and countermeasures to prevent abuse.”

FTC Unfair and Deceptive Marketing Lawyer

Entangled in an FTC investigation? Get in touch with Kelly / Warner Law. Click here to learn more about our online marketing legal practice.

Text Message Marketing Laws: FTC Fines Text Spammers

text message marketing laws Text message marketing laws exist. In fact, officials are always looking to bust spam schemes. Below, we’ll review one such promotional compliance case.

The Federal Trade Commission sued a large mobile spam ring for, essentially, breaking text message marketing laws. Apparently, the defendants unlawfully gathered information and sold it to third-party marketers.

Specifically, the case cited the Federal Trade Commission Act and the Telemarketing Consumer Fraud and Abuse Prevention Act violations. Subsequently, plaintiffs sought preliminary and permanent injunctive relief.

Officials also asked for equitable restitution on behalf of the victims.

Text Message Marketing Laws: The FTC Investigates, Then Sues

Back in 2011, FTC staffers uncovered evidence that consumers were being duped into revealing identifiable information in exchange for “free merchandise.”

The defendants allegedly used questionable mobile marketing techniques like:

  1. Unsolicited text messages, sent directly by the defendants and through intermediary third-parties; plus
  2. Phony prize notices.

Sample text messages listed in the complaint

  • “You WON! Go to www.prizeconfirm.com to claim your $1000 Walmart Gift Card Now!”
  • “FREE MSG: you have been chosen to test & keep the new iPad for free only today!! Go to website and enter 2244 and your zip code to claim it now!”

Second Tier Websites Collected More Information Than Users OK’d

Under the scheme, the defendants funneled participants to websites that required consumers to reveal identifiable information.

However, before claiming prizes, individuals with “winning codes” had to input their zip codes and emails. Then, after entering personal details, consumers were directed to yet another web page requiring even more personal information.

Ultimately, participants had to complete thirteen offers before claiming the “free” merchandise. And according to the FTC, the defendants shared or sold said information with robocalling marketers.

Questions About Text Message Marketing Laws?

Have legal questions about text message marketing laws or other online marketing issues? Contact Kelly Warner Law.

Jerk.com Legal Matters: Personal Review Website Under FTC Investigation

jerk.com law Jerk.com, RipOffReport, Yelp, and other niche review sites are now Internet staples. And while review websites can sometimes present a problem for businesses, they can also serve as great advertising tools. Sure, a surly customer could sully your reputation for a stint, but more often than not, happy customers share glowing testimonials, which helps boost business.

A New Type Of Online Review Site (It’s Now Getting Personal)

When social media started to flourish, a new type of “review site” became popular. People grew bored with rating products and services, and moved on to rating each other. In fact, if you believe Aaron Sorkin’s creation myth, a crude “Hot or Not” site birthed Zuckerburg’s now ubiquitous online hangout, Facebook.

The Rise Of Personal Review Websites

Jerk.com is one of the more popular “personal review websites” around. It features user-generated content and ranking functionalities. Some believe the platform also features questionable “automated content.” Jerk.com’s rules about who can post a profile are, shall we say, not strict. As such, it’s easy for users to create unflattering pages about their least favorite people.

In their nascent days, Jerk.com loved free speech so much that, according to Gene Quinn, the company allegedly refused to remove material about a 10-year-old target.

But like Internet laws, Jerk.com has evolved. Most notably, the social media site says they now adhere to DMCA takedown procedures. Moreover, “Remove” is the second item on their website menu – which, if clicked, takes you to a pay for removal portal.

Jerk.com Lawsuits & Detractors

As you’d imagine, since its inception, Jerk.com has had its fair share of detractors. But what recently caught officials’ attention were allegations that Jerk, LLC wasn’t following COPPA regulations. COPPA – The Children’s Online Privacy Protection Act – is a strict law that vouchsafes personally identifiable information of minors aged 13 and under. COPPA violation fees are steep and the FTC is always on the hunt for violators.

During the FTC investigation material surfaced that raised the question: Did Jerk.com’s profile generation methods also skirt the law?

This April, the FTC denied Jerk, LLC’s motion to quash a civil investigative demand. As a result, the FTC will continue to investigate the website’s content generation methods.

Contact An Online Defamation Lawyer

Are you dealing with an online defamation issue? A COPPA issue? If yes, get in touch. Kelly Warner is a full service defamation and Internet law legal practice. We’ve helped many others and can do the same for you.