Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

Aaron P. Rubin

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Lawrence Gallick

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

Anthony M. Ramirez

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Socially Aware is devoted to the law and business of social media, proactively addressing emerging issues and keeping our clients informed of new developments. We cover fields such as artificial intelligence, privacy and data security, Section 230, intellectual property, and much more.

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Vloggers have become the reality stars of our times. For an increasing number of social media users, what was once a hobby is now a lucrative career. You may be surprised to learn that Felix Kjellberg (aka “PewDiePie”), a 25-year-old Swedish comedian and the world’s most popular YouTube star, is reported to have earned $8.5 million in 2014.The UK has its own vlogger superstars in the form of Zoella and Alfie Deyes. Together, this power couple of social media has amassed 12 million YouTube subscribers, 6.8 million Instagram followers and almost 6 million Twitter followers. Zoe Suggs (aka “Zoella”), 25, started vlogging in 2009 and has since become a brand in fashion and beauty marketing, publishing a novel and creating a line of products. Alfie, 21, started his Pointless vlog when he was 15 and has since published a series of books. It was even announced earlier this year that tourists will soon be able to see waxworks of Zoella and Alfie at London’s Madame Tussauds. But Zoella and Alfie are not alone; there is now a whole generation of vloggers rivalling film and sports stars in the popularity ranks. Indeed, we now even have a host of social media talent agencies formed to help propel vloggers to superstardom.Vloggers are particularly popular with young people who enjoy the more intimate connection they can have with these approachable idols. Therefore, brands who want to target a young demographic are increasingly keen to work with vloggers. This collaboration typically involves brands paying vloggers to feature in “advertorial vlogs,” i.e., videos created in the usual style of the vlogger, but with the content controlled by the brand.Now, of course, there is nothing inherently wrong with there being a commercial relationship between a brand and a vlogger from a legal perspective. However, particularly where you have the influence of celebrity, plus an impressionable audience, vloggers and brands need to be very careful that they don’t fall foul of consumer protection rules that are in place to protect consumers from unfair advertising practices. In August 2015, the UK advertising regulator issued new guidance to help vloggers and brands be responsible and stay on the right side of the law. In this blog post, we will identify the key issues raised by the guidance. We will also provide an overview of some of the other key legal issues that brands need to be aware of when using social media for marketing and advertising in the UK.<h4>Vlogs</h4><a href="http://www.legislation.gov.uk/ukdsi/2008/9780110811574/contents" target="_blank" rel="noopener">The Consumer Protection from Unfair Trading Regulations 2008</a> (“CPRs”) prohibit certain unfair commercial practices. These include using editorial content in the media to promote a product where a trader has paid for the promotion without making that clear (advertorial).The<a href="https://www.asa.org.uk/codes-and-rulings/advertising-codes/non-broadcast-code.html" target="_blank" rel="noopener"> Committee of Advertising Practice Code</a> (the “CAP Code”) acts as the rule book for non-broadcast advertisements in the UK and requires that advertising must be legal, decent, honest and truthful. The CAP Code was extended to cover social media in 2011. The Cap Code is enforced by the <a href="https://www.asa.org.uk/Rulings/Adjudications/2015/5/Procter-and-Gamble-(Health-and-Beauty-Care)-Ltd/SHP_ADJ_288449.aspx" target="_blank" rel="noopener">Advertising Standards Authority</a> (“ASA”), the UK regulator responsible for advertising content in the UK. The ASA has the power to remove or have amended any ads that breach the CAP Code.Rule 2.1 of the CAP Code states that marketing communications must be obviously identifiable as such. Rule 2.4 states that marketers and publishers must make clear that advertorials are marketing communications, e.g., by labelling them “advertisement feature.” These rules apply to marketing communications on vlogs in the same way as they would to marketing communications that appear on blogs or other online sites. But as the CAP Executive noted last year, a number of marketers have “fallen foul of the ASA by blurring the line, intentionally or not, between independent editorial content written about a product and advertising copy.”In November 2014, the ASA’s ruling against Mondelez provided a clear example of a brand failing to comply with the CAP Code. Mondelez had engaged five celebrity vloggers to promote its Oreo cookies by participating in a race to lick cream off a cookie as quickly as possible. The channels featuring the vlogs typically contained non-promotional content, and the vlogs failed to clearly indicate the commercial relationship between Mondelez and the vloggers. The reference to “Thanks to Oreo for making this video possible” might indicate that Oreo had been involved in the process, but it did not make clear that the advertiser had paid for and had editorial control over the videos. As a result, the advertorials were banned.In another high-profile case, in May 2015, a YouTube video providing makeup tutorials featuring the popular vlogger Ruth Crilly, who has 300,000 subscribers on YouTube, was banned by the ASA for failing to clearly identify itself as marketing material. The video appeared on the “Beauty Recommended” YouTube channel, which is operated by Procter & Gamble, with the intention of marketing its Max Factor range of products. The ASA stated that the channel page provided “no indication” that it was a Max Factor marketing tool, and emphasized that “it wasn’t clear until a viewer had selected and opened the video that text, embedded in the video, referred to Procter & Gamble….We consider that viewers should have been aware of the commercial nature of the content prior to engagement.”<h4>Guidance</h4>In August 2015, the CAP Code Executive published guidance to help vloggers and brands better understand their obligations under the advertising rules. While the guidance is not binding, it’s a helpful statement of the rules as they apply to vlogs.Advertorial. Where a brand collaborates with a vlogger on a video that is produced by the brand and published on the brand’s website or social media page, this is very likely to be a marketing communication—but it wouldn’t be an advertorial. However, where a vlog is made in the usual style of the vlogger, but the content of the vlog is controlled by the brand and the vlogger has been paid (not necessarily with money) for the vlog, this would be an advertorial. Because the extent of the brand involvement may not be obvious to the viewer, this needs to be made explicit upfront so that viewers are aware that the video is an ad before engaging. Labels such as “ad,” “ad feature,” “advertorial,” or similar are likely to be acceptable, whereas labels such as “sponsored by,” “supported by” and “thanks to X for making this possible” should be avoided, as these would not make it sufficiently clear that the brand had control over the content of the vlog. Viewers should be aware that they are selecting an ad to view before they watch it so that they can make an informed choice. Finding out that something is an ad after having selected it, at the end of a video or halfway through, is not sufficient.Commercial breaks/product placement. In terms of commercial breaks or product placement within a vlog, it needs to be clear when the ad or product placement starts. This could be via onscreen text, a sign, logo or the vlogger explaining that they have been paid to talk about a particular item by the brand.Vlogger-promotion. If the sole content of a vlog is a promotion of the vlogger’s own merchandise, this would not be considered an advertorial. Rather, it would be a marketing communication. The video title should make clear that the video is promoting the vlogger’s products, but it’s unlikely that the vlog itself will need labelling as an ad if it’s clear from the context that it’s a marketing communication.Sponsorship. Where a brand has sponsored a vlog, but the brand has no control over the vlog, this would not be considered an ad and would not be caught by the CAP Code. However, to ensure compliance with the CPRs, the vlogger should give a nod to the sponsor in order to disclose the nature of the commercial relationship.Free Items. Vloggers may be sent free items by a brand. Where there is no condition attached to the item by the brand and the vlogger can choose whether or not to cover the item in a vlog, this would not be an ad caught by the CAP Code. In addition, where the brand provides the vlogger with free products on the condition that they are reviewed independent of any brand input, then, as the brand retains no control over the vlog, the video would not have to be labelled as an advertorial. However, in such circumstances, the vlogger should disclose to consumers that the vlogger has an incentive to talk about the product, along with the nature of the incentive, to ensure compliance with the CPRs.<h4>Other Social Media Marketing</h4>Vlogging isn’t the only aspect of social media marketing that creates compliance challenges, of course. There are other issues that brands need to be aware of when advertising and marketing using social media in the UK. We have outlined some of these below. For issues specific to the UK financial services sector, please see our previous blog post: <a href="https://www.sociallyawareblog.com/2015/03/26/uks-financial-services-regulator-no-hashtags-in-financial-promotions/" target="_blank" rel="noopener">UK’s Financial Services Regulator: No Hashtags in Financial Promotions</a>.Native Advertising (written advertorial). A native ad is advertising that resembles editorial content. Native ads are a popular form of content marketing, but again raise concerns that consumers may not be aware that the content is advertising in breach of the CPRs and Cap Code. <a href="http://www.iabuk.net/resources/standards-and-guidelines/content-and-native-disclosure-guidelines" target="_blank" rel="noopener">Guidance</a> issued in February 2015 by <a href="http://www.iabuk.net/resources/standards-and-guidelines/content-and-native-disclosure-guidelines" target="_blank" rel="noopener">IAB</a> (the UK trade association for digital advertising) advised advertisers to provide consumers with prominently visible visual cues to enable them to understand, immediately, that they are engaging with marketing content that has been compiled by a third party in a native ad format and is not editorially independent. The guidance suggests clear brand logos and the use of different design formatting for native ads. It also advises the publisher or provider of the native ad format to use a reasonably visible label that makes clear that a commercial arrangement is in place.Employee Endorsements. Companies are keen to encourage their employees to use social media and become advocates for the company. However, companies must be careful; if an employee chooses to discuss his or her employer’s brand favorably on social media, then this is likely to be construed as an advert under the CAP Code, even where the employee is acting independently and not at the request of his or her employer. An employee endorsement that is not transparent also runs the risk of breaching the CPRs. Therefore, employees must make clear that they are affiliated with their employer when making any company endorsements on social media. Organizations should also provide employees with clear social media policies and training to avoid any incident of inadvertent advertising.Ads via Twitter and Celebrity Endorsements. As mentioned above, the CPRs and CAP Code require users to be aware that they are viewing an advert. In terms of Twitter, this means that promotional tweets should be accompanied by the hashtag #spon or #ad. This is particularly the case where the advert may not be immediately apparent as a promotional tweet, e.g., where it is in the form of a celebrity endorsement. As with promotions using vloggers, companies are increasingly keen to use celebrities in connection with promotions in order to increase their brand awareness within that celebrity’s group of followers.In March 2012, an advertising campaign by Mars involved reality star Katie Price tweeting about the Eurozone crisis, and soccer player Rio Ferdinand engaging his followers in a debate about knitting. The campaign involved four teaser tweets by each celebrity to focus attention on their Twitter profile (but with no marketing content), culminating with a final tweet that was an image of the celebrity with a Snickers chocolate bar and the line “you’re not you when you’re hungry @snickersUK #hungry#spon.” While the final tweet was clearly labelled as an advert, the ASA ruled that the first four tweets only became marketing communications at the point the fifth and final tweet was sent (as the first four tweets contained no marketing references). As a result, the ASA ruled that the campaign did not breach advertising standards as the fifth tweet (and as such, the entire campaign) was clearly identifiable as an advert.However, Nike was less successful in June 2012. Soccer players Wayne Rooney and Jack Wilshere tweeted “My resolution – to start the year as a champion, and to finish it as a champion… #makeitcount.gonike.me/makeitcount.” While the ASA agreed that the tweets were obviously marketing communications, the reference to the Nike brand was not sufficiently prominent. The tweets also lacked #spon or #ad to signify advertising. As it was not sufficiently clear to all readers that the tweets were part of a marketing campaign, the advertisement was banned.User-Generated Content. Companies also need to be wary when using user-generated content when promoting their brand. For example, companies may be deemed to be advertising if they: (i) provide a link to a user blog that includes positive comments, (ii) re-tweet positive tweets from users, or (iii) allow users to post comments on the company website. To ensure that such content is responsible, accurate and not misleading, harmful or offensive, companies should monitor user-generated content to ensure that the content is appropriate for the likely audience and preserve documentary evidence to substantiate any claims.Advergames. Advergames are online video games that are created in order to promote a brand, product or organization by immersing a marketing message within the game. In May 2012, the ASA published guidance that made clear that advergames will be considered advertising and are subject to the CAP Code. For further discussion on advergames, please see our previous blog post: <a href="https://www.sociallyawareblog.com/2014/12/18/what-are-the-rules-of-the-advergame/" target="_blank" rel="noopener">What Are the Rules of the Advergame in the UK?</a><h4>Conclusion</h4>The key message for organizations who want to use social media in their marketing campaigns is to treat consumers fairly and to be upfront and transparent. But good practice isn’t just about legal compliance, it will also help maintain consumers’ respect for and trust in your brand. If your social media campaign hits the headlines, you want it to be for all of the right reasons.

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How UK Brands That Use Vlogger Endorsements & Social Media for Marketing Can Stay on the Right Side of the Law

How UK Brands That Use Vlogger Endorsements & Social Media for Marketing Can Stay on the Right Side of the Law

Vloggers have become the reality stars of our times. For an increasing number of social media users, what was once a hobby is now a lucrative career. You may be

In December 2014, we noted that the Federal Trade Commission’s (FTC) settlement with advertising firm Deutsch LA, Inc. was a clear signal to companies that advertise through social media that they need to comply with the disclosure requirements of Section 5 of the FTC Act. On September 2, 2015, the FTC announced <a href="https://www.ftc.gov/news-events/press-releases/2015/09/xbox-one-promoter-settles-ftc-charges-it-deceived-consumers" target="_blank" rel="noopener">a settlement</a> along the same lines with Machinima, Inc., a company promoting the Xbox One system. This new action indicates that the FTC is serious about enforcing compliance in this space, so companies need to make sure that their advertising and marketing partners understand their obligations under Section 5.A Quick Refresher on Online Advertising Disclosure RequirementsAs we explained in our previous alert, the FTC’s <a href="https://www.ftc.gov/sites/default/files/documents/federal_register_notices/guides-concerning-use-endorsements-and-testimonials-advertising-16-cfr-part-255/091015guidesconcerningtestimonials.pdf" target="_blank" rel="noopener">Endorsement Guides</a> describe how advertisers using endorsements can avoid liability under Section 5 for unfair or deceptive acts or practices. Simply put, a customer endorsement must be from an actual, bona fide user of the product or service and, if there is any material connection between the endorser and the advertiser that consumers would not reasonably expect but that would affect the weight given to the endorsement—such as payment or an employment relationship—then that connection must be clearly and conspicuously disclosed.According to the <a href="https://www.ftc.gov/system/files/documents/cases/150902machinima-cmpt.pdf" target="_blank" rel="noopener">complaint</a> in In re Machinima, Machinima paid video bloggers (“influencers”) to promote Microsoft’s Xbox One system by producing and uploading to YouTube videos of themselves playing Xbox One games. Machinima did not require any disclosure of the compensation the influencers received, and many videos lacked any such disclosure. The FTC alleged that the payments would not be reasonably expected by YouTube viewers, such that the failure to disclose them was deceptive in violation of Section 5. In light of the Deutsch LA case, which dealt with endorsements on Twitter that did not include proper disclosures, In re Machinima seems uncontroversial. But what makes the case interesting is how close Microsoft came to being swept up in it.Microsoft Escapes Liability, NarrowlyThe FTC also issued a <a href="https://www.ftc.gov/system/files/documents/closing_letters/nid/150902machinima_letter.pdf" target="_blank" rel="noopener">closing letter</a> reflecting that it had investigated Microsoft, and Microsoft’s advertising agency Starcom, in relation to influencers’ videos. (Starcom managed the relationship with Machinima.) Even though the FTC did not ultimately take action against Microsoft (or Starcom), the closing letter is significant because it makes clear the FTC’s position that a company whose products are promoted bears responsibility for the actions of its ad agencies—as well as the actions of those engaged by its ad agencies.According to the closing letter, Microsoft avoided an enforcement action because it had a “robust” compliance program in place that included specific guidance relating to the FTC’s Endorsement Guides and because Microsoft made training relating to the Endorsement Guides available to employees, vendors and personnel at Starcom. Furthermore, Microsoft and Starcom adopted additional safeguards regarding sponsored endorsements and took swift action to require Machinima to insert disclosures into the offending videos.Given the increased reliance of advertisers on social media campaigns, the Machinima case provides both a clear warning and clear guidance to companies on how to minimize the risk of a Section 5 enforcement action. Not only must notice be provided of any paid endorsements, regardless of the medium in which they appear, but advertisers should also seriously consider having in place specific policies and procedures to address the FTC’s Endorsement Guides—as well as to ensure that their ad agencies and other involved parties comply with them.

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Clients seek out Julie because of her practical advice on cutting-edge issues at the intersection of privacy and consumer protection laws. She provides clients with practical solutions to compliance c

Julie O'Neill

Clients seek out Julie because of her practical advice on cutting-edge issues at the intersection of privacy and consumer protection laws. She provides clients with practical solutions to compliance challenges around a wide variety of both online and offline privacy issues, including tracking, interest-based advertising, geo-targeting and other mobile tracking, personalization, and cross-device tracking. Recognized in The Legal 500 US 2014, 2016, 2019, and 2020 and Chambers USA 2021 for her exceptional legal work, her clients praise her saying, “She is really good at giving practical, targeted advice and taking stock of what the risk profile of the client is, so that the advice is holistic.” (Chambers USA 2021).

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FTC Continues Enforcing Ad Disclosure Obligations in New Media and Issues a Warning to Advertisers

FTC Continues Enforcing Ad Disclosure Obligations in New Media and Issues a Warning to Advertisers

In December 2014, we noted that the Federal Trade Commission’s (FTC) settlement with advertising firm Deutsch LA, Inc. was a clear signal to companies that adve

On July 10, 2015, the Federal Communications Commission (FCC) released a 140-page <a href="https://www.fcc.gov/document/tcpa-omnibus-declaratory-ruling-and-order" target="_blank" rel="noopener">Omnibus Declaratory Ruling and Order</a> in response to more than two dozen petitions from businesses, attorneys general, and consumers seeking clarity on how the FCC interprets the Telephone Consumer Protection Act (TCPA). As noted in vigorous <a href="https://www.fcc.gov/article/fcc-15-72a5" target="_blank" rel="noopener">dissents by Commissioners Pai</a> and <a href="https://www.fcc.gov/article/fcc-15-72a6" target="_blank" rel="noopener">O’Rielly</a>, several of the rulings seem likely to increase TCPA litigation and raise a host of compliance issues for businesses engaged in telemarketing or other practices that involve calling or sending text messages to consumers.Since the FCC issued the order, trade associations and companies have filed multiple petitions for review in courts of appeals challenging the order (for example, see here and here). It will thus ultimately be up to the courts of appeals to decide whether the FCC’s new interpretations of the TCPA are reasonable.What is an “Automatic Telephone Dialing System”? The TCPA generally prohibits certain calls to cell phones made with an Automatic Telephone Dialing System (ATDS). <a href="https://www.law.cornell.edu/uscode/text/47/227" target="_blank" rel="noopener">As defined by statute</a>, an ATDS is “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” In the absence of statutory or FCC guidance, some courts have <a href="http://cdn.ca9.uscourts.gov/datastore/opinions/2009/06/19/07-16356.pdf" target="_blank" rel="noopener">construed</a> “capacity” broadly to encompass any equipment that is capable of automatically dialing random or sequential numbers, even if it does not actually do so, or even if it must be altered to make it capable of doing so.In light of these decisions, a number of entities asked the FCC to clarify that equipment does not qualify as an ATDS unless it has the present capacity to generate and dial random or sequential numbers.In its <a href="https://www.fcc.gov/document/tcpa-omnibus-declaratory-ruling-and-order" target="_blank" rel="noopener">ruling</a>, the FCC found that an ATDS includes equipment with both the present and potential capacity to generate and dial random or sequential numbers, even if such potential would require modification or additional software in order to do so. An ATDS also includes equipment with the present or potential capacity to dial numbers from a database of numbers.The FCC, however, did state that “there must be more than a theoretical potential that the equipment could be modified to satisfy the [ATDS] definition.”  Per this limitation, the FCC explicitly excluded from the definition of an ATDS a “rotary-dial phone.”Consent of the Current Subscriber or User The TCPA exempts from liability calls to mobile phones “made with the prior express consent of the called party.” It does not, however, define “called party” for purposes of this provision, and courts have divided over how to construe that term.Some courts have construed the term to mean the actual subscriber to the called mobile number at the time of the call, while others have construed it to mean the intended recipient of the call. The distinction is critical because consumers often give up their mobile phone numbers and those numbers are reassigned to other people, meaning that the actual subscriber and the intended recipient may not be the same person.Faced with lawsuits from owners of such reassigned numbers, a number of entities petitioned the FCC, asking it to clarify that calls to reassigned mobile numbers were not subject to TCPA liability where the caller was unaware of the reassignment, and to adopt the interpretation that “called party” means the intended recipient of the call.In response to petitions seeking clarity on this issue, the FCC ruled that the “called party” for purposes of determining consent under the TCPA’s mobile phone provisions is “the subscriber, i.e., the consumer assigned the telephone number dialed and billed for the call, or the non-subscriber customary user of a telephone number included in a family or business calling plan.”Consistent with its interpretation of “called party,” the FCC further ruled that where a wireless phone number has been reassigned, the caller must have the prior express consent of the current subscriber (or current non-subscriber customary user of the phone), not the previous subscriber. Businesses, however, may have properly obtained prior express consent from the previous wireless subscriber and will not know that the number has been reassigned. The FCC thus allows a business to make one additional call to a reassigned wireless number without incurring liability, provided the business did not know the number had been reassigned and had a reasonable basis to believe the business had the intended recipient’s consent.Is Consent Revocable?The TCPA is silent as to whether, or how, a called party can revoke his or her prior express consent to be called. Given that silence, one entity petitioned the FCC to request that the Commission clarify that prior consent to receive non-telemarketing calls and text messages was irrevocable or, in the alternative, set forth explicit methods of revocation. In response, the FCC ruled that consent is revocable (with regard to both telemarketing and non-telemarketing calls), and that such revocation may be made “in any manner that clearly expresses a desire not to receive further messages.” Consumers may use “any reasonable method, including orally or in writing,” to communicate that revocation and callers may not designate an exclusive means of revocation.The “Urgent Circumstances” Exemption to Consent Requirement Notwithstanding the FCC’s rulings regarding prior express consent, the FCC took this opportunity to create several new exemptions to that requirement with regard to certain non-marketing calls made to cellular phones. The FCC exempted the following types of calls:<ul><li>Calls concerning “transactions and events that suggest a risk of fraud or identity theft”;</li><li>Calls concerning “possible breaches of the security of customers’ personal information”;</li><li>Calls concerning “steps consumers can take to prevent or remedy harm caused by data security breaches”;</li><li>Calls concerning “actions needed to arrange for receipt of pending money transfers”; and</li><li>Calls “for which there is exigency and that have a healthcare treatment purpose, specifically: appointment and exam confirmations and reminders, wellness checkups, hospital pre-registration instructions, pre-operative instructions, lab results, post-discharge follow-up intended to prevent readmission, prescription notifications, and home healthcare instructions.”First and foremost, the consumer must not be charged for the calls.</li><li>Further, such calls must be limited to no more than three calls over a three-day period, must be concise (generally 1 minute or 160 characters, if sent via text message), cannot include marketing or advertising content (or financial content, in the case of healthcare calls), and must have some mechanism for customer opt-out be provided.</li><li>The FCC reasoned that all of the aforementioned types of calls involved urgent circumstances where quick, timely communication with a consumer was critical to prevent financial harm or provide health care treatment. Although prior express consent is not required, such calls are still subject to a number of limitations.</li></ul>Other Consent IssuesIn addition to the points above concerning consent, the FCC also ruled on a number of specific consent issues, described here in brief:<ul><li>Provision of Phone Number to a Health Care Provider. Clarifying an earlier ruling, the FCC ruled that the “provision of a phone number to a healthcare provider constitutes prior express consent for healthcare calls subject to HIPAA by a HIPAA-covered entity and business associates acting on its behalf, as defined by HIPAA, if the covered entities and business associates are making calls within the scope of the consent given, and absent instructions to the contrary.”</li></ul><ul><li>Third-Party Consent on Behalf of Incapacitated Patients. The FCC ruled that consent to contact an incapacitated patient may be obtained from a third-party intermediary, although such consent terminates once the patient is capable of consenting on his or her behalf.</li><li>Ported Phone Numbers. In response to a request for clarification, the FCC ruled that porting a telephone number from wireline service (i.e., a land line) to wireless service does not revoke prior express consent.</li><li>Consent Obtained Prior to the Current Rules. In response to petitions requesting relief from or clarification of the prior-express-written-consent rule that went into effect on October 16, 2013, the FCC ruled that “telemarketers should not rely on a consumer’s written consent obtained before the current rule took effect if that consent does satisfy the current rule.”</li><li>Consent via Contact List. In response to a petition concerning the use of smartphone apps to initiate calls or text messages, the FCC ruled that the mere fact that a contact may appear in a user’s contact list or address book does not establish consent to receive a message from the app platform.</li><li>On Demand Text Offers. In response to a petition concerning so-called “on demand text offers,” the FCC ruled that such messages do not violate the TCPA as long as they (1) are requested by the consumer; (2) are a one-time message sent immediately in response to that request; and (3) contain only the requested information with no other marketing information. Under such conditions, the messages are presumed to be within the scope of the consumer’s consent.</li></ul>Calls Placed by Users of Apps and Calling PlatformsThe FCC also addressed a number of petitions seeking guidance as to who “makes” or “initiates” a call under the TCPA (and is thus liable for TCPA violations) in a variety of scenarios involving calls or text messages made by smartphone apps and calling platforms.The FCC offered no clear rule, and instead held that to answer this question “we look to the totality of the facts and circumstances surrounding the placing of a particular call to determine: 1) who took the steps necessary to physically place the call; and 2) whether another person or entity was so involved in placing the call as to be deemed to have initiated it, considering the goals and purposes of the TCPA.”The FCC noted that relevant factors could include “the extent to which a person willfully enables fraudulent spoofing of telephone numbers or assists telemarketers in blocking Caller ID” as well as “whether a person who offers a calling platform service for the use of others has knowingly allowed its client(s) to use that platform for unlawful purposes.”Authorization of “Do Not Disturb” TechnologyFinally, at the request of petitioning state attorneys general, the FCC affirmed that nothing in the Communications Act or FCC rules or orders prohibits telephone carriers or VoIP providers from implementing call-blocking technology to stop unwanted “robocalls.” The FCC explained that such carriers “may legally block calls or categories of calls at a consumer’s request if available technology identifies incoming calls as originating from a source that the technology, which the consumer has selected to provide this service, has identified.”  The FCC “strongly encourage[d]” carriers to develop such technology to assist consumers.

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Clients seek out Tiffany for her successful track record in defending class action claims on behalf of clients in a broad range of industries, including technology, healthcare, and consumer product companies. She represents numerous Fortune 500 companies in high-stakes litigation involving privacy and marketing claims in courts throughout the United States.

Tiffany Cheung

Clients seek out Tiffany for her successful track record in defending class action claims on behalf of clients in a broad range of industries, including technology, healthcare, and consumer product companies. She represents numerous Fortune 500 companies in high-stakes litigation involving privacy and marketing claims in courts throughout the United States.

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FCC Clarifies Its Interpretations of the Telephone Consumer Protection Act, Provoking Strong Objections From the Business Community

FCC Clarifies Its Interpretations of the Telephone Consumer Protection Act, Provoking Strong Objections From the Business Community