Consumer Protection Update
Consumer Protection Committee
Christie Grymes November 6, 2006
Federal Trade Commission Update
» Ontario Inc.
» Northwestern Ohio Foam Packaging, Inc.
» Integrity Security & Investment Services,
» National Prize Information Group Corp.
» Prerecorded Messages in Telemarketing
» Food Marketing
Canadian Billing Companies
» FTC alleges that Canadian billing companies billed and
accepted payment from U.S. businesses for non-existent
business and travel directories and unordered or
undelivered office supplies and consulting services.
» Defendants allegedly cut actual print ads that businesses
had placed in legitimate publications and pasted them onto
the defendants’ invoices.
» Federal judge has entered a temporary restraining order
freezing the companies assets and prohibiting its deceptive
Northwestern Ohio Foam Packaging, Inc.
» Northwestern Ohio Foam Packaging, Inc. allegedly made
false and misleading performance claims about its
insulation product, “The Barrier.”
» Exaggerated the product’s “R-value” by over 600%.
» Failed to explain the meaning of R-value or disclose the R-value
of particular products on product packaging.
» The company has agreed to pay $104,257 and to comply
with the FTC’s R-value Rule.
Integrity Security & Investment Services, Inc.
» The FTC charged Integrated Security and Investment
Services, Inc. with advertising and selling confidential
consumer phone records and records of credit card
accounts to third parties without authorization.
» The company has agreed to a settlement agreement
requiring the forfeit of profits earned through the sale of
consumer records and banning the company from
obtaining or selling records in the future.
National Prize Information Group Corp.
» The FTC has filed a complaint against National Prize
Information Group Corp. for falsely informing consumers
that they had won cash prizes of up to $3 million.
» The prize notices, sent in personalized mail messages,
encouraged consumers to respond immediately by sending
$20 to the company.
» No prizes were awarded.
» The FTC seeks a temporary restraining order, preliminary
injunction, and an asset freeze.
Prerecorded Messages in Telemarketing
» The Telemarketing Sales Rule limits the number of calls a
telemarketer may abandon, prohibiting the use of prerecorded
» The FTC rejected a petition to allow prerecorded message if an
established business relationship exists.
» The FTC will no longer forbear from initiating enforcement
» The FTC has proposed an amendment to make the prohibition
against pre-recorded messages explicit.
» The Commission is seeking comment on a DMA petition to
change the method for measuring the maximum allowable call
» Pursuant to legislation passed in November 2005, the FTC
must prepare a report on marketing activities and
expenditures targeted to children.
» The FTC is seeking comment on a proposal to collect
information from food and beverage companies and quick
» The FTC expects to send the request to about 50 parent
companies of industry participants.
» Malt-O-Meal/General Mills
» United Airlines
» BISSELL challenged Electrolux’s advertising for the
Atlantis OptiHEAT carpet cleaner, claiming that the ads
incorrectly suggested that the OptiHEAT generates heat
and increases the temperature of water placed in the unit.
» Electrolux argued that the advertising communicates that
the product maintains the water temperature.
» NAD recommended that Electrolux discontinue claims
that the product raises water temperature, has “maximum
suction power” and “now” has OptiHeat.
» NAD also recommend that Electrolux discontinue the use
of a red “OptiHeat” light on the product.
Unilever/Proctor & Gamble (P&G)
» P&G challenged Unilever’s performance claims in
advertising for Degree Ultra Clear Antiperspirant.
» NAD concluded that Unilever overstated its product’s
performance by claiming that Degree will leave no white
marks on clothing.
» Although the product demonstration showed some residue
for the Degree product, the other claims conveyed that it
leaves no residue.
» NAD recommended that Unilever discontinue its television,
web, and print advertising campaign for Degree.
» General Mills challenged Malt-O-Meal’s “Betcha can’t
taste the difference” slogan as well as other comparative
» Malt-O-Meal argued that the slogan did not require
substantiation and that as a registered trademark, it was
not subject to NAD review.
» NAD found that the slogan could be interpreted by
consumers to mean that there is no difference in taste
between Malt-O-Meal and its competitors and
recommended that Malt-O-Meal discontinue use of the
» A consumer who was unable to purchase United Airlines’
advertised “Troops Fare” challenged the accuracy of the
company’s ads before the NAD.
» United Airlines did not respond to the NAD’s request for
substantiation, arguing that the DOT has jurisdiction over
» The NAD noted that an advertiser is required by law to
provide substantiation for claims and that DOT
jurisdiction does not preclude participation in the self-
» NAD will refer the case to the appropriate federal agency
» MLB Advanced Media
» Review of Ad Rules
» Ads for a sweepstakes informed kids that they could
enter at Target, but didn't specify how.
» CARU was concerned that kids might think that they
had to make a purchase in order to enter because the
ad failed to clearly disclose that kids could enter by
» Target argued that it should not have to prominently
disclose the alternate method of entry because the
primary method of entry did not require a purchase.
» CARU Guidelines on Sweepstakes require that a free
method of entry must be universally available and
clearly and prominently disclosed.
MLB Advanced Media
» An MLB website that was advertised to kids in
Nickelodeon Magazine invited kids to enter an e-mail
address to sign up for an e-mail newsletter.
» When online contact information is collected to provide
an e-newsletter to a child, a company must notify the
parent about the intended uses of the information and
give the parent a chance to opt-out.
» MLB had already taken steps to correct the problem.
» Sony Pictures advertised “Click”, a PG-13 film, during
children’s programming including Drake & Josh, Fairly
Odd Parents, and Just for Kicks.
» CARU was concerned that despite prominent display of a
PG-13 rating, the advertisements would create interest in
a product in appropriate for children. CARU recommended
that Sony stop running the commercials during
programming targeted to children under the age of twelve.
Review of Ad Rules
» Conflicts between major food grocery brands and fast-food
companies have created a sticking point for CARU’s review
of children’s advertising guidelines.
» Grocery brands such as Kraft and PepsiCo are willing to
accept stringent guidelines and minimum nutrition
requirements for children's advertising, while the fast-food
industry will not agree to such restrictions.
» At the request of an anonymous competitor, the ERSP
investigated rapid weight loss and beauty claims made by
NxCare for its dietary supplement, NV.
» The ERSP found NxCare’s claims to be unsubstantiated
and recommended that NxCare modify certain
performance and testimonial claims related to the product.
The ERSP also recommended that the company more
carefully qualify its exclusivity claims.
Attorney General Actions
» R.J. Reynolds
» Friedman’s Jewelers
» Verizon, BellSouth, Embarq and Email DiscountNetwork,
» Morgan Stanley
» In 2004, CVS entered into a settlement with the New York
Attorney General over the company's sweepstakes
marketing practices. As part of the settlement, CVS
agreed to make entry forms available at retail locations,
conspicuously post sweepstakes rules in stores, and
ensure that the staff knew how to direct consumers to
non-purchase methods of entry.
» The company has agreed to pay $152,000 in civil
penalties for violating the terms of this settlement. The
company will also be required to comply to new
» The Attorneys General of 38 states of reached a
settlement agreement with RJ Reynolds that will end the
company’s sale of flavored cigarettes.
» The Attorneys General group accused the company of
using candy, fruit and alcohol flavors to market to young
» The settlement places strict restrictions on the production
and marketing of cigarettes with any characterizing flavor
other than tobacco or menthol.
» Friedman’s Jewelers has reached a settlement
agreement with 18 state Attorneys General who
charged that the company did not adequately inform
consumers of insurance fees associated with financing
» The company will be required to pay $2,150,000 to the
Verizon, BellSouth, Embarq and Email
» The Florida Attorney General has filed suits against
internet and phone companies for placing unauthorized
charges on consumers’ phone bills in violation of the
Florida Deceptive and Unfair Trade Practices Act.
» The Attorney General’s office estimates that more than
20,000 Florida consumers have been effected, losing a
total of up to $200,000.
» The New York Attorney General has reached a settlement
with investment broker Morgan Stanley over charges that
the company failed to properly supervise a broker who
defrauded consumers of at least $740,000.
» The broker, who was employed by Morgan Stanley
between 1997 and 2001 was accused of mismanaging
consumer accounts, and engaging in excessive and
unsuitable trading designed for personal rather than
» Under the settlement, Morgan Stanley will pay
$740,964.18 in restitution and $300,000 in costs.
» Dutch insurance company ING has entered into a
settlement agreement with the New York Attorney
General to resolve charges that the company provided
biased financial advise to teachers in the New York
United Teachers union.
» ING paid the union up to $3 million a year to promote
ING group annuity plans. The extent of the payments
was not disclosed to the teachers.
» Under the settlement ING will pay $30 million in
restitution to New York teachers and $100,000 in costs.
The company will also provide clear product disclosure
through the use of cover-sheet summaries of costs and
» DirectTV will pay $50,000 for violating the state’s No Call
» The company was accused of making calls marketing
satellite dish equipment and services to Missourians on
» The company was also ordered to obtain a copy of
Missouri’s No Call list and abide by the law in the future.
» Courts in both North Dakota and Indiana have ruled
against FreeEats.com challenges of the states’ do not call
laws. The courts rejected the companies’ claims that the
laws were preempted by federal law and Federal
Communications Commission regulations.
» The Virginia-based telemarketing was sued by the
Attorneys General of both states for attempting to place
prerecorded telemarketing calls.
» The United States Supreme Court refused a request to
hear the case.
Lanham Act Litigation
» Gail Green Licensing & Design Limited v. Accord, Inc. (ND Ill)
» GGLDL alleges the defendant entered into a nondisclosure and
confidentiality agreement with GGLDL to inspect unpublished
"copyrighted creative works” in connection with defendant's
clothing and accessories for pets business.
» The two parties did not enter into a licensing agreement and
several years later, GGLDL alleges, it discovered the defendant
using the unpublished works without payment, licensing, or
» Plaintiff brought false association and false advertising claims
under the Lanham Act. Defendants countered that plaintiff is not
a competitor - and has no standing under Sec. 1125(a)(1)B), the
court agreed and the case was dismissed with prejudice.
» Trademark Dilution Revision Act of 2006
» Unlawful Internet Gambling Enforcement Act
Trademark Dilution Revision Act of 2006
» Under the act, the owner of a distinctive famous mark is
entitled to an injunction against a party using a mark in a
manner that is likely to cause dilution by blurring or
tarnishment—regardless of the presence or absence of
actual or likely confusion.
» This essentially overturns the Supreme Court's decision in
Moseley v. Victoria Secret Catalogue. In that case, the
Court held that the in order to prevent another company
from using a mark under the 1996 Federal Trademark
Dilution Act, a trademark holder had to show that actual
dilution had occurred.
» President Bush signed this bill into law on October 6.
Unlawful Internet Gambling Enforcement Act
» The Act directly prohibits the acceptance of funds by
persons engaged in certain betting or wagering businesses
in connection with the participation of another person in
certain gambling activities involving at least the partial use
of the Internet.
» The Act is triggered only upon the violation of an existing
state or federal law.
» The law provides exceptions for fantasy sports, games of
skill, bets protected by the Interstate Horseracing act of
1978, and certain other bets and wagers
» President Bush signed this bill into law on October 13.