The SEC has rung the bell again on a celebrity touting a crypto token offering without adequate disclosure of a paid role. On October 3, 2022, the Securities and Exchange Commission released its order instituting cease and desist proceedings against Kim Kardashian and detailing Kardashian’s violation of Section 17(b) of the Securities Act (see Administrative Proceeding File No. 3-21197). Kardashian came under scrutiny from the SEC after she promoted EthereumMax Tokens (Emax Tokens) via her Instagram account in June of 2021, near the height of the cryptocurrency market, without making the proper disclosures. The SEC had previously fined boxer Floyd Mayweather and rapper DJ Khaled in 2018 for similar violations of the SEC’s “anti-touting” rules.
This article was previously published on Venable’s All About Advertising Law blog.
Advertisers, e-commerce websites, affiliate networks, and publishers each play a large role in the development of the Internet. One reason they have been able to do so is Section 230 of the Communications Decency Act of 1996 (CDA), which immunizes online interactive services from liability arising from third-party content on their platforms. The CDA does so in twenty-six words:
“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”
Through this immunity, the CDA allows online services to host the speech of others, without assuming responsibility for what those users may say or do. No one disputes the premise that Section 230 fosters free expression and the creation of vibrant marketplaces for advertisers and merchants to efficiently and effectively reach consumers. Recently, however, confusion and controversy have arisen as to exactly who and what Section 230 does and does not protect, leading to divisions among court decisions and to calls for legislative “overhaul.” A quick review for merchants, advertisers, agencies, and affiliate networks seems desirable.…
The California Court of Appeal (the Court) has affirmed a trial court’s grant of preliminary injunction, enjoining HomeAdvisor’s use of allegedly misleading language in advertisements. See People ex rel. Gascon v. HomeAdvisor, Inc., No. A154960 (Cal. Ct. App. June 5, 2020).
The lawsuit was brought by the People of the State of California (the People), acting by and through the San Francisco District Attorney. Specifically, the People claimed that HomeAdvisor’s advertisements were “false and misleading because they are likely to deceive consumers into believing that all service professionals hired through HomeAdvisor who come into their homes have passed criminal background checks. That is not the case. The only person who undergoes a background check is the owner/principal of an independently-owned business.” Id. at *1.
Continue Reading Court of Appeal Affirms: No First Amendment Protection for Misleading Commercial Speech
An increasing number of celebrities and social media personalities are endorsing the use of cannabidiol (CBD) products through social media. Many of these “influencers,” however, fail to account for and comply with the complex regulatory environment surrounding CBD advertisements. In the United States, the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) both limit the use of certain language in CBD endorsements. As these advertisements attempt to reach the broadest possible audience, violations by influencers are especially noticeable to regulators, who have stepped up their enforcement efforts in this area.
Continue Reading CBD Advertisements: What Celebrity Influencers Need to Know
Venable attorneys Marcella Ballard and Kristen Ruisi recently participated in an MIP Global Trademark Forum panel on Responsible Advertising, Social Media and Influencers. With Marci moderating and Kristen presenting, the panel also included Jessica E. Cardon, deputy general counsel at Quality King Distributors; Lydia Cheuk, deputy general counsel at Away; and Melissa Moriarty, assistant general counsel at VaynerMedia. During their discussion, panelists shared the following insights:
- Brands are relying more on influencers, leading to increased FTC scrutiny
Kristen spoke about how the FTC is becoming stricter in its enforcement of its guidelines, which strive to prevent influencers from making false claims about products or services they haven’t tried and ensure that consumers are aware of advertising relationships. While the responsibility to disclose relationships with the brand they are promoting or endorsing ultimately rests with the influencer, brands still have to work with influencers to ensure they are meeting their disclosure obligations.…
The Federal Trade Commission held a workshop earlier this week in Washington, D.C., to discuss possible updates to the COPPA Rule, which implements the Children’s Online Privacy Protection Act (“COPPA”). COPPA was originally enacted in 1998 and regulates the way entities collect data and personal information online from children under the age of 13. The Rule hasn’t been updated since 2013, and the intervening years have produced seismic technological advances and changes in business practices, including changes to platforms and apps hosting third-party content and marketing targeting kids, the growth of smart technology and the “Internet of Things,” educational technology, and more.
For the most part, FTC staff moderators didn’t tip their hand as to what we can expect to see in a proposed Rule revision. (One staff member was the exception, whose rapid-fire questions offered numerous counterpoints to industry positions, so much so that the audience would be forgiven for thinking they were momentarily watching oral argument at the Supreme Court.) Brief remarks from Commissioners Wilson and Phillips staked out their positions more clearly, but their individual views were so different that they too offered little assistance in predicting what a revised Rule may look like. Commissioner Wilson opened the workshop by sharing her own experience as a parent trying to navigate and supervise the games, apps and toys played by her children, and emphasized the need for regulation to keep up with the pace of technology to continue protecting children online. Commissioner Phillips also referred to his children at one point, but his remarks warned against regulation for regulation’s sake, flagged the chilling effect on content creation and diversity when businesses are saddled with greater compliance costs, and advocated a risk-based approach.…