Warner Music Group’s lawsuit against Iconic alleges that Iconic and its influencers used WMG’s copyright music without permission.

In total, WMG says Iconic has used more than 165 different copyrighted tracks owned by WMG across at least 169 videos. WMG says Iconic never sought to obtain licenses for the tracks.

Remember: Brands and influencers cannot used music from TikTok’s standard (i.e., non-commercial) music library for any sponsored content oar advertising without obtaining a license from whomever owns the rights to the music.

Platforms like TikTok and Instagram have licensing deals with big record labels that allow users to include music in videos, but those licenses don’t allow for commercial usage:

Bang Energy was found liable for this exact type of infringement in a case brought by Universal Music Group earlier this year.

The lesson: if you’re a brand or a creator, do not use music in sponsored content or advertising without clearing the rights. Damages for willful copyright infringement can be up to $150,000 per infringing act (i.e., per post)!

Francesca Witzburg:

Hey guys. Today I have Rob Freund who is an amazing attorney out in California who deals with all aspects of influencer advertising, marketing law. He also is a good friend of mine and we are doing this impromptu live today. So I ask, I like to do these periodically with Rob because he’s kind of on the other side of my practice. So he’s really an expert when it comes down to promotions, offers, influencers, marketing. There’s a whole body of law that you need to be aware of when you are selling and doing promotions online.

Hey Rob.

Rob Freund:

Hey, good morning.

Francesca Witzburg:

How are you?

Rob Freund:

I’m doing well, how are you?

Francesca Witzburg:

I’m good. I just gave you a lovely intro and I will repeat it cause I want you to hear <laugh>. Okay. This is Rob Freund. He’s an incredible attorney. He’s based in California. He advises on all aspects of influencers, marketing, advertising, promotions, and he is a good friend of mine and he owns Robert Freund Law and a lot of you follow him. We already have a ton of people in here, Rob, who are really excited to hear what you’ve been working on, what kind of issues you’ve been seeing and advising on. And I like to do these periodically because the law is evolving, especially with TikTok and Instagram. So we can get started with what I would say, what are the best practices right now for influencers who are doing promotions or sweepstakes online line?

Rob Freund:

Yeah, those are sort of related, but related issues that have different considerations. When you’re talking about giveaways and sweepstakes in particular, the answer to that sort of depends on whether the influencer has their own brand that they’re giving something away through that giveaway. So if you have your own beauty brand and you’re running a giveaway for your followers or something like that and you’re supplying the product, that’s sort of a different situation from if you’re a brand that’s reaching out to work with influencers to help promote your giveaway. From the influencer’s perspective, if they are not also the brand, if they’re just promoting some other advertiser, then the biggest issues that they wanna pay attention to are making sure that they’re complying with FTC rules about disclosing their connection to that advertiser. Whether it’s through sort of traditional influencer marketing, like. “I’m getting paid to make a post,” that requires a disclosure or “I’m getting free product or I’m getting a free sweepstakes entry even to post about something.”

All of those situations require that the influencer make clear to their audience that there is this material connection between them and the brand that needs to be disclosed. If they are promoting a sweepstakes, for example, like, such and such brand is giving away a Tesla and here’s how to enter and here’s how you can win and so on. That also requires a disclosure if the influencer is getting any kind of benefit from promoting that sweepstakes. So we can also talk about if you’re organizing and you’re the brand that’s promoting the sweepstakes, some of the issues that go into that. But in addition to disclosure compliance, it’s really important that influencers understand whatever contract they have with the brand that’s running the promotion. Particularly if you’re working with a sophisticated brand or one that at least is put some thought into their promotion, you’re gonna have an agreement with them about that covers the basics: How long is this promotion running? How are you getting paid? What kind of content are you being asked to create or is that gonna live? Who’s gonna own it? How long is it gonna be up? And things of that nature.

And where the disputes typically happen is around that usage and ownership issue. Either the influencer and the brand just didn’t have the same understanding of what some of those terms mean or what they intended. And it’s very common to just view the contract as something that’s like the last step before you get started and you don’t really need to pay close attention to it. But that’s sort of a long way of saying FTC disclosures and paying close attention to your agreements are probably the two most critical pieces of any kind of promotion from the influencer’s perspective.

Francesca Witzburg:

And are we still seeing disclosure issues? Have most influencers incorporated this with the tools that Instagram and TikTok offered making it really easy or are we still seeing violations of disclosure requirements?

Rob Freund:

I still see a lot of non-compliance. I don’t know if the data’s trending that there’s more or less, but you mentioned the tools that the platforms give. What’s interesting and kind of frustrating is that the FTC has said those tools aren’t good enough anyway. That’s annoying. So even if you were to use paid partnership with tool on Instagram with nothing more, you could still potentially have an FTC problem on your hands—more likely for the brand than for individual influencers. But I have seen recently some plaintiff’s lawyers trying to lump individual influencers as defendants in with the brand over these disclosure issues that I’ve just been talking about. So it’s still an issue. I think a lot of creators are still sort relying on the brand to tell them what to do, and they think, “well if I wasn’t getting paid for this or if the contract didn’t say, I have to make this disclosure, then isn’t that just sort on the brand at the end of the day?” And the legal answer is no, everybody shares liability. The practical answer is historically the agencies have gone after the brands more aggressively, but they have gone after individuals too. And so it’s not a safe position to say, well it’s on the brand to figure out when I need to disclose and how to do it.

Francesca Witzburg:

Yeah, I think that’s why your platform is so important because just because you’re an influencer, you are your business you and it’s not enough to just rely on the contract because those agreements are negotiated by a brand lawyer to benefit the brand. They’re not negotiated on your behalf. So thank you for that. And I do want to address this one question that Greg asked. He asked, what if the influencers just wanna promote a brand naturally, and I see people do this who maybe they have a big following and they want to get a brand’s attention. Are there any legal issues around that or just organically tagging?

Rob Freund:

If you truly have no connection to that brand and you don’t have the kind of connection that the FTC would say is material, meaning it would affect the weight or the credibility that a consumer would place on your endorsement of that brand, then there’s nothing that you really need to disclose. If I just really want to promote this ring light that my girlfriend got me, I can make a post today singing its praises and tagging the brand and everything else and I don’t need to say “#ad” or anything like that because I don’t have any connection to this brand other than that I like it. If they sent me this for free, or if when I bought this they said, “Hey, make a post and you’ll get 20% off your next purchase from our company,” then I would have one of those connections that needs to be disclosed.

But just posting about brands that you like, nothing that you need to flag one way or another or do anything other than give your honest belief about it. So that’s really all there is to that. There’s some nuance. If you had a campaign with a brand at one point and then the campaign ends and then just out of your own volition you wanna make another post about that brand, do you still need to disclose? That’s an issue that the FTC is considering as they go through their review of these rules, which they intend to update in the next year or so?

Francesca Witzburg:

Thank you. So I think we should shift into emerging tech NFTs. And so I would love to know on your end what kind of issues you’re seeing. And let me just give you a quick hilarious example. So I had a client the other day who asked me about doing something in the metaverse because the laws don’t apply there

So I think there’s this misconception and the reality is like, yes, the law applies wherever you are and the Metaverse is not an alternate universe, it’s software. This is just gaming software. This is very basic stuff. That’s my answer from an IP perspective, is that maybe a little bit of creative lawyering or lawyers who understand the tech, what kind of issues are you seeing in on the influencer advertising marketing side?

Rob Freund:

Yeah, I completely agree with what you just said.

To quickly answer a question that I see here in the chat, “what if you’re not an influencer?” There’s no definition of influencer, it’s anybody who endorses a brand. There’s no threshold over which you become an influencer such that the law applies. If you are making an endorsement of a brand, you are an influencer for purposes of what we’re talking about.

But as to issues that come up in the metaverse, I hear the same thing or the same kind of sentiment that affects how clients are thinking about the metaverse. It’s like, yes it’s new territory to the extent there’s different tech and there’s new ways for people to interact, but it’s not accurate to think that this is unregulated anymore than when the new Xbox comes out, to say that’s unregulated.

It’s different, but it’s not new legal territory in terms of what law applies to it. It’s just like any new tech, the courts, and the legislature if it comes to it, are slow to react to applying our current laws to these new scenarios. But you can’t just go and sort break things because there’s no regulation, that’s just not the case. And I think that that sort of attitude is on the one hand exciting for people who are really enthusiastic about the space. It feels like the wild west, but there’s also a lot of risk there if you’re not aware of what you’re doing from a legal perspective. I see issues come up with trying to run sweepstakes with NFTs and cryptocurrency and web3 and things like that. That’s probably the issue that I am involved with in terms of the metaverse most often. And it’s a similar thing, it’s people, it’s common to not appreciate how the current laws we have apply in very similar or the same ways to promotions that just happen to be in the context of entities.

Francesca Witzburg:

Yeah, interesting. And so I tell people if you wouldn’t do it in real world, don’t try to use an NFT to get around having an illegal lottery.

Rob Freund:

Right, exactly.

Francesca Witzburg:

Or violating someone’s IP. No.

Rob Freund:

Yeah. And I’m sure you see a lot more of the trademark issues come up. I’ll get questions that to lawyers seem like obvious “no”s. Can I take these pictures of Rolex watches and have a set of Rolex NFTs? Of course not <laugh>.

Francesca Witzburg:

I think why I’m so fascinated by NFTs and I’ve realized it’s because it’s this intersection of IP and it’s really where First Amendment meets fair use, meets IP rights. The Meta Berkins case, it’s just so interesting because someone did that, a designer who said, I’m an artist, I’m gonna draw and create meta, gonna create digital handbags and make them and sell and sell art as NFTs. And they were selling for like 40 ETH, which I think at the time was like $10,000 or I forget it was a crazy high amount of money kind of almost similar to some of the product bags. So it pissed Hermes off and now they’re battling. And for me it’s like, it’s just so fascinating because where do you draw the line of fair use? And the Supreme Court is actually hopefully going to provide some clarity on this, which I feel like they’re not going, I feel like it’s not gonna be that helpful, but we’ll see what the fair use test is gonna be. And I just think it’s a really cool area of the law for us all to watch. And for businesses creators be super careful. There’s always a risk. Fair use is not a right, it’s a defense. So you could still be infringing someone’s copyright and you may have to go through a whole litigation just to find out if that defense applies to you or not. It’s not great.

Rob Freund:

Right. And I get a lot of questions about fair use and people sort of expect that there are either blanket answers to this category of conduct is fair use, or is it fair use if I make videos about or in this way? And it is frustrating as lawyers to have to say “it depends” all the time. But fair use is probably the most “it depends” area that I can think of, because even if you have a district court ruling saying something like “YouTube reaction videos in this particular case, there’s a fair use defense,” that doesn’t mean that you could get a different judge in the same district court that sees it differently.

Francesca Witzburg:

Way I counsel clients, as I say, it’s a risk assessment. So if you don’t create your own organic content, be really careful, use realty free videos, even if you see everyone else doing it, don’t follow what everyone else is doing. But if you feel like you’re okay and you’ll be able to navigate handling the demand letter, then maybe that’s a risk your business is willing to tolerate.

Rob Freund:

And I say the same thing, it’s important to understand what the risks are and to some extent your attorney can help you figure out where on the spectrum your particular issue lies. But that involves of digging into the facts of what’s going on in terms of the content that we’re talking about. Sometimes I’ll hear like, “oh, I spoke with another lawyer that I’m good on fair use after a quick chat.” That’s probably a red flag about that attorney. Unless it was truly just like a casual conversation and you weren’t really asking for legal advice. But it’s the extremely rare case, I think that an attorney could say “you’re a hundred percent safe on a fair use defense” after just a quick chat about something.

Francesca Witzburg:

A hundred percent. That’s true. I would never do that. I like an initial call and then I have to do the analysis. Sure. I have to go through the four factors and give legal advice.

Rob Freund:

Yeah. And then you have to explain, this is my take on the four factors and different courts will weigh them differently and see them differently. And so it’s then just a business decision about how much risk a client wants to take on and it’s our job to just identify the risk and try to wait it on the spectrum of extremely risky or not very risky behavior.

Happy Saturday – And happy Thanksgiving! I’m looking forward to some family time and all of the Thanksgiving food, except for turkey. I think turkey is overrated. It’s fine, but it’s a bottom-tier holiday food for me.

Here’s what I’ve been paying attention to over the last seven days:

New Lawsuits

  • One day before the FTC voted unanimously to seek public comment regarding whether to modify or expand the scope of the Business Opportunity Rule, it announced that it sued and reached a settlement with Kevin David and his affiliated companies for violating the Biz Op Rule, the Consumer Review Fairness Act, Section 5 of the FTC Act, and prior commission determinations in connection with the defendants’ “Amazon Automation” services and crypto investment opportunities.

    The proposed stipulated order enters a judgment of almost $53 million, which will be partially suspended (due to inability to pay) after the defendants pay $2.6 million.

    The defendants allegedly violated so many of the FTC’s rules that the FTC compared them to an everything bagel

    There’s a lot to dig into regarding the aggressive marketing tactics and practices that the defendants used here, and that last link above is worth a read for anyone offering coaching, automated services, or or any opportunities marketed using earnings claims.

    Long story short, you may want have counsel look over your business practices and your ads if they look like this:


    For a 90-second tip about earnings claims, check out my most recent Instagram video, in case you missed it.
     
  • Activewear brand Lilia’s Active is being sued by an influencer marketing agency for failing to pay over $150k in invoices.

    The agency also accuses Lilia’s Active of “accepting orders … without any intent of honoring or fulfilling those orders.”
     
  • Following FTX’s dramatic implosion, SBF and several celebrities who endorsed FTX (including Tom Brady, Gisele, Shaq, Steph Curry, and Larry David) face a class action for various securities law violations.

    Some have asked why the celebrities appearing in FTX ads are potentially on the hook.  Part of the reason is that, as the Complaint lays out, “although Defendants disclosed their partnerships with the FTX Entities, they have never disclosed the nature, scope, and amount of compensation they personally received in exchange for the promotion of the Deceptive FTX Platform,” which the SEC requires.

    This, like the recent SEC settlement with Kim Kardashian over her Ethereum Max promotions, is a good reminder regarding the SEC disclosure requirements that go beyond those what the FTC requires in the context of promoting securities. So keep them in mind if you engage celebrities (or anyone else) to promote crypto projects on social media. 
     
  • Speaking of crypto debacles, Bitcoin Latinum faces another investor lawsuit, and this one doesn’t mince words:

    Image

Legal News

  • Hormel Foods reached a settlement with the Animal Legal Defense Fund regarding Hormel’s allegedly false advertising of its “Natural Choice” brand of meats.

    ALDF alleged that calling those products “natural” was misleading because the animals were fed hormones and antibiotics, and the meats contain artificial preservatives.

    This case is yet another example of why I strongly recommend that anyone advertising any product using the word “natural” to have those ads carefully reviewed by counsel.

    That single word has fueled countless lawsuits in recent years, and a judge might not think it means the same thing that you think it means. 
     
  • This is an interesting look at whether Twitter would enjoy Section 230 immunity in litigation arising out of the scores of fake tweets from imposter accounts that received verification badges under the new pay-to-play “Twitter Blue” subscription system.
     
  • Tom Petty’s estate is considering suing Arizona GOP gubernatorial candidate Kari Lake for using “I Won’t Back Down” without permission in her social media posts.
     
  • Elizabeth Holmes is going to prison for 11 years for the Theranos fraud.

Off topic:

If you’re a chess player and want to have a game with me, add me on chess.com!

Thanks for making it this far.  Have a great weekend!

-Rob

Happy Saturday – What a week it’s been. Crypto is imploding, Elon is being Elon, and Season 3 of Love is Blind concluded. It’s a lot to take in.

My goal with this newsletter is to share with you some of the things I read as I stay on top of current issues and trends for my clients. 
If you were forwarded this from a friend, please click here to subscribe for free, and consider sharing it with someone who might like to see it.

Here’s what I’ve been paying attention to over the last seven days:

New Lawsuits

  • EDM producer 3LAU, who famously generated more than $11M in revenue through selling his Ultraviolet album as an NFT, is being sued by Luna Aura, a singer who contributed to the track Walk Away. She claims 3LAU never paid her any portion of that revenue, despite their contract, which she alleges entitles her to royalties from those sales.
     
  • The Pennsylvania Attorney General has sued Fluent for deceptive lead-gen tactics, such as allegedly tricking consumers into providing “consent” to use of personal information by Fluent’s “marketing partners.”  
     
  • Off-grid vehicle maker Living Vehicle is suing influencers who claim LV’s trailers contained high levels of toxic chemicals, including “very high formaldehyde” that caused illness and rendered the trailers uninhabitable. 

    Living Vehicle says it has the evidence to prove there are no such chemicals in its trailers, so it’s suing the influencers for trade libel and business disparagement.

    This week, Living Vehicle filed its motion for a preliminary injunction to prevent the influencers from making any additional claims about purported chemicals. 
     
  • Men’s Journal is being sued for copyright infringement for using a photo it allegedly found on the internet to advertise a shirt, without clearing the rights to said photo. 
     

Legal News

  • Obnoxious Instagram “personality” Jay Mazini is going to prison for running a Ponzi scheme.  

    “This multi-million dollar case is a reminder for anyone thinking of investing: Be skeptical of any investments with larger than life promises, because if it sounds too good to be true, it probably is,” IRS-CI Special Agent-in-Charge Fattorusso said in a statement.
     
  • Twitter won yet another account termination case, for the same reasons as usual (i.e., Section 230 and Twitter’s TOS).
     
  • Speaking of Twitter, their recent high-level departures have caught the FTC’s attention
     
  • And speaking of the FTC, they will meet next week to vote on whether to initiate rulemaking that would expand the Business Opportunity Rule to cover “business and e-commerce coaching and work-from-home offers.”

Off topic:

Here’s my favorite quote shouted in a moment of victory that I can think of: https://www.youtube.com/watch?v=gKQOXYB2cd8.  Both an inquisitive and exclamatory statement at once, it defies categorization. 

Thanks for making it this far.  Have a great weekend!

-Rob

Happy Saturday, and Happy Halloween!

This year, I’m dressing up as Waluigi. He’s always been my favorite Mario character, and I already look a lot like him in real life, so I’m excited to dress in overalls and WAA at people a lot.  

This installment is a bit shorter than normal. Not every week is full of interesting tidbits, but this way you can get back to your weekend sooner.Anyway, my goal with this newsletter is to share with you some of the things I read as I stay on top of current issues and trends for my clients. 
If you were forwarded this email from a friend, please click here to subscribe for free, and consider sharing it with someone who might like to see it.

Here’s what I’ve been paying attention to over the last seven days:

New Lawsuits

  • The maker of Jeeter weed pre-rolls is facing a class action brought by California consumers who claim the product doesn’t have as much THC as advertised.  
  • A talent management company is suing a beauty product brand and its CEO for over $100k in unpaid invoices related influencer marketing services.  
  • A model who lost a lawsuit against Twitter for copyright infringement has amended her complaint to add a defendant with one of the racier names I’ve seen on a pleading.

    I can only imagine appearing in court for that defendant. “Good morning, your honor, John Smith appearing for defendant….uh, the other defendant.”

Legal News

  • Smashburger ran ads saying its “Trible Double” hamburgers contained “double the beef,” but consumers in a class action said those burgers had the same amount of beef, just split across two patties, and they wouldn’t have bought the burgers if they knew the truth.

    Smashburger has agreed to pay $5.5M to settle the case
  • A seller of novelty drinking glasses with bullets embedded them must pay $3M to their competitor, who sued under the Lanham Act for false advertising because the losing competitor advertised the glasses as being “Made in the USA,” when in reality, the glasses themselves were made in China, but the bullets were glued to the glass in the U.S.
  • Section 230 shielded TikTok from liability for the popular but incredibly risky (and in some cases fatal) “Blackout Challenge.” The mother of a child who died participating in the challenge sought to hold TikTok liable under products liability and negligence theories.

    She argued that TikTok had a duty to prevent its algorithm from recommending potentially deadly content to kids, and TikTok’s algorithmic recommendations are effectively TikTok’s own publication of content. But the court ruled that the algorithm simply promotes the work of others, so Section 230 shields the platform from liability.
  • This is a good overview of some of the potential revisions to the FTC’s endorsement guides.
  • Here is a quick high-level rundown of some of the issues to keep in mind if you run giveaways as part of your web3/crypto projects. 

Off topic:

Every year, I buy the new Call of Duty release and expect it to be different in some real way, and every year, it’s pretty much the same thing. But I bought it again this year. If you did too, and you want to hop in a game some time, send me a message so we can connect.

Thanks for making it this far.  Have a great weekend!

-Rob

This case is a great reminder for brands and influencers about usage rights and the importance of understanding creator agreements.

A model and creator is suing a beauty brand she partnered with in federal court for false endorsement and misappropriation of likeness.

Under the influencer agreement, the creator agreed to post 1 photo and 1 video to Instagram and granted the brand rights to that content only. Later, she discovered that the brand used another image (shown above) taken from her IG account and used that image to promote that brand in stores across the U.S.

Because she did not grant the brand usage rights to that image or her likeness more broadly, she sent a demand letter to the brand seeking $40,000 in additional compensation.

When the brand ignored the demand letter (never a good idea), she filed this lawsuit.

The brand has until August 22 to respond, and I’ll track this one as it progresses.

The issues presented here come up over and over again.

Brands often mistakenly assume that because they engaged a creator for one campaign, they can use that creator’s images and likeness however they want.

That’s not true, unless the agreement covers such usages.

Here are just a few of the issues that you want to consider as you (preferably through your legal team) draft your agreement:

-Who owns the rights to the content?

-Where can the content be used, and for how long?

-How is the influencer being paid, and when?

-What publicity rights are being transferred?

-Is there an exclusivity clause, and is everyone okay with its scope?

-Does the brand get to approve the content before it goes live?

-Where will you resolve disputes, and what law will apply?

-How do you terminate the agreement, and what happens when you do?

Thinking through all of these issues in advance will save you time and money down the road.

The Texas Attorney General is suing an influencer who sold online fitness and nutrition plans.

The lawsuit says she sold the plans “with the promise of personalized nutritional guidance and individualized fitness coaching.”

The price of the plans ranged from $92 for a one-week program, to $300 for a 3-month regimen.

But the AG says “the online nutrition and fitness plans delivered to consumers were not individualized.”

They also alleged she “failed to provide the promised coaching and check-ins, … largely ignored consumer complaints, or offered only partial refunds.”

Instead, customers complained that the check-ins and feedback they received were “generic and non-substantive, e.g., ‘You’re killing it!’”

The lawsuit also alleges that she charged customers a shipping fee, even though the plans were emailed.

The customers joined the influencer’s Facebook group, where they were able to compare plans and, according to the lawsuit, realize that they received the same “individualized” plans despite having different goals and starting metrics.

So why post about this?

It’s an important reminder to pay attention to the claims you make about the products and services you offer.

There’s nothing inherently unlawful about selling off-the-shelf template nutrition or workout plans.

And it may seem obvious that if you call something “personalized,” then you need to tailor it to each person.

But it’s also common for brands and influencers to include a word or two in their ad copy that conveys a certain meaning—intentional or not—that a significant portion of their audience will rely on when making a purchase.

Those one or two words, if they don’t accurately describe the product or service being sold, can make the difference between a successful business and a lawsuit from the government or a class action from customers.

So, it’s a good idea to review all of your ad copy, especially if you are selling a plan or a course, to make sure that you aren’t overpromising or phrasing things in a way that might carry a meaning you didn’t intend.

A music NFT project called Opulous featured Lil Yachty as “collaborating” on their NFT drops.

But he says he never agreed to be part of the project.

So, Yachty is suing Opulous, its music distribution partner, and that partner’s founder individually.

He’s asserting claims in California federal court for trademark infringement, false endorsement, and violations of his publicity rights.

According to the lawsuit, Yachty had intro conversations with the Opulous team who pitched their “music copyright-backed NFTs,” which allow people to buy fractional licenses to various music recordings and earn streaming royalties.

Ultimately, Yachty passed on the invitation.

But Opulous issued a press release and advertising campaign stating it was “kicking things off” with drops “led by world-famous artists including Lil Yachty.”

Opulous also used Yachty’s image in tweets and LinkedIn posts promoting the project.

This is not the first NFT project that I have read about where a musician’s likeness has been used allegedly without the artist’s permission or involvement.

While the context is new—NFTs as we currently know them are still in their relative infancy—the issues presented here are not.

It’s a mistake to think that the NFT or metaverse spaces are “unregulated,” which is something I hear repeated frequently.

IP rights, including publicity rights, exist everywhere.

And Yachty’s allegations present classic, straightforward claims for trademark and publicity rights violations.

While there are many novel legal issues that come with new technologies, it’s important to understand where the risks lie, old and new.

On the heels of a significant enforcement action against an ecommerce retailer over customer reviews, the FTC released two new guidance documents.

You might already know that the FTC has brought lawsuits against brands and marketers for hiding negative reviews, paying for positive reviews, creating fake reviews, failing to disclose incentives, and other deceptive acts.

Here are the bullet points, quoting from the new FTC docs:

For marketers:

• Don’t ask for reviews from people who haven’t used your product or service.

• Don’t ask staff to write reviews of your business unless they disclose that relationship.

• Don’t ask for reviews only from customers you think will leave positive ones.

• Don’t ask family and friends for reviews unless they disclose that relationship.

• If you offer incentives for reviews, don’t condition it on the review being positive.

• If you offer incentives, the incentive needs to be disclosed.

For review platforms and review sites:

• Don’t ask for reviews only from people you think will leave positive ones.

• If you offer incentives for reviews, don’t condition it on the review being positive.

• Don’t discourage or prevent people from leaving negative reviews.

• Have some process in place to verify that reviews are real.

• Don’t edit reviews to make them sound more positive.

• Treat negative and positive reviews equally: publish both; don’t feature some more prominently than others.

• Clearly disclose how you collect and display reviews and determine overall ratings.

When the FTC issues “guidance,” more actions typically follow.

But enforcement in this area isn’t new—some other examples:

-In 2015, the FTC sued AmeriFreight, a car shipment broker, because it showcased online customer reviews without disclosing that the reviewers were given discounts and entries into giveaways.

-In 2019, the FTC sued UrthBox for its practice of providing free products to customers in exchange for positive reviews and not disclosing the relationship.

-In 2020, the FTC obtained a $23.9M judgment against student loan debt relief operator who failed to disclose customers were paid to leave positive BBB reviews.

Ana De Armas appeared in the trailer for the 2019 film Yesterday, but she isn’t in the movie.

Fans who claim they only paid to rent the movie through Amazon because of her appearance in the trailer are suing Universal for false advertising.

The lawsuit is a proposed class action on behalf of everyone in California and Maryland who paid to see the movie.

The plaintiffs allege that “consumers were promised a movie with Ana De Armas by the trailer” but didn’t receive such a movie, so they “were not provided with any value for their rental or purchase.”

They claim that Universal couldn’t rely on the fame of the actors who actually appear in the movie to promote sales, so they used De Armas despite cutting her from the cast.

This case reminds me of the class action against Sega over the trailers for the videogame Aliens: Colonial Marines.

In that case, the plaintiffs claimed the promo videos for the game showed gameplay elements that weren’t included in the game itself.

Sega settled that case for $1.25M.

It will be interesting to see how Universal handles this one.

In the meantime, this is a good reminder to ensure that your ads don’t include claims about your products or services that might mislead some consumers as to the qualities and features of their purchases.

False advertising litigation more generally is common and expensive to deal with, even if you’re ultimately right.

Limiting risk early, where you can, will save time and money down the road.

Unless you’re the government, running lotteries is illegal in the U.S.

If you run a sweepstakes or giveaway as part of your NFT project (or anywhere else), you don’t want to risk having your promotion look like a lottery.

What’s the difference?

In a sweepstakes, entrants can win a prize for free based on chance alone.

No purchase, payment, or other consideration is needed, and the winner is picked at random.

In a lottery, the entrant has to give something of value (like buying a ticket or an NFT), called consideration.

So to avoid having your promotion be called a lottery, you need a free method of entry that counts the same as any paid methods.

It is a crime in every state to run a lottery.

And in California, you need to let people know, “clearly and conspicuously,” that no payment is necessary to enter.

As NFTs continue to grow in popularity, you can bet they will attract attention from regulators and plaintiffs’ lawyers.

It’s worth the effort to understand the risks you are taking with how you promote your NFT project, so that you can avoid a surprise lawsuit down the road.

If an influencer creates a TikTok promoting a brand, using music that’s not in TikTok’s commercial library, then that influencer risks committing copyright infringement unless they have a license from the rights owner.

And the brand and any ad agency involved in the campaign can be liable for the infringement too.

That might seem surprising—it’s extremely common to see popular songs in the background of influencer content.

But just because everyone is doing it doesn’t mean it’s allowed.

Sony Music’s recent lawsuit against Gymshark is just one example of how this problem can rear its head.

Sony sued Gymshark over hundreds of TikToks and IG videos that “include sound recordings featuring such chart-topping and award-winning artists as Beyoncé, Britney Spears, A$AP Rocky, and Calvin Harris.”

Sony’s complaint lays out how Gymshark pays influencers to create videos wearing and promoting Gymshark products and including popular songs.

Sony points to the IG and TikTok terms of service to support the infringement theory:

IG’s TOS says: “Use of music for commercial or non-personal purposes in particular is prohibited unless you have obtained appropriate licenses.”

TikTok’s says “NO RIGHTS ARE LICENSED WITH RESPECT TO SOUND RECORDINGS AND THE MUSICAL WORKS EMBODIED THEREIN THAT ARE MADE AVAILABLE FROM OR THROUGH THE SERVICE.”

Sony specifically alleges the “third-party influencer who created Gymshark videos have likewise infringed Plaintiffs’ copyrights” and that Gymshark is liable for contributing to that infringement.

So what the lesson from this?

If influencers have the creative freedom to pick sounds for their content, they should clear those sounds with the brand before posting.

The obligation to clear sound choice before posting is something that can and should be addressed by the brand/agency in the influencer agreement.

And if you’re the agency or the brand, claiming you didn’t know about the music or that you needed to clear rights won’t help you much from a legal perspective.

Gymshark has until January 25 to respond to the lawsuit, and it has told the court it plans to move to dismiss.

I’ll provide updates here as the case progresses.

A lot of people are afraid of contracts.

That’s because they are approaching the concept from the wrong perspective.

I often hear from people who are worried that a formal contract with scare off someone they’re looking to work with, because forcing someone to sign a document shows you don’t trust them.

It’s a mistake to allow those worries to convince you that you don’t really need to get whatever it is in writing.

True, not everything needs a 20-page agreement filled with legalese.

But every agreement that matters needs to be documented.

Think about it like this: contracts aren’t really about trust at all.

You build trust through your reputation and your work; not through your documents.

My friend Andy Frisella summed up this issue nicely in a recent episode of his podcast (I’m paraphrasing):

That fear of sending contracts isn’t an issue of trust but communication.

When you present that agreement to the other party, it should be with the intent that it will never need to be looked at again, unless an issue cannot be resolved through a conversation.

And if you get to that point, the contract is like an insurance policy—it’s there to help everyone navigate the impasse and get through it.

Of course, you should always make sure that you understand and are comfortable (or at least willing to live with) everything in a contract presented to you before you sign it.

If something seems unfair, or even if you just aren’t completely sure, have it reviewed by someone with experience who will look out for you.

But don’t be afraid of written contracts—use them to help protect your business so that you have an easier time building that trust.

On Monday, Meta sued a company called SocialData, which provides account metrics and other social media analytics data to its users.

Specifically, SocialData provided information about Instagram accounts, including username, follower and like count, post count, verification status, and demographic analysis of the account’s audience.

Meta alleges SocialData used thousands of automated bot IG accounts to collect and aggregate (i.e., scrape) the data and sold that data in the form of “Audience Data” reports.

What’s the problem?

For one thing, everyone who creates an IG account agrees to the Instagram Terms of Use, which prohibit “collecting information in an automated way.”

So, one of the claims against SocialData is for breach of contract—violating the Terms of Use.

Meta also asserts a claim for violation of California’s Comprehensive Computer Data Access and Fraud Act (the CDAFA), which is California’s version of the federal Computer Fraud and Abuse Act.

The relevant part of the CDAFA makes it unlawful to “knowingly access and without permission … make use of any data from a … computer system.”

Here, Meta says it sent SocialData a cease and desist letter explaining the violations and demanding that Social Data stop.

But SocialData responded saying it believed scraping data was “a fundamental right” and continued the alleged operations.

So, Meta says, SocialData knew it was accessing the IG computer system without permission, in violation of the CDAFA.

You might be wondering, “what about that LinkedIn decision that said scraping data is legal?”

SocialData said the same thing in response to the cease and desist letter.

It’s true that in hiQ Labs v. LinkedIn, the Ninth Circuit ruled that automated scraping of publicly accessible data probably does not violate the federal version of CDAFA.

But the U.S. Supreme Court “vacated” that ruling (meaning it has no effect) earlier this year, so it’s back before the Ninth Circuit for further review.

Meta’s pending lawsuits against SocialData and other analytics services (like BrandTotal) likely explain why services like IGBlade vanished in recent months.

There are rules about offering a “money-back guarantee” that brands and their customers should know.

The FTC’s rule is that a seller can use the terms “satisfaction guarantee,” “money back guarantee,” or similar language only if it “refunds the full purchase price of the advertised product at the purchaser’s request.”

The rule also requires that any “limitations or conditions that apply” need to be presented “with such clarity and prominence as will be noticed and understood” by customers.

In other words, if the guarantee doesn’t mean a complete, no-questions-asked refund, then the conditions need to be explained clearly enough that no one could miss it.

So, if you advertise a “60-day money back guarantee,” but the customer has to pay shipping, submit some kind of proof about using the product, or other condition, that needs to be set out clearly at the same time as the guarantee offer is presented.

A real-life example:

Last year, the FTC reached a $22M settlement with a manufacturer of a pain relief device.

Among other problems, the lawsuit alleged that the seller offered a “risk-free” and “money-back” guarantee, but that shipping and handling was not refundable.

The seller only disclosed that limitation in separate links on their website and at the bottom of invoices.

They also sometimes required “burdensome tasks” to obtain a refund, including proof of completing a treatment regimen—also only disclosed in separate links and on invoices.

Paying attention to your guarantee language up front can save a lot of trouble later.

Black Friday tip: make sure your subscription offers comply with the Restore Online Shoppers’ Confidence Act (ROSCA).

The FTC recently issued a statement warning the ecommerce industry that it plans to “ramp up” enforcement related to subscription programs that automatically renew.

The statement focused on three issues: consent, disclosure, and cancellation.

Consent:

The FTC says that marketers need “affirmative, informed consent” before charging customers for an automatic renewal or “negative option” program.

Affirmative informed consent means accepting the terms of a subscription “separately from any other portion of the entire transaction,” and the FTC specifically reiterated that pre-checked boxes don’t cut it.

Disclosure:

All of the terms of a subscription offer (e.g., initial payment, recurring costs, deadline to cancel, how to cancel) need to be “clearly and conspicuously disclosed” in simple language.

That means no hiding terms behind links or requiring customers to hover their mouses over anything on a site to see the terms.

Cancellation:

You need to give customers a simple mechanism to cancel through the method they used to sign up (e.g., signing up through an app means cancellation option through the app).

The FTC said marketers should not attempt to stop the cancellation by forcing customers to click through new offers or other barriers.

We are going to see more enforcement from this new FTC regime—they have explicitly promised it.

Now’s a great time to check over your practices to make sure you’re limiting risk.

Last week, the FTC sent more than 700 warning letters, each called a “Notice of Penalty Offense,” to brands and agencies around the country.

The letters list a series of marketing practices that the FTC has determined to be deceptive, including:

-Falsely claiming an endorsement (e.g., “used by Clint Eastwood” if that’s not true)

-Misrepresenting an endorser recently (or ever) used the product

-Using an endorsement to make deceptive performance claims (e.g., “I lost 150lb in a week”)

-Misrepresenting that a review or endorsement represents the actual experience or opinion of a user (e.g., giving reviewers a script that doesn’t match their honest belief)

-Misrepresenting that a review or endorsement reflects the typical user experience, and

-Failing to disclose a material connection with an endorser.

That last one is most relevant to influencer marketing.

The FTC requires disclosure of “material connections” between someone endorsing a product or service (like an influencer) and the business itself.

The idea is that a consumer might give less weight to a product review if they knew the brand was compensating the reviewer, so it’s a deceptive practice to hide the relationship from people making purchasing decisions based in part on the reviews.

This is why we have things like “# ad,” though that’s not the only way to disclose the connection.

While these FTC letters don’t accuse the brands and agencies of wrongdoing, they have the effect of giving notice that violations can result in penalties of up to $43,792 PER VIOLATION.

It’s been about a year and a half since we saw an FTC enforcement action targeting influencer disclosure issues.

These 700+ letters, and the FTC’s 5-0 vote to authorize them, show that these issues are back in the spotlight.

Now is a great time to take a look at your campaign compliance.

Earlier this year, U.S. Sen. Richard Burr, R-N.C., introduced Senate Bill 203, titled the Recognizing the Protection of Motorsports Act of 2017. The RPM Act would amend the Clean Air Act to clarify that it is legal to modify a road-going automobile into a racecar used exclusively on racetracks regardless of whether the car thereafter complies with the CAA’s emission standard. The RPM Act would also confirm that it is legal to manufacture, distribute, sell and install racing parts used to convert these vehicles for exclusive track use.

Read more about the possibility of EPA action in our Daily Journal article by clicking here.

On Jan. 13, 2015, the United States Supreme Court issued its long-awaited ruling in Jesinoski v. Countrywide Home Loans, Inc., No. 13-684, 2015 WL 144681 (U.S. Jan. 13, 2015) resolving a circuit split over the notice requirements that must be complied with under the Truth In Lending Act (TILA), 15 U.S.C. § 1601 et seq., for rescission of a home mortgage loan.

View full article on The National Law Review.