Spring Has Sprung, And The FTC Is In Full Bloom

Spring Has Sprung, And The FTC Is In Full Bloom

April 20, 2017

Commission sends letters to 90+ influencers and marketers regarding social media endorsement requirements, enforces Made in the USA claim standards, hosts hearing health workshop, and implements Trump directive.

Within the last few days alone, the Federal Trade Commission (FTC or the Commission) has:

  • Announced that it recently sent letters to more than 90 celebrities, athletes, other influencers, and marketers regarding clear and conspicuous disclosure of influencer relationships with brands that must be made in social media posts when there is a material connection between an endorser and an advertiser;
  • Approved final consent orders settling charges that two companies made misleading Made in the USA claims;
  • Hosted a public workshop to examine competition, innovation, and consumer protection issues raised by hearing health and technology, especially hearing aids; and
  • Shared what it is doing to implement “aggressively” a Trump administration directive aimed at eliminating wasteful, unnecessary regulations and processes.

Disclosures in Social Media Endorsements

On April 19, 2017, the Commission issued a press release and posted on its blog regarding its letters to more than 90 celebrities, athletes, other influencers, and marketers regarding clear and conspicuous disclosure of influencer relationships with brands that must be made in social media posts when there is a “material connection” between an endorser and an advertiser. The letters followed a petition filed by Public Citizen, Campaign for a Commercial-Free Childhood, and Center for Digital Democracy regarding influencer advertising on Instagram, as well FTC staff reviews of influencer posts on Instagram.

FTC pointed out that the legal responsibility for disclosing the influencer/brand relationship is a two-way street, in that influencers should clearly let people know about material connections and marketers should ensure that such disclosures are made, usually through influencer education and monitoring. While the letters, FTC’s Endorsement Guides, and FTC’s brochure, FTC Endorsement Guides: What People are Asking, offer a number of specific examples to guide influencers and marketers, the Commission offered the following general advice regarding social media disclosures in its recent announcement:

  • Keep disclosures unambiguous;
  • Make disclosures hard to miss; and
  • Avoid hard to read disclosures that are buried in a string of hashtags.

Made in the USA Claim Enforcement

On April 18, 2017, the Commission announced that it had approved final consent orders settling charges that iSpring Water Systems, LLC, a Georgia-based distributor of water filtration systems, and Block Division, Inc., a Texas-based distributor of pulley block systems, made misleading Made in the USA claims. FTC noted that in many instances, despite iSpring’s false, misleading, or unsupported claims, products either were wholly imported or are made using a significant amount of inputs from overseas. With regard to Block Division, the Commission alleged that the company used unqualified “Made in USA” claims in advertising to represent that certain products and the parts used to make them were all or virtually all made in the United States. However, FTC’s complaint stated that the company’s products included significant imported parts that were essential to the function of the products at issue.

These orders follow in a long line of FTC U.S. Origin claim enforcement actions, as evidence by the Commission’s Made in the USA page, which features a number of cases and closing letters. The FTC’s Enforcement Policy Statement on U.S. Origin Claims outlines both the Commission’s “Made in the USA” standard and FTC’s determination that unqualified U.S. origin claims should be substantiated by evidence that a product is all or virtually all made in the United States. Beyond the Policy Statement, the Commission has issued a Complying with the Made in USA Standard guidance, which answers many U.S. Origin claim frequently asked questions (FAQs).

Hearing Health and Tech Workshop

On April 18, 2017, the Commission hosted a public workshop in Washington, D.C. to explore competition, innovation, and consumer protection issues raised by hearing health services and technology. The goal of the workshop was to bring together researchers, health care providers, industry representatives, consumer representatives, policymakers, and other stakeholders to discuss how enhanced competition and innovation might increase the availability and adoption of hearing aids by consumers who need them.

One of the likely geneses of the workshop, and something we discussed previously, was the U.S. Food and Drug Administration’s (FDA or the Agency) announcement last December via a rare “immediately in effect” guidance document that it does not intend to enforce the Agency’s “Condition for Sale” requirements for Class I air-conduction hearing aids and Class II wireless air-conduction hearing aids. Previously, and under FDA’s “Condition for Sale” requirements, such hearing aids were only available upon a medical evaluation or by signing a waiver to forego such an evaluation. Beyond FDA’s deregulatory action, FTC’s workshop also follows on the heels of the October 2015 recommendations of the President’s Council of Advisors on Science and Technology (PCAST), the comments received at FDA’s April 2016 workshop, “Streamlining Good Manufacturing Practices (GMPs) for Hearing Aids,” and the June 2016 report of the National Academies of Sciences, Engineering and Medicine (NAS), “Hearing Health Care for Adults: Priorities for Improving Access and Affordability.”

In its call for public comments ahead of the workshop, FTC asked, among other things, “To what extent are hearing aids, PSAPs [personal sound amplification products] or ‘hearables’ interoperable with different adjustment or programming tools, as well as other technologies and communications systems?” This question almost certainly contemplates hearing aid compatibility (HAC) with wireless phones. Despite the benefits that hearing aid deregulation could afford consumers, from decreased cost to increased choice and convenience, one must wonder how deregulating many hearing aids will impact consumers’ ability to use their hearing aids with wireless phones. Coupling a hearing aid device with a wireless handset requires HAC ratings both of wireless handsets and of hearing aid devices. While the wireless industry already provides HAC ratings of handsets on a large scale, consumers still do not have ready access to HAC ratings of their hearing aid devices. Given large scale hearing aid deregulation, it seems possible that hearing aid device HAC ratings could become an unintended casualty. And without the assistance of professionals to assist hearing impaired consumers with coupling their hearing aids with their wireless handsets, it will be up to regulators to engage the hearing aid industry so that consumers have access to hearing aid device HAC ratings.

FTC Reform

Finally, on April 17, 2017, the Commission released details of its plans to implement aggressively a Trump administration directive aimed at eliminating wasteful, unnecessary regulations and processes. Acting Commission Chairman Maureen K. Ohlhausen stated that she “welcomed the President’s directive, and [that FTC is] already working hard to achieve it.”

To that end, the following initiatives are already underway at the Commission:

  1. New groups within the Bureau of Competition and the Bureau of Consumer Protection are working to streamline demands for information in investigations to eliminate unnecessary costs to companies and individuals who receive them.
  2. Both enforcement Bureaus are reviewing their dockets and closing older investigations, where appropriate.
  3. The entire Commission continues to work to identify unnecessary regulations that are no longer in the public interest.
  4. The Bureau of Consumer Protection is actively reviewing closed data security investigations to extract key lessons for improved guidance and transparency.
  5. The Bureaus of Consumer Protection and Economics are working together to integrate economic expertise even earlier in FTC investigations to better inform Commission decisions about the consumer welfare effects of enforcement actions.
  6. Acting Chairman Ohlhausen has established a new capability within her office to collect and review ideas on process streamlining and operational efficiency opportunities from across the Commission.
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