add logo of sponsor RISK AND REWARD

[add logo of sponsor] RISK AND REWARD: WHAT YOU SHOULD KNOW ABOUT REGULATORY AND LITIGATION RISK AFFECTING YOUR COMPANY’S MARKETING STRATEGIES IN 2015 January 21, 2015 Anaheim, California Sponsored by Crowell & Moring LLP Panelists: David Ervin Steven Allison Van Nguyen #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 1

[add logo of sponsor] Social Media – Endorsements #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 2

Social Media Platforms #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_3 3

Same Principles Apply To Marketing Through Social Media

Endorsements & Testimonials #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_5 5

FTC Revised Endorsement Guides

Key Requirements for Endorsements < Endorsements must represent the accurate experience and opinion of the endorser and describe the typical performance < Material connections must be disclosed #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_7 7

When is a statement an endorsement?

Why does it matter? < Advertisers may be liable for an endorser’s actions. – Failure to disclose connections – False claims < Advertisers may be liable even if they did not authorize, approve, or use the claims. < Risks can be greater for use of celebrity endorser who is professionally-trained actor, has millions of social media followers and appears regularly in press and media. 9 #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_9 9

Disclosing Material Connections 10 #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_10

Disclosing Material Connections

Disclosing Material Connections

Disclosing Material Connections #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_13 13

Disclosing Material Connections

Staying Out of Trouble

Staying Out of Trouble

Staying Out of Trouble

Staying Out of Trouble #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_18 18

Staying Out of Trouble

Staying Out of Trouble < FTC decided to not enforce: – Case of first impression – had not previously publicly addressed whether entry into a contest is a material connection or whether a pin may constitute an endorsement – Limited duration and limited contestants – Cole Haan has since adopted a social media policy #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_20 20

Social Media Policies Really Matter < Hyundai Blogging Campaign – Bloggers received gift certificates as an incentive to include links to Hyundai videos in their posts or to comment on Hyundai’s Super Bowl ads < – FTC’s position: Advertiser providing gift to blogger for posting specific content promoting the advertiser’s product constitutes a material connection that needs to be disclosed #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_21 21

Social Media Policies Really Matter

The Power of Policies < FTC investigation re: Nordstrom Rack promo event “Tweet. Up” for new store < Nordstrom provided “social influencers” with gifts to promote store opening < FTC closes investigation Feb. 2013 for two reasons: – Some influencers did disclose gifts – Nordstrom revised social media policy to address FTC’s concerns < Key to defense – social media policy and efforts to comply 23 #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 23 090701_23

FTC Provides Guidance on Disclosures #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_24 24

. com Disclosures < In 2013, the FTC released the “. com Disclosures” < Originally released in 2000 to address ads on websites < Updated to broaden scope to include social media < Addresses advertising or promotional messaging via Twitter or other virtual media < Examples of how to comply with the law: “Ad” or “#Sponsored” (not #spon) in the tweet < Advice to avoid buried or generically labeled hyperlinks < Also not a good idea to use pop-ups #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_25 25

Disclosures #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_26 26

Disclosures #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_27 27

Disclosures #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_28 28

[add logo of sponsor] Telephone Consumer Protection Act I’m Not A Telemarketer – Why Should I Care? #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 29

Cell Phone Based Marketing Has Arrived

Text Message Marketing Is Especially Attractive

Industries Using Mobile Marketing Are Not Traditional Telemarketers

Example – Carl’s Jr. Text Campaign #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_33 33

Risks Increase

Recent TCPA Settlements

TCPA Text

TCPA Text – Key Terms

What is a “Call”?

What is An “Autodialer”?

Broad View: Every Computer Might Be an Autodialer

Narrow View: Only Present Capacity Makes It An Autodialer

How To Break The Tie?

What is “Prior Express Consent”?

Who is Liable?

What to Do to Limit Liability?

If Lawsuit Happens

[add logo of sponsor] Native Advertising #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 47

Native Advertising Sponsored Content Custom Content Brand Journalism Content Marketing Content Integration Advertisergenerated Content Thought Leadership Sponsored Micro-sites Paid Links Product Placement Brand Content Advertorial Advertising Content Embedded Advertising Hybrid Advertising Disguised Advertising #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_48 48

Definitions of “Native Advertising” < Advertising that is intended to blend seamlessly with the medium on which it’s displayed < Blending advertisements with news, entertainment, and other editorial content in digital media. < Advertising that is maximally compatible in form and function with the editorial content of the medium. < Ads designed to look and feel like editorial content. < Ads integrated into the design of the publisher’s site. < “Native Advertising” – Form & Function differentiate #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_49 49

Native Ad Spending Trends #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_50 50

Sponsored/Branded Content Publisher-Produced Brand-Produced 090701_51 51

Brand Journalism #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_52 52

Sponsored Articles #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_53 53

Sponsored Articles: Brand Integrity < The Atlantic ran an advertorial on the growth of Scientology < The article was sponsored by the Church of Scientology but resembled other Atlantic articles < Readers went into uproar 54 090701_54

Content Syndication: Twitter & Vine #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_55 55

In-Stream Native Advertising In-Feed Ads Search & Promoted Listings 090701_56 56

Sponsored Tweets & Posts #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_57 57

Promoted Listings #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_58 58

Promoted Listings #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_59 59

Regulatory Risks & Claims § Federal Trade Commission (FTC) • Unfair or deceptive acts or practices in or affecting commerce; 15 U. S. C. § 45 § National Advertising Division (NAD) § Misleading, untruthful, or unsupported advertising § Consumer Litigation § Unfair or deceptive acts or practices § Cal. Bus. & Prof. Code § 17200 § N. Y. Gen. Bus. Law §§ 349(a), 350 -a(1) #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 60 090701_60

Disclosing Sponsored Content: Qualcomm, NAD Case Reports, Case #5633 (2013) #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_61 61

Labeling “Editorial” Content American Media, Inc. , NAD Case Reports, Case #5665 (2013) < “SHAPE Water Boosters” promoted in article captioned as “NEWS” in the September 2013 issue of Shape Magazine. < Decision: NAD recommended that Shape Magazine “clearly and conspicuously designate content as advertising when it promotes Shape-branded products. ” < Readers of Shape Magazine “may reasonably believe that editorial recommendations in [the magazine] are independent of the influence of a sponsoring advertiser. ” #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 62 090701_62

Unbranded Editorial Content: Widgets § Taboola Decision: When consumers are linked to sponsored content in a context which consumers may reasonably understand to be editorial, consumers should be advised that the link is sponsored through the use of clear and conspicuous disclosures. § Governing Principles: § Consumers must be advised when linked content is sponsored. § Consumers can be misled if a party “induces the first contact through deception, even if the buyer later becomes fully informed. ” #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 63 090701_63

Best Practices: Transparency and Disclosure are Critical There should be clear labeling of native ads. #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_64 64

[add logo of sponsor] Gift Cards #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 65

Gift Card Overview

Federal Gift Card Law: What It Covers

Federal Gift Card Law: What is Required

State Laws: Some General Trends

Escheatment: Jurisdiction Issues < First Priority Rule: state law of owner applies when issuer knows name and address; most gift card programs designed to avoid – Texas v. New Jersey, 379 U. S. 674 (1965) < Second Priority Rule: state law of issuer’s domicile when owner’s name/address unknown (e. g. , state of incorporation) – Delaware v. New York, 507 U. S. 490 (1993). < “Third Priority Rule”: despite being rejected twice by Supreme Court under the 11 th Amendment, number of states apply transaction-based rule to assert jurisdiction for property when no other state law requires escheatment: – AL, AK, AZ, DC, GA, ID, IA, LA, ME, MI, MT, NH (>$100), NJ, NM, TX, UT (>$25), WV, MY – New Jersey 2010 law invalidated: New Jersey Retail Merchants Ass’n v. Sidamon-Eristoff, 669 F. 3 d 374 (3 d Cir. 2012) #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_70 70

State of Delaware ex rel. French v. Card Compliant, LLC, et al. , N 13 C-06 -289 (Superior Court of Delaware, New Castle). #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_71 71

Card Compliant qui tam case #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_72 72

Card Compliant case: Risk Profiles < Third party gift card service providers appear to be at risk: – Case will likely decide whether contract is enough < Subsidiary issuer entities: – Critical to maintain separateness and corporate formalities (e. g. , office) – Essential that at least breakage be held in subsidiary bank account < Redemption rates: rates below 60% increase risk < Publicly-traded company filings: – Revenue recognition statements provide roadmap for regulators < Gift card programs older than 7 years: – No statute of limitations. DE looks back to 1981, CA even further – Extrapolation and estimation methods trump document retention policies < Gift card issuers that have escheatment reporting system due to nature of business: – Track record of reporting allows regulators to compare against breakage – Once issuer starts escheatment reporting, must continue in perpetuity #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_73 73

Warning Bell for Gift Card Issuers < Assess potential exposure. Assess program to gauge the potential for exposure under state unclaimed property and false claims act statutes by examining: – Structure of the gift card program – The contract and communications with any third-party card issuers or program managers – Internal communications concerning the structure of the card program or escheatment reporting – How gift card proceeds and unused balances were tracked and accounted for – Any public financial disclosures impacted by revenues from gift cards. < Monitor the litigation. Some potential outcomes: – How gift card programs should be designed and implemented – Which state’s unclaimed property law applies to card programs with sponsors, issuers, and program managers in different states – Whether corporations with gift card programs should consider reporting and paying unused balances to Delaware or other states. < Analyze options for restructuring gift card programs. – Be proactive in analyzing options for card programs under various legal scenarios that could emerge in the aftermath of the Card Compliant litigation. – Strong incentives for private individual litigants to bring qui tam actions on behalf of states in pursuit of prepaid card balances from corporations. #IHCC 15 2015 ACC-So. Cal In-House Counsel Conference 090701_74 74

Panelists

Significant Take-Away Points

11 th Annual In-House Counsel Conference January 21, 2015 (Anaheim, CA) www. acc. com/chapters/socal/ #IHCC 15 77 000000_77