| Happy Holidays! As we anticipate the arrival of 2024, Olshan’s Advertising and Branding legal teams are excited to present our insights on trends we expect to dominate the legal landscape next year. Keep these developments in mind when shaping your marketing and branding strategies and compliance efforts in the upcoming year. |
CRACKING DOWN ON JUNK FEES
Politicians and regulators are rallying against undisclosed fees that significantly inflate the final cost of consumer purchases, such as hotel bookings, ticket purchases, car rentals, credit card usage, and loans. Their focus? Demanding transparent pricing. Proposed federal and state laws aim to compel marketers to present the complete price, inclusive of all obligatory fees and charges, and to eliminate “junk fees” that materially increase a price.
In Congress, the “Junk Fee Prevention Act” is on the table, pushing for sellers to conspicuously display the total price, encompassing mandatory fees, in every advertisement and initial consumer interaction. This legislation would also grant authority to the FTC to promulgate corresponding regulations. Acting independently, the FTC recently proposed a rule to outlaw hidden fees, barring businesses from advertising prices that obscure or omit mandatory fees. Furthermore, this rule would mandate that sellers disclose fee amounts, their purposes, and refundability upfront. Similar restrictions are being proposed by other federal regulators. Comments can be submitted to the FTC until January 8, 2024.
States are also taking action. This year, California passed Senate Bill 478, prohibiting advertising of prices that exclude mandatory fees or charges (excluding government-imposed taxes or fees), effective July 1, 2024. Recently, the Massachusetts Attorney General proposed regulations requiring pricing advertisements to prominently feature the total cost of goods or services—excluding taxes, shipping, and government fees—prior to gathering consumer information. Comments on the proposed Massachusetts regulations are due by December 20, 2024.
Expect this to be a hot regulatory item in 2024. Marketers should carefully check their pricing disclosures to be sure that all fees are justified and properly disclosed.
CONTINUED SCRUTINY: CURBING AUTO-RENEWAL PROGRAMS AND ONLINE CANCELLATION
Both federal and state legislators and regulators continue to focus on auto-renewal/continuous service programs, particularly emphasizing the necessity of online cancellation for orders initiated via the Internet. In March 2023, the FTC aimed to modernize its “negative option rule,” aligning it with state laws and increasingly common continuity programs. The proposed FTC Rule Concerning Recurring Subscriptions and Other Negative Option Plans would mandate disclosure of continuity program terms and cancellation processes before acquiring a consumer’s billing information. Moreover, it would mandate explicit informed consent for the negative option feature and would require “click to cancel” for online orders. Inspired by California’s existing law, the proposed rule aims to limit unsolicited “save” offers. Recently, the FTC announced plans for a virtual informal hearing on January 16, 2024, to discuss these proposed amendments.
States are also actively introducing laws and regulations pertaining to automatic renewals. Most notably, Massachusetts proposed enhanced regulations requiring not only online cancellation but also elevated compliance responsibilities concerning renewals. Earlier this year, states such as Virginia and Kentucky enacted their own measures similarly restricting automatic renewal plans and cancellation.
Private plaintiffs have also joined in the fray, bringing proposed class actions against marketers who fail to offer online cancellation options when accepting online enrollment.
For marketers who offer continuous service programs, it is critical to re-evaluate their enrollment and cancellation paths to address these evolving standards.
FTC CONTINUES TO FOCUS ON ENDORSEMENT AND REVIEWS
Significant developments in the FTC’s treatment of endorsements and reviews occurred this year. In June, the FTC finalized its revised Endorsement Guides. In addition to adding a definition of “clear and conspicuous,” explaining the potential liability advertisers, endorsers and intermediaries, and highlighting child-directed advertising as an area of specific concern, the revised guides include a new principle regarding procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, or editing consumer reviews that can alter how consumers interpret a product. In addition to the revised Endorsement Guides, the FTC has proposed a new rule that would specifically address deceptive practices involving consumer reviews. Further, it has continued to pursue enforcement actions against advertisers that utilize such consumer reviews in what the FTC purports to be a deceptive manner. For example, this year the FTC reached a settlement with room and roommate-finder platform, Roomster, in relation to charges that the company bought fake reviews to encourage consumers to pay for the platform. The FTC’s rulemaking process will continue into 2024, and we expect that the FTC will continue to prioritize this issue through both the rulemaking process and potential enforcement efforts.
FCC POISED TO SHORTEN THE LEASH FOR LEAD GENERATORS
Although not final as of the time this is being published, the FCC is poised to make life difficult for lead generators and the companies that rely on them. In late November, the FCC proposed a rule that would require texters and robocallers obtain prior express written consent that is specific to a single seller in order to comply with the Telephone Consumer Protection Act. The problem, according to the FCC, is the “lead generator loophole,” which currently allows lead generators to obtain consent on behalf of multiple sellers from consumers who complete a single lead form, often hyperlinked to a long list of sellers. The FCC is expected to pass the rule during in mid to late December, effective in 2024. Another possible change will be extending the National Do-Not-Call Registry to text messages instead of just phone calls.
PRIVACY LAWS CONTINUE TO EVOLVE
Privacy laws relating to the collection and use personal information continue to be a hot topic for 2024. While there is still no over-arching federal privacy law in the United States, several states have passed privacy laws that affect businesses that collect (whether online or off-line) and use personal information. California, Connecticut, Virginia, and Colorado already have privacy laws in effect. Utah’s privacy law goes into effect on December 31, 2023. Five more states’ privacy laws will become effective in 2024 – Washington (3/31/24), Oregon (7/1/24), Texas (7/1/24), Florida (7/1/24), and Montana (10/1/24). Additional state laws will become effective beyond 2024 – Delaware (1/1/25), Iowa (1/1/25), Tennessee (7/1/25), and Indiana (1/1/26). Beyond the laws that have been enacted, numerous state legislatures will be reviewing and debating proposed privacy legislation in 2024, namely: Missouri, Wisconsin, Michigan, Ohio, Pennsylvania, New Jersey, North Carolina, Maine, and Massachusetts.
While these laws are all somewhat different, the main provisions of the laws are fairly consistent. Namely, the laws apply to businesses that meet certain thresholds (typically $25 million in gross annual revenue), maintain a database with a certain number of residents from the states involved (typically 50,000 to 100,0000), or earn more than 50% of revenue from “selling” personal data. The laws also apply regardless of where a business is located if the business collects data from individuals residing in the states that have enacted privacy laws.
The laws require businesses to provide clear and concise notice to the individuals from whom data is collected detailing how the business collects, uses, and shares such information and allow such individuals to opt out of certain types of uses (typically use for advertising purposes). Businesses must also allow individuals access to the personal information maintained and must delete personal information upon request from such individuals. The laws also require that businesses enter into written agreements with service providers and third parties with whom personal information is shared, and the various laws contain specific provisions that must be included in such agreements.
The landscape of privacy laws is complex and ever-changing, and all businesses should look to review and update their privacy practices in 2024 to assure compliance with these developing laws.
AI TO RECEIVE INCREASED GOVERNMENT SCRUTINY
2024 is poised to be a year that the FTC increase its authority over the abuse of artificial intelligence in advertising. FTC chair Lina M. Khan wrote in a New York Times opinion piece, “As companies race to deploy and monetize A.I., the FTC is taking a close look at how we can best achieve our dual mandate to promote fair competition and to protect Americans from unfair or deceptive practices.” In late November, the FTC authorized its staff members to begin issuing non-public subpoena-like information demands for products and services that use or claim to be produced using AI. One of the FTC’s main concerns will be how AI uses consumer data. For example, in 2023, Amazon was accused of, and settled charges, that its Alexa software indefinitely kept recordings of children in order to perfect its voice recognition algorithm.
ARTIFICIAL INTELLIGENCE AND INTELLECTUAL PROPERTY
Next year will likely see recommendations and rules from the U.S. Patent and Trademark Office (USPTO) and the U.S. Copyright Office in relation to artificial intelligence and its impact on intellectual property. Recognizing the lack of laws governing AI, on October 20, 2023, President Biden issued an Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (Order). The Order acknowledges AI’s “extraordinary potential for both promise and peril,” and parts of the Order deal specifically with intellectual property.
In the Order, the USPTO is directed to publish guidance to USPTO patent examiners and applicants addressing the “use of AI, including generative AI, in the inventive process” and how “inventorship issues ought to be analyzed” in terms of AI. The Order further requires that the USPTO Director “issue additional guidance to USPTO patent examiners and applicants to address other considerations at the intersection of AI and IP.” The USPTO has thus far refused to grant patent protection to any invention created by AI as the Patent Act seems to mandate that a patentable invention must be created by a human. Questions remain, however, as to inventions created in part by AI.
The Copyright Office has also been directed to issue recommendations relating to the use of AI and copyrights, including the scope of protection for works created using AI and the manner in which copyrighted works can be used in AI training. Prior to the issuance of the Order, the Copyright Office published a “Notice of inquiry and request for comments” regarding AI and (a) the copyrightabilty of works created by AI, (b) the use of copyrighted works to train AI, (c) the liability for infringing works created by AI, and (d) the treatment of generative AI that imitates human artists. The Copyright Office has consistently taken the position that works created by AI are not capable of copyright protection because a copyrightable work, like a patentable invention, must be created by a human. There are many other issues that remain unresolved.
Although the Order does not specifically mention trademarks, the Order lists as a guiding principle that AI and related technologies must be used to “promote competition.” A concern with the use of AI systems is that AI may favor larger companies when recommending products to consumers, making it more difficult for small companies to compete, and one can easily see how larger companies with significant resources could use AI to quell competition, giving rise to potential claims of unfair competition or infringement.
What key legal issues do you see in the near future? Share your thoughts with us. Of course, if you have any questions on these or other issues, please reach out to us.
Olshan Branding Group:
Andrew Lustigman (alustigman@oslhanlaw.com), Mary Grieco (mgrieco@olshanlaw.com), Scott Shaffer, Claudia Dubón (cdubon@olshanlaw.com), Morgan Spina (mspina@olshanlaw.com), Steve Gursky, Lee Sporn, Elizabeth Nunn, Lillian Chilton, Kathleen Northrop, and Yvonne Lee
