Do-Not-Call Registry Coming Soon

By the end of 2003, the telemarketing industry may see profound changes. Congress has funded a national “do-not-call” registry that will apply to most interstate telemarketing calls. Starting this July, consumers who wish to pull the plug on telemarketers may register their home and cellular phone numbers, free of charge, with the Federal Trade Commission (FTC). As of October, telemarketers must scrub their call lists against the registry at least once every 90 days. Telemarketers who call numbers on the registry will face fines of up to $11,000 per violation.

What impact will the registry have on marketers? The billion dollar question is just how many consumers will sign up. Also, some types of calls Ñ including those from long-distance phone companies and intrastate telemarketers Ñ are, for the moment, exempt from the registry. However, since the registry has strong political appeal, it is likely to be expanded at the federal and state levels. Here in California, proposed Senate Bill 33, introduced by Senator Liz Figueroa, effectively would extend the national registry to calls originating and terminating within the state. While it is too early to pen an obituary, the registry could deal a major blow to the telemarketing industry and push marketing dollars down other avenues.

Victor Wins a Round with Victoria

Holders of famous trademarks often take aggressive legal action against small businesses bearing similar names. In a March 4 decision, the Supreme Court sided with the little guy. Victoria’s Secret, a major lingerie retailer, filed suit against Victor’s Little Secret, a retail store in Kentucky that sold lingerie, “adult novelties,” and a variety of other items. Victoria’s Secret claimed that its name would be blurred and tarnished by the similar name of its tiny competitor. In ruling for Victor’s Little Secret, the Supreme Court stated that the “mere fact” that consumers mentally associate “Victor’s Little Secret” with “Victoria’s Secret” is not sufficient to prove actual trademark dilution. For example, “even though Utah drivers may be reminded of the circus when they see a license plate referring to the ‘greatest snow on earth,’ it by no means follows that they will associate ‘the greatest show on earth’ with skiing or snow sports, or associate it less strongly or exclusively with the circus.”

Nike Hopes for a Swoosh at the High Court

Last spring, the California Supreme Court ruled that Nike Inc. could be liable under a deceptive advertising theory if it made untrue statements about its overseas labor practices. Nike and other companies have claimed that the ruling will have a chilling effect on corporate speech in violation of the First Amendment. The U.S. Chamber of Commerce went so far as to say that “California’s draconian regime is deterring speech around the globe.” The U.S. Supreme Court will take up the Nike case in April and should issue its decision by June. In plaintiff-friendly states like California, the ruling could have a major impact on corporate public relations campaigns.

Media Squeezed by Regulators and Advertisers

The FTC has called on the media to reject “obviously deceptive” ads for weight loss products. Within the next few months, the agency will issue a list of “scientifically unfeasible” claims, such as assurances that consumers who take pills will shed pounds while still enjoying unlimited amounts of high-calorie foods. According to FTC Chairman Timothy Muris: “We’re not asking media outlets to review clinical studies or other substantiation for weight loss ads.” Rather, the “clearance process would simply mean comparing the claims in an ad with the claims on our list and making any necessary cuts.” Whether or not the media actually uses the FTC “taboo list” to screen ads for weight loss products, we can expect that the list will be used in false advertising suits filed by California prosecutors and private plaintiffs’ attorneys.

Advertisers sometimes shove back. IDT Corporation recently sued CNN, in state court in New Jersey, for failing to run an ad promoting its telephone service. IDT asserted that CNN is a “vital public facility” that declined to run IDT’s ads for fear of offending IDT’s competitors. The suit appears to be a long shot, but already it has garnered some publicity for IDT.

Internet Advertisers Beware

What happened to Mrs. Fields Cookies and Hershey Foods may happen to you. Both companies paid civil penalties to the FTC for violating the Children’s Online Privacy Protection Act Rule. The rule, which took effect three years ago, applies to operators of commercial Internet sites and online services directed to children under the age of 13 as well as to general audience sites and services that knowingly collect personal information from children. The rule requires, among other things, that web site operators obtain verifiable consent from a parent or guardian before collecting personal information from children. For example, according to the FTC, Mrs. Fields erred by promoting clubs that sent birthday greetings and coupons for free products. The company allegedly collected names, addresses and birth dates from over 84,000 children without obtaining parental consent. Even though Mrs. Fields did not share the information with third parties, it still violated the FTC’s rule.

Advertising & Marketing Law Update is a publication of Downey Brand LLP