Advertising Law In 2024: Attorneys Tuning In For ‘Clean Beauty,’ ‘Dark Patterns’ Developments
Attorneys are watching how the Federal Trade Commission and other authorities address online marketing practices this year that are increasingly viewed as potentially harmful to consumers.
2024 promises to be a busy year in the regulation of digital advertising, data privacy, and AI as it relates to intellectual property.
Rulemaking proposed by the US Federal Trade Commission stands to impact common online marketing practices increasingly viewed as "dark patterns" as well as ratings and review fraud, while enforcement of varying state privacy laws is expected to ramp up, among other burgeoning challenges for digital marketers.
Meanwhile, high-profile federal court cases are likely to provide legal clarification this year around use of "clean beauty" claims in the cosmetics space.
Read attorney responses to HBW Insight’s prompt:
Kelley Drye & Warren
... ratings and reviews.
As product reviews have become central to marketing plans and consumers’ purchase decisions, up has popped the fake review industry, which is valued at more than $1 billion dollars. That is a lot of money being directed to bump up the reputations of products and businesses. Both government and tech companies understand the value of these reviews, but are struggling to prevent rampant fraud. Despite these efforts, many consider the problem unsolvable and likely to get worse as artificial intelligence makes the reviews easier to write and avoid detection. How effective can the FTC and state regulators be in policing ratings and reviews? And how committed will review platforms and tech companies be toward that objective when the ratings and reviews lead to sizeable profits? Expect this problem and corresponding crackdown to grow substantially in 2024.
Read Villafranco’s take on the FTC’s revived penalty offense authority and prospects for collecting civil penalties from alleged violators.
Amin Talati Wasserman
‘Dark Patterns’ was a buzzword in the consumer protection world in the last year and a half, with the FTC ‘bringing them to light’ with a workshop and report. The FTC describes ‘dark patterns’ as increasingly sophisticated user interface (UX) design practices that trick or manipulate consumers into buying products or services or giving up their privacy. While the FTC views ‘dark pattern’ tactics as violating Section 5 of the FTC Act, over the past few months the FTC has proposed trade regulation rules that take aim at dark patterns as they appear in common marketing practices, potentially exposing companies that violate these rules to steep civil penalties. Some of these rules might go into effect in 2024.
- Rule on Unfair or Deceptive Fees, or the ‘Junk Fee’ rule: The FTC proposed a rule that would prohibit advertisers from omitting mandatory add-on fees from advertised prices, or misrepresenting the nature and purpose of fees with vague names that do not adequately disclose what consumers are paying for. The total advertised price would have to be disclosed at the beginning of a transaction and all add-on fees would need to be clearly described. The Notice and Comment period for this rule was extended to February 7, 2024.
- Amended Negative Option Rule: The FTC highlighted automatic renewal plans as a plagued with dark pattern tactics. The proposed amendments to the Negative Option Rule would be expanded to more broadly cover subscriptions and recurring payments, include a ‘click to cancel’ provision that would require it to be as easy to cancel recurring charges as enroll, require sellers to obtain consent before pitching ‘save’ offers to consumers who reach out to cancel, and to require annual reminders for some types of automatic renewal plans. The Notice and comment period has now closed, and the FTC set an informal hearing on January 16, 2024 to discuss the proposed Amendments to the Rule.
- Rule on the Use of Consumer Reviews and Testimonials: The rule would ban clearly deceptive and unfair practices involving reviews and endorsements – for example, fake reviews, review hijacking, paid reviews, reviews written by company insiders, buying positive or negative reviews, company controlled review websites that appear to be independent, illegal review suppression, and the sale of fake social media indicators. The comment period closed on September 29, 2023 and the FTC posted 105 comments to its website.
As a result, I anticipate that companies will seek to improve transparency by addressing marketing practices the FTC has branded ‘dark patterns’ as they become aware of the heightened risk of regulatory enforcement.
… defining clean beauty.
The term has been around for years, and with the global clean beauty market expected to approximate $15bn by 2030 it’s clear that consumers are increasingly demanding so-called ‘non-toxic,’ ‘clean,’ or ‘natural’ products. But what these terms mean legally has been the subject of intense debate. In 2024, we’re expecting to see decisions in two federal court cases involving retailers’ ‘clean b2eauty’ programs, clarifying whether their definitions of clean match up with those of certain consumers. You’ll also see additional litigation involving cosmetics marketed as ‘clean,’ but which may contain per- and polyfluoroalkyl substances (PFAS), benzene contaminants, or so-called endocrine disrupting chemicals. Finally, in 2024, FDA will begin requiring labeling of fragrance allergens in cosmetics products, and propose mandatory good manufacturing practices for cosmetics manufacturers. All of these decisions will affect whether or how clean beauty is legally defined in the United States.
Read about pending “clean beauty” cases against Sephora USA, Inc. and Target Corporation.
Other Takes From Around The Web
Vice President, Public Policy
Network Advertising Initiative
Businesses will struggle to comply with the patchwork of compliance requirements, as multiple new laws take effect and enforcement activity increases.
Five comprehensive state privacy laws are fully or largely in effect as we head into 2024, including California, Virginia, Colorado, Connecticut, and Utah, but key regulations, updates to those laws, and some of the most impactful provisions will be coming into force later this year, along with a set of five additional new laws. The expansive regulations finalized early last year by the California Privacy Protection Agency (CPPA) will come into force at the end of March 2024, at the same time the Washington and Nevada health laws will take effect. Notably, Washington’s My Health My Data Act (MHMD) includes the broadest definition of ‘Consumer Health Data’ and a controversial private right of action–the state plaintiffs’ bar has likely been preparing for a windfall of class actions to test the state’s injury requirement. The midyear mark will see comprehensive laws in Oregon, Texas and Florida coming into force, as well as the key Colorado requirement for companies to comply with ‘universal opt-out mechanisms’ (UOOMs).
It’s not surprising that enforcement actions by state regulators on new laws have been limited to date, but that’s likely to change in 2024.
Read more on NAI’s Expectations for Digital Advertising and Data Privacy in 2024.
Frankfurt Kurnit Klein & Selz
Frankfurt Kurnit Klein & Selz
We heard a lot from the regulators about dark patterns again this year. It’s time for marketers to re-examine their consumer-facing websites, particularly e-commerce sites, to see if they employ any functionality or graphics that could be considered ‘dark patterns,’ i.e., ones that encourage consumers to unwittingly make decisions, like purchase or privacy choices, that favor the marketer but not themselves. For example, are there bright colors or animated graphics that distract from or obscure important disclosures, or buttons that are labeled in a confusing way; are items added to the shopping cart without the consumers affirmatively putting them there? Marketers would be well-advised to clean up these features before regulators tell them to.
Read more from Seligman and Taylor on advertising law issues that should be prioritized this year.
Mary L. Grieco
Olshan Frome Wolosky
Next year will likely see recommendations and rules from the US Patent and Trademark Office (USPTO) and the US 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). ... 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.
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.
Read more on artificial intelligence and intellectual property in 2024.