Arkansas brought the action pursuant to the Arkansas Deceptive Trade Practices Act (ADTPA), which prohibits deceptive and unconscionable business practices, and the Arkansas Personal Information Protection Act (PIPA), which requires businesses protect data concerning Arkansas residents with reasonable security practices. Numerous allegations by the state against Temu regarding app user personal information include that it is:

• Using the inducement of low-cost Chinese-made goods to lure users into unknowingly providing near-limitless access to their PII,
• Misleading users regarding how it uses their data,
• Not allowing users to avoid being tracked on the internet,
• Collecting virtually limitless amounts of data, and in addition to Bluetooth and Wi-Fi access, gaining full access to user contacts, calendars, and photo albums, plus all social media accounts, chats, and texts,
• Gaining permission from user devices upon app installation to subsequently install any further program it wishes without user knowledge or control,
• Obtaining personal information in a way that is purposely secretive and intentionally designed to avoid detection,
• Providing or selling user data to unauthorized third parties or using user data in a way that users did not authorize,
• Potentially harvesting data of non-users who have communicated with users, and
• Subjecting user data to misappropriation by Chinese authorities.

The state cites reports and third-party research throughout its complaint to support its claims against Temu. Temu, in response, said the company was “surprised and disappointed” by General Griffin filing the lawsuit without what the company called “any independent fact finding.”

In addition to the allegations regarding privacy harms of the app, the state claims defendants make deceptive representations about the quality of the goods sold, which it says are frequently counterfeit, and that users experience undelivered packages and poor customer service. The state further claims Temu uses “false-reference pricing,” in which a retailer represents to a prospective customer that a product is on sale at a steep discount when the “discounted price” is the product’s regular market price. The state’s allegations against Temu also include the use of fake and deceptive reviews, a concern to many AGs, and the claim that Temu failed to take adequate measures to protect minors, among others.

The state requests the court preliminarily and permanently enjoin defendants from treating Arkansas consumers unlawfully, unconscionably, and deceptively as described in the complaint, plus requests civil penalties and other monetary and equitable relief. Temu said, “We categorically deny the allegations and will vigorously defend ourselves.”

Arkansas is not the only state concerned about Temu’s practices. In 2023, Montana banned the download of the Temu app (and a handful of other apps) on devices issued by the state or connected to the state network based on its affiliation with foreign adversaries. The state also banned third-party firms conducting business for or on behalf of the state of Montana from using Temu and the other apps in question.

This action demonstrates the breadth of authority provided to state AGs, especially related to consumer protection. AGs routinely use UDAP laws to bring expansive matters, which can evolve from looking at one issue into many. Here, while there is much attention to the allegations related to Temu’s data collection and security practices, the other general UDAP violations on the quality of products and fake reviews show how multiple areas of misconduct claims will be addressed by AGs. All of these areas continue to be a hot topic for state AGs, as are companies with foreign affiliations thought of as problematic. As we have discussed many times before, the AGs often work together in their missions to protect consumers; only time will tell if more AGs follow with complaints against the popular shopping app.

SC Johnson argued that consumers will understand “simple” in the tagline to mean that the ingredients in the products are not complex and that they are minimally processed. Native countered that the word just conveys the message that Native products use fewer ingredients. NAD sided with Native and determined that because the tagline is visually separate from the ingredient list, reasonable consumers would understand that “simple,” in this context, refers to the product as a whole and not to the individual ingredients.

Native provided evidence that minimalist formulations for skincare products use 10 or fewer ingredients, as opposed to other formulations which can have more than 30 ingredients. The Native products fall on the lower side of that range with somewhere between 9 to 11 ingredients. Accordingly, NAD found that Native could support the reasonable interpretation of “simple” that appeared in the tagline. The decision is simple enough, so far, but things get more complicated when it comes to the ingredients.

Native argued that the term “simple ingredients” was meant to convey a message about the basic function performed by the highlighted ingredients and that the message is reinforced by a plain-language description of that function. SC Johnson and NAD both disagreed. NAD concluded that that one reasonable message that consumers may take away from the term “simple ingredients” in the context in which the term appeared is that the ingredients are not complex and that they are minimally processed.

NAD relied on the opinion of an SC Johnson expert who explained that the some of the ingredients in the Native products “go through complex manufacturing and processing to refine them so that they no longer resemble the original simple ingredient at the start of the manufacturing process, or the simple ingredient stated on the label.” Native did not disagree with the explanation of the process. Accordingly, NAD determined that Native could not support the description of certain ingredients as “simple.”

Companies that make personal care products may be drawn to using words like “simple” to appeal to customers looking for minimalist products, but those words can be difficult to substantiate, in part, because they don’t have clear meanings. (The same goes for “clean” claims, which we discussed here and here.) It’s important to take a close look at the context in which you use those words to figure out how consumers (or NAD) may interpret them and to make sure you have the evidence to support that interpretation.

Loper Bright Enterprises v. Raimondo

Loper Bright overrules Chevron, eliminating the deference given to agencies’ interpretations of ambiguous statutes. Since 1984, courts have employed a two-step framework when reviewing an agency’s statutory interpretations. First, courts determined “whether Congress has directly spoken to the precise question at issue.”[1] If it had not and there was any ambiguity, courts moved on to the second step, deferring to the agency’s interpretation if it was a “permissible construction of the statute.”[2] Under Chevron, courts were obliged to cede their independent judgment to an agency’s reasonable interpretation.

In Loper Bright, the Supreme Court held that this deference “defies the command of the [Administrative Procedure Act] that ‘the reviewing court’—not the agency whose action it reviews—is to ‘decide all relevant questions of law’ and ‘interpret . . . statutory provisions.’”[3] Agencies, according to the Court, “have no special competence at resolving statutory ambiguities. Courts do.”[4] Going forward, courts must do what they do best and “use every tool at their disposal to determine the best reading of the statute and resolve the ambiguity.”[5]

For forty years, Chevron has given agencies an advantage in disputes over the statutes they administer. It has required courts to defer to agency interpretations, even when the agency’s interpretation has evolved (sometimes dramatically) over time. In his concurring opinion, Justice Gorsuch points to the FCC’s changing rules regarding the classification of broadband internet across four administrations as an example of the “regulatory whiplash that Chevron invites.”[6]

The death of Chevron deference will be felt across administrative agencies, including at the Federal Trade Commission (“FTC” or “Commission”). Most immediately, the decision may impact the Commission in legal challenges it faces to two rules: the Non-Competes Clause Rule and the Combating Auto Retail Scams (CARS) Rule. Previously, if there was a dispute about the meaning of the statute at issue, the FTC could simply point to Chevron and expect to prevail. For example, in National Automobile Dealers Association v. Federal Trade Commission, the court applied Chevron to determine that the FTC’s interpretation of “uses” under the Fair and Accurate Credit Transactions Act of 2003 was reasonable and entitled to deference.[7] [Full disclosure: the author worked on this case on behalf of the FTC.] Going forward, a reviewing court will now use its own judgment to resolve any ambiguity.

Beyond rulemaking, Loper Bright could also potentially impact any FTC efforts to expand its authority under Section 5 of the FTC Act. Section 5 is famously broad (and, some might even say, ambiguous). Entities and individuals that find themselves in a dispute with the agency over statutory questions, such as what constitutes an unfair method of competition, may now press their case before a “neutral party ‘to interpret and apply’ the law without fear or favor … .”[8]

Jarkesy v. S.E.C.

In Jarkesy v. S.E.C., the Court ruled that the Seventh Amendment right to a jury trial requires that the SEC seek civil penalties for securities fraud in district court. The Court found that, where an agency’s claims are legal in nature, they must be tried before a district court. In determining whether claims are legal (and not, for example, equitable or admiralty), courts must consider both the remedy and cause of action. When a monetary remedy is meant to punish rather than “restore the status quo,” it is legal rather than equitable, and implicates the Seventh Amendment.[9] In addition, the Court found that the “public rights” exception (Congress’s ability to assign certain matters to an agency without a jury) did not apply, because fraud is in the nature of an action at common law. Suits akin to those brought in common law “presumptively concern private rights, and adjudication by an Article III court is mandatory.”[10]

While this decision will affect administrative agencies beyond the SEC, its immediate impact on the FTC is likely to be limited. The Commission is already required to go to district court to obtain civil penalties. It is an open question whether there might be other remedies sought by the FTC in administrative litigation that are likewise legal in nature and implicate private rights, which may no longer be obtained in-house. For example, the FTC has sometimes issued cease and desist orders in deception cases which ban Respondents from doing business in a particular industry.[11] If this remedy is viewed as punitive and implicates a core private right, it could only be imposed by an Article III court. Other novel remedies the Commission has obtained in settlements, such as so-called algorithmic disgorgement, may also be off-limits in an agency cease and desist order.

Because the Seventh Amendment jury trial requirement resolved the case, the Court did not reach two other questions that could have affected the FTC. First, the Court did not determine whether the ability of an administrative agency to determine whether to bring an action administratively or in federal court violates the non-delegation doctrine. Second, the Court did not consider whether an ALJ’s two layers of for-cause removal protections violates separation of powers. These and other issues, such as whether the FTC’s role as both prosecutor and judge in administrative proceedings constitutes a due process violation, will continue to be the subject of litigation. If these questions ultimately find their way back to the Court, at least two Justices have signaled that Article III and the Due Process Clause of the Fifth Amendment also limit agencies’ ability to handle certain matters administratively. In a concurrence, Justice Gorsuch, joined by Justice Thomas, writes that, because the SEC would deprive Jarkesy of property, “due process demands ‘nothing less than the process and proceedings of the common law… .’”[12] This means use of an Article III court and “not the use of ad hoc adjudication procedures before the same agency responsible for prosecuting the law, subject only to hands-off judicial review.”[13]

The fight against the so-called administrative state seems destined to continue for a bit longer. We will keep you posted.

Notes

[1] Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842 (1984).

[2] Id. at 843.

[3] Loper Bright Enterprises v. Raimondo, 603 U.S. __(2024) (slip op., at 21).

[4] Id. (slip op., at 23).

[5] Id.

[6] Gorsuch, J., concurring at 24.

[7] Nat’l Auto. Dealers Ass’n, v. FTC, 864 F. Supp. 2d 65 (D.D.C. May 22, 2012).

[8] Id. at 6.

[9] SEC v. Jarkesy, 603 U.S. ___(2024) (slip op., at 9).

[10] Id. at 14.

[11] See, e.g., In the Matter of Traffic Jam Events, Docket No. 93-95 (Oct. 25, 2021), https://www.ftc.gov/legal-library/browse/cases-proceedings/x200041-202-3127-traffic-jam-events-llc-matter (cease and desist order bans Traffic Jam and David J. Jeansonne II from participating in any business relating to the advertising, marketing, promotion, distribution, or sale or leasing of motor vehicles).

[12] Gorsuch, J., concurring at 12. See also, Axon Enterprise, Inc. v. FTC, 598 U.S. 175, 204 (2023) (Thomas, J., concurring).

[13] Id.

Background

Since the original Rule was issued in 2009, the use of health-related apps and other direct-to-consumer technologies collecting health information (e.g., fitness trackers and wearable blood pressure monitors) has proliferated. In September 2021, the FTC issued a “Policy Statement” reinterpreting the scope of the HBNR and signaling the FTC’s intent to treat these new products and technologies as covered by the Rule. The updated HBNR, finalized on April 24, 2024, formalizes this expansion of the HBNR as envisioned in the Policy Statement.

Who Is Subject to the HBNR?

The HBNR applies to entities offering or maintaining personal health records not covered by HIPAA. It covers vendors of PHRs, PHR-related entities, and third parties providing services to these entities. However, distinguishing among these categories can be challenging. Here are a few examples:

• Vendors of PHR. Companies providing online platforms or mobile apps that allow consumers to create comprehensive health records by storing and managing their health information from multiple sources are likely vendors of PHR. Examples include fitness tracking apps, diet and nutrition apps, and mental health apps that integrate data from the user and other sources, such as wearable devices or purchase histories stored with retailers.
• PHR-Related Entities. Businesses offering devices like remote blood pressure cuffs or internet-connected glucose monitors may qualify as PHR-related entities when users sync this health information with another health app.
• Third Party Service Providers. Third party service providers are roughly equivalent to processors or service providers. Businesses offering data security, advertising, or analytics services, for example, to a PHR vendor or a PHR-related entity with access to unsecured PHR data are considered third party service providers under the HBNR.

Businesses should be aware that where they fall under these categories depends heavily on the specific practices at hand, and they may move from one category to another. For instance, a third party may be considered a PHR-related entity if it offers services to a health app for its own purposes, such as research and development or product improvement. Similarly, a device manufacturer may be a PHR-related entity if it syncs health information with a third-party health app, but a vendor of PHR if it syncs health information with its own app (while integrating data from multiple sources).

What’s New

• Covered Health Care Providers. “Covered health care providers” constitute one category of the sources of PHR individually identifiable information (other categories of sources are employers and HIPAA-covered entities). The Rule expansively defines covered health care providers to include “any online service such as a website, mobile application, or internet-connected device” that supports the tracking of consumer health indicators, like fitness, sleep, mental health, and vital signs. Under the revised Rule, mobile apps are now considered covered PHR-related entities when they integrate with other devices or services, such as geolocation functions, calendars, or third party data, linking them to the user’s PHR. Crucially, the Rule only applies to services with the capacity to draw information from multiple sources. For example, businesses that integrate fitness data into third-party sleep apps could now be considered PHR-related entities under the Rule.
• “Breaches” Subject to the Rule. The revised Rule expands the scope of a “breach of security” to include any disclosures, including sharing or selling, of unsecured PHR that are not authorized by the individual. Covered providers should be mindful that this updated definition goes well beyond a traditional cybersecurity incident. For example, businesses that collect PHR for a legitimate purpose and subsequently share or use that information in a way not expressly authorized by the individual may have committed a “breach” under the new definition.
• Timing of Notice to the FTC. Businesses covered by the HBNR that experience a breach involving the unsecured data of more than 500 individuals now have sixty days to notify individuals and the FTC of the incident. This change will be helpful to businesses, particularly larger entities, as the previous Rule required notifications to be sent within ten days, regardless of the size of the data breach.
• Expanded Use of Electronic Notice. PHR vendors and related entities that discover a breach of security must provide written notice to individuals. Updates to the Rule now allow for the use of email and other electronic means to notify consumers of a breach, including text messages, in-app messages, and website banner messages. Additionally, breach notices must now include a brief description of the measures businesses are taking to protect affected individuals.

Why It’s Important

App developers and other companies providing health, wellness, fitness, and related apps should consider these updates to the HBNR, assess its applicability to their business, and comprehensively review their notification obligations in the event of an unauthorized disclosure. Firms offering data security, cloud computing, advertising, or analytics services to health apps should also review their potential obligations as third party service providers.

Summer Associate Joe Cahill contributed to this post.

A child posted a photo on his Instagram account of himself and a cousin wearing 1 Hotel branded robes at one of their hotels. 1 Hotel commented on the post stating: “We love this photo! Reply to this comment with #sharemy1pic if you’re happy with us sharing your photo on our social channels.” The child’s account responded: “@1hotels thank you! #sharemy1pic.” 1 Hotel then used the photo on its Instagram account. It later also posted the photo on its website to sell the robes in the photo.

Two years after the photo was posted, the plaintiffs obtained a copyright registration for the photo. The plaintiff later filed a lawsuit against 1 Hotel in the Central District of California, alleging (among other things) that the hotel’s use of the photo constituted copyright infringement and unauthorized use of the child’s likeness. The hotel then filed a motion to dismiss.

All causes of action were dismissed for different reasons, but some will likely be revived because the plaintiffs were given the opportunity to amend a few of them so that they were passable under the applicable pleading standards. Importantly though, the court substantively determined that the exchange between the plaintiff and hotel on Instagram created an “implied license” to use the photo on the hotel’s “social channels.” (It’s not clear why the license was implied, rather than express.) However, the court found that the hotel may have exceeded the scope of that license by using the photo to sell robes on its website since the exchange never mentioned that. Accordingly, the court denied the hotel’s motion to dismiss the copyright claim on substantive grounds, because there is a material issue of fact as to whether the implied license extended to the sale of robes on a website.

The hotel sought to dismiss the misappropriation claim related to use of the minors’ likenesses by arguing (1) that the plaintiffs consented to the use of the photo, (2) the use was incidental, and (3) the children are not readily identifiable. The court rejected the first argument for the reasons mentioned above. Although the hotel may have had consent to post the photo on its social channels, it may not have had consent to post it on its website. The court also easily found that the use was not incidental and that the children were readily identifiable.

The causes of action referenced above may be litigated further if the Plaintiffs submit an Amended Complaint, but this present decision still includes some helpful lessons for companies that want to use content they find on social media. First, although getting a signed release is likely always the safest approach, companies can likely get consent in a less formal matter, such as the one illustrated above. However, when getting consent, it’s important to be clear about the scope of that consent. Make sure you’re clear about how and where you want to use content to help avoid any surprises (and lawsuits).

Attorney General Formella of New Hampshire kicked off the conference with a fireside chat on AI, where platforms promoted open access principles, more STEM graduates to compete internationally in AI, and combatting CSAM. Panelists discussed how just because an AI service is built on the same model does not mean that it works in the same way. South Carolina Attorney General Wilson followed up with a panel on the ethics of using AI as attorneys, where panelists noted that it may actually be a violation of ethical obligations to underutilize AI. Arizona Attorney General Miyares led another fireside chat touching on AI, asking his panelist about responsible AI and whether AI regulation will actually solve problems in the space.

Kansas Attorney General Kobach led a discussion regarding preemption, noting that it cuts both ways politically. While conservatives may view preemption as positive because unified federal norms make regulation easier for businesses, he noted progressives want preemption in areas such as immigration. Panelists then discussed the value of ERISA preemption and pointed to alternatives to addressing potential issues with pharmacy benefit managers such as using UDAP laws or regulating medical practitioners in that space instead.

Attorney General Ken Paxton of Texas spoke with small business owners in different industries and a professor to learn how tech platforms may both help and harm businesses. Small businesses noted that review platforms and targeted advertising have made positive impacts on their businesses by providing access and feedback on customers’ needs, while the professor countered that big tech also carries some additional downsides. General Paxton elaborated on the risks to small businesses including a constantly changing dynamic environment, government taxes, and a lack of “bailouts”.

Members of the conference applauded Oregon Attorney General Rosenblum as she commemorates her last year as Attorney General. She led a panel related to her National Association of Attorneys General initiative on America’s Youth. General Rosenblum began her panel noting that she believed her initiative was something all AGs could come together on -- the health, well-being, and success of young people. The panel focused on preventing computer generated CSAM and sexploitation of children, then turned to the effectiveness of COPPA and promoting safety by design. Panelists remarked that even a tracking cookie question where you can’t find the “no” button may be a dark pattern, especially when it comes to children online. Others noted that privacy torts can be used creatively, as the New Mexico AG’s office did, to bring lawsuits affecting children’s privacy.

The conference concluded with breakout sessions including an update on the Organized Retail Crime enforcement space. There we learned about new legislation, including amendments to state INFORM laws and the creation of new task forces, from our own Paul Singer. Other panelists provided updates on the new scams criminals are using to evade detection including sophisticated skimmer rings.

Stay tuned, as the National Association of Attorneys General Presidential Initiative conference will take place in early September to focus more on AGs protecting America’s youth.

• 1:1 Consent – At the end of 2023, the FCC adopted an amendment to the definition of “prior express written consent” under its TCPA rules to require that a consumer give specific consent to be contacted by a particular seller for marketing purposes, and that such consent must be “logically and topically related” to the context in which it was obtained. This rule will officially go into effect on January 27, 2025, but we have seen a trend among service providers in the industry (particularly calling and texting platforms) requiring that their customers implement 1:1 consent well ahead of that deadline (and make corresponding changes to their privacy policy about sharing consent data with third parties). It would be prudent for affected businesses to take this time to carefully review their opt-in processes and privacy policies to assess what changes are necessary from both a commercial and legal compliance perspective.

• AI and the TCPA – On February 8, 2024, the FCC voted unanimously in favor of a Declaratory Ruling that classifies AI-generated voices on robocalls as ​“an artificial or pre-recorded voice” under the TCPA. This means that calls using AI technology to generate a simulated or pre-recorded human voice must satisfy the TCPA’s consent requirements (including prior express written consent for marketing calls using AI). While the FCC focused the ruling on the common use and accessibility of AI-generated voices by bad actors to perpetrate fraud and spread misinformation, the development underscores the heightened regulatory scrutiny on a business’s use of AI to mimic human behavior for marketing purposes. The FTC also outlined in a recent blog post some of the potential consumer protection and privacy concerns that can arise from the use of AI chatbots to interact with consumers.

• Expanded Opt-Out Rules – On February 15, 2024, the FCC adopted a Report and Order and Further Notice of Proposed Rulemaking to amend its TCPA rules and clarify the ways in which consumers can revoke consent to receive calls and texts. Among the changes were the adoption of various “per se” reasonable methods for revoking consent, including by texting the words ​“stop,” ​“quit,” ​“end,” ​“revoke,” ​“opt out,” ​“cancel,” or ​“unsubscribe.” The FCC also made clear that businesses cannot prescribe a particular method for revoking consent, and must honor reasonable opt-out requests within 10 business days. Importantly, while businesses are permitted to send a one-time text to clarify the scope of a consumer’s opt-out request if that consumer has previously consented to receive multiple types of messages, if the consumer does not respond to that message, they are presumed to revoke consent for all further non-emergency communications. The effective date for the amended revocation of consent rule is still uncertain, as it is undergoing a review by the Office of Management and Budget. Once that review is complete, the FCC will issue a notice, and the rule will be effective six months thereafter. Businesses can prepare for this change by evaluating and testing their technology and processes to confirm they can honor opt-outs in accordance with the new requirements.

• Telemarketing Sales Rule Changes – Looking beyond regulatory changes at the FCC, the FTC announced in March a significant update to the Telemarketing Sales Rule, most notably by expanding parts of the rule to business-to-business calls, and expanding the scope and timeline of recordkeeping obligations for telemarketers. These amendments generally became effective on May 16, 2024, except for the “call detail” records subsection, for which the FTC had previously announced a 180-day grace period to give affected businesses time implement systems, software, or procedures necessary to comply. As such, businesses will have until October 15, 2024 to adhere to that particular provision of the rule.

• New and Updated State Telemarketing Laws. A number of recently-enacted state laws related to telemarketing have taken effect (or will take effect) in 2024, including:

• Maryland – The “Stop the Spam Calls Act of 2023” became effective on January 1, 2024. Key provisions of the new law include a requirement for “prior express written consent” for telephone solicitations that involve “an automated system for the selection or dialing of telephone numbers,” as well as call time and frequency restrictions similar to those adopted in other states, and a private right of action for alleged violations. To date, we are not aware of any private litigant bringing forward an action in court under the new law.

• Maine – Earlier this year, Maine adopted a first-of-its-kind amendment to its telephone solicitation law that requires solicitors to scrub against the FCC’s reassigned number database prior to initiating a call. While limited in scope due to underlying exemptions in the statute, the requirement will become effective on July 16, 2024.

• Georgia – Several changes to an existing telemarketing law in Georgia were recently enacted, including: (1) eliminating the requirement for a “knowing” violation of the law to pursue enforcement; (2) extending liability for calls made “on behalf of any person or entity” in violation of the law; (3) allowing private plaintiffs to pursue claims for violations as part of a class action with no limitation on damages; and (4) creating a safe harbor defense for solicitations made to a consumer “whose telephone number was provided in error by another subscriber” if the caller “did not know, or have reason to know, that the telephone number was provided in error.” These amendments will become effective on July 1, 2024.

• Mississippi – By a series of amendments to its existing telephone solicitation law, Mississippi severely restricted the ability of businesses to contact consumers by phone about Medicare Advantage plans (unless a consumer first initiates a call to the business about such plans), and effectively banned telemarketing for Medicare supplement plans. These restrictions are unique among state telemarketing regulations because they are narrowly focused on calls about certain Medicare plans, and may be challenged on First Amendment grounds. In the interim, however, the restrictions will take effect on July 1, 2024.

If you have any questions about how these developments may affect your business, please contact Alysa Hutnik or Jenny Wainwright. For more telemarketing updates, subscribe to our blog.

The plaintiffs argued that reasonable consumers would understand the claim to mean “that Energizer AA MAX batteries last up to 50% longer than most, if not all, alkaline batteries in most, if not all, devices.” In a short unpublished opinion, a three-judge panel with the Ninth Circuit upheld a lower court’s order dismissing the proposed class action, holding that the plaintiffs’ interpretations of the claims were unreasonable and contradicted what was on the package.

The court noted that Energizer “promises only an upper limit of performance (a ceiling of 50%) compared to a certain category of competitors (basic alkaline batteries) in a subset of applications (demanding devices).” It rejected the plaintiffs’ allegations that the disclosure was too small and that it was too vague. On the first point, the court noted that disclosures were not unreasonably small and that they appeared immediately next to the representations they qualified.

Although the court agreed that the disclosure may have been a little vague, it held that “these words are not particularly technical or difficult to understand, and though not exact, they cabin the scope of Energizer’s claim in a way that renders Plaintiffs’ reading of the advertising unreasonable.” In other words, reasonable consumers would not understand the claim to mean that the AA MAX batteries last 50% longer than all competing batteries in all circumstances.

The decision is persuasive authority but, as an unpublished opinion, it isn’t binding on district courts. It’s important to remember that what messages may be conveyed by an “up to” claim – and what substantiation is required for those messages – will depend on the context. It’s also important to remember that both the FTC and NAD have read “up to” claims more broadly in some circumstances and have concluded that consumers expect to achieve the advertised results in “almost all” cases.

The FTC alleges that Adobe and two of its executives did resort to trickery to make their subscription plans look more attractive. Specifically, the FTC alleges that Adobe pushed consumers towards an “annual paid monthly” subscription without adequately disclosing that cancelling the plan in the first year could cost hundreds of dollars. Consumers would only learn about the early termination fee (or “ETF”) if they discovered it in the fine print or hovered over small icons to find the disclosures.

In addition to failing to clearly disclose the ETF in the sign-up flow, the complaint alleges that Adobe made it difficult for consumers to cancel their subscriptions. For example, consumers had to deal with dropped calls, multiple transfers, and resistance from customer service representatives. Some people who thought they had cancelled continued to see charges on their credit card statements. The FTC said that a large volume of consumer complaints should have led the company to know something was wrong.

The complaint alleges that the defendants failed to comply with the Restore Online Shoppers’ Confidence Act (or “ROSCA”) and the FTC Act by failing to clearly and conspicuously disclose material terms of the transaction – including details of the ETF – before getting a consumer’s billing information. The complaint also alleges that Adobe violated ROSCA and the FTC Act by failing to provide “simple mechanisms” for consumers to stop recurring charges.

It’s too early to predict how this case will turn out, but we can still learn some important lessons at this stage. Federal and state regulators continue to focus on subscription plans, so you should make sure that your sign-up flows clearly present all material terms and that your cancellation process works smoothly. You should also monitor consumer complaints so that you can identify and fix problems before regulators become aware of them.

We all have our blemishes, but if you try too hard to hide them, that could lead to unpleasant surprises for everyone when they are finally discovered.

AT&T argued that the term “Price Lock” is misleading because T-Mobile isn’t locking the price of its service for any amount of time. T-Mobile countered that “Price Lock” isn’t a claim about locking its price, but rather the name of a policy that allows customers to cancel their service and receive their last month for free, if they cancel within 60 days of a price increase. In fact, an on-screen disclosure reads: “Get your last month of service on us if we ever raise your internet rate.”

NAD noted that the term “price lock,” without qualification, “conveys the message that the price is locked for monthly service as long as the consumer wants the service.” In this case, T-Mobile argued that term is clearly qualified by its on-screen disclosure. Even though NAD acknowledged that the disclosure in the commercial was fairly prominent – which is not something we frequently hear from NAD – it found that the disclosure wasn’t enough to prevent the claim from being misleading. Why?

Although companies can use a disclosure to clarify a claim, NAD wrote that “a disclosure cannot contradict the claim it qualifies.” More specifically: “A disclosure that ‘Price Lock’ does not lock the price but gives consumers one month of free service if certain conditions are met contradicts the main message communicated by the ‘Price Lock’ claim.” Accordingly, NAD recommended that T-Mobile either stop making the claim or better explain the details of its policy “as part of the main claim.”

A good song and dance can brighten a neighbor’s day, but it takes talent to pull that off. Drift off key or miss a few steps on the porch and your neighbors will show that Ring camera footage to their friends and laugh at you every chance they get. A good disclosure can save a claim, but it also takes talent to pull that off. If your disclosures aren’t clear or they clash with your claim, your competitors will show that footage to NAD and laugh at you, too.

Riviana Foods objected to Planting Hope’s continued use of the symbol and filed a challenge in an unusual venue – the National Advertising Division (“NAD”). Although NAD focuses on advertising disputes, Riviana argued that Planting Hope’s use of the registered trademark symbol conveys the misleading advertising message that the RIGHTRICE trademark is registered with the USPTO.

This is far from a typical advertising case, and it’s not clear whether Planting Hope disputed NAD’s jurisdiction over the matter, but in March 2024, NAD issued a decision in which it recommended that the company stop using the registered trademark symbol in ads unless there is a final determination reinstating the RIGHTRICE trademark on the federal register. Planting Hope agreed to comply.

In May 2024, Riviana initiated a compliance proceeding questioning whether Planting Hope had sufficiently complied. Planting Hope explained that it had made changes to digital materials, but not physical materials, and that its motion to set aside the default judgment had been fully briefed and was awaiting a decision from the Trademark Trial and Appeal Board (“TTAB”). A successful motion would moot NAD’s decision.

NAD determined that just because Planting Hope was waiting for the TTAB decision, that didn’t mean it could wait to comply with NAD’s decision. NAD asked the company to take down images on its social media pages that included the registered trademark symbol. NAD didn’t ask Planting Hope to remove existing inventory with that symbol from stores, but cautioned the company not to produce new inventory with that symbol at this time.

Although NAD has previously determined that trademarks can convey advertising claims, this is the first time NAD has explicitly determined that an advertiser’s use of a trademark symbol can itself constitute a claim. NAD isn’t going to turn into a venue for broader trademark disputes, but if you find yourself in this narrow fact pattern, NAD may present a good venue for a challenge.

But now, some states may soon have new tools to combat potential unfair and deceptive practices throughout a variety of industries. With the legislative season coming to a close, we have your rundown of the spread of “hidden fees” regulation including California and beyond. So, if a vacation from hidden resort fees is all you ever wanted – and a trip to see Carhenge or the Alamo (attractions in states where attorneys general have been active in enforcement) has already been checked off your bucket list – here are your ideal places to get away:

California: The Golden State’s newly minted Consumers Legal Remedies Act (SB 478) amendment will take effect on July 1, 2024, specifically making it unlawful for companies across virtually all industries to advertise or display a price without including all mandatory fees and charges, save taxes and fees imposed by the government (though the bill states that “drip pricing” is already prohibited). Click here and here for more details. California is such a lovely place, and if you are traveling on a dark desert highway looking for somewhere to rest your head, you should be aware the California Resort Fee Bill (AB 537) contains similar measures even more specific to the short-term lodging industry (effective July 1, 2024).

When all of this raises your appetite, you can dig into the legal back-and-forth between lawmakers and California’s food and beverage industry. In response to questions about how SB 478 would apply to bars and restaurants, lawmakers recently introduced an urgency measure (SB 1542) that would make clear that restaurants may still display mandatory gratuities, services charges, and other fees separately so long as they are clearly displayed on the menu and don’t come as a post-dessert surprise. Interestingly, the legislature specifically noted that this is intended as a clarification, not a change in existing law. As of today, this hasn’t passed yet, but we will be sure to provide updates.

Massachusetts: If the Cape is more your style, you may want to pay attention to Massachusetts AG Andrea Campbell’s proposal of a new slate of regulations that would require businesses to “clearly disclose” the total price of goods and services. Like in California, this would apply across industries. If enacted, non-compliance would constitute an unfair and deceptive trade practice. Read our full coverage here.

Minnesota: If you have the land of 10,000 lakes in mind, the state recently passed HF3438 requiring that an advertised or displayed price include all mandatory fees and surcharges (not including taxes), including additional clarity on “mandatory fees” compared to California’s statute. The bill provides exemptions or specifications for several industries, including specifically requiring that hotels (among other food or beverage establishments) must clearly and conspicuously disclose the percentage of any automatic or mandatory gratuities that consumers will be charged. The law will take effect January 1, 2025.

The Near Hits: As state lawmakers leave for their own summer vacations, some notable legislation got left on the drawing board. For instance, in the Land of Lincoln, the state’s proposed Junk Fee Ban Act gained momentum when it easily passed the Illinois House in a 71-35 vote but then never made it to the Senate floor. We saw similar attempts in Connecticut and New York. While these bills didn’t cross the finish line this year, we expect many states will take on this issue in the next legislative season.

Against this backdrop of state activity, the FTC is in the midst of rulemaking process that would ban hidden fees and further regulate the types of fees companies can charge. Revisit our coverage on that here and here. Also in Washington, the House of Representatives just passed the No Hidden Fees Act. If made law, the Act would require hotels and other short-term rentals to clearly display mandatory fees.

Clearly, multiple levels of government are “checking out” hidden fees. Even President Biden denounced “surprise” fees in his 2023 State of the Union Address.

Of Importance…

• Updates to regulation are occurring but general state consumer laws still apply. While some states may be setting specific standards in this area, remember state consumer laws, which outlaw deceptive acts and practices (and in many states, unfair acts and practices), still apply. Therefore, just because a state doesn’t specifically spell-out fees requirements in its statutes or regulations, it does not mean fees disclosures comply with states’ interpretations of the law. (For example, the AG’s office in Washington DC issued guidance on the types of restaurant fees that may violate existing law.)
• Some fees face greater scrutiny than others. AGs have sought out so-called “bogus” fees they feel offer consumers little value. Companies should be mindful of what the fees actually deliver for consumers and convey the value accurately and clearly.
• Messaging and disclosures are critical. The crux of the states’ take on drip pricing is a failure to disclose certain fees in a timely manner (if at all), and AGs have taken issue with tactics that do not clearly describe when a fee is mandatory or not.

We expect to see more on “junk fees” in the weeks and months ahead. Subscribe to our monthly newsletter AG Chronicles and Ad Law Access blog to stay up-to-date.

MLE’s beef with Chestnut stems from Chestnut’s reported sponsorship deal with Impossible Foods, a company that makes plant-based hot dogs. An MLE spokesperson said that Chestnut’s deal would be like Michael Jordan telling Nike that he was going to represent Adidas, too. Impossible Foods responded by saying they support Chestnut “in any contest he chooses” and that “meat eaters shouldn’t have to be exclusive to just one wiener.”

Should a meat eater be exclusive to just one wiener? If you’re just an amateur eater, you can probably eat whatever hot dog you want. But if you’re a professional eater, the analysis may change. MLE claims they have worked with Chestnut for years “under the same basic hot dog exclusivity provisions.” Chestnut, however, said he doesn’t have a contract with MLE or Nathan’s, and “they are looking to change the rules from past years as it related to other partners I can work with.”

Although we work on sponsorship agreements across a broad range of industries and events, we’ve not worked in the man-eat-dog world of competitive eating, so we don’t know what’s standard here. In most sponsorship agreements, though, it’s common to see an exclusivity clause that prevents a person from endorsing competing products (and how that’s defined can be highly-negotiated). In some cases, these agreements may also prevent a person from using a competing product in public.

If this post caught your attention because you’re looking to achieve fame for your company by partnering with a celebrity, you should probably work with a legal professional to help make sure you have the exclusivity rights you need for a successful campaign. But if this post caught your attention because you’re looking to achieve personal fame by eating massive quantities of food in a short amount of time, you should probably work with a medical professional to help make sure that’s really a good idea.

This month we will have a roundtable discussion on investigations and enforcement actions led by state attorneys general (AGs) and the broad authority the states have to perform pre-litigation discovery through investigative subpoenas, often called ​civil investigative demands or CIDs. We will break down the investigation process and discuss:

• Common issues that trigger a state – or multi-state – investigation
• What to expect when under investigation and how to respond
• Background and caselaw on state AG CID authority
• Other pre-suit investigative tools available to state AGs
• Strategies for avoiding a state AG inquiry

Register Here.

The NARB panel majority came to a different conclusion from NAD on the packages. Two of the three panelists found that, in the context of the three samples they were provided, Glad’s “25% more durable” claim is not misleading. One panelist thought because an asterisk after the claim linked to a disclosure on the same panel, the disclosure was sufficiently clear. Another panelist thought the basis of the claim was clear, even without the disclosure. And the third panelist found the claim to be misleading because the disclosure wasn’t sufficiently clear.

This close decision underscores how tricky it can be to get disclosures on packages right, but there are a few lessons we can glean from it. First, it’s clear that NAD wants disclosures to appear on the same panel as the claims they qualify. (Some courts are more flexible.) Second, NAD wants those disclosures to appear in close proximity to the claims. This decision, though, suggests that advertisers may have some flexibility on that point as long as the disclosures are linked to the claim with an asterisk and are otherwise clear.

While AGs have generally used state consumer protection laws in these enforcement actions, which are inherently broad in scope, there is also an increased legislative focus on hidden fees. For instance, California has passed a first-in-the nation law effective July 1, 2024, specifically requiring disclosures of all mandatory fees within a total price, including in the lodging industry. (The California AG’s Office has released FAQs related to the law.) Stay tuned for more on hidden fee legislation in an upcoming post.

What major actions have AGs taken to date?

The FTC first sounded the alarm in 2012 with a warning letter accusing hotels of unlawful “drip pricing” by not including resort fees in advertised daily room rates. Then, in 2016, a coalition of AGs launched a multistate investigation into whether disclosures of hotel fees violated state consumer protection laws. In 2019, Nebraska sued Hilton and Washington DC sued Marriott, beginning the resort fee enforcement actions by the states. Since that time, multiple lawsuits and settlements have been filed regarding hidden resort fees.

For instance, Choice Hotels International has settlements with Colorado, Nebraska, Oregon, Texas, and Pennsylvania. Also regarding Choice Hotels, Maryland successfully sued to enforce a subpoena served on the company and recently, the state filed a petition for constructive civil contempt for alleged failure to comply with the court order; the matter is ongoing. Another major hotel company, Omni Hotels, has settlements with Colorado, Nebraska, Pennsylvania and Texas.

Meanwhile, litigation against Marriott International continues in Washington DC, while Colorado, Nebraska, Pennsylvania, and Texas have settled with the chain. Regarding Hilton, Texas sued with litigation ongoing, while Nebraska settled its suit. In separate lawsuits, Texas also sued Hyatt Hotels Corporation and Booking Holdings Inc., which includes online travel companies such as Booking.com, Priceline, Agoda, Rentalcars.com, KAYAK, and Opentable, with litigation ongoing in each matter.

AGs are watching for so-called hidden fees, and AG staff often have first-hand knowledge as they stay in hotels just like other consumers. After Pennsylvania settled with Marriott International, the hotel chain added a new sustainability fee at some of its locations. The AG claimed the hotel had failed to comply with their agreement, which led to a court order and new settlement requiring payment of $225,000 for the alleged previous compliance shortcomings.

What acts did the States find problematic?

In general, the AGs alleged that hotels advertised low base rates to attract consumers away from competitors. Then the hotels later disclosed resort fees, amenity fees, and destination fees when travelers had already begun the booking process. These could range from $9 to $95 per room, per day. States argued failing to disclose all fees up front made it difficult for consumers to compare prices and make informed choices as they booked their stays.

AGs also questioned the purpose of some fees, alleging that hotels made confusing or contradictory claims about what fees actually covered. This included amenities fees for generally complimentary services (like internet access, local and toll-free calls, and access to a fitness center) or resort fees charged by hotels that may not provide resort-like services. States also questioned the practice of including these fees in a general “Taxes and Fees” section, which they alleged could mislead consumers into believing the fees were imposed by the government, not the hotel.

What do these settlement agreements require?

The AG settlements followed common themes requiring:

• The total price is afforded “most prominent display.” This means that all mandatory fees are clearly and conspicuously disclosed and that full price, including those add-ons, gets premium billing on booking websites.
• When a consumer sorts by price (e.g. lowest to highest), the “sorting” price includes all mandatory fees. This prohibits hotels from suggesting that a room is less expensive than others if that is not actually the case at check-out.
• Distinguish taxes from fees. The agreements require hotels draw a clear line separating their own fees from government (or quasi government) tax charges.
• The goods and services included in an “amenity” fee are clearly disclosed, before booking.

Businesses can look to these requirements to gain insight on how broadly states may interpret their current consumer protection laws as well as their expectations of businesses in industries beyond lodging. For our next installment on new legislation in this area, be sure to subscribe to the AdLaw Access blog.

One of the key issues in the case is exactly what message the “ultimate clean” claim conveys to consumers. NAD reviewed a series of ads for the tablets and concluded that the claim could convey one of three different messages, depending on the context in which the claim appeared. It’s instructive to walk through some examples to see how NAD came to its conclusions and what those conclusions meant for the company’s substantiation requirements.

• Product Line Superiority Claims: One web page ranked different Finish products as “Good,” “Better,” “Best,” and “Ultimate.” NAD determined that “in the context of this explicit hierarchy, the ‘Ultimate Clean’ reasonably conveys the message that Finish Ultimate is the superior product among the Finish line.” Similarly, a statement inviting consumers to try “our best clean & shine” conveyed the message that Finish Ultimate provides the best clean and shine among the Finish products.
• Market Superiority Claims: In other places, the “Ultimate Clean” claim appeared in conjunction with language describing Finish Ultimate as “the only tab” with CycleSync technology and claims that it provides “revolutionary performance.” NAD determined these statements position Finish Ultimate “as having performance characteristics that other detergents do not have and, thus, reasonably conveys a comparative superiority message” across the market – not just across Finish products.
• Monadic Performance Claims: Other places touted the benefits of CycleSync technology “without invoking a comparison.” For example, in these contexts, Reckitt didn’t mention that “it was the only detergent with that technology or that it provided revolutionary performance.” NAD determined that those claims “do not convey a message of comparative superiority. Rather, the description of the technology provides a monadic explanation for how Finish Ultimate achieves its performance in the toughest conditions.”

NAD noted that Reckitt’s substantiation requirements would differ depending on the context (and, therefore, meaning) of the claim. For example, for the “product line superiority” claims, Reckitt would just need to test against other products in the line. For the “market superiority” claims, Reckitt would need to test against all “significant competitors in the market” – a much higher burden. For the monadic claims, Reckitt may not need comparative tests at all.

This case is worth noting for anyone who wants to make an “ultimate” claim, but the lessons are broader than that. The same claim can convey a different message, depending on the context, and small differences in wording can translate into big differences in substantiation requirements. It’s important to scour through your claims to figure out what messages they convey as carefully as you scour your dishes to clean them (especially if you’re not lucky enough to have dual-canine pre-rinse technology).

Connecticut:

In March, Connecticut Attorney General William Tong announced a PSA on concerns related to deceptive THC products and protecting children. Last year, AG Tong, along with Stamford Police, confiscated thousands of illegal Delta-8 THC, Delta-8 THCO, Delta-9 THCO, and other high THC cannabis products found for sale at Stamford vape shops. Some of the products were allegedly packed with THC and put kids in danger, including products that resembled Oreos, Cheetos, and Sour Patch Kids. In addition, AG Tong recently announced a settlement with a company that operated events – that were accessible to individuals under the age of 21 – involving allegedly illegal marketing and sale of cannabis.

Missouri:

Missouri Attorney General Andrew Bailey issued civil investigative demands (CIDs) in April 2024 to multiple businesses that sell Delta-8 and Delta-9 goods after reports of alleged violations of the Missouri Merchandising Practices Act. AG Bailey stated that Missourians have a right to know if they will be subject to potentially dangerous side effects and highlighted the danger of marketing potentially harmful products directly to children. AG Bailey issued CIDs to both retailers selling Delta-8 and Delta-9 products, and manufacturers and distributors selling illicit vapes and e-cigarettes, showing that even those that don’t directly engage with consumers can still be liable for committing unfair and deceptive acts and practices. Per the CIDs, General Bailey believes businesses are engaging in illegal means to market and sell the products to Missourians, including potential misrepresentation or omission of material facts. The CIDs demand information such as measures taken to ensure proper labeling of products, measures taken to ensure quality and safety of products, and whether sales comply with age restrictions.

Nebraska:

Also in April, Nebraska Attorney General Mike Hilgers filed a lawsuit against Midwest Smoke Shop, which operates retail outlets in various cities in Nebraska. The lawsuit aims to address the repeated sale of allegedly mislabeled and contaminated THC products to children, including Delta-8 THC products. The state alleged Midwest Smoke Shop violated the Consumer Protection Act, Uniform Deceptive Trade Practices Act, and Nebraska Pure Food Act. Specifically, AG Hilgers allegations include that selling THC products at retail “without consideration for age restriction or youth buyers” is an unfair practice, and selling THC products similar to food products is a deceptive practice under the Consumer Protection Act. This lawsuit is the latest in a string of lawsuits filed against THC shops – in October 2023, AG Hilgers sued multiple retailers across the state.

Other Recent Enforcement:

Last year, Florida Commissioner Wilton Simpson announced Florida’s largest ever hemp inspection sweep, “Operation Kandy Krush,” which inspected almost 500 food establishments in various Florida counties and uncovered nearly 70,000 packages of hemp extract products, including high-potency THC products, marketed towards children. The Florida legislature recently added age requirements for the purchase of hemp products intended for human consumption and created protections for Florida minors by prohibiting marketing that targets children. This operation showed Florida’s intent to regulate hemp products and keep them out of the hands of minors.

These are just a few examples of recent enforcement actions against manufacturers and sellers of THC products to protect consumers, including children. As we often blog, AGs have long prioritized protecting the vulnerable, including minors, and are willing to target all levels of the supply chain for alleged offenses. We are also seeing AGs and legislatures working to protect youth through age verification of products and services that may harm children, such as THC, pornography, and social media. We expect more activity on this front as AGs and others work to protect consumers.

CARU reviewed several types of videos on the “Vlad and Niki” YouTube channel and had concerns over whether the videos adequately disclosed the presence of ads or sponsored content. If you only advertise to adults feel free to skip this post and peruse some of our adult-oriented content. (You know what I mean.) But if you advertise to kids under 13, this decision will be relevant to you. Here are some of the highlights.

Sponsored Videos

Some of the videos on the channel are produced in connection with brand partnership agreements for which CMG earns compensation. These videos clearly disclosed – both in text and in audio – that the videos were “sponsored by” a brand or that they included “paid promotion.” CARU had some concerns with the disclosures, though. First, because the videos averaged 5:30 in length, CARU determined that the disclosures should be repeated throughout the video. While CMG did that in most cases, in a few videos, CARU thought additional repetition was necessary.

Second, CARU determined that although the “sponsored by” and “paid promotion” disclosures may work for adults, they may not work for kids. Instead, CARU recommended that CMG use language that kids in the target audience are more likely to understand. For example: “This is an advertisement for XXX;” “We were paid by XXX to make this video;” or “Thank you, XXX, for paying me to make this video.” These disclosures should appear in both text and audio at beginning and end of each video and, for longer videos, after each ad break.

Product Promotion Videos

CARU reviewed various videos promoting Vlad-and-Niki-branded products that are produced under licensing agreements under which CMG shares in the revenue generated by sales of the products. CMG argued that because each product is Vlad-and-Niki branded, the relationship between CMG and the toys is self-evident and that a disclosure isn’t necessary. CARU disagreed. Although it’s possible that argument may work in content directed to adults, CARU noted that advertisers have to be “extra-protective” when advertising to kids.

Although some videos included #ad in the description or a statement that the video “features products that Vlad and Niki helped to create,” CARU thought these disclosures weren’t sufficient. Again, CARU recommended language that kids are more likely to understand. For example, CARU recommended that CMG add a clear and conspicuous disclosure – such as “This is an ad for our Vlad and Niki toy,” or “We are selling this Vlad and Niki toy” – when Vlad and Niki are shown playing with or holding up the toys with the Vlad and Niki logo prominently in focus.

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This decision is a reminder that advertisers always need to think about what their target audience is likely to take away from ads. Because kids under 13 may not have the same abilities to distinguish between ads and content as adults do, the CARU Self-Regulatory Guidelines for Children’s Advertising impose enhanced disclosure requirements. While many of these requirements would likely be seen as excessive when advertising to adults, CARU – and likely the FTC – will see them as necessary when advertising to kids.

The set of principles recognize the role that carbon credits have in promoting the country’s climate goals and unlocking economic potential; however, the principles acknowledge that “widespread confidence in the integrity of credited emissions reductions and removals is critical for VCMs to reach their potential.”

We highlight some of the key takeaways below.

• The activities that generate the credits and the credits themselves should be certified to a robust standard that accounts for the following considerations:
  • The activity should be additional. The principles define additionality as an activity that would not have occurred in the absence of the incentives of the crediting mechanism and is not required by law or regulation. This definition accounts for “incentives” as well as legal requirements, so is broader than the FTC’s definition in the current Green Guides, which only accounts for legal requirements.
  • The credit should be unique in that it corresponds to only one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere and is not double-counted.
  • The claimed emissions reductions or removals are based on credible methodologies and leakage does not occur, which means the carbon dioxide is not just displaced outside the project or program boundary.
  • The activity design should be validated and the results should be verified by a qualified, accredited, independent third party.
  • The emissions removed or reduced should be permanent.
  • Baselines for emissions reductions and removals should be based on rigorous methodologies and avoid over-crediting.
• Corporate buyers that use credits should use VCMs to complement measurable within-value-chain emissions reductions as part of their net zero strategies. This includes working with suppliers on efforts to pursue decarbonization activities.
• The principles recommend that credit users disclose when credits are purchased, cancelled, or retired on an annual basis, a recommendation that the principles acknowledge may be more than what is required by applicable law.
• The principles note that standards for public claims based on carbon credits are constantly evolving, but that standards-setting organizations should allow companies to count reductions and removals based on carbon credits toward their Scope 3 emissions where it would be unreasonable to expect a company to fully abate those emissions within a given timeframe.

Some of these principles are addressed in the FTC’s current Green Guides, such as core integrity considerations around additionality and double counting, but overall the principles are far more robust than the FTC’s guidance on this topic. We do not expect the FTC will issue guidance in the revised Green Guides that would be contradictory to these principles, so marketers should closely review the principles and ensure that they are adhering to them when making claims based on carbon credits.