Corporate Counsel on E-Marketing & Privacy Law (Los Angeles March 19, 2007).

1. Marketing Pitfalls
Bennet Kelley
March 19, 2007

2. Scope
• Not about handling
FTC or state
investigations
• About staying off
regulators radar
screen

3. Part I:
Marketing Methods

4. WORDS
MONTY THINGS IN ARCANE
HORMEL YOUR INBOX
RHYMING
MINUTIA
PYTHON WITH RAM
100 100 100 100 100
200 200 200 200 200
300 300 300 300 300
400 400 400 400 400
500 500 500 500 500

5. What do the following have in
common?
Vikings
Margaret Thatcher
Nikita Khrushchev
Herbal Viagra Users

6. What is Spam?

7. CAN-SPAM Act of 2003
Controlling the Assault of Non-Solicited
Pornography and Marketing Act of 2003
• Anti-Fraud & Disclosure Statute
• Does not “CAN Spam” –
– except for wireless spam
• No “Do Not Email Registry”
• No “ADV” Requirement
• Applies to an email where the “primary purpose”
is commercial advertisement or promotion of a
product/service
• No volume requirement
• Is sending a resume subject to CAN-SPAM?
• No private right of action
• Except for ESP’s

8. CAN-SPAM
Principal Requirements
From line must
identify sender
Subject line must not be deceptive.
Adult Messages must provide notice.
Requires Working Opt-Out
Mechanism for Advertiser
Postal Address for Advertiser

9. Opt-Out Mechanism
• Opt-out Link • Separate Lines Of Business/
– More Detailed Options Possible Divisions
(e.g., menu options for – If (a) email sent by separate
unsubscribing) line of business or separate
– Must be functioning for 30 days division; and (b) it holds itself
out as the separate unit to the
– Remove within 10 days
consumer – then opt-out only
– Must also provide postal applies to that division and not
address the entire company.
• May Not Use/Sell After Opt-out Example
Consumer opting out of email from
• Suppression List Chevrolet is not opting out of
– Must use before each mailing General Motors.
– Seed suppression to ensure not
being abused by affiliates

10. Opt-Out Examples
Acceptable Opt-Out Non-compliant
I no longer wish to receive □ I no longer wish to receive
the following offers: Country Music offers.
□ Country Music
□ Hip-Hop □ I no longer wish to receive
updates on Britney Spears’
□ Disco meltdown
□ Latin
□ K-FED □ Please send me more stuff
□ Remove me from all offers

11. Multiple Advertisers
In One Email/Newsletters
CURRENT RULE
• CAN-SPAM ACT AS DRAFTED:
All must have opt-out
• Non-binding FTC Guidance Letter
–
Multiple opt-out links are not required only if:
(1) the recipient has opted-in to receive multi-advertiser messages and
such consent is documented
(2) one advertiser assumes role as “Designated Sender”
(3) Designated Sender” provides opt-out link which it honors; and
(4) Designated Sender” should select the list and its name should be in
the from line.

12. Multiple Advertisers
In One Email/Newsletters
PROPOSED REGULATIONS FTC Example
• May designate one advertiser as X, Y and Z are the advertisers. X may
the sender – who must provide be the “Designated Sender” ONLY IF
address, opt-out link etc.
• X satisfies (1), (2) or (3)
• Designated Sender must either:
• AND neither Y nor Z satisfy (1), (2) or
(1) Control the content; OR (3)
(2) Determine list to be used; OR
(3) Be identified in from line; AND
(4) No other advertiser satisfies 1-3
– Not in effect yet

13. State Spam Laws
• CAN-SPAM Does Not Preempt
– State laws that “are not specific to electric mail, including State trespass, contract
or tort laws”; OR other State laws “to the extent that those laws relate to acts of
fraud or computer crime”
• E.g., California Chapter 571 (effective January 1, 2005)
– Prohibits e-mail using third-party domain without permission; falsified or forged
headers or deceptive subject lines.
– Private right of action - damages of $1,000 per email up to $1MM “per incident”
• Michigan & Utah Child Registry Laws
– Question of Preemption

14. Omega World Travel (4th Cir 2006):
States can only regulate material misstatements
The CAN-SPAM Act . . . does not make every
error or opt-out request into grounds for a
lawsuit. The e-mails in this case are not
actionable under the Act. Nor can the
messages be actionable under Oklahoma’s
statutes, because allowing a state to attach
liability to bare immaterial error in
commercial e-mails would be inconsistent
with the federal Act’s preemption text and
structure . . .

15. Telephone Consumer
Protection Act of 2003
• Do Not Call Registry – more
than 107 Million telephone
numbers
• The FCC’s rules prohibit
telephone solicitation calls to
your home before 8 am or
after 9 pm.
– must provide his or her name,
the name of the person or entity
on whose behalf the call is being
made,
– and a telephone number or
address at which that person or
entity may be contacted

16. Part 2: Spyware

17. Spyware
A somewhat vague term generally
referring to software that is secretly
installed on a users computer and that
monitors use of the computer in some
way without the users' knowledge or
consent.
Most spyware tries to get the user to view
advertising and/or particular web pages.
Some spyware also sends information
about the user to another machine over
the Internet.
Spyware is usually installed without a
users' knowledge as part of the
installation of other software, especially
software such as music sharing software
obtained via download.
- Matisse Glossary of Internet Terms

18. The Wares
Adware Malware
• Software bundled with ad service • Software designed specifically to
software damage or disrupt a system, such
• Notice & consent issues as a virus or a Trojan horse.
Spyware Scareware
• Gathers information on user • “Faux Spyware”, i.e., benign
without knowledge applications falsely labeled as
– Email addresses Spyware
– Passwords
– Credit Card Information Warez
• Keystroke Logging • Term used by software "pirates" to
• Alters default settings describe software that has been
stripped of its copy-protection and
made available on the Internet for
downloading..

19. Spyware
15 States with Spyware Laws
• California law is model
– Prohibits deceptive downloading and/or collection of information
– Prohibits taking over third party computer or altering default settings
No Federal Law
• 108th & 109th Congress:
– Passed House & Senate Commerce Committee
– No Senate Vote
– Reintroduced in 2007
FTC Position
• Already have sufficient authority
– Enforcement actions against Digital Enterprises; Seismic Entertainment
Productions; Max Theater; TrustSoft; Advertising.com; Odysseus
Marketing; Enternet Media . . .

20. Federal Enforcement

21. State & Civil Enforcement

22. Public Interest Groups
• Battling in the
court of public
opinion

23. Part 3: Content Issues

24. The Best Things in Life Are
Free*
*Except for everything really cool that you have to pay for. Participation or human sacrifice may be required. Void in Bosnia, Burkina Faso
and any country where Madonna adopted a kid. To claim your prize, you must tap your head and rub your belly while reciting the alphabet
backwards.

25. FTC Guidelines on
Use of the Word “Free”
(a)(2)
. . . the offer of ``Free'' (c) . . . When making ``Free'' or similar
merchandise . . . must be made with offers all the terms, conditions and
extreme care so as to avoid any obligations upon which receipt and
possibility that consumers will be retention of the ``Free'' item are
misled or deceived. . . . contingent should be set forth clearly
and conspicuously at the outset of the
b) . . . . when the purchaser is told that offer so as to leave no reasonable
an article is ``Free'' to him if another probability that the terms of the offer
article is purchased, the word ``Free'' might be misunderstood. Stated
indicates that he is paying nothing for differently, all of the terms, conditions
that article and no more than the and obligations should appear in close
regular price for the other. Thus, a conjunction with the offer of ``Free''
purchaser has a right to believe that the merchandise or service. For example,
merchant will not directly and disclosure of the terms of the offer set
immediately recover, in whole or in part, forth in a footnote of an advertisement
the cost of the free merchandise or to which reference is made by an
service by marking up the price of the asterisk or other symbol placed next to
article which must be purchased, by the the offer, is not regarded as making
substitution of inferior merchandise or disclosure at the outset.
service, or otherwise.
Use “Extreme Care”. . . EXCEPT
WHEN

26. It’s
Your
Name

27. State Law Example: Ohio
• Oh.Admin. Cod., Titl. 109 ! 109:4-3-04.
When using the word "free" in a consumer
transaction, all the terms, conditions, and
obligations upon which receipt and retention
of the "free" goods or services are
contingent shall be set forth clearly and
conspicuously at the outset of the offer.
• FONT: Terms, conditions must be printed
in a type size half as large as the word "free"
• PROXIMITY: All of the terms, conditions, and
obligations should appear in close proximity
with the offer of "free" goods or services.
• FOOTNOTE* NOT ENOUGH

28. But then again . . .
Ohio statute • FTC - All terms not required to be
included in initial disclaimer, may
• Gives “great weight” to FTC direct consumers to more
rulings detailed disclosure.
– FTC has held that a clear and
• And exempts practices “required or prominent statement “directing
specifically permitted by [FTC] consumers to a location where
orders, trade regulation rules and the disclosure required herein
guides will be available is sufficient
(e.g., "For conditions and
Ohio R.C. § § 1345.05(B) (2), 1345.11(B) membership details," followed
by: "load up trial software" or
"see registration process" or
words of similar effect.)”
– In re American Online, 125 F.T.C. 403 (1998);

29. The Three P’s for Disclaimers
• Placement
• Prominence
• Proximity

30. X
Disclaimed Text
Disclaimer

31. Using Hyperlinks
When Using Hyperlinks • Make the link obvious.
to Lead to Disclosures:
• Label the hyperlink appropriately
to convey the importance, nature,
and relevance of the linked-to
information.
• Take consumers directly to the
disclosure on the click-through
page.
• Assess the effectiveness of the
hyperlink by monitoring click-
through rates and make changes
accordingly. Be prepared to show
the link is effective

32. Don’t Be Subtle
An explicit instruction like "see
below for important
information on diamond
weights" will alert consumers
to scroll and look for the
information. The text prompt
should be tied to the
disclosure that it refers to.
General or vague statements,
such as "see below for
details," provide no indication
about the subject matter or
importance of the information
that consumers will find and
are not adequate cues.

33. HYPERLINK
3 P’s = W OK

34. Other Content Issues
Child Registry Laws
• Michigan, Utah and more to
come.
• What is prohibited: if it is
otherwise a crime for the minor
to purchase, view, possess,
participate in or otherwise
receive the product or service.
• No alcohol, tobacco, firearms,
adult content (including sex for
hire), gambling, illegal or
prescription drugs.

35. Online Gambling
• 2003 DOJ Letter to NAB: “DotNet” Sites
individuals that accept and run
[online gambling ads] may be • There can be no web links from
aiding and abetting these an online free-to-play poker
illegal activities. website (i.e. “poker.nets”) to a
online pay-to-play poker website
• Sporting News: $7.2MM (i.e. “poker.com”) website
settlement with DOJ
• There must be an on-screen
• Discovery: Over $5MM Seized disclaimer on the home page of
by US Marshalls the online free-to-play poker
website (i.e. “poker.nets”) that
states that this site is purely
• Esquire: Search warrant after educational."
running BoDog ads

36. Appendix
State Laws On
Use of Word “Free”

37. Connecticut
Conn. Agencies Regs. ! 42-110b-19 (1998) ("It shall be an unfair or deceptive act or practice to: (a)
Advertise any merchandise or service as free by the use of the word `free' or any other terms of similar
import when the merchandise or service is not, in fact free. . . . Failure to disclose any and all terms,
conditions and obligations required of the consumer shall be a violation of these regulations.");
Florida
817.415 Florida Free Gift Advertising Law.
(4) RESTRICTIONS ON USE OF WORD "FREE." ! Any item or portion of an item unconditionally offered as
"free" shall in fact be free, without obligation or requirement of consideration in any form, when accepted in
writing within the time limit set forth in the advertisement or within a reasonable time, if no time limit is so
set. However, any person so receiving and accepting such offer may be required to pay any necessary
transportation or delivery charges directly to the United States Postal Service or other regulated public
carrier.
(5) REQUIREMENTS FOR ADVERTISEMENTS. ! Advertising in which items are offered as free with conditions
or obligations necessary to acceptance shall include a clear and conspicuous statement of any such
conditions or obligations and advertising in compliance herewith shall not be considered deceptive.
Idaho
Idaho Admin. Code ! 04.02.01.071 (1998) ("It is an unfair and deceptive act or practice for a seller to offer
any goods or services as free, by use of the word `free' or other terms of similar import, if the seller fails to
clearly and conspicuously disclose at the outset all terms, conditions and obligations upon which receipt and
retention of the free items are contingent.");

38. Illinois
515 Ill. Comp. State 505/P2 (West 1992) ("It is an unlawful practice for any person to
promote or advertise any business, product, or interest in property, by means of offering
free prizes, gifts or gratuities to any consumer, unless all material terms and conditions
relating to the offer are clearly and conspicuously disclosed at the outset of the offer so as
to leave no reasonable probability that the offering might be misunderstood.").
Ohio
Oh.Admin. Cod., Titl. 109 ! 109:4-3-04.
(C) When using the word "free" in a consumer transaction, all the terms, conditions, and
obligations upon which receipt and retention of the "free" goods or services are contingent
shall be set forth clearly and conspicuously at the outset of the offer. Terms, conditions,
and obligations of the offer must be printed in a type size half as large as the word "free,"
and all of the terms, conditions, and obligations should appear in close proximity with the
offer of "free" goods or services. Disclosure of the terms of the offer set forth in a footnote
of an advertisement to which reference is made by an asterisk or other symbol placed next
to the offer is not regarded as making disclosure at the outset.
Utah
Utah Admin. Code R152-2-4 (1998) ("A `free' or similar offer is deceptive unless all the
terms, conditions, and obligations upon which receipt and retention of the `free' item are
contingent are set forth clearly and conspicuously at the outset of the offer so as to leave
no reasonable probability that the terms of the offer might be misunderstood.").

39. Bennet Kelley
Associate General Counsel
Director of Govt’l Affairs &
Privacy
ValueClick, Inc.
Westlake Village, CA
BKelley@ValueClick.com