The latest trend in customer loyalty and brand value is the creation of the Limited Edition gift card. Currently, consumers can purchase the gift card for the value of the card. When the value is depleted, the gift card is theirs to keep. The retention by the consumer of the commemorative card is associated with a positive perspective on the client.

Recently, the Texaco Company has begun selling what it calls commemorative gift cards, featuring the image of Juan Pablo Montoya on the cards and touting it as a limited edition card. Currently, the special edition card costs no extra.

Some state laws forbid the charging of a sizeable premium for a gift card. This new twist, however, paves the way for companies to recoup any losses they may rack up in the creation of the cards themselves. So long as the card is legally a “limited edition,” and there is some real value associated with collecting the card, companies may start trying to push the envelope with regard to charging a premium for gift cards. It appears that the “free drinking glass with fill-up” days are long over.

The advent of the DVR has turned those hard-earned advertising dollars into mush as target customers easily zip past commercials to get to their favorite shows. And while YouTube, GoogleVideo, and other easy-upload sites have been hosting bootlegged-and-previously televised commercials since their inception, only recently has the advertising industry stopped using their legal muscle to take down these rogue postings and adopted a if-you-can’t-beat-’em-join-’em attitude.

Indeed, actually getting consumers to affirmatively seek out commercials seems to be the new craze. And it’s working. In fact, many companies, like Burger King, are using YouTube and other social networking sites, to launch full-scale campaigns. The grainy, slightly do-it-yourself style of the ads is actually adding to their appeal. In some cases, it’s unclear whether the ads are corporate sponsored or created by individuals, another attractive component for the Gen-X-Zers whose mantra seems to be “don’t hard-sell me.”

This ad recently appeared on YouTube, to the delight of consumers. The controversy it sparked is only adding to the commercial’s viewership. Moreover, Smirnoff likely didn’t have to make a million-plus ad buy as it would have for television.

If your spidey senses are tingling because you’re wondering about alcohol beverage control laws, misleading advertising claims, CARU challenges and the like, stay tuned. Ad law is getting interesting again.

At attorney in New York is seeking class action status in a lawsuit filed against Starbuck’s for its coupon campaign that closed early after the tell-a-friend response got out of hand. The Starbucks chain offered its employees an email coupon for a free cup of coffee and allowed the employees to pass the coupon onto friends and family. Evidently having not learned from Napster, within hours, the friends and families contacted numbered in the thousands, and Starbuck’s, inundated with coupons, was forced to shut down the promotion early.

New York attorney, Peter Sullivan, sued. According to the Orange County Register, he believes that “Starbucks should account to the thousands of consumers who relied upon the advertisement, went out of their way to stop by a Starbuck’s and ended up being charged $3.00 for coffee.”

Hardly a “bait and switch” in this attorney’s opinion, (the measure by which a jury is likely to judge the Starbuck’s debacle), Starbuck’s may be able to show that it was merely an honest mistake and a good deed that got out of hand. Moreover, it’s not likely that all that many people went out of their way to get the free drink, considering there’s a Starbuck’s on most corners. Still, it would have been wise for the coffee chain to attach certain restrictions on the coupon.

Practice Pointer:
Viral marketing coupons are popular and companies endeavoring to use them should take certain precautions to insure that it is not overwhelmed with responses. Some examples are as follows:

The FTC has ordered Sunmark to pull its matchmaking advertising campaign because the ad misleads consumers into thinking that the company has a higher marriage rate than it can prove. The ads amounted to false advertising, under Section 5 of the FTC Act.

Sunmark, which operates a matchmaking service, ran advertisements in national magazines in which it claimed that it was responsible for the marriages of 3,478 of its members. In fact, only about 950 of its members actually married other members; 1600 members were married to third parties not related to the site. Another 800 members included in the count were dating, but had not actually married. The ads, which ran in magazines for 2 months, suggested that Sunmark’s matchmaking rate was 8%, when in fact it was only 4.7%.

Practice Note: To rectify the blunder, Sunmark could have placed a disclaimer in its advertisement, noting that of the 2,550 actual marriages, only 950 marriages were member-to-member. Simply stating that “some” marriages were not member-to-member, however, would have been insufficient. Indeed, the FTC cited another matchmaking company for failing to provide the actual number of non-member marriages, even though it placed a disclaimer in its ad.

On April 6, 2006, the FTC entered judgement against OptIn Global, which advertised, inter alia, home mortgages via e-mail, in violation of the Federal CAN-SPAM Act. Under the Act, companies may not send e-mails that are primarily advertisements unless the e-mail contains an opt-out provision, and truthfully informs the e-mail recipient who is sending the communication and for what purpose.

The judgment calls for OptIn to return the roughly half million in revenue that it made running the advertisements, and adds a penalty of $2.4 million, effectively gutting the company. Finally, it imposes on the company and its affiliated companies (of which there are at least 12 DBAs) specific duties should it advertise in the future, that go beyond the provisions of CAN-SPAM, making it so they Can’t Spam any longer.

Practice Pointer: The Federal CAN-SPAM Act lays out specific guidelines for commercial advertising that must be adhered to in sending e-mail communications that are primarily commercial in nature. Most notably, those guidelines state that the email must:

The National Advertising Division (”NAD”) has requested that 1-800-patches.com discontinue many of its advertising claims on its Green Tea 300 product because the claims are misleading.

In one instance, an ad states that Green Tea 300 is “30 Times more potent than regular green tea.” The ad goes on to ask clients to “Join Oprah” in losing 10 pounds. In addition, the ad shows a doctor extolling weight loss virtues of Green Tea and quotes him as saying, “[Lose] 10 pounds in six weeks. I will guarantee it.”

In its defense, 1-800-patches.com stated it based its potency claim on the fact that Green Tea 300 has 30 times more polyphenol than green tea steeped in a testing laboratory (the company did not pay for the study; it merely read the findings). The polyphenol count is the only measure by which 1-800-patches.com makes its claim. The company claims the “Join Oprah” and doctor guarantee portion of the advertising was specifically related to an episode of the Oprah Winfrey Show in which a doctor guaranteed a weight loss of 10 pounds for a diet regimen that included consumption of Green Tea (although not the Green Tea 300 product).

NAD correctly found that advertisers may not make claims using consumer testimonials or expert endorsements that cannot be substantiated by the advertiser. Moreover, advertisers must have appropriate scientific evidence to support scientific claims. The use of Oprah’s name and a quote by a doctor each suggested an endorsement of the company’s product that was not accurate. Ultimately, 1-800-patches.com pulled the questionable advertising.

Practice Pointer: While it was improper for 1-800-patches.com to suggest an endorsement of its product by either a doctor or a celebrity that it didn’t have, it would have been acceptable to have mentioned the television show. For instance, the advertiser could have stated “A recent episode of The Oprah Winfrey Show highlighted the virtues of green tea.” Depending on the size and placement of such a statement, such use would likely not suggest an affiliation between the advertiser and the celebrity.

SC Johnson & Sons, Inc., through the National Advertising Division (”NAD”), challenged Colgate-Palmolive’s recent claims pertaining to Murphy Soft-Wipes pre-moistened dust cloths. Among the claims SC Johnson found questionable were those found in a newspaper FSI, stating the product:

SC Johnson, a Colgate-Palmolive competitor, asserted that the claims made in the advertising and on the product packaging were false, misleading, and unsubstantiated, and requested substantiation of the claim that the Soft-Wipes actually repelled dust. In response, Colgate-Palmolive provided NAD with proprietary evidence showing that the Soft-Wipes comtained anti-static agents that, when applied to a surface, created electrical charges that repelled dust.

Because SC Johson was not allowed to view the actual claims (Colgate-Palmolive released them only to NAD, claiming trade secret in the results), it tested the product in its own laboratories and provided those non-proprietary results to NAD. The SC Johnson results show that there was no difference in the dust collection rate of surfaces cleaned with a regular dust product and surfaces cleaned with a Soft-Wipe.

In reviewing the evidence from both parties, NAD found that in fact, Colgate-Palmolive had not met its burden of showing that there was a reasonable basis for claiming that the Soft-Wipes actively repelled dust. Colgate-Palmolive issued a statement vehemently disagreeing with the findings of NAD. Nonetheless, it has relaunched the product with a new advertising campaign, pending new test results.

Practice Pointer: Under Section 5 of the FTC Act, the advertiser has the initial burden of presenting a reasonable basis for its claims. While a “reasonable basis” can amount to internal laboratory testing of a premise, standard practice is to have tests conducted by an independent laboratory.

Kraft Foods, which markets drinks under the Capri Sun label, got a clean bill of health this week from the Children’s Advertising Review Unit, (”CARU”), which requested the food conglomerate substantiate its claims that its childrens sports drink “hydrates better than water.”

Kraft provided CARU with a study conducted at the University of Georgia that found Kraft’s sports drink actually helped to keep healthy, active children hydrated better than water alone. In addition to the foregoing, Kraft provided CARU with information collected from several associations devoted to athletics that had come to the same conclusion; namely, that drinking sports drinks, especially during prolonged intentive exercise, can help children stay hydrated.

Practice Pointer: Counsel should encourage its corporate clients to engage in whatever forms of industry self-regulation are available. Not only is the process generally faster and cheaper than being subjected to a private action or an FTC investigation, but it encourages Congress to allow the self-regulatory process to proceed, rather than enacting statutes that may hinder commercial progress.

Beware of Secret Downloads.
Take Two Interactive and subsidiary publisher Rock Star Games have been deflecting the firestorm fueled by their latest video game release, Grand Theft Auto: San Andreas (”GTA”).

Yesterday, the Australian Office of Film and Literature Classification revoked its original adult rating for the game, making GTA illegal to sell, advertise, or distribute in the country. This follows a decision by the U.S. Federal Trade Commission (”FTC”) to re-rate the game after it was alterted to “secret downloads” readily available on the web that added additional sex and violence scenes dubbed “Hot Coffee.”

The revocation by Australia coupled with the re-rating by the FTC has prompted certain large retailers, like Wal-Mart Stores to remove the game from sale. This has forced the company to ratchet down their sales predictions for the game by $40 Million.

Take Two is about to take two more: PC World reports that the company is facing two class-action lawsuits from plaintiffs alleging that the company engaged in false advertising and fraud when it failed to disclose hidden content that would have otherwise classified the game as adult. Ouch. That scalds.

Practice Pointer: Companies should be encouraged to participate honestly in the self-regulation process.

The FTC and the Department of Health and Human Services is planning a jointly sponsored workshop on Marketing, Self-Regulation, and Childhood Obesity on July 14th and 15th in Washington, D.C. The workshop will be the first of its kind and aims at bringing together the concerns and interests of the medical community, food and beverage marketers, media, and entertainment companies to discuss the issue of children’s obesity.

HHS secretary Michael Levitt has identified children’s obesity as one of the “major health challenges facing the nation.” The two-day workshop, says FTC Chairman Deborah Platt Majora, will allow affected industry professionals to devise strategies for dealing with the new issue and perhaps creating a self-regulatory body between industries.

Practice Pointer: Clients should be encouraged to participate in and support self-regulatory bodies. These bodies can actually work to reduce the amount of adversarial proceedings against private companies, and reduce the cost of reworking advertising.