End of The Year Update – Best of December

2018 ended with some exciting advertising law headlines: dropped lawsuits, cannabis regs, and SEC settlements with DJ Khaled and Floyd Mayweather, Jr.

1.  Production Transparency.       The Department of Justice has halted its investigation, which began in 2016, into whether ad agencies were directing production business to their own in-house folks rather than to independent agencies. The DOJ examined whether this practice was fixing the bidding process by enabling production houses to increase their prices so the in-house groups would win the contracts. IPG, MDC Partners, Omnicom, Publicis Groupe and WPP were all part of the investigation however, the DOJ has confirmed that no action was taken against any of these holding companies. This investigation came and went so what’s next?  No less than the FBI vs. fraudulent media buying practices. Transparency in this area of the advertising industry will continue to be a focus by federal agencies for the foreseeable future.

2.  Cannabis Rules.          In an effort to create “a trustworthy, professional and ethical business space,” the National Association of Cannabis Businesses (“NACB”), finalized its first Advertising Standards. The NACB guidelines allow the cannabis industry to show its dedication to operating at high levels of ethics and responsibility. The NACB explained. “It is important that the cannabis industry develop a robust set of business-approved guidelines to build trust amongst market participants and local, state and national regulators,” Eugene Morgulis, director of NACB’s Legal and Strategic Initiatives, said in a statement. “With consumer-targeted ads becoming more prevalent, we need to self-regulate or we will face charges by heavy-handed government-driven rules that may hinder business’s ability to market to and educate consumers.”   

For the full set of guidelines, click here: https://www.nacb.com/national-advertising-standards

3.           No Party for DJ Khaled and Floyd Mayweather, Jr.         DJ Khaled and Floyd Mayweather, Jr. settled claims brought by the SEC alleging that the celebs failed to disclose payments they received for promoting investments in Initial Coin Offerings (“ICO”).    This case was the first ever brought by the SEC to address endorsement violations in the world of cryptocurrency. It certainly won’t be the last, however, given the interest of influencers looking to work in and capitalize on this area.  The SEC acknowledged that celebrities and others, “are using social media networks to encourage the public to purchase stocks and other investments,” and that celebrities “do not have sufficient expertise to ensure that [an] investment is appropriate and in compliance with federal securities laws.” Celebrity endorsements may be illegal if celebrities don’t disclose the amount and nature of any compensation paid to a them to endorse such an investment.  In these cases, DJ Khaled failed to disclose $50,000 in payment and Mayweather failed to disclose $300,000 in payments from separate cryptocurrency companies when they promoted such ICO’s on their various social media and other outlets.   They each paid hefty fines and agreed not to promote any securities for 2 and 3 years respectively.   A TKO for celebrities who now have to comply with not only the FTC Endorsement Guides but also SEC rules when they endorse ICO’s.