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False Advertising and Privacy Settlements

Parties Settle Subway v. Quiznos Litigation
In 2006, Subway Restaurants filed a false advertising action against Quiznos Restaurants relating to two television commercials and a contest that invited consumers to submit videos comparing Quiznos and Subway sandwiches. The domain name for the contest website was www.meatnomeat.com. As part of the contest, Quiznos posted four sample videos that it created or approved, provided contest rules and "thought starters" with suggestions for entrants, and posted some of the contestant videos.

The advertising industry was closely following this case because one of the issues was whether Quiznos would be able to qualify for immunity from liability for the false advertising claim relating to the videos submitted by contestants under Section 230 of the Communications Decency Act. Section 230 provides in part: "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." Subway did not dispute that Quiznos was a provider and a user of an interactive computer service, so the issue was whether Quiznos merely published information provided by third parties or instead was, as the court said, "actively responsible for the creation and development of disparaging representations about Subway contained in the contestant videos."

The court declined to answer this question, stating that it was for a jury to decide if Quiznos was a traditional publisher or if it went "further and actively participated in creating or developing the third-party content submitted to the contest website." But the court did identify certain features of the contest that could sway a jury towards finding that Quiznos was not merely a publisher.

Here, the Defendants invited contestants to submit videos comparing Subway and Quiznos and demonstrating "why you think Quiznos is better." The domain name used to solicit entrants for the Contest, "meatnomeat.com," is arguably a literal falsity because it implies that the Subway sandwich has "no meat." In addition, the four "sample videos" designed by the Defendants to shape the Contest submissions arguably contain false representations because they depict the Subway sandwich as having no meat or less meat than a Quiznos sandwich. . . . Whether the Defendants are responsible for creating or developing the contestant videos is an issue of material fact, best submitted to the jury after viewing all of the relevant evidence. A reasonable jury may well conclude that the Defendants did not merely post the arguably disparaging content contained in the contestant videos, but instead actively solicited disparaging representations about Subway and thus were responsible for the creation or development of the offending contestant videos.

The decision is Doctor's Associates, Inc. v. QIP Holder LLC, et al., No. 3:06-cv-1710 (D. Conn. Feb. 19, 2010).

FTC Settles with LifeLock over False Allegations of Data Security

The Federal Trade Commission announced that LifeLock, Inc. has agreed to pay $11 million to the FTC and $1 million to a group of 35 state attorneys general to settle charges that the company used false claims to promote its identity theft protection services, which it widely advertised by displaying the CEO's Social Security number on the side of a truck. According to the FTC, this is one of the largest FTC-state coordinated settlements on record.

The FTC charged that statements in LifeLock's ads about its identity theft services and in ads about its own data security were false. According to the FTC's complaint, LifeLock claimed that its identity theft services, available for a monthly fee, offered absolute protection from identity theft, but the fraud alerts that LifeLock placed on customers' credit files protected only against certain forms of identity theft and gave them no protection against the misuse of existing accounts, the most common type of identity theft. The FTC's complaint further alleged that LifeLock claimed that it would prevent unauthorized changes to customers' address information, that it constantly monitored activity on customer credit reports, and that it would ensure that a customer always would receive a telephone call from a potential creditor before a new account was opened. The FTC charged that those claims were false. Regarding LifeLock's own data security, the FTC charged that LifeLock routinely collected sensitive information from its customers, including their social security numbers and credit card numbers, claiming that such data was encrypted, when in fact the data was not encrypted.

The FTC and state settlements with LifeLock bar deceptive claims, and prohibit the company from misrepresenting the "means, methods, procedures, effects, effectiveness, coverage, or scope of any identity theft protection service." They also bar misrepresentations about the risk of identity theft, and the manner and extent to which LifeLock protects consumers' personal information. In addition, the settlements require LifeLock to establish a comprehensive data security program and obtain biennial independent third-party assessments of that program for twenty years.

The FTC will use the $11 million it receives from the settlement to provide refunds to consumers. It will be sending letters to the current and former customers of LifeLock who may be eligible for refunds under the settlement, along with instructions for applying. Information about the redress program can be found at www.ftc.gov/lifelock.


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