New California Law Requires Disclosure When Using A Chatbot

Beginning on July 1, 2019, a new California law will require websites that use chatbots to clearly disclose that it is a bot communicating online, and not a person.

The use of online chatting with ecommerce and other types of websites is becoming more widespread on a daily basis. Online chat tools allow potential customers to ask questions about products and services and get answers on a real-time basis. These tools also enable companies to address service and support issues on a real-time basis. I’ve used these tools to get help from wide spectrum of websites, ranging from the Delaware Secretary of State, when I needed guidance on a corporate filing on behalf of a client, to Goulet Pens, when I dropped an expensive fountain pen and needed guidance on a replacement nib.

The new California law makes it “unlawful for any person to use a bot to communicate or interact with another person in California online, with the intent to mislead the person about its artificial identity for the purpose of knowingly deceiving the person about the content of the communication in order to incentivize a purchase or sale of goods or services in a commercial transaction or to influence a vote in an election.”

However, there’s no liability if the person using the bot discloses that it is, in fact, a bot. The disclosure must be “clear, conspicuous, and reasonably designed” to inform persons that they are communicating with a bot. While the law doesn’t provide any more specific information on how a disclosure can comply with that standard, we can look to some general principles and Federal Trade Commission (FTC) guidelines that have evolved over the past few years. For example:

  1. Placement and prominence of the disclosure
  2. How close the disclosure is to the related claim
  3. Whether the disclosure can be avoided
  4. Whether other parts of the advertisement distract from the disclosure
  5. Whether the language is understandable

 

Considering that more than 39 million people live in California, it is highly likely that some California resident is using your website, no matter where your company is based, and no matter whether you sell to businesses or consumers. Consequently, we strongly recommend that all companies that sell goods or services and that use online chat tools comply with the California law. As mentioned at the top, this law goes into effect on July 1, 2019.

Celebrity Endorsements and Social Media

If you follow any celebrities or sports stars on social media, you may have seen one of them endorsing or promoting a product. Just the other day, Katy Perry posted a photo of herself on Instagram, wearing a Prada outfit with the hashtag “#Prada.”

The fact that I follow Katy on Instagram may shock you, but here’s something even more shocking: did you know that Federal Trade Commission rules require celebrities and influencers to disclose their relationships with brands on social media? You may not be the only one to just learn that. The FTC recently sent out more than 90 letters to various celebrities, athletes, and other social media influencers, reminding them of their obligation to clearly disclose their relationships to brands when promoting or endorsing products on social media. When I look at that picture posted by Katy, I wonder whether Prada paid her to promote their products? Or did they give her the outfit for free? Is she just posting in Prada spontaneously? You can’t tell from her post.

The FTC has endorsement guidelines that apply to these situations. If there is a “material connection” between an endorser and an advertiser, they have to clearly and conspicuously disclose that connection, unless it is already clear from the context. A material connection is a connection that might affect the credibility that consumers give the endorsement. It can be a business or family relationship, a monetary payment, or a gift of free product. These guidelines don’t just apply to the celebrities like Katy Perry or Donald Trump; they also apply to the marketers like Prada. So if Katy wore that Prada outfit just because she loves how she looks and feels in Prada (and who doesn’t?), that’s one thing. But if Prada pays her to wear their outfits and post pictures on Instagram, then it’s not quite as compelling an endorsement. The same applies if Donald Trump tweets about how wonderful Ivanka’s fashion line is. She’s his daughter, so there’s a material connection that affects the amount of credibility we give to Trump’s tweet. On the other hand, in the specific case of Donald and Ivanka Trump, the family relationship is well known, so there may not be a need for an explicit disclosure.

In the letters, the FTC noted that in the case of Instagram posts, consumers may only see the first three lines of longer posts, unless they click the “more” button. According to the FTC, when making endorsements on Instagram, celebrities should disclose the material connection about the “more” button. The same general concept applies to other social media – Facebook, Snapchat, Twitter, etc.

It is common in these posts to provide multiple hashtags, generally at the end of a post. Putting a disclosure in such a location is not conspicuous enough. Also, some techniques influencers may use to disclose material connections may not be sufficient. For example, the FTC noted that consumers may not understand disclosures such as “#sp” or “Thanks [brand name].”

Consequently, brands and marketers should develop an “influencer policy” that provides guidelines to the various celebrities and other influencers that endorse their products on social media. The brands should try to agree in advance as to the disclosure that the influencer will make, rather than leave it up to the influencer’s discretion. Using a hashtag such as #ad or #advertisement is appropriate in cases where the brand has had input in the content. A hashtag such as #sponsor (rather than #sp) is appropriate in other cases. Also, the policy should require that disclosures be made at the top of a post, and be separate from long hashtag strings.

By taking a more proactive approach to how celebrities and influencers endorse products on social media, brands can minimize their liability for misleading endorsements. Are you paying attention, Katy?

New Limits On Online Advertising to Minors

FacepalmWebsite and mobile app operators everywhere need to be aware of a new California law dealing with online advertising to children that took effect on January 1, 2015. The law protects any minors under the age of 18 who live in California, and there are more than 9 million residents of California under the age of 18. Consequently, even if the website or mobile app operator is located in another state, they probably have users located in California, and need to comply with the new law.

What does the new law do? First, it prohibits the operators of a website or app directed to minors from advertising or marketing certain products and services, which I’ve listed below.

Second, for websites and apps not specifically directed to minors, it prohibits marketing such products and services to minors that the operator actually knows are using the website or app, if the marketing or advertising is specifically directed to that minor based on information specific to that minor, including his profile, activity, address, or location (but excluding IP address and product identification numbers for the operation of a service). However, an operator of one of these broader-audience websites and apps will be considered in compliance so long as it takes reasonable actions in good faith to avoid any prohibited marketing or advertising.

 

Third, a website or app operator directed to minors or who has actual knowledge that minors are using its site/app cannot knowingly use, disclose, compile, or allow a third party to use, disclose, or compile, the personal information of a minor with with actual knowledge that such use, disclosure, or compilation will be for the purpose of marketing or advertising prohibited goods or services to that minor.

 

For sites/apps directed to minors where the advertising is provided by a third party, the operator is in compliance if it notifies the third party service that the site/app is directed to minors. Once that notice is provided, the third party service becomes subject to the law’s restrictions. A company providing these third party advertising services will need to set up a procedure for sites/apps to notify it that they are directed to minors, and a procedure for compliance with the advertising restrictions.

 

Now for the fun part. Here is the list of products and services that the advertising prohibitions apply to:

 

  1. Alcoholic beverages
  2. Firearms and handguns
  3. Ammunition, including reloaded ammunition
  4. Handgun safety certificates
  5. Aerosol paint containers that could be used for defacing property
  6. Etching cream that could be used for defacing property
  7. Tobacco, cigarettes, rolling papers, blunt wraps, or any other paraphernalia that could be used for smoking or ingestion of tobacco, products prepared from tobacco, or any controlled substance
  8. BB or pellet guns and devices
  9. Dangerous fireworks
  10. Tanning (in an ultraviolet tanning device)
  11. Dietary supplement products containing ephedrine group alkaloids
  12. Tickets or shares in a lottery game
  13. Salvia divinorum or Salvinorin A, or any substance containing those products (these are psychoactive plants in the mint family, that can induce hallucinatory experiences – I had to look it up!)
  14. Body branding
  15. Permanent tattoos
  16. Drug paraphernalia
  17. Electronic cigarettes
  18. Obscene matter
  19. Less lethal weapons, as defined in the California Penal Code (including tear gas guns, slingshots, crossbows, stun guns, etc.)

 

So basically, all the kinds of things that kids are interested in, but shouldn’t be. The stuff of parents’ nightmares.

As I mentioned at the top, this law doesn’t just apply to operators of websites and apps located in California. The key to the law is that the minors be located in California; the website/app operator can be anywhere. Since California has more than 9 million residents under the age of 18, it is likely that if you operate an app or website directed at minors, one or more of your users will be in California. And of course, if you actually know that one of the users of your website is a minor residing in California, the law applies. Having registration information on a user that shows the user is a California minor may be enough.

The new law also imposes some content-removal obligations on the operators of these websites and apps, which I will cover in a different post.

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