Scarinci Hollenbeck, LLC
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Author: Scarinci Hollenbeck, LLC
Date: July 10, 2019
The Firm
201-896-4100 info@sh-law.comFor app developers, bringing an app to market is exciting. But it’s still important to check all of your “compliance” boxes before releasing your app to users. Marketing legal pitfalls are common and can quickly erase any revenue generated by your app.
The Federal Trade Commission Act imposes several requirements on all businesses that use advertising to market their products or services: advertising must be truthful and non-deceptive; advertisers must have evidence to back up their claims; and advertisements cannot be unfair. An ad is considered “deceptive” if it contains a statement – or omits information – that is likely to mislead consumers acting reasonably under the circumstances; and is “material,” which means that it is important to a consumer’s decision to buy or use the product. Meanwhile, an ad or business practice is unfair if it causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid; and it is not outweighed by the benefit to consumers.
With regard to marketing apps, the FTC advises that companies must be truthful about what their app can do. The agency has also provided the following rule of thumb:
Look at your product and your advertising from the perspective of average users, not just software engineers or app experts. If you make objective claims about your app, you need solid proof to back them up before you start selling. The law calls that “competent and reliable evidence.” If you say your app provides benefits related to health, safety, or performance, you may need competent and reliable scientific evidence.
Companies must also disclose key information clearly and conspicuously. The FTC offers the following guidance for app developers regarding what it means to be “clear and conspicuous”:
That they’re big enough and clear enough that users actually notice them and understand what they say. Generally, the law doesn’t dictate a specific font or type size, but the FTC has taken action against companies that have buried important terms and conditions in long licensing agreements, in dense blocks of legal mumbo jumbo, or behind vague hyperlinks.
With respect to truth-in-advertising requirements, it’s important to get it right the first time around. Civil penalties imposed by the FTC range from thousands of dollars to millions of dollars, depending on the nature of the violation. In some cases, advertisers have been ordered to give full or partial refunds to all consumers who purchased the product.
App developers must incorporate user privacy protections into their app from the ground up. That means limiting the data you collect from users, securely storing the data you retain, and safely disposing of data you no longer need. The FTC offers the following guidelines:
Businesses that plan to market their apps to children must also comply with the Children’s Online Privacy Protection Act (COPPA). It is important to note that COPPA not only applies to apps dedicated to children. It also applies to operators of general audience apps with “actual knowledge that they are collecting, using, or disclosing personal information from children under 13.”
Under COPPA, operators of online services directed to children under age 13 are required to provide notice and obtain parental consent before collecting items of “personal information” from children. “Personal information” includes more commonly understood information like names, email addresses, and social security numbers, as well as “persistent identifier[s] that can be used to recognize a user over time and across different Web sites or online services.” Under COPPA, operators are required to implement certain safeguards to protect children’s privacy. They include:
Given the potential for missteps, particularly for first-time entrepreneurs and new businesses, it is wise to consult with an experienced business attorney who can review your planned marketing campaign and flag any potential compliance concerns.
If you have any questions or if you would like to discuss the matter further, please contact me, Jeff Cassin, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.
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