Stay ADvised: What's New This Week, March 2

Articles

• Colorado Cannabis Cos. Advertise via Highway Sponsor Loophole
• Spain to Curb Online-Betting Ads
• Vape Companies Fight Back at FDA Regulation
• Federal Judge OKs San Francisco Political Advertising Disclosure Law
• New Mexico AG's Suit Says Google Collecting Kids' Data

Colorado Cannabis Cos. Advertise via Highway Sponsor Loophole

One could say cannabis is keeping Colorado's highways clean. Drivers along Colorado’s highways may have noticed a surge in adopt-a-highway signs sponsored by cannabis companies. That is because cannabis companies in Colorado are bypassing strict restrictions on advertising their products by taking advantage of a loophole that allows them to sponsor clean highways and thus utilize adopt-a-highway signs.

Although the purchase and consumption of cannabis is legal in Colorado, the state has strict limits on when and how companies may advertise their wares.

Currently, Colorado law prohibits businesses from advertising cannabis on television, radio and print unless advertisers can show that the audience is predominantly 21 and older. The state also imposes tight limits on digital advertising, banning pop-up ads for marijuana sales. However, cannabis companies have found a way to advertise without running afoul of advertising laws by participating in the Clean Colorado highway cleanup program.

The opportunity to sponsor highways (and thus utilize signs as ads) is so appealing that cannabis dispensaries, cultivators, manufacturers, and edible producers are currently the top sponsors of highways in the program, accounting for approximately 66 percent of the sponsored roads, despite representing only half of the organizations in the program. Only general services such as plumbing and real estate as well as ad agencies sponsor more Colorado highways.

The legal loophole stems from the fact that different rules govern highway signs versus cannabis industry advertising. "The rules governing highways signs are in a different section than rules governing the cannabis industry," said Nico Pento, the government affairs director for one local dispensary chain. "The highway signs were a loophole that was overlooked."

Although the highway signs were not intended to be used as ads, the surge in cannabis sign sponsorship has made an impact on the state, with signs for dispensaries growing widely along Colorado highways, and many signs featured in prime locations along exits near advertiser businesses. Despite the positive impact on the upkeep and cleanliness of the highways resulting from the sponsorship, there are critics of the practice, who say the signs are changing the landscape – and not for the better.

These critics may soon have bigger concerns as advertisers begin to take advantage of a new Colorado law effective January 1, 2020 that will permit cannabis companies to market on billboards and other outdoor media, as long as those ads are not placed within 500 feet of schools, religious houses, or playgrounds.

Key Takeaways

Colorado is not the only state that strictly regulates cannabis advertising. California's advertising rules are only slightly less stringent. The state allows television, print, and radio ads as long as over 70 percent of the audience for the ads is over 21. Billboards advertising cannabis are also permitted, but not within 15 miles of any other state or the Mexican border. In New York, where medical cannabis is legal, no illuminated outdoor signs for cannabis are allowed and all outdoor signs must be in black and white.

Spain to Curb Online-Betting Ads

Advertisers of online betting may soon be out of luck in Spain, as the country has announced it will place new limits on advertising for this category. Advertising for betting, particularly on sporting events, has grown rapidly in Spain and accounts for many of the commercials during soccer matches. The legislation would be among the toughest such restrictions on online sports betting in the European Union to date.

The restrictions of the Royal Decree of Commercial Communications for Gaming Activities on sports betting ads will affect 80 percent of betting ads promoted online, on television, and at sporting events. Ads for online betting will be restricted to 1 a.m. to 5 a.m. During sports games, televised ads may only air after 8 p.m. Many soccer games in Spain start before 8 p.m.

The law will also prohibit betting houses from paying sports stadiums to use their company name as sponsors and from featuring sports figures or celebrities who the government considers "well-known personalities" in the ads. Teams sponsored by betting companies must also limit their merchandising for children.

The limits will be equally applicable to games where actual money changes hands as well as to "make believe" gambling, the rationale being that free games actually make it appear as if winning is easier than it actually is, thereby contributing to the gambling problem.

The ban is not absolute, however. Sports betting companies may still sponsor merchandised shirts for adults. Additionally, the restrictions do not ban bookmaker sponsorship of sports, a move that gambling clubs have applauded, as they currently have many such deals in place.

The government's refusal to institute a total ban on sports betting ads has some consumer groups concerned. They argue that the government should have issued a total ban on these ads – asserting the broadcast of betting ads during soccer matches to be a "serious irresponsibility."

In response, Consumer Affairs Minister Alberto Garzón has lauded the benefits of the compromise solution, noting that although a total ban would be ideal, it would ultimately be counterproductive: "If there are people [who want] the total ban on advertising, I am here to discuss it and explain that international experiences, such as that of Italy, have proved to be a failure; that the economic rationality of the measure is also wrong and that therefore the total ban on advertising is not only inappropriate, but also imprudent."

Garzón has called these curbs on online betting ads a "first step" to deal with a "social alarm that exists" in Spain.

Key Takeaways

Garzón has likened the anti-sports betting advertisement regulation to tobacco laws, in the sense that both sectors have, what he called, harmful impacts on public health. It is not just Spain that is grappling with the issue. For the summer of 2019, sports gambling companies voluntarily banned such ads during sports games in England. Also in 2019, Italy banned all gambling ads, with violators risking a €50,000 fine per infraction.

Vape Companies Fight Back at FDA Regulation

An appeal by a trade organization represents the latest effort to delay FDA enforcement of rules cracking down on electronic nicotine delivery systems that do not have premarket authorization. In a brief filed before the 5th Circuit, the United States Vaping Association and Big Time Vapes, a vape shop in Mississippi, argued that the FDA is not authorized to impose new regulations curbing the vaping industry and that these upcoming regulations violate the separation of powers doctrine.

Plaintiffs contend that the Family Smoking Prevention and Tobacco Control Act (TCA) is unconstitutional under the non-delegation doctrine set forth in the U.S. Supreme Court's 1935 Panama Refining v. Ryan decision, which struck down a statute for delegating too much legislative power to the executive branch. Consequently, the 2016 FDA rule extending TCA authority to the FDA with respect to e-cigarettes is unconstitutional as well, argue plaintiffs.

Under the proposed rule, manufacturers of electronic nicotine delivery systems would be required to file premarket tobacco product applications (PMTAs). The rule is intended to help ensure that PMTAs contain sufficient information for the agency to evaluate the physical aspects of a tobacco product and the product's potential public health benefits and harms.

Citing the Supreme Court’s decision in Mistretta v. U.S. (1989), plaintiffs also claim the lower court erred when it found that the TCA offers sufficient guidance to regulatory agencies as to what is a "tobacco product." Even under a moderate interpretation of the nondelegation doctrine, they claim, the TCA does not contain sufficiently convincing principles to guide regulators.

"Congress left cigars, hookah, pipe tobacco, [electronic nicotine delivery system products], and all other tobacco products unregulated and punted the question whether to extend the TCA to the Secretary [of the U.S. Department of Health & Human Services], without providing any parameters or guidance whatsoever," the brief argues.

Adding to the vaping industry's urgency is a looming May 12, 2020 deadline imposed by a U.S. District Court judge order in Maryland in July 2019, requiring manufacturers to submit premarket applications for deemed tobacco products, including e-cigarette products, that were on the market as of August 8, 2016. That order is pending an appeal. In the meantime, the FDA appears to be sticking to its guns on the May 12 deadline and has suggested that the appeal is moot.

Key Takeaways

The vaping industry's brief urges the court to adopt a more forceful interpretation of the nondelegation doctrine. This industry faces an uphill battle between the various courts that have ruled against it, and/or that the courts seem particularly willing to give Congress and the FDA considerable leeway in regulating tobacco and nicotine products.

Federal Judge OKs San Francisco Political Advertising Disclosure Law

A San Francisco federal judge has upheld the constitutionality of a municipal mandate requiring political advertisers to disclose their biggest donors on political ads. San Francisco’s Proposition F requires political ads to disclose the source and amount of any funding above $5,000, where previously the threshold for disclosure had been $10,000. The measure passed overwhelmingly with 77 percent of voters approving the measure late last year.

Plaintiff, a political group supporting an earthquake safety bond, had argued that the law's requirement that political ads disclose secondary donors was an unconstitutional infringement on free speech and freedom of association. U.S. District Judge Charles Breyer disagreed, finding the requirement constitutional as it placed only a "modest burden" on speech or association. Judge Breyer drew the line at disclosure requirements so lengthy that they left little room for the actual advertisement.

Plaintiffs took issue with the law's secondary disclosure requirement, which mandates that where a donor is another political organization, the ads must not only disclose the donors and amount received but also the names of the political group donor’s top two contributors and the amounts contributed.

This portion of the law violates freedom of speech and association, argued plaintiffs, who did not wish to disclose that two of their top donors received funding from business groups.

Plaintiffs further argued that the sheer size of the disclosure would drown out the ad, but the city of San Francisco had already agreed to provide an exemption from the disclosure requirement in cases where the disclosure takes up more than 40 percent of a display ad, mailed notice, or audio or video commercials. However, that exception does not apply to smaller print ads or shorter commercials.

Judge Breyer upheld the measure, finding that the second donor disclosure requirement ultimately serves the interests of the public and the government by providing transparency in political advertisements. Although Judge Breyer agreed that disclosures which "leave little or no room for the political message" would violate free speech, he noted that the U.S. Supreme Court has held that "a disclaimer may commandeer a prominent position in a political ad without first offending the First Amendment."

Moreover, in the case of the disclosures required by San Francisco, they would take up no more than about 35 percent of the advertisement, giving advertisers plenty of space to convey their message, reasoned Judge Breyer.

Key Takeaways

While groups supporting Proposition F hailed the ruling as a repudiation of "pay-to-play politics" and praised how Judge Breyer "resoundingly rejected the lawsuit's arguments that forcing secretive super PACs to reveal their top donors in ads has no value," others were not as pleased with the result. Plaintiffs opined that the decision will "have a chilling effect on speech" as "grassroots organizations in future elections will have to deal with these issues on an ad hoc basis."

New Mexico AG's Suit Says Google Collecting Kids' Data

New Mexico's Attorney General has filed a suit alleging that Google is illegally collecting data from New Mexico students via Chromebooks which the company provides to state schools free of charge.

The complaint, filed in New Mexico federal court, claims Google collects information from children under 13 through these computers, in violation of the federal Children’s Online Privacy Protection Act (COPPA) and New Mexico’s Unfair Practices Act. COPPA prohibits operators of websites and online services directed to children from collecting personal information from minors under the age of 13 without verifiable parental consent. Alongside the suit, the Attorney General also reached out to Google to demand that the company stop the illegal data collection.

Among the types of data Google collects are a record of websites visited by students, search terms, voice recordings, passwords, and other data that qualifies as personal information under COPPA, according to the suit. Attorney General Hector Balderas asserts that the company’s actions are particularly troubling in light of the fact that many students use the school’s computers to look up search terms they might not otherwise feel comfortable doing at home.

Google's collecting "troves" of personal data without parental consent amounts to nothing short of "spy[ing] on New Mexico's children and their families," alleges Attorney General Balderas. "Student safety should be the No. 1 priority of any company providing services to our children, particularly in schools," he added. "Tracking student data without parental consent is not only illegal, it is dangerous."

To that end, Attorney General Balderas said he had been in contact with schools across the state to make sure they would continue using the computers so as not to interrupt learning, while ensuring there is "no immediate harm." However, it was not immediately clear what steps the state had taken to allow continued use of the computers while making sure no data was collected.

Google denied the allegations, calling them "factually wrong." According to the tech giant, its G Suite for Education requires schools to obtain parental consent: "We do not use personal information from users in primary and secondary schools to target ads," said Google spokesperson Jose Castaneda. "School districts can decide how best to use Google for Education in their classrooms and we are committed to partnering with them." The Federal Trade Commission (FTC) specifically allows operators of websites or online services directed to children to rely on schools to obtain verifiable parental consent for scholastic use of the services.

New Mexico's suit seeks an injunction blocking Google from collecting data from children without parental consent, damages, attorneys' fees, and costs. The state previously joined in a 2018 suit against Google and other tech companies alleging the company was illegally collecting data through its apps.

Key Takeaways

New Mexico's suit is a reminder that websites and online services that partner with schools to facilitate scholastic use of their offerings must take care to follow the FTC's guidance for when, and how, verifiable parental consent may be obtained through the schools if the service will involve the collection of personal information from users under 13 years of age.